i

Telecommunications Law and Regulation

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iii

Telecommunications
Law and Regulation
Fifth Edition

E d it e d b y
Ian Walden

1
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1
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v

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 ma-
terial, 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 struc-
tured 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 cor-
rect 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
vi
vi

Contents

Table of Cases  ix
Table of Statutes  xix
Table of EU Legislation  xxxi
Table of International Instruments  xli
List of Contributors  xlv

PART I: FUNDAMENTALS

1. TELECOMMUNICATIONS LAW AND REGULATION: AN

INTRODUCTION  3
Ian Walden
2. THE ECONOMICS OF TELECOMMUNICATIONS REGULATION  27
Lisa Correa

PART II: REGULATORY REGIMES 

3. THE TELECOMMUNICATIONS REGIME IN

THE UNITED KINGDOM  101
Ian Walden, Helen Kemmitt, and John Angel

4. EUROPEAN UNION COMMUNICATIONS LAW  147

Ian Walden

5. US TELECOMMUNICATIONS LAW  195

Karen Lee and Jamison Prime

PART III: KEY REGULATORY ISSUES 

6. AUTHORIZATION AND LICENSING  285

Anne Flanagan
7. SPECTRUM MANAGEMENT  381
Anne Flanagan
8. ACCESS AND INTERCONNECTION  435
Ian Walden
vi

viii Contents

9. CONSUMER PROTECTION AND TELECOMMUNICATIONS  491

Elizabeth Newman
10. COMPETITION LAW AND TELECOMMUNICATIONS  533
Vincent Smith and Lorna Woods

PART IV: TELECOMMUNICATIONS TRANSACTIONS 

11. CAPACITY AGREEMENTS: FROM MICROWAVES TO MVNOs  599

Graeme Maguire, Joanne Wheeler, and Rhys Williams
12. CORPORATE AND MULTINATIONAL ENTERPRISE
TELECOMMUNICATIONS TRANSACTIONS  625
Bostjan Makarovic

PART V: COMMUNICATIONS CONTENT 

13. COMMUNICATIONS PRIVACY  645

Ian Walden
14. CONVERGENCE: THE IMPACT OF BROADCAST REGULATION
ON TELECOMMUNICATIONS  683
Daithí Mac Síthigh
15. INTERNET SERVICE PROVIDERS: CONTENT LIABILITY,
CONTROL, AND NETWORK NEUTRALITY  733
Christopher T. Marsden

PART VI: INTERNATIONAL REGULATORY REGIMES

16. INTERNATIONAL REGULATORY LAW  791

Ian Walden
17. TELECOMMUNICATIONS REFORM IN EMERGING MARKETS  847
Ann Buckingham, Camilla Bustani, David Satola,
and Cameron Whittfield

Index  895
ix

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
x

x Table of Cases

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
xi

Table of Cases xi

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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xii Table of Cases

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
xi

Table of Cases xiii

Intel (Case T-​286/​09) [2009] OJEU C 227/​13, 13 May 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 564

Intel Corp v Commission (Case C-413/​14P) [2014] 5 CMLR 9; [2017] 5 CMLR 18. . . . . . . . . . . . . . . 564
International Fruit Company NV and others v Produktschap voor Groenten
en Fruit (Case 21/​72) [1972] ECR 1219. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 630
International Private Satellite Partners (Case IV/​34.768), OJ L 354/​75,
31 December 1994. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 801
Iowa Utilities v FCC, 219 F 3d 744 (2000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251
Iridium (Case IV/​35/​.518), OJ L 16/​87, 18 January 1997. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 801
Italy v Sacchi [1974] 2 CMLR 177 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 685
ITT Promedia (Case T-​111/​96) [1998] ECR II-​2937 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 558
ITV Broadcasting v TV Catchup (Case C-​275/​15). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 706
ITV v TVCatchup [2011] EWHC 1874 (Pat) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 706
ITV v TVCatchup [2015] EWCA Civ 204. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 652

Mannesmannröhrenwerke v Commission (Case T-​112/​98) [2001] ECR II-​729 . . . . . . . . . . . . . . . . 584
Mathias v Walling Enterprises, 609 So 2d 1323, 1332 (Fla App 1992). . . . . . . . . . . . . . . . . . . . . . . . . 287
Maximilian Schrems v Data Protection Commissioner (Case C-​362/​14), 6 October 2015. . . . . . 889
max.mobil Telekommunikation Service GmbH v Commission [2002] 4 CMLR 32. . . . . . . . . . . . 160
MCI Communications v AT&T, 708 F 2d 1081 (7th Cir 1983), 464 US 891 (1983). . . . . . . . . . . . . . . 835
MCI Inc v Commission and France (T-​310/​0 0) [2004] 5 CMLR 26. . . . . . . . . . . . . . . . . . . . . . . . . . . . 160
MCI Telecommunications Corp, 60 FCC 2d 25 (July 13, 1976). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198
MCI Telecommunications Corp v FCC, 561 F 2d 365 (DC Cir 1977). . . . . . . . . . . . . . . . . . . . . . . . . . 198
MCI Telecommunications Corp v FCC, 580 F 2d 590 (DC Cir 1978). . . . . . . . . . . . . . . . . . . . . . . . . . 198
MCI/​Worldcom/​Sprint (Case M.1741) [2003] OJEU L300/​1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 577
Mediakabel BV v Commissariaat voor de Media [2005] ECR I-​4 891. . . . . . . . . . . . . . . . . . . . . . . . . . 685
Mercury Communications Ltd v Scott-​Garner & ors [1983] 3 WLR 914. . . . . . . . . . . . . . . . . . . . . . . 112
Mercury Personal Communications Ltd v Secretary of State for Trade & Industry
[2000] UKCLR 143 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 475
Metro-​Goldwyn-​Mayer Studios, Inc v Grokster Ltd, 545 US 900 (2005) (‘Grokster’). . . . . . . . . . . 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). . . . . . . . . . . . . . . . . 202
National Biscuit Co v City of Philadelphia, 98 A 2d 182, 187–​188 (Pa, 1953). . . . . . . . . . . . . . . . . . . 292
National Cable & Telecommunications Association, Inc v Brand X Internet
Services 545 US 967 (2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211
National Cable & Telecommunications Association, Inc v Gulf Power Co,
534 US 327 (2002). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251
New Media Online v Bundeskommunikationssenat (Case C-​374/​14) [2015],
21 October 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 716
News Corp/​BSkyB (Case M.5932), 21 December 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 568
Newscorp/​Telepiu (COMP/​M.2876). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 568
Nokia/​Navteq (M.4942), 2 July 2008, [2009] OJEU C13/​8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 581
North Carolina Utilities Commission v FCC, 537 F 2d 787, (4th Cir 1976),
cert denied, 429 US 1027 (1976) (NCUC I). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231
Norwich Pharmacal Co v Customs and Excise Commissioners [1973]
UKHL 6, [1974] AC 133 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 750
Nungesser and Eisele v Commission (Case 258/​78) [1982] ECR 2015. . . . . . . . . . . . . . . . . . . . . . . . . 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). . . . . 370
People of the State of California v FCC, 905 F 2d 1217 (9th Cir 1990). . . . . . . . . . . . . . . . . . . . . . . . . 211
Perfect 10, Inc v Amazon, Inc, 508 F 3d 1146, 1172–​73 (9th Cir 2007). . . . . . . . . . . . . . . . . . . . . . . . . 737
Perfect 10, Inc v Google Inc, 416 F Supp (2nd 828) CD Cal 2006. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 737
xv

Table of Cases 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
xvi

xvi Table of Cases

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
xvi

Table of Cases xvii

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
xvi

xviii Table of Cases

Viho v Commission (Case C73/​95P) [1996] ECR I-​5457 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 540

Vodafone Airtouch and Mannesmann (Case No Comp/​M.1795),
OJ C 141/​19, 19.5.2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162
Vodafone/​BT [2004] CAT 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 448
Vodafone Espana SA v Commission (T-​109/​06) [2008] 4 CMLR 19 . . . . . . . . . . . . . . . . . . . . . . . . . . . 177
Vodafone Limited v Office of Communications [2008] CAT 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
Volker and Markus Schecke GbR and Hartmut Eifert v Land Hessen
(Cases C-​92/​09 and C-​93/​09) [2012] All ER (EC) 127 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 647
Vonage Holdings Corp v FCC (489 F 3d 1232 (DC Cir 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265
Von Hannover v Germany (2005) 40 EHRR I. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 677
Von Hannover v Germany (2012) 55 EHRR 15. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 677
VZW Belgian Anti-​Piracy Federation v NV Telenet, Case 2010/​A R/​2541,
26 September 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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

xi
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
x
xx Table of Statutes
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
xxi
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
xxi
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
xxi
xxii Table of Statutes
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
xxi
Table of Statutes
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
xxiii
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
xvxi
xxiv Table of Statutes
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
xv

Table of Statutes xxv

s 9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 422 Communications Act 2003 (Maximum

s 9(1A). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 422 Penalty for Contravention of
s 9A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 691 Information Requirements)
s 9ZA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 423 Regulations 2003 (SI 2011/​1773)������������420
s 9ZA(7). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 423 Community Radio (Amendment) Order
s 9ZA(8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 423 2015 (SI 2015/​1000)������������������������������������704
s 12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 421 Competition Appeal Tribunal Rules
s 13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 420, 421 (SI 2015/​1648)
s 14. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 421, 427 r 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 595
s 18. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 424 r 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 595
s 20. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 425 Consumer Contract (Information,
s 21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 421, 426 Cancellation and Additional
s 22. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 420–​1 Charges) Regulations 2013
s 23. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 421, 426 (SI 2013/​3134)����������������������������������������������519
s 27. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 425 Consumer Protection (Cancellation of
s 28. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 425 Contracts Concluded Away from
s 29. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 424 Business Premises) Regulations
s 30. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 430 1987 (SI 1987/​2117)������������������������������������516
s 35(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 419 Consumer Protection
s 48. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 658 (Distance Selling) Regulations
s 159(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 425 2000 (SI 2000/​2334) ������������������������� 516, 519
Consumer Protection from Unfair
Statutory Instruments Trading Regulations 2008
Advanced Television Services (SI 2008/​1277)���������������������������������������������721
Regulations 1996 (SI 1996/​3151)������������451 reg 19. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 722
Alternative Dispute Resolution for Contracting Out (Functions
Consumer Disputes (Competent Relating to Broadcast Advertising)
Authorities and Information) and Specification of Relevant
Regulations 2015 (SI 2015/​542)��������������528 Functions Order 2004
Audiovisual Media Services Regulations (SI 2004/​1975)����������������������������������������������723
2010 (SI 2010/​419) ��������������������������������������715 Control of Misleading Advertisements
Audiovisual Media Services Regulations Regulations 1988 (SI 1988/​915)��������������516
2014 (SI 2014/​2916) ������������������������������������719 Copyright and Related Rights
Broadcasting Act 1996 (Renewal of Regulations 2003 (SI 2003/​2498),
Local Radio Multiplex Licences) reg 27(1)��������������������������������������������������������749
Regulations 2015 (SI 2015/​904)��������������705 Data Retention (EC Directive)
Code of Practice for Electronic Regulations 2009 (SI 2009/​859)��������������661
Programme Guides (Addition of reg 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 662
Programme Services) Order 2012 Digital Economy Act 2017
(SI/​2011/​3003) ��������������������������������������������702 (Commencement No. 1) Regulations
Communications (Access to (SI 2017/​765)������������������������������������������������763
Infrastructure) Regulations 2016 Digital Economy Act 2017
(SI 2016/​700) (Infrastructure Access (Commencement No. 3) Regulations
Regulations)������������������������������������������������363 (SI 2017/​1286)����������������������������������������������368
Pt 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 465 Electronic Commerce (EC Directive)
reg 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 466 Regulations 2002 (SI 2002/​2013),
reg 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 466 reg 4(2)����������������������������������������������������������744
xvi

xxvi Table of Statutes

Electronic Communications and Foreign Satellite Service Prescription

Wireless Telegraphy Regulations Order 1998 (SI 1998/​1865)������������������������689
2011 (SI 2011/​1210)��������� 338, 419, 466, 505 Foreign Satellite Service Prescription
Sch 1 (No 2) Order 1998 (SI 1998/​3083) ����������689
para 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 315 Foreign Satellite Service Prescription
para 27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 506 Order 2005 (SI 2005/​220)��������������������������689
para 27(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 510 Investigation Powers (Interception
para 88. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 510 by Businesses etc for Monitoring
Electronic Communications Code and Record-​keeping Purposes)
(Conditions and Restrictions) Regulations 2018 (SI 2018/​356)��������������673
Regulations 2003 (SI 2003/​2553) ����������373 Investigatory Powers (Technical
reg 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 373 Capability) Regulations 2018
regs 5–​8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 373 (SI 2018/​353)������������������������������������������������660
reg 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374 Legislative Reform (Further Renewal
reg 14. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374 of Radio Licences Order) 2015
reg 16. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374 (SI 2015/​2052)����������������������������������������������705
Electronic Communications Code Local Digital Television
(Conditions and Restrictions) Programme Services Order 2012
(Amendment) Regulations 2013 (SI 2012/​292)������������������������������������������������702
(SI 2013/​1403)����������������������������������������������373 Open Internet Access
Electronic Communications Code (EU Regulation) Regulations 2016
(Conditions and Restrictions) (SI 2016/​607)��������������������������������������� 513, 785
(Amendment) Regulations 2017 reg 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 525
(SI 2017/​753)������������������������������������������������373 Privacy and Electronic Communications
Electronic Communications Code (EC Directive) Regulations 2003
(Jurisdiction) Regulations 2017 (SI 2003/​2426) (PECR)����������������������������� 648
(SI 2017/​1284)����������������������������������������������369 reg 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 494
Electronic Communications reg 2(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 679
(Market Analysis) Regulations 2003 reg 8(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 666
(SI 2003/​330)������������������������������������������������469 reg 9(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 674
Electronic Communications (Universal reg 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 678
Service) Order 2003 (SI 2003/​1904) ������136 reg 11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 678
art 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 494 reg 12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 678
Electronic Communications (Universal reg 14(5)(a)(ii). . . . . . . . . . . . . . . . . . . . . . . . . . 666
Service) (Amendment) Order 2011 reg 15. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 678
(SI 2011/​1209)����������������������������������������������419 reg 16. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 678
art 5(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 361 reg 16A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 678
Electronic Communications reg 17. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 675
(Universal Service) Regulations regs 18–​26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 680
2003 (SI 2003/​33)����������������������������������������360 reg 19. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 679
Foreign Satellite Service Prescription reg 19(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 680
Order 1993 (SI 1993/​1024)������������������������689 reg 20. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 664
Foreign Satellite Service Prescription reg 20(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 680
Order 1995 (SI 1995/​2917)������������������������689 reg 21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 679
Foreign Satellite Service Prescription reg 21(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 680
Order 1996 (SI 1996/​2557)������������������������689 reg 22(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 680
Foreign Satellite Service Prescription regs 25–​26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 680
Order 1997 (SI 1997/​1150)������������������������689 reg 33. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183
xxvi

Table of Statutes xxvii

Privacy and Electronic Communications Town and Country Planning

(EC Directive) (Amendment) (General Permitted Development)
Regulations 2011 (SI 2011/​1208)���648, 679 (Scotland) Amendment (No 2) 
Privacy and Electronic Communications Order 2001 (SSI 2001/​266)������������������������373
(EC Directive) (Amendment) Town and Country Planning (General
Regulations 2016 (SI 2016/​524)��������������679 Development) (Amendment) Order
Privacy and Electronic Communications (Northern Ireland) 2003 (SR 98)������������373
(EC Directive) (Amendment) (No. 2) Transfer of Undertakings (Protection
Regulations 2016 (SI 2016/​1177)������������680 of Employment) Regulations 2006
Regulation of Investigatory Powers (SI 2006/​246)������������������������������������������������655
(Maintenance of Interception Unfair Terms in Consumer
Capability) Order 2002 Contracts Regulations 1999
(SI 2002/​1931)����������������������������������������������660 (SI 1999/​2083)����������������������������������������������516
Satellite Television Service Regulations Video Recordings Act 1984 (Exempted
1997 (SI 1997/​1682)������������������������������������696 Video Recordings) Regulations 2014
Telecommunications (Data Protection (SI 2014/​2097)����������������������������������������������719
and Privacy) Regulations 1999 Wireless Telegraphy Act 2006
(SI 1999/​2093)��������������������������������������������� 648 (Directions to Ofcom) Order 2010
Telecommunications (Interconnection) (SI 2010/​3024)���������������������������� 122, 385, 421
Regulations 1997 (SI 1997/​2931)������������446 Wireless Telegraphy Act 2006
reg 6(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 448 (Directions to Ofcom) Order 2012
reg 6(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 448 (SI 2012/​293)������������������������������������������������702
Telecommunications (Lawful Business Wireless Telegraphy
Practice) (Interception of (Exemption) Regulations 2003
Communications) Regulations 2000 (SI 2003/​74)��������������������������������������������������419
(SI 2000/​2699) Wireless Telegraphy (Licence Award)
reg 3(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 673 Regulations 2012 (SI 2012/​2817)������������424
reg 3(1)(a)(cc) . . . . . . . . . . . . . . . . . . . . . . . . . . 673 Wireless Telegraphy (Exemption)
reg 3(2)(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 673 (Amendment) Regulations 2011
Telecommunications (Licence (SI 2011/​2950)����������������������������������������������422
Modification) (Mobile Public Wireless Telegraphy (Exemption and
Telecommunications Operators) Amendment) (Amendment)
Regulations 1999 (SI 1999/​2453)������������449 Regulations 2010 (SI 2010/​2512)������������419
Telecommunications (Licence Wireless Telegraphy (Exemption and
Modifications) (Standard Schedules) Amendment) (Amendment)
Regulations 1999 (SI 1999/​2450)������������449 Regulations 2013 (SI 2013/​1253)������������419
Telecommunications (Licensing) Wireless Telegraphy (Exemption and
Regulations 1997 (SI 1997/​2930)������������ 117 Amendment) (Amendment)
Television Multiplex Services Regulations 2014 (SI 2014/​1484)������������419
(Reservation of Digital Capacity) Wireless Telegraphy (Exemption and
Order 2008 (SI 2008/​1420) ����������������������699 Amendment) (Amendment)
Town and Country Planning, England Regulations 2017 (SI 2017/​46) ����������������419
and Wales (General Permitted Wireless Telegraphy (Limitation of
Development) Order 1995 Number of Licences) (Amendment)
(SI 1995/​418), Pt 24 ������������������������������������373 Order 2006 (SI 2006/​2786) ����������������������424
Town and Country Planning (General Wireless Telegraphy (Mobile Spectrum
Permitted Development) (England) Trading) Regulations 2011
Order 2015 (SI 2015/​596), Sch 1, Pt 16������144 (SI 2011/​1507)������������������������������������� 431, 432
xxivi

xxviii Table of Statutes

Wireless Telegraphy (Recognised Indonesia

Spectrum Access Charges) Regulation of Ministry of
Regulations 2007 (SI 2007/​392)��������������426 Maritime and Fishery
Wireless Telegraphy (Recognised No 33/​M EN/​2002, art 5(f)������������������������805
Spectrum Access Charges)
Regulations 2011 (SI 2011/​2762)������������426 Lebanon
Wireless Telegraphy (Recognised Law 431/​2002 of July 2002��������������������������������854
Spectrum Access Charges)
Regulations 2015 (SI 2015/​1399)������������426
Malaysia
Wireless Telegraphy (Recognised
Multimedia Act 1998 ����������������������������������������888
Spectrum Access and Licence)
(Trading Regulations) 2009
(RSA Trading Regulations) Myanmar
(SI 2009/​17)��������������������������������������������� 426–​7 Electronic Transactions Law (No 5 of
Wireless Telegraphy 2004), Arts 34 et seq������������������������������������891
(Register) Regulations 2004
(SI 2004/​3155)����������������������������������������������301 Netherlands
Wireless Telegraphy (Spectrum Trading) Telecommunications Law 2012
Regulations 2012 (SI 2012/​2187)������������132 Art 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 787
Wireless Telegraphy (Spectrum Trading) Art 7:1a. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 787
Regulations 2004 (SI 2004/​3154)�����������430 Art 7:4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 786–​7
Art 7:4a. . . . . . . . . . . . . . . . . . . . . . . . . . . 765, 787

Other Jurisdictions New Zealand

Submarine Cables and Pipeline
Australia
Protection Act 1996 ����������������������������������805
Telecommunications Act 1997, s 4������������������ 11
Telecommunications Act 2001 ����������������������437
Telecommunications and Other
ss 102–​105. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305
Legislation Amendment
s 106. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305
(Protection of Submarine Cables
s 110. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305
and Other Measures) Act 2005,
No 104, Sch 1, Pt I, ss 36–​37 ��������������������805
Nigeria
Brazil Communications Act 2003,
Law No. 12965 Decree No. 8771/​2016 ����������766 Chapter VI, Part I ��������������������������������������859

Finland Russia
Information Society Code (917/​2014)������������766 Federal Law No. 374-​FZ������������������������������������661

Germany Slovenia
Federal Telecommunications Law on Electronic
Law (TKG), § 6 ����������������������������������� 627, 633 Communications 2012 ����������������������������766
Teleservices Act 1997 (TDG)����������������������������739
Solomon Islands
India Telecommunications Act 2009
Regulations (No. 2 of 2016)������������������������������766 (No 20 of 2009)��������������������������������������������859
xxi
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
x
xxx Table of Statutes
§ 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
xxi

Table of EU Legislation

Regulations Reg 717/​2007/​EC [2007] OJ L 171/​32

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
(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
xxix
xxxii Table of EU Legislation
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
xxixi

Table of EU Legislation xxxiii

Dir 90/​388/​EEC [1988] OJ L 192/​10 Art 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190–​1

(Services Directive) �������� 157, 163, 168, 402 Dir 97/​13/​EC [1997] OJ L 117 (Licensing
Art 1(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164 Directive) ���������������304, 310–​13, 404–​5, 447
Art 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169 Recital 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 404
Art 4c. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190 Recital 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 404
Art 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179 Recital 12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 312
Dir 91/​263/​EEC [1991] OJ L 128/​1 Recital 13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 404
(Telecommunications Terminal Art 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311
Equipment)��������������������������������������������������166 Art 5(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311
Dir 92/​4 4/​EEC [1992] OJ L 165/​27 Art 5(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 312
(Open Network Provision Art 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311
to Leased Lines)���������������������������������173, 584 Art 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 310
Recital 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180 Art 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311
Dir 93/​38/​EEC [1993] OJ L 199/​8 4 Art 9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311
(Procurement Procedures of Entities Art 9(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 312
Operating in the Water, Energy, Art 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311
Transport and Telecommunication Art 10(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311
Sectors) ��������������������������������������������������������163 Art 10(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311
Dir 94/​46/​EU [1994] OJ L 268/​15 Art 11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 312, 404
(Satellite Communications)�����������169, 800 Art 12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 312
Art 2(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163 Art 13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156, 312
Dir 95/​46/​EC [1995] OJ L 281/​31 (Data Art 14. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185
Protection Directive, DPD)�������322, 646–​9, Annex 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311
651, 655, 669, 676, 746, 776 Annexes 3.1–​3.6. . . . . . . . . . . . . . . . . . . . . . . . 311
Recital 47. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 664 Annex 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311
Art 2(h). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 666 Dir 97/​33/​EC [1997] OJ L 199/​32
Art 8(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 665 (Interconnection Directive)�������������������172,
Art 16. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 664 444–51, 447, 456, 460, 489, 503
Art 17. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 667 Art 3(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 445
Art 17(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 664 Art 4(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 446
Art 25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 639 Art 4(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 445
Dir 95/​47/​EC [1997] OJ L 281/​51 Art 4(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 445
(Standards for the Transmission of Arts 6–​8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 446
Television Signals)��������������������������� 451, 707 Art 7(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 461
Dir 95/​51/​EC [1995] OJ L 256/​49 Annex I. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 445
(Use of Cable TV Networks)��������������������169 Annex II. . . . . . . . . . . . . . . 446–7, 449, 454, 468
Dir 95/​62/​EC [1995] OJ L 321/​6 (ONP Dir 97/​36/​EC [1997] OJ L 202/​60
Voice Telephony Directive) ����������� 172, 187 (Pursuit of Television
Recital 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181 Broadcasting Activities)��������������������������685
Art 2(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180 Recital 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 686
Art 7(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 502 Dir 97/​51/​EC [1997] OJ L 295/​23
Dir 96/​2/​EC [1996] OJ L 20/​59 (Mobile and (Competitive Environment in
Personal Communications)�������������169, 402 Telecommunications��������������������������������584
Dir 96/​19/​EC [1996] OJ L 74/​13 (Full Recital 9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181
Competition in Telecommunications Art 1(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180
Services)�������������������������������������������� 164, 190–​1 Art 2(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
Art 1(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169 Art 11(1a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
xvxi
xxxiv Table of EU Legislation
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
xv
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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
xxxv
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
xxxvii
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
xxxivi
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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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Table of EU Legislation
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
xxxix
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
xl
xl Table of EU Legislation
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
xli

Table of International Instruments

Agreement between the European Art VI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 796

Communities and the Government Art VIII. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 796
of the United States of America on Arts XIV–​X X . . . . . . . . . . . . . . . . . . . . . . . . . . . 796
the application of positive comity Convention on the International
principles in the enforcement of Maritime Satellite Organization
their competition laws, OJ L 173/28, 1976 (INMARSAT) ������������������������������������799
18 June 1998��������������������������������������������������24 Convention on the Registration
Agreement Establishing the World of Objects Launched into Outer
Trade Organization 1994 ������������������������828 Space 1975
Art III(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 827 Art IV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 796–​7
Agreement on Government Convention Télégraphique
Procurement ����������������������������������������������829 Internationale de Paris (1865)����������������391
Agreement on Trade-​Related Aspects Council of Europe Convention for the
of Intellectual Property Protection of Individuals with
(TRIPS) 1994������������������������������������������� 828–​9 Regard to Automatic Processing of
Agreement relating to the International Personal Data 1981
Telecommunications Satellite Art 3(2)(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 649
Organization (INTELSAT) 1971 Council of Europe Convention on
Art 1(h). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 798 Cybercrime 2001
Art IV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 798 Additional Protocol . . . . . . . . . . . . . . . . . . . . 758
Art XVII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 799 Art 6.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 758
Basic Telecommunications Agreement EC Treaty 1950 ����������������������������������������������������161
(BTA), 1997�������������������������������������������239–​40 Art 30. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166
Convention establishing the European Arts 34–​37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166
Telecommunications Satellite Art 50. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 315
Organization 1982 (EUTELSAT)�� 799–​800 Art 60. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 314
Art III(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 799 Art 81. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178, 569
Art XIV(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800 Art 81(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 541
Convention for the Protection of Art 82. . . . . . . . . . . . . . . . . . . . . . . . . 178, 560, 569
Submarine Cables 1884 Art 86. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166, 496
Art 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 804 Art 86(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 496
Art 311(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 804 Art 95. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
Convention on International Liability for Art 249 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
Damage Caused by Space Objects 1972 European Charter of Fundamental
Art I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 795 Rights of the EU 2000�������������� 491, 504, 762
Art I(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 795 Art 7. . . . . . . . . . . . . . . . . . . . . . . . . . 645, 646, 655
Art I(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 795 Art 8. . . . . . . . . . . . . . . . . . . . . . 646, 655, 670, 674
Art II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 796 Art 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 714
Art III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 796 Art 11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 754
Art IV.1(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 796 Art 16. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 709, 783
Art V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 795 Art 17. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 709, 783
xli
xlii Table of International Instruments
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
xli
Table of International Instruments
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
xliii
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
xvil
xvl

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, gov-
ernments, and regulators on regulatory restructuring, licence auctions, corporate
transactions, and privatizations in the communications sector, with a particular
focus on developing countries. Email: ann.buckingham@lw.com.

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 telecommuni-
cations regulation and sector liberalization. She has been at Ofcom since 2006,
during which time she has been closely involved with a number of European le-
gislative 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, aca-
demia, 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 lec-
tures 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
xvli

xlvi List of Contributors

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 ex-
perience 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 TIAA-
CREF, 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 regula-
tion. 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 communica-
tions 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 inter-
national tech transactions and communications regulatory issues including com-
munications 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
xvli

List of Contributors xlvii

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 telecom-
munications division with the Slovenian telecoms regulator, acted as a regulatory
advisor to a number of telcos and other ICT businesses, and consultant to regula-
tory 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 frame-
work. 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 re-
nowned 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 re-
searched 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 collabora-
tive 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 intel-
lectual property department of Lovells (now Hogan Lovells) and worked as the
in-house lawyer for TalkTalk Direct, a subsidiary of Carphone Warehouse.
xvli

xlviii List of Contributors

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 ap-
plications 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 state-
ment of FCC policy. Email: primej@gmail.com.

David Satola is Lead Counsel, Technology and Innovation, in the World Bank Legal
Department, focusing on legal aspects (transactional and regulatory) of telecom-
munications reforms, internet governance, human rights on the internet, cyber-
security/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
xil

List of Contributors xlix

and Co-Chair of the Satellite Finance Network (www.satellitefinancenetwork.

org), and writes two regulatory columns for international satellite industry jour-
nals: 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.
l
1

Part I

FUNDAMENTAL S
2
3

TELECOMMUNIC ATIONS L AW
AND R EGUL ATION

AN INTRODUCTION

Ian Walden

1 .1 The Subject Matter  3

1.2 The Telecommunications Sector  4
1.3 Technology and Terminology  5
1.4 Telecommunications Law and Regulation  8
1.5 Liberalization and Regulation  9
1.6 Liberalization and Privatization  11
1.7 Policy, Law, and Regulation  12
1.8 Regulatory Framework  14
1.9 Regulatory Powers  16
1.10 Regulatory Models and Methods  19
1.11 Regulation and Competition Law  21
1.12 Regulation and Standards  22
1.13 Regulating in the Global Economy  24
1.14 Concluding Remarks  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 provi-
sion of all forms of network infrastructure, communication services, and equip-
ment 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
4

4 Part I  Fundamentals

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, how-
ever, 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 com-
mitment 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 telecom-
munications sector within the global economy. At the end of the twentieth cen-
tury, 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 for-
tunes 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 restruc-
turing. Nearing two decades into the new century, it is estimated that the tele-
communications 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 fluctu-
ates 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 in-
volves 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 <https://​w ww.ovum.com/​ovum-​forecasts-​1-​5 -​t rillion-​i n-​revenues-​f rom-​g lobal-​telecoms-​media-​
market-​i n-​2021/​>.
3
 Ofcom Communications Market Report: UK, 3 August 2017, at 1.3.
5

1  Telecommunications Law and Regulation 5

needs to become familiar. Such terminology relates, in large part, to the tech-
nology 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 fur-
ther, 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 con-

nection 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,

4
  Professor Laurie Cuthbert, Queen Mary, University of London, helped draft this section originally.
5
  See in particular Chapters 4, 14, and 15.
6

6 Part I  Fundamentals

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 transmis-
sion 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 pro-
hibitive. 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 net-
work (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 organiza-
tions 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;
7

1  Telecommunications Law and Regulation 7

• 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 particu-
larly 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 avail-
ability, 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 net-
work, 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 com-
plicated, 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 trad-
itional telephone networks, such as flat rate rather than minute-​based tariffs,
which has enabled the implementation of much simpler (and cheaper) billing sys-
tems. 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

6
  In June 2015, BT announced that it plans to switch off its PSTN and ISDN networks by 2025.
8

8 Part I  Fundamentals

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 gener-
ally perceived as the domain of ‘media law’7 or ‘internet law’ rather than ‘telecom-
munications 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 min-
utes.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 compara-
tive 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 telecommu-
nications 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

7
  eg Goldberg, Sutter, and Walden, Media Law and Practice (Oxford: OUP, 2nd edn, 2019).
8
  eg RouteTrader <http://​r tx.routetrader.com>.
9

1  Telecommunications Law and Regulation 9

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 lib-
eralization 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 regu-
lators when trying to establish legal clarity and certainty for an industry under-
going convergence with other industries.10 The internet is the classic example of
this technological phenomenon. The existence of a clear legal and regulatory dis-
tinction 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 tele-
communications 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 struc-

ture, from that of monopoly to one of competition. Many of the laws and regula-
tions 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, net-
works, and services. Liberalization of the market for telecommunications equip-
ment 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 im-
pact of the telegraph and Carr, N, The Big Switch (New York: Norton, 2013).
10

10 Part I  Fundamentals

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 in-
frastructure, 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 alterna-
tive, particularly in developing countries and/​or driven by environmental con-
cerns. 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 monop-
olistic, 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 en-
sure the transition to competition, but subsequently to govern persistent market
features that militate against competition. The continuing importance of regula-
tion 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 devel-
opments, 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 bi-
ennial 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 regula-
tory authority, to review the regulatory framework and remove any unnecessary
burdens (Communications Act 2003, s 6).
1

1  Telecommunications Law and Regulation 11

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 re-
gard 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 in-
dustry 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 straightfor-
ward. 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 eco-
nomic sector.
Concerns that a state-​owned incumbent might inhibit market entry have come
a clear second to such revenue-​raising concerns. Indeed, governments have re-
mained 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 pro-
cess 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.
12

12 Part I  Fundamentals

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 gov-
ernment. 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 per-
formance of the incumbent, particularly where, as in the UK, a significant pro-
portion 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 inter-
national 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 com-

petitive 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).

12

 eg Ofcom Report, ‘Results of research into consumer views on the importance of communications
13

services and their affordability’, 22 July 2014.

13

1  Telecommunications Law and Regulation 13

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 tele-
communications is the role of service providers in law enforcement and national
security matters. Telecommunication operators are often subject to ex ante obliga-
tions 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 suc-
cessfully 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 telecom-
munications 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 refer-
ence when intervening in the market.

  See further Chapter 4, at Section 4.8.

14

15
  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 de-
cision (2006/​621/​EC) on the state-​a id implemented by France for France Télécom, OJ L 257/​11, 20 September
2006, respectively.
14

14 Part I  Fundamentals

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 cer-
tainties absent in the statutory framework, or contain detailed obligations con-
trolling 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 regu-
latory authority with a specific remit to intervene in the operation of the telecom-
munications 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 regu-
lation of the sector between different authorities. In the UK, for example, the

19
  See Commission Communication, ‘Towards a new framework for Electronic Communications infra-
structure 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 telecommunica-
tions 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.
15

1  Telecommunications Law and Regulation 15

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 juris-
dictional complexities are multiplied, sometime requiring recourse to the courts
to establish and clarify the right to regulate (Chapter  5). Regulatory multipli-
city, 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 inter-
national 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 sat-
ellite 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 con-
trast, 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 organiza-
tions 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 infra-
structure. 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
 <http://​c a.globalstar.com/​en/​>.
16

16 Part I  Fundamentals

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 harmoniza-
tion 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 li-
censing:  granting the right to build, operate, and supply telecommunications
equipment, networks, and/​or services. Liberalization is about the entry of com-
petitors 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 infra-
structure 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 interven-
tion 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 electromag-
netic spectrum for use in wireless communications. Historically, spectrum was
distributed between the incumbent, the military, and various related public ser-
vice 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 re-
sources. In the UK and Germany, auctions for the 3G mobile spectrum netted their
17

1  Telecommunications Law and Regulation 17

governments $30 billion and $50 billion respectively. However, as with much eco-
nomic 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 ex-
tremely difficult task and one which, if mistakes are made, can generate substan-
tial 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 pos-
sible 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 liberal-
ization, 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 spec-
trum, as well as resources recognized under public international law as the ‘prop-
erty of all mankind’, specifically outer space and the high seas (Chapter 16). Public
policy makers and regulators are also giving greater consideration to environ-
mental 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).
18

18 Part I  Fundamentals

systems. Co-​location and facility-​sharing obligations are designed to address en-

vironmental as well as competition concerns (Chapter 8).
One critically important area of regulatory intervention is that of dispute reso-
lution. 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 settle-
ment 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 lib-
eralization 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 regula-
tory 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, chal-
lenging 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 exces-
sively procedural in order to stem legal challenges and the associated commit-
ment 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.
25

  See, eg, Ofcom, Dispute Resolution Guidelines, 7 June 2011.

26
19

1  Telecommunications Law and Regulation 19

1.10  R E GUL ATORY MODEL S A ND ME THOD S

The importance of the regulatory authority in the telecommunications market re-

quires consideration to be given to the structure and the manner of working of
the authority being established. Generally, regulatory authorities can be distin-
guished 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 exces-
sively 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 re-
muneration rates between public authorities and private sector operators means
staff retention can be a significant concern for a regulator trying to build and re-
tain institutional experience.
Personalities are always likely to influence the prevailing regulatory environ-
ment and the manner in which policies are pursued. Where the regulatory au-
thority 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 sur-
face 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
20

20 Part I  Fundamentals

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 re-
fers to measures that arise in reaction to the decisions and activities of entities.
Establishing the costs associated with the provision of telecommunications net-
works 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 identi-
fication 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 regu-
latory process, in terms of attribution, calculation methodology, eg whether his-
torical 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 mech-
anism for ensuring that a dominant operator is controlled whilst providing suf-
ficient 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 infor-
mation about various aspects of their business activities, either to the regulator,
competitors, or consumers: eg tariff filings and technical standards for intercon-
nection. Information asymmetry is an inevitable regulatory problem in a complex
sector such as telecommunications. Transparency obligations are designed to re-
move the likelihood of anti-​competitive practices and to provide a certain degree
of legal certainty, for example, through obligations to publish standard contrac-
tual 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 net-
works and services, OJ L 108/​7, 24 April 2002, at Art 12 and Annex IV, Part A.
21

1  Telecommunications Law and Regulation 21

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 inef-
fective 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 regula-

tory 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.
28

 See Emtel Ltd v The Information Technology and Communication Technologies Authority & ors (2017) SCJ
29

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.
2

22 Part I  Fundamentals

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 regula-
tion 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 add-
ition, the nature of the telecommunications industry as a ‘networked’ industry,
with parallels in industries such as airlines and power, give rise to certain char-
acteristics 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 conse-
quence, 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 formu-
lating 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 telecom-
munications: an overview’, in Amongst Friends in Computers and Law (Netherlands: Computer/​L aw Series,
No 8, 1990), at 75–​92.
23

1  Telecommunications Law and Regulation 23

The nature of the communications process requires that the various parties ad-
here to a certain agreed standard, whether in terms of language, protocol, num-
bers, 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 exist-
ence 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 telecom-
munications 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 flex-
ible and rapid processes. Participation in the work of such bodies can require op-
erators 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 com-
pany, 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 applic-
able, particularly the ‘essential facilities’ doctrine. 35 However, regulators may
be concerned to ensure that ex ante measures are in place to prohibit such prac-
tices (Chapter 10).

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

35
24

24 Part I  Fundamentals

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 behav-
iour 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 ven-
ture 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 agree-
ments 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 na-
tional incumbent may also be the subject of regulatory intervention. For example,

36
  eg Commission Recommendation ‘On Leased lines interconnection pricing in a liberalized telecommu-
nications 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.
25

1  Telecommunications Law and Regulation 25

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 con-
sequences were the merger to be successful was that BT may end up with a sub-
stantial 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 effect-
ively 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 telecommuni-
cations sector has gone from an environment of scarcity to one of relative or ac-
tual abundance. The legal framework governing such abundance should become
less complex than that required during the process of transition from a monop-
olistic 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 glo-
balization on merger activity, which may require traditional competition law prin-
ciples 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 as-
pect of a telecommunications lawyers’ work, compared to issues of establishment
and operation.
Telecommunications law is evolving rapidly in parallel with the market it pur-
ports 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.

38
26

26 Part I  Fundamentals

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 out-
line of some of the key aspects of international best practice in law and regula-
tion for the telecommunications or communications sector over the next five to
ten years.
27

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 regula-
tory concepts of the industry. While the focus is mainly on the economic regula-
tory 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.
28

28 Part I  Fundamentals

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 essen-
tial for those who work in regulation—​whether in companies, government, or regu-
latory 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 corporat-
ization. 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 pos-
ition 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 cus-
tomers. 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.
29

2  The Economics of Regulation 29

2 .3  THE PR INC IPL E S OF E CONOMIC R E GUL ATION

Before discussing the alternative forms and implementation of economic regula-

tion 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 What does this mean?
regulation

Prevent possible abuse Economic regulation should be focused on preventing abuse of

of monopoly power
Regulation should
not distort business
decisions
Costs of regulation
should be limited to
that which is essential
Regulation should
try to ‘mimic’ the
likely operation of a
competitive market
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.
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.
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.
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.
30

30 Part I  Fundamentals

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 deci-
sions are not distorted.

2.4.1  Strong presence of common costs

Common costs are a strong feature of communications networks. When a com-
munications 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 con-
nected, additional electronic equipment at each end of the connection (ie at
the customer’s location and the communications firm’s location) must be in-
stalled to use the copper/​fibre for transmission purposes. In essence, the com-
munications firm must make three capacity investment decisions: (i) how much
common capacity to install to handle actual usage; (ii) how much access con-
nection 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 whole-
sale and retail services. These costs—​so-​called ‘common costs’—​a re incurred re-
gardless 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.
31

2  The Economics of Regulation 31

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 avail-
able capacity, additional output can be produced at nearly zero marginal or incre-
mental 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

6
  Named after Frank P Ramsey, who set out this issue in 1927.
7
  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 other-
wise 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.
32

32 Part I  Fundamentals

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 con-
sumer (not the firm) who suffers because his/​her calls or data packets are not de-
livered.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 exter-
nality. 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 intercon-
nection 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.
3

2  The Economics of Regulation 33

customers are attracted to an operators’ network based on the cost of call origin-
ation, 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 net-
works, they are subject to considerable economies of scale and scope. In consid-
ering 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 in-
creases, 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.
34

34 Part I  Fundamentals

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 com-
panies 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 prod-
ucts 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 con-
sider: 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 in-
crease, production to supply the relevant products or services (supply-​side sub-
stitution)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 com-
petition 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 pro-
duced 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 com-
petitive levels, manufacturers producing other grades could easily start supplying that grade; market power is
thus constrained by substitution by suppliers.
35

2  The Economics of Regulation 35

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 sup-
pliers 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 as-
sumed 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 investiga-
tion 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 ‘cur-
rent’ 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 rele-
vant 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.
36

36 Part I  Fundamentals

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 pre-
vent 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 de-
gree 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 com-
monly used as a preliminary indicator of dominance. Although, they are not con-
clusive 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 persist-
ently above 50 per cent.25 Market shares between 40 per cent and 50 per cent could

23
  Case 27/​76, United Brands v Commission [1978] ECR 207, [1978] 1 CMLR 429.
24
  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 dom-
inance 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.
37

2  The Economics of Regulation 37

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 dis-
cussion 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 differ-
entiated products such as retail products. Whichever measure is used, for the as-
sessment 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 desig-
nation 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 indi-
cate 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.
38

38 Part I  Fundamentals

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 his-
torical 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 ac-
commodated without any significant declines in prices and profits. The rate of in-
novation 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 innov-
ation 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 con-
sidered. 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 Examples
barrier

Absolute advantages—​access to • Examples are:

important assets which are not
available to entrants
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
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;
39

2  The Economics of Regulation 39

Types of entry Examples

barrier

o The presence of sunk costs could also affect entry into

Exclusionary advantages—​
behaviour by the incumbent can
also act as a barrier to entry
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.
• 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
40

40 Part I  Fundamentals

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 sup-
plier 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 im-
portant 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 dis-
cussed, market shares are not conclusive on their own. The complex nature of competi-
tion 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 de-
termine 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 <https://​w ww.gov.uk/​govern-
ment/​uploads/​s ystem/​uploads/​attachment_​data/​fi le/​2 84400/​oft415.pdf>.
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.
41

2  The Economics of Regulation 41

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 ef-
ficiency, since they have no incentive to do so. If they reduce their costs, the conse-
quence 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 in-
dustry). 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 be-
cause 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 cred-
itors, 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.
42

42 Part I  Fundamentals

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 oper-
ation 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 net-
works 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 sec-
tors 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
43

2  The Economics of Regulation 43

circumstances, the NRA should consider whether there is a need for additional safe-
guard 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 set-
ting 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 activ-
ities 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 rela-
tively 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 com-
munications, 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 strat-
egies 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 fa-
cing 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.
4

44 Part I  Fundamentals

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 construc-
tion 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 in-
cumbent 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 moni-
toring 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.
33

  Replacement or Current Costs—​w hat it costs to replace old assets with modern equivalent assets of equal
34

remaining life. This reflects general inflation, plus specific effects such as technical progress.
45

2  The Economics of Regulation 45

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 pla-
cing 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 ex-
ercise 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 ra-
ther 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 re-
cover 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 con-
sider 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 un-
able 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 particu-
larly 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, rele-
vant, 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 <http://​webarchive.nationalarchives.gov.uk/​20140402142426/​http:/​w ww.
oft.gov.uk/​shared_​oft/​economic_ ​research/​oft1224.pdf>.
46

46 Part I  Fundamentals

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 coun-
tries. This is partly because each industry/​country has an individual NRA, al-
lowing personal differences to manifest themselves. More fundamental, however,
are the underlying differences in the structure of the regulated industry. For ef-
fective 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 signifi-
cant scale and scope economies in telecoms networks (see Section 2.4). The incum-
bent 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 in-
tegrated firm’s incentives and ability to distort competition in the downstream
market. In particular, the regulator can pursue a range of different models of sep-
aration (see Table 2.3 below). Broadly, each model provides successively stronger
constraints on the ability of the vertically integrated incumbent to act on this in-
centive 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
2. Creation of a wholesale
division
3. Virtual separation
Separate financial reporting comprising of profit and
loss statements and balance sheets for the upstream and
downstream entities
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
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
<https://​mpra.ub.uni-​muenchen.de/​3572/​1/​M PRA_​paper_​3572.pdf>.
47

2  The Economics of Regulation 47

4. Functional separation Model 3 accompanied by the physical separation of the

5. F
 unctional separation with
local incentives
6. Functional separation with
independent governance
7. Legal separation
8. Structural separation
business and its processes eg location, staff, branding,
management information systems
Model 4 with different management incentives to those of
the wider firm
Model 5 but with the addition of a separate divisional Board
with non-​executive members who act independently from
the group Board
Upstream business is established as a separate legal entity
within the wider group, but remains under the same overall
ownership
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 incen-
tive to discriminate, structural separation may not in itself change the bottleneck
division’s incentives to operate efficiently, invest, or deliver a good quality of ser-
vice. Therefore, the NRA would still need to continue to regulate the structurally
separate bottleneck division to protect consumers in the absence of strong com-
petition. 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.
48

48 Part I  Fundamentals

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 imple-
mented in the UK. Arguably, the UK experience can be divided into three phases
of liberalization and economic regulation (i) privatization and the early develop-
ment of competition; (ii) the end of the UK duopoly policy; and (iii) increasing con-
vergence 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 equip-
ment, followed by services, and quickly spread to the beginnings of network com-
petition 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 au-
tumn 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 govern-
ment, 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 deci-
sions, 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 com-
panies charged high and generally parallel prices.
49

2  The Economics of Regulation 49

To open up the possibility of additional local network competition, the govern-

ment also licensed cable operators to provide all forms of communications services
in addition to television programme services. However, in deference to the du-
opoly 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 in-
dustry 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 cus-
tomers 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 interconnec-
tion regime.38 In addition to the requirement for access and interconnection regu-
lation, 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 con-
straints on the established networks, particularly BT, from providing television pro-
gramme 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

38
  See further Chapter 8.
39
 DTI, Competition and Choice: Telecommunications Policy for the 1990s (London: HMSO, 1991 cm1461).
50

50 Part I  Fundamentals

personal communication networks (PCNs) to extend the reach of mobile competi-

tion. 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 net-
work 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 along-
side 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 com-
petitive 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 imple-
ment 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 en-
sure 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 founda-
tion 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 mar-
kets 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.

40
51

2  The Economics of Regulation 51

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 regula-
tion. Given the increasing convergence between telecommunications, broadcasting,
and information technology, five new EU Communications Directives were intro-
duced 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 pro-
portionate 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.

41

  Commission guidelines on market analysis and the assessment of significant market power under the
42

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 <http://​webarchive.
nationalarchives.gov.uk/​20160702162827/​http:/​stakeholders.ofcom.org.uk/​consultations/​telecoms_​p2/​>.
44
  See further Chapter 7.
52

52 Part I  Fundamentals

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 al-
though 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 whole-
sale inputs provided by the incumbent, BT. Ofcom decided therefore that the
focus of economic regulation should be on opening access to the network elem-
ents 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 high-
lighted 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 re-
main.47 In particular, Ofcom highlighted that given the increasing dependence on
communications, more needs to be done to make sure there is widespread avail-
ability 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 <http://​media.
ofcom.org.uk/​news/​2013/​w inners-​of-​t he-​4g-​mobile-​auction/​>.
46
 Ofcom, ‘A notice under Section 155(1) of the Enterprise Act 2002’, 2005, at <http://​webarchive.
nationalarchives.gov.uk/​2 0160702162827/​http:/​stakeholders.ofcom.org.uk/ ​binaries/​c onsultations/​s ec155/​
summary/​sec155.pdf>.
47
  Ofcom, ‘Initial conclusions from the Strategic Review of Digital Communications’, 2016, at <https://​
www.ofcom.org.uk/​phones-​telecoms-​a nd-​i nternet/​i nformation-​for-​i ndustry/​policy/​d igital-​comms-​review/​
conclusions-​strategic-​review-​d igital-​Communications>.
53

2  The Economics of Regulation 53

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 pro-
vide service to retail customers. It said that while functional separation and EoI (es-
sentially 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 competi-
tors. 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.

48

  Ofcom, ‘Making communications work for everyone:  Initial conclusions from the Strategic Review of
49

Digital Communications’, 2016, section 6 at <https://​w ww.ofcom.org.uk/​_ ​_​data/​a ssets/​pdf_​fi le/​0 016/​50416/​
dcr-​statement.pdf>.
50
  Ofcom Press Release, ‘BT agrees to legal separation of Openreach’, 2017, at <https://​w ww.ofcom.org.uk/​
about-​ofcom/​latest/​media/​media-​releases/​2017/​bt-​agrees-​to-​legal-​separation-​of-​openreach>.
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 <https://​w ww.ofcom.org.uk/​_ ​_​data/​assets/​pdf_​file/​0035/​98855/​Openreach-​consultation-​2017.pdf>.
54

54 Part I  Fundamentals

The discussion above provides a whistle-​stop tour of the broad phases of liber-
alization 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 com-
munications 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 com-
mitments were jettisoned and new arrangements were put in place. These tight-
ened 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.
5

2  The Economics of Regulation 55

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 devel-
oped an effective wholesale line rental (WLR) product, 54 the cap would be fur-
ther 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 regu-
lation 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 ef-
fective 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 pro-
cesses 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 exam-
ined 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 <http://​webarchive.
nationalarchives.gov.uk/​2 0160702162827/ ​http:/​s takeholders.ofcom.org.uk/ ​binaries/​c onsultations/​retail/​
statement/​r pcstatement.pdf>.
56

56 Part I  Fundamentals

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 con-
sumers through the process of switching.
To further inform consumers of their available options, Ofcom has also priori-
tized 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 mech-
anism 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 im-
prove 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 en-
courage its standalone telephony customers to look for better value deals to pro-
mote 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 <http://​webarchive.nationalarchives.
gov.uk/​2 0160702162827/ ​http://​s takeholders.ofcom.org.uk/ ​b inaries/​c onsultations/​c onsumer-​s witching-​
review/​summary/​Consumer_​Switching.pdf>.
57
 Ofcom, ‘Comparing service quality’, 2017, at <https://​w ww.ofcom.org.uk/​phones-​telecoms-​a nd-​
internet/​advice-​for-​consumers/​quality-​of-​service>.
58
 Ofcom, ‘Automatic compensation’, 2017, at <https://​w ww.ofcom.org.uk/​_ ​_​data/​a ssets/​pdf_ ​fi le/​0 030/​
98706/​automatic-​compensation-​consultation.pdf>.
59
  Ofcom Press Release, ‘Landline prices review to protect elderly and vulnerable’, 2016, at <https://​w ww.
ofcom.org.uk/​about-​ofcom/​latest/​features-​a nd-​news/​landline-​prices-​review>.
60
  Ofcom, ‘Review of the market for standalone landline telephone services: statement’, 2017, at <https://​
www.ofcom.org.uk/​_ ​_​data/​a ssets/​pdf_ ​fi le/​0 015/​107322/​standalone-​landline-​statement.pdf>.
57

2  The Economics of Regulation 57

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 sub-
ject to regulatory control, tended to expand. Secondly the severity of X, the de-
duction 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 par-
ticular the effect of price regulation on nascent competition. In a monopoly envir-
onment, 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 in-
cumbent-​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 be-
come 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 en-
sure 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.
58

58 Part I  Fundamentals

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 wel-
fare. 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 re-
balancing 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 rebalan-
cing 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, re-
balancing is difficult to implement. Firstly, it is difficult to separately define costs

  See Section 2.14 for a discussion about marginal costs.

62
59

2  The Economics of Regulation 59

where two services are closely linked. Secondly and more importantly from a pol-
itical 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 pro-
cess. Oftel was concerned about this and so concluded in 1986 that no further re-
balancing 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 un-
profitable. 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 sub-
sidization 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.

63

  An industry exhibiting economies of density is one where the more closely packed together the customers
64

are, the lower the unit costs.

60

60 Part I  Fundamentals

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 be-
tween 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 commu-
nications 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 rec-
ognized 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 com-
pleted, 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 em-
phasis is likely to be upon targeting subsidies to ensure that the telephone is af-
fordable 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 rev-
enues 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
61

2  The Economics of Regulation 61

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 cal-
culation. 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 cal-
culation 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 in-
cumbent, 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 communica-
tions 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 oper-
ators. 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 <http://​webarchive.nationalarchives.
gov.uk/​2 0040104233440/ ​http:/​w ww.ofcom.org.uk/​s tatic/​a rchive/​oftel/​publications/​1995_ ​9 8/​c onsumer/​
univ_​2 .htm>.
62

62 Part I  Fundamentals

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 im-
proved 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 broad-
band USO.67 This is intended to give everyone a right to a decent broadband con-
nection, 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 se-
cure 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 broad-
band 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 regu-
latory 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 <http://​
webarchive.nationalarchives.gov.uk/​2 0040104233440/​http:/​w ww.ofcom.org.uk/​static/​a rchive/​oftel/​publi-
cations/​eu_​d irectives/​2003/​u so0303.htm>.
67
  Government press release, ‘Government plans to make sure no-​one is left behind on broadband access’,
2015, at <https://​w ww.gov.uk/​government/​news/​government-​plans-​to-​m ake-​s ure-​no-​one-​i s-​left-​b ehind-​
on-​broadband-​access>.
68
  Letter from DCMS to Ofcom, March 2016, at <https://​w ww.ofcom.org.uk/​_ ​_​data/​a ssets/​pdf_ ​fi le/​0 027/​
53676/​dcms_​letter.pdf>.
69
  Ofcom, ‘Achieving decent broadband connectivity for everyone: Technical advice to UK Government on
broadband universal service’, 2016, at <https://​w ww.ofcom.org.uk/​_​_​data/​a ssets/​pdf_​fi le/​0 028/​95581/​fi nal-​
report.pdf>.
70
 See <https://​w w w.gov.uk/​g overnment/​n ews/​h igh-​s peed-​b roadband-​t o-​b ecome-​a -​l egal-​r ight>.
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).
63

2  The Economics of Regulation 63

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 net-
work increases with the number of people on the network. This means that com-
petition 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 intercon-
nect 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 regu-
latory 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 behav-
iour 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.

  See also Chapter 8.

71 72
  See further Chapter 8.
  The effectiveness of an entrant’s challenge to an incumbent is dependent on not only price but the non-​
73

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 nat-
ural monopoly features. See Vickers, J and Yarrow, G, Privatisation: An Economic Analysis (Cambridge: MIT
Press, 1998).
64

64 Part I  Fundamentals

In contrast, if interconnect and access charges are set too low, this could inef-
ficiently 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 invest-
ment 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, tech-
nology choices may be driven by a short-​term focus of recovery of network costs ra-
ther 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 inter-
connect 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 regula-
tory 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 set-
ting 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.
65

2  The Economics of Regulation 65

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 de-
partments, administration, human resources and the Chief Executive’s office. To
ensure recovery of these common costs, under the FAC method, these are nor-
mally allocated to the respective service on the basis of either output, gross rev-
enues, 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 alloca-
tions, 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 al-
located 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 ineffi-
cient. 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 mar-
ginal 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 mar-
ginal 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.
6

66 Part I  Fundamentals

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 in-
puts 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 calcula-
tion 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 sig-
nals to consumers and the market.
LRMC is however rather difficult to calculate in practice. Inputs (such as staff, ve-
hicles, and machines) can only be sensibly varied in larger discrete amounts in re-
sponse 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 incre-
ment 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 dis-
tance 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/​eco-
nomic 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 effi-
cient costs to be recovered through interconnect charges.
67

2  The Economics of Regulation 67

or fully allocated costs. The first step involves (where necessary) re-​valuing the as-
sets 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 be-
tween the two models allows for only relevant costs to be recovered. If the NRA re-
lied 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 fa-
vour 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 ac-
tual network in place, the assumptions underpinning the model may be unreal-
istic. 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 de-
fined 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 incre-
mental 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 set-
ting purposes, it is fairly standard practice to mark-​up LRIC by an amount con-
sidered 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 effi-
cient. Ramsey pricing involves marking-​up services where demand is not respon-
sive 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,
68

68 Part I  Fundamentals

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 re-
quired to put Ramsey prices into practice means that at a practical level, it is diffi-
cult. 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 re-
cover 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 pri-
vatized and ending with a discussion of Ofcom proposals from its recent Strategic
Review of Digital Communications.
69

2  The Economics of Regulation 69

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 inter-
connection 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 domin-
ance in the market, customers directly connected to Mercury had the inconveni-
ence 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 separ-
ation 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 regu-
lated 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 meth-
odology for determining undue discrimination (in terms of BT’s retail prices
versus interconnection and access prices). Via this approach to accounting sep-
aration, some transparency was introduced into BT’s costs. It is of course de-
batable 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.
70

70 Part I  Fundamentals

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 cur-
rent) 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 method-
ology 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 com-
petitive 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 bas-
kets, 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 <http://​webarchive.
nationalarchives.gov.uk/​20040104233440/​http:/​w ww.ofcom.org.uk/​static/​a rchive/​oftel/​publications/​1995_​
98/​pricing/​ncctitle.htm>.
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 <http://​webarchive.nationalarchives.gov.uk/​
20040104233440/​http:/​w ww.ofcom.org.uk/​static/​a rchive/​oftel/​publications/​1995_ ​98/​pricing/​ncct797.htm>.
71

2  The Economics of Regulation 71

complaints on BT’s charges. In particular, it set out that anti-​competitive behav-

ioural 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 in-
dicate 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 suffi-
ciently 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 competi-
tion 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 main-
tained. 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 com-
petition 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 signifi-
cantly 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 <http://​webarchive.nationalarchives.gov.uk/​20040104233440/​http:/​w ww.ofcom.org.uk/​static/​a rchive/​
oftel/​publications/​>.
72

72 Part I  Fundamentals

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 net-
work 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 com-
petitive 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 op-
erators 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 origin-
ally 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 regu-
lation let alone a price control. The effect of the LLU regulations meant however
that leased lines became more important in facilitating delivery of higher band-
width 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 <http://​webarchive.
nationalarchives.gov.uk/​2 0040104233440/ ​h ttp:/​w w w.ofcom.org.uk/​s tatic/​a rchive/​o ftel/​p ublications/​
broadband/​l lu/​l lu0500.htm>.
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 <http://​
webarchive.nationalarchives.gov.uk/​2 0040104233440/​http:/​w ww.ofcom.org.uk/​static/​a rchive/​oftel/​publi-
cations/​broadband/​l lu/​l lup1200.htm>.
86
  Leased lines are permanently connected communications links that are used by business and other op-
erators for services such as voice and data traffic and internet access.
73

2  The Economics of Regulation 73

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 whole-
sale 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 competi-
tive market structure, Oftel said it would interpret the requirement for cost orienta-
tion as meaning any price between the long run incremental cost (LRIC) floor and
standalone cost (SAC) ceiling, subject to any relevant combinatorial and non-​dis-
crimination tests also being satisfied. If, by contrast, the relevant economic market
was not effectively competitive, Oftel would be inclined to interpret the cost orienta-
tion requirement to mean that prices should be set on a LRIC basis with some allow-
ance for common cost recovery.
Following this direction from Oftel, BT began offering wholesale leased cir-
cuits in August 2001, although take-​up was low because operators had concerns
about BT’s applicable terms and conditions. To boost the development of broad-
band 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 ser-
vice 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 <http://​webarchive.nationalarchives.gov.uk/​20040104233440/​http:/​w ww.ofcom.org.uk/​static/​a rchive/​
oftel/​publications/​broadband/​leased_​l ines/​ppcs0602.htm>.
89
  Oftel, ‘Partial Private Circuits, Phase Two—​a Direction to resolve a dispute concerning the provision of par-
tial private circuits’, 23 December 2002, at <http://​webarchive.nationalarchives.gov.uk/​20040104233440/​http:/​
www.ofcom.org.uk/​static/​a rchive/​oftel/​publications/​broadband/​leased_​l ines/​ppc1202/​d irection.htm>.
74

74 Part I  Fundamentals

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 re-
funds to operators. In addition, Oftel confirmed a number of improvements for BT to
make to its service level agreement. These improvements included BT paying com-
pensation 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 accord-
ance with the guidelines set out by the Commission.91 In most of the market re-
views, 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 competi-
tion. 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 ap-
proach 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 neces-
sary additional costs of providing the downstream products. This allows other
providers to purchase access services and compete effectively against the regu-
lated firm’s downstream arm by ensuring that no margin squeeze takes place.
Retail minus should in principle guarantee that no discrimination takes place

90
  See Chapter 4.
 Oftel EU directive implementation, at <http://​webarchive.nationalarchives.gov.uk/​20040104233440/​
91

http:/​w ww.ofcom.org.uk/​static/​a rchive/​oftel/​publications/​eu_​d irectives/​i ndex.htm>.

75

2  The Economics of Regulation 75

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 con-
cerns about non-​price discrimination;
• There was a need to promote timely and efficient investment in emerging tech-
nologies and platforms as existing copper switched networks became due for
replacement.

The TSR led to the implementation of two main interventions. The first in-
volved 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 com-
petitors 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 com-
petitors 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).
76

76 Part I  Fundamentals

• 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 ana-
logue exchange lines, and wholesale ISDN30 and ISDN2 lines;
• Wholesale local access—​ie fixed telecommunications infrastructure; the phys-
ical 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 communi-
cations 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 re-
lates 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

93
  See also Chapter 8, at Section 8.5.
94
  Ofcom, ‘Explanatory Statement and Notification of decisions on BT’s SMP status and charge controls
in narrowband wholesale markets’, 2005, at <http://​webarchive.nationalarchives.gov.uk/​20160702162827/​
http:/​stakeholders.ofcom.org.uk/​consultations/​charge/​statement/​>.
7

2  The Economics of Regulation 77

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 ap-
proach 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 whole-
sale 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 whole-
sale 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 <http://​webarchive.nationalarchives.
gov.uk/​20160702162827/​http:/​stakeholders.ofcom.org.uk/​consultations/​review_​bt_ ​ncc/​statement/​>.
96
  Ofcom, ‘Review of the fixed narrowband services wholesale markets:  Consultation on the proposed
markets, market power determinations and remedies’, 2009, at <http://​webarchive.nationalarchives.gov.
uk/​2 0160702162827/​http:/​stakeholders.ofcom.org.uk/​binaries/​c onsultations/​review_​w holesale/​summary/​
fnwm.pdf>.
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 <https://​w ww.ofcom.org.uk/​_ ​_​data/​a ssets/​pdf_​fi le/​0 033/​76497/​fi xed-​access-​markets.pdf>.
100
  Ofcom, ‘Fixed access market reviews:  Approach to setting LLU and WLR Charge Controls’, 2013, at
<https://​w ww.ofcom.org.uk/​consultations-​a nd-​statements/​c ategory-​1/​l lu-​w lr-​cc-​13>.
101
  As set out in Section 2.14, pure LRIC is the cost of adding an increment of output. LRIC+, in contrast in-
cludes an EPMU mark-​up for common cost recovery.
78

78 Part I  Fundamentals

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 volun-
tarily 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 ap-
propriate 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 ap-
proach, 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 re-
view. In particular, commercial investments in next generation access (NGA) net-
works 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 regu-
latory 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 regula-
tory 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 <http://​webarchive.nationalarchives.gov.
uk/​2 0160702162827/​http:/​stakeholders.ofcom.org.uk/ ​binaries/​c onsultations/​c opper/​statement/​statement.
pdf>.
104
  Ofcom, ‘Local loop unbundling: setting the fully unbundled rental charge ceiling and minor amend-
ment to SMP conditions FA6 and FB6’, 2005, at <http://​webarchive.nationalarchives.gov.uk/​20160702162827/​
http:/​stakeholders.ofcom.org.uk/​binaries/​consultations/​l lu/​statement/​l lu_ ​statement.pdf>.
105
  Ofcom, ‘Review of the wholesale local access market:  Statement on market definition, market power
determinations and remedies’, 2010, at <http://​webarchive.nationalarchives.gov.uk/​20160702162827/​http:/​
stakeholders.ofcom.org.uk/​binaries/​consultations/​w la/​statement/ ​W LA_ ​statement.pdf>.
79

2  The Economics of Regulation 79

• 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 com-
munications 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, ul-
timately 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 <http://​webarchive.nationalarchives.
gov.uk/​2 0160702162827/ ​http:/​s takeholders.ofcom.org.uk/ ​binaries/​c onsultations/​w lr-​c c-​2 011/​s tatement/​
statementMarch12.pdf>.
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
<https://​w ww.ofcom.org.uk/​_ ​_​data/​a ssets/​pdf_ ​fi le/​0 032/​78863/​volume1.pdf>.
80

80 Part I  Fundamentals

cost-​based charges because controls on current generation broadband con-

tinued 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 detri-
ment 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 broad-

band services depends on service providers having access to wholesale broad-
band 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 competi-
tion 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 condi-
tions 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 <https://​w ww.ofcom.org.
uk/​_​_​data/​a ssets/​pdf_​fi le/​0 015/​72420/​v ula_​margin_​fi nal_​statement.pdf>.
111
 Ofcom, ‘Review of the wholesale broadband access markets 2006/​07’, 2007, at <http://​stakeholders.
ofcom.org.uk/​consultations/​w bamr07/​summary>.
81

2  The Economics of Regulation 81

• those geographic areas covered by exchanges where there are two or three prin-
cipal 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 competi-
tive 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 re-
view, 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 sig-
nificant 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 <https://​w ww.ofcom.org.uk/​_ ​_​data/​a ssets/​pdf_ ​fi le/​0 028/​
37666/​w bastatement.pdf>.
114
  Ofcom, ‘WBA charge control:  Charge control framework for WBA Market 1 services’, 2011, at <http://​
stakeholders.ofcom.org.uk/​binaries/​consultations/​823069/​statement/​statement.pdf>.
82

82 Part I  Fundamentals

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 prem-
ises; and the Hull Area—​0.7 per cent of UK premises, where KCOM is the only sig-
nificant 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 re-

view of the leased lines markets. It concluded that additional bandwidth categories
should be defined for very high bandwidth traditional interface (TI) and high band-
width 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 na-
tional in scope, with two exceptions. The exceptions related to the markets for high
bandwidth and very high bandwidth traditional interface symmetric broadband ori-
gination117 (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 <http://​stakeholders.ofcom.org.uk/​binaries/​consultations/​
review-​w ba-​markets/​statement/ ​W BA-​Statement.pdf>.
116
  In January 2013, the Office of National Statistics (ONS) announced the outcome of its October 2012 con-
sultation 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 <http://​webarchive.nationalarchives.gov.uk/​
20160702162827/​http://​stakeholders.ofcom.org.uk/​consultations/​l lcc/​statement/​>.
83

2  The Economics of Regulation 83

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 con-
nectivity. 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 band-
width 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 band-
width 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 <http://​stakeholders.ofcom.org.uk/​consult-
ations/​business-​connectivity-​m r/​fi nal-​statement/​>.
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.
84

84 Part I  Fundamentals

• 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 down-
stream 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 sug-
gested that competition has delivered new services and increased choice to re-
tail 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 determin-
ations and remedies for wholesale call termination, wholesale call origination and wholesale narrowband
access markets’, 2016, at <https://​w ww.ofcom.org.uk/​_ ​_​data/​a ssets/​pdf_ ​fi le/​0 016/​95011/​Narrowband-​
Market-​Review.pdf>.
85

2  The Economics of Regulation 85

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 re-
view 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 pro-
vide 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 suf-
fered 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 <https://​w ww.ofcom.org.uk/​_ ​_​data/​a ssets/​
pdf_ ​fi le/​0 020/​108353/​fi nal-​statement-​narrowband-​market-​review.pdf>.
125
  Ofcom, ‘Wholesale Local Access Market Review—​Statement—​Volume 1—​Markets, market power de-
terminations and remedies’, 2018, at <https://​w ww.ofcom.org.uk/​_ ​_​data/​a ssets/​pdf_ ​fi le/​0 020/​112475/​w la-
​statement-​vol-​1.pdf>.
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 cus-
tomer 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
<https://​www.ofcom.org.uk/​_​_​data/​assets/​pdf_​file/​0024/​95109/​Wholesale-​Local-​Access-​Market-​Review.pdf>.
128
  Ofcom, ‘Wholesale Local Access Market Review: Consultation on duct and pole access remedies’, 2017, at
<https://​www.ofcom.org.uk/​_​_​data/​assets/​pdf_​file/​0008/​101051/​duct-​pole-​access-​remedies-​consultation.pdf>.
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>.
86

86 Part I  Fundamentals

competitors about the absolute costs and time required to build ultrafast broadband
networks at scale. Following consultation of the proposals, a final decision was pub-
lished 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 flexi-
bility 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 incen-
tives 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 be-
came 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 conclu-
sions.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 com-
petition. 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 <https://​w ww.ofcom.org.uk/​_ ​_​data/​a ssets/​pdf_ ​fi le/​0 023/​112487/​w la-​statement-​vol-​2 .pdf>.
131
  Ofcom, ‘Wholesale Broadband Access Market Review: Consultation on market definition, market power
determinations and remedies’, 2017, at <https://​w ww.ofcom.org.uk/​_ ​_​data/​a ssets/​pdf_​fi le/​0 013/​103180/​
wba-​consultation.pdf>.
87

2  The Economics of Regulation 87

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 re-

viewed 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 mar-
kets 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 competi-
tive 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 <https://​w ww.ofcom.org.uk/​
consultations-​a nd-​statements/​c ategory-​1/​business-​connectivity-​market-​review-​2015>.
133
  WDM allows a single fibre to carry several leased line services simultaneously.
8

88 Part I  Fundamentals

In previous reviews and following the conclusion from the TSR, reliance was pre-
dominantly 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 ef-
ficient investment for BT and for rival infrastructure operators (in line with the
conclusion from the DCR). In implementing these two remedies, Ofcom recog-
nized 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 inconsisten-
cies between the pricing of active and dark fibre products. Given this, Ofcom de-
termined 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 elem-
ents of that 1Gbit/​s service—​called the ‘active-​m inus’ pricing approach.
Ofcom considered that this approach results in a charge consistent with the de-
sign 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 infrastruc-
ture 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 con-
tinue 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 con-
trol 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 communica-
tions interconnection and access regulation has gone through a number of stages.

134
  British Telecommunications plc v Office of Communications (Market definition Ruling) [2017] CAT 17.
135
  British Telecommunications plc v Office of Communications (Judgment Market Definition) [2017] CAT 25.
89

2  The Economics of Regulation 89

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 uncer-
tainty. Given the riskiness of this investment, regulators have had to strike an ap-
propriate 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 invest-
ment, 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 en-
courage 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 regu-
lated). 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 infra-
structure 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 prac-
tice this often means the competitor placing a small street cabinet with a DSLAM, next to a telco local copper ag-
gregation cabinet using a ‘tie cable’ to connect to the last part of the local loop into customers’ homes).
90

90 Part I  Fundamentals

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 con-
sciously 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 op-
erators 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 implemen-
tation 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 how-
ever say that once competition based on dark fibre proves effective and, active rem-
edies 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 en-
courage the development of competition by licensing a number of mobile oper-
ators. 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 net-
works has often been the subject of much debate.
In the 1990s, residential and business consumer organizations expressed con-
cern 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
91

2  The Economics of Regulation 91

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 competi-
tive 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 cus-
tomers 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 recog-
nized that such action would have a significant impact on the whole of the mo-
bile 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 con-
sidered 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 net-
works 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 <http://​webarchive.nationalarchives.gov.uk/​
20040104233440/ ​http://​w ww.ofcom.org.uk/​s tatic/​a rchive/​oftel/​publications/​1995_ ​9 8/​pricing/​c tm0398.
htm>. 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 <http://​webarchive.nationalarchives.
gov.uk/​2 0040104233440/ ​h ttp://​w w w.ofcom.org.uk/​s tatic/​a rchive/​o ftel/​p ublications/​1995_ ​9 8/​p ricing/​
cmmc1298.htm>.
139
  Review of the Price Control on Calls to Mobiles, February 2001, at <http://​webarchive.nationalarchives.
gov.uk/​2 0040104233440/ ​h ttp://​w ww.ofcom.org.uk/​s tatic/​a rchive/​o ftel/​p ublications/​m obile/​c tom0201.
htm>.
140
 Review of the Charge Control on Calls to Mobiles, 26 September 2001, at <http://​webarchive.
nationalarchives.gov.uk/​2 0040104233440/ ​h ttp://​w w w.ofcom.org.uk/​s tatic/​a rchive/​o ftel/​p ublications/
​mobile/​c tm0901.htm>.
92

92 Part I  Fundamentals

market, as it was just one of a bundle of interconnected services purchased by cus-

tomers; 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 con-
strain termination charges. Reviewing the termination charges offered by the
MNOs, the CC submitted that they operated against the public interest and ac-
cordingly 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 <http://​
webarchive.nationalarchives.gov.uk/​ 2 0040104233440/ ​ h ttp://​ w w w.ofcom.org.uk/​s tatic/​a rchive/​o ftel/​
publications/​mobile/​c tm_ ​2003/​i ndex.htm>.
142
  See further Section 2.15 and Chapter 4.
143
  Review of mobile wholesale voice call termination markets—​E U Market Review, at <http://​webarchive.
nationalarchives.gov.uk/​2 0040104233440/ ​http://​w ww.ofcom.org.uk/​s tatic/​a rchive/​oftel/​publications/​eu_​
directives/​2003/​c tm/​c tm0503.pdf> and Wholesale Mobile Voice Call Termination: Proposals for the identi-
fication and analysis of markets, determination of market power and setting of SMP Explanatory Statement
and Notification, 19 December 2003, conditions available at <http://​webarchive.nationalarchives.gov.uk/​
20160702162827/​http://​stakeholders.ofcom.org.uk/​consultations/​mobile_​c all_​termination/​>.
93

2  The Economics of Regulation 93

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) pub-
lish 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 re-
spect 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 signifi-
cant 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 ter-
mination whether on 2G or 3G networks.
Both BT and H3G appealed Ofcom’s MCT Statement. H3G appealed Ofcom’s de-
termination 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.

144

  Mobile Call Termination Statement (MCT), March 2007, at <http://​webarchive.nationalarchives.gov.

145

uk/​20160702162827/​http://​stakeholders.ofcom.org.uk/​binaries/​consultations/​mobile_​c all_​term/​statement/​
statement.pdf> 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 <http://​webarchive.nationalarchives.gov.uk/​20160702162827/​
http://​stakeholders.ofcom.org.uk/​binaries/​consultations/​h 3gsmp/​statement/​statement.pdf>.
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.
94

94 Part I  Fundamentals

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 re-
tail 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

148
 See Hutchison 3G (UK) Limited v Office of Communications [2009] EWCA Civ 683.
149
  ‘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.
95

2  The Economics of Regulation 95

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 re-
ceive 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 mo-
bile 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 termin-
ation charges expiring in March 2011, Ofcom published a consultation document
in May 2009,151 which considered the different approaches that may be taken to-
wards 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 re-
sponses 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 <http://​ec.europa.eu/​smart-​regulation/​i mpact/​ia_​c arried_​out/​docs/​ia_​2009/​c _​2009_​
3359_​en.pdf>.
151
  Ofcom, ‘Wholesale mobile voice call termination: Preliminary consultation on future regulation’, 2009,
at <http://​webarchive.nationalarchives.gov.uk/​20160702162827/​http://​stakeholders.ofcom.org.uk/​binaries/​
consultations/​mobilecallterm/​summary/​mobile_​c all_​term.pdf>.
152
  Ofcom, ‘Wholesale mobile call termination review (second consultation)’, 2010, at <http://​webarchive.
nationalarchives.gov.uk/​20160702162827/​http://​stakeholders.ofcom.org.uk/​consultations/​w mctr/​>.
153
  Ofcom, ‘Mobile termination review statement’, 2011, at <http://​webarchive.nationalarchives.gov.uk/​
20160702162827/​http://​stakeholders.ofcom.org.uk/​consultations/​mtr/​statement>.
154
  Ofcom, ‘Mobile call termination market review 2015–​18’, 2014, at <http://​stakeholders.ofcom.org.uk/​
binaries/​consultations/​mobile-​c all-​termination-​14/​summary/​MCT_​Consultation.pdf>.
155
  Ofcom, ‘Mobile call termination market review 2015–​18: Statement on the markets, market power de-
terminations and remedies’, 2015, at <https://​w ww.ofcom.org.uk/​_ ​_​data/​a ssets/​pdf_ ​fi le/​0 029/​76385/​mct_​
final_​statement.pdf>.
96

96 Part I  Fundamentals

a single MTR cap for all mobile networks with SMP and to set the MTRs with ref-
erence 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 obliga-
tion 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 ap-
proach in remedying the harm caused by MTRs set above the efficient cost bench-
mark. 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 im-
posed 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 en-
vironment 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 in-
dustry 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 trad-
itional use of fully allocated costs, although simple to implement means how-
ever 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 <https://​
www.ofcom.org.uk/​_ ​_​data/​a ssets/​pdf_ ​fi le/​0 021/​112458/​Final-​Statement-​Mobile-​Call-​Termination-​Market-​
Review-​2018-​2021.pdf>.
97

2  The Economics of Regulation 97

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 techno-
logical and strategic development. As the market develops and convergence takes
hold there will be a multitude of pricing packages on the market offering con-
sumers 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 pol-
icies will be required to protect consumers and encourage competition and in-
vestment. 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
98

98 Part I  Fundamentals

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 legis-
lation. All these issues will play out over the next few years. The forces of competi-
tion 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

01
01

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  101
3.2 Development of the Industry  108
3.3 Development of Regulation  111
3.4 Key Issues  133
3.5 Concluding Remarks  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 move-
ment 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.

1
  See generally Standage, T, The Victorian Internet (London: Phoenix, 1999).
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102 Part II  Regulatory Regimes

Between 1835 and 1844 the electric telegraph was introduced,2 and elec-
tric 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 na-
tional 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 there-
fore 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 exclu-
sive 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’ teleg-
raphy 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 tele-
phone, played a significant part in the history of the setting up of telephone sys-
tems 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
  The Railway Regulation Act 1844, s XII. 4
  Ibid, at s XIII. See further Chapter 15.
5
  As an institution, the ‘General Post Office’ was established by Oliver Cromwell in 1657.
013

3  The Telecommunications Regime in the UK 103

• 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 (es-
pecially telegraph poles), compulsory acquisition of land, arrangement for dig-
ging 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 net-

works 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 tele-
graph 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 tele-
graph 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 <http://​w ww.btplc.com/​Thegroup/​BTsHistory/​BTgrouparchives/​
index.htm>.
7
  AG v Edison Telephone Company of London (1880) 6 QBD 244.
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104 Part II  Regulatory Regimes

to operate telephone systems under certain conditions, for example they were re-
stricted 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 tele-
graph 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 de-
cided 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 rec-
ognition 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

8
  Henry Fawcett, Postmaster-​G eneral, HC Deb 17 July 1882 vol 272 cc711-​2 .
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3  The Telecommunications Regime in the UK 105

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 tele-
phone 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  succes-
sion 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 telecommunica-
tions regulation in a number of ways, including:

• it showed that a small operation that did not enjoy economies of scale could pro-
vide 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 re-
mained 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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106 Part II  Regulatory Regimes

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 ex-
penditure, 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 gov-
ernment ‘trading fund’, which meant that it produced rudimentary commercial
accounts, a balance sheet, etc. This produced a radical change within the organ-
ization 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 divi-
sions: Post and Telecommunications.
Under the Post Office Act 1969, the Post Office ceased to be a government depart-
ment 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 for-
malized the telecommunications monopoly by giving the new Post Office ‘ex-
clusive 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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3  The Telecommunications Regime in the UK 107

4(1) of the Telecommunications Act 1984, while the concept of running a telecom-
munication 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 li-
censing 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 tele-
coms business. The common ground was a shared history, common pool of em-
ployees, 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 reloca-
tion 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 communica-
tion services,14 while the regulator for both is Ofcom, having assumed responsi-
bility 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 tel-
egraphy’. To the GPO, radio was just another form of telegraphy. It therefore
fell inside the GPO monopoly, and, apart from specialized regulatory require-
ments, 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 fre-
quencies 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 han-
dled communications on behalf of several different people and took messages

  Report of the Post Office Review Committee (Cmnd 6850), 1977.

13

 <http://​w ww.postoffice.co.uk/​broadband-​phone>.
14 15
  Postal Services Act 2011, s 28(1).
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108 Part II  Regulatory Regimes

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 de-
velop 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 telecommuni-
cations market experienced a period of unprecedented growth and the telecom-
munications 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 competi-
tion 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 pro-
vide competition to BT at all levels. Mercury’s first competitive telecommunica-
tions 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.
16
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3  The Telecommunications Regime in the UK 109

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 re-
ceived 823 applications for licences to run new telecommunications systems. It had
granted 632 licences and 102 were under consideration.17 There were 140 PTOs pro-
viding domestic and international services.
A number of ISPs, in addition to BT, had also entered the market and were pro-
viding 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 fran-
chises 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) culmin-
ated 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 mo-
bile 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.
17

  A small number of franchises remained independent—​i ncluding Wight Cable covering the Isle of Wight
18

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.
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110 Part II  Regulatory Regimes

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 pro-
portion 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 cus-
tomers buying a mobile phone to complete all the necessary contractual arrange-
ments 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 (mo-
bile 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 en-
abled on two-​t hirds of mobile subscriptions.23 The next iteration, 5G services are
expected to be launched by 2020.

21
  Ofcom consultation, ‘Mostly mobile’, 8 July 2009, at 2.12.
22
  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.
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3  The Telecommunications Regime in the UK 111

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 wire-
less. 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 dis-
agreement 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 simultan-
eously 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, par-
ticularly 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 at-
tention 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 cus-
tomers 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.

24
  Ofcom Statement, ‘Review of the Wholesale Broadband Access Markets’, 26 June 2014, at 1.20.
25
  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 whole-
sale 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.
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112 Part II  Regulatory Regimes

The British Telecommunications Act 1981 separated the Post Office’s func-
tions 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 au-
thority 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 com-
petition. 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 competi-
tors’ 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

28
  The formal separation occurred on 1 October 1981.
29
  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.
13

3  The Telecommunications Regime in the UK 113

massive finance to do this. Government policy was against a nationalized in-

dustry 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 con-
cept 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 inde-

pendent 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 fi-
nally 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 cus-
tomer 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 fur-
ther 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.
14

114 Part II  Regulatory Regimes

• improve the licences for cellular and local cable networks;

• empower Mercury and cable operators to dig up streets, etc. which meant mod-
ernizing 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 in-
frastructure 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: com-
pensation 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 com-
pete 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 ex-
penditure was concerned and accountable to Parliament like any other govern-
ment 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.

33

  Schedule 2 para 9. Schedule 2 of the 1984 Act has been incorporated into the Communications Act 2003,
34

under s 106, and renamed the ‘electronic communications code’. See further Chapter 6.
15

3  The Telecommunications Regime in the UK 115

• 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 inter-
national 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 com-
plaints 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 provi-
sion 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

  Telecommunications Act 1984, s 3(1).

35 36
  Ibid, s 3(2). 37
 Ibid.
  Monopolies and Mergers Commission, which then became the Competition Commission, and is now the
38

Competition and Markets Authority.

39
  Telecommunications Act 1984, s 7.
40
  Now the Department for Business, Energy and Industrial Strategy.
16

116 Part II  Regulatory Regimes

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 tele-
communication 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 termin-
ation 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 rela-
tion to matters reserved for the DGT’s decision under licences granted to telecom-
munication 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 chal-
lenge 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 al-
lowed 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

41
  Section 18(5). 42
  Section 18(6).
43
  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 <http://​webarchive.nationalarchives.gov.uk/​20111202172129/​http://​w ww.competition-​commission.
org. uk/​rep_​pub/​reports/​1999/​422bt.htm#full>.
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.
17

3  The Telecommunications Regime in the UK 117

chose to transpose the various EU Directives into UK law through statutory in-
struments 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 com-
petition 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

49
  eg Telecommunications (Licensing) Regulations 1997, SI 1997/​2930.
50
  See OECD Reviews of Regulatory Reform, Regulatory Reform in the UK. 51
 Ibid.
52
 Cm1303. 53
  Cm1461, March 1991.
18

118 Part II  Regulatory Regimes

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 au-
thorized, 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 pro-
moting infrastructure competition was complicated by three major events. 56
These were:

• European Union law encouraged national regulators not to discriminate be-

tween providers that were building networks and those that were not;
• the collapse of investor confidence in the telecoms market which led to alterna-
tive 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 telecommu-
nications 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.
19

3  The Telecommunications Regime in the UK 119

3.3.6 Convergence
In July 1998, the DTI published a Green Paper, Regulating communications:  ap-
proaching 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 to-
wards 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 in-
dependent 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 obliga-
tions, 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 con-
sider and adjudicate on complaints; and to monitor, research, and report on standards and fairness in broad-
casting (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).
210

120 Part II  Regulatory Regimes

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 li-
censing 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 en-
titlement. 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 gen-
eral 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 super-
vision 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 com-
mittees 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 pro-
moting competition.67

63
  See further Chapter 4.
64
  A consolidated version of the general conditions, as at 28 May 2015, is available at <http://​w ww.ofcom.
org.uk>.
65
  And subsequently the Postal Services Commission and the BBC Trust.
66
  The Office of Communications Act 2002, s 1. 67
  Section 3(1).
21

3  The Telecommunications Regime in the UK 121

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 communica-
tions 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 as-
sociated 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 neces-
sary 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

  Section 3(2).
68 69
  Section 4.
  Sections 134A–​134B, inserted by the Digital Economy Act 2010, s 1, and amended by the Digital Economy
70

Act 2017, s 82. For the Ofcom reports, see <https://​w ww.ofcom.org.uk/​research-​a nd-​data/​multi-​sector-​re-
search/​i nfrastructure-​research>.
71
  National Audit Office, ‘The effectiveness of converged regulation’, November 2010.
21

122 Part II  Regulatory Regimes

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 dis-
pute. A dispute is between communications providers in respect of the provision
of network access or any other regulatory conditions imposed by Ofcom.74 A com-
plaint 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 differ-
ences 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 ap-
pellate 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 im-
posed 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
  Ofcom, ‘Dispute resolution guidelines’, 7 June 2011. 78
 <http://​w ww.offta.org.uk/​i ndex.htm>.
79
  Communications Act, s 193.
213

3  The Telecommunications Regime in the UK 123

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 tech-
nical and economic issues and consequently were often reluctant to overturn the
decision of an industry-​specific regulator. Under the old appeals system no deci-
sion taken by the DGT was ever successfully challenged in the UK courts. In con-
trast 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 telecommunica-
tions market. This was the first wide ranging analysis of the telecommunications
sector for 13 years. Ofcom set out five fundamental questions:

  Ibid, s 196(4).
80 81
  [2003] CAT 5.
  For copies of the judgments see <http://​w ww.catribunal.org.uk/​2 38/​a ll/​2/​Judgments.html>.
82

83
  See the Explanatory Notes to the Digital Economy Act 2017, at paras 45–​49. The CAT had previously dis-
tinguished 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.
124

124 Part II  Regulatory Regimes

• 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 tele-
coms market?
• Is there scope for a reduction in regulation or is the market power of the incum-
bents 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 oper-
ational 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: in-
frastructure 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 acknow-
ledged that those who relied on BT to provide access have experienced 20 years
of slow product development; inferior quality wholesale products; poor transac-
tional processes; and a general lack of transparency.
Ofcom’s proposal was that it should focus regulation to deliver equality of ac-
cess 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 <http://​w ww.Ofcom.org.uk/​static/​telecoms_ ​review/​i ndex.htm> for the strategic review consult-
ation documents and statements.
86
  The review did cover mobile but the results of Phase 1 showed that in terms of competitive market struc-
tures 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.
215

3  The Telecommunications Regime in the UK 125

• 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 settle-
ment 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 pur-
pose of remedying, mitigating, or preventing any adverse effect on the competi-
tion concerned.

3.3.8.1  The BT undertakings

On 21 June 2005 BT’s board agreed in principle to offer to the Ofcom Board le-
gally binding89 undertakings in relation to the operational separation of its under-
takings. 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 in-
vestigation 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 pro-
posals 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

  Enterprise Act 2002, s 131(1).

87 88
  Ibid, s 154.
  A breach of the undertakings is ultimately enforced through normal courts.
89

90
  Numerous amendments and exemptions to the undertakings have been granted since 2005. See <https://​
www.ofcom.org.uk/​phones-​telecoms-​a nd-​i nternet/​i nformation-​for-​i ndustry/​policy/​bt-​u ndertakings>.
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.
216

126 Part II  Regulatory Regimes

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 whole-
sale 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 pro-
viders 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 communi-
cations 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 pro-
cesses. 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 informa-
tion, and sales functions.
The Oftel approach had been to try to ensure that wholesale products specific-
ally designed by BT under regulatory pressure were as close to being fit for pur-
pose 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 prod-
ucts 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.
94
  Undertakings, section 2.1.
217

3  The Telecommunications Regime in the UK 127

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 mem-
bers, 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 moni-
toring, 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 re-
quired to report regularly to the BT board on BT’s compliance with the undertak-
ings 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 undertak-
ings were first agreed were now being delivered; in particular, increased compe-
tition 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 <http://​w ww.btplc.com/​Thegroup/​Theboard/​Boardcommittees/​E quality
ofAccessBoard/​E qualityofAccessBoard.htm>.
96
  EAB Annual Report, 2009.
97
  Ofcom, ‘Making communications work for everyone:  Initial conclusions from the Strategic Review of
Digital Communications’, 25 February 2016.
218

128 Part II  Regulatory Regimes

detriment of its competitors. As a consequence, Ofcom proposed the legal separ-

ation 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 pro-
vide 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 air-
time 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 fa-
vourably than competing service providers.101

98
  Ofcom, ‘Strengthening Openreach’s strategic and operational independence’, 26 July 2016.
99
  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 de-
fined 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
219

3  The Telecommunications Regime in the UK 129

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 spec-
trum is a finite resource, resulting in a ‘ring-​fenced’ market that affords consider-
able 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 po-
tential to become effectively competitive. However, the DGT defined a separate
market for mobile voice call termination. He considered that all of the mobile op-
erators 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.
310

130 Part II  Regulatory Regimes

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 termin-
ation 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 con-
sidered 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 ultim-
ately 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 mo-

bile 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 auc-
tion system. These licences were awarded to the existing four mobile networks and
a new entrant, 3.

105
  Ofcom statement, ‘Wholesale Mobile Voice Call Termination’, June 2004.
106
  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 re-
view, Ofcom identified seventy-​t wo MCPs (March 2015) and before that thirty-​t wo MCPs (April 2011).
31

3  The Telecommunications Regime in the UK 131

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 produ-
cing 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 condi-
tion 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 an-
other 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 allo-
cated specific frequencies. Providers of mobile telecommunication services there-
fore 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 al-
lowed 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 admin-
istrative 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.

109

  See further Chapter 8, at Section 8.5.4.

110 111
  See further Chapter 8, at Section 8.5.4.2.
312

132 Part II  Regulatory Regimes

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 spec-
trum 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 spec-
trum 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 recom-
mendations but, in summary, concluded that the UK needed to radically change
the way in which spectrum was allocated.112 Generally the recommended ap-
proach was the need to make more use of economic mechanisms in order to se-
cure optimal use of the spectrum.
Following the independent report, Ofcom carried out its own review of spec-
trum 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 own-
ership and use of spectrum; and
• Rights of spectrum users should be clearly defined and users should feel com-
fortable that they will not be charged without good cause.114

Ofcom has introduced a series of measures with the aim of de-​regulating spec-
trum. 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 flexi-
bility 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 <https://​w ww.ofcom.org.uk/​spectrum/​spectrum-​management>.
31

3  The Telecommunications Regime in the UK 133

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 ad-
dressing 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 cus-
tomers 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 de-
termined 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 dif-
ferent 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 avail-
able 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.
314

134 Part II  Regulatory Regimes

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 pro-
viding a basic service to customers. In such circumstances operators and ser-
vice 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 neces-
sary 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 oper-
ation of such schemes.

119
  Oftel, ‘Number portability in the Mobile Market’, July 1997.
120
 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
  See further Chapter 9, at Section 9.2.5. 124
  General Conditions of Entitlement, at 18.9.
315

3  The Telecommunications Regime in the UK 135

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 respon-
sible for routing the call onward to the network to which the consumer now sub-
scribes. There are a number of weaknesses in onward routing. For example, the
dependence on the donor network leaves consumers exposed in the event of net-
work failure by the donor network.125 There are also issues of inefficiency associ-
ated 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 mon-
opoly, 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 en-
sure 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 en-
vironment the safety net is maintained. In the UK, the USO is detailed in condi-
tions 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 com-
munications 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.
316

136 Part II  Regulatory Regimes

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 so-
cial 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 al-
though 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 popula-
tion 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 re-
quirements 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 fa-
cility, 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 spe-
cial social needs.
• Special measures for end users with disabilities.

129
  See Oftel, n 127 above, at para 18.
130
  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).
317

3  The Telecommunications Regime in the UK 137

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 spe-
cific conditions on these two organizations. In addition, a number of General
Conditions impose obligations on all publicly available telephone service pro-
viders. For example, General Condition 8 requires the provision of directory in-
formation 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 con-
cluded that neither was currently appropriate. It considered that exclusion from
broadband services did not currently result in social exclusion sufficient to war-
rant 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, ra-
ther 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 ‘un-
fair 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

133
  See further Chapter 7. 134
  Ofcom, ‘Review of Universal Service Obligation’, 14 March 2006.
135
  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.
318

138 Part II  Regulatory Regimes

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 infrastruc-
ture competition. In December 1998, he issued a consultation paper putting for-
ward 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 frame-
work 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 ac-
cepted that the initial process of LLU was not a success. The actual implementa-
tion 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 alloca-
tion 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.

138
  See also Chapter 8. 139
  This decision was taken in advance of EU Regulation EC 2887/​2000.
140
  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.
319

3  The Telecommunications Regime in the UK 139

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 in-
creased 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 competi-
tion, 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 trad-
itional 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 ser-
vice, 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 for-
bearance 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

143
  See <www.offta.org.uk>. 144
  Ofcom, ‘Communications market report’, 3 August 2017.
145
  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.
410

140 Part II  Regulatory Regimes

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 informa-
tion that providers must offer to certain customers to ensure they are well in-
formed about the capability of VoIP services.

When Ofcom set out its forbearance policy it was partly on the basis that this re-
flected 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 be-
comes and must be regulated as a PATS.148
Ofcom issued a consultation over the summer and in December 2007149 an-
nounced 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 organ-
izations 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.
14

3  The Telecommunications Regime in the UK 141

Conditions of Entitlement, to make clear to consumers and small business cus-

tomers 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 an-
nouncements. Similarly, subscribers and users must be notified where an emer-
gency 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 situ-
ation that may impact adversely on the UK’s ability to match international com-
petitors’ 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 gen-
eration 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 net-
work 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 par-
ticular with the access networks.153 For current access network owners, next

  Condition 14, Annex 3, paras 8–​12.

151

  Video-​on-​demand services, such as Netflix and BBC’s iPlayer, have increased the strain on existing
152

networks.
153
  Broadband Stakeholder Group, ‘Pipe Dreams? Prospects for next generation broadband deployment in
the UK’, 16 April 2007.
412

142 Part II  Regulatory Regimes

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 pro-
grammes, such as the ‘Superfast Broadband Programme’, which involves sub-
stantial 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

154
  See Ofcom, ‘Future Broadband, Policy approach to next generation access’, 29 September 2007.
155
  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 <https://​w ww.gov.uk/​g uidance/​broadband-​delivery-​u k>.
159
  The Telegraph, ‘BT defends £1.7bn rural broadband scheme as rivals question whether taxpayer cash was
needed’, 16 June 2016.
143

3  The Telecommunications Regime in the UK 143

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 im-
plications for most, if not all, sectors of industry, telecommunications included.
This section considers some of the implications of Brexit for UK telecommunica-
tions 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 com-
prise 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 ob-
liged to implement into domestic law. Since much of the EECC is a recasting of ex-
isting 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 in-
cremental 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 telecommu-
nications networks and services are not subject to a ‘country of origin’ approach
to EU harmonization. Operators have to conduct themselves on a distinctly na-
tional 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 pro-
viding 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 communica-
tion 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.
41

144 Part II  Regulatory Regimes

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 telecommu-
nications 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 re-
cent 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 rele-
vant 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’ prin-
ciple 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 aboli-
tion 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

162
  See Chapter 16, at Section 16.3. 163
  See Chapter 7, at Section 7.5.
164
  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 incom-
patible 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 <http://​telecoms.com/​2 33002/​smaller-​european-​operators-​oppose-​eu-​roaming-​d irective/​>.
145

3  The Telecommunications Regime in the UK 145

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 environ-
ment 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 <http://​w ww.vanillaplus.com/​2016/​0 8/​26/​20824-​is-​t he-​abolition-​of-​eu-​roaming-​charges-​a n-​
opportunity-​or-​t hreat-​for-​operators/​>.
172
 FCC, In the matter of Restoring Internet Freedom, Declaratory Ruling, Report and Order, 14 December
2017 (FCC 17-​166).
416
147

EUROPE AN UNION COMMUNIC ATIONS  L AW

Ian Walden

4.1 Introduction  147

4.2 Evolving Policy and the Regulated Sphere  148
4.3 Sources of Law  155
4.4 Liberalization of the EU Telecommunications Market  160
4.5 Harmonization of the EU Telecommunications Market  170
4.6 ’Significant Market Power’  173
4.7 Regulatory Authorities  178
4.8 Universal Service  186
4.9 Future Directions  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, recom-
mendations, 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 in-
dustrial 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.
418

148 Part II  Regulatory Regimes

The chapter is broadly divided in two:  the first part reviews the historical de-
velopment 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 regu-
lations 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 pro-
tect 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 harmon-
ization and the development of minimum standards;
• Full application of the competition rules.

In the second phase, from 1993 to 2002, full market liberalization became pol-
itically acceptable as concerns about the impact of liberalization failed to materi-
alize. 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 telecom-
munications infrastructures, OJ C 379/​4, 31 December 1994.
419

4  European Union Communications Law 149

change in the legal framework governing a market was undertaken and substan-
tially 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 pres-
sures for reform. First, from a legal perspective, the adoption in 1997 of the World
Trade Organization (WTO) agreement on ‘basic telecommunications’ and asso-
ciated 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, com-
petition 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 net-
works 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 infra-
structure 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 <https://​ec.europa.eu/​d igital-​single-​market/​en/​news/​
implementation-​eu-​regulatory-​f ramework-​electronic-​communications-​2015>.
510

150 Part II  Regulatory Regimes

moving towards greater reliance on the application of ex post European compe-

tition 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 in-
dustries 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 trans-

mission 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 communica-
tions 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 electromag-
netic 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, irre-
spective of the type of information conveyed.
‘electronic communications service’ means a service normally provided for re-
muneration which consists wholly or mainly in the conveyance of signals on elec-
tronic 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 elec-
tronic communications networks and services; it does not include information
society services, as defined in Article 1 of Directive 98/​34/​EC14, which do not con-
sist 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 deter-
mine 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 meas-
ures 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.
51

4  European Union Communications Law 151

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 re-
gime 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 edi-
torial 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 con-
veyance of signals’, and are primarily regulated under the ‘Electronic Commerce’
Directive.16 The boundary between this latter activity and the provision of elec-
tronic communication services is particularly blurred, given the potential var-
iety 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 inter-
preted, 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 de-
terminations of status, preferring to place the onus on the regulatee to determine
in the first instance, intervening only when considered necessary. Blurred regu-
latory 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 admin-
istrative 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.
512

152 Part II  Regulatory Regimes

to an underlying transmission service, such as a Wifi link.18 From a consumer per-

spective, however, the service is likely to ‘feel’ like a communication service, des-
pite 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 out-
side the regulated regime. However, pressure has been building up to shift to-
wards 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 con-
nectivity 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 in-
formation 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 intrin-
sically 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 frame-
work for electronic communication networks and services available at <https://​e tno.eu/​d atas/​p ositions-​
papers/​2 015/ ​E xpert_ ​c ontributions/ ​E TNO_ ​R esponse_​Telecoms_ ​F ramework _ ​R ev iew_ ​c onsultation_​
071215.pdf>.
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).
513

4  European Union Communications Law 153

This latter term is intended to capture ‘functionally equivalent services’, such as

OTT messaging services.23 The interactive nature of an ‘interpersonal communi-
cation 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 ‘excep-
tional circumstances’, where the service cannot be used without the principal ser-
vice 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 trans-
mission 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 en-
forcement of owners’ intellectual property rights, and measures designed to en-
sure 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 im-
pacts 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 pro-
vision and use of ‘telecommunications terminal equipment’ or ‘radio equipment’,
the physical kit, or other components that are connected to an electronic commu-
nications network or service by end-​users, which are subject to a separate ‘type ap-
proval’ 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
  Universal Services Directive, Article 22(3). 26
  See further Chapter 15.
27
  Framework Directive, Art (1)4. See further Section 4.4.3.
514

154 Part II  Regulatory Regimes

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 in-
clude, 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 broad-

cast 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 communica-
tion 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 na-
tional 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

28
  Directive 99/​5/​EC, at Art 2(e).
29
  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
  Ibid, at Art 2(o). 31
  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 <http://​w ww.
ofcom.org.uk/​telecoms/​ioi/​g _ ​a _ ​regime/​gce/​gcoe/​>.
33
  eg Framework Directive, at Art 25.
51

4  European Union Communications Law 155

was operating successfully, with only relatively minor amendments and improve-
ments 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 re-
views 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 repre-
sent a new generation of EU telecommunications law, but is intended to consoli-
date 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 pri-
marily been founded on two different strands of European Treaty law: competi-
tion 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 frame-
work 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 per-
sonal 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 protec-
tion laws, OJ L 337/​11, 18 December 2009.
37
  Directive 2009/​140/​EC amending Directives 2002/​21/​EC on a common regulatory framework for elec-
tronic 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 com-
munications networks and services, OJ L 337/​37, 18 December 2009.
38
  2016 Proposal. 39
  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.
516

156 Part II  Regulatory Regimes

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 communi-
cation services’ is not subject to the ‘country of origin’ principle, whereby busi-
nesses 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 circum-
stances).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 authoriza-
tion 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 depart-
ments 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 telecommuni-
cations sector has been very considerable. Indeed, the manner in which EU com-
petition 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 spe-
cial 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.

41
  See <http://​ec.europa.eu/​i nternal_​market/​services/​docs/​services-​d ir/​g uides/​cop_​en.pdf>.
42
  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.
517

4  European Union Communications Law 157

Therefore, in addition to the more traditional forms of regulatory intervention by

a competition authority against undertakings engaged in anti-​competitive prac-
tices, 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 telecommuni-
cations terminal equipment, followed by a further Directive on telecommunica-
tion 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 le-
gitimate 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 obvi-
ously 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 ac-
cess network to exploit the potential of the internet.53 At that time, there was sig-
nificant public clamour for action, which galvanized the institutions to adopt a
more interventionist regulatory approach. Similarly, ‘mobile roaming’ was a high

45
  The relevant Treaty provision at the time was 90(3).
46
  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 ac-
cess 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 communica-
tions 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.
518

158 Part II  Regulatory Regimes

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 car-
ried 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 telecommu-
nications,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 neu-
trality’, constraining the ability of operators to discriminate certain types of con-
tent, 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,

54
  COM(2006) 382 final, 12 July 2006, at p 8.
55
 See <http://​ec.europa.eu/​comm/​competition/​sectors/​telecommunications/​a rchive/​i nquiries/​roaming/​
index.html>.
56
 Commission Press Release, ‘Statement on inquiry regarding mobile roaming’, MEMO/​ 01/​262, 11
July 2001.
57
  Regulation 531/​2012, as amended, at Art 6a. 58
  See Chapter 1, at Section 1.7.
59
 eg Commission Recommendation 2005/​698/​EC ‘on accounting separation and cost accounting sys-
tems 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
  Framework Directive, Art 19(1). 62
  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 recommenda-
tion (Art 19(3)(a)).
519

4  European Union Communications Law 159

particularly in respect of the complex but critical areas of pricing and cost ac-
counting, as well as providing assistance to undertakings, both market players
and potential entrants, about how the Commission views particular matters, par-
ticularly in terms of competition analysis.
However, while ‘soft law’ has been used by the Commission to pursue its competi-
tion 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 de-
regulation 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 regu-
late 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 ex-
pressly 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 dir-
ectly or indirectly to the telecommunications sector. It is responsible for elec-
tronic commerce issues, including regulating the provision of ‘information society
services’,69 which will generally be offered by telecommunication services pro-
viders. DG Internal Market was also responsible for data protection issues, which
included sectoral measures imposing special obligations in the telecommunica-
tions sector; although the responsibility has subsequently transferred to the DG
Justice.70
The CJEU has inevitably played a role in the development of European tele-
communications law as the ultimate arbiter of European legal instruments.
Proceedings have come before the Court based on one of four legal grounds pro-
vided for under the TFEU:71

64
  Universal Services Directive, Recital 48.
65
  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
  See Framework Directive, at Art 16(3). 67
  OJ C 321/​1, 31 December 2003, at paras 22–​2 3.
68
  Audiovisual Media Services Directive at Art 4(7). 69
  See n 14. 70
  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 <https://​ec.europa.eu/​d igital-​single-​market/​sites/​d igital-​
agenda/​fi les/​g uidetocaselaw2010en_​0.pdf>.
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160 Part II  Regulatory Regimes

• Infringement proceedings (Article 258)—​A s part of its role to ensure implementa-

tion 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 re-
spect 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 ques-
tions 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 telecom-
munications sector, such as the Annex of Telecommunications and the Reference
Paper, comprise a potential source of EU law in terms of interpretation and appli-
cation, 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 appli-
cation 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.
16

4  European Union Communications Law 161

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 prohib-
iting private message-​forwarding agencies in the UK from relaying telex messages
received from and intended for relay to another country.79 The Commission’s deci-
sion was appealed by the Italian government to the ECJ, whilst the British govern-
ment 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 dom-
inant 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 re-
sulting 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 tele-
communications 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.

79

  Case 41/​8 3 Re British Telecommunications: Italy v Commission [1985] 2 CMLR 368.

80

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.
612

162 Part II  Regulatory Regimes

joint ventures, merger activities, and even state aid83 in every aspect of the sector.
Such regulatory intervention has extended to alliances and mergers between na-
tional 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 undertak-
ings or undertakings to which Member States grant special or exclusive rights’. The
primary mechanism by which the Commission decided to liberalize national tele-
communications 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.
613

4  European Union Communications Law 163

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 pro-
visions 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 ‘other-
wise than according to objective, proportional and non-​d iscriminatory criteria’.95
During the liberalization process, the procurement practices of telecommunica-
tion operators that were public undertakings and operating under special or ex-
clusive 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 in-
fringe 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

91
  See n 35.
92
  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 net-
works 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.
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164 Part II  Regulatory Regimes

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 telecommu-
nications equipment) and the freedom to provide services was achieved by re-
stricting the ability of a Member State to prohibit the supply of equipment and
services except for ‘non-​economic reasons in the general public interest’, other-
wise referred to as the ‘essential requirements’. Such reasons reflect the deroga-
tions 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 equip-

ment 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 1.  Security of network operations
2. Electromagnetic compatibility requirements 2. Maintenance of network
3. Effective use of radio frequency spectrum integrity
4. Interworking of apparatus via the network 3.  Interoperability of services*
5. Protection of the network from harm or misuse 4.  Data protection*
of network resources 5. Effective use of radio frequency
6. Features protecting the privacy of subscribers and users spectrum*
7. Features ensuring avoidance of fraud 6. Avoidance of harmful
8. Features ensuring access to emergency services interference*
9. Features facilitating use by users with disabilities 7.  Protection of the environment*
10. Features ensuring that only software that is compliant 8. Town and country planning
with the essential requirements can be loaded onto the objectives*
equipment
(* 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 in-
frastructure, such as mobile transmitters and digging-​up streets to lay cable.

100
  Case C-​18/​8 8, Régie des Télégraphes et des Téléphones v GB-​Inno-​BM SA [1991] ECR I-​5941.
101
  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.
615

4  European Union Communications Law 165

In the first stages of liberalization, much concern was directed towards the im-
pact on the ‘national’ (ie incumbent) network of new operators connecting ‘un-
regulated’ 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 en-
trants. 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 regu-
latory concept in respect of telecommunication networks and services has dis-
appeared; 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 re-
ceive communications. In common with all major jurisdictions, Europe has had a
distinct regulatory regime for end-​user equipment, historically referred to as ‘tele-
communications terminal equipment’.106 As such equipment merged with com-
puting, 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 tele-
communications terminal equipment, 86/​361/​E EC; OJ L 217/​21, 5 August 1986.
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166 Part II  Regulatory Regimes

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 recogni-
tion was the initial vehicle for the achievement of a ‘Single Market’. The first legis-
lative 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 rela-
tion 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 tech-

nical 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 tele-
communications 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).
617

4  European Union Communications Law 167

• 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 telecommuni-
cations 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 equip-
ment 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 <http://​ec.europa.eu/​
growth/​tools-​databases/​nando/​i ndex.cfm>.
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 prod-
ucts, OJ L 218/​30, 13 August 2008.
114
  Directive 1999/​5/​EC, see n 86, at Recital 7.
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168 Part II  Regulatory Regimes

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 equip-
ment being removed from the sectoral regime and placed under generic measures
governing all electrical equipment.117 ‘Radio equipment’ remains subject to a sec-
toral regime designed primarily to ensure the efficient use of spectrum and the
avoidance of harmful interference, but extending to the other ‘essential require-
ments’ 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 soft-
ware ‘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 ‘manufac-
turer’ 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 liberal-
ization 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 telecommunica-
tions 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.
619

4  European Union Communications Law 169

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 ‘exclu-
sive rights for the provision of telecommunications services, including the es-
tablishment and the provision of telecommunications networks required for the
provision of such services’ (Article 1(2)). This removed the ‘reserved service’ excep-
tion 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

122
  See further Chapters 2 and 8.
123
  Commission Directive 94/​4 6/​EC amending Directive 88/​301/​E EC and Directive 90/​388/​E EC in par-
ticular 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 aboli-
tion of the restrictions on the use of cable television networks for the provision of already liberalized telecom-
munication 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 imple-
mentation 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 tele-
communications services, OJ L 347/​45, 18 December 1997. See further Chapter 16, at Section 16.4.
710

170 Part II  Regulatory Regimes

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 compe-

tition, 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 tech-
nical 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 devel-
opment 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 ac-
tivities 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 ac-
cess code (00).134 In 2007, the number range beginning with ‘116’ was reserved for

128
  See n 101. 129
  See n 2.
130
  CEPT is a body comprising some 48 postal and telecommunications ‘administrations’ of European
Countries, not limited to the European Union: <http://​w ww.cept.org>.
131
  eg Council Resolution of 27 April 1989 on standardization in the field of information technology and tele-
communications, 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 <http://​w ww.ero.dk/​etns>.
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
71

4  European Union Communications Law 171

the provision of services of social value, such as hotlines and helplines.135 It was en-
visaged 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 suc-
cess 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 con-
ceived 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 introduc-
tion 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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172 Part II  Regulatory Regimes

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 en-
visaged 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 provi-
sion 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 pro-
vision 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 obliga-
tions to ensure that the provision of ‘fixed’ voice telephony to users, which included
residential customers as well as competing service providers, was under harmon-
ized 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 provi-
sion (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.
713

4  European Union Communications Law 173

Further market liberalization led to the replacement of the voice telephony dir-
ective 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 liber-
alization of national markets. Such detail arises both from the scope of the issues
addressed, as well as the imposition of asymmetric obligations on market partici-
pants. One feature of the harmonization process is the key role played by the NRAs
in implementing and complying with the principles contained in the harmoniza-
tion 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 environ-
ment, introducing ex ante regulations for certain telecommunications oper-
ators.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 des-
ignated.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 uni-
versal 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
  Ibid, at Art 2(3). 150
  Ibid, at Art 11(1a).
174

174 Part II  Regulatory Regimes

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, in-
deed, the German government refused to use the 25 per cent trigger for the appli-
cation 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 competi-
tion 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 ‘signifi-
cant market power’ in the following terms, based on CJEU jurisprudence,154
An undertaking shall be deemed to have significant market power if, either in-
dividually 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

151
  See further Chapter 10.
152
  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
 Ibid. 154
  eg Case 322/​81 Michelin BV v Commission [1983] ECR 3461, para 6.
715

4  European Union Communications Law 175

an appreciable extent independently of competitors, customers and ultimately

consumers.155

In addition, recognizing the peculiar nature of ‘network’ industries and the oli-
gopolistic structure of various telecommunications markets, such as mobile, ex-
press 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 com-
petition 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 di-
vergent approaches being taken by Member States, the designation procedure is
subject to certain harmonization provisions at each stage of the process: market def-
inition, 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 subse-
quently 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 par-
ticipant has SMP, they should also give ‘utmost account’ to guidelines concerning
the analysis procedure issued by the Commission (Article 16).160 The intention be-
hind 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).

155

  eg Commission decision:  Case IV/​M. 1524 Airtours/​First Choice [2000] OJ L 93/​01 and Court of First
156

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.
716

176 Part II  Regulatory Regimes

Where the criteria are not shown to be present, the application of ex ante regu-
lation 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 obliga-
tions 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 neces-
sary, 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 frame-
work’.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 re-
tail 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 pro-
ductive inefficiencies.
• Termination (Two-​way access):  This relates to the link between price set-
ting 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
  eg retail price caps. 165
  ERG (03) 30rev1 (April 2004).
71

4  European Union Communications Law 177

feasible, sufficient access to wholesale inputs should be ensured. Third, where in-
frastructure 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 desig-
nated SMP operator rather than evasion.
The fourth harmonization element in the Framework Directive concerns the no-
tification 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), intro-
duced 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 com-
ments 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 add-
ition, 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-​ 0 6 Base NV v Commission (22
295-​
February 2008).
167
  There have been 105 withdrawals. For an overview of notifications, as of January 2018, see <https://​
circabc.europa.eu/​faces/​jsp/​extension/​w ai/​navigation/​container.jsp>.
718

178 Part II  Regulatory Regimes

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 in-
herent 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 re-
sources most slavishly followed the Commission Recommendation on Markets;
while at the other end of the spectrum, some NRAs, such as Ofcom, have elab-
orated 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 oper-
ators, 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 au-
thority, or both.
The ex ante controls were transposed into national law by the Member States, ei-
ther 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.

168
 eg British Telecommunications plc v Ofcom [2017] CAT 17.
169
  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 im-
plementation of the rules on competition laid down in Articles 81 and 82 of the Treaty, OJ L1/​1, 4 January 2003.
719

4  European Union Communications Law 179

One of the central features present in the Member States prior to liberalization
of the telecommunications market was the fact that the regulatory institution re-
sponsible for regulating the market, often a Ministry of Communications, was
usually also responsible for controlling the commercial activities of the incum-
bent operator. It was recognized that such merged functions would not be appro-
priate 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 pro-
hibit 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 equip-
ment 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 regu-
latory 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 telecommunica-
tions 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 telecommunica-
tions services; OJ L192/​10, 24 July 1990, at Art 7.
810

180 Part II  Regulatory Regimes

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 in-
cumbent, 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 divesti-
ture 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 establish-
ment 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 or-
ganisations providing telecommunications networks and/​or services shall
ensure effective structural separation of the regulatory function from activ-
ities 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.
81

4  European Union Communications Law 181

operators and are involved in the granting of rights of way.177 In the UK, such a pro-
vision 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 re-
sources necessary, in terms of staffing, expertise, and financial means, for the per-
formance 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 en-
forcement 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 de-
pendency 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 jur-
isdictions. 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.

  Framework Directive, at Art 11(2).

177 178
  See Council Directive 95/​62/​EC, at Recital 10.
  Directive 97/​51/​EC, at Recital 9.
179

180
  See Case C-​389/​08, Base NV and others v Ministerraad (6 October 2010), where it was held that a determin-
ation 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, in-
dependence, impartiality and transparency’ stipulated in the Framework and Universal Services Directives.
812

182 Part II  Regulatory Regimes

In the Commission’s 1999 Communications Review of the regulatory frame-

work, 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 re-
sponsibilities between institutions at national level does not lead to delays and
duplications of decision making, iii) improving co-​operation between sector spe-
cific and general competition authorities and iv) requiring transparency of deci-
sion 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 regu-
latory 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 en-
sure 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 des-
ignated 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 cooper-
ation between different NRAs, particularly competition and consumer law author-
ities.188 In the UK, for example, the Office of Communications (Ofcom) exercises
certain functions concurrently with the Competition and Markets Authority in

181
  See ‘The 1999 Communications Review’, see n 10, at section 4.8.3.
182
  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 ob-
ligation 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).
813

4  European Union Communications Law 183

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 in-
dependent 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 jurispru-
dence.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 oc-
currence 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 re-

quire 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
  Framework Directive, Art 4. 192
  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 re-
spect to reconciling the principles contained in the Telecommunications Act 1984, s 3(2).
814

184 Part II  Regulatory Regimes

A final aspect of NRA responsibility concerns their role in intervening and re-
solving disputes between market participants. Under pre-​NRF, NRAs were re-
quired 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, insuffi-
cient powers, and appeal procedures often resulted in significant delays, which
usually disadvantaged the market entrant. The Framework Directive therefore im-
poses 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 com-
munications sector continues to be a defining feature of EU law and regulation.
National divergences in NRAs as institutions and personalities would seem an in-
evitable 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 real-
ization 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 es-
tablishment 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

196
  Framework Directive, at Art 20.
197
 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.
815

4  European Union Communications Law 185

Subsequently, as part of the 2007 Reform Proposals, the Commission pro-

posed the establishment of the European Electronic Communications
Market Authority,199 although with nothing like the independence and exclu-
sive decision-​m aking powers of the European Central Bank, as called for by
Commissioner Reding, which indicated the controversial nature of the pro-
posal 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 compe-
tition 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 author-
ities in the Member States.205 Under the NRF, the Commission currently has the fol-
lowing 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 obli-
gations 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.
816

186 Part II  Regulatory Regimes

• 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 telecommunica-
tions 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 lib-
eralization has been the ability to preserve and pursue the potentially conflicting
public policy objective of ‘universal service’: the provision of access to telecommu-
nications 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 <https://​ec.europa.eu/​d igital-​single-​market/​en/​
communications-​committee>.
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 <https://​
ec.europa.eu/​d igital-​single-​market/​en/​radio-​spectrum-​committee-​rsc>.
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 <http://​
rspg-​spectrum.eu>.
209
  Directive 99/​5/​EC, at Art 13. 210
  See n 172, at 3.1. 211
  See <https://​etno.eu>.
817

4  European Union Communications Law 187

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 telecommunica-
tion 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 periph-
eral and disadvantaged countries and regions.214

In response, the Commission adopted a Communication addressing the import-

ance 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 de-
tailed the various tiers that comprise the policy. First, a basic voice telephony ser-
vice 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 con-
solidated 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.
81

188 Part II  Regulatory Regimes

• 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 en-
able 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 sub-
sidiarity, 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 impos-
ition 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 ‘func-
tional internet access services’, defined by reference to ‘a dynamic basic list of on-
line services usable over a broadband connection’, while removing certain legacy
services, such as public payphones and directory enquiry services.218

216
  Universal Services Directive, Art 3(1).
217
  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.
819

4  European Union Communications Law 189

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 communica-
tions platform, although the entry of the twelve Accession States delayed some-
what 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 con-
sumers (Article 11(2)). NRAs may set and monitor performance against certain tar-
gets, 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 ac-
tual provision of a connection. Under the Universal Services Directive, NRAs may
require designated operators to offer tariff options or packages targeted specific-
ally 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 provi-
sion 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
  COM(2008) 572 final, 25 September 2008. 221
  COM(2011) 975 final, 23 November 2011.
222
  See further Chapters 9 and 15.
910

190 Part II  Regulatory Regimes

areas. Indeed, in a fully competitive market, operators may perceive positive

benefits in being designated as having USOs, and therefore Member States are re-
quired 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 uni-
versal service and related funding mechanisms. In particular, the burden could
only be placed upon undertakings providing ‘public telecommunications net-
works’, 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 effect-
ively 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 oper-
ators 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 inter-
national. 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.
224
  Directive 96/​19/​EC, Art 6, inserting Art 4c into Directive 90/​388/​EC. 225
  47 USC §254(d).
91

4  European Union Communications Law 191

‘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 disad-
vantageous competitive position. In the absence of a regulatory obligation to pro-
vide 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 mech-
anism 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

226
  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.
227

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.
912

192 Part II  Regulatory Regimes

objective, to be borne by governments through general taxation, rather than im-

posed on operators.
Responding to such concerns, the Universal Services Directive states that
Member States shall decide to fund any unfair burden resulting from the provi-
sion 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 ser-
vice 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 deter-
mination 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 stand-
ards’.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 ren-
tals, 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 ap-
proach 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 elem-
ents of it. The bidder requesting the lowest subsidy would then be ‘awarded’ the
obligation under a service agreement.235

231
  USD, at Art 13(1).
232
  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.
913

4  European Union Communications Law 193

To date, Member State experience would not appear to reflect the historic con-
cern 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 com-
munications law over the past thirty years. As the third distinct phase of develop-
ment, 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 conver-
gence, 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 trans-
mitted, 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 back-
stop 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.
236
914

194 Part II  Regulatory Regimes

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 com-
munications 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 regu-
lating 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 lib-
eralization since the beginning, as well as one of the first to fully privatize the na-
tional 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.
915

US TELECOMMUNIC ATIONS  L AW
Karen Lee and Jamison Prime

5.1 Introduction  195

5.2 Regulatory Law and Policy: History and Developments  196
5.3 Overview of Key US Regulatory Bodies and Procedural
Principles  219
5.4 Federal Bodies  220
5.5 State Bodies  226
5.6 Procedural Principles and Mechanisms: The Administrative
Procedure Act and Administrative Law Principles  227
5.7 The Pre-​Emption Doctrine and FCC Jurisdiction  230
5.8 Licensing  233
5.9 Spectrum Management  241
5.10 Access, Interconnection, and Related Measures  242
5.11 Universal Service Obligations (USOs)  258
5.12 Competition Law  267
5.13 Consumer Privacy Measures  274
5.14 Concluding Remarks  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.
916

196 Part II  Regulatory Regimes

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 commu-
nications regulation. Since the adoption of the 1934 Act, the FCC has remained a
constant. However, the regulatory policies Congress has required the FCC to im-
plement 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 vig-
orous 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, des-
pite 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 develop-
ment 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 in-
ventor of the telephone, and later known as AT&T—​monopolized the telephony
market. Thereafter competition flourished for about a decade. At one stage, inde-
pendent 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.

1

  Pub L No 104–​104, 110 Stat 56 (8 February 1996) (codified at 47 USC §§251–​261, 271–​276, 336, 363, 571–​573,
2

549, 613, 160–​161, 660–​561, 230, 232, 614, and at 15 USC §79z–​5c).
917

5  US Telecommunications Law 197

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 ‘pro-
vide 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 au-
thority 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

3
  Mann-​E lkins Act (18 June 1910, ch 309, 36 Stat 539).
4
  See Section 5.8.1 for the meaning of ‘common carrier’.
918

198 Part II  Regulatory Regimes

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 na-
tional and international calls. However, in 1969, when the FCC granted a licence
to Microwave Communications, Inc (MCI) to install and operate microwave facil-
ities 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, competi-
tors 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 op-
erators 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 distor-
tions and artificial arbitrage opportunities which arose as a result of the subsidiza-
tion 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 vio-
lated 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

5
  Sherman Anti-​t rust Act, ch 647, 26 Stat 209, 209–​10 (1892) (codified as amended at 15 USC §§1–​7).
91

5  US Telecommunications Law 199

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 ori-
ginal 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 fa-
vour 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 pro-
mote competition among interexchange carriers in the late 1980s, the FCC distin-
guished between common carriers with market power (‘dominant’ carriers) and
common carriers without market power (‘non-​dominant’ carriers). Dominant car-
riers 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 en-
forced by the FCC. However, non-​dominant carriers had to ensure that their ser-
vice 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 tel-
ephony services. It declared invalid all state regulation that prohibited or re-
stricted the entry of competitors into intrastate telecommunications services and
02

200 Part II  Regulatory Regimes

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 pro-
vision 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 evolu-
tion. This section focuses on cable’s historical development and legacy position
as the original multichannel video programming distributor (MVPD). The regula-
tion 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 re-
ceives 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

6
  The MFJ was officially terminated on 11 April 1996 following the enactment of the 1996 Act.
7
  See 47 USC §271. 8
  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).
201

5  US Telecommunications Law 201

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 regu-
lators soon became concerned that cable’s carriage of free-​to-​a ir broadcast sig-
nals 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 competi-
tion, 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 modi-
fied 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).
10

  Pub L No 102–​385, 106 Stat 1460 (1992).

11
20

202 Part II  Regulatory Regimes

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 au-
thorities 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 indi-
vidual 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 com-
petition, 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 con-
tinues 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 sub-
scription 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).
230

5  US Telecommunications Law 203

operator, entered the video content market directly through its purchase of NBC
Universal from General Electric, which was approved in 2011. The industry con-
tinues 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 op-
erators; 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 subscrip-
tion 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 chal-
lenging the traditional cable model. As the cost of cable programming continues
to rise due to increased fees for retransmission, particularly for sports program-
ming, 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 com-
bination of fibre-​to-​t he-​home, satellite television (it purchased DirecTV in 2015),
and internet television subscription services. It counted 30 million content sub-
scribers 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’ sub-
ject 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 regula-
tion, 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.
024

204 Part II  Regulatory Regimes

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 cel-
lular 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 envi-
sioned, however, the technology did not exist to deploy widespread wireless net-
works. 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 sys-
tems 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.
205

5  US Telecommunications Law 205

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 em-
ployed 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 incen-
tives 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 ground-
breaking 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 su-
perior propagation characteristics. Advances in technology have also made it pos-
sible 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 popula-
tion to a widely accepted medium that was marked by falling prices, increased ser-
vice 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 develop-
ments 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 <http://​w ireless.
fcc.gov/​i ndex.htm?job=cmrs_ ​reports>.
026

206 Part II  Regulatory Regimes

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 conferen-
cing, and advanced gaming. The ITU released the IMT-​Advanced standards as-
sociated 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 ap-
proved 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, al-
though it is becoming increasingly challenging to find additional suitable fre-
quency 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 atten-
tion. These frequencies were previously seen as undesirable by the mainstream

  See further Section 5.11.1.

17
207

5  US Telecommunications Law 207

incumbent wireless carriers due to their short propagation distances and greater
susceptibly to disruption. Use of such spectrum is expected to result in the deploy-
ment of dense networks consisting of clusters of low-​power small cells with ad-
vanced 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 regu-
lators have relied on vigorous competition among licensees to deliver service im-
provements 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 en-
tity 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 educa-
tional broadcast purposes, recovered from television broadcasting, and repur-
posed from satellite use have all been used to expand mobile broadband networks.
Because many of these services have been licensed under different schemes, regu-
lators 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 satel-
lite in the US has increased dramatically since the 1960s. Historically, domestic
satellite services in the US were provided by private entities; however, inter-
national satellite communications services in the US were offered exclusively by

18
  See further Section 5.2.5.3 below.
028

208 Part II  Regulatory Regimes

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 au-
thorize 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 inter-
connection 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 competi-
tors 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 pri-
vatize, 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 ser-
vice 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 ap-
proach 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 spec-
trum 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

19
  Pub L No 87–​624, 76 Stat 419 (1962). 20
  Presidential Determination No 85–​2 .
21
  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.
029

5  US Telecommunications Law 209

the provision of public safety services during times of emergency when terrestrial
networks may be unavailable; and the provision of telephony services where trad-
itional 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, rela-
tively inexpensively, and in large quantities; increased competitive commercial
launch options offered by companies such as SpaceX; and technological improve-
ments 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, re-
gardless 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

23
  See Sections 5.8 and 5.10.
24
  ‘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).
201

210 Part II  Regulatory Regimes

management, control, or operation of a telecommunications system or the man-

agement of a telecommunications service’.26 However, the essence of the two con-
cepts 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 in-
dustry 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 in-
dustry 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 pur-
suant 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 com-
panies, Computer Inquiry III gave them the flexibility to integrate their basic and

  47 USC §153(20).
26
21

5  US Telecommunications Law 211

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 ‘compar-
ably 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 informa-
tion, 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 telecommuni-
cations service. Instead, cable modem services were classified as ‘information
services’. However, the FCC found that, as the conveyance element of a cable ser-
vice 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 ser-
vice’ 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).
21

212 Part II  Regulatory Regimes

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 ac-
cess 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 respon-
sibility’, such as Title II (common carrier), Title III (spectrum management), and
Title VI (cable), the FCC had no authority to regulate Comcast’s internet man-
agement 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 in-
crease the roll-​out of broadband services on the basis that the conveyance element was a ‘telecommunica-
tions 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 subsec-
tion (c)(1)(B)’.
231

5  US Telecommunications Law 213

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 inter-
state 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, ef-
ficient, 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 ‘telecom-
munications service’ and applying all Title II regulation to it; or
• Classifying the access component of broadband internet services as a ‘telecom-
munications 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 pro-
viders 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 por-
tions 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 ‘ad-
vanced telecommunications capability’. The Court of Appeals held that §706 em-
powered the FCC to adopt rules regulating broadband services, including network
neutrality provisions. However, the proposed network neutrality provisions regu-
lated 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).
241

214 Part II  Regulatory Regimes

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 telecom-
munications services, it would have upheld the Commission’s network neutrality
provisions.
In 2015, fifteen months after the Verizon decision, the FCC declared broad-
band 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 pro-
viders 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 re-
quired 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 fol-
lowed 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 in-
frastructure 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 de-
cision was denied on 1 May 2017. See USTA v FCC and USA, No 15-​1063 (DC Cir 1 May 2017).
36
  See further Section 5.13.5. 37
  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).
251

5  US Telecommunications Law 215

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 re-
tention 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 es-
timated 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, fol-
lowed 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 broad-
band 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 broad-
band 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
261

216 Part II  Regulatory Regimes

a reasonable and timely fashion,40 the FCC observed that Americans are increas-
ingly 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 pro-
viders 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 con-
sumers 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 suit-
able for wireless broadband services, included an obligation to treat lawful con-
tent, 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 cus-
tomers 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).
271

5  US Telecommunications Law 217

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 ac-
cessing, 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 ac-
cess 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 hin-
dered 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 pro-
viders 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.
281

218 Part II  Regulatory Regimes

appointed by President Trump, Ajit Pai, and Commissioners Michael O’Rielly and
Brendan Carr, also Republicans, staunchly oppose them, preferring less interven-
tion 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 in-
formation48 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 con-
tribute 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 develop-
ment 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).
291

5  US Telecommunications Law 219

slow to emerge. In recent years, however, the FCC has adopted a number of im-
portant 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 intercon-
nected VoIP providers to directly obtain telephone numbers from American
numbering administrators (see Section 5.10.3). In addition, there is an ongoing in-
quiry 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 out-
reach 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 comple-
mented 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 ser-
vice 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 respon-
sible for all telecommunications issues, including policy, licensing, and enforce-
ment, 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).
20

220 Part II  Regulatory Regimes

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 cer-
tain 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 oper-
ators. 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).
21

5  US Telecommunications Law 221

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 in-
tegrated 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, ef-
fectively, 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 enforce-
ment field offices throughout the US.
As of 2017, the FCC is organized into seven operating bureaux, which collect-
ively 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 pro-
grammes 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 ser-
vice licensing. Other major bureaux include: the Media Bureau, which is charged
with regulating AM and FM radio stations, television broadcast stations, multi-
channel video programming distributors, such as cable television entities; the
2

222 Part II  Regulatory Regimes

International Bureau, which is responsible for the FCC’s international telecom-

munications and satellite programmes, implements international treaties con-
cerning 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 con-
tent 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 of-
fices 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 ap-
proval 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 de-
ployed throughout the FCC’s organization, and will assume some functions, such
as auction design and implementation, that are currently managed by other bur-
eaux and offices.
The majority of the FCC’s licensing and regulatory work continues to be con-
ducted 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 en-
forcement 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).
56
23

5  US Telecommunications Law 223

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 cre-
ated 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 pro-
posals 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).
24

224 Part II  Regulatory Regimes

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 respon-
sibility 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 author-
ities. 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 car-
riers. 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 neu-
trality 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 telecom-
munication 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 cab-
inet-​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).
25

5  US Telecommunications Law 225

Office, part of the Library of Congress, are involved in issues relating to intellec-
tual 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 un-
manned 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 trig-
gered 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 telecommu-
nications 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 facili-
tate 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,
26

226 Part II  Regulatory Regimes

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 contri-
butions to Congressional interests. Members of Congress are not hesitant to criti-
cize 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 con-
tact 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 re-
duced 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 com-
plaints, 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 telecom-
munications policies differ (significantly in some cases) from state to state, but
generally all PUCs are state-​created agencies with a division specializing in tele-
communications regulation. Historically, some PUCs, in states such as Illinois,
27

5  US Telecommunications Law 227

New York, and California, embraced competition within the local exchange mar-
kets; 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 compli-
ance 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 telecommunica-
tions policy. The NARUC is comprised of federal and state utility regulators and
strives to coordinate action by state regulators and to develop cooperation be-
tween federal and state regulators. Despite these aims, in practice the NARUC rep-
resents 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
28

228 Part II  Regulatory Regimes

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 inter-
pret and apply laws, they must act within established procedural guidelines. The
Administrative Procedure Act sets forth the basic ‘notice and comment’ frame-
work 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 pro-
posed 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 agen-
cies. 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 dis-
cussion 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 po-
tentially 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 gen-
erated 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
29

5  US Telecommunications Law 229

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 par-
ties’ 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 sum-
mary 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 pro-
ceedings, the FCC may issue a document adopting rules while simultaneously pro-
posing 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 meet-
ings 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 div-
ision 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
203

230 Part II  Regulatory Regimes

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 deter-
minations 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 de-
cision 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 respon-
sible for regulating interstate and foreign commerce in wire and radio communi-
cations; 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 cre-
ation of dual regulators reflected the need to balance the interests of state and fed-
eral 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
213

5  US Telecommunications Law 231

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 be-
tween 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 hand-
sets 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 ‘inter-
state’ 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 regu-
lators retain jurisdiction over issues that are separable from interstate communi-
cations 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 jurisdic-
tion only if the FCC can demonstrate that interstate and intrastate issues are in-
separable and that the exercise of jurisdiction by the state frustrates the statutory
authority of the FCC.
23

232 Part II  Regulatory Regimes

The scope of the FCC’s jurisdiction over intrastate telephony matters was
formally augmented in the Telecommunications Act of 1996. The 1996 Act re-
quired 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 contra-
venes 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, notwith-
standing 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 in-
clude its decisions concerning VoIP,61 the deployment of wireless facilities,62 and
municipal broadband providers.63 In the municipal broadband providers deci-
sion, 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 con-
tain a sufficiently clear statement of pre-​emption. However, the decision  (along
with those concerning VoIP and the deployment of wireless facilities) serves to il-
lustrate the continuing importance of the pre-​emption doctrine and the role of the
courts in delineating the boundaries of federal and state jurisdiction over commu-
nications matters.

60
  47 USC §251(d)(3)(A)–​(C).
61
  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).
23

5  US Telecommunications Law 233

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 broad-
casting, 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 re-
quest 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 ex-
tent 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.
66
234

234 Part II  Regulatory Regimes

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 regu-
latory activities. These regulatory fees (which are different from application pro-
cessing 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 authoriza-
tion 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 appli-
cation process for granting §214 authorizations for the provision of international
services. Provided an applicant is not (i) affiliated with a foreign carrier who pos-
sesses 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
253

5  US Telecommunications Law 235

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 for-
eign 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 mo-
bile 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 thresh-
olds. 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 typ-
ically 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 dom-
inance through a variety of means, including setting auction rules that exclude
bidding by licensees of like services, and allocating multiple frequency chan-
nels 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.
263

236 Part II  Regulatory Regimes

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 ‘mu-
tually 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 spec-
trum auctions have attracted considerable attention, the 1934 Act (as amended)
requires the FCC to consider efficient spectrum use and not the expectation of rev-
enues 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 ser-
ious applicants. Whereas the very first auctions were chaotic affairs with a live auc-
tioneer 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 en-
sure 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 auc-
tions. The auction policy has not been without problems, however. Traditionally,
the FCC faced the greatest difficulties in implementing its designated entity pro-
cedures. Constitutional challenges undermined the FCC’s women and minority
bidding preference programmes, and some designated entities either defaulted on
273

5  US Telecommunications Law 237

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 pro-
cess. More recent challenges have been policy related, focusing on matters of auc-
tion 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 cus-
tomers to use the devices and applications of their choice’ remains controversial.
Proponents assert that this condition furthered what was then considered the im-
portant 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 au-
thority 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 ser-
vice, 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 li-
cences might be difficult to administer. Examples include implanted medical de-
vices, 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 un-
licensed 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 op-
erations, 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 pro-
hibited 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
238

238 Part II  Regulatory Regimes

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 com-
munications 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 li-
censed networks and, in 2016, began deploying equipment designed to provide
4G LTE services under the unlicensed rules. This development has been contro-
versial; while the technology promises to enhance mobile carriers’ service and re-
liability 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 in-
clude combinations of the licensing and authorization models discussed above.
For example, the Commercial Spectrum Enhancement Act of 2004,67 which es-
tablished 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 auc-
tion 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 pro-
ceeds. The adoption of service rules for a new radio service, the Citizens Broadband
Radio Service, in 2015 is particularly noteworthy because it introduced a mech-
anism 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 spec-
trum. Incumbent Access users, consisting of federal government users and grand-
fathered fixed satellite service operations, will receive protection from harmful
interference from all other band users. Priority Access Licenses, awarded by auc-
tion, 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).
293

5  US Telecommunications Law 239

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 con-
sumer devices that make use of location-​sensing technologies to avoid interference
with the signals of incumbent broadcasters, on an unlicensed basis in spectrum be-
tween 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 li-
cences 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 informa-
tion 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 car-
riers abroad under the guise of promoting effective competition. For example,
it required all foreign carrier applicants to satisfy the ‘effective competitive op-
portunities’ (ECO) test when applying for international §214 and cable landing li-
cences. 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 com-
mitments 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 ser-
vice, but was not expected to alter the fundamental three-​t iered licensing approach.
69
  See further Chapter 16, at Section 16.4.3.1.
420

240 Part II  Regulatory Regimes

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 own-
ership 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 fa-
cilitate 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 car-
rier 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.
214

5  US Telecommunications Law 241

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 fre-
quencies 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 car-
rier, 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 neces-
sary 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 inter-
national 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
  See further Chapter 7. 75
  See further Chapter 16, at Section 16.3.2.
24

242 Part II  Regulatory Regimes

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 rele-
vant 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 interfer-
ence 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 oper-
ation at a later date.
This allocation model serves as the basic framework for organizing the electro-
magnetic 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 suf-
ferance 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.
77
243

5  US Telecommunications Law 243

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 tech-
nically 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 pro-
vide 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 provi-
sions, 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, eco-
nomic, 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 telecommu-
nications 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 uneco-
nomic’.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

  See 47 USC §251(c)(3).

78 79
  47 CFR §§51.307–​51.321. 80
  47 CFR §51.317(a)(1).
  47 CFR §51.317(a)(2)(iii).
81 82
  47 CFR §51.317(b). 83
  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).
42

244 Part II  Regulatory Regimes

FCC rules mandate that ILECs provide local loops, subloops, network interface de-
vices, 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 ceil-
ings 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 elem-
ents would ‘impair’ the ability of a carrier seeking UNEs to provide telecommuni-
cations 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

85
  47 CFR §51.319.
86
  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).
245

5  US Telecommunications Law 245

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 ex-
change 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 speci-
fied 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 ad-
jacent 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).
426

246 Part II  Regulatory Regimes

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 re-
quiring 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 tech-
nically 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 determin-
ations 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 adop-
tion 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 responsi-
bilities 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 pro-
viders 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
  47 USC §252(c)(2)(A)–​(B). 102
  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).
247

5  US Telecommunications Law 247

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 conse-
quently permitted in their own right to rely on §251 of the Act to interconnect dir-
ectly 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 tele-
phone 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 re-
quests 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.
428

248 Part II  Regulatory Regimes

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 require-
ment 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 disincen-
tives 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 ser-
vice, 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 con-
sulted 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 regu-
late 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 <http://​w ww.fcc.gov/​wcb/​ppd/​I ntercarrierCompensation/​h istory.
html>.
112
  In re Core Communications, Inc, 531 F 3d 849 (2008).
249

5  US Telecommunications Law 249

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 deci-
sion of the Court of Appeals disappointed many, however. Rather than announce
sweeping reforms, the FCC adopted a narrow order114 to address the specific con-
cerns 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 pri-
ority. 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).

113

  High-​Cost Universal Service Support, Order on Remand and Report and Order and Further Notice of
114

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 com-
pensation. Nevertheless, it asserted it could regulate ISP-​bound traffic in accordance with the interim ar-
rangements 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 ter-
minated 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.
520

250 Part II  Regulatory Regimes

arrangements which included capping rates for all forms of interstate access and
intrastate termination. Carriers had to bring interstate and intrastate termin-
ation 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 re-
mains 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 dir-
ected 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 mo-
bile subscriber. There has been a lack of interest in ‘calling party pays’ (CPP) offer-
ings, 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 mo-
bile networks, despite initiating a Notice of Inquiry to gather information on for-
eign 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 tele-
communications services available for resale on reasonable and non-​ d is-
criminatory 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).
215

5  US Telecommunications Law 251

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 direc-
tions 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 fu-
ture, 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 car-
riers’ (a term interpreted by the FCC to include wireless providers125) with non-​dis-
criminatory 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 cer-
tification, 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.

  47 CFR §51.603.
122 123
  47 USC §252(d)(3).
  Review of the Commission’s Rules Regarding the Pricing of Unbundled Network Elements and the
124

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).
25

252 Part II  Regulatory Regimes

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 sub-
sequently 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 deci-
sion 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 telecommunica-
tions 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, es-
pecially 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 in-
stalled 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

126
  See further Section 5.11.1.
127
  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
  See further Section 5.2.5.2. 130
  Ameren Corporation v FCC, 865 F 3d 1009 (8th Cir 2017).
253

5  US Telecommunications Law 253

Deployment Advisory Committee (BDAC) to examine pole attachment and other

infrastructure issues as it identifies ways to accelerate the deployment of broad-
band 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 un-
reasonable dialling delay and must provide customers with the option of using dif-
ferent 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 port-
ability 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 wire-
less carriers where the coverage area of the wireless carrier overlaps with the geo-
graphic 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).
524

254 Part II  Regulatory Regimes

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 (collect-
ively 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 re-
quired 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 an-
tenna 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 wire-
less 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 pro-
hibiting 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.
25

5  US Telecommunications Law 255

on a church’s roof despite the fact that the denial effectively precluded the provi-
sion 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 con-
sumer 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 re-
ports 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 con-
tract 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, re-
commending 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 re-
quires agencies to implement procedures for considering potential environ-
mental 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 as-
sessment 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).
526

256 Part II  Regulatory Regimes

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 proper-
ties, 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 commu-
nications 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 environ-
mental 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 trig-
gered 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 over-
whelm 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 sig-
nificant 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).
139

 Accelerating Wireless Broadband Deployment by Removing Barriers to Infrastructure Investment,

140

Notice of Proposed Rulemaking and Notice of Inquiry, WT Docket No 17-​79, FCC No 17-​38, 32 FCC Rcd 3330
(2017).
257

5  US Telecommunications Law 257

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 avail-
ability of telecommunications with the interests of state, local, and tribal commu-
nities, 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 telecom-
munications 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 obliga-
tion 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 ex-
ceptions, 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 mark-
edly different for travellers who leave the US, who remain subject to high inter-
national 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).
528

258 Part II  Regulatory Regimes

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 trans-
parency and no blocking rules referred to Section 5.2.5.3, although the trans-
parency 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 isad-
vantage’ 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 con-
sideration 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 prohib-
ited 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 de-
vices available to end-​users. As a result of the Commission’s December 2017 de-
cision, the network neutrality framework consists of only a transparency rule,
although the FCC also mandates that broadband providers must inform their cus-
tomers about their blocking, throttling, paid prioritization, and affiliated priori-
tization 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.
259

5  US Telecommunications Law 259

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 uni-
versal 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 telecom-
munications services’. When determining the services that should be provided
universally under §254, the FCC is required to take into account ‘advances in tele-
communications and information technologies and services’ and consider four
factors, including, for example, whether a particular service is essential to edu-
cation, public health, or public safety and a ‘substantial majority’ of residential
customers have subscribed to the service. Universal service policy must also be in-
formed by seven broad principles, such as that quality service should be available
at just, reasonable, and affordable rates; that access to advanced telecommunica-
tions 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 ex-
panded 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 con-
sumer 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 sup-
ported access to the internet, but most universal service funding was spent on
supporting voice services. Following the adoption of the Recovery Act, however,
620

260 Part II  Regulatory Regimes

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 broad-
band 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 uni-
versal 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 ap-
pointed by the FCC, in accordance with Part 54 of the Commission’s rules, are dis-
cussed 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.
216

5  US Telecommunications Law 261

comprise all voice telephony services (fixed and mobile) and, since 2016, broad-
band services (fixed and mobile) and bundled voice and broadband services.
Current rules dictate that from 2021, Lifeline services will consist only of broad-
band services (fixed and mobile) and bundled voice and broadband services
that meet minimum service standards.148 It appears that these rules will be un-
affected by the FCC’s 2017 decision to reclassify broadband services as informa-
tion 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 speci-
fied 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 pro-
vides eligible low-​income subscribers living on Native American land with dis-
counts 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 con-
tains 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).
62

262 Part II  Regulatory Regimes

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 in-
tended 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 under-
served areas. CAF is the most complex and costly of the four universal service pro-
grammes. 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 pro-
cess 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).
623

5  US Telecommunications Law 263

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 sup-
port 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 unsub-
sidized 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 de-
velop 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 be-
tween 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 broad-
band 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).
624

264 Part II  Regulatory Regimes

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 broad-
band 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 compo-
nents:  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 con-
struction 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.
265

5  US Telecommunications Law 265

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 inter-
state and international services is broad and encompasses satellite, mobile, and
payphone services. Telecommunications carriers and interconnected VoIP pro-
viders164 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 inter-
state and international telecommunications services of a provider (less its pro-
jected 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 pro-
jected revenue for all interstate and international telecommunications services
offered by all providers who must contribute to the scheme less their total esti-
mated 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 avail-
ability 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 ap-
proach in an attempt to increase available funding and to ensure that telecommu-
nications 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).
163

  Universal Service Contribution Methodology, Report and Order and Notice of Proposed Rulemaking,
164

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
  47 CFR §54.709(a) and (a)(1). 166
  47 CFR §54.709(a)(2). 167
  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).
62

266 Part II  Regulatory Regimes

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 con-
nection. 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 wire-
less prepaid provider) who assigned a telephone number to a residential customer
would pay US$1 per month for each number. Fees for wireless prepaid providers
would be determined by an alternative formula that took into account the number
of monthly minutes generated by the provider. All providers of business services
would be required to pay a fee based on the number of businesses connected to the
public network. In the second option, arrangements similar to those in the first op-
tion would apply for residential customers, although the amount contributed per
number would be US$.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 contribu-
tions 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).
627

5  US Telecommunications Law 267

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 re-
main unresolved. In the absence of any decision to expand the contribution base,
the quarterly contribution factor used to calculate contributions paid by tele-
communications 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 monop-
olists, 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 par-
ties 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 con-
spiracies 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.
173
628

268 Part II  Regulatory Regimes

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 com-
petition 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 pro-
duction 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 un-
reasonably 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 vio-
lated 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 competi-
tion or tend to create a monopoly’. Discrimination is permissible, however, where
price differences arise due to the cost of manufacture, sale, or delivery. Other pro-
visions prohibit the payment or acceptance of bribes, discrimination in rebates,
629

5  US Telecommunications Law 269

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 con-
victed. 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 con-
sumers 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 re-
mains 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 prac-
tices following internal reviews by in-​house economists and lawyers and com-
plaints from industry participants, concerned citizens, informants, and other

174
  Department of Justice, Corporate Leniency Policy, available at <http://​w ww.usdoj.gov/​atr/​public/​g uide-
lines/​0 091.htm>.
175
  Department of Justice, Leniency Policy for Individuals, available at <http://​w ww.usdoj.gov/​atr/​public/​
guidelines/​0 092.htm>.
176
  Clayton Act, §4(a), 15 USC §15.
270

270 Part II  Regulatory Regimes

government agencies. Both may compel legal and natural persons to produce in-
formation 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 agen-
cies 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 nat-
ural 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 op-
erators 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 <http://​w ww.justice.gov/​atr/​public/​d ivisionmanual>. For a copy of the
FTC’s manual, see <http://​w ww.ftc.gov/​foia/​ch03investigations.pdf>.
271

5  US Telecommunications Law 271

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 ac-
quiring 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 re-
gardless 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 par-
ties 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 appro-
priate 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.
178

  Note the monetary thresholds are adjusted annually.

179
72

272 Part II  Regulatory Regimes

Notifying parties may voluntarily submit additional information to facilitate re-

view of the transaction.
After a Notification and Report Form is submitted, both the DoJ and the FTC re-
view 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 respon-
sibility for the relevant segment of the market affected by the merger becomes re-
sponsible 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 re-
quest. Interested third parties may submit written comments or make a presenta-
tion 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 nego-
tiated settlements must be published in the Federal Register and third parties
must be given time to comment on their proposed terms. Additional proced-
ures 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 acqui-
sition 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.
723

5  US Telecommunications Law 273

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 reorgan-
izations, 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 land-
ings183 may be transferred.
Failure to obtain the FCC’s prior permission may result in fines and other en-
forcement 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 rele-
vant FCC authorization. The impact of the proposed licence transfer on compe-
tition 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 con-
sidered. Each licence transfer is assessed on a case-​by-​case basis, and the proced-
ures 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 transac-
tions 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 re-
quires a majority vote of its commissioners, controversial and large-​scale mergers
have often been approved with conditions that are either developed by the com-
missioners in order to reach consensus or proposed by the applicant in response to

  47 CFR §§63.03, 63.04, and 63.24.

180 181
  47 USC §310(d). 182
  47 CFR §25.119.
  47 CFR §1.767.
183

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).
247

274 Part II  Regulatory Regimes

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 condi-
tions do not relate to the merits of the transaction, but instead are designed to im-
pose regulations that further the majority members’ policy goals.
The FCC also has powers under §§7 and 11 of the Clayton Act to block acquisi-
tions 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 unsoli-

cited 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 commer-
cial speech. Communications privacy matters in the US are complicated by the
distinction between telecommunications services and information services, be-
cause 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 commer-
cial 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 gov-
ernment 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 sub-
stantial 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.
275

5  US Telecommunications Law 275

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 au-
thority to adopt regulations to stop unwanted telephone solicitations in order to
protect the privacy rights of residential telephone subscribers. The TCPA also im-
posed 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 man-
dated 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 soli-
citors on a company-​by-​company basis. Companies were expected to comply with
subscriber requests, although companies that had established business relation-
ships 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 le-
gitimate 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 require-
ments 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 situ-
ation, 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).

186

  Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, Report and Order,
187

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).
267

276 Part II  Regulatory Regimes

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 estab-
lished a single national database of fixed and mobile telephone numbers of sub-
scribers 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 over-
sight 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, how-
ever, 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 permis-
sion to ring them.

If telemarketers do not respect the wishes of subscribers, subscribers may com-

plain 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
  See further Section 5.4.3. 192
  15 USC §45(a)(2).
193
 See, eg, Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991,
above n 190.
72

5  US Telecommunications Law 277

had established business relationships with customers from respecting the do-​not-​
call list. However, this exemption was abolished in 2012 and replaced with a require-
ment 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 re-
ceiving 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 dis-
played 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 pur-
poses of defrauding, harming, or otherwise obtaining anything of value, and ap-
plied 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 telemar-
keting 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 re-
quests 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 <https://​t ransition.fcc.gov/​cgb/​
Robocall-​Strike-​Force-​Final-​Report.pdf>.
278

278 Part II  Regulatory Regimes

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 advert-
isements 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 in-
form 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 le-
gislation 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

199
  Pub L No 109-​21, 119 Stat 359 (2005).
200
  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).
279

5  US Telecommunications Law 279

requires senders of commercial emails to notify recipients that such emails are
advertisements, to provide the sender’s physical postal address, and to give recipi-
ents 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 mech-
anism 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 de-
vices. 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 frame-
work 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 telecommuni-
cations 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 ad-
dresses 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).
820

280 Part II  Regulatory Regimes

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 in-
formation 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 mo-
bile services in specified emergency situations. Disclosure of CPNI upon the af-
firmative 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 pur-
pose of publishing telephone directories.207
The FCC has adopted and revised rules implementing these substantive confi-
dentiality provisions on numerous occasions since 1996 to reflect changes in tech-
nology 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 broad-
band 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 prac-
tices, 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 reclassi-
fied broadband services as telecommunications services, providers of broadband
services became telecommunications carriers and the FTC lost its authority to

206
  47 USC §222(d). 207
  47 USC §222(e).
208
 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.
281

5  US Telecommunications Law 281

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 car-
riers. They imposed notice, customer approval, data security, and data breach no-
tification 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 in-
auguration of President Trump and the receipt of numerous petitions for recon-
sideration 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 ac-
cess.213 The stay was to remain in place until the Commission was able to recon-
sider 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 reso-
lution 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 pro-
viders. In addition, the FTC had argued that the FCC’s rules resulted in two dif-
ferent 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

211
  See also Section 5.4.3.
212
  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 spe-
cifically authorized by a law enacted after the date of the joint resolution.
28

282 Part II  Regulatory Regimes

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 en-
suring 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 pre-
sent additional policy challenges that cannot be readily foreseen. It is also be-
coming 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 ana-
lysis 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 compre-
hensive communications-​related legislation, the 1996 Act, was enacted, and many
aspects of the communications environment have changed dramatically in the
intervening time.
283

Part III

KE Y REGUL ATORY  ISSUES

824
258

AUTHOR IZ ATION AND LICENSING

Anne Flanagan

6.1 Introduction  285

6.2 Licences: Privileges and Necessities  287
6.3 International Law and Telecommunications Licensing
Standards  308
6.4 The EU’s Licensing Regime  310
6.5 Concluding Remarks  379

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 re-
quirements. 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 tele-
communications regulatory or general legal framework is not comprehensive or
otherwise adequate. Here, conditions and rights integrated into licences can sub-
stitute 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 adju-
dicate breaches, eg arbitration procedures and rules as well as limitations on the reasons it can be abrogated
or breached.
286

286 Part III  Key Regulatory Issues

might otherwise be reluctant to commit the capital required to roll out new tech-
nologies 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 mar-
kets and competitive markets although the same considerations may not equally
apply. For example, one of the most significant aspects of the current EU frame-
work is that, generally, electronic communications providers need not obtain in-
dividual 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 ap-
plied 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 spec-
trum 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 on-
going Single Market and other concerns. It considers briefly the problems that the

2
  For an examination of issues arising in developing markets, see Chapter 17.
3
  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 jus-
tification 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 dis-
cussion 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), <http://​c sreports.
aspeninstitute.org/​Roundtable-​on-​Spectrum-​Policy/​2016/​report/​details/​0227/​Spectrum-​2016>.
6
  See Chapter 7.
287

6  Authorization and Licensing 287

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 regula-
tion. The chapter will first, however, briefly examine the history and jurispruden-
tial 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 coun-

tries provided telecommunications as a public service, usually with posts, tele-
graph, 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 ‘per-
mission’ 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 tele-
communications 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
82

288 Part III  Key Regulatory Issues

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 un-
lawful’.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 tele-
communications, 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 neces-
sity14 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 sev-
eral reasons. Inns were the first post offices in Britain and, innkeepers, the first
postmasters in a system before that also ultimately governing telegraph and tele-
communications 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.
12
  Bouvier’s Law Dictionary, n 8.
13
  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 re-
lated 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.
289

6  Authorization and Licensing 289

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 his-
tory 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 regula-
tion 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 rec-
ognition 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 re-
quired, 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’, <https://​w ww.avvo.com/​legal-​
guides/​u gc/​fcc-​s ection-​214-​l icensing-​for-​t elecommunications-​providers-​offering-​i nternational-​c alling>
(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 gener-
ally, 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).
920

290 Part III  Key Regulatory Issues

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 privil-
eges or franchises held since the time of memory that often had the result of re-
straining 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 in-
tellectual 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 nu-
merous 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 limi-
tations on the economic liberty of innkeepers in the form of a licence require-
ment 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 con-
trary 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’, re-
spectively. See Maitland, WH, n 26, at 261–​264. Hence trade and governance were often intertwined.
28
  4 Holdsworth, n 23, at 346. 29
  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 priv-
ileges, commissions, and grants of monopoly not confirmed by statute.
32
  4 Holdsworth, n 23, at 350–​352.
219

6  Authorization and Licensing 291

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 pro-
viders 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 telecommunica-
tions 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

  Webb, S, and B, n 14, at 5, n 1.

33 34
  Ibid, at 5, n 1. 35
  Ibid, at 2–​3. 36
  Ibid, at 5–​6.
  Civil law countries in Europe apparently had similar systems for authorizing and regulating transporta-
37

tion 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 op-
eration 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
  Webb, S, and B, n 14, at 4–​5. 39
  Ibid, at 4.
29

292 Part III  Key Regulatory Issues

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 admin-
istrative 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).
239

6  Authorization and Licensing 293

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 con-
sidered 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 com-
munications licensing, tracing this in the few telecommunications markets where
licensing existed before the last forty years’ liberalization, and in modern telecom-
munications 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 en-
gaged’ 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,  <http://​w ww.btplc.com/​Thegroup/​
BTsHistory/​1851to1880/​1869.htm>.
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 di-
vulge the content of a communication which would not apply to an unlicensed entity acting outside the scope
of the Act. See ibid, 254–​255.
924

294 Part III  Key Regulatory Issues

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 au-
thorizations without individual regulatory decisions or permissions, although as-
sociated 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, usu-
ally via the licence, such as requiring it to interconnect on a non-​d iscriminatory
basis and at regulated, sometimes cost-​ based rates and maintaining sep-
arate accounting to ascertain and verify such cost. Specific examples of a li-
cence 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

51
  See Events in Telecommunications History, n 49.
52
  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: <https://​
www.ectaportal.com/​policy-​publications/​reports>.
55
  See Chapter 3.
259

6  Authorization and Licensing 295

construct a microwave network and provide long-​d istance services over it to sub-
scribers 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 (pos-
sibly operating in both fixed and wireless markets) have caused countries to de-
limit 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 in-
novation, 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 mo-
bile 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 li-
cences, 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

56
  See Chapter 5.
  See ITU, ‘Key ICT indicators for developed and developing countries and the world’, 2017, <https://​w ww.
57

itu.int/​en/​I TU-​D/​Statistics/​Pages/​stat/​default.aspx>.
58
  Special Condition 12, Hong Kong Mobile Carrier Licence for 3G Networks, <http://​w ww.ofta.gov.hk/​en/​
3g-​l icensing/​publications_​c12_ ​mcl.html>. (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>.
296

296 Part III  Key Regulatory Issues

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, sched-
uled 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 in-
vestment. 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 tel-
ephony 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 de-
liver 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 provi-
sion 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), <http://​w ww.emirates247.com/​news/​emirates/​u ae-​resident-​a lert-​y ou-​m ay-​now-switch-
​your-​i nternet-​fi xed-​l ine-​provider-​2015-​10-​20-​1.607422>.
61
  Algeria only recently required LLU by its incumbent. See ‘Algerian government adopts new telecoms bill,
report says’ (Telegeography 3 January 2017), <https://​w ww.telegeography.com/​products/​commsupdate/​a rt-
icles/​2017/​01/​03/​a lgerian-​government-​adopts-​new-​telecoms-​bill-​report-​says/​>.
62
 See Carrier or Service Provider Licence, Form I, sec G, Jamaica Telecommunications Act 2000,
Telecommunications (Forms) Regulations 2000, <http://​w ww.our.org.jm/​ourweb/​sites/​default/​fi les/​docu-
ments/​sector_​documents/​application_ ​for_​c arrier_ ​l icense_​or_ ​service_​provider_ ​l icense.pdf>.
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).
279

6  Authorization and Licensing 297

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 at-
tached to or interconnected with the network for its protection and that of em-
ployees 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 tech-
nology 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 regula-
tion 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), ordin-
arily 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), <https://​w ww.itu.int/​osg/​spu/​
ni/​3G/​.../​l icensing_​policy/​3G_​l icense_​t able_​F INAL-​3.xls>.
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.
298

298 Part III  Key Regulatory Issues

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 net-
works 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 telecommunica-
tions 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 en-
compass 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 reli-
ance on other laws if the sector enforcement power is too limited in scope or
effectiveness. Thus, the UK telecommunications regulator, Ofcom, is further em-
powered under the UK Competition Act 1998 and the Enterprise Act 2002. It can
choose, therefore, which avenue will be more effective for specific anti-​competi-
tive 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

68
  Authorisation Directive, Art 6(3).
69
  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
<http://​w ww.ofcom.org.uk/​static/​telecoms_ ​review/​june05.htm>.
29

6  Authorization and Licensing 299

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 run-
ning 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 emer-
gent 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 na-
tional 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’, <http://​w ww.btplc.com/​U KDigitalFuture/​A greed/​i ndex.htm>, ac-
cessed 10/​0 9/​2017.
72
  See Chapter 4. Also see n 70.
03

300 Part III  Key Regulatory Issues

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 an-
nually 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 in-
cumbent former monopolist. This can be found, for example, in the fees set by nu-
merous 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 pro-
viding 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 re-
source category) but are rather merely revenue raisers and ultimately a service tax on end users), <http://​w ww.
ipi.org/​ipi_ ​i ssues/​detail/​testimony-​before-​t he-​s enate-​c ommerce-​s cience-​a nd-​t ransportation-​c ommittee-​
regarding-​v ideo-​f ranchise-​reform-​a nd-​voip>. 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 account-
ability 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), <http://​w ww.konkurrensverket.se/​g lobalassets/​forskning/​
projekt/​2012-​310-​t ransparency-​a nd-​accountability-​of-​telecommunications-​regulation-​i n-​s weden.pdf>.
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), <https://​w ww.lusakatimes.com/​2010/​0 6/​16/​z ambia-​lowers-​i nternational-​gateway-​
license-​fee/​>.
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).
301

6  Authorization and Licensing 301

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 pos-
sible 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 gov-
ernment and the provider.78 This is the case, for example, where private sector
strategic investment and expertise is required to modernize large telecommuni-
cations 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 be-
tween 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 obliga-
tions. 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, <http://​
spectruminfo.ofcom.org.uk/​spectrumInfo/​t rades>.
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.
302

302 Part III  Key Regulatory Issues

the contract fulfils the purposes of licensing and may effectively serve as the li-
cence. 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 accom-
panying 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 af-
fects 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 pro-
cess typically commensurate in democracies with property interests.85 The 2002
Framework took much of the discretion to grant and remove permissions to pro-
vide 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

81
  See CJS, n 8, at 3.
82
  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.
30

6  Authorization and Licensing 303

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 pro-
jected 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 origin-
ally 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 ‘in-
stantaneous’ (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 understand-
able. 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 auc-
tioned 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 strat-
egies’ (RCR Wireless News 4 October 2016), <https://​w ww.rcrwireless.com/​20161004/​opinion/​
reality-​check-​need-​new-​spectrum-​sharing-​small-​cell-​strategies-​t ag10>.
87
  See generally, FCC 03-​113, First Report and Order and Further Notice of Proposed Rulemaking that au-
thorizes 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’, <https://​w ww.thenumberingsystem.com.au/​#/​about-​smartnumbers>.
034

304 Part III  Key Regulatory Issues

6.2.5  Types of licences and licensing processes

6.2.5.1  Licence form
Thousands of licence types are theoretically possible in telecommunications, glo-
bally. 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 under-
taking 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 applica-
tion 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 re-
quirements 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 re-
quire individual decisions or the exercise of discretion. Rather, the undertaking
meeting the conditions is authorized to operate the network and/​or services de-
scribed by that authorization if it does so in conformity with its conditions. There

92
  Republic of Trinidad and Tobago Telecommunications Act, 2001, §21 (Act 4 of 2001).
93
  Directive 97/​13/​EC of the European Parliament and of the Council of 10 April 1997 on a common frame-
work 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.
305

6  Authorization and Licensing 305

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 spe-
cified period, as were the UK class licences, but that has little consequence if the
entitlement is virtually automatic. The general authorization does not mean sim-
plicity, 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 oper-
ator’ 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 con-
nected to its network (s 106)  and grants rights to recover damages for contra-
vention 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), <http://​w ww.mbie.govt.nz/​i nfo-​services/​sectors
industries/​t echnology- ​c ommunications/​c ommunications/​t elecommunications-​b roadcasting-​network-​
operators/​how-​to-​register>.
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 pri-
vate 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), <http://​w ww.ictregulationtoolkit.org/​
toolkit/​3.2>.
036

306 Part III  Key Regulatory Issues

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 an-
other 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 dif-
ferent person or body from the issuing entity. For example, in Trinidad and Tobago,
the Minister of Public Administration grants ‘concessions’ to authorize the oper-
ation 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 pro-
cedures 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 evalu-
ation 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 entre-
preneurial 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 pro-
vider does not own the network, or that the service has characteristic of pure tele-
communications 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), <http://​w ww.tatt.
org.tt/​Portals/​0/​Documents/​E ligibility%20and%20Evaluation%20Criteria%20for%20Concessions.pdf>.
103
  See ibid, at 23. 104
  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.
307

6  Authorization and Licensing 307

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 en-
trants 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 object-
ives 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, how-
ever, 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, <http://​w ww.itu.int/​
net/​w sis/​stocktaking/​docs/​activities/​1291981845/​Towards%20a%20Next%20Generation%20Connected%20
Nation_ ​Singapore.pdf>.
108
  Goodman, E, McCoy, S, and Kumar, D, ‘An overview of problems and prospects in US spectrum manage-
ment’, in Telecommunications Convergence: Implications for the Industry & for the Practicing Lawyer, 698 PLI/​
Pat 341 (Practising Law Institute, New York, 1 May 2002).
038

308 Part III  Key Regulatory Issues

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 moderniza-
tion 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 har-
monization of regulatory standards for licensing is agreed to be a critical aspect
of multilateral trade agreements. The most effective international accord for tele-
communications 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.
039

6  Authorization and Licensing 309

• the ‘Transparency’ general condition (Article III) requires all Members to pub-
lish 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 re-
strict service supply, (4(c)); Members must inform applicants of decisions within
a reasonable time after the submission of completed application and, upon re-
quest, advise of the status of the application, without delay (3);
• the ‘National Treatment’ condition (Article XVII) requires that there be no dis-
crimination against a foreign service or suppliers of that service as compared to
those domestic services or suppliers where the Member has included a sched-
uled 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 condi-
tions 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).
310

310 Part III  Key Regulatory Issues

current state of allocated frequency bands is to be made publicly available, ex-

cept specific government frequency use (6, Reference Paper).

The EU’s legal framework is one clearly compliant with WTO standards for li-
censing 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 conver-
ging 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 imple-
mentation 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 telecom-
munications services subject to any permission, the Directive’s default was for a
general authorization requiring no explicit decision. Individual licences, in con-
trast, 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).

  See Chapter 4.
114 115
  Directive 2002/​20/​EC as amended by Directive 2009/​140/​EC.
  Directive 97/​13/​EC, n 93.
116
31

6  Authorization and Licensing 311

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, in-
formation required to verify compliance, prevention of anti-​competitive behav-
iour and discriminatory tariffs, and efficient use of numbering capacity (Annex,
2). General authorization conditions encompassed a range of consumer protec-
tions, including billing and contract format (Annex, 3.1), provision of: emergency
services, customer information needed for directory services and services for dis-
abled 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, pro-
vision of universal service, quality and permanence of service/​networks, manda-
tory 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 suf-
ficient numbers, and only via a published decision detailing the reasons for the
limitation (Article 10). Detailed, objective, transparent, non-​d iscriminatory, pro-
portionate, and pre-​published criteria for awarding the limited licences were re-
quired, 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 inde-
pendent 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 authoriza-
tions could not be prevented from providing the relevant network or service, al-
though 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 compli-
ance 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 con-
trolling, managing, and enforcing the general authorization scheme and were to
321

312 Part III  Key Regulatory Issues

be sufficiently detailed and published in an accessible way (Article 6). Fees for in-
dividual 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 licen-
sees failing to comply with their licence conditions could have the licences with-
drawn, amended, or suspended, or have imposed measures to ensure compliance.
The undertaking had the opportunity to state its views on the condition’s applica-
tion 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 tele-
communications regulatory groups, such as CEPT, with developing a harmon-
ized regime for general authorizations (Article 12). Neither was very successful.
The current EU regulatory framework including the Authorisation Directive pro-
posed 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 indi-
vidual licences to those circumscribed circumstances necessary to impose condi-
tions, the Licensing Directive’s flexibility was exploited. Individual licences were
mandated for many situations and general authorizations were the exception ra-
ther 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 author-
ization 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.
31

6  Authorization and Licensing 313

and economic development on the implementation of dynamic and competitive

information society services, including pan-​European services, and infrastruc-
ture.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 harmon-
ization 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 al-
ternative 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 invest-
ment 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

118
 Ibid.
119
  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 elec-
tronic 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 <https://​
ec.europa.eu/​digital-​single-​market/​en/​telecoms-​rules > and <http://​www.culture.gov.uk/​images/​consultations/​
10-​1134-​implementing-​revised-​electronic-​communications-​framework-​revisions-​directives.pdf>.
120
  Executive Summary, ‘Support for Impact Assessment, Review of the regulatory framework for elec-
tronic communications’ (SMART 2015/​0 005), <https://​ec.europa.eu/​d igital-​single-​market/​en/​news/​support-
​studies-​i mpact-​a ssessment-​telecoms-​review>.
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), <https://​w ww.orange.com/​f r/​content/​download/​32216/​955794/​
version/​2/​fi le/​telecom_ ​i nvestment_​comparison_​US_​v s_ ​E U.pdf>.
341

314 Part III  Key Regulatory Issues

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 commu-
nication 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 con-
trol 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).
123

  eg email conveyance posited by the Framework Directive as a communications service rather than an
124

information society service. See Recital 10.

351

6  Authorization and Licensing 315

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 net-
works 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 de-
fined 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 electromag-
netic 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, irre-
spective of the type of information conveyed. (Article 2(a), 2002/​21/​EC) (italics in-
dicate 2009 changes)

The framework intends a horizontal approach to authorization that governs irre-

spective 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), <http://​w ww.europarl.europa.eu/​sides/​getAllAnswers.do?reference=E-​2009-​0 969&
language=EN>.
126
  See eg Europarl Ref E-​4364/​0 9, Answer by Mrs Reding on behalf of the Commission (16 September 2009),
<http://​w ww.europarl.europa.eu/​sides/​getAllAnswers.do?reference=E-​2009-​4364&language=EN>.
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 construc-
tions, 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 com-
munications 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 elec-
tronic 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’).
361

316 Part III  Key Regulatory Issues

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), inter-
personal 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 provi-
sion to a general authorization requirement (Article 3(2)) that does not require an
explicit decision or other administrative act (Recital 8). The proposed EECC em-
phasizes 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 ex-
cludes number-​i ndependent ICS from the general authorization regime as unwar-
ranted 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 iden-
tify the provider, such as company registration numbers, location, contact de-
tails, and a brief description of the services and when they commence (Article
3(3)). Notification by cross-​border providers of services to undertakings in sev-
eral Member States are limited to only one notification per Member State con-
cerned (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 inter-
active 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 pro-
posed 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.
371

6  Authorization and Licensing 317

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 sig-
nificant 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 na-
tional 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 avail-
able, 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), <https://​
euobserver.com/​d igital/​137706>.
134
  As to its continued relevance, see Recitals 26, 33, Art 9, Directive 2009/​140/​EC.
318

318 Part III  Key Regulatory Issues

• negotiate and obtain interconnection with and access to other publicly available
networks covered by a general authorization anywhere in the EU under condi-
tions 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 essen-
tially guaranteed in each Member State to those providing public networks and/​
or services, cross-​border entry and the possibility for pan-​European services is fa-
cilitated. 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 con-
firm 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 gen-
erally 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 au-
thorization’ 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

135
  See further Chapter 8.
136
  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.
391

6  Authorization and Licensing 319

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 inconsist-
ency142 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 suffi-
cient 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 spe-
cific 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 com-
parative 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 pro-
cedures; all current consultations must be available through a single accessible
point with the result publicly available except that involving confidential informa-
tion 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 ap-
propriate for the nature of the service in view of the ‘objective pursued taking due

  Italics reflect amendments by Directive 2009/​140/​EC.

141

142
  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 num-
bers 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 con-
trast, 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.
320

320 Part III  Key Regulatory Issues

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 en-
sure 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 deci-
sion 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 judi-
cial 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 im-
posed on them:  (i) those under the general authorization, (ii) individual obliga-
tions 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, how-
ever, 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

145
  Italics reflect amendments by Directive 2009/​140/​EC.
146
  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 au-
thorization 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.
321

6  Authorization and Licensing 321

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 net-
works and services under the general authorization, if justified. However, as the
Directive cautions, for networks and services not provided to the public, it ‘is ap-
propriate to impose fewer and lighter conditions’ than are justified for public net-
works 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 re-
quired 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.
152

153
  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 un-
fairly burdensome USO from public revenues.
155
  A further s (11a) clarifies that conditions regarding use for public communications can encompass elec-
tronic communications beyond broadcast and encompasses the warning of imminent threats and the mitiga-
tion of a major disaster. See Annex A.
23

322 Part III  Key Regulatory Issues

10. personal data/​ privacy protection (Electronic Communications Privacy

Directive);156

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 propor-
tional 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’.

156
  See further Chapter 13.
157
  Italics denote 2009 amendments; bold text, proposed EECC redactions. The referenced access as re-
quired by Art 6, is equivalent access and affordability of public telephony service (voice supporting local, na-
tional 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).
23

6  Authorization and Licensing 323

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 at-

tached to the grant of rights to use of numbers and spectrum. Conditions for num-
bers 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

160
  The bold text above indicates the proposed EECC’s redactions.
  Administrative charges, information, general access, use in major disasters, privacy/​data protection,
161

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 electromag-
netic 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 con-
sumer 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 jus-
tifications 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 char-
ging 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).
342

324 Part III  Key Regulatory Issues

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 ser-
vice providers for a limited number of reasons.169 These can be divided into two
overarching categories: (a) those imposed on undertakings found to have signifi-
cant 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 im-
pose appropriate conditions on SMP operators where, after a market ana-
lysis (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 ac-
cessible, non-​c onfidential information must be made available to all inter-
ested 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 cre-
ated 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

168
  See proposed Art 88(6), Annex II E (10), EECC.
169
  Art 6(2). 170
  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
  Ibid, at Art 10. 173
  Ibid, at Art 11. 174
  Ibid, at Art 12. 175
  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 citi-
zens and contributing to the internal market’s development.
325

6  Authorization and Licensing 325

that are not effectively competitive, NRAs must impose appropriate regulatory obli-
gations 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 pref-
erential treatment, or unreasonable bundling of products/​services.181 These must
meet the Framework Directive’s requirements for transparency, objectivity, pro-
portionality, and consultation as with other conditions. NRAs can also apply appro-
priate 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 bottle-
necks 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 inte-
grated entities with SMP in relevant access markets, where persistent and important
market failures exist despite appropriate conditions.183 This approach was essen-
tially a page from Ofcom’s playbook in forcing BT to agree to restructure its oper-
ations 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 ac-
cess policies have promoted service-​based over infrastructure-​based com-
petition 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
  Ibid, at Art 13a(1). 185
  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.
326

326 Part III  Key Regulatory Issues

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 in-
frastructure alone might be more conducive to sustained competition than
other ex ante controls. This would be only after a modified market review pro-
cess 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 mar-
kets 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 con-
nectivity or to make services interoperable where they control access to end-​users
(eg via unique numbering or addresses).190 These may include mandated intercon-
nection 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 facil-
ities 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 condi-
tional access services necessary for end-​user access to digital TV and effective com-
petition 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 pro-
posed 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

188
  Art 65 (1), proposed EECC. 189
  Art 77, proposed EECC.
190
  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
  2002/​19/​EC, Art 5(1)(a). 192
  Ibid, at Art 5(1)(b). 193
  Ibid, at Art 6; see Chapter 8.
194
  See Arts 59 (1), 110, proposed EECC.
327

6  Authorization and Licensing 327

building, to the first concentration/​distribution point outside the building and fur-
ther where ‘strictly necessary’ or ‘insurmountable’ barriers exist.195 These may in-
clude 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 cap-
able 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 pro-
viders, including non-​SMP, are:

1. universal connection to the public communications network and access to a de-

fined, minimum set of publicly available telephone services (PATS)202 at a fixed
location (Article 4, 2002/​22/​EC as amended);

195
  See Art 59 (2), proposed EECC.
196
  Member States can change this to reflect a level of function in keeping with the majority trend in a na-
tional 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 ma-
jority 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 educa-
tion/​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 en-
quiry eliminating the possibility that service providers otherwise meeting the definition are not excluded from
238

328 Part III  Key Regulatory Issues

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 ac-
cess 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 con-
cerning 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 ob-
ligation from those in the general authorization. To ensure transparency, the cri-
teria 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 inten-
tion 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 re-
quirements 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.
239

6  Authorization and Licensing 329

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 consult-
ation 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 author-
ization, for rights of use or specific obligations, NRAs may request, without add-
itional 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 gen-
eral 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 propor-
tionate, objectively justified information necessary to verify compliance with ap-
plicable 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
30

330 Part III  Key Regulatory Issues

• 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 elec-
tronic 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 con-
troversial as possible future plans for network deployment would seem to be confi-
dential 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 gen-
eral 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 in-
formation 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 obliga-
tions, 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 inde-
pendence of these other authorities.
211
  Arts 20 (1), 22 (3), proposed EECC. 212
  Art 22 (4).
213
  Directive 2002/​20/​EC, as amended by Directive 2009/​140/​EC. 214
  Art 30, proposed EECC.
31

6  Authorization and Licensing 331

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 man-
dated by Article 4 of the Framework Directive. This requires that all network/​ser-
vice 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 par-
ties 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 en-
forcement regime. They seemed also to provide for a more streamlined enforce-
ment 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 sub-
stitute for the NRA’s decision where granted in accordance with national law. Ibid.
219
  Art 31, proposed EECC.
32

332 Part III  Key Regulatory Issues

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 administra-
tive 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 enforce-
ment of secondary legislation and administrative decisions, such as decisions on ac-
cess 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 pub-
lished annually but that regulators provide an annual overview of their admin-
istrative 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 regula-
tion, 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 object-
ively justified, transparent, and non-​discriminatory, as well as proportionate to
their intended use. This, with other Articles in the Directive that permit a compara-
tive/​competitive procedure for granting individual rights of use, contemplates the
possibility of usage fees determined by auction. The proposed EECC does not sub-
stantively 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
  Art 16, proposed EECC. 222
  Art 89, proposed EECC. 223
  Art 42, proposed EECC.
3

6  Authorization and Licensing 333

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 trans-
formative 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 infrastruc-
ture 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 at-
tempts 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 ‘ap-
proval’ 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 po-
tential financial penalties viewed as an effective deterrent, and implemented ac-
cordingly, 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).
34

334 Part III  Key Regulatory Issues

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 re-
balancing 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 re-
viewed for SMP since the 2009 reforms, with only four wholesale markets re-
maining 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 pro-
posed 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 require-
ments232 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

229
  Explanatory Memorandum, proposed EECC, at 2.
230
  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), <https://​publications.parliament.uk/​pa/​c m201617/​
cmselect/​c meuleg/​71-​x xxvii/​7114.htm>.
232
  These would encompass the range of end-​u ser protections under the conditions to the general author-
ization such as transparency and minimum service quality requirements, minimum contract requirements,
and restrictions case.
35

6  Authorization and Licensing 335

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 re-
forms 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 im-
plementation and enforcement by Ofcom.

6.4.4.1  The Communications Act 2003

The Act, Part 2, Chapter 1 ‘Electronic Communications Networks and Services’ gov-
erns 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 tele-
communications 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 speci-
fied 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 con-
tinued with effect and as modified by Ofcom, the converged regulator for all elec-
tronic 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 com-
pliance.235 The General Conditions of Entitlement comprise over eighty pages of

  2003, Chapter 21.
233

  Ofcom, ‘Original Notification setting general conditions under section 45 of the Communications Act
234

2003’, 22 July 2003, <http://​stakeholders.ofcom.org.uk/​telecoms/​ga-​scheme/​general-​conditions/​a rchive/​>.

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)’, <http://​stakeholders.ofcom.org.uk/​binaries/​telecoms/​ga/​general-​conditions.pdf>.
36

336 Part III  Key Regulatory Issues

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 per-
mits to be applied ‘generally’ to every person providing an electronic communica-
tions 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 re-
quirement 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 origin-
ally 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 fa-
cilities 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, <http://​
www.ofcom.org.uk/​consult/​condocs/​P rop1984tele/​provis_​terminiate/​>.
238
  Oftel, Statement of DGT, ‘Guidelines for the interconnection of public electronic communications net-
works’, 23 May 2003.
37

6  Authorization and Licensing 337

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 condi-
tions (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 inter-
operability and network access and interconnection. Conditions governing ‘es-
sential 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 uni-

versal service obligation (s 51(1)(d));
• the provision, availability, and use, in the event of a disaster, of electronic com-
munications 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 com-
munications networks, including, but not limited to, a service enabling access for
disabled end-​users (s 64).

  See Consultation, n 237.
239

  Section 45 also authorizes conditions on providers with exclusive and special privileges from other in-
240

dustries 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.
38

338 Part III  Key Regulatory Issues

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 degrad-
ation 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 pro-
viders (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 ser-
vice 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).
39

6  Authorization and Licensing 339

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 gen-
eral authorization default reforms. Ofcom has added to and otherwise amended
the Conditions to address evolutions in markets and market conduct, tech-
nology, 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 sub-
stantive 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 pri-
mary 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 cus-

tomer service and strengthening it to ensure more prompt and efficient
handling with progress reports to complainants and earlier access to alter-
native dispute resolution where the provider does not intend to take further
action;

  See Section 6.4.2.4.

248

  See Communications Act 2003, ss 48(A)–​49(C) regarding notification to the Commission of imposition,
249

modification of universal service conditions.

250
  Ofcom, ‘Initial conclusions from the Strategic Review of Digital Communications’, 25 February 2016, at 22.
340

340 Part III  Key Regulatory Issues

• 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 iden-
tifies 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 unneces-

sary 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, dir-
ectly 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.
314

6  Authorization and Licensing 341

• 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 net-
work 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 re-
quirement 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 do-
mestic/​small business customers can find the information CPs are required to
publish under GC 10.2 (unnecessary in light of new direct publication/​i nforma-
tion obligations);
• publication of and compliance with a code of practice for premium rate services
regarding information, complaints and dispute resolution in GC 14.2 (unneces-
sary in light of new direct obligation in C.2);
• obligation to provide tone dialling in GC 16.1 (market developments make obli-
gation 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 re-
viewing, 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 en-
compasses 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.
324

342 Part III  Key Regulatory Issues

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.
34

6  Authorization and Licensing 343

▪ 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.

261

  Minor revision of GC 4.3, in part.

262

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 im-
pact 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 com-
ponent 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, <https://​www.
ofcom.org.uk/​aboutofcom/​latest/​media/​media-​releases/​2013/​telephone-​call-​charges-​to-​be-​made-​simpler>.
34

344 Part III  Key Regulatory Issues

◦ 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.
354

6  Authorization and Licensing 345

▪ 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.
275

  Transposes GC 18.9.
276

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.
364

346 Part III  Key Regulatory Issues

◦ 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 auto-
matic 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 prob-
lems’, 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.
374

6  Authorization and Licensing 347

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).

283
  Minor clarification re: pricing details.
284
  Largely transposes GC 10.1–​10.2.
285
  C2.4–​C2.8 essentially transpose GC 14.8–​14.12.
348

348 Part III  Key Regulatory Issues

• 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.
394

6  Authorization and Licensing 349

• 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 re-
dundant 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—​pro-
tecting 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.
530

350 Part III  Key Regulatory Issues

• 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)

298
  Largely transposes GC 12.1, in part.
299
  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 set-
ting out high-​level minimum standards for accessible processing procedures (Section 1) and consumer com-
plaint 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); ac-
cessibility 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).
351

6  Authorization and Licensing 351

• 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.
307

  Includes circumstances such as age, physical or learning disability, physical or mental illness, low lit-
308

eracy, 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.
532

352 Part III  Key Regulatory Issues

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

316
  Transposes, enhances GC 22.3.
317
  Transposes GC 22. 4.
318
  Transposes GC 22.5, 22.6.
319
  Transposes GC 22.7.
53

6  Authorization and Licensing 353

• 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

320
  Transposes GC 22.8, 22.9.
321
  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.
534

354 Part III  Key Regulatory Issues

◆ 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

325
  Transposes Annex 1, GC 22.
326
  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.
35

6  Authorization and Licensing 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

331
  Transposes GC 23.3.
332
  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.
536

356 Part III  Key Regulatory Issues

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 sug-
gests 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 pro-
viders. 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 under-
stand 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 condi-
tions that govern transparency about automated compensation schemes promul-
gated 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

337
  Ofcom, ‘Statement: Review of the General Conditions’, 19 September 2017, at Annex 14.
338
  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 prac-
tice 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.
537

6  Authorization and Licensing 357

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 diffi-
cult (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 ob-
ligation applicable to all ECN/​ECS providers and specific service-​related informa-
tion 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 im-
posed 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 require-
ments while maintaining the previous application to providers of VoIP outbound
call services of requirements for network integrity, access to emergency organ-
izations, free use of 999 or 112 emergency numbers and caller location infor-
mation 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 mar-
kets is encouraged and that end-​users are not deterred from changing providers.

342
  Annex 1, GC 14.
343
  Ofcom, ‘Simplifying Non-​G eographic Numbers—​change in implementation date’, 26 February 2015.
344
  Ibid. See also GCs 14, 17.
538

358 Part III  Key Regulatory Issues

Some of its reforms have focused on consumers/​small businesses seeking to

change broadband providers and that they are not obstructed by uncoopera-
tive providers or difficulties in changing residences.345 Ofcom’s 2015 reforms re-
quired 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 cus-
tomers 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 ob-
ligations 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 man-
agement and extended to reflect KPIs related to revised quality of service re-
quirements 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 perform-
ance was measured, while quality of service reporting, were voluntary and not conditions under the BT li-
cence. 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, <http://​w ww.ofcom.org.uk/​consult/​condocs/​bt_ ​k pi/​statement/​statement_​d irections.pdf>.
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), <http://​w ww.
btplc.com/ ​ T heg roup/ ​ R eg ulator yandPublicaf fairs/​ O ur under ta k ings/ ​ K eyPerformanceIndicators/​
KeyProductPerformance Indicators/​i ndex.htm>.
350
 See eg Ofcom, ‘Quality of Service Direction for WLR:  Direction setting further minimum stand-
ards  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.
539

6  Authorization and Licensing 359

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 com-
parative 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 pro-
duced 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 auto-
matically 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 ser-
vice and complaint handling, finding that the sector trails behind others with
longer wait times, perceived lack of ease and flexibility, and consumer frustra-
tion.357 To address these, in the 2017 revisions Ofcom has honed and reinforced

  Ofcom, ‘Topcomm Review: Quality of Service Review’, 29 July 2009.

352

  Ofcom, ‘Review of the General Conditions of Entitlement’, 20 December 2016, at 5.31–​5.34.

353

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: <https://​w w w.ofcom.org.uk/​_ ​_​d ata/​a ssets/​p df_ ​f ile/​0 024/​107691/​A nnex-​1-​i ndustry-​a utomatic-​
compensation-​scheme.pdf>.
356
  See text accompanying n 292 above.
357
  Ofcom, ‘Comparing Quality Service’, 12 April 2017, at 46–​62.
630

360 Part III  Key Regulatory Issues

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 in-
clude 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 geo-
graphical 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.
316

6  Authorization and Licensing 361

• 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 un-
necessary 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 dis-
abled end-​user obligations to where an ‘equivalence’ provision has been imple-
mented.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
  Digital Economy Act 2017 c. 30 (27 April 2017). 370
  Ibid, s 1, Pt 1.
371
  Ofcom, ‘Designing the Broadband universal service obligation: Call for inputs’, 7 April 2016.
632

362 Part III  Key Regulatory Issues

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 communi-
cations 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 cur-
rently 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 con-
cerning 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 per-
mitted 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 en-
sure 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), <https://​
www.ft.com/​content/​ebaf1ed6-​e4e2-​11e7-​8b99-​0191e45377ec>.
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).
36

6  Authorization and Licensing 363

person providing facilities for the use of application programme interfaces or elec-
tronic 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 pro-
gramme 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 con-
nection 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 con-
sumers’.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 ser-
vice 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.

378

  See Ofcom, ‘Review of the Wholesale Local Access Market’, 7 October 2010. These may be in addition
379

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, <http://​w ww.ofcom.org.uk/​consult/​condocs/​epg/​epg/​stat_​provisions/​>. 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).
634

364 Part III  Key Regulatory Issues

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 do-
mestic consultation with interested/​a ffected parties and publish notifications of
the proposed determinations that identify: the relevant markets, the parties de-
termined 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 infor-
mation 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 condi-
tions to be imposed ‘under exceptional circumstances’ where dominance exists in
a service market by a person who is a provider of electronic communications net-
works 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 func-
tional 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, com-
plex process. The 2009 EU reforms made it more so with the consecutive, ra-
ther than concurrent, domestic and EU consultations and comment periods.

  Ofcom ‘S 4.4, Review of Wholesale Broadband Access Markets’, June 2004.

383
365

6  Authorization and Licensing 365

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 num-
bers of parties lined up on each side of an issue with seemingly perpetual chal-
lenges 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 com-
munications 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 condi-
tions is found in sections 96A to 104 of the Act, with powers, including to im-
pose 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 sus-
pension or restriction for a single serious breach or repeated breaches of a con-
dition (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 notifica-
tion in its ‘Enforcement Guidelines for regulatory investigations’, 28 June 2017.
387
  With repeated, non-​serious breaches, intermediate penalties must be sought.
63

366 Part III  Key Regulatory Issues

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 in-
formation 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 deacti-
vated 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 com-
plaints handling policies and procedures under GC 14, including the failure to ad-
vise 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, <http://​w ww.ofcom.org.uk/​about/​policies-​a nd-​
guidelines/​penalty-​g uidelines/​>.
389
  Ofcom, ‘Penalty Guidelines, Section 392 Communications Act 2003’, 14 September 2017, <https://​w ww.
ofcom.org.uk/​_ ​_​data/​a ssets/​pdf_ ​fi le/​0 022/​106267/​Penalty-​Guidelines-​September-​2017.pdf>.
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.
367

6  Authorization and Licensing 367

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 informa-
tion392 (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 pur-
suant to what is called the Electronic Communications Code.393 However, after
a Law Commission review in 2013 and further consultations, the UK govern-
ment, 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 re-
place 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 pay-
able 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, up-
grades and infrastructure sharing to agreements under the current Code. Digital Economy Act 2017, pt 2, s 4,
Sch 2.
638

368 Part III  Key Regulatory Issues

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 communi-
cations apparatus which is on, under or over the land,
• carry out any works on the land for or in connection with the installation of elec-
tronic communications apparatus on, under or over the land or elsewhere,
• carry out any works on the land for or in connection with the maintenance, ad-
justment, alteration, repair, upgrading or operation of electronic communica-
tions 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 communica-
tions 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 min-
imal adverse impact on its appearance and impose no additional burden on the
landowner. 399 The practical implications of these qualifications to the right re-
main 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.

396
  The Digital Economy Act 2017 (Commencement No. 3) Regulations, SI 2017/​1286 (c. 119).
397
  Digital Economy Act 2017, pt 2, s 4, Sch 1.
398
  Schedule 3A, Communications Act 2003, s 5. 399
  Ibid, s 17. 400
  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.
369

6  Authorization and Licensing 369

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 con-
sideration 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 preju-
dice 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.
370

370 Part III  Key Regulatory Issues

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 re-
fuses 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

408
  See eg Peel Land and Property (Ports No.3) Ltd v TS Sheerness Steel Ltd [2013] EWHC 1658 (Ch).
409
  Communications Act 2003, s 4, Sch 3A. 410
  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.
731

6  Authorization and Licensing 371

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 infrastruc-
ture 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 let-
ters 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 no-
tices (eg requesting rights, assigning rights, requesting removal of apparatus, etc).
419
 See Register, <https://​w ww.ofcom.org.uk/​phones-​telecoms-​a nd-​i nternet/​i nformation-​for-​i ndustry/​
policy/​electronic-​comm-​code>.
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
  Statement, n 420, at 2.64. 423
  Section 109(e), Communications Act 2003.
732

372 Part III  Key Regulatory Issues

to ensure such arrangements are in place.424 These information require-

ments 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 ex-
ample of the possible tension between the economic and social policies that
underlie these mandatory factors is where Code powers are sought to facili-
tate the roll-​out of alternative infrastructure presumed to promote compe-
tition or make access to new services available except that building of that
infrastructure will require significant highway disruptions and infrastruc-
ture 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 applica-
tion, 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 indi-
vidual 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

424
  Statement, n 420, at 2.85–​2 .88.
425
  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, <http://​w ww.ofcom.org.uk/​atoz/​
?letter=D&publication=All&sector=All>.
73

6  Authorization and Licensing 373

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 net-
works, 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 ‘per-

mitted 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 au-
thorities 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 an-
cient monuments, conservation, and other protected areas.436 The Regulations
seek to minimize the aesthetic, environmental, and functional impact of the in-
stallation 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

  See s 106, Communications Act.

431 432
  See Statement, n 420 at 2.89–​2 .96.
433
  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.
347

374 Part III  Key Regulatory Issues

with its use, such as agricultural land. They require coordination between pro-
viders and others installing utilities,438 or coordinating public works such as
highway and road authorities, and impose inspection and maintenance obliga-
tions 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’ trig-
gering 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 un-
authorized 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 con-
ditions 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 ser-
ious 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.

438
  Ibid, at reg 14.    439  Ibid, at reg 10.
440
  The annual certificate shall, in the case of a company state, that in the Code Operator’s Board’s reason-
able 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), <http://​w ww.communicationsbill.gov.uk/​i mplementation_​c onsult-
ations.html>.
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.
735

6  Authorization and Licensing 375

Premium rate services  Section 120 of the Communications Act 2003 author-
izes a condition that is general in nature as it may be imposed on all persons pro-
viding 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 ac-
cessed 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 con-
trol, 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 pre-
mium 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 investiga-
tion procedure with an immediate preliminary investigation for an apparent ser-
ious and urgent breach with the possibility to order the withholding of payments

  See further Chapter 9.

445

  As discussed above, revisions to the General Conditions will eliminate Ofcom’s Code of Practice re-
446

garding 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.
376

376 Part III  Key Regulatory Issues

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 ad-
judicated 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, desig-
nated 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 ac-
tivities 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, <http://​w ww.ofcom.org.uk/​t v/​obb/​prog_​cb/​obb114/​>.
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).
73

6  Authorization and Licensing 377

The charging principles provide for administrative fees to be charged as a per-

centage 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, espe-
cially in the separation of content services that are excluded and transmissions
involving content layers that remain communications services. However, pro-
viders are to determine their revenue for ‘relevant activities’ and certify this infor-
mation to Ofcom within twenty-​eight days of the publication of a general demand
for such information.454 Based on this information, Ofcom calculates the indi-
vidual 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 in-
creased 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.

452

  DGT Guidelines, ‘The definition of “relevant activity” for the purposes of administrative charging’, 29
453

July 2003, at 2.1.

454
  See Ofcom, Networks and service, general demand for information, March 2004.
455
  Ofcom’s Tariff Tables 2017/​2018, 30 March 2017, at s 2.4. 456
  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 head-
quarters are also cited for the overall increased budget.
738

378 Part III  Key Regulatory Issues

Table 6.2  Ofcom’s 2017–​2018 Networks and Services Administrative

Charges Bands
•  Bottom (£) •  Top (£) •  Relevant Turnover (£) •  Fee Payable (£)

0 5,000,000 0
5,000,000 10,000,000 5,000,000 5,635
10,000,000 25,000,000 10,000,000 11,270
25,000,000 50,000,000 25,000,000 28,175
50,000,000 75,000,000 50,000,000 56,350
75,000,000 100,000,000 75,000,000 84,525
100,000,000 150,000,000 100,000,000 112,700
150,000,000 200,000,000 150,000,000 169,050
200,000,000 300,000,000 200,000,000 225,400
300,000,000 400,000,000 300,000,000 338,100
400,000,000 500,000,000 400,000,000 450,800
500,000,000 600,000,000 500,000,000 563,500
600,000,000 750,000,000 600,000,000 676,200
750,000,000 1,000,000,000 750,000,000 845,250

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 ap-
propriate can be imposed (s 41). The penalty, however, is capped at twice the an-
nual 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
739

6  Authorization and Licensing 379

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 re-
forms 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 require-
ments 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 telecommu-
nications 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 techno-
logical 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.
459

  None of these considerations touches on Brexit and what changes it may produce, if any.
460
830

380 Part III  Key Regulatory Issues

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 al-
most 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, harmon-
ized, and technology-​neutral framework for any electronic communications net-
work 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 de-
velopment, 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 author-
ization law for electronic communications providers will likely continue to wit-
ness this dynamic evolution.
381

SPEC TRUM MANAGEMENT

Anne Flanagan1

7.1 Introduction  381

7.2 Spectrum and Communications  388
7.3 Chart of Radio Spectrum  390
7.4 History of Spectrum Regulation  391
7.5 The EU Spectrum Framework  402
7.6 The UK Spectrum Framework  418
7.7 Concluding Remarks  432

7.1 INTRODUC TION

Developments in communications and broadcast, in addition to wireless tech-

nologies, 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
382

382 Part III  Key Regulatory Issues

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 ubiqui-
tous 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 un-
precedented demand for electromagnetic spectrum,5 the medium or ‘pipe’ over
which such mobile voice and data and other communications services are pro-
vided. 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 ‘spec-
trum’. 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 interfer-
ence have traditionally driven policy regarding spectrum’s allocation and regula-
tion. 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 speci-
fied condition/​conformity requirements.
Ongoing technological developments such as digitization, advanced compres-
sion 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, <https://​w ww.itu.int/​en/​I TU-​
D/​Statistics/​Pages/​stat/​default.aspx>.
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),
<https://​c ommunity.keysight.com/​c ommunity/​k eysight-​blogs/​i nsights-​outside-​t he-​box/​blog/​2 016/​0 7/​2 9/​
fcc-​5g-​spectrum-​a llocation-​demands-​3-​breakthrough-​i nnovations>.
38

7  Spectrum Management 383

the unprecedented and growing demand for spectrum, including notably for mo-
bile 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 exam-
ining their current policies, allocations, and uses of allocated spectrum.8 Various
complex strategies are being used or, at least, considered to promote more effi-
cient 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 op-
tion 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 realloca-
tion in various jurisdictions of what is called the ‘digital dividend’, or, the spec-
trum 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 op-
erate in the same spectrum bandwidth as one analogue channel. These more ef-
ficient 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), <http://​fi les.brattle.com/​
files/​5 927_ ​s ubstantial_ ​l icensed_ ​s pectrum_ ​d eficit_​(2015-​2 019)_​-​_​u pdating_​t he_ ​f cc’s_ ​mobile_ ​d ata_ ​d e-
mand_​projections.pdf>.
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), <http://​w ww.communicationstoday.co.in/​reports/​10255-​how-​5g-​
technology-​w ill-​contribute-​to-​t he-​g lobal-​economy>.
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

384 Part III  Key Regulatory Issues

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 ex-
perience 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 perform-
ance 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 origin-
ally 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 terres-
trial television (23 February 2012), <http://​stakeholders.ofcom.org.uk/​binaries/​consultations/​949731/​sum-
mary/​condoc.pdf>.
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 win-
ners 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), <https://​w ww.cornwalllive.com/​news/​cornwall-​news/​new-​4g-​masts-​c amborne-​could-​
1308423>. 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 reimburse-
ment of £105 spend to fix interference problem, notification of which they did not receive), <https://​w ww.
midulstermail.co.uk/​news/​cookstown-​residents-​out-​of-​pocket-​a s-​4g-​signal-​k ills-​f reeview-​t v-​1-​7121102>.
14
  Department for Culture, Media and Sport, News Release, ‘Eliminating Interference with TV signals from
4G’, 2 April 2012, <http://​w ww.culture.gov.uk/​news/​media_ ​releases/​8 865.aspx>.
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 elec-
tronic communications services in the Community, [2011] OJL 106/​9, 18 April 2011.
358

7  Spectrum Management 385

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 ad-
dressed via mandatory channels where technically necessary18 as well as cooper-
ation 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 ex-
ample with 2G spectrum, these could include that it was obtained under dif-
ferent 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 incum-
bents 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), <https://​w ww.thinksmallcell.com/​Technology/​t he-​mobile-​i ndustry-​focuses-​on-​spectrum-​
refarming-​t hroughout-​2017.html>.
18
  See eg Commission Decision 2009/​766/​EC on the harmonisation of the 900 MHz and 1800 MHz fre-
quency 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 op-
erational 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.
386

386 Part III  Key Regulatory Issues

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 tri-
bunal interpretation of the EU ‘Refarming Directive’,24 however, found that the
original 2G GSM spectrum grantee had no directly enforceable right to the auto-
matic 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 frame-
work 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 al-
located 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 har-
monization 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 spec-
trum that any one holder might control. These were to address competition con-
cerns 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 mo-
bile 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
 See Telefonica O2 Ltd v Ofcom [2010] CAT 25. 26
  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), <http://​w ww.telegraph.co.uk/​business/​2017/​12/​20/​ofcom-​accuses-​t hree-​holding-​spec-
trum-​auction-​failed-​legal-​bid/​>.
387

7  Spectrum Management 387

committed to repurposing at least 500 MHz of bandwidth from both federal gov-
ernment 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 deregu-
lation of spectrum frameworks from existing ‘command and control’ models
that dictate use according to the technical characteristics of the spectrum, ex-
plored 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 es-
sentially service and technological neutrality. The concern here is how to en-
sure 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 spec-
trum to participate in secondary spectrum markets enabling under-​utilized spec-
trum 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 regu-
lation. 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), <https://​w ww.rcrwireless.com/​20150806/​policy/​fcc-​releases-​600-​m hz-​auction-​r ules-​stomps-​t-
​mobile-​i ncreased-​reserve-​request-​t ag2>.
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.
83

388 Part III  Key Regulatory Issues

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 re-
peats in a second of time, a cycle counted in ‘Hertz’. 34 Thus a wave that re-
peats 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 us-
able 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 be-
tween 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 en-
ergy or power and high frequency waves are very short and have high energy. See Imagine, ‘Electromagnetic
Spectrum: Introduction’ (NASA GSFC, February 2010), <http://​i magine.gsfc.nasa.gov/​docs/​science/​k now_ ​l1/​
emspectrum.html>.
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 communica-
tions an impossibility as little as five years ago), <https://​sites.google.com/​site/​sub9khz/​>.
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), <http://​i magine.gsfc.nasa.gov/​docs/​
science/​k now_ ​l1/​emspectrum.html>.
39
  The power of the transmitting device is also relevant to distance that radio waves can travel.
389

7  Spectrum Management 389

geographic areas and can carry more data.40 As basically illustrated in Table 7.1,
different frequencies’ propagation characteristics are relevant to different com-
munication uses and technologies. While waves at the same frequency in the

Table 7.1  ITU radio frequency designations

Designation Frequency Range Wavelengths Typical Uses
ELF Extremely low 3 Hz to 30 Hz 100 Mm to Submarine
frequency 10 Mm communications
SLF Superlow frequency 30 Hz to 300 Hz 10,000 km to 1,000 Submarine
km communications
ULF Ultralow frequency 300 Hz to 3 kHz 1,000 km to 100 km Mine
communications
VLF Very low frequency 3 kHz to 30 kHz 100 km to 10 km Submarine
communications,
avalanche beacons,
wireless heart
monitors, geophysics
LF Low frequency 30 kHz to 300 kHz 10 km to 1 km Navigation, time
signals, AM
broadcasting
MF Medium frequency 300 kHz to 3 MHz 1 km to 100 m AM (medium wave)
broadcasting
HF High frequency 3 MHz to 30 MHz 100 m to 10 m Short wave
broadcasting,
amateur radio,
long range aviation
and military
communications
VHF Very high frequency 30 MHz to 300 MHz 10 m to 1 m FM broadcasting,
television, ground-​
to-​a ir and air-​to-​a ir
communications
UHF Ultrahigh frequency 300 MHz to 3 GHz 1 m to 10 cm Television, mobile
phones, wireless
LAN, Bluetooth,
microwave ovens
SHF Superhigh frequency 3 GHz to 30 GHz 10 cm to 1 cm Wireless LAN, radar
EHF Extremely high 30 GHz to 300 GHz 1 cm to 1 mm Radio astronomy,
frequency high-​speed
microwave radio

  Rysavy, n 37.
40
930

390 Part III  Key Regulatory Issues

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 possi-
bility of interference with simultaneous but competing uses at the same frequency
in the same geographical location led to national, international, and multilat-
eral 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 spec-
trum licensing, as well as from international standards bodies like the Institute
of Electrical and Electronics Engineers (IEEE) that work to develop technical spe-
cifications 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 dis-
cussion 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 propa-
gation, see Toronto Emergency Communications Group, ‘Basic Amateur Emergency Radio Course: Module
7: Radio Wave Propagation’, October 2010, <http://​w ww.emergencyradio.ca/​course/​>.
42
  The WiFi 802.11 is a grouping of IEEE standards for low-​powered high frequency communications sys-
tems 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.
391

7  Spectrum Management 391

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 de-
livery. 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 telecommunica-
tions 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 inter-
national 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 inter-
national 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 wire-
less telegraphy, the forerunner of other wireless communications technologies.

  Standage, T, The Victorian Internet (New York Walker & Co, 1998), 2.

44

  Schmahl, S, ‘The United Nations:  Facing the Challenges of the “Information Society” ’, (2007) 11 Max
45

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.
392

392 Part III  Key Regulatory Issues

Wireless telegraphy, like many other technologies, evolved from a series of theor-
etical 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, ex-
periments, 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 sym-
bols 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 tel-
egraphy 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, <http://​w ww.theiet.org/​resources/​l ibrary/​a rchives/​biographies/​
faraday.cfm>.
49
  Marconi, G, ‘Wireless Telegraphic Communication: Nobel Lecture 1909’, <http://​w ww.nobelprize.org/​
nobel_​prizes/​physics/​laureates/​1909/​marconi-​lecture.pdf.>.
50
  Braga, GM, ‘Marconi Family History’ (Marconi Family Society), <http://​marconisociety.org/​about/​mar-
coni-​family/​>.
51
 Events in Telecommunications History, BT Archives, <http://​w ww.btplc.com/​Thegroup/​BTsHistory/​
1881to1911/​1896.htm>.
52
  Marconi, n 49. 53
 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
39

7  Spectrum Management 393

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 in-
sured by Lloyd’s would exclusively use Marconi’s equipment and could not com-
municate 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 scien-
tists from numerous countries whose intellectual contribution enabled Marconi’s
antenna,61 was that his exclusionary conduct flew in the face of maritime trad-
ition 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 communi-
cation 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 im-
pede 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’, <http://​earlyradiohistory.us/​1963hw02.htm#2footnote>.
  Ibid, Section 10.
56 57
 Ibid. 58
 Ibid. 59
 Ibid.
  Radiotelegraph and Radiocommunications Conferences, ‘Preliminary Conference on Wireless Telegraphy
60

(Berlin 1903)’ (ITU History Portal), available at:  <https://www.itu.int/en/history/Pages/RadioConferences.

aspx?conf=4.35>.
61
  See Kraetke, ‘Opening Speech’, Minutes, Procés-​Verbaux and Protocole Finale, Preliminary Conference
on Wireless Technology (Berlin 1903) (trans Neilson, GR), 5, <https://www.itu.int/dms_pub/itu-s/oth/02/01/
S02010000284803PDFE.pdf>.
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.
934

394 Part III  Key Regulatory Issues

such as interference and that radio telegraphy needed to be promoted internation-

ally.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 con-
ference 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

64
 Ibid.
65
  ITU Library and Archives, ‘Art V, Final Protocol –​Preliminary Conference on Wireless Telegraphy (Berlin
1903)’, <https://www.itu.int/en/history/Pages/RadioConferences.aspx?conf=4.35>.
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,
<http://www.handle.itu.int/11.1004/020.1000/4.36>.
67
  See Radiocommunications Sector, ‘100 Years of ITU Radio Regulations (1906–​2006)’, <https://www.itu.
int/en/history/Pages/100YearsITURadioRegulations.aspx>.
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),
<http://​itu150.org/​h istorical-​t imeline/​>. 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, <http://​search.itu.int/​h istory/​H istoryDigitalCollec
tionDocLibrary/​12.26.71.en.pdf>.
70
 Ibid. 71
 Ibid.
72
  See eg McPhail, TL, ‘The Medium: Global Technologies and Organizations’, in Global Communications:
Theories, Stakeholders, and Trends (Wiley-​Blackwell, 2011), 270–​271.
395

7  Spectrum Management 395

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 pri-
mary 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 fre-
quency 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 fre-
quency use registered with the requirements of the Radio Regulations. This work
in connection with international coordination of spectrum, allocation, and inter-
ference control is accomplished via the ITU-​R. Its Recommendations address
technological developments that may, inter alia, enable new uses, enhance cap-
abilities, 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 promul-
gation. This allows for regional variation where international harmonization is not

73
 Ibid. 74
  See Chapter 16, at Section 16.3. 75
 Ibid.
  ‘50th Anniversary of the Madrid Conferences’, (1982) 49(9) Telecommunication Journal 510–​511, <https://​
76

itu.tind.io/​record/​13682?ln=en>.
77
 Ibid.
78
  It is noted that sometimes allocations are determined purely on technological and not political consid-
erations. 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.
936

396 Part III  Key Regulatory Issues

essential or based only on technical merits and permits a structure to help con-
sensus building, not an easy process with so many different interests.79 The div-
ision 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 promul-
gating 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 or-
ganization, 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 mo-
bile satellite systems, can be supported as per Resolution 359 (rev.WRC-​15), alloca-
tions and how possible modifications of the Regulations impact compatibility and
sharing with other services,81 an issue blending the regulatory and technical con-
cerns 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 pro-
duced 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), <https://​w ww.transfinite.
com/​content/​w rc2019list>.
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, dir-
ector of France National Frequencies Agency), <http://​spacenews.com/​f rance-​seeks-​itu-​help-​halt-​satellite-​
signal-​jamming-​i ran/​>.
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’), <http://​w ww.erodocdb.dk/​docs/​doc98/​official/​pdf/​ercrep025.pdf>.
397

7  Spectrum Management 397

complex arrangement of competences with the EU Member States which as sov-

ereign states and ITU members themselves have jurisdiction over national spec-
trum 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 quali-
fied by existing EU Treaty limitations, comprising another application of the ‘exist-
ence 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, ser-
vice, 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, <https://​w ww.legislation.gov.au/​Details/​F 2014L01800>.
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.
938

398 Part III  Key Regulatory Issues

which it had allocated frequency. It set what it considered were appropriate stand-
ards 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 ap-
pealed for years in the US courts. The comparative processes, labelled ‘beauty con-
tests’, 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 ob-
jectivity 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 re-
source 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, com-
petitive bidding. This decision was premised on modern economic theory that ef-
ficient 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 pro-
ductive 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 fur-
ther social or competition policy, such as set asides to permit new entrants or spec-
trum caps to ensure relative competitive holdings of spectrum.93 While pure price
auctions may be more objective than comparative processes, they also have flaws.

88
  47 USC §309. See further Chapter 5.
89
  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, <http://​
jerrybrito.com/​pdf/​2007StanTechLRev1.pdf>.
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.
93

7  Spectrum Management 399

For example, concerns were raised about the massive overbidding for 3G spec-
trum94 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 co-
ordinate 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 in-
novation beyond existing technology, eg the long-​term licences viewed as neces-
sary 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 interfer-
ence 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), <http://​w ww.
newamerica.net/​fi les/ ​WorkingPaper18_ ​FCCAuctionRules_ ​Rose_ ​F INAL.pdf>.
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 consid-
erable 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), <http://​t ransition.fcc.gov/​Daily_​Releases/​Daily_​Business/​
2012/​db0515/​DOC-​314071A1.pdf>.
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), <http://​fox.web.rice.edu/​pub-
lished-​papers/​fox-​a nd-​bajari-​aej-​m icro.pdf>.
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), <https://​papers.ssrn.com/​sol3/​papers.
cfm?abstract_ ​id=1961225>.
99
  Industry groups have suggested, however, that restrictions/​set asides for other uses have only ultim-
ately produced delays, enhanced costs, lower state revenues, and proved to the ultimate detriment of con-
sumers 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
04

400 Part III  Key Regulatory Issues

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 seem-
ingly 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 spec-
trum 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 neces-
sity, discussed in Chapter 6. The invention of the telegraph prompted the nation-
wide 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 sys-
tems 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 gov-
ernment 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 re-
quired 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, <http://​w ww.legislation.gov.uk/​u kpga/ ​V ict/​26-​27/​112/​contents>. See further
Chapter 3.
102
  Telegraph Act 1868, <http://​w ww.legislation.gov.uk/​u kpga/ ​V ict/​31-​32/​110/​contents/​enacted>.
103
  Records of the Post Office and British Telecommunications public corporation: 1849–​1984, BT Digital Archives,
<http://​www.digitalarchives.bt.com/​Calmview/​Record.aspx?src=CalmView.Catalog&id=BTA%2f3+BT1>.
104
 Ibid. 105
 Ibid.
106
  Telegraph Act 1870, <http://​w ww.legislation.gov.uk/​u kpga/ ​V ict/​33–​3 4/​8 8/​contents>.
107
  Attorney-​G eneral v The Edison Telephone Co of London, Ltd [1880–​81] LR 6 QBD 244.
410

7  Spectrum Management 401

The Postmaster General’s exclusive privilege in telegraphic systems did not ex-
tend 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’ inter-
ests 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 com-
munications 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.
108

  Records of the Post Office and British Telecommunications public corporation: 1849–​1984, n 103.

109

110
 Ibid. 111
  Ibid, 1912.
112
  See DEFE 59, Record Summary, ‘Ministry of Defence and predecessors: Defence Signal Board and pre-
decessors:  Minutes and Papers’ (National Archives), <http://​d iscovery.nationalarchives.gov.uk/​details/​r/​
C15205>.
113
  Wireless Telegraphy Act 1949, s 1. 114
  Post Office Act 1969, s 3(1).
420

402 Part III  Key Regulatory Issues

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 pro-
cesses 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 require-
ments 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 div-

ided into three phases. Pre-​EU regulation, the European market generally com-
prised 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 mon-
opolists. 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 mu-
tual 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 ini-
tially 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 communica-
tions, 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.
430

7  Spectrum Management 403

the Terminal Equipment Directive, the EU sought to ensure transparency and

simplified, objective procedures for the licensing of equipment attached to net-
works, in order to meet essential requirements for user and network safety by re-
quiring 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 equip-
ment 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 intro-
duction 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 fur-
ther 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 add-
itional 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 previ-
ously excluded from the R&TTE Directive must now also comply with the essen-
tial 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).
04

404 Part III  Key Regulatory Issues

among other things.123 The RED continues the prior self-​certification for harmon-
ized 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 compli-
ance 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 to-
gether 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, con-
tained a stated default for general authorizations but clearly permitted in-
dividual 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 indi-
vidual licence.128 These factors, combined with the vast discretion permitted
to the National Regulatory Authorities (NRAs), resulted in the varying indi-
vidual 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 har-
monisation 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 tech-
nical 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 indi-
vidual licences in the field of telecommunications services.
128
  Ibid, at Art 11.
450

7  Spectrum Management 405

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 authoriza-
tions in the 2002 Authorisation Directive,130 part of a revised post-​liberalization frame-
work 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 require-
ment 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 pro-
posed in 2016 by the Commission for, inter alia, the purpose of ensuring more har-
monized 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 pro-
posed 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 con-
ditions 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 spec-
trum 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 infrastruc-
ture 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), <https://​w ww.qualcomm.com/​i nvention/​technologies/​5g-​n r/​spectrum-​sharing>.
406

406 Part III  Key Regulatory Issues

• 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 in-
dividual 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 communi-
cations or service;134
• objectives of general interest (Article 46, proposed EECC).

The proposed EECC thus changes slightly the criteria for deciding whether indi-
vidual 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 ac-
cording to national conditions, possibly where a general authorization was man-
dated 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.

133

  Adequate receiver resilience is critical to protect against harmful interference. This will be important for
134

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.
470

7  Spectrum Management 407

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 spe-
cific 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 neces-
sary spectrum sharing among the harmonized competences that NRAs must have
(Article 35 (1)(f)). Notable in this regard are, however, the network operators’ ob-
jections to the greater use of spectrum sharing, general authorizations for spec-
trum 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 ex-
tension 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 con-
sultation 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, <https://​www.orange.com/​en/​Group/​Committed-​to-​Europe/​The-​new-​Code-​EECC>; European
Telecommunications Network Operators’ Association Position Paper on the European Electronic Communica­
tions Code (ETNO, January 2017), <https://​etno.eu/​datas/​positions-​papers/​2017/​ETNO%20Position%20Paper%20
on%20the%20EECC>.
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 com-
mensurate under the ‘public trust’ theory discussed in Chapter 6 at Section 6.2.2.
048

408 Part III  Key Regulatory Issues

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 pro-
portionate (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 iscrim-
inatory, 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 ob-
jectives of promoting regulatory consistency and predictability, non-​d iscrimination, technological neutrality,
promoting high capacity data connectivity, promoting competition in provision of networks, including effi-
cient 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 bene-
fits 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 appli-
cations, 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;
409

7  Spectrum Management 409

The proposed Code requires the further layering that the Member State clearly de-
fine 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 pro-
posed 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 com-
plex, 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 pro-
posed 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 dead-
lines where all twenty-​eight Member States would have award processes, is also
questioned.140
Individual rights to use spectrum under the Authorisation Directive can cur-
rently 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 spec-
trum accumulations. Peer review as per Art 35 (2), proposed EECC.
140
  BoR 17/​129 ‘Peer Review Process (Article 35)’ (BEREC, 30 May 2017).
140

410 Part III  Key Regulatory Issues

• transfer by the grantee; and

• commitments made in competitive/​comparative selection procedures.141

Individual conditions must be objectively justified according to the service in-

volved, proportionate, transparent, and non-​d iscriminatory (Article 6(1)). They
must not duplicate the general conditions or conditions applicable to undertak-
ings 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 condi-
tions, 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 net-
works 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 commit-
ments 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 gen-
eral authorization is that under Annex I, B (for the provision of networks) that al-
lows, 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 restric-
tions and avoidance of harmful interference requirements can encompass general

141
  Part B, Annex.
142
  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/​ef-
fective use, avoidance of interference, and electromagnetic disturbances and public health.
41

7  Spectrum Management 411

authorization conditions of use to address both the Commission’s goal of spec-

trum 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 require-
ment. 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 re-
strictions (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 spec-
trum 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 ques-
tioned. 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.
412

412 Part III  Key Regulatory Issues

of these rights to use this public resource must have a coherent approach in set-
ting 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 tech-
nical 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 rev-
enue 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 ful-
filling 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 har-
monization 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 stra-
tegic 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.

147
413

7  Spectrum Management 413

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 spec-
trum 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 op-
erate 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 in-
appropriate, 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 divi-
dend’, 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 harmon-
ization here might have resulted in purely local and possibly non-​technological
considerations being applied to valuable spectrum with propagation characteris-
tics 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).
41

414 Part III  Key Regulatory Issues

services or enhanced broadcast and mobile services, among others. Such di-
vergent 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 pro-
posed 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) en-
hanced Member State duties of cooperation and spectrum management re-
quirements 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 con-
sidered as follows.152
The duties of cooperation arose under Article 8a, Framework Directive that im-
posed 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, scien-

tific, 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 im-
poses 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 ob-
jectively 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.
451

7  Spectrum Management 415

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 rans-
fers 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 object-
ives 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 object-
ives 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.
416

416 Part III  Key Regulatory Issues

set the regulatory principles and policy objectives to be applied for various spec-
trum 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 ac-
cess 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 ad-
equate 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 per-
manent, 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 spec-
trum 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 for-
mats 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).
417

7  Spectrum Management 417

The Decision further identified as a European priority the provision of harmon-

ized 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 re-
spective 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 compe-
tences. The Member States and the EU must cooperate in this situation according
to the unity of international representation principle.159 This means that, practic-
ally, 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 accord-
ance 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 implemen-
tation 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).
148

418 Part III  Key Regulatory Issues

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 pro-
vision 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 deci-
sion 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 compe-
tences. 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 pro-
visions of the Communications Act 2003 regarding regulatory obligations with

161
  Case C-​6 87/​15, (25 October 2017), at paras 47–​55. 162
  Ibid, at para 51.
163
  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), <https://​w ww.internetsociety.
org/​resources/​doc/​2017/​european-​regional-​bureau-​newsletter-​18-​nov-​2 4-​nov-​2017/​>.
165
  Wireless Telegraphy Act 2006.
166
 Practical Law ‘Wireless Telegraphy Act receives Royal Assent’ (Thompson Reuters, 2006), <https://​
uk.practicallaw.thomsonreuters.com/​4-​205-​7993?transitionType=Default&contextData=(sc.Default)&firstP
age=true&bhcp=1>.
419

7  Spectrum Management 419

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 equip-
ment.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 struc-
ture, 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 pro-
visions 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), <http://​webarchive.nationalarchives.gov.uk/​20051027120000/​http://​w ww.ofcom.
org.uk/​static/​a rchive/​ra/​rahome.htm>. The specific acts governed by these are ‘to instal or use wireless tel-
egraphy 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, <https://​w ww.
ofcom.org.uk/​spectrum/​radio-​spectrum-​a nd-​t he-​law/​l icence-​exempt-​radio-​u se/​w ireless-​telegraphy-​regu-
lations>. 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
240

420 Part III  Key Regulatory Issues

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 par-
ticular 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 re-
quires 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 con-
siderations, 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 pri-
ority 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 <http://​spectruminfo.ofcom.org.uk/​spectrumInfo/​>.
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.
241

7  Spectrum Management 421

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 re-
strictions and constraints, and with a view to achieving such purposes as is speci-
fied 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 fol-
lowing 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 an-
nual fee decision by Ofcom. Had the other Ofcom acts pursuant to the Direction

  [2017] EWCA Civ 1873, at para 54.

176

  Wireless Telegraphy Act 2006 (Directions to OFCOM) Order 2010, SI 2010/​3024.

177

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 pro-
cess 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.
24

422 Part III  Key Regulatory Issues

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 regu-
latory 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 object-
ives. 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 re-
vision 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, <http://​w ww.ofcom.org.uk/​radiocomms/​i fi/​l icensing_​policy_​
manual_​2/​>.
184
 See eg Wireless Telegraphy (Exemption) (Amendment) Regulations 2011. Also see, Ofcom, Licence
Exempt Radio Use, <http://​stakeholders.ofcom.org.uk/​spectrum/​spectrum-​management/​l icence-​exempt-​
radio-​u se/​>.
185
  Annex B, Authorisation Directive comprises a nine-​item list of the types of conditions that can be im-
posed on the use of spectrum. These include conditions regarding usage fees; technical/​operational condi-
tions 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/​com-
petitive 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
243

7  Spectrum Management 423

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 electromag-
netic 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 deter-
mine 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 electromag-
netic spectrum for wireless telegraphy, Ofcom must consult and publish a no-
tice 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/​publica-
tion 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 fre-
quency. See Annex B, Directive 2002/​20/​EC as amended by Directive 2009/​140/​EC.
42

424 Part III  Key Regulatory Issues

non-​t ransferrable conditions of more than ten-​year duration for possible exemp-
tion 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 appro-
priate 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 frequen-
cies 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 justi-
fied, 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’ transmit-
ters, etc. However, the section 29 requirements may just apply where multiple but
limited numbers of users can share the same spectrum bands, perhaps with prior-
ities 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, <https://​w ww.ofcom.org.uk/​_ ​_​data/​a ssets/​
pdf_ ​fi le/​0 016/​41344/​condoc.pdf/>.​
245

7  Spectrum Management 425

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 in-
dicated 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 ap-
propriate,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 fu-
ture 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 oper-
ator 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 au-
thorization 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, <http://​w ww.ofcom.org.uk/​radiocomms/​i fi/​l i-
censing_​policy_​manual_​2/​c rown>.
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,  <https://​w ww.ofcom.org.uk/​m anage-​y our-​l icence/​r adiocommunication-​l icences/​s atellite- ​e arth/​
earth-​stations>.
426

426 Part III  Key Regulatory Issues

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 noti-
fication 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 manage-
ment 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 li-
cence 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 sta-
tions 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), <https://​w ww.ofcom.org.uk/​_ ​_​data/​a ssets/​pdf_ ​fi le/​
0038/​6 6899/​fees_​for_​g rant_​of_​rsa_​for_​roes.pdf>.
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 condi-
tions’, 20 June 2008); Ofcom Consultation, ‘Crown Recognised Spectrum Access in the 3400 MHz -​3600 MHz’,
17 December 2011.
247

7  Spectrum Management 427

(surrendered to Ofcom which then issues a new RSA/​l icence) or they remain con-
current.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 pay-
ment 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 re-
serve bands for other users that had not originally been allocated that spectrum
which the relevant operators threatened repeatedly to challenge in court, the gov-
ernment 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 spec-
trum 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
  RSAs can now be auctioned as well. 207
  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, <https://​w ww.ofcom.org.uk/​spectrum/​spectrum-​management/​spectrum-​awards/​awards-​
in-​progress/​2-​3-​a nd-​3-​4-​g hz-​auction>.
209
  Communications Act 2003, s 167.
248

428 Part III  Key Regulatory Issues

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 har-
monized 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 even-
tually allowed to use their 2G 900 MHz band spectrum that they were given (origin-
ally 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 bid-
ders, 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 spec-
trum 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 spec-
trum to LTE and WiMAX usage. Ofcom indicated in the Notice that it did not con-
sider 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 spec-
trum 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

210
  See text and accompanying notes 176–​181.
211
  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), <http://​w ww.guardian.co.uk/​technology/​blog/​2011/​oct/​11/​4g-​spectrum-​auction>.
213
  See Garside, J, ‘London Becomes 4G High Speed Internet Hot Spot’ (The Guardian, 13 November 2011),
<http://​w ww.guardian.co.uk/​business/​2011/​nov/​13/​4g-​h igh-​speed-​mobile-​i nternet-​t rial-​i n-​london?INTCM
P=ILCNETTXT3487>.
214
  See Second Consultation, n 211, at 1.24.
249

7  Spectrum Management 429

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 pro-
posed 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 inclu-
sive of ‘not spot’ areas for which Ofcom had £150 million designated for infrastruc-
ture, 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 seem-
ingly 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), <http://​www.theverge.com/​2012/​3/​27/​2905627/​ofcom-​delays-​everything-​everywhere-​lte-​network/
​in/​2671145>.
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.
340

430 Part III  Key Regulatory Issues

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 spec-
trum 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 acquisi-
tion 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 exped-
ited 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 rele-
vant 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 to-
gether 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 pro-
gramme of increasing liberalization of spectrum via de-​licensing bands and/​or

218
  Hutchinson 3G v Ofcom [2017] EWHC 3376 (Admin).
219
  Repealed and replaced by the WTA, s 30.
431

7  Spectrum Management 431

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 concur-
rently 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 spec-
trum 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 obliga-
tion 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 pro-
portionately and will consider whether the licensee could have done more or con-
tributed 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 neces-
sary regulations to withdraw the requirement for the variation and publication

220
  Ofcom Statement, ‘A Statement on spectrum trading: Implementation in 2004 and beyond’, 6 August 2004.
221
  See Ofcom, ‘Trading Guidance Notes’, July 2015, at 1. 222
 Ibid.
223
  The Wireless Telegraphy (Mobile Spectrum Trading) Regulations 2011, SI 2011/​1507, at s 8.
224
  Trading Guidance Notes, n 221 at Table 4. 225
  Ibid, at s 3.
342

432 Part III  Key Regulatory Issues

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 revo-
cation of the licence.226 Ofcom can refuse consent for a transfer where necessary
in the interests of national security, compliance with EU and international obliga-
tions, 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 achieve-
ments 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 be-
come an almost global reality. The inventions that lie at the heart of today’s mo-
bile 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 imagin-
ation. 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

226
  See Statement, n 220, at s 7.
227
  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’), <http://​earlyradiohistory.us/​1901age.
htm>.
229
  See Decision, n 8.
34

7  Spectrum Management 433

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 con-
tinue to cause the Commission to seek new regulatory powers, it is not deserved.
However, not every regulator’s decoder ring always receives across all frequen-
cies 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 imple-
mentation 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 sig-
nificant 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, how-
ever, 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.
34
435

ACCE SS AND INTERCONNEC TION

Ian Walden1

8.1 Introduction  435

8.2 Basic Concepts and Terminology  438
8.3 Access and Interconnection Regulation  443
8.4 EU Obligations in Relation to Access and Interconnection  451
8.5
UK Access and Interconnection Regime  465
8.6
Practical and Contractual Issues in Negotiating
Circuit-​Switched Access Agreements  478
8.7 Practical and Contractual Issues in Negotiating IP
Interconnection Agreements  481
8 .8 Concluding Remarks and Future Trends  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 op-
erator in order to enable it to deliver services to its own customers. The issues dis-
cussed 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

1
  This chapter was originally written for the 2nd edition by Emma McCormack.
2
  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).
346

436 Part III  Key Regulatory Issues

continue to be a need to mandate access from those market players that con-
trol facilities and services that a competitor cannot feasibly, economically or
technically, duplicate. In a networked industry like telecommunications, com-
petitors 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 trans-
mission network and associated operational systems, while the latter would in-
clude access to ducts and poles.
‘Interconnection’ is a type of access right.4 At its most basic level, interconnec-
tion 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 to-
gether at a ‘point of interconnection’ and require each operator to carry messages
received from the other operator at the point of interconnection across their net-
work 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 ar-
rangements with operators in other territories. Incumbent operators will have
had interconnection arrangements with incumbent operators in other coun-
tries, 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 deter-
mine, 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 telecommu-
nications 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.
437

8  Access and Interconnection 437

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 com-
petition and any-​to-​a ny connectivity. Most jurisdictions recognize that inter-
connection is so vital to the development of competition that specific ex ante
regulatory controls over access and interconnection are necessary and propor-
tionate. New Zealand tried relying exclusively on ex post competition law, but
the courts proved unable to resolve key issues of dispute concerning intercon-
nection arrangements.6
As electronic communications markets have matured, and as communica-
tions 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 interconnec-
tion 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 ef-
fectively competitive are less likely to yield lower prices and high levels of innov-
ation. 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 ac-
cess 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 inter-
connection, 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 sub-
ject to an ex ante access regime under the Telecommunications Act 2001, implemented by the Commerce
Commission of New Zealand.
7
  See also Chapter 11.
348

438 Part III  Key Regulatory Issues

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 inter-

connection arrangements greatly assists an understanding of the regulatory re-
gime. 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 net-
works 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 com-
munication 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.
349

8  Access and Interconnection 439

Telecommunications operators obviously charge us to make calls on their net-

works. 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 mo-
bile 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 inter-
connected, could be varied in a number of ways. For example, it may not be effi-
cient 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 inter-
connection’, 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

8
  See also Chapter 2, at Section 2.13 and Chapter 16 at Section 16.3.5.   See further Chapter 15.
9
40

440 Part III  Key Regulatory Issues

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 vir-
tually 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 tel-
ephony. Large, high-​speed networks have developed which aggregate and transit
traffic between numerous smaller networks, such as small retail ISPs. The oper-
ators 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 predom-
inant IP infrastructure operator in a region, or one of a limited number of oper-
ators 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.
10
41

8  Access and Interconnection 441

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 pro-
viders to bypass backbone providers and obtain international connectivity dir-
ectly. 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 interconnec-
tion 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 gener-
ally 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 intercon-
nection. 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 arrange-
ments will largely depend on their respective bargaining positions, based on fac-
tors 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 ar-
rangements, of which interconnection is only one kind. These range from very in-
trusive arrangements involving physical access to another operator’s facilities or
network, to the mere provision of wholesale services. Many different kinds of ar-
rangements lie in between these ends of the spectrum.

  They may also be referred to as ‘Bill and Keep’ arrangements.

11

  The peering agreement will sometimes indicate a ratio (eg 1:4) within which the relative volume of traffic
12

flows between the networks may vary, but if they fall outside it can trigger an option to levy charges or renego-
tiate the agreement.
42

442 Part III  Key Regulatory Issues

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 distribu-
tion 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 com-
ponent of its network to be upgraded to enable high bandwidth transmission
capacity. Where replacement with optical fibre has not occurred, it has been pos-
sible, through digital subscriber line (DSL)14 technologies, to upgrade the trad-
itional 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-​en-
abled 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 pro-
viding broadband services to the user.
Access arrangements may relate to facilities as well as network elements. An ex-
ample 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’ cus-
tomers. 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 ex-
ample 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

13
  Access Directive, Art 2(e).
14
  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.
43

8  Access and Interconnection 443

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 car-
rier 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 competi-
tion law prohibits certain anti-​competitive agreements and the abuse of a dom-
inant 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 spe-
cial characteristics which justify a more interventionist approach than is involved
where general competition law is applied. These characteristics include the preva-
lence of previously state-​owned and state-​funded operators who have historic-
ally 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 ex-
ample, to build out an entire competing communications network. Thirdly, the
fact that cooperation among competitors, in the form of access and interconnec-
tion arrangements, is essential for the successful operation of competitive com-
munications 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.
4

444 Part III  Key Regulatory Issues

The aim of sector-​specific legislation is to foster competition. Therefore, as com-

petition 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 al-
together 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 lib-
eralization 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 re-
ceiving 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 be-
tween Mercury and Vodafone and between Mercury and BT Cellnet (the two mo-
bile network operators at the time).

18
  Directive 97/​33/​EC of the European Parliament and of the Council on interconnection in telecommu-
nications with regard to ensuring universal service and interoperability through the application of the prin-
ciples 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 expos-
ition and commentary’, in Beesley, ME, Privatisation, Regulation and Deregulation (2nd edn.) (Routledge,
1997) pp 299–​327.
45

8  Access and Interconnection 445

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 rele-
vant 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 intercon-
nection 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 inter-
connection 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 ef-
ficient interconnection of these networks to the extent necessary to ensure inter-
operability 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 turn-
over 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.

22

  For further discussion on the costing of interconnection, see Chapter 2.

23

24
 Commission Recommendation 98/​195/​EC ‘on Interconnection in a liberalized telecommunications
market’, OJ L 73/​42, 12 March 1998.
46

446 Part III  Key Regulatory Issues

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 op-
erators 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 tele-
communications 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 inter-
national 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 per-
mitted to interconnect in accordance with relevant national licensing or au-
thorization schemes.

Where commercial negotiations failed to bring about interconnection, NRAs

had a range of powers to intervene to settle disputes, to require specified con-
ditions to be observed, to specify issues to be covered in interconnection agree-
ments, 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 li-
cences (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.

25
47

8  Access and Interconnection 447

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 interconnec-
tion offer and to provide access services at cost-​orientated prices.
A range of interconnection products were requested by Annex II operators, par-
ticularly of BT. Some examples that have proved particularly important for com-
peting operators include the following:

1. FRIACO interconnection—​FRIACO stands for fixed-​rate internet access call ori-

gination. 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 inter-
connection, operators wishing to purchase wholesale DSL products from
BT were required to purchase an end-​to-​end service, consisting of DSL ac-
cess, 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).
48

448 Part III  Key Regulatory Issues

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 be-
tween 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 interconnec-
tion products in a series of decisions over 2001 and 2002.31

Another direction made by the DGT under the Interconnection Regulations con-
cerned 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 pro-
vide 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 cir-
cuits, 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.
49

8  Access and Interconnection 449

ensure connectivity between Vodafone customers and BT customers, or between

Vodafone customers and customers on any other network. Indeed, for such con-
nectivity 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 re-
quests for access, to not unduly discriminate, to publish a reference interconnec-
tion offer, and to charge cost-​based prices for access services.
In addition, specific access conditions were at various times imposed on oper-
ators 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 en-
abled 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 per-
ceived 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).
540

450 Part III  Key Regulatory Issues

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 con-
ditions, 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 tele-
phone 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 oper-
ator 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, criti-
cized 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 ac-
cess to the local loop, OJ L 336/​4, 30 December 2000 (‘Local Loop Regulation’).
38
  See further <http://​w ww.offta.org.uk>. 39
  See further Chapter 14.
451

8  Access and Interconnection 451

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 chan-
nels 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 re-
quired, 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 con-
trol 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 sur-
rounded 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 pro-
vided for. Apart from fostering competitive markets, the reasoning for the new ap-
proach 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 sub-
ject 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 infra-
structure and associated services: The 1999 Communications Review’, COM(1999) 539, 10 November 1999.
542

452 Part III  Key Regulatory Issues

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 iden-
tify 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 communica-
tion networks that had been granted rights to install facilities on, over, or under
public and private property, including through expropriation (Article 12). A pro-
cess 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 elec-
tronic 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 com-
munications networks and services, OJ L 337/​37, 18 December 2009.
47
  See further Chapter 6, at Section 6.4.4.4.
543

8  Access and Interconnection 453

‘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 ineffi-
cient or physically impracticable’ (Article 12(3)). Fourth, a transparency obligation
has been inserted whereby undertakings are required to provide, on request, in-
formation 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 op-
erational 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 ac-
cess 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 ac-
cess 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 def-
inition 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.

48
54

454 Part III  Key Regulatory Issues

‘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 in-
volved or other parties who have access to the network. Interconnection is a spe-
cific 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 elec-
tronic 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 communica-
tions networks’ shall have a right, and, when requested by other such undertak-
ings, 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).
50
  See Case C-​277/​07, Commission v Poland, 13 November 2008; [2008] ECR I-​8 403, at para 36.
54

8  Access and Interconnection 455

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 con-
duct, 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 par-
ties 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 ne-
gotiations. 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 net-
works’, 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 en-
courage, 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 interoper-
able (Article 5(1)(ab));52

51
  Case C-​192/​0 8, 12 November 2009; [2009] ECR I-​10717.   Inserted in 2009.
52
546

456 Part III  Key Regulatory Issues

• to provide access to application program interfaces (APIs) and electronic pro-

gram guides (EPGs) on fair, reasonable, and non-​d iscriminatory terms, to the
extent necessary to ensure accessibility for end-​users to digital radio and televi-
sion 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 inter-
connection, 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 en-
titled 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 re-
gime under the Interconnection Directive and that under the Access Directive
concerns the test that is applied to determine whether an undertaking is con-
sidered 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 com-
petition 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.

53

  Commission Staff Working Document ‘on the Review of the EU Regulatory Framework for electronic
54

communication networks and services –​Proposed changes’ COM(2006) 334 final, at 5.4.

547

8  Access and Interconnection 457

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 re-
quired 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 na-
tional 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 rec-
ommendation, they are required to undertake a consultation process with other
national regulatory authorities and the Commission. The Commission may ultim-
ately 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 appro-
priate, 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 rem-
edies detailed in Articles 9 to 13a of the Access Directive. These wholesale
remedies, graduated in nature from mild behavioural obligations to signifi-
cant 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.
55

  Commission Guidelines on market analysis and the assessment of significant market power under the
56

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.
548

458 Part III  Key Regulatory Issues

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 re-
lates to the provision of ‘access to, and use of, specific network facilities’,
particularly in situations where it is considered that denial of access or unrea-
sonable 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 technolo-
gies 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 ne-
cessary 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 con-
sumer 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.
60
  Access Directive, Art 8(4). See also C-​2 8/​15, Koninklijke KPN BV v ACM, 15 September 2016.
549

8  Access and Interconnection 459

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 regula-
tory 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 ‘refer-
ence offer’. The reference offer should be sufficiently unbundled to enable a re-
questing 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 down-
stream 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 circum-
stances, 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
640

460 Part III  Key Regulatory Issues

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 obliga-
tion 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 incum-
bent, 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 under-
taking deciding to voluntarily separate its ‘local access network assets’ into an-
other 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 obliga-
tions 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 recom-
mendations and follow ‘as a rule’, except where it ‘is not appropriate to the cir-
cumstances that it may depart from it, giving reasons for its position’.63 A similar
power was granted to the Commission under the Interconnection Directive,

61
  Case 277/​16, Polkomtel v Prezes Urzędu Komunikacji Elektronicznej, 20 December 2017, at para 40.
62
  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.
416

8  Access and Interconnection 461

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 treat-
ment of fixed and mobile termination rates in the EU’, designed to further har-
monize 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 recommen-
dation ‘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 con-
ditions 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 ac-
cess 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.

64

  Ibid, at 2. See further Chapter 2, at Section 2.14.

65

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 method-
ologies to promote competition and enhance the broadband investment environment, COM(2013) 5761 final,
11 September 2013.
462

462 Part III  Key Regulatory Issues

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 prac-
tices, 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 oper-
ators 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 impos-
ition of symmetrical obligations on all operators to ensure access to ‘non-​replicable
network assets, such as in-​house wiring and cables’.70 Existing Commission recom-
mendations 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 ‘com-
mercial 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
  Ibid, at 15. 70
 Ibid.
71
  eg BT has announced its intention to close its legacy PSTN core network by 2025.
463

8  Access and Interconnection 463

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 compo-
nent 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 jus-
tification 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 obli-
gations 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 con-
nectivity 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 pro-
gressively 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 estab-
lished 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 pro-
jected 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 mo-
bile termination rates across the Union, OJ L 331/​39, 14 December 2017.
74
  Regulation No 717/​2007, at recital 4. 75
  Ibid, at recital 13. 76
  Ibid, at recitals 6–​8 and 10.
77
  Regulation No 531/​2012, at recital 81 and Art 16(5). 78
  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.
64

464 Part III  Key Regulatory Issues

digital economy.81 To lower the cost of such deployment, improved access to ex-
isting 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 net-
work 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 re-
quired to build the infrastructure. Such coordination is also seen as a means of re-
ducing 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 fi-
nanced in whole or part through public funds (Article 5). As with access to existing
physical infrastructure, network operators have transparency obligations in re-
spect of ‘on-​going or planned’ civil works (Article 6).
Another perceived obstacle to network deployment is the number and var-
iety 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 proced-
ures 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).

81
  Commission Communication, ‘A Digital Agenda for Europe’, COM(2010) 245 final/​2, 26 August 2010.
82
  Directive 2014/​61/​E U on measures to reduce the cost of deploying high-​speed electronic communica-
tions 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)).
456

8  Access and Interconnection 465

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 in-
frastructure’ must then meet all reasonable requests for access from public com-
munication 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 imple-
mented 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 intercon-
nection, 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’).
64

466 Part III  Key Regulatory Issues

Directive.86 Finally, consideration is given to the role of state aid in regulating ‘ac-
cess’ 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 net-
work 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 accord-
ance with the Deployment Directive, network operators now have a right to request
‘discloseable information’ from an ‘infrastructure operator’, subject to various condi-
tions;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 obliga-
tion to report on the UK’s communications infrastructure, which includes
the need to report on ‘the extent to which UK networks share infrastruc-
ture’ (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
  Ibid, para 59. 90
 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.
467

8  Access and Interconnection 467

2011. 93 Addressing network sharing, Ofcom noted that it would expect any com-
pany seeking shared access to infrastructure to attempt to negotiate a com-
mercial 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 convey-
ance of signals, where such system is provided wholly or mainly for making elec-
tronic 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 pro-
vider 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

93
  Ofcom, ‘Infrastructure Report’, 1 November 2011. It was renamed the ‘Connected Nations Report’ in 2015.
94
  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.
648

468 Part III  Key Regulatory Issues

Ofcom’s statement is also helpful in analysing whether an electronic commu-

nications network is ‘provided wholly or mainly for making electronic commu-
nications 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 avail-
able to others on good faith, but, conversely, a service with more than one cus-
tomer 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 re-
quire 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 avail-
able to members of the public provided that it is generally available to such po-
tential 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, be-
cause 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 re-
quired 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
469

8  Access and Interconnection 469

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 under-
taking 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 cri-
teria 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 obliga-

tion to provide access to wholesale products, Ofcom has often required the SMP

  Framework Directive, Art 16(1).

101

  See Electronic Communications (Market Analysis) Regulations 2003, SI 2003/​330.

102

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, <http://​
webarchive.nationalarchives.gov.uk/​20080714072725/​http://​w ww.ofcom.org.uk/​static/​a rchive/​oftel/​publi-
cations/​i nd_ ​g uidelines/​acce0902.htm>.
740

470 Part III  Key Regulatory Issues

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 rea-
sonable 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 guid-
ance on the situation arising when a competing operator demands a new whole-
sale 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 whole-
sale access product available to a competitor, it can be difficult to determine
whether demand for the product will materialize. It is therefore difficult to de-
termine 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 ‘rea-
sonable’. The Access Guidelines state that if the SMP operator will incur signifi-
cant 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 de-
mand and/​or specify a process of balancing payments between the SMP op-
erator 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, sig-
nificant 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 inte-
grated retail business.

  Ibid, at 13.
105
 Ibid.
106
741

8  Access and Interconnection 471

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 com-
petitors, 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 suf-
ficiently 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 op-
erator 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 de-
cisions 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.
107

  Ibid, 35. Note that this rule does not apply to standard network interfaces, which must be made available
108

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.
742

472 Part III  Key Regulatory Issues

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 discrimin-
ation by a vertically integrated SMP operator in favour of its downstream busi-
ness 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 op-
erators 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 pub-
lished 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 op-
erator 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

111
  Ibid, 24. 112
  Ofcom, ‘Undue discrimination by SMP providers’, 15 November 2005.
113
  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.
743

8  Access and Interconnection 473

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, sep-
arate statements would be required in relation to the different activities of a
vertically integrated operator. As it is generally not feasible for NRAs to con-
tinually 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 con-
sultation document is published, setting out the relevant markets, proposed find-
ings 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 deter-
mination comes into effect. Even then, Ofcom’s decision may be subject to appeal

  Access Guidelines, 19–​21. See also Chapter 2, at Section 2.15.1.5.

115 116
  Ibid,  21–​22.
  Framework Directive, Art 16(6).
117 118
  In accordance with ibid, Art 7(3).
47

474 Part III  Key Regulatory Issues

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 con-
ditions, 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 broad-
casting through access to application programme interfaces and electronic pro-
gramme 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, con-
nectivity 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 oper-
ators, 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

119
 eg British Telecommunications plc v Ofcom [2017] CAT 25.
120
 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).
745

8  Access and Interconnection 475

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 re-
ceived onto their network. These obligations would have gone beyond the obliga-
tion 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 con-
nectivity was not appropriate, for several reasons. In considering imposing an ob-
ligation 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 ter-
mination 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 ser-
vice 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 amend-
ments were only made to the licences of O2 and Vodafone, who voluntarily ac-
cepted 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 con-
dition 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 suc-
cessful (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.
476

476 Part III  Key Regulatory Issues

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 pro-
vide 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 ac-
cess services. As noted earlier, conditional access services allow broadcasters
to make the receipt of their television and radio signals in intelligible form con-
ditional 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 con-
ditional 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

 Oftel, National Roaming Condition, 15 May 2003.

125 126
 Ofcom, National Roaming, 22 July 2004.
 DGT, The regulation of conditional access, Setting of regulatory conditions; Explanatory statement and
127

formal notification pursuant to section 48(1) of the Communications Act 2003 (2003).
74

8  Access and Interconnection 477

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 cer-
tain 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 con-
dition. 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 jurisdic-
tions. In addition to providing market participants and new entrants with regu-
lated 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 con-
ditionality 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 obli-
gations 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
  Communications Act 2003, s 104(4). 132
 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.
748

478 Part III  Key Regulatory Issues

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 agree-
ment 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 distin-
guish 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 con-
siderations 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 ar-
rangement that operators deal with on a day-​to-​day basis remains interconnec-
tion. 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 advan-
tage 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 <https://​w ww.gov.uk/​g uidance/​broadband-​delivery-​u k>. 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.
749

8  Access and Interconnection 479

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 war-
ranties, 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 intercon-
nection 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 inter-
connection’. 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 lo-
cate (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 re-
quire 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 net-
work providing mobile call termination or geographic call termination has been
480

480 Part III  Key Regulatory Issues

determined as having SMP in the market for the termination of calls onto their re-
spective 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 termin-
ation 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 rea-
sonable 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.

136
  See further Chapter 2, at Section 2.15.2.
137
 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 geo-
graphic termination rates’, 29 October 2009.
418

8  Access and Interconnection 481

8.6.1.4  Interconnection circuits

Interconnection circuits are links, such as leased lines, that connect a party’s net-
work 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 ref-
erence 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 agree-
ment for each different type of access, BT historically published a small number
of agreements with schedules for each different service. However, with the oper-
ational 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 pos-
sibility 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 ref-
erence 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 <www.openreach.co.uk>.
482

482 Part III  Key Regulatory Issues

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 defin-
ition 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 dis-
pute 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 arrange-
ment 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 net-
works taking advantage of this situation and sending all their traffic for free across
the networks with which they are peering, peering agreements prohibit the ex-
change 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 ex-
pensive by a factor of ten, than transit services which achieve the same connect-
ivity.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 pur-
pose 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 <http://​c seweb.ucsd.edu/​
classes/​w i01/​c se222/​papers/​norton-​isp-​d raft00.pdf>.
438

8  Access and Interconnection 483

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 net-
works 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 gen-
erated). 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 be-
tween 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 avail-
able.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 relation-
ship. 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.
143

  Internet traffic carries in it data that indicates which ISP the traffic originated from (‘originating autono-
144

mous 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.
84

484 Part III  Key Regulatory Issues

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 cus-
tomers, 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 intercon-
nection. 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 tech-
nical 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 ex-
change. 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 ex-
change, 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’!
458

8  Access and Interconnection 485

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 bene-
fits 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 be-
tween the networks. The parties may find that they have points of presence150 in
common exchanges already, in which case establishing the physical interconnec-
tion 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 pro-
vide 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 <https://​w ww.linx.net/​about/​good-​of-​
the-​i nternet/​bcps/​i nter-​peer-​technical-​resolution>.
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.
486

486 Part III  Key Regulatory Issues

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 settle-
ment) 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 char-
acteristics 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 confidenti-
ality concerns: confidentiality of customer information and communications, and
confidentiality of business information shared between the parties for the pur-
pose 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 <http://​legalminds.lp.findlaw.com/​l ist/​c yberia-​l/​m sg42080.html>.
487

8  Access and Interconnection 487

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 infor-
mation 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 interconnec-
tion 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 pro-
vider was often governed by a peering arrangement, with points of interconnec-
tion 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 arrange-
ments, 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’, <http://​w ww.cukier.com/​w ritings/​peering-​c ukier-​
dec97.html>.
153
  Both third party CDN service providers, such as Akamai, and self-​provision CDNs, such as Netflix Open
Connect.
84

488 Part III  Key Regulatory Issues

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 back-
bone 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, some-
times called a ‘backchannel fee’, for data received onto their network from the
downstream network. A backchannel fee will be charged to the downstream net-
work, for example, when a user on the backbone provider’s network, or on any net-
work 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 net-
works 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 con-
sidered 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 ex-
changes, private interconnection arrangements are more common because the
transit operator has better control over quality of service.

  See n 152, at 58.
154

  A good explanation of the payment arrangements can be found in the ACCC discussion paper ‘Internet
155

Interconnection Service’ (2003).

489

8  Access and Interconnection 489

8.7.2.3  Service levels
Detailed schedules are likely to specify service level guarantees and may spe-
cify 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 cal-
culated, invoiced, and paid. Numerous different models may be used to calcu-
late 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 inter-
connection 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 oper-
ators 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 interconnec-
tion, 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.

156
940
941

CONSUMER PROTEC TION AND

TELECOMMUNIC ATIONS
Elizabeth Newman

9.1 Introduction: Why Is There Consumer Protection for

Telecommunications?  491
9.2 EU Provisions  495
9.3 UK Provisions  505
9.4 Concluding Remarks  531

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 co-
dify 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 connect-
ivity ‘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.
492

492 Part III  Key Regulatory Issues

This chapter looks at why special consumer protection measures exist for
telecommunications services, over and above the consumer protection meas-
ures 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 util-
ities: 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 im-
plemented 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 regu-
latory 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 pro-
posed 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 ser-
vice 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 condi-
tions: Statement and Notification issued by the Director General of Telecommunications on the implementa-
tion 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 prac-
tices 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.
493

9  Consumer Protection 493

9.1.2 Competition
The second reason why special consumer protection measures exist for telecom-
munications is that, since the end of monopolies in the sector, operators have
been regulated to provide for a competitive sector. The introduction of competi-
tion 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 pro-
vider offering a better service, and the availability of alternative services means
that each communications provider has to have an eye to its competitors and en-
sure 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 oper-
ators 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 con-
sumer protection environment would become more homogenous among the ex-
isting 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 na-
tional differences, and make it necessary to ensure regulatory intervention to up-
hold 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 con-
stituent 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 com-
petition 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 ser-
vice, 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 uni-
versal service and users’ rights relating to electronic communications networks and services, COM(2000) 392
final 2000/​0183(COD).
12
  Universal Service Directive, Recital 30.
94

494 Part III  Key Regulatory Issues

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 con-
sumer 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 telecommu-
nications services are likely to know less about the product or service than the sup-
plier, 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 re-
ceive 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 net-
work 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 in-
cludes 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 cus-
tomers’; for example, requirements for communications providers to get express
consent to renew an initial commitment period17 and to provide codes of prac-
tice.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
  See definition in GCs. 16
  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.
495

9  Consumer Protection 495

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 al-
ready mentioned, in September 2016, the European Commission put forward pro-
posals 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 adop-
tion 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 infor-
mation, quality of service (QoS), switching, and number portability. The 2015
Regulation introduced rights of access and requirements for internet access ser-
vice (IAS) contracts.

9.2.1  Minimum contract terms

Provisions regarding customer contracts were included early in the liberaliza-
tion 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

  See further Chapter 4.

20 21
  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
22

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 elec-
tronic communications networks and services and Regulation 531/​2012 on roaming on public mobile com-
munications 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).
946

496 Part III  Key Regulatory Issues

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 connec-
tion to the public telephone network and other services, because contracts are an
important tool for consumers to ensure a minimum level of transparency of infor-
mation 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 no-
tice 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 re-
quirements.28 In particular, amended Article 20 sets out more detailed require-
ments 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
  See Chapter 4, at Section 4.5. 27
  Universal Service Directive, Recital 30.
28
  Citizens’ Rights Directive, Art 1(14).
497

9  Consumer Protection 497

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 min-
imum 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 de-
viations from advertised speeds could impact the end-​user.
• Remedies available in the event of any continuous or regulatory recurring dis-
crepancy 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 re-
quirements of Article 4(1) of the 2015 Regulation.31
Other service information required under Article 20 includes the types of main-
tenance service offered and customer support services provided and the means
of contacting those services, and any restrictions on the use of terminal equip-
ment 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 interper-
sonal 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
  See further Chapter 15. 31
  2016 Proposals, at Art 95(4).
948

498 Part III  Key Regulatory Issues

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 im-
plementation 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 min-
imum harmonization approach, they mandate end-​user rules, making these sub-
ject 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 ac-
cess services seamlessly across national borders within the EU by removing the op-
portunity 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

32
  See further Chapter 13.
33
  eg the proposals on contract duration (in Art 98 in the first draft) are not subject to maximum harmon-
ization, 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).
94

9  Consumer Protection 499

direct interpersonal and interactive exchange of information between a fi-

nite 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 tele-
phone network. 36
• Services consisting wholly or mainly of the conveyance of signals, such as trans-
mission services used for M2M communications and for broadcasting.37

Most end-​user provisions will not apply to number-​independent interper-

sonal 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 provi-
sion 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 telecom-
munications consumer protection measures and consumer protection meas-
ures 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 in-
formation 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 character-
istics of the service provided, the Code requires the provider to set out any min-
imum 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 require-
ments 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

36
  See further Chapter 4, at Section 4.2. 37
  2016 Proposals, at Art 2(4).
38
  2016 Proposals, at Art 95.
39
  Directive 2011/​8 3/​E U on consumer rights, OJ L 304/​6 4, 22 November 2011.
50

500 Part III  Key Regulatory Issues

be taken by the undertaking in reaction to security or integrity incidents or threats

and vulnerabilities. The Code also requires providers of number-​based interper-
sonal communications services to provide information on any constraints on ac-
cess 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 re-
quired to complete and give to consumers and micro and small enterprises41 prior
to conclusion of the contract. This would ensure that consumers and small busi-
nesses 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 fa-
cility 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 al-
ready 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 require-
ments, 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 en-
sure 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.
510

9  Consumer Protection 501

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 compara-
tive 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 oper-
ators 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 amend-
ments, 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 infor-
mation 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).

44
  See further Chapter 3, at Section 3.2.3.
45

  2016 Proposals, at Art 96.

46
520

502 Part III  Key Regulatory Issues

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 commu-
nications 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 commu-
nications 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 ef-
fective 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

  Directive 95/​62/​EC, Art 7(3).

47 48
  COM(1999) 539, November 1999.
  Citizens’ Rights Directive, Art 1(14).
49 50
  See Recital 243 and new Art 97.
530

9  Consumer Protection 503

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 measure-
ment methods and the way the information should be published including pos-
sible 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 amend-
ments 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 com-
mitment period that exceeds 24  months, and must always offer a contract op-
tion 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 dur-
ation 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 re-
quired 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

  Citizens’ Rights Directive, Art 1(21).

51 52
  2016 Proposals, at Art 98.
  Directive 98/​61/​EC of the European Parliament and of the Council of 24 September 1998 amending
53

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.
504

504 Part III  Key Regulatory Issues

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 re-
quirement 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 discrimin-
atory requirements or conditions of access or use on end-​users based on nation-
ality 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.
50

9  Consumer Protection 505

9.3  UK PROV ISIONS

The UK regime for providing consumer protection in relation to telecommunica-

tions 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 amend-
ments 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 con-
ditions, 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 pro-
vided them.60 For the UK’s approach, see Section 9.3.1.5.

  See further Chapter 6.

58

  Ofcom, ‘Review of the General Conditions of Entitlement, Statement and Consultation’, 19 September
59

2017. See further Chapter 6.

60
  Citizens’ Rights Directive, Recital 32, and Universal Service Directive, Art 21(1), (as amended).
506

506 Part III  Key Regulatory Issues

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 pub-
lish 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 volun-
tary 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 infor-
mation should be provided to consumers in both the fixed-​line and the mobile mar-
kets, 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 com-
plaints received by the communications provider to be resolved. Ofcom also re-
quired 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 with-
drew 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 in-
formation at that time.65 Research had also helped to isolate what QoS informa-
tion 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

61
  Ofcom Direction under General Condition 21.1 on quality-​of-​service, 27 January 2005.
62
  Carrier pre-​selection. 63
  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.
570

9  Consumer Protection 507

However, Ofcom’s recent approach has been to regulate by using existing compe-
tition 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 com-
plaints data, periodically,70 and has taken action to improve the way in which con-
sumer 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 re-
lating 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 an-
nual 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 pub-
lished 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

68
  See Ofcom discussion document on traffic management and ‘net neutrality’, 24 June 2010.
69
  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
  Communications Act 2003, s 136. 74
  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
 <https://​w ww.ofcom.org.uk/​phones-​telecoms-​a nd-​i nternet/​advice-​for-​c onsumers/​quality-​of-​service/​
report/​i nteractive-​report>.
78
  Ofcom report, ‘Comparing service quality’, 12 April 2017. 79
 <http://​a sa.org.uk>.
508

508 Part III  Key Regulatory Issues

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 ser-
vice 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 guid-
ance 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 speed-
checking 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 be-
lieve they are likely to receive a speed at or close to the headline speed claim, al-
though 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 af-
fect 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 web-
site, 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 im-
proved 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 com-
plaint in respect of an advert stating that a Business Cloud package offered ‘unlimited’ storage space.
82
 <https://​w ww.asa.org.uk/​uploads/​a ssets/​uploaded/​dbf3043b-​02b4-​4134-​9ba50f2ad0be4d06.pdf>.
83
  ASA News item: ‘ASA calls for a change in the advertising of broadband speed claims’, and research re-
port by GfK.
84
  Voluntary code of practice: broadband speeds, version 3.0, June 2015.
509

9  Consumer Protection 509

(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 infor-
mation 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 condi-
tions 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 com-
munications 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.

85

  Ofcom consultation, ‘Review of the General Conditions of entitlement: Consultation on the general con-
86

ditions relating to consumer protection’, 20 December 2016.

510

510 Part III  Key Regulatory Issues

amending Section 51 of the Communications Act 2003, to allow Ofcom to impose

a general condition that requires undertakings to provide information of a spe-
cified 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, broad-
band adverts that include price claims must convey a consumer’s full commit-
ment 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 com-
mitment (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 under-
stand 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 publica-
tion of comparable information90 has been to operate an accreditation scheme to
ensure that these comparison websites operate effectively, by providing accurate,

87
  Electronic Communications and Wireless Telegraphy Regulations 2011, SI 2011/​1210, Sch 1, para 27(b).
88
  Ibid, Sch 1, para 88.
89
  ASA advice online: Compulsory charges: Telecommunications, 7 July 2016.
90
  Universal Service Directive, Art 21 (as amended).
51

9  Consumer Protection 511

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 compli-
ance between audits, and introduced a requirement for accredited price com-
parison 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 organ-
izations 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 op-
eration 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.
512

512 Part III  Key Regulatory Issues

• 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 protec-
tion 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 in-
formation, content, application or service, via their IASs).
• A clear and comprehensible explanation of the remedies available to the con-
sumer in accordance with national law in the event of any continuous or
regularly recurring discrepancy between the actual performance of the IAS re-
garding speed or other quality of service parameters and the performance indi-
cated 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).
531

9  Consumer Protection 513

or provider’s location or the location, origin, or destination of the information, con-

tent, 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 con-
ducted 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 con-
cerning 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, propor-
tionate 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 re-
quired to sign up for a contract that is excessive in length, and must be given an op-
tion 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 sub-
scribers 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. 95
  GC C1.6.
96
  GC C1.7. 97
  GC C1.8.
514

514 Part III  Key Regulatory Issues

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 for-
ward 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 em-
ployees99 and extended this in the new GCs to all public electronic communica-
tions 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 con-
nection 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 in-
formation 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 ter-
mination, 26 March 2018.
99
  Ofcom statement on automatically renewable contracts, 13 September 2011. 100
  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.
51

9  Consumer Protection 515

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 tele-
phone 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 ex-
ample, 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 ex-
ample, 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.

103

  Ofcom statement and consultation, Protecting citizen-​consumers from misselling of fixed-​l ine telecoms
104

services, 22 November 2004.
516

516 Part III  Key Regulatory Issues

• 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 protec-
tion 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 per-
suaded 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 in-
dustry and consumer representatives aimed at preventing misselling and, in par-
ticular, 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 of-
fence for a person in the course of business to give a consumer a misleading indica-
tion 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 on-
line 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

105
 Ibid. 106
 Ibid. 107
  The Trade Descriptions Act 1968.
108
  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).
571

9  Consumer Protection 517

9.3.2.6  Codes of practice

In light of the responses to its April 2004 consultation, Ofcom concluded that the ex-
isting 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 docu-
ment. 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 es-
tablish 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, be-
cause 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 re-
quirements, 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 es-
tablish 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.

114

  The requirement for communications providers to establish codes of practice on sales and marketing was
115

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).
518

518 Part III  Key Regulatory Issues

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 pro-
viders 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 communica-
tions 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 cus-
tomer had been slammed.
At the time the dispute arose, BT was subject to a Direction issued in 2003 speci-
fying 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 al-
ternative providers were concerned that under the 2003 Direction BT could in-
appropriately 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 cus-
tomers 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 cir-
cumstances 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 in-
formation 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 con-
sumer protection mechanism would also be reduced, and Ofcom thought it might
remove BT’s ability to use Cancel Other at this point.

116
  Code of practice for the sales and marketing of subscriptions to mobile networks, 31 July 2007.
117
  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.
519

9  Consumer Protection 519

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 posi-
tive changes in practices by mobile-​service providers and retailers, these changes
had not been uniformly applied and had not brought about an adequate reduc-
tion in consumer complaints or consumer harm. Introduction of the code had
caused some mobile-​service providers to review their sales and marketing pro-
cedures 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 tele-
communications 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 aggres-
sive 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 re-
tailers, 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 informa-
tion 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.
119

 The phrase ‘durable medium’ originally came from the Consumer Protection (Distance Selling)
120

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.
520

520 Part III  Key Regulatory Issues

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 migra-
tion 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 me-
dium. 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.
521

9  Consumer Protection 521

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 pro-
cedures 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 provi-
sion 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 trans-
ferring 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 pro-
vider 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 con-
tact 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 ac-
tivity, 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.

123
  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.
124
  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.
25

522 Part III  Key Regulatory Issues

The gaining provider must have procedures in place to enable the customer to ter-
minate 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 require-
ments in relation to arrangements that enable an end-​user to change communica-
tions 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 difficul-
ties 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 auto-
matically 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.

126
  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.
127
  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.
253

9  Consumer Protection 523

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 pro-
cess 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 pro-
viders 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 provi-
sion 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 environ-
ment, and necessary, because the normal procedural route through the courts
would be too slow and costly to provide an effective constraint on suppliers’ be-
haviour. 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 plat-
forms’, 14 July 2017.
134
  Ofcom call for inputs, ‘Helping consumers to engage in communications markets’, 14 July 2017.
135
  Section 102. 136
  Section 124S.
542

524 Part III  Key Regulatory Issues

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 cer-
tainty 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 es-
tablished 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 ap-
proved by Ofcom under GC14.4. But an Ofcom review of consumer-​complaints
procedures, started in December 2009, found that a significant proportion of con-
sumers 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 communica-
tions 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

137
  Communications Act 2003, s 52.
138
  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.
52

9  Consumer Protection 525

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 communica-
tions 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 con-
tain 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 com-
plaint. 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 compli-
ance. 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
  2015 Regulation, Art 3. 142
  Ibid, Art 4(1). 143
  Reg 7.
144
 Ofcom, ‘Monitoring compliance with the EU Neutrality regulation:  A report to the European
Commission’, 23 June 2017.
562

526 Part III  Key Regulatory Issues

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 satis-
factorily 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 en-
suring 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 re-
quire 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 ser-
vice, 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

145
  Oftel consultation, ‘Developing a telecommunications ombudsman’, March 2001.
146
  Communications Act 2003, s 52(2)(b). 147
  Ibid, s 52(3). 148
  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
 <http://​w ww.ombudsman-​services.org/​communications.html>.
152
 <http://​w ww.cisas.org.uk/​>.
527

9  Consumer Protection 527

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 dis-
pute 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 pro-
viding 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 informa-
tion on any points. The process is an iterative one and each party has the oppor-
tunity 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 provi-
sional 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 evi-
dence checklists for enquirers and consumers. Consumers can complete applica-
tions 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 communi-
cation 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 deter-
mination of the claim. Adjudicators apply legal principles to determine whether
the consumer has proven, on the balance of probabilities, that their communi-
cations provider has breached the contract or their code of practice. Neither con-
sumers 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 be-
longs 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).

153
528

528 Part III  Key Regulatory Issues

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 busi-
nesses 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 com-
pensation for consumers and smaller businesses when things go wrong with their
communications services.154 However, a voluntary initiative was proposed by in-
dustry, 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.
529

9  Consumer Protection 529

Originating communications providers who provide PRS are required to comply

with certain requirements. Under the GCs that apply until 1 October 2018, pro-
viders must establish a code of practice for handling customer enquiries and com-
plaints 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 spe-
cific 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 regula-
tion 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

158
 GC14.2. 159
  GC C2. 160
  See further Chapter 14, at Section 14.7.
161
  Non-​geographic numbers starting 084, 087, 090, 091, 098, and 118. 162
  In Annex 2 to GC14.
163
  GC C2.4–​2 .9. 164
  See further Chapter 14, at Section 14.7.
165
  Consumer Protection Partnership: fourth report, October 2017.
530

530 Part III  Key Regulatory Issues

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 de-
rives 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 require-
ment for service providers to ensure that their domestic and small business cus-
tomers 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 con-
nection, 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 infor-
mation 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 ‘inter-
personal communications services’.

166
  This is also a problem for FTTP (fibre to the premises) networks, as optical fibre networks do not con-
tinue 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 resili-
ence of operators’ networks.
167
  GC A3.3 and A3.6(c).
513

9  Consumer Protection 531

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 broad-
band 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 pro-
posals 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 broad-
band. They also propose increased harmonization of consumer protection provi-
sions 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.
532
53

10

COMPE TITION L AW AND

TELECOMMUNIC ATIONS
Vincent Smith and Lorna Woods

10.1 Introduction: Applying Competition Law to Electronic

Communications  533
10.2 Competition and Regulation  535
10.3 Restrictive Agreements in Electronic Communications  538
10.4 Abuse of Market Power in Electronic Communications  553
10.5 Competition Law and Electronic Content  566
10.6 Competition Law Control of Concentrations  574
10.7 Shaping the Market—​Competition Market Investigations  582
10.8 UK Competition Law: Enforcement and Appeals in
the Electronic Communications Sector  591
10.9 Conclusions  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 nat-
urally. 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 tele-
communications 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.
354

534 Part III  Key Regulatory Issues

The move to a market driven approach has not been entirely successful, with
former monopolists continuing to hold substantial market power in some mar-
kets, 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 con-
solidation. 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 re-
mains relevant and our discussion takes place against the background of the regu-
latory framework for electronic communications.
In contrast to previous editions, this chapter includes material on content pro-
vision 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 transmis-
sion technologies and the same transmission technology to distribute different
types of service) may be seen to entrench the divide between transmission (tele-
communications) and electronic content (including broadcasting and interactive
services such as gaming). This divide, however, was never as clear as policy docu-
ments 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 pro-
vider) acquired shares in production company All3media (the UK’s largest in-
dependent 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.
53

10  Competition Law 535

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 rela-
tionship 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 pro-
hibition 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 telecommu-
nications markets, we will consider how competition rules have been used to con-
trol 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 ques-

tion: what do we want electronic communications markets to look like? By con-
trast, 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 acqui-
sition 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.
536

536 Part III  Key Regulatory Issues

behaviour had not occurred? As a general rule, competition law analysis is retro-
spective, 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 min-
imize) distortion of competition:

• control of restrictive agreements, both between competitors (‘horizontal’ agree-

ments) 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 author-
ities 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 regu-
latory 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) be-
yond the scope of the ‘general’ competition enforcement system. Market investi-
gation 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 regula-
tion apply inconsistently in a particular case? The EU’s electronic communications
573

10  Competition Law 537

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 au-
thorities (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 oper-
ators in Member States. In the UK, Ofcom is the enforcer of electronic communica-
tions 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 in-
vestigatory 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 competi-
tion 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 com-
munications 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.
7

  Art 101(1) Treaty on the Functioning of the EU (TFEU); Regulation EC 1/​2003 [2003] OJEU 1/​1, Art 4;
8

Regulation 139/​2004 (‘Merger Regulation’) [2004] OJEU L24/​1, Art 1.

358

538 Part III  Key Regulatory Issues

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.

9

  Consumer Rights Act 2015, Sch 8, amending the Competition Act 1998.

10
539

10  Competition Law 539

worded. EU law will apply where the agreement or collusion may have an appre-
ciable 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 af-
fected13—​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 con-
duct appears to follow a market norm.15 ‘Concerted practice’ catches an arrange-
ment 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 collu-

sion 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 com-
petition between members or with non-​members, for example by recommending
prices.17

11
  Art 101 Treaty on the Functioning of the EU [2016] OJEU C202/​47.
12
  Competition Act 1998, s 2(1)(a). 13
  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.
504

540 Part III  Key Regulatory Issues

‘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 en-
sure 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 con-
trol 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 out-
side 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 agree-
ment will have the ‘object’ of restricting competition if it would reduce the inde-
pendent 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 ac-
tual 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

18
  Case C73/​95P, Viho v Commission [1996] ECR I-​5 457.
19
  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.
514

10  Competition Law 541

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 cu-
mulative effect of the restrictions operated by the whole network will need to be con-
sidered 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 examin-

ation 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 eco-
nomic ‘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
  Société Technique Minière, n 24. 30
  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.
524

542 Part III  Key Regulatory Issues

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 feas-
ible 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 in-
dispensable 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 sub-
stantial 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
  Exemption Guidelines, n 31, para 84. 34  Ibid, para 75. 35
  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.
534

10  Competition Law 543

10.3.2  Network interconnection agreements

The competition law prohibitions apply fully to network interconnection agree-
ments. 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 author-
ities 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 regu-
lation 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 com-
petition 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 pro-
vided that there are proper safeguards (as also required under the EU regulatory

  Competition Act 1998, s 54(1)(a) and Sch 10.

41

  Commission guidelines on market analysis and the assessment of significant market power under the
42

Community regulatory framework for electronic communications networks and services, 11 July 2002 [2002]
OJEU C165/​6 (‘SMP guidelines’), paras 22–​32.
43
  ‘Access guidelines’, 22 August 1998, [1998] OJEU C265/​02. 44
  SMP guidelines, n 42, para 22.
45
  Access guidelines, n 43, para 60. 46
  Deutsche Telekom v Commission, n 7.
54

544 Part III  Key Regulatory Issues

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 tele-
communications 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 prohib-
ited under EU competition law.

As noted, there is no EU block exemption specifically for telecommunications ac-

cess 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 compe-
tition 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 de-
tailed regulatory requirements as to the content of the agreement.

47
  Access guidelines, n 43, paras 132 and 139. 48
  Ibid, paras 136 and 141.
49
 eg O2 UK/​T-​Mobile UK (3G) [2003] OJ L200/​59. 50
  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.
54

10  Competition Law 545

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 agree-
ment. Disputes over network access under these agreements, which are often
resolved under Ofcom’s regulatory powers, may nonetheless include competi-
tion 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 elec-
tronic communications appeals—​on both competition and regulatory grounds.54

10.3.3  Infrastructure sharing agreements

From a competition law perspective, infrastructure sharing agreements—​for ex-
ample 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 agree-
ments 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 cir-
cumstances.57 Where this requirement is imposed, operators should nevertheless
ensure that any terms included in the agreement which go beyond what is man-
dated 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 net-
work of another where their ‘home’ network does not have (full) coverage (eg in

53
  eg the dispute on BT’s SIA on charge change terms: CW/​01083/​01/​12.
54
  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.
564

546 Part III  Key Regulatory Issues

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 agree-
ments and have been the subject of a number of European Commission competi-
tion 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 ‘re-
strictive 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 in-
frastructure sharing was not so great that either of them became completely de-
pendent 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 ar-
rangement. 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

58
  eg case T-​328/​03, O2 Germany v Commission [2006] ECR II-​1231, at para 109.
59
  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
  n 55. 61
  n 56. 62
  O2 Germany (n 58).
574

10  Competition Law 547

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 agree-
ment 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 fa-
vourable 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 compe-
tition 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 ap-
plication of technical innovation. A simple (non-​exclusive) IP licence will there-
fore 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 ad-
dressed 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 competi-
tion.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 set-
ting 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.

63
  Ibid, paras 68–​69, 109. 64
  Ibid, para 72.
  Case 258/​78, Nungesser and Eisele v Commission [1982] ECR 2015.
65
584

548 Part III  Key Regulatory Issues

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 ac-
companying it, apply to IP licences whose primary purpose is for the licensee to
‘produce’ a product (including services).68 IP here also includes recorded confi-
dential technical ‘know-​how’, provided the know-​how is substantially valuable in
producing the services licensed.69 In contrast, straightforward licences for the re-
sale 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 commu-
nications 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 com-
pany 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 commu-
nications 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 con-
sumers 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 mod-
erate 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

66
  Regulation 316/​2014, [2014] OJEU L93/​17 (technology transfer).
67
  Regulation 330/​2010, [2010] OJEU L102/​1 (vertical agreements). 68
  Art 1(1)(c).
69
  Art 1(1)(i). 70
  Regulation 316/​2014, n 66, Art 3; Regulation 330/​2010, n 67, Art 3.
594

10  Competition Law 549

appreciably—​a lso based on market share thresholds. Vertical agreements (be-

tween non-​competitors) are presumed not to have an appreciable effect on com-
petition 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 exemp-
tions 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 li-
cences 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 pro-
moting 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 par-
ticularly 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 prop-
erly described in the agreement and must be based on objective factors unre-
lated 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

  Commission Notice on agreements of minor importance, [2014] OJEU C291/​1.

71 72
  Ibid, para 13.
  See eg Bellamy & Child, n 6, 736–​750.
73

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
  TT guidelines, n 74, paras 113–​114, 208–​215. 77
  Ibid, para 115. 78
  Ibid, paras 184–​188.
50

550 Part III  Key Regulatory Issues

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 ex-
emption 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 agree-
ments 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 main-
tenance 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 prod-
ucts, 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 sup-
plier 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 auto-
matically 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 ex-
emption’ will apply. However, ‘pure’ or self-​standing software licences do not have
their own competition block exemption and may not come within either the ‘ver-
tical’ or ‘technology transfer’ block exemptions—​t he technology transfer block ex-
emption 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

79
  Ibid, paras 133–​134, 242–​2 43. 80
  Vertical guidelines, n 75, paras 31–​38.
81
  Ibid, esp. at paras 60–​6 4. 82
  Ibid, paras 43–​45. 83
  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.
51

10  Competition Law 551

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 soft-
ware 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 stand-
ards, 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 na-
tional 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 compe-
tition 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;

85
  Directive 2009/​2 4 legal protection of computer programs, [2009] OJEU L111/​16, Art 1(1).
86
  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.
52

552 Part III  Key Regulatory Issues

• 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), exemp-
tion is not likely. This is particularly true if a standard is adopted in these circum-
stances 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 pos-
ition of the Commission would appear to cover all kinds of standard setting pro-
cedures, 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

90
  Bellamy & Child, n 6, para 6.087. 91
  Commission Press Release IP/​05/​1565.
92
  Directive 2002/​21 Electronic Communications Framework Directive, n 57, Art 17(1).
53

10  Competition Law 553

essential patents’ (SEPs) automatically has a dominant position on the down-

stream markets in question.93 We will consider the Commission’s mobile telecom-
munications 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 compe-
tition 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 re-
stricting competition where the undertaking carrying it out has a significant
degree of market power. This is essentially why the EU’s e-​communications regu-
latory regime—​in large part—​now only applies to operators having ‘significant
market power’ (SMP). EU competition law similarly only prohibits unilateral be-
haviour 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 re-
strictions in electronic communications markets before they happen, whereas the
prohibition on abuse of dominance only applies (at the earliest) where an indi-
vidual undertaking behaves in a way which may fairly imminently restrict compe-
tition.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
  Art 102 TFEU, paras (c) and (d) in particular. 95
  Ibid, para (a). 96
  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.
54

554 Part III  Key Regulatory Issues

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 di-
mensions: 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 dif-
ferent 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 world-
wide. 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

99
  Case C-​322/​81, Michelin v Commission [1983] ECR 3461, para 57. 100
  [1997] OJEU C372/​5.
101
  [2009] OJEU C45/​7. 102
  Market Definition Notice, n 28, para 9. 103
  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.
5

10  Competition Law 555

sustained price increase, even where it is small. This is likely to be a particular fea-
ture 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 author-
ities.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 iden-
tified 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 ap-
preciable 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 rele-
vant market is often used. The CJEU has held that there is a presumption of domin-
ance 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

  Ibid, para 24.
106 107
  SMP guidelines, n 42, paras 40–​43.
  Framework Directive, n 57, Art 15(1); SMP guidelines, n 42, paras 26–​27.
108

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
  See Chapter 4, at Section 4.6. 111
  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.
56

556 Part III  Key Regulatory Issues

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 ex-
ample, become substitutes—​for many consumer services at least—​to using fixed
voice telephony infrastructure. Previous regulatory monopolies—​reserving cer-
tain 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 domin-
ance, 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 sus-
tained 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 down-
stream 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’ be-
tween 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 telecommunica-
tions 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 rev-
enues for services using it. For this reason there was a concerted effort in the 2000s

  See Chapter 4, at Section 4.4.

114 115
  See discussion in Bellamy & Child, n 6, para 10.026.
  Ibid, para 10.027.
116
57

10  Competition Law 557

to open up this market by allowing competing operators to connect to the con-

sumer 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 re-
gime. 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 con-
sider 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 ‘def-
inition’ available is that abusive behaviour is conduct which would not be pos-
sible in an effectively competitive market:123 the dominant undertaking has a

  Deutsche Telekom, n 7.
117

  Originally provided in Regulation 2887/​2000, [2000] OJEU L336/​4, now replaced by Directive 2002/​
118

19 ‘Access’ Directive, [2002] OJEU L108/​7, Art 12(1)(a).

119
  Framework Directive, n 57, Art 14(2). 120
  SMP guidelines, n 42, para 30.
121
  Michelin, n 99. 122
  Case 85/​76, Hoffmann-​La Roche v Commission [1979] ECR 461, para 91.
123
 Ibid.
58

558 Part III  Key Regulatory Issues

‘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 telecommunica-
tions markets. First we look at pricing abuses—​both those which simply exploit
customers (eg by overcharging) and those which attempt to exclude competi-
tors. 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, com-
petition 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 char-
ging 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 telecommuni-
cation services markets—​it can favour its own downstream business by charging

124
  Case C-​202/​07P, France Télécom v Commission [2009] ECR I-​2 369, para 105.
125
  Case T-​111/​96, ITT Promedia [1998] ECR II-​2937, esp at para 26.
126
  Commission Press Release, 11 April 1997, IP/​97/​292.
59

10  Competition Law 559

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 diffi-
cult 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 telecom-
munications sector.
In Wanadoo, the Commission found that, for the later period (2001–​2002),
Wanadoo had priced below average total cost—​not including an appropriately al-
located amount for fixed costs—​as part of a strategy to exclude competing sup-
pliers 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

127
  Commission Decision, Case COMP/​38.233—​Wanadoo Interactive [2005] 5 CMLR 5.
128
  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
  [2009] 4 CMLR 25. 131
  Case C-​202/​07P, para 37.
132
  eg Ofcom, ‘Consultation on LLU and wholesale line rental charge controls’, 20 April 2013.
560

560 Part III  Key Regulatory Issues

either negative or not sufficient to cover the costs which the downstream com-
petitor 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 regula-
tory regime in place for price controls. As regulatory price control has been drawn
back, use of competition law to prevent distortions of competition in telecom-
munications 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 regula-
tory 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 cus-
tomers.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) com-
petitors 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 ap-
peal, the General Court upheld the Commission’s decision that regulatory obliga-
tions 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

133
  Telia Sonera Sverige, n 98. 134
  n 7.
135
  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
  Case T-​27/​03, Deutsche Telekom AG v Commission [2008] ECR-​I I 477. 137
  n 7.
516

10  Competition Law 561

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 obliga-
tion 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 down-
stream 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 dom-
inance.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 dom-
inant position) refusal to allow access to use the innovative product will not neces-
sarily 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 ef-
fectively 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

138
  Case C-​7/​97, Bronner v Mediaprint [1998] ECR I-​7791.
139
  eg copyright in Case C-​4 81/​01, IMS Health v Commission [2004] ECR I-​5039.
140
  Hoffmann-La Roche, n 122.
562

562 Part III  Key Regulatory Issues

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, dis-
cussed 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 mem-
bers of the body may also be abusive contrary to Article 102. Where a standard set-
ting 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 ac-
cess 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 neverthe-
less arise from a refusal to license if the following conditions are met:

141
  eg in Bronner, n 131. 142
  Case T-​201/​0 4, Microsoft v Commission [2007] ECR II-​3601.
143
  See Section 10.3. 144
  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).
563

10  Competition Law 563

• 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 it-
self offering downstream competing programs and services, the Court had no dif-
ficulty 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 al-
lowing 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 tele-
communications 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 provi-
sional 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 bun-
dled 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.
654

564 Part III  Key Regulatory Issues

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 na-
tional 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 pos-
sessed 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.
56

10  Competition Law 565

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 in-
dependent 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 in-
fringement. 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 injunc-
tion 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 neverthe-
less 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.

150 151
  [2017] EWHC 1304 (Pat), 7 June 2017.
  Huawei, n 149.
152
56

566 Part III  Key Regulatory Issues

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 in-
fringement 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 dif-
ficulty of seeing telecommunications as entirely separate from content. Actors in
one sector may affect the other sector. Bottlenecks may also occur where telecom-
munications providers offer content. Internet intermediaries may act as bottle-
necks too; they are also now providing content, again  blurring the boundaries
between content provider and intermediary. The boundary between telecommu-
nications operator and intermediary is also unclear: some social media platforms
offer messaging services and ‘voice chat’ (eg Steam). As noted, there is consider-
able vertical integration. A  consequent concern relates to triple play bundles—​
usually comprising fixed telephony, TV and (broadband) internet156 which have

153
  Decision, 29 April 2014, press release IP/​14/​4 89, [2014] OJEU C344/​6. 154
  n 149.
155
  Ibid, para 60.
156
  OECD, ‘Broadband bundling: Trends and Policy Implications’ Digital Economy Paper No. 175, (OECD
Publishing: Paris, 2011), <http://​d x.doi.org/​10.1787/​5kghtc8znnbx-​en>, at 5.
567

10  Competition Law 567

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 ser-
vice provided, but also through being an audience for advertising. It has been sug-
gested 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 op-
erators, 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 plat-
form 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 pos-
ition 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, <http://​w ww.oecd-​
ilibrary.org/​content/​workingpaper/​5js04dp2q1jc-​en>.
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.
658

568 Part III  Key Regulatory Issues

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’ (high-
lights) services. Some services may be affected by the pricing models of the trans-
mission 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 aggre-
gation 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 de-
mand 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 pack-
ages 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

164
  Commission Decision, Case IV/​M.469, MSG Media Service, 94/​922/​EC OJ [1994] L364/​1.
165
  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.
596

10  Competition Law 569

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 def-
inition 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 telecommu-
nications 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 rev-
enues: 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 com-
pete 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 substi-
tutability,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 <http://​ec.europa.eu/​competition/​a ntitrust/​sector_ ​i nquiries.html>,
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.
570

570 Part III  Key Regulatory Issues

The current position174 on whether joint selling arrangements are compat-

ible with the Treaty is found in the UEFA Champions League decision.175 The
Commission found that the joint selling agreements formulated through UEFA re-
sulted in there being no competition between the clubs as to the price and condi-
tions 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 fore-
closure. Only bigger broadcasters were able to afford the rights, excluding com-
petitors in neighbouring markets. Finally, a number of rights (notably IPTV and
mobile rights) were not exploited by the deal. The Commission was thus con-
cerned 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 pro-
mote a brand such as the Champions League. Following the Commission’s inter-
vention, 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 ex-
empted under Article 101(3) TFEU.
Despite experience from the football rights cases, long content licensing agree-
ments continue to be common,177 with even longer ongoing relations between the
contractual partners, a fact which the Commission views as making it more diffi-
cult for new competitors to enter the market.178 The payment structures used, es-
pecially in respect of premium content (advance payments, minimum guarantees
and fixed fees per product irrespective of the number of users) also favour estab-
lished players rather than market entrants.179 These advantages are likely to con-
tinue 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
  Inquiry into e-​Commerce, n 171, para 69. 179
  Ibid, paras 70–​71.
180
  eg Intel’s work on virtual reality to give a more ‘immersive’ experience.
571

10  Competition Law 571

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, appli-
cations and services for smart mobile devices by tying or bundling certain Google ap-
plications 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-​in-
stalled. Consequently, Google Search is set as the default, or exclusive, search service
on most Android mobile devices sold in Europe, entrenching Google’s dominant pos-
ition 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 ar-
gued that even though WMP was supplied at no extra cost, other media player sup-
pliers 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

181
  Art 102(d) TFEU.
182
  Case C-​95/​0 4P, British Airways EU:C:2006:133, paras 70–​71. See also Section 10.4.
183
  Microsoft, n 142.
752

572 Part III  Key Regulatory Issues

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 stand-
ards 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 ten-
dency 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 alter-
native products which compete with individual elements of the bundle?185
Refusal to supply (as opposed to conditional dealing or tying) is another con-
cern 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 de-
mand, 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 as-
sess 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 <ec.europa.eu/​competition/​a ntitrust/​c ases/​i ndex.html>.
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.
753

10  Competition Law 573

‘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 ‘in-
dispensability’ addresses whether it is economically vital to create a different net-
work 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 indis-
pensable. 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 con-
cerns 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 compar-
able 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 system-
atically favoured its own comparison shopping product (now ‘Google Shopping’)
over others. The abusive behaviour was that Google leveraged its market domin-
ance in general internet search into a separate market, that of comparison shop-
ping.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 in-
novation. 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, <http://​europa.eu/​rapid/​press-​release_ ​M EMO-​17-​1785_​en.htm>.
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, <https://​papers.ssrn.com/​sol3/​papers.cfm?abstract_​
id=2561355>; and Petit, N, ‘Theories of Self-​P referencing Under Article 102 TFEU: A Reply to Bo Vesterdorf’ (29
April 2015), <http://​d x.doi.org/​10.2139/​ssrn.2592253>.
547

574 Part III  Key Regulatory Issues

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 in-
volve 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 conveni-
ence 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

193
  Ibáñez Colomo, n 184, 212. 194
  Streetmap EU v Google Inc & Ors [2016] EWHC 253 (Ch).
195
  Ibid, para 63. 196
  Ibid, paras 59–​6 0. 197
  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.
57

10  Competition Law 575

effects of future changes to the structure of markets. Where a merger (or the cre-
ation 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 (pri-
marily) 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 ap-
plied 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 poten-
tial 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 sub-
stantive 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 competi-
tion authorities in merger control matters, as there is with behavioural competi-
tion law enforcement.

  Regulation 139/​2004 [2004] OJEU L24/​1, Art 2(2).

200 201
  Enterprise Act 2002, s 22(1)(b).
  Ibid, s 44A.
202
567

576 Part III  Key Regulatory Issues

A detailed explanation of the scope of the EU Merger Regulation, and its proced-
ures, 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 con-
cerned 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 sig-
nificant impact on the approach to mergers in the broader electronic communi-
cations sector, with a number of mergers being subject to national intervention
on media plurality grounds.209

203
  See Faull and Nikpay, and Whish, n 198. 204
  Art 21.2 and 21.3 Merger Regulation, n 8.
205
  Art 1.1 Merger Regulation, n 8. 206
  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 <http://​w ww.culture.gov.uk/​news/​news_​stories/​8259.
aspx>.
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.
75

10  Competition Law 577

• 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 in-
dependent 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 author-
ities 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 au-
thority 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 unrea-
sonably 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 communi-
cations 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, <https://​w ww.gov.uk/​government/​uploads/​s ystem/​uploads/​attachment_​d ata/​fi le/​515405/​C MA_​
letter_​to_​Commissioner_ ​Margrethe_​Vestager.pdf>.
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 <https://​a ssets.
publishing.service.gov.uk/​media/​56992242ed915d4747000026/​BT_​E E_​fi nal_​report.pdf>.
578

578 Part III  Key Regulatory Issues

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 telecom-
munications 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 di-
vestment of certain assets necessary to enable a new competitor, the French oper-
ator 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 con-
sidered 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

216
  15 January 2016, n 215. See CMA press release in particular.
217
 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, <https://​ec.europa.eu/​commission/​commissioners/​2014-​2019/​vestager/​a nnouncements/​
competition-​a nd-​i nvestment-​telecoms_​en>; see also Curwen, P and Whalley, J, Mobile Telecommunications
Networks:  Restructuring as a Response to a Challenging Environment (Cheltenham:  Edward Elgar, 2014),
208–​209.
579

10  Competition Law 579

needed to ensure effective competition—​creating a potential ‘substantial impedi-

ment 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 con-
sumers 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 inde-
pendence necessary to act autonomously from both parents and is not wholly de-
pendent 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 ‘concentra-
tion’ will have significant consequences both for the competition test to be ap-
plied 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.

220
  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
221

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 <http://​
ec.europa.eu/​competition/​publications/​c mb/​2014/​CMB2014-​01.pdf>.
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
  Ibid, paras 98–​101. 226
  Merger Regulation, n 8, Art 4.
580

580 Part III  Key Regulatory Issues

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 com-
mercially 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 differ-
entiated 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 par-
ties were more dependent on each other’s networks for adequate coverage and
the transmission needed to provide the advanced services intended. The arrange-
ments 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 ra-
ther limited and the possibility that competition might not be restricted, as com-
pared with the ‘counterfactual’, could not be excluded.231

227
  Ibid, Art 2(4).
228
  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
  See further Chapter 8. 231
  T-​328/​03, n 229, para 109.
518

10  Competition Law 581

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 mo-
bile handset market. The concern was that Nokia could foreclose competing mo-
bile 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 competi-
tion 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 mer-
gers 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
  M.4942, decision of 2 July 2008, [2009] OJEU C13/​8. 234
  Merger Regulation, n 8, Art 21(4).
528

582 Part III  Key Regulatory Issues

Secretary of State on the advice of Ofcom.235 This regime does not target vertical
integration—​mergers involving media companies and telecommunications com-
panies—​but includes other kinds of media mergers.
Ofcom and the DTI (then responsible for media mergers, now DCMS) have pub-
lished 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, un-
like purely ‘economic’ mergers, it is for the Secretary of State to decide if any en-
forcement 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

235
  Enterprise Act 2002, s 42.
236
  DTI, ‘Enterprise Act 2002: Public Interest intervention in Media Mergers’, May 2004, <http://​webarchive.
nationalarchives.gov.uk/​20100512170615/​http://​w ww.bis.gov.uk/​fi les/​fi le14331.pdf>. Ofcom, ‘Measuring
media plurality’, 19 June 2012, <https://​w ww.ofcom.org.uk/​_ ​_​data/​a ssets/​pdf_ ​fi le/​0 031/​57694/​measuring-​
media-​plurality.pdf>.
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 re-
view, 12 September 2017, <https://​w ww.gov.uk/​government/​uploads/​s ystem/​uploads/​attachment_​data/​fi le/​
644186/​DCMS_​letter_​to_​Sky_​Fox_​12_​Sep_​2017_ ​_​1_​.pdf>.
239
  Enterprise Act 2002, s 47. 240
  Ibid, s 54.
538

10  Competition Law 583

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 be-
cause the powers under Regulation 17/​62 were focused on individual firms’ behav-
iour 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 en-
quiries 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 be-
came 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
  Regulation 1/​2003, n 8, Art 17. 242
  Formerly, Art 12 Regulation 17/​62.
243
  Case 60/​81, IBM v Commission [1981] ECR 2639. 244
  Regulation 1/​2003, n 8, Art 20.
584

584 Part III  Key Regulatory Issues

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 tele-
communications: roaming (2001), leased lines (1999) and local loop (1999) together
constituting a three phase inquiry into the telecommunications sector, and more re-
cently 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 informa-
tion 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 re-
lation 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 intro-
duced 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 oper-
ators 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 na-
ture 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
 <http://​ec.europa.eu/​competition/​a ntitrust/​sector_ ​i nquiries.html>.
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.
58

10  Competition Law 585

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 tel-
ephony 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 trans-
mission 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 enforce-
ment 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.

249

  Enterprise Act 2002, s 131 (replacing the earlier provisions under the Fair Trading Act 1973 (FTA));
250

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
586

586 Part III  Key Regulatory Issues

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 pro-
visions 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 par-
ticular markets may not be working well but are separate from a market investi-
gation. 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 investiga-
tion, 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 com-
parison 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 re-
commendations (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 trig-
gering 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
 <https://​w ww.gov.uk/​c ma-​c ases/​price-​comparison-​website-​u se-​of-​most-​favoured-​nation-​clauses>.
578

10  Competition Law 587

Of more relevance in telecommunications is the role of certain sectoral regu-

lators, 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 investi-
gation (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 ‘func-
tional 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 frame-
work 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 ap-
proach was taken when OfCom returned to the question in 2015.254
In its initial conclusions, Ofcom expressed the concern that the vertically in-
tegrated 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 investi-
gation reference to be made to the CMA but Ofcom envisaged a different approach,

  See also Chapter 3, at Section 3.3.8.

253

  Ofcom, ‘Strategic Review of Digital Communications: Terms of reference, competition and investment

254

in converged communications infrastructure’, 12 March 2015, <https://​w ww.ofcom.org.uk/​_ ​_​data/​a ssets/​

pdf_ ​fi le/​0 029/​78626/​dcr_​terms_​of_ ​reference_​12_ ​march_ ​2015.pdf>; 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 inde-
pendence Proposal for comment’.
58

588 Part III  Key Regulatory Issues

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 an-
nounced 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 con-
tent 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 de-
termined 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 compe-
tition 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 inten-
tional or not) and any other unintentional conduct. The boundary between ‘struc-
ture’ 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
 <https://​w ww.ofcom.org.uk/​c onsultations-​a nd-​statements/​c ategory-​1/​strengthening-​openreachs-​i n-
dependence> 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, <https://​w ww.ofcom.org.uk/​_ ​_​
data/​a ssets/​pdf_ ​fi le/​0 026/​94940/​Final-​signed-​letter-​to-​t he-​European-​Commission-​2 81116.pdf>.
256
 < https://​w ww.btplc.com/​U KDigitalFuture/​A greed/​i ndex.htm>.
257
 <https://​w ww.ofcom.org.uk/​about-​ofcom/​latest/​features-​a nd-​news/​openreach-​statement>.
258
  See Ofcom’s imposition of WMO obligation on Sky:  Ofcom, ‘Review of the pay tv wholesale must-​offer
obligation’, 19 November 2015, <https://​w ww.ofcom.org.uk/​_ ​_​d ata/​a ssets/​p df_ ​fi le/​0 022/​76081/​Review-​
of-​t he-​pay-​T V-​w holesale-​must-​offer-​obligation-​.pdf>.
259
  See discussion on essential facilities in Section 10.4. 260
  Enterprise Act 2002, s 134(1).
261
  Enterprise Act 2002, s 134.
589

10  Competition Law 589

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 enforce-
able 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 out-
come 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 fea-
tures that exist in more than one market,264 though this is limited to ‘conduct’ not

  CC3 (revised), n 250, para 155.

262 263
  Ibid, para 102.
  Enterprise Act 2002, s 131(2A) and (6).
264
950

590 Part III  Key Regulatory Issues

‘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 inves-
tigate 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 telecom-
munications is on the pay TV market. After receiving representations from a
number of competing market participants, including telecommunications oper-
ators 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 tele-
vision services on all platforms. It took the initial view that distinct narrow eco-
nomic 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 efficien-
cies (eg phone services with audiovisual content) would mean that these mar-
kets 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

265
  Ibid, s 131(1) and 131(2A).
266
 Ofcom, ‘Pay TV market investigation’, <https://​w ww.ofcom.org.uk/​consultations-​a nd-​statements/​
category-​1/​market_​i nvest_​paytv>.
267
  Sports rights were dealt with under Ofcom’s sectoral powers in Communications Act 2003, s 316 to im-
pose a wholesale ‘must offer’ obligation on Sky, an obligation which was successfully challenged before the
courts, see Harrison and Woods, n 161.
591

10  Competition Law 591

content sectors, and the impact that access to premium content, as well as bund-
ling 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 regu-
lator, 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 behav-
iours 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 ex-
isted 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 enforce-
ment 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.
592

592 Part III  Key Regulatory Issues

their respective sectors alongside their regulatory powers. In practice, the ma-
jority of administrative competition enforcement in the electronic communica-
tions 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 con-
currently with the CMA. Ofcom does not participate in the ‘parallel’ enforce-
ment 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 con-
trol is primarily limited to those mergers which may raise media plurality issues.
However, Ofcom often makes representations on mergers in the electronic com-
munications 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 in-
vestigation provisions in the Enterprise Act 271 where it believes that there are fea-
tures 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 communi-
cations 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

269
  Competition Act 1998, s 54(2). 270
  eg Three/​O2, 1 February 2016.
271
  Enterprise Act 2002, 131 and Communications Act 2003, s 370. 272
  Enterprise Act 2002, s 131.
273
  4 August 2010, at <https://​www.ofcom.org.uk/​_​_​data/​assets/​pdf_​file/​0017/​72008/​pay-​tv-​movies-​decision.
pdf>. The Competition Commission subsequently found that there was no appreciable adverse effect on com-
petition in any pay TV market:  report of 2 August 2012 (at 15), <http://​webarchive.nationalarchives.gov.uk/​
20140402201316/​http://​www.competition-​commission.org.uk/​assets/​competitioncommission/​docs/​2010/​
movies-​on-​pay-​tv/​main_​report.pdf>.
539

10  Competition Law 593

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 com-
munications 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 le-
gislation 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 consid-
ering sector regulation. This new duty is backed up by a new power for the govern-
ment 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 straightfor-
ward. 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 allo-
cate competition cases between them.281 The factors taken into account when al-
locating a case include relevant sector knowledge, effect of the market behaviour

  See Section 10.5.
274

  See Section 10.6. In particular, Ofcom has used the possibility of a market investigation to prompt an
275

offer of undertakings in lieu of a reference for BT to separate its wholesale business (Openreach) from its re-
tail offerings, <https://​w ww.ofcom.org.uk/​_ ​_​data/​a ssets/​pdf_ ​fi le/​0 023/​47075/​consolidated_​u ndertakings24.
pdf>.
276
  Regulation 1/​2003, n 8, Art 3(1). 277
  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 broad-
casting sector see s 317.
280
  ERRA 2013, s 52.
281
 17 June 2014, <https://​www.gov.uk/​government/​uploads/​system/​uploads/​attachment_​data/​file/​502645/​
Ofcom_​MoU.pdf>.
954

594 Part III  Key Regulatory Issues

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), in-
formation 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 le-
gislation. 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

282
  Ibid, para 30.
283
  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 con-
cerning 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).
59

10  Competition Law 595

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 en-
forcement 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 re-
quire 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.

288

  Note that the standard of review for appeals under the Communications Act 2003 has recently been
289

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 <http://​w ww.catribunal.org.uk/​fi les/​
Guide_​to_​proceedings_​2015.pdf>.
292
  Competition Act 1998, Sch 8, para 3(2).    293  Ibid, para 3(2)(e).    294  Ibid, para 3(4).
956

596 Part III  Key Regulatory Issues

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 regu-
lated 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 telecom-
munications is both vital—​particularly to address ‘convergence’ issues—​a nd dif-
ficult, 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 ifficul-
ties with market definition being a main example.
Continued technological change is not the only challenge facing Ofcom. The im-
petus 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 telecom-
munications 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 telecom-
munications market for many years to come.
597

Part IV

TELECOMMUNIC ATIONS TR ANS AC TIONS

958
95

11

C APACIT Y AGR EEMENT S

FROM MICROWAVES TO MVNOs

Graeme Maguire, Joanne Wheeler, and Rhys Williams1

11.1 Introduction  599

11.2 Types of Capacity Agreement  602
11.3 Key Contractual Issues  611
11.4 Regulatory Issues  618
11.5 Emerging Trends  622

11.1 INTRODUC TION

11.1.1  What are capacity agreements?

In a competitive communications environment, capacity agreements enable op-
erators 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 communica-
tions facilities.
In the broadest sense, capacity relates to the ability of a communications net-
work 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 trans-
mitted, or the number of calls that can be carried simultaneously to the band-
width 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.
60

600 Part IV  Telecommunications Transactions

Electronic communications operators require capacity in order to sell services to

their customers. Accurate capacity planning is essential for operators seeking to es-
tablish 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 en-
sure 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 dif-
ferent 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 pri-
mary 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 typic-
ally 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 in-
cumbent 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 com-
petition, 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’ op-
erators 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
610

11  Capacity Agreements 601

wire systems, not least because of the advantages they offered over the old sys-
tems, 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 informa-
tion in digital form, sent through the fibre strand over a pre-​determined wave-
length. 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 real-
ized 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 cap-
acity to Company B in exchange for similar amounts of capacity in a different geo-
graphic 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 treat-
ment 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 transmit-
ting 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 ori-
ginally limited to two wholly discrete frequencies on the same fibre. Since the

2
  See further Chapter 16, at Section 16.2.2.
620

602 Part IV  Telecommunications Transactions

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 ac-
cess 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 in-
creased 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 ba-
sically 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
630

11  Capacity Agreements 603

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 transmis-
sion, notably the Ethernet protocol.
In addition, partial private circuits (PPCs), which provide dedicated transmis-
sion 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 attrac-
tion of PPCs, indeed the key to the attraction of all capacity agreements, is owner-
ship 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 exten-
sive 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 en-
abled 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 inter-
national communications as other countries followed the UK’s lead.
Unlike a traditional leased line, however, an IPLC is not a single dedicated cir-
cuit. 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.
604

604 Part IV  Telecommunications Transactions

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 author-
ized 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 ex-
ample a satellite link). The intention is that if one cable is accidentally cut, for ex-
ample 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 sep-
arate 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 ac-
knowledges 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
650

11  Capacity Agreements 605

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 peri-
odic 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 ad-
vantage of specific capital allowances for IRUs, enabling them to obtain tax deduc-
tions 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 per-
spective, contractual rights. Having paid significant sums up front for a contrac-
tual 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 op-
erator. A lot of time and effort was spent in attempts to characterize IRUs as prop-
erty rights, but to little or no avail.
The term ‘indefeasible’ is something of a misnomer, given that IRUs are not in-
defeasible 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 main-
tenance 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 ar-
rangements 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 rev-
enue 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
60

606 Part IV  Telecommunications Transactions

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 re-
lief. 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 de-
rived from the use or exploitation of its cable system. Where the receipt is a cap-
ital 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 own-
ership 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

4
  ITTOIA, s 146.
5
  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.
670

11  Capacity Agreements 607

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 communi-
cations 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, con-
struct, 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 re-
quired 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 trans-
mission 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.
608

608 Part IV  Telecommunications Transactions

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 communi-
cations network, satellites can provide key links to the internet backbone and
multiple fibre networks. The commercial value of satellite communications tech-
nology 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, de-
fence 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 per-
manent or an occasional-​use basis. A transponder, basically a microwave relay cir-
cuit, 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 telecommu-
nications 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 in-
clude 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 cus-
tomers 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

9
  See Section 16.2.1.
609

11  Capacity Agreements 609

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 tel-
ephony.11 Others have adopted innovative business models by relying on adver-
tising revenues.
There are various attractions for commercial entities wishing to set up such ven-
tures. 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 regu-
latory 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 pro-
vide the mobile network operator with an opportunity to increase economies of

10
  Ofcom, ‘The International Communications Market Report 2016’, Glossary, 205 <https://​w ww.ofcom.org.
uk/​_​_​data/​a ssets/​pdf_​fi le/​0 026/​95642/​ICMR-​Full.pdf>.
11
  See Ofcom, ‘Strategic Review of Digital Communications’ Discussion Document, 16 July 2015, 74.
610

610 Part IV  Telecommunications Transactions

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 pro-
viders 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 net-
work operator. This ability to purchase wholesale extends beyond the basic pur-
chase 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 re-
turn on sunk network investment costs, with the responsibility for marketing and
customer support often being dealt with by the MVNO. In this way, MVNOs pro-
vide the mobile network operator with an opportunity to generate increased econ-
omies 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
 <http://​w ww.virginmedia.com/​c orporate/​media-​c entre/​press-​r eleases/​v irgin-​media-​a nd-​bt-​a gree-​
new-​mobile-​deal.html>.
13
 <https://​w ww.gsmaintelligence.com/​research/​? file=e83c8a3cb0f8a685fb8ab53fff206518&download>.
61

11  Capacity Agreements 611

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 indi-
vidual terms, there remain a number of key issues to bear in mind in every cap-
acity 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 com-
mitment 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 pri-
mary traffic path fails? What is the guaranteed speed of restoration? This is par-
ticularly 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 fa-
cilities 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
612

612 Part IV  Telecommunications Transactions

understand the balance between the margin a supplier may be making on pro-
viding 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 com-
munications 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 author-
ities 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 au-
thority, typically in the form of an approved reference offer. Adherence to these
SLAs is seen by regulators as critical to ensuring a functioning competitive en-
vironment, and regulatory authorities can apply various regulatory tools to en-
sure 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 im-
plementation 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 ad-
dressed 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 prop-
erties, depending on the type of fibre, its length, and its purpose.16 The capacity of

14
  See further consideration of SMP obligations in Chapter 4, at Section 4.6 and Chapter 8.
15
  <https://​ w ww.ofcom.org.uk/ ​ a bout- ​ o fcom/ ​ l atest/ ​ m edia/ ​ m edia- ​ releases/ ​ 2 017/ ​ b t- ​ a grees- ​ t o- ​ l egal-​
separation-​of-​openreach>; <http://​www.btplc.com/​UKDigitalFuture/​Agreed/​index.htm>; <https://​www.ofcom.
org.uk/​_​_​data/​assets/​pdf_​file/​0035/​98855/​Openreach-​consultation-​2017.pdf>.
16
  eg ITU-​T G.652 (11/​16) remains perhaps the most commonly deployed fibre.
613

11  Capacity Agreements 613

an optical fibre to accept transmission technology (such as WDM) depends upon

its specifications. Thus, given the speed with which technology is developing, pur-
chasers 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 rela-
tion 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 innov-
ation 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 agree-
ment 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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614 Part IV  Telecommunications Transactions

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 possi-
bility 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 commer-
cial 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
651

11  Capacity Agreements 615

arrangements tend to focus particular attention on the laws that the satellite op-
erator and customer must comply with. The satellite operator will generally be re-
quired 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 oner-
ously, 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 out-
ages, and also issues such as micrometeoroid impacts and unavoidable conjunc-
tion 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 miti-
gate the consequences.
Rights of pre-​emption and restorability: As the ultimate aim of any satellite oper-
ator 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 sat-
ellite operator therefore has to prioritize allocation of capacity and, where designated
capacity is not available, offer alternative capacity. The relevant terms used to de-
scribe 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.

17
61

616 Part IV  Telecommunications Transactions

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 trans-
ponder 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 re-
spect 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 ar-
rangement 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
671

11  Capacity Agreements 617

nature of the network. The telecommunications regulatory regime in the par-

ticular market in which the arrangement is concluded may also require the in-
sertion 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 re-
quiring 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 communica-
tions, 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 mo-
bile 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 responsi-
bility, 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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618 Part IV  Telecommunications Transactions

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 mo-
bile 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, de-
pending 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 regu-
lated 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 regula-
tory authority may impose conditions on those operators, in particular in relation
to ensuring that charges are on cost-​orientated terms and are not discriminatory.

18
  Defined in the Communications Act 2003 (as amended), s 32(1).
19
  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.
619

11  Capacity Agreements 619

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 regu-
latory 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 flexi-
bility 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 ap-
plication 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 un-
duly 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  <http://​w ww.ofcom.org.uk/​consult-
ations/​bcmr08/​>.
602

620 Part IV  Telecommunications Transactions

In 2013, Ofcom identified a set of markets at retail and wholesale level for con-
tinuing 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 re-
tail 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 dis-
criminate 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 ori-
gination (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 connect-
ivity 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

23
  Ofcom, ‘Business connectivity market review’, 28 March 2013.
24
  Ofcom, ‘Business connectivity market review’, 28 April 2016 <https://​w ww.ofcom.org.uk/​consultations-​
and-​statements/​c ategory-​1/​business-​connectivity-​market-​review-​2015>.
25
  British Telecommunications v Office of Communications (BCMR), 1260/​3/​3/​16  <http://​w ww.catribunal.
org.uk/​2 37-​9285/​1260-​3-​3-​16-​British-​Telecommunications-​.html>.
612

11  Capacity Agreements 621

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 identifica-
tions 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 intro-
duce 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 ap-
plied 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 ser-
vice 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 competi-
tion 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 <https://​w ww.ofcom.org.uk/​_ ​_​data/​a ssets/​pdf_​fi le/​0 018/​
108018/​BCMR-​Revocation-​Notification.pdf>.
27
  Ofcom, Business Connectivity Markets, ‘Temporary SMP conditions in relation to business connectivity
services’, 23 November 2017 (BCMR Temporary Conditions Statement) <https://​w ww.ofcom.org.uk/​_ ​_​data/​
assets/​pdf_​fi le/​0 019/​108019/​BCMR-​Temporary-​Conditions.pdf>.
28
  Ofcom, ‘Statement on adding dark fibre to the temporary remedies for business connectivity markets’, 12
April 2018 <https://​w ww.ofcom.org.uk/​_ ​_​data/​a ssets/​pdf_​fi le/​0 015/​112902/​dark-​fibre-​statement.pdf>.
29
  See further Chapter 16, at Section 16.3.2.
30
  See further Chapter 10.
62

622 Part IV  Telecommunications Transactions

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 in-
novative types of capacity agreements, particularly where such OTT service al-
lows for interconnectivity with the public switched telephone network or PSTN.
Where such interconnectivity is provided, innovative aggregation and resale ar-
rangements 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 regu-
latory 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 atti-
tude 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 ac-
tions 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 af-
fecting 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 sup-
porting the M2M that underpin the Internet of Things. The three principal charac-
teristics being targeted for 5G are: (i) a minimum downlink of 1 Gbps, (ii) latency
623

11  Capacity Agreements 623

under 1 millisecond, and (iii) improved energy efficiency, although it remains un-
clear 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 develop-
ment 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 infrastruc-
ture, 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 in-
creasingly 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 consolida-
tion, 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 re-
quirements) to negotiate terms and conditions.

31
  The authors would like to thank Barry Jennings, Legal Director Bird & Bird, for his assistance with up-
dating 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 communi-
cations networks and services, (2014/​710/​E U), Annex, OJ L 295/​79, 11 October 2014.
642
652

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  626

12.2 Licensing and Authorization for Corporate and MNE
Communications  630
12.3 Wholesale Access Regulation  634
12.4 Numbering Resources  636
12.5 Contractual Aspects  637

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 or-
ganizational service solutions, and the associated regulatory and commercial
law implications. Outsourcing to specialized communications providers, of-
fering cloud-​based solutions, and meeting all voice, video, and data connect-
ivity needs increasingly by means of high-​speed IP connectivity creates specific
challenges for service authorization, market regulation, and the drafting of
contracts.
62

626 Part IV  Telecommunications Transactions

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 be-
cause 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 sover-
eignty 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 re-
quirement such as ensuring end-​to-​end connectivity with a guaranteed quality
of service (QoS) between their global branches could prove to be a challenge be-
cause 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 typ-
ically meant that operators from MNEs’ home countries could follow their cor-
porate 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 ad-
ministrative 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.
672

12  Multinational Enterprises 627

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 to-
wards 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 bene-
ficial 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 net-
work 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 obs-
tacle for that may be emerging ‘net neutrality’ laws, although the latter might be
more lenient regarding specialized corporate services such as virtual private net-
works (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’ telecommu-
nications 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.
628

628 Part IV  Telecommunications Transactions

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 communi-
cations 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 re-
quires 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 migra-
tion 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,

6
  See eg ‘Report Enabling the Internet of Things’, BoR (16) 39, 12 February 2016.
7
 <https://​slack.com/​>.
8
 See eg <http://​searchunifiedcommunications.techtarget.com/​a nswer/​Is-​UC-​as-​a-​Service-​s ynonymous-
​ ith-​cloud-​UC>.
w
629

12  Multinational Enterprises 629

or email, with a view to more efficient collaborative communications. Such com-

munications 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 com-
munications 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 pro-
vision has been taking place in the way the services are provided. Whereas uni-
fied 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 col-
laborative 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, com-
bining 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 ap-
plications, and handles tasks such as system maintenance, backup, and resiliency
planning.9 Cloud solutions might further involve a full platform (PaaS) for appli-
cation 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 mo-
bile 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

9
 <http://​searchcloudcomputing.techtarget.com/​definition/​I nfrastructure-​a s-​a-​Service-​IaaS>.
630

630 Part IV  Telecommunications Transactions

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 com-
panies 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 coun-
tries are still permitted to operate their own domestic licensing schemes for com-
munications 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 sustain-
ability of the abolition of retail roaming surcharges and on the application to be submitted by a roaming pro-
vider 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.
613

12  Multinational Enterprises 631

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 elec-
tronic 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 elec-
tronic 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 pro-
viders cannot be required to establish in the Member State a branch or a legal en-
tity 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 there-
fore 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 telecommu-
nications regulatory authority, plus possibly other requirements such as the pro-
vision 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.

13
  See further Chapters 4 and 6.
  Art 3(2) of the amended Authorisation Directive. The UK does not require notification unless a certain
14

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 indi-
vidual 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
 Ibid. 17
  See Art 2 of the amended EU Framework Directive.
18
  See eg amended Authorisation Directive, Arts 3 and 6, and the Annex.
632

632 Part IV  Telecommunications Transactions

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 ex-
ample, a CaaS solution hosted in the cloud and accessible via the web might pro-
vide 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 re-
sponsible 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, con-
stitute 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 trad-
itionally 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 signifi-
cant conveyance component, and are primarily online equivalents of traditional
offline environments, such as video-​conference rooms or online multimodal cor-
porate collaborative tools. In these cases, contractual responsibility for convey-
ance on a public network would provide for a more relevant regulatory boundary.24

19
  BEREC Report on OTT Services, January 2016, at 16. 20
 Ibid.
21
  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 <http://​
www.subtel.gob.cl/​telefonia-​ip/​>.
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.
63

12  Multinational Enterprises 633

12.2.3  Collaborative environments

Voice and video may be only two of the several components that form today’s in-
tegrated 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 telecommu-
nications operator. Furthermore, such environments may be built for a specific
company, hosted in its own private or public cloud, maintained and further de-
veloped 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 communi-
cations 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 previ-
ously confined to traditional telecommunications services, regulators and policy-
makers 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 ap-
proaches may expressly seek to capture ancillary communications features of col-
laborative 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.
364

634 Part IV  Telecommunications Transactions

for the EU ePrivacy Regulation recognizes the problem of integrated online en-
vironments, 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 transmis-
sion 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 administra-
tive 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 communica-
tion 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 loca-
tions. 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 re-
spect 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, ‘inter-
personal 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.
653

12  Multinational Enterprises 635

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 en-
trants because they require high-​quality services not always available in the in-
cumbent 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 rela-
tionship 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 <http://​w ww.commverge.com/​Solutions/​I PCoreEdgeNetworks/​I PMPLSNetworks/​t abid/​169/​
Default.aspx>.
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 require-
ments 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.
63

636 Part IV  Telecommunications Transactions

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 prod-
ucts 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 offer-
ings by technology alone, others such as asymmetric broadband via copper pairs
or hybrid copper-​fibre networks may require additional characteristics:  guaran-
teed 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 coun-
tries’ 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 band-
widths, 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 loca-
tion (Market 4).
39
  Explanatory Note to the Commission Recommendation of 9 October 2014 on relevant product and service
markets, at 47.
40
 <https://​w ww.iana.org/​numbers>.
673

12  Multinational Enterprises 637

be accessible globally, the practical solution is often provided by means of inter-

national 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 be-
cause specific conditions may be attached to the use of national numbers. Apart
from general requirements for the local use of geographic numbers that are regu-
larly found in national numbering plans,43 other specific business-​related con-
ditions 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 agree-
ment:  network access, transmission service, and the provision (and possibly in-
stallation) 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) be-
tween locations, calls and text messaging (SMS) at designated rates;

41
  CEPT/ECTRA Decision of 2 December 1999 On European Telephony Numbering Space (ETNS) conven-
tions (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 <https://​w ww.bundesnetzagentur.de/​S haredDocs/​D ownloads/​E N/​BNetzA/​P ressSection/​P ress
Releases/​2017/​27012017_ ​r ufnummern.pdf?_ ​_​blob=publicationFile&v=2>.
638

638 Part IV  Telecommunications Transactions

• 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 solu-
tion or, alternatively, the hosting of the CaaS solutions for the MNE by the pro-
vider 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 ex-

tent resemble those in the agreements for residential end-​users and small busi-
nesses, 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 re-
gardless 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 dur-
ation of the contract and the conditions for renewal.45
The provision of equipment, software, including its development and mainten-
ance, 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 com-
pany 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

  See Art 20 of the amended Universal Service Directive.

45 46
  See Telecomulonimbus, n 5.
  See Sinclair, M in Walden, I, Telecommunications Law and Regulation (4th edn, Oxford University Press,
47

2012), at 569 et seq.

693

12  Multinational Enterprises 639

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 so-
lution 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 solu-
tion 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 com-
prising 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, util-
izing 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 dif-
ferent 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 confiden-
tiality.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.
48

  See Determann, L, ‘Local Data Residency Requirements for Global Companies’ (Baker & McKenzie,
49

August 2015), <http://​w ww.bakermckenzie.com/​en/​i nsight/​publications/​2015/​0 8/​local-​data-​residency-​re-

quirements-​for-​g lobal-​com_ ​_ ​/​>.
50
  Mundra, M, ‘Multi-​tenant Vs. Single-​tenant Architecture (SaaS)’ (SAP Blog, July 2015), <https://​blogs.sap.
com/​2015/​07/​12/​multi-​tenant-​v s-​single-​tenant-​a rchitecture-​saas/​>.
51
 Ibid.
604

640 Part IV  Telecommunications Transactions

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 communi-
cations 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 con-
tinue to be highly volume-​sensitive.52
‘Per user’ charging has traditionally been based on the number of voice tele-
phone channels that can simultaneously be used by the corporation to communi-
cate 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.
614

12  Multinational Enterprises 641

ISDN30 because they support up to thirty voice telephone channels. These chan-
nels 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 regu-
lated 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 commu-
nications 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 cor-
porate 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 fea-
tures 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
 <https://​apprenda.com/​l ibrary/​g lossary/​definition-​payperuse-​software-​saas/​>.
624
634

Part V

COMMUNIC ATIONS CONTENT

64
654

13

COMMUNIC ATIONS PR IVAC Y

Ian Walden1

13.1 Introduction  645

13.2 Defining Terms  648
13.3 User–​State  653
13.4 Service Provider–​User  664
13.5 Subscriber–​User  672
13.6 User–​User  675
13.7 Concluding Remarks  681

13.1 INTRODUC TION

The right to privacy of communications is one of the most enduring and widely rec-
ognized 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 no-
tions of family and home. While the terminology used in international instruments
and national constitutions may have evolved over time to reflect changing technolo-
gies, 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, pro-
tecting 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.
64

646 Part V  Communications Content

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 in-
dustry 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 im-
portant in our communications environment.
This chapter examines how each of these four privacy relationships has be-
come 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 elec-
tronic 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’.
674

13  Communications Privacy 647

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 inter-
fered with. Third, there is a need for an independent supervisory authority to ‘con-
trol’ 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 trad-
itional 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 regu-
latory 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 supple-
mented 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 tele-
communications sector, OJ L 24/​1, 30 January 1998.
684

648 Part V  Communications Content

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 relation-
ships, focusing on two particular aspects. First, the obligations placed upon tele-
communications 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: com-
munications 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 commu-
nications as much as the rights of citizens. Privacy jurisprudence has been most
comprehensively examined by the European Court of Human Rights (ECtHR),

13
  GDPR, at Art 95. 14
  Explanatory Notes to the Regulation of Investigatory Powers Act, at para 9.
15
  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.
694

13  Communications Privacy 649

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 ‘legit-
imate 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 re-
gime 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 ‘corres-
pondence’,23 data protection law focuses solely on the ‘provision of publicly avail-
able 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, un-
like 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 com-
municate 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.
560

650 Part V  Communications Content

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 tech-
nical 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 ‘inter-
personal communication services’,25 which will embrace a range of OTT commu-
nications 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 ‘in-
clude 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 character-
ization 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, de-
pending on the nature of the relationship with the hotel.
A second part of the definition is the need for the service to be ‘publicly avail-
able’. 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 en-
ables 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 communi-
cation 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,
<https://​w ww.theguardian.com/​media/​2 017/​m ay/​2 9/​p ublishers-​c all-​f or-​r ethink-​of-​proposed-​c hanges-​
to-​online-​privacy-​laws> and Business Insider UK, ‘European regulators are about to kill the digital media
industry’, 14 August 2017, <http://​u k.businessinsider.com/​european-​regulators-​a re-​about-​to-​k ill-​t he-
​d igital-​media-​i ndustry-​2017-​8>.
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.
615

13  Communications Privacy 651

any limitation in the PEC Directive must be viewed in the context of the con-
tinuing 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 communi-
cation, 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 com-
munications environment as we spend more of our lives online. In terms of com-
munications 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

30
  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
31

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
  ePrivacy proposal, at recital 20. 34
  134 S Ct 2473 (2014), at 20–​21.
562

652 Part V  Communications Content

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 ex-
changed or conveyed between a finite number of parties’ (Article 2(d)), which, as al-
ready 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 communi-
cating content are further distinguished: ‘calls’ and ‘electronic mail’. A definition
for a ‘call’ was provided in the original PEC Directive, but was subsequently de-
leted 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 lo-
cation (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 com-
munication 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 ac-
cess 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.
653

13  Communications Privacy 653

that it comprises ‘information no less sensitive . . . than the actual content of com-

munications’.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 con-
cerning any relationship with a provider of an online or offline service.
While these categories can help us to examine the different dimensions of com-
munications 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 pro-
vider 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 surveil-
lance’.40 While on many issues Zakharov simply reasserts where the Court’s jurispru-
dence stands, on some matters, the jurisprudence has become more pronounced.
The User–​State privacy relationship is relevant to a book on telecommunica-
tions 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

36
  Tele2, n 35, at para 99.
37
  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.
564

654 Part V  Communications Content

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 pro-
viders to conduct themselves in certain ways in order to be in a position to as-
sist 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 en-
forcement obligations:  whether the applicable service falls within the regu-
lated 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 on-
going liberalization of the telecommunications sector and rapid technological de-
velopments 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 cap-
abilities 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 hand-
over). Call associated data also includes information about the call that is available to the network operator/​
service provider (e.g. duration of connection).’
65

13  Communications Privacy 655

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 funda-
mental 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 rec-
ommendation 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 inter-
ference in two provisions. First, Member States are required to ensure the con-
fidentiality 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 ex-
ceptions 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 relation-
ships 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 incompat-
ible 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 enforce-
ment 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).
56

656 Part V  Communications Content

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 admin-
istrative 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 pre-
ventative 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 in-
tended departure from the EU could eventually lessen these constraints, although
not if they were considered an important consideration in any ‘adequacy’ deter-
mination 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 per-
mitting LEAs direct access to a service provider’s network. This echoes the senti-
ment 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 im-
portant safeguards against abuse’ (para 269).

49
  Tele2, n 35, at 112.
50
 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 commu-
nications 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 ap-
proval 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.
657

13  Communications Privacy 657

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 con-
sternation and distrust towards service providers. In response, service providers
have tried to become more transparent about such practices, publishing ‘trans-
parency’ 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 pre-
vention, 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 ser-
vice providers to assist LEAs in the course of an investigation. UK law has re-
cently 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 con-
centrates 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 <https://​snowdenarchive.cjfe.org/​g reenstone/​cgi-​bin/​l ibrary.cgi>.

57

 Google was the first, see <https://​t ransparencyreport.google.com>. See also Vodafone’s ‘Law
58

Enforcement Disclosure Report’, <https://​w ww.vodafone.com/​c ontent/​s ustainabilityreport/​2 014/​i ndex/​

operating_​responsibly/ ​privacy_​a nd_​security/​law_​enforcement.html>.
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.
568

658 Part V  Communications Content

‘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 ‘telecommu-
nications 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 pro-
viding 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 per-
ceived 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.
659

13  Communications Privacy 659

email, messaging applications and cloud-​based services’.67 The government has

also stated that a person is offering a telecommunication service where connect-
ivity is provided incidental to the operation of an application or website or is other-
wise 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 lo-
cated at least in part in the UK, the jurisdictional trigger for services is merely the of-
fering 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 obli-
gations 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 interoper-
ability is concerned, but a range of considerations, including cost, will deter-
mine what data is generated by the operation of a telecommunication network or
service. For example, requirements for data to bill, whether for wholesale inter-
connection or retail users, will determine what traffic data the network needs to
generate. With the adoption of an expansive definition of what constitutes a ‘tele-
communication 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.
67

  See Home Office, ‘Draft code of practice on Interception of Communications’, February 2017.

68

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).
60

660 Part V  Communications Content

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 practic-
able’,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 uncer-
tainty, 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 vulner-
ability that could be exploited for malicious purposes. The requirement repeats
an identical requirement under RIPA,74 but has significantly extended applica-
tion 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 ‘reason-
able 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 pay-
ments 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

71
  eg ibid, at ss 43(4), 66(3), and 128(5).
72
  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 <http://​w ww.etsi.org/​technologies-​clusters/​technologies/​lawful-​i nterception>.
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)).
61

13  Communications Privacy 661

to market entry. In terms of communications privacy, however, significant pay-

ments 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 pro-
viders 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 con-
sidered, primarily because it is considered to interfere with the essence of our pri-
vate 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 de-
bate 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 trans-
posing 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 cur-
rently 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.
62

662 Part V  Communications Content

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 gov-
ernment 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 protec-
tion 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 eco-
nomic considerations. Each seems highly problematic. First, because we permit
(and expect) operators to retain more sensitive data on our behalf (eg communi-
cations content); second, because it implies that were the public sector to be re-
sponsible for retention it would not have mind to cost considerations, which seems
unrealistic; and third because economic considerations cannot simply be disen-
tangled 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 com-
munications’, ie content, and the acquisition of communications data, ie traffic
data. Conduct-​related requests are in respect of ‘equipment inference’ and ‘na-
tional 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.
85
63

13  Communications Privacy 663

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 net-
work. As such, the role of the operator in equipment interference is more facilita-
tive, 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 rele-
vant error’90 to the Investigatory Powers Commissioner (s 235(6)).
Finally, service providers are under a duty not to disclose the existence or con-
tent of any notice or warrant they have received, although the consequences differ
between the ex ante obligations, which are enforceable through civil proceed-
ings,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.
86

  Ibid, at s 99(2). A ‘communication’ is defined at s 135, while ‘equipment data’ is defined at s 100.
87

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 sub-
ject 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).
64

664 Part V  Communications Content

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 gen-
eral data protection regime and its potential applicability to the different parties dis-
cussed 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 de-
pending 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 re-
spective 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 transmis-
sion 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 exemp-
tion 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
  DPD, at recital 47. 98
  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 im-
posed 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.
65

13  Communications Privacy 665

a controller in respect of customer content, to enable them to have the freedom

to determine certain processing purposes, while accepting contractual restric-
tions 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 be-
come more fluid and complex to determine and apply in respect of particular pro-
cessing 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, pro-
cessing 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, sub-
scriber 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 in-
terpreted as permitting routine storage for a maximum six months, with only
disputed cases being processed for longer.103 Processing of traffic data is per-
mitted 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 pur-
poses (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.
6

666 Part V  Communications Content

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 ‘pro-
cessor’ 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 ex-
panded scope of the ePrivacy proposal has generated such opposition from cer-
tain 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 tele-
coms 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 independ-
ently 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

104
  DPD, at Art 2(h), GDPR, at Art 4(11).
105
  See Case C-​199/​12, Josef Probst v mr.nexmet GmbH, 22 November 2012 [2013] CEC 913.
106
  eg <https://​dma.org.uk/​article/​eprivacy-​lobbying-​and-​the-​threat-​to-​b2b-​marketing-​and-​telemarketing>.
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.
67

13  Communications Privacy 667

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 unauthor-
ized 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 li-
abilities on service providers, some of which substantially overlap with require-
ments 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 elec-
tronic communication services’ (Article 4(1)).115 In the original measure, the add-
itional 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 duplica-
tion 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 in-
centivizing good data security practices, as well as countering a natural tendency
to keep such matters secret. From the data subject’s perspective, notification en-
ables 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

112
  DPD, at Art 17, GDPR, at s 2.
113
  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
  ePrivacy proposal, at 1.2 and 3.5. 117
  California Civil Code § 1798.29 and 1798.80 et seq.
68

668 Part V  Communications Content

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 op-
erator 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 investi-
gation.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 ne-
cessary, its decision can be overruled by the authority, which can then order no-
tification. 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 meas-
ures 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, re-
commended measures to mitigate any potential adverse consequences, and con-
tact 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 no-
tification 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), <https://​ico.org.uk/​action-​weve-​t aken/​audits-​ad-
visory-​v isits-​a nd-​overview-​reports/​>.
69

13  Communications Privacy 669

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 exer-
cise control over their personal data. Under the DPD, transparency was primarily
subsumed within the concept of ‘fair’ processing, but has become a distinct prin-
ciple under the GDPR.124 As noted in the previous section, service providers are re-
quired 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 ana-
logue 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 per-
sonal 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 inter-
ception of communications, a service provider may also engage in conduct for
certain purposes that could amount to interception. In an age of behavioural on-
line 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 al-
gorithmic 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

  Arts 5(1)(a) and 12.

124 125
  Art 17.
 Regulation (EU) 2015/​2120 laying down measures concerning open internet access, OJ L 310/​1, 26
126

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.
607

670 Part V  Communications Content

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 inter-
ception 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 trans-
mitted by the service (s 45).

The scope of the first purpose seems particularly unclear since, subject to com-
pliance with general data protection laws, an operator may have strong commer-
cial incentives to tie the provision of a service to an act of interception, such as
monitoring communications for advertising purposes. Such uncertainty be-
comes 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 re-
main whether it would be lawful under data protection law without either the con-
sent 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 protec-
tion’ (30 September 2010).
131
  eg Telecommunications Act 1984, s 45(1): ‘A person engaged in the running of a public telecommunica-
tion 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).
671

13  Communications Privacy 671

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 applic-
able 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 there-
fore 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 elec-
tronic form or via a directory enquiry service. To reconcile these potentially di-
vergent interests, the PEC Directive requires that subscribers be fully informed
before being included in a directory, including any functionality that the direc-
tory 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

134
 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)
135

[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 net-
works and services (as amended in 2009) (‘Universal Services Directive’), at Arts 5 and 25.
672

672 Part V  Communications Content

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 al-
ready 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 adver-
tising. 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 ex-
amples of the Subscriber–​User relationship are that between an employer and em-
ployee 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 ad-
dresses 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
  Framework Directive, at Art 2(k). 140
  Ibid, at Art 2(h).
141
  eg Family Locator: <https://​itunes.apple.com/​gb/​app/​family-​locator-​g ps-​phone-​t racker/​id588364107?
mt=8>
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).
673

13  Communications Privacy 673

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 communi-
cation’ (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 pro-
tected 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 communi-
cating 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 sec-
ondary regulations made under RIPA, and subsequently the IPA, generally re-
ferred 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 telecommuni-
cation 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 exam-
ined 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).
647

674 Part V  Communications Content

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 commu-
nications, 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 ex-
penditure’, 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 sub-
scriber 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 deter-
mine what measures to take, the provision calls for sufficient availability of ‘alter-
native 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 there-
fore 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
  PECR, at reg 9(2). 149
  GCE, at Conditions 12.4 and 12.5 respectively.
657

13  Communications Privacy 675

13.5.3  Call-​blocking
The provisions on lawful business practices and itemized bills are designed to pro-
tect the user’s privacy from the subscriber. The PEC Directive also contains a provi-
sion 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 for-
warding 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 commu-
nications in the User–​User relationship (at Section 13.6.3 below).
The ePrivacy proposal removes any reference to the need to reconcile the inter-
ests of the subscriber and user, which implies that the Subscriber–​User relation-
ship 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 web-
sites 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 cen-
tury, 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 ob-
jectives, ie to identify, measure, and track the conduct of visitors interacting with
an online resource.152 The policy and regulatory concern with such techniques

150
  Art 11 and PECR, reg 17.
151
  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.
67

676 Part V  Communications Content

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 pri-
vate sphere. Indeed, the original standard that defined such techniques was spe-
cifically 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 ter-
minal equipment of a subscriber or user’ must provide clear and comprehensible
information about the purposes for such processing and a right to refuse such pro-
cessing (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 communi-
cation or to provide an ‘information society service’ that had been explicitly re-
quested. 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 de-
vice 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 <www.allaboutcookies.org> and <https://​w ww.youronlinechoices.com>.
155
 See <https://​ico.org.uk/​about-​t he-​ico/​news-​a nd-​events/​c urrent-​topics/​changes-​to-​cookies-​on-​our-​
website/​>.
76

13  Communications Privacy 677

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 infor-
mation 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 re-
fers 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 expect-
ations 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 pro-
vides 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 in-
coming 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 dis-
close 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

156
  See <https://​epic.org/​privacy/​streetview/​>.
  ICO, ‘In the picture: A data protection code of practice for surveillance cameras and personal informa-
157

tion’, 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.
678

678 Part V  Communications Content

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 flexi-
bility. 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 commu-
nications 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 facil-
ities,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 pro-
cessing 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, restric-
tions 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 sub-
sequent 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 <http://​bt.custhelp.com/​app/​a nswers/​detail/​a _ ​id/​9952/​~/​how-​do-​i-​w ithhold-​my-
​telephone-​number%3F>.
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
  Civil Contingencies Act 2004, s 1. 164
  PECR, reg 16A.
679

13  Communications Privacy 679

13.6.3  Unsolicited communications

In our ‘always on’ connected society, simply being contacted has become a sig-
nificant 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 be-
come 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 ex-
ception is provided where a person has obtained the contact details ‘in the con-
text 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 iden-
tity (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 in-
fringers, 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 <https://​ico.org.uk/​media/​action-​weve-​t aken/​enforcement-​notices/​2014013/​mpn-​keurboom-​ltd-​
20170503.pdf>.
170
  PECR, reg 2(4), which includes ‘anything that performs the function of a line’.
680

680 Part V  Communications Content

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 un-
solicited commercial communication, or is the service provider simply taking ad-
vantage 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 mes-
sages 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 estab-
lishment of national ‘registers’ to enable subscribers to opt out of receiving un-
solicited 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

171
  PECR, regs 19(3), 20(3), 21(2), and 22(4). 172
  Johnson v Youden [1950] 1 KB 544, at 546.
173
  47 USC § 227. See <http://​w ww.reuters.com/​a rticle/​u s-​y ahoo-​classaction/​yahoo-​must-​face-​class-​
action-​over-​text-​messages-​u-​s-​judge-​idUSKBN0UI21R20160105>, also <http://​w ww.yahootcpaclass.com>.
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 <https://​
www.mpsonline.org.uk/​t ps/​i ndex.html> and <http://​w ww.fpsonline.org.uk/​f ps/​>.
618

13  Communications Privacy 681

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 relation-
ship 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 ex-
pression 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 con-
straints 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 im-
plemented 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 re-
stricted 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 distin-
guishable, 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 strength-
ened sanctions regime under the GDPR. For communication service providers, the
additional constraints under the PEC Directive have long been a source of griev-
ance, when compared with others in the Internet supply chain. If the ePrivacy pro-
posal proceeds in its current form, this additional burden will become applicable
628

682 Part V  Communications Content

to a much greater number of controllers. As with consumer protection,177 an argu-

ment 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 re-
spond to appropriately authorised LEA data requests seems relatively uncontro-
versial. 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.
177
638

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 es-
tablished 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 regu-
lation 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 adminis-
trative 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
684

684 Part V  Communications Content

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 regu-
lation 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 pro-
posed 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 spon-
sorship, 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 de-
velopments 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.
658

14  The Impact of Broadcast Regulation 685

the principle of broadcasting as a Treaty service,4 and a lengthy debate on the ap-
propriate 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 rela-
tion 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 be-
tween Television Without Frontiers and the Electronic Commerce Directive.9 The
AVMSD made significant revisions to the original Directive, including the intro-
duction 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 competi-
tion, 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, en-
tertain or educate’ to the general public, and
(c) being conveyed by electronic communications networks (adopting the defin-
ition from the Framework Directive Article 2(a)).11

4
  Italy v Sacchi [1974] 2 CMLR 177.
5
  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.
68

686 Part V  Communications Content

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 fun-
damental 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 simultan-
eous 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 ser-
vice 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 cata-
logue of programmes selected by the media service provider’. The media ser-
vice 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 compar-
able 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. <http://​w ww.theregister.
co.uk/​2006/​05/​19/​eu_​censorship/​>; 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.
678

14  The Impact of Broadcast Regulation 687

events, situation comedies, documentaries, children’s programmes and ori-

ginal 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, de-
fined 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 sub-
stantial 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 broad-
casts, 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)  <https://​w ww.ofcom.org.uk/​_ ​_​data/​a ssets/​pdf_ ​fi le/​0 021/​
32088/​v ideoregulation.pdf>.
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) <http://​register.consilium.europa.eu/​pdf/​en/​0 6/​st15/​st15277.en06.pdf>.
68

688 Part V  Communications Content

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 iden-
tical 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 con-
cerned.) 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 per-
haps 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 re-
ception (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
  See further Chapter 15. 17
  See further Chapter 4.
698

14  The Impact of Broadcast Regulation 689

parameters of the Directive. For example, Swedish law provides for further restric-
tions on advertising directed at children, and French law requires further use of
European content than that required by the Directive.18 This is generally accept-
able, 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 audi-
ences 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 in-
volves 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 pos-
sible 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 con-
tains ‘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 in-
clusion 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.
960

690 Part V  Communications Content

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 limita-
tions23 and the subsequent ratification of the action by the Commission. This pro-
vision builds on Court of Justice decisions regarding conflicts of this nature.24
Moreover, services originating in other states can also be the subject of regu-
lation 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 pro-
visions 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 con-
sidered. If this is inconclusive on the grounds that a significant part of the work-
force 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 out-
side 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 as-
sociations 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 (broad-
casters 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.
691

14  The Impact of Broadcast Regulation 691

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, cap-
acity 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 ex-
tension 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 in-
clusion 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. <http://​stakeholders.ofcom.org.uk/​binaries/​consultations/​satellite_ ​services/​
summary/​condoc.pdf> on changes to the licensing regime for satellite earth stations.
629

692 Part V  Communications Content

Table 14.1  AVSMD requirements applicable to television and on-demand

services
Television On-​demand

Prohibition on incitement to Article 6 Article 6

hatred
Protection of minors 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.
639

14  The Impact of Broadcast Regulation 693

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 televi-
sion 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.
30

  Commission v Belgium C-​11/​95 [34]: ‘it is solely for the Member State from which television broadcasts
31

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 ex-
ercise its own control in that regard’. The overwhelming majority of channels available in the UK are licensed
by Ofcom.
964

694 Part V  Communications Content

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 tele-
vision 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 col-
lectively branded and presented to consumers as ‘Freeview’.
Cable, satellite, and internet services are typically licensed as TLCS. It is how-
ever 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 for-
merly 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 re-
ception by the public. Multiplexes, TLCS, DTPS, and restricted services are ex-
cluded 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
 <http://​stakeholders.ofcom.org.uk/​binaries/​enforcement/​broadcast-​l icence-​conditions/​press-​t v-​revo-
cation.pdf>. 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.
695

14  The Impact of Broadcast Regulation 695

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 dif-
ferently 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 broad-
casting regulation and other conduct outwith broadcasting, by the corporate en-
tity 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 (provi-
sion 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 dis-
order grounds, it found that the same facts also supported a finding that the li-
censee was no longer fit and proper.38

 <https://​w ww.ofcom.org.uk/​_ ​_​data/​a ssets/​pdf_​fi le/​0 022/​32485/​bskyb-​fi nal.pdf>.

35

 <https://​w ww.ofcom.org.uk/​_ ​_​data/​a ssets/​pdf_ ​fi le/​0 013/​103621/​decision-​fit-​proper.pdf>.

36

37
 <ht t p://​ s ta keholders.ofcom.org.u k/ ​ b inaries/​ e nforcement/​ c ontent- ​ s anct ions- ​ a djudicat ions/​
bangmedia-​revocation.pdf>.
38
  See discussion in Section 14.4.2, below.
96

696 Part V  Communications Content

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 avail-
able 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 televi-
sion 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 sur-
render. Licences can only be refused on specified grounds:  two are carried for-
ward 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 fair-
ness) (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.

39
 <https://​w ww.ofcom.org.uk/​_ ​_​data/​a ssets/​pdf_ ​fi le/​0 028/​8 8219/​Guidance-​for-​religious-​bodies.pdf>.
40
  List available at <https://​w ww.ofcom.org.uk/​manage-​your-​l icence/​t v-​broadcast-​l icences/​c urrent-​
licensees> (frequently updated).
41
  Satellite Television Service Regulations 1997, SI 1997/​1682. 42
  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.
697

14  The Impact of Broadcast Regulation 697

Following the implementation of the AVMSD in the UK a TLCS may now be re-
quired (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 ser-
vice 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 broad-
casting 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 (ap-
proved 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 gen-
eral 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 fre-
quencies) would require multiple licences.
TLCS licences are available in respect of three types of service: editorial, tele-
shopping, or self-​promotional. Editorial services are subject to the general provi-
sions 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 pay-
ment, 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  <http://​l icensing.ofcom.org.uk/​binaries/​t v/​l icensing-​position.
pdf>.
968

698 Part V  Communications Content

programming and self-​promotional services (promotion of the products, services

or channels of the broadcaster) cannot contain editorial material (eg normal pro-
grammes) 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 dis-
cussed 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 ser-
vice obligations—​t hat are classed as television broadcasting services). The differ-
ence 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 ex-
cluded. 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 ser-
vice 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 com-
pany 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 re-
maining 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.
96

14  The Impact of Broadcast Regulation 699

Ltd (B) and Crown Castle (now Arqiva) (C/​D). Following switchover and consoli-
dation, 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 pro-
vision of the ‘core proposals’ of the licensee which were set out during the appli-
cation 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 plat-
form 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 ‘rele-
vant 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.

46

 <http://​l icensing.ofcom.org.uk/​t v-​broadcast-​l icences/​c urrent-​l icensees/​multiplex/​>.

47

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 broad-
casting, or the mill owners’ triumph’ (2002) 3 Journal of Media Law and Practice 131, 134–​5.
07

700 Part V  Communications Content

(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 pro-
gramme 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 program-
ming’ 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 ap-
proved 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 fran-
chises, 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 un-
likely that a new licence will be issued. See Ofcom, ‘Report to the Secretary of State on the public teletext ser-
vice’ 1 December 2010 <http://​stakeholders.ofcom.org.uk/​binaries/​broadcast/​t v-​ops/​public-​teletext-​report.
pdf>.
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) ap-
peals 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.
701

14  The Impact of Broadcast Regulation 701

its remit or to step in and regulate through specific conditions, in the case of a ser-
ious 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 pro-
vides 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 fur-
ther 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 con-
tent 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 broad-
casting 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 cir-
cumstances. 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.
53

 <http://​w ww.bbc.co.uk/​bbctrust/​governance/​regulatory_ ​f ramework/​charter_ ​agreement/​>.

54

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 <https://​w ww.gov.uk/​government/​uploads/​s ystem/​uploads/​
attachment_​data/​fi le/​77982/​Maria_​M iller_​letter_​to_​ed_​r ichards.pdf> and <https://​w ww.ofcom.org.uk/​
about-​ofcom/​latest/​media/​media-​releases/​2014/​ofcom-​renews-​itv-​stv-​utv-​a nd-​channel-​5 -​l icences>.
702

702 Part V  Communications Content

structure of ITV has also undergone significant change since 1991, with all li-
cences 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 ap-
proving 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 con-
tain 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 com-
mitments (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
<https://​w ww.ofcom.org.uk/​_ ​_​data/​a ssets/​pdf_ ​fi le/​0 018/​95103/​C hannel-​3-​networking-​a rrangements-​2016.
pdf>.
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.
703

14  The Impact of Broadcast Regulation 703

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 pro-
gramme 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 com-
munications 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 ap-
plicable 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.
074

704 Part V  Communications Content

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 re-
stricted 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 sta-
tions are recognized as ‘quasi-​national’ by providing a digital service and having
local programming obligations removed.68 Analogue licences are subject to re-
newal 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 statu-
tory 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 ana-
logue 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, <http://​webarchive.nationalarchives.gov.uk/​20100304014526/​
http://​ofcom.org.uk/​radio/​i fi/​radio_​d igitalbritain/​d igitalbrit.pdf> [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
 <https://​w ww.gov.uk/​government/​uploads/​s ystem/​uploads/​attachment_​data/​fi le/​591508/​R adioDereg-​
Final13Feb.pdf>.
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) <https://​w ww.ofcom.org.uk/​_ ​_​data/​a ssets/​pdf_ ​fi le/​
0032/​94838/​The-​Communications-​Market-​Digital-​R adio-​Report-​2016.pdf>.
705

14  The Impact of Broadcast Regulation 705

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 re-
newed up to 2030 subject to requirements on maintaining coverage (in order to sup-
port 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 copy-
right fees for retransmission of a television service,78 such a provision would not

72
  Broadcasting Act 1990, s 54(6A).
73
  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.
076

706 Part V  Communications Content

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’ pro-
visions 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 pro-
viders 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 broad-
casters 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
<http://​downloads.bbc.co.uk/​aboutthebbc/​reports/​pdf/​RetransmissionandAccessChargesReview.pdf>.
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
 <ht t ps:// ​ w w w.gov.u k /​ g over n ment/ ​ u ploads/​ s ystem/ ​ u ploads/​ a t tach ment _ ​ d ata/ ​ f i le/ ​ 2 25783/​
Connectivity_​Content_ ​a nd_​Consumers_ ​2013.pdf>.
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’: <http://​w ww.digitaluk.co.uk/​_ ​_​
data/​a ssets/​pdf_​fi le/​0 017/​86120/​L icence_​DTAS_​0 44.pdf>.
84
 <https://​w ww.ofcom.org.uk/​_ ​_​data/​a ssets/​pdf_​fi le/​0 031/​19399/​epgcode.pdf>.
70

14  The Impact of Broadcast Regulation 707

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 unsuc-
cessful 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 re-
ceivers 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 sub-
scriber 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 ser-
vice 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 re-
placed by a set of ‘voluntary commitments’ published by Sky, which Ofcom found

85
  eg Digital UK, ‘Logical Channel Number policy’ 3 April 2017 <http://​w ww.digitaluk.co.uk/​_ ​_​data/​a ssets/​
pdf_​fi le/​0 009/​86814/​Digital_​U K_​L CN_​Policy_​v 6.0.pdf>; Sky, ‘Method for allocating listings in Sky’s EPG’
May 2015. <http://​s 3-​eu-​west-​1.amazonaws.com/​skygroup-​sky-​static/​documents/​about-​sky/​regulatory-​i n-
formation/​method-​for-​a llocating-​l isting-​i n-​skys-​epg-​290116.pdf>.
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 <http://​
www.broadcastnow.co.uk/​n ews/​multi-​p latform/​c omment/​w hy-​i s-​s kys-​t ightening- ​o f-​i ts- ​e pg-​r ules-​s o-​
sensitive/​264165>. 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  <http://​stakeholders.ofcom.org.uk/​binaries/​consultations/​t psguidelines/​statement/​statement.pdf>. 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. <http://​w ww.ofcom.org.uk/​
static/​a rchive/​oftel/​publications/​eu_​d irectives/​2003/​condac0703.pdf>.
90
  Rapture TV v Ofcom [2008] CAT 6.
078

708 Part V  Communications Content

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 re-
gionalization) 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 pre-
vent the exclusive broadcast of such events ‘in such a way as to deprive a substan-
tial 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, <https://​w ww.ofcom.org.
uk/​_ ​_​data/​a ssets/​pdf_ ​fi le/​0 025/​57418/​ac_ ​statement.pdf>; Sky, ‘Voluntary commitments by Sky in relation
to the provision of access control services’, 23 April 2015  <http://​corporate.sky.com/​documents/​about-​sky/​
regulatory-​i nformation/​v oluntary-​c ommitments-​b y-​s ky-​i n-​r elation-​t o-​t he-​provision-​of-​access-​c ontrol-​
services.pdf>.
92
 <http://​c orporate.sky.com/​d ocuments/​a bout-​s ky/​r egulatory-​i nformation/​s ky-​a nd-​s ssl-​p ublished-​
price-​l ist.pdf>.
93
  Neilan, C, ‘BSkyB and BBC clash on fees’ Broadcast, 20 October 2010. <http://​w ww.broadcastnow.co.uk/​
news/​broadcasters/​bskyb-​a nd-​bbc-​clash-​on-​fees/​5033524.Article>; Toynbee, P, ‘How the badly maimed BBC
can stand up to parasitic Sky’ Guardian, 3 January 2012. <http://​w ww.guardian.co.uk/​commentisfree/​2012/​
jan/​02/​maimed-​bbc-​parasitic-​sky>.
94
  Plunkett, J, ‘BBC and BSkyB reach agreement over retransmission payments’ Guardian, 28 February
2014 <https://​w ww.theguardian.com/​media/​2014/​feb/​2 8/​bbc-​bskyb-​agree-​retransmission-​deal>.
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 (un-
successful 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).
079

14  The Impact of Broadcast Regulation 709

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 li-
cences 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 legit-
imate 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 re-
quirement 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 con-
duct 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
  For example, condition 7 of the TLCS licence. 100
  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 <http://​
www.bai.ie/​en/​bai-​publishes-​r ight-​of-​reply-​scheme/​>.
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.
701

710 Part V  Communications Content

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 appro-
priate 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 tele-
shopping, 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 produc-
tion, although the target in this case is 10 per cent of transmission time or (if per-
mitted 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 inde-
pendent 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 im-
pose 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 cam-
paign 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. <http://​stakeholders.ofcom.org.uk/​binaries/​
consultations/​e _​p_​q/​statement/​epq_ ​statement.pdf>.
107
 <http://​stakeholders.ofcom.org.uk/​binaries/​consultations/​e _​p_​q/​statement/​epq_ ​statement.pdf 5>.
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.
71

14  The Impact of Broadcast Regulation 711

detailed UK requirement109 is specific to television110 and applied to the public ser-

vice 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 dif-
ficult 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), fair-
ness 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 in-
fringement 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 applica-
tion 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 pro-
viding 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]‌.
721

712 Part V  Communications Content

offence, crime, religion, impartiality/​accuracy/​prominence, and elections/​ref-

erenda. 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 imparti-
ality, which is not addressed by the Directive and is the subject of continued vari-
ation 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 broad-
caster 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 con-
sent, 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 investiga-
tion. 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 re-
quested. Third parties can make representations if they wish. Subsequently, a pre-
liminary view is drawn up by Ofcom and representations are again invited on it;

112
  The CJEU has considered the interpretation of the underlying AVMS provisions: Case C-​2 44/​10, METV.
113
  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  <http://​stakeholders.ofcom.org.uk/​binaries/​broadcast/​g uidance/​june2011/​fairness-​privacy-​
complaints.pdf>.
115
  Ofcom, ‘Procedures for investigating breaches of content standards for television and radio’, 3 April
2017  <http://​ s takeholders.ofcom.org.uk/ ​ b inaries/ ​ b roadcast/​ g uidance/​ j une2011/ ​ b reaches- ​ c ontent-​
standards.pdf>.
116
  See discussion in Bonner and Aston n 108, 382.
731

14  The Impact of Broadcast Regulation 713

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 sanc-
tions, 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 gen-
eral 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 pro-
vide 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 sus-
pension 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 representa-
tions 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
 <https://​w ww.ofcom.org.uk/​_ ​_​data/​a ssets/​pdf_ ​fi le/​0 023/​105269/​I man-​F M-​Revocation-​Notice.pdf>.
119
  Ofcom, ‘Procedures for the consideration of statutory sanctions in breaches of broadcast licence’, 3 April
2017, <https://​w ww.ofcom.org.uk/​_ ​_​data/​a ssets/​pdf_ ​fi le/​0 030/​71967/​P rocedures_ ​for_​consideration.pdf>.
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,
741

714 Part V  Communications Content

breach of Section 2 of the Code (but no sanction was applied) by Ofcom. The ar-
gument 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 argu-
ments 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 provi-
sions or the Code itself, and these provisions confirmed for ECHR purposes that
the restriction was prescribed by law and pursuing a legitimate goal, leaving pro-
portionality 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 dia-
logue which retains a degree of relevant content’, this does not extend to ‘gra-
tuitous 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 con-
firmed 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.
122
751

14  The Impact of Broadcast Regulation 715

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, <http://​stake-
holders.ofcom.org.uk/​binaries/​consultations/​vod/​summary/​vod.pdf>; Ofcom, ‘The regulation of video on
demand services’, 18 December 2009, <http://​stakeholders.ofcom.org.uk/​binaries/​consultations/​vod/​state-
ment/​vodstatement.pdf>.
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 in-
formation 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
 <https://​w ww.ofcom.org.uk/​t v-​radio-​a nd-​on-​demand/​i nformation-​for-​i ndustry/​on-​demand>.
128
  Communications Act 2003, s 386N.
761

716 Part V  Communications Content

• its principal purpose is the provision of programmes the form and content of
which are comparable to the form and content of programmes normally in-
cluded 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 pro-
visional view, leading where applicable to a Scope Determination (recording a
breach of Sections 386BA and 386D(ZA) of the Communications Act 2003 (notifi-
cation 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 con-
sidered 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 ‘com-
parability’ 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.
71

14  The Impact of Broadcast Regulation 717

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 an-
other 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 de-
cisions 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 con-
tent 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 com-
parability 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 con-
sequences, 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
 <http://​stakeholders.ofcom.org.uk/​binaries/​enforcement/​vod-​services/​sunvideo.pdf>; 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.
781

718 Part V  Communications Content

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 ser-
iously 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, substi-
tuting ‘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 equiva-
lent material (termed ‘specially restricted material’) required access control,

136
  Ofcom, ‘Sexually explicit material and video-​on-​demand services’ <http://​stakeholders.ofcom.org.uk/​
binaries/​i nternet/​explicit-​material-​vod.pdf>.
137
 <http://​old.culture.gov.uk/​i mages/​publications/​E Vletter-​to-​ed-​r ichards-​3aug2011pdf.pdf>.
791

14  The Impact of Broadcast Regulation 719

and material refused classification by the BBFC (or its equivalent) could not be in-
cluded 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 (cur-
rently the British Board of Film Classification), and sale or supply of an unclas-
sified 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 princi-
pally 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.
702

720 Part V  Communications Content

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 commu-
nication.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 pur-
pose 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 re-
ceipt.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 sig-
nificant 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’ <http://​a sa.org.uk/​Regulation-​E xplained/​H istory-​of-​Ad-​Regulation.
aspx>.
712

14  The Impact of Broadcast Regulation 721

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 pro-
cess 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.
148

  R v ASA ex parte The Insurance Service (1990) 2 Admin LR 77; R (Debt Free Direct) v Advertising Standards
149

Authority [2007] EWHC 1337 (Admin).

150
  This role was for many years played by the former Office of Fair Trading (OFT). Trading standards is pri-
marily 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 prac-
tice, Camden Council carries out the necessary work on behalf of NTSB. The statutory duty to enforce and as-
sociated 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.
72

722 Part V  Communications Content

handling, although NTSB can also act without an ASA referral.151 Through CAP, de-
cisions 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 tele-
communications terms, it includes mobile phone, email, VOD, and internet ad-
vertising) 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 informa-
tion 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 con-
sumer law, and was subject to the voluntary levy. However, to fulfil the UK’s trans-
position 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 ap-
plies 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 au-
thorities ‘shall have regard to the desirability of encouraging control of unfair commercial practices by such
established means as it considers appropriate’.
152
 <https://​w ww.asa.org.uk/​codes-​a nd-​r ulings/​non-​compliant-​online-​advertisers.html>.
153
  Ofcom, ‘The regulation of video on demand services’ 18 December 2009 <http://​stakeholders.ofcom.org.
uk/​binaries/​consultations/​vod/​statement/​vodstatement.pdf>  66.
723

14  The Impact of Broadcast Regulation 723

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 commer-
cial communications on all audiovisual media services, ie that advertising be rec-
ognisable (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 con-
sumption (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 applica-
tion, with one exception: Article 22 sets out six further television-​specific restric-
tions 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 as-
signed 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 provi-
sions 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
 <http://​stakeholders.ofcom.org.uk/​binaries/​consultations/​reg_​broad_ ​ad/​statement/​mou.pdf>.
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).
742

724 Part V  Communications Content

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 statu-

tory 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 televi-
sion, 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 envir-
onmental claims, rule 20 with five rules on motoring. Particularly detailed provi-
sion 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 broad-
casters 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.

157
  Bonner and Aston vol 5, n 108, p 262.
158
  Barnett, E, ‘BACC to change ownership and rebrand as Clearcast’ Media Week 11 September 2007. <http://​
www.mediaweek.co.uk/​news/​737144/​>. 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 <http://​k b.clearcast.co.uk/​w iki/​26/​channels-​we-​clear-​for>.
160
  Diomed Direct v Clearcast (High Court, May 2016).
752

14  The Impact of Broadcast Regulation 725

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 dedi-
cated 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 proportion-
ality.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 pro-
vided 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 op-
posed to the amount of advertising in a given hour, which is capped at 12 min-
utes), 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 fur-
ther 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 advertise-
ments. 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 program-
ming, 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 re-
strictions on scheduling in rule 32, eg on advertisements broadcast in or adja-
cent to programmes ‘principally directed at or likely to appeal particularly to’
under 18s, or avoiding ‘unsuitable juxtapositions’ between programmes and
advertisements.

  Case C-​2 34/​12, Sky Italia v AGCOM [2014] 1 CMLR 22.

161 162
  Case C-​2 81/​0 9, Commission v Spain.
  Ofcom, ‘Regulating the quantity of advertising on television’ 15 December 2011  <http://​stakeholders.
163

ofcom.org.uk/​broadcasting/​broadcast-​codes/​advert-​code/​ad-​m inutage>.
164
  First introduced as a trial in 2011, and made permanent in a 2014 amendment to COSTA.
762

726 Part V  Communications Content

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 per-
mitted within the scope of the controls on advertising breaks, but a teleshop-
ping ‘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 broad-
casting 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 adver-
tisement 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 de-
fined 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 teleshop-
ping), meaning that the licence for a PTV service must specify that it is a tele-
shopping 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 <http://​stakeholders.ofcom.org.uk/​binaries/​consultations/​participationtv3/​statement/​statement.pdf>.
167
  C-​195/​0 6, [2007] ECR I-​8 817.
72

14  The Impact of Broadcast Regulation 727

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 plat-
form (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 pro-
motional references’. It must be appropriately acknowledged, but sponsorship
announcements are not counted towards the 20 per cent maximum time for ad-
vertising. 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, documen-
taries, 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 entertain-
ment, but not children’s programmes. ‘Prop placement’ (with no payment asso-
ciated 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, appro-
priate 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 cer-
tain smoking-​related products), nor in three further programme categories (reli-
gion, consumer advice, current affairs) (Communications Act 2003, s 6, Sch 11A).
Sponsorship and product placement are regulated by ­ chapter  9 of the
Broadcasting Code.
728

728 Part V  Communications Content

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: chat-
line, 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 mem-
bers 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 warn-
ings, 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

168
  ICSTIS v Andronikou (liquidators of Allied Communications Ltd) [2007] EWHC 2307 (Admin).
169
  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).
729

14  The Impact of Broadcast Regulation 729

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 ac-
cessed 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 avail-
able 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) condi-
tions 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 gen-
eral obligation to monitor’ is specifically mentioned), it is not required.
The general requirements of the code relate to legality, consumer protec-
tion (transparency and pricing, fairness, maximum charges), and privacy. The
content requirements are principally avoiding the causing of harm or ‘un-
reasonable 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 provi-
sions of the PSA Code.
PRS (or ‘other telephony services for which the revenue is shared’) can be in-
cluded 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 mech-
anism. 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 pro-
visions 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).
703

730 Part V  Communications Content

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 re-
mains 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, particu-
larly 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 com-
missioners of original content alongside what was for long their core catalogues of
works previously broadcast or exhibited elsewhere. The BBC moved its BBC3 ser-
vice 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 pro-
grammes’ 18 July 2007 <https://​w ww.ofcom.org.uk/​_ ​_​data/​a ssets/​pdf_ ​fi le/​0 020/​42914/​report.pdf>; House of
Commons Culture, Media & Sports Committee, ‘Call TV quiz shows’ 25 January 2007, HC 72 <http://​w ww.
publications.parliament.uk/​pa/​c m200607/​c mselect/​c mcumeds/​72/​7203.htm>.
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 sub-
scription services.
713

14  The Impact of Broadcast Regulation 731

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 re-
quirements 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 polit-
ical or industry consensus on the appropriateness of applying any particular ap-
proach 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 stand-
ards’ 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 broad-
casting (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 (per-
haps analogue television and the public teletext service), and recognized the
changes pertaining to ITV (including the future of non-​BBC public service broad-
casting). 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 con-
sequences 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
 <https://​w w w.ofcom.org.uk/​c onsultations-​a nd- ​s tatements/​c ategory-​3/​m andatory- ​d aytime-​p in-
​protections>.
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
 <ht t ps:// ​ w w w.gov.u k/​ g over nment/ ​ u ploads/​ s ystem/ ​ u ploads/​ a t tachment _ ​ d ata/ ​ f i le/ ​ 2 25783/​
Connectivity_​Content_ ​a nd_​Consumers_ ​2013.pdf>.
723
73

15

INTER NE T SERVICE PROVIDER S

CONTENT LIABILITY, CONTROL, AND NETWORK NEUTRALITY

Christopher T. Marsden

1 5.1 Defining Information Society Service Providers  734

15.2 US Legislation on Intermediary Liability  735
15.3 Development of European Law  739
15.4 European Copyright Enforcement via ISPs  745
15.5 Graduated Response in Europe  752
15.6 European Hotlines to Remove Illegal Content  756
15.7 Development of Legal Debate Regarding Traffic Management  763
15.8 US Network Neutrality  768
15.9 European Legislation and Regulation of Network Neutrality  774
15.10 Concluding Remarks: From Mere Conduit to
Interceptors of Content  787

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) be-
tween 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, <https://​w ww.gov.uk/​government/​uploads/​s ystem/​uploads/​at-
tachment_​data/​fi le/​270943/​0780_ ​iv.pdf>.
734

734 Part V  Communications Content

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 pro-
vider 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 re-
muneration which consists wholly or mainly in the conveyance of signals on elec-
tronic 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 elec-
tronic 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 ser-
vice 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 provi-
sions 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.
753

15  Content Liability, Control, and Network Neutrality 735

connections for digital online communications, between or among points spe-

cified 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 net-
work 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 ac-
cess 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

8
  Digital Millennium Copyright Act 1998, s 512(k)(1)(A–​B).
9
  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 <http://​c uria.europa.eu/​juris/​document/​document.jsf?d
oclang=EN&text=&pageIndex=0&mode=DOC&docid=121743&cid=848081>.
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. <http://​curia.europa.eu/​juris/​document/​
document.jsf?text=&docid=115202&pageIndex=0&doclang=EN&mode=doc&dir=&occ=first&part=1&cid=574684>.
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).
763

736 Part V  Communications Content

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’ provi-
sions to widely protect ISPs, even where (a) it was aware of unlawful hosted con-
tent; (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 . . . ap-
plied 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 informa-

tion, 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, direc-
tories, 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).
73

15  Content Liability, Control, and Network Neutrality 737

s 512. In A&M Records v Napster,18 the court refused to extend the safe harbour pro-
visions 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 copy-
right 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 vio-
lation 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’).

18

  In re Aimster Copyright Litigation 334 F 3d 643 (7th Cir 2003).

19

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
  Tiffany (NJ), Inc v eBay, Inc 600 F 3d 93 (2nd Cir 2010). 23
  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.
738

738 Part V  Communications Content

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 fil-
tering 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 es-
tablishment 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 dam-
ages 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 crim-
inal certain forms of copyright infringement, [the United States]  . . .  acted with
exceeding caution.’36 However, the proposed extradition to the United States

30
  Ibid at 937. 31
  Napster, n 18, at 1027.
32
 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
<http://​w ww.ligue.org/​documents/​2011rapportBUS.pdf>.
34
  See Memorandum Of Understanding (2011) dated 7 June 2011, at <http://​w ww.copyrightinformation.
org/​sites/​default/​fi les/​Momorandum%20of%20Understanding.pdf>, 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 <https://​w ww.eff.org/​deeplinks/​2011/​07/​g raduated-​response-​deal-​w hat-​i f-​u sers-​had-​been>
18 July 2011.
35
  See <http://​w ww.copyrightinformation.org/​news/​releases>, 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).
793

15  Content Liability, Control, and Network Neutrality 739

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 sig-
nalled 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 communica-
tions 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 prin-
ciple 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 estab-
lish 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 <http://​w ww.cybercrime.gov/​u samay2001_ ​5.htm>.
39
  See US Attorney Prosecuting IP Crimes Manual, Criminal Copyright Infringement Issues, §II.B.2 (2006),
available at <http://​w ww.cybercrime.gov/​ipmanual/​02ipma.html#II.B.2.a>.
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 <http://​web.mclink.it/​MC8216/​netmark/​attach/​bonn_​en.htm#Heading01>.
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.
470

740 Part V  Communications Content

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, to-
gether 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 es-
tablished 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.

  See Chapter 14, Section 14.2.

46 47
  ECD, Art 2(h).
  A number of issues are excluded from ECD scope under Art 1(5) or Art 3 (derogations from the Internal
48

Market clause listed in ECD annex).

741

15  Content Liability, Control, and Network Neutrality 741

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 sub-
stantially, because when an ISP ‘obtains actual knowledge’ of a site containing in-
fringement 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 know-
ledge’ 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’ il-
legal 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 in-
tegral 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

49
  Case C-​324/​0 9 L’Oréal SA & Others v eBay International AG & Others, decided 12 July 2011.
50
  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.
472

742 Part V  Communications Content

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 im-
ages (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 dir-
ectly 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 min-
imum 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 <http://​cordis.europa.eu/​ist/​t rust-​security/​projects_ ​f p5.htm>.
53
  The ISPA UK Code of Practice Statement of Policy, as amended 2007, at <http://​w ww.ispa.org.uk/​about_​
us/​page_​16.html>.
54
  ISPA (2007) n 53.
473

15  Content Liability, Control, and Network Neutrality 743

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 re-
quire 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 no-
tify 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

55
  Digital Millennium Copyright Act 1998, s 512(i)(1)(A). 56
  Ibid, s 512(g). 57
  Ibid, s 512(g)(2).
58
  Ibid, s 512(g)(2)(c). 59
  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).
47

744 Part V  Communications Content

post that the content was neither illegal nor harmful. Consequently there is a po-
tential 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 require-
ments 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 enforce-
ment. 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 re-
form 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 ambi-
tious 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 <http://​w ww2.ohchr.org/​english/​bodies/​h rcouncil/​docs/​17session/​A .HRC.17.27_​en.pdf>.
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  <http://​psauthority.
org.uk/​news-​and-​events/​news/​2016/​july/​uk-​regulator-​phonepayplus-​to-​rename-​as-​phone-​paid-​services-​
authority>.
475

15  Content Liability, Control, and Network Neutrality 745

comments on, among other matters, the interpretation of the provisions con-
cerning 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 excep-
tion 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 pro-
tected 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, con-
trasted 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 <http://​ec.europa.eu/​i nternal_ ​market/​e-​commerce/​docs/​communication2012/​
COM2011_ ​942_​en.pdf>. 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 <www.blplaw.com/​media/​pdfs/​News%20and%20Views/​Headdon.pdf>.
476

746 Part V  Communications Content

• 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 copy-
right or related right.’ Recital 59 Copyright Directive states:
In the digital environment, in particular, the services of intermediaries may in-
creasingly 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’ al-
though 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 pos-
ition 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 equiva-
lent 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.
47

15  Content Liability, Control, and Network Neutrality 747

and shall be applied in such a manner as to avoid the creation of barriers to legit-
imate 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 re-
calling, 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 af-
fect’ 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 ‘con-
ditions 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 re-
move 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 con-
tent 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 com-
merce in the internal market and the implementation of the Directive on electronic commerce (2000/​31/​
EC), at <http://​ec.europa.eu/​i nternal_ ​market/​consultations/​docs/​2010/​e-​commerce/​questionnaire_​%20e-​
commerce_​en.pdf>.
76
  Article 2(3) of the Enforcement Directive requires that measures are ‘effective, proportionate and dissua-
sive’. 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 ob-
ligation 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.
478

748 Part V  Communications Content

facts of the case itself: the Belgian court ordered an ISP to filter all traffic for copy-
right 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 pro-
tection of the fundamental right to property, which includes the rights linked to
intellectual property, must be balanced against the protection of other funda-
mental 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 ex-
pense. The Belgian court’s order would have emasculated Article15 ECD. This rea-
soning 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 cus-
tomers 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 un-
lawful use.78 Confirmation that IP addresses may be considered personal data ar-
rived 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 <http://​c uria.europa.eu/​juris/​
document/​document.jsf?text&docid=119512&pageIndex=0&doclang=EN&mode=req&dir&occ=first&part=1
&cid=158253>.
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.
479

15  Content Liability, Control, and Network Neutrality 749

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 injunc-
tion 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 sub-
scribers 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’ copy-
right 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) <http://​w ww.bailii.org/​ew/​
cases/​E WHC/​C h/​2010/​6 08.html>.
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.
570

750 Part V  Communications Content

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 jur-
isdiction 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 en-
able 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 en-
able 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 prece-
dent 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 <http://​papers.ssrn.com/​sol3/​papers.cfm?abstract_​id=1653259>.
86
  Norwich Pharmacal Co v Customs and Excise Commissioners [1973] UKHL 6, [1974] AC 133.
715

15  Content Liability, Control, and Network Neutrality 751

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 exces-
sively costly’. The cost in this case to BT ‘would be modest and proportionate’ sup-
ported 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 circum-
stances including . . . costs, consequences for the parties and effectiveness of tech-
nical 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.
752

752 Part V  Communications Content

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 ac-
cess to The Pirate Bay following judgment on 2 May in Dramatic Entertainment
Limited v British Sky Broadcasting Limited.90 Graham Smith had presciently ar-
gued 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.

89
  ’Arts Group tell BT to block access to The Pirate Bay’, BBC, 4 November 2011.
90
 Dramatic Entertainment Limited v British Sky Broadcasting Limited [2012] EWHC 1152 (Ch) 2 May
at: <http://​w ww.bailii.org/​e w/​c ases/​E WHC/​C h/​2012/​1152.html>.
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 resi-
dence or place of establishment within the internal market and amending Regulation (EC) No 2006/​2004 and
Directive 2009/​22/​EC, 25 May.
753

15  Content Liability, Control, and Network Neutrality 753

‘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 para-
graph 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 re-
jected 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
<http://​t orrentfreak.com/​p irate-​b ay-​f ounders-​p rison-​s entences-​f inal-​s upreme- ​c ourt-​a ppeal-​r ejected-​
120201/​>.
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.
574

754 Part V  Communications Content

3. If the infringement is repeated within a year, the internet user is penalized ac-
cording 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 subscrip-
tion 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 ju-
dicial 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 con-
sent 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 suspen-
sion 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 <https://​w ww.legifrance.
gouv.fr/​a ffichTexte.do;jsessionid=?cidTexte=JORFTEXT000027678782&dateTexte=&oldAction=rechJO&cate
gorieLien=id>.
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 for-
ever and also if there has not yet been any infringement but it is likely to happen. Section 97A requires a service
75

15  Content Liability, Control, and Network Neutrality 755

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 dis-
missed 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 ra-
ther 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 <http://​w ww.bailii.org/​e w/​c ases/​E WCA/​Civ/​2012/​2 32.html>.
103
  Draft Online Infringement of Copyright (Initial Obligations) (Sharing of Costs) Order 2011 (draft Costs
Order) January 2011, <https://​w ww.legislation.gov.uk/​u kdsi/​2011/​9780111505779>—​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 <https://​w ww.ofcom.org.uk/​_ ​_​data/​a ssets/​pdf_ ​fi le/​0 033/​99483/​online-​content-​study-​010316.pdf>.
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, pres-
entation to E-​Commerce Directive Expert Group, 23 September at <http://​ec.europa.eu/​i nternal_​market/​e-​
commerce/​docs/​expert/​20100923-​presentation-​dea_​en.pdf>.
576

756 Part V  Communications Content

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 mechan-
isms: IP address filtering, DNS poisoning, and keyword searching.107 A fourth possi-
bility 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 sup-
port 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 coord-
ination 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 sus-
pected 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 <http://​ec.europa.eu/​i nformation_​society/​activ-
ities/​sip/​policy/​programme/​i ndex_​en.htm>.
75

15  Content Liability, Control, and Network Neutrality 757

pan-​European hotline association INHOPE contributes to the EC Safer Internet

Forum with all the SIAP-​funded programs. EuroISPA110 recognized the devel-
opment 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 con-
tent, 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 web-
sites suspected to contain child pornography.
Several European states have laws against Holocaust denial, while many ban ma-
terials 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, <http://​w ww.saferinternet.org/​w w/​en/​pub/​i nsafe/​
news/​newsletter/​newsltr_​a rchives/​2007_​september.htm>.
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 <http://​w ww.ivir.nl/​publications/​v aneijk/​Moving_​
Towards_​Balance.pdf>.
113
 Norwegian Parliament study group on internet filtering law proposal at NOU-​2007-​2:  <http://​w ww.
regjeringen.no/​nb/​dep/​jd/​dok/​nouer/​2007/​nou-​2007-​2/​6.html?id=449809>.
114
 Callanan, Cormac and Nikos Frydas (2007) INHOPE Global Internet Trend Report at <http://​w ww.
saferinternet.org/​w w/​en/​pub/​i nsafe/​news/​a rticles/​0 907/​2007_ ​i nhope.htm>.
115
  See CETS No: 185 Council of Europe Convention on Cybercrime of 23 November 2001, entered into force
1 July 2004 at <http://​conventions.coe.int/​Treaty/​E N/​Treaties/​Html/​185.htm>.
578

758 Part V  Communications Content

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 na-
tional or ethnic origin, as well as religion if used as pretext for any of these fac-
tors . . . [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 arrange-
ments 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 cur-
rently allow for police intervention, but Scandinavian models do. Hotlines are exem-
plars 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 <http://​ssrn.com/​abstract=1103030>; 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 <http://​
blogscript.blogspot.com/​2008/​12/​iwf-​v-​wikipedia-​and-​rest-​of-​world.html>; Clayton, Richard, ‘Technical aspects
of the censoring of Wikipedia, Light Blue Touchpaper’, 11 December 2008, at <http://​www.lightbluetouchpaper.
org/​2008/​12/​11/​technical-​aspects-​of-​the-​censoring-​of-​wikipedia/​>; 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 <http://​www.osce.org/​publications/​rfm/​
2004/​12/​12239_​89_​en.pdf>.
759

15  Content Liability, Control, and Network Neutrality 759

opportunities for the dissemination of this type of material.118 Facilitated by gov-

ernment, 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, con-
sumer 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 ob-
jectives and IWF itself obtained charitable status, registered on 5 December 2005. Its
mission is, ‘To work in partnership with internet service providers, telecommunica-
tion 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
 <http://​w ww.iwf.org.uk/​public/​page.29.htm>—​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 <http://​w ww.mit.edu/​activities/​
safe/​labeling/​r3.htm>.
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: <http://​w ww.iwf.org.uk/​f unding/​page.64.htm>.
122
  The Annual Report is available on the Internet Watch Foundation website: <http://​w ww.iwf.org.uk/​ac-
countability/​a nnual-​reports>.
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 <http://​w ww.iwf.org.uk/​hotline/​t he-​laws/​c riminally-​obscene-​adult-​content/​c riminal-​justice-​
and-​i mmigration-​act-​2008>. It has always cooperated with police to report illegal material under the Obscene
Publications Act 1959.
670

760 Part V  Communications Content

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 devel-
oped 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
<http://​w ww.iwf.org.uk/ ​hotline/​t he-​l aws/​non-​photographic- ​c hild-​s exual-​a buse-​i mages/​c oroners-​a nd-
​justice-​act-​2009>.
126
  Internet Watch Foundation, ‘Incitement to racial hatred removed from IWF’s remit’, 11 April 2011 at
<http://​w ww.iwf.org.uk/​about-​iwf/​news/​post/​302-​i ncitement-​to-​racial-​hatred-​removed-​f rom-​iwfs-​remit>.
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 <http://​www.ceop.gov.uk/​>.
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 <http://​www.iwf.org.uk/​documents/​20041015_​mou_​final_​oct_​2004.pdf>.
131
 Clayton, R, ‘Failures in a Hybrid Content Blocking System, presented at the Workshop on Privacy
Enhancing Technologies’ 2005, Dubrovnik, at <http://​w ww.cl.cam.ac.uk/​~rnc1/​cleanfeed.pdf>.
132
  See Internet Watch Foundation 7 June 2004 announcement at <http://​w ww.iwf.org.uk/​media/​news.
archive-​2004.39.htm>.
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 <http://​
www.befreecenter.org/​Upload/​Conference/​papers/​BT.ppt>.
716

15  Content Liability, Control, and Network Neutrality 761

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 re-
tail 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 ac-
commodate 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 terri-
tory. These measures must be set by transparent procedures and provide adequate
safeguards, in particular to ensure that the restriction is limited to what is neces-
sary and proportionate, and that users are informed of the reason for the restric-
tion. 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 <https://​publicaffairs.linx.net/​news/​
?p=154>.
135
  Internet Watch Foundation (2008) Child Sexual Abuse Content URL List, at <http://​w ww.iwf.org.uk/​cor-
porate/​page.49.233.htm>.
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 radical-
isation: 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 <http://​publicaffairs.linx.net/​news/​?p=497#more-​497>.
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’.
672

762 Part V  Communications Content

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 pro-
cedures 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 ex-
ample. 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 <www.apcomms.org.uk/​uploads/​apComms_​Final_​Report.pdf>; Callanan, Cormac,
Gercke, M, De Marco, E, Dries-​Z iekenheiner, H, Internet blocking: balancing cybercrime responses in demo-
cratic societies, (Dublin:  Aconite Internet Solutions, 2009)  at <http://​w ww.aconite.com/​sites/​default/​fi les/​
Internet_​blocking_​a nd_​Democracy.pdf>.
143
  IP-​16-​1937, ‘European Commission and IT Companies announce Code of Conduct on illegal online hate
speech,’ Brussels, 31 May 2016, at <http://​europa.eu/​rapid/​press-​release_​I P-​16-​1937_​en.htm>.
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.
673

15  Content Liability, Control, and Network Neutrality 763

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 in-
dependent 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 an-
nounced 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 tele-
coms 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.
145

  Digital Economy Act 2017 (Commencement No 1) Regulations 2017, SI 2017/​765.

146

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 <http://​w ww.bbc.co.uk/​
news/​technology-​4 0630582>.
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 <http://​registrars.nominet.uk/​news/​
nominet-​a nnouncements/​update-​on-​registration-​policy>.
674

764 Part V  Communications Content

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 <www.aei-​brookings.org/​publications/​abstract.php?pid=1067>.
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), <http://​ssrn.com/​abstract=1018326>.
156
  Comcast v FCC (2010) No 08-​1291, delivered 6 April.
765

15  Content Liability, Control, and Network Neutrality 765

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 imple-
mented 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 Guidelines 160
24/​2/​2009 161 Zero rating NKOM 2014
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 20/​12/​2012 Zero rating 2015
Communications 2012166
Finland Information Society Code 17/​9/​2014 2014
(917/​2014)167
India Regulations (No. 2 of 2016) 8/​2/​2016 8 August 2016
Brazil Law No. 12.965 Decree 11/​5/​2016 No implementation to
No. 8771/​2016 mid-​2017168

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 <http://​eng.nkom.no/​technical/​i nternet/​net-​neu-
trality/​net-​neutrality>.
161
  Olsen, T, ‘Net Neutrality Activities at BEREC and Nkom, Norwegian Communications Authority’ (2015),
slide 5, at <http://​berec.europa.eu/​fi les/​doc/​2015-​07-​13_​0 9_​56_ ​36_ ​3.%20Noruega%20Nkom%20net%20neu-
trality%20-​%20Summit%20BEREC-​EaPeReg-​R EGULATEL-​E MERG.pdf>.
162
  See The Chilean ‘Law 20.453, which enshrines the principle of net neutrality for consumers and Internet
users’ (2010), at <http://​w ww.leychile.cl/​Navegar?idNorma=1016570&buscar=NEUTRALIDAD+DE+RED>.
163
  See <http://​w ww.subtel.gob.cl/​i mages/​stories/​a rticles/​subtel/​a socfile/​10d_​0368.pdf>.
164
  See  <https://​www.government.nl/​documents/​policy-​notes/​2012/​06/​07/​dutch-​telecommunications-​act>.
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 <https://​w ww.finlex.fi/​fi/​laki/​k aannokset/​2014/​en20140917>.
167
  ‘No. 003-​02-​10/​2012-​32’, at <http://​w ww.uradni-​l ist.si/​1/​content?id=11144>.
168
  For updates, see ‘Ministry of Justice’, (2016) at <http://​pensando.mj.gov.br/​marcocivil/​>.
67

766 Part V  Communications Content

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 ma-
turity, 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

169
 See Western Union Telegraph Co v Call Publishing Co, 181 US 92, 98 (1901).
170
  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).
67

15  Content Liability, Control, and Network Neutrality 767

analysts to be special, due to its decentred construction,172 separating it from

earlier ‘technologies of freedom’ including radio and the telegraph. It is im-
portant to recognize the end-​to-​end principle governing internet architecture.173
The internet had never been subject to regulation beyond that needed for inter-
operability 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 pri-
vatized in 1991–​95 meant that development was focused almost entirely in the ap-
plication 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 trans-
mission 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 en-
gineers 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 con-
gestion, 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.
678

768 Part V  Communications Content

‘common carriage’ under the Telecommunications Act, and its alter ego ‘informa-
tion 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 aban-
donment 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 regu-
lated ‘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 pre-
serve 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: <http://​w ww.coe.int/​t/​dghl/​
standardsetting/​media/​Doc/​M M-​S -​PL(1999)012_​en.asp>.
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 <http://​h raunfoss.fcc.gov/​edocs_​public/​attachmatch/​DOC-​261936A1.pdf>.
180
 Powell (2004) Four Freedoms speech, at <http://​h raunfoss.fcc.gov/​edocs_​public/​attachmatch/​DOC-​
243556A1.pdf>.
181
  FCC 05-​151, adopted 5 August 2005.
679

15  Content Liability, Control, and Network Neutrality 769

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 regu-
latory 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 broad-
band ISP.184 FCC ordered Comcast to within 30 days:

1. disclose to the Commission the precise contours of the network manage-

ment 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 discrimin-
atory 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 manage-
ment 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 cus-
tomers’ 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 <http://​
hraunfoss.fcc.gov/​edocs_​public/​attachmatch/​DA-​05-​5 43A1.pdf>.
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’).
70

770 Part V  Communications Content

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 acces-
sibility’, ‘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 re-
quired 60 days before both pro-​and anti-​net neutrality organizations were able to

185
  Comcast Corp. v FCC, 600 F.3d 642, 2010 United States Court of Appeals for the District of Columbia.
186
  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).
71

15  Content Liability, Control, and Network Neutrality 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 incap-
able of effective enforcement following litigation which ended in 2014192 and re-
sumed 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, applica-

tions, 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 <http://​commcns.org/​sOFyyT>.
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 <http://​
www.washingtonpost.com/ ​b usiness/​t echnology/​a tandt-​t o-​t hrottle-​d ata-​s peeds-​f or-​h eaviest-​w ireless-​
users/​2011/​0 8/​01/​g IQAh0HBoI_​story.html>.
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 <https://​apps.fcc.gov/​edocs_​public/​attachmatch/​FCC-​
05-​151A1.pdf>. 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 <https://​apps.fcc.gov/​edocs_​public/​attachmatch/​FCC-​
15-​2 4A1.pdf>.
72

772 Part V  Communications Content

• 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 <http://​i nternet-​g overnance.fgv.
br/​s ites/​i nternet-​g overnance.fgv.br/​f iles/​p ublicacoes/​net_ ​neutrality_ ​r eloaded_​0 .pdf>. For economic
analysis, see OXERA, ‘Zero rating: free access to content, but at what price?’, July 2016, at <http://​w ww.
oxera.com/​L atest-​T hinking/​A genda/​2 016/​Z ero-​r ating-​f ree-​a ccess-​t o-​c ontent,-​b ut-​a t-​w hat-​p r.aspx>.
197
  Northrup, L, ‘T-​Mobile Now Exempts 33 Streaming Music Services From Data Limits, Adds Apple Music,
Consumerist’ (2015), at <http://​consumerist.com/​2015/​07/​2 8/​t-​mobile-​now-​exempts-​33-​streaming-​music-​
services-​f rom-​data-​l imits-​adds-​apple-​music/​>.
198
  Goldstein, P, ‘Net Neutrality Rules won’t Force Carriers to Get FCC Permission for New Plans’ (2015),
at <http://​w ww.fiercewireless.com/​story/​net-​neutrality-​r ules-​wont-​force-​c arriers-​get-​fcc-​permission-​new-​
plans-​offic/​2015-​02-​26>.
199
  Telecom Paper, ‘FCC Set to Approve AT&T’s DirecTV Takeover with Conditions’ (2015), at <http://​w ww.
telecompaper.com/​news/​fcc-​set-​to-​approve-​atandts-​d irectv-​t akeover-​w ith-​conditions/​> (‘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.’)
73

15  Content Liability, Control, and Network Neutrality 773

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 fu-
ture plans, for instance zero rating schemes or specialized services, that may risk
breaching net neutrality: ‘new process involves requesting and receiving an ad-
visory 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 <http://​a rstechnica.com/​business/​2014/​12/​comcast-​to-​stop-​blocking-​hbo-​
go-​a nd-​showtime-​on-​roku-​streaming-​devices/​>.
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 <http://​t ransition.fcc.gov/​Daily_​Releases/​Daily_​
Business/​2015/​db0728/​FCC-​15-​94A1.pdf>.
202
 FCC, Open Internet Advisory Opinion Procedures, Protecting and Promoting the Open Internet, GN Docket
No. 14-​28 (2015), at <https://​w ww.fcc.gov/​document/​public-​notice-​open-​i nternet-​advisory-​opinions>.
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).
74

774 Part V  Communications Content

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 Phase 1: Policy 2005–​10 Phase 2: Open Internet Phase 3: Title II Open
Regulation under Title I, 2010–​14 Internet, 2014–​

Challenge Internet Policy Statement Open Internet Order Response to Verizon v

to Existing 2005 following ‘Four FCC (2014)
Regulation Freedoms’ speech 2004
Commission Comcast investigation Preserving the Open Protecting and
Proceeding 2007–​8208 Internet (2009)209 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 Comcast v FCC Court of Verizon v FCC Court NPRM drafted May
down Appeals 6 April 2010 of Appeals 14 January 2017—​deregulatory
2014213 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 <https://​w ww.publicknowledge.
org/​news-​blog/​blogs/​net-​neutrality-​i n-​court-​t his-​week-​t he-​story-​of-​how-​we-​got-​here/​>.
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.
75

15  Content Liability, Control, and Network Neutrality 775

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 mo-
bile 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, col-
lated 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 pro-
moted by [NRAs] (Article 8(4)(g) Framework Directive), alongside the strength-
ening 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 <http://​eur-​lex.europa.eu/​LexUriServ/​LexUriServdo?uri=OJ:L:2009:337:0037:0069:
EN:PDF>.
219
  See Jasper P Sluijs, Florian Schuett, and Bastian Henze, Transparency regulation in broadband mar-
kets: Lessons from experimental research, (2011) 35 Telecommunications Policy 592–​6 02 for an experimental
analysis of transparency regulation in broadband.
76

776 Part V  Communications Content

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 per-
sonal 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 regu-
latory 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 min-
imum quality of service requirements’.
As with all telecoms licensing conditions, net neutrality depends on the phys-
ical 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 meas-
ures (TMM) be permitted, and that the end-​user be informed of this reasonable-
ness 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.
7

15  Content Liability, Control, and Network Neutrality 777

‘reasonableness’ of traffic management practices. In Canada, the CRTC has relied

on inquiries to the dissatisfaction of advocates. Little was done to define reason-
ableness 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 recal-
citrant 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 ‘sym-
metric’ regulation on all operators, not simply dominant actors, but ask for clari-
fication 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 ob-
ligations of access and/​or interconnection (with the definition of ‘access’ also
modified in Article 2 Access Directive as previously stated). Dispute resolutions

 <http://​stakeholders.ofcom.org.uk/​consultations/​net-​neutrality/​?showResponses=true>.
224

 Ofcom (2012) Draft Annual Plan 2012/​13, at <http://​w ww.ofcom.org.uk/​about/​a nnual-​reports-​a nd-​
225

plans/​>.
226
  Ofcom (2012) at paragraphs 5.40–​5.42. 227
  See Marsden (2017), n 151, at Chapter 6.
78

778 Part V  Communications Content

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 pro-
vide 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 imple-
mentation on 30 September 2010.228 BEREC issued their response to the EC con-
sultation 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 con-
sumption per user in certain circumstances (more than fixed network access with
high bandwidth resources) and as this does not involve selective treatment of con-
tent 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), sym-
metrical regulation must be maintained to ensure technological neutrality: ‘there
are not enough arguments to support having a different approach on network neu-
trality 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 suffi-
cient’234 and points out the limited role of NRAs.

228
 <http://​e c.europa.eu/​i nformation_ ​s ociety/​p olicy/​e comm/ ​l ibrary/​p ublic_ ​c onsult/​n et_ ​n eutrality/​
index_​en.htm>.
229
  BoR (10) 42 BEREC Response to the European Commission’s consultation on the open Internet and net
neutrality in Europe, at <http://​w ww.erg.eu.int/​doc/​berec/​bor_​10_​42.pdf>.
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 <http://​erg.eu.int/​docu-
ments/​berec_​docs/​i ndex_​en.htm>.
234
  See BoR 67 [11] at p 5.
79

15  Content Liability, Control, and Network Neutrality 779

The Netherlands became the first European nation to formally introduce man-
dated 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 discrimin-
atory 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 poten-
tially 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 under-
taking providing public communications networks or publicly available elec-
tronic communications services;
(2) ‘internet access service’ [IAS] means a publicly available electronic communi-
cations service [PECD] that provides access to the internet, and thereby con-
nectivity to virtually all end points of the internet, irrespective of the network
technology and terminal equipment used.

235
  See further Marsden, n 151, esp. Chapter 4.
236
  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 communica-
tions networks and services and Regulation (EU) No 531/​2012 on roaming on public mobile communications
networks within the Union, OJ L 301/​1.
237
 <http://​eng.nkom.no/​technical/​i nternet/​net-​neutrality/​berec-​a nd-​net-​neutrality>.
238
 IP-​15-​5927 (2015) Press Release <http://​europa.eu/​rapid/​press-​release_​I P-​15-​5927_​en.htm> and
MEMO-​15-​5275 Roaming charges and open Internet:  questions and answers, 27 October 2015, at <http://​
europa.eu/​rapid/​press-​release_​M EMO-​15-​5275_​en.htm>.
239
  Art 2 of Directive 2002/​21/​EC.
870

780 Part V  Communications Content

‘Virtually all’ may have the meaning ‘substantially all’ or ‘most that are technic-
ally 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 func-
tional 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 ex-
cluded 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 elec-
tronic communications networks and services; it does not include information
society services, as defined in Article 1 of Directive 98/​34/​EC, which do not con-
sist 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 de-
fined or written in the Regulation—​is to be preserved in Articles 3–​6, which im-
pose 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 con-
tent, 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 condi-
tions 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.
781

15  Content Liability, Control, and Network Neutrality 781

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 tech-
nical [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, de-
grade 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 excep-
tional 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 spe-
cific 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.’
782

782 Part V  Communications Content

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 elem-
ents 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 “reason-
able 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 accord-
ance 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 en-
forces 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 im-
pact 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: <http://​ssrn.com/​abstract=2741173>.
243
  Ibid, at 8.
244
  Ibid, at 11.   245  Ibid, at 13.
783

15  Content Liability, Control, and Network Neutrality 783

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 devi-
ations 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 con-
sumer in accordance with national law in the event of any continuous or regu-
larly 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] param-
eters and the performance indicated by the [PIAS] in accordance with
points (a)  to (d)  of paragraph 1 shall, where the relevant facts are estab-
lished 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.
874

784 Part V  Communications Content

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 require-
ments concerning technical characteristics, minimum [QoS] requirements and
other appropriate and necessary measures on one or more [PECP], including pro-
viders of [IAS]. NRAs shall publish reports on an annual basis regarding their moni-
toring 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 stake-
holders 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 dis-
suasive. 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.
785

15  Content Liability, Control, and Network Neutrality 785

Regulation, and were primarily drafted by the UK (Ofcom) and Norwegian regu-
lators. 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 pro-
vider 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 im-
pact 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, fol-
lowing 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 <http://​w ww.legislation.gov.
uk/​u ksi/​2016/​6 07/​pdfs/​u ksi_​20160607_​en.pdf>.
786

786 Part V  Communications Content

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 sus-
pension by ACM of the burden during a possible preliminary question. The objec-
tion 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 para-
graphs, 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 net-
works’ 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 <https://​u itspraken.rechtspraak.nl/​i nziendocument?id=ECLI:NL:RBROT:2017:2940&showb
utton=true>.
249
  European Commission, ‘Digital Single Market Reports and studies:  Annual country reports on open
internet from national regulators—​2017’, 20 July 2017 at <https://​ec.europa.eu/​d igital-​single-​market/​en/​
news/​a nnual-​country-​reports-​open-​i nternet-​national-​regulators-​2017>.
250
 Ofcom, ‘Monitoring compliance with the EU Net Neutrality regulation:  A report to the European
Commission’, 2017, at 8–​9.
78

15  Content Liability, Control, and Network Neutrality 787

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 pres-
ence 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 na-
tional 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 be-
haviours 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 re-
search 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 fu-
ture of internet development for innovators. This raising of barriers is summar-
ized 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 ex-
erted 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 neu-
trality 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 <http://​w ww.internetpolicy.org/​briefing/​12_ ​99.html>.
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.
87

788 Part V  Communications Content

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 ac-
cess 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.
789

Part VI

INTERNATIONAL REGUL ATORY REGIMES

970
791

16

INTERNATIONAL REGUL ATORY   L AW

Ian Walden

16.1 Introduction  791

16.2 International Network Infrastructure  793
16.3 International Telecommunication Union  806
16.4 World Trade Organization  827
16.5 Concluding Remarks  844

16 .1 INTRODUC TION

Telecommunications is an inherently trans-​national technology. As such, the de-

velopment 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 tech-
nical 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 pedi-
gree 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 communi-
cations links across jurisdictions subject to both domestic and international law.
As such, the telecommunications industry has been subject to treaties and con-
ventions 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 funda-
mental 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
729

792 Part VI  International Regulatory Regimes

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 pro-
cess 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 telecommunica-
tions 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 appro-
priate decisions in such a rapidly evolving environment.
International telecommunications organizations such as the ITU are also ex-
periencing institutional competition from other inter-​governmental bodies, par-
ticularly the World Trade Organization (WTO). While the associated multinational
trade agreements have focused on telecommunications as a distinct economic ac-
tivity, 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 con-
vergence, 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 develop-
ment, 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 em-
brace 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.
739

16  International Regulatory Law 793

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 tele-
communications operator.1 At an international level, similar issues arise con-
cerning 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 pur-
poses, 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 sta-
tionary (ie a synchronous orbit). An advantage of GEOs is the ability to provide
continuous and relatively comprehensive coverage of the earth with only three

1
  See further Chapter 6, Authorization and Licensing.
2
  Issues relating to the assignment of frequency spectrum and orbital slots are discussed in Section 16.3.2.
974

794 Part VI  International Regulatory Regimes

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 sys-
tems; while the quality of communications is diminished somewhat by the trans-
mission 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 satel-
lite or any other space object.
In 1962, the UN General Assembly adopted a declaration comprising nine fun-
damental legal principles governing the use to be made of ‘outer space’.6 This dec-
laration 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 ce-
lestial 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 re-
gions 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, repre-
senting 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).
759

16  International Regulatory Law 795

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 un-
affected 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 re-
garding 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 poten-
tial ‘launching states’; for example, where a satellite supplier based in the UK ar-
ranges 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 ‘com-
ponent 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 encom-

passed 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 <http://​www.bis.gov.uk/​ukspaceagency/​what-​we-​do/​space-​and-​the-​growth-​agenda/​uk-​capabilities-​for-​
overseas-​markets/​the-​outer-​space-​act-​1986/​registry-​of-​space-​objects>.
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.
796

796 Part VI  International Regulatory Regimes

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 per-
sons (ie the State of nationality); or for those sustaining damage whilst in its terri-
tory (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 con-
cept that each State would maintain a register detailing the space objects for which
the State claimed jurisdiction and control. Such registration procedures were for-
malized 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 <http://​w ww.intelsat.com/​resources/​galaxy-​15/​operational-​status.asp>.
17
  New York, 14 January 1975; TS 70 (1978); Cmnd 7271. The Convention entered into force for the UK on 30
May 1978.
79

16  International Regulatory Law 797

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 aus-
pices 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 trans-
posed 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 oper-
ator.22 Under the terms of any such licence, a licensee is subject to a number of ob-
ligations, 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 en-
sure 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 compul-
sory 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.
18

  The information to be supplied is: the name of the launching State or States; an appropriate designator or
19

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 <http://​w ww.oosa.unvienna.org>).
20
  See Section 16.3.2.
21
 An example of a typical licence can be obtained at <http://​w ww.bis.gov.uk/​a ssets/​bispartners/​
ukspaceagency/​docs/​osa/​osa2008example.pdf>.
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.
798

798 Part VI  International Regulatory Regimes

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 in-
demnify 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 compo-
nents: 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, con-
trol, monitoring and related facilities and equipment required to support the op-
eration 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 con-
trolled. 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 there-
fore ‘Cold War’ implications. However, the 1962 UN resolution represented an im-
portant 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 <https://​w ww.gov.uk/​gov-
ernment/​publications/​d raft-​spaceflight-​bill>.
27
  See <http://​services.parliament.uk/​bills/​2017-​19/​spaceindustrybill.html>.
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).
97

16  International Regulatory Law 799

operated in accordance with the inter-​governmental Agreement and an ‘Operating

Agreement’. Member countries were required to grant Intelsat, and certain of its of-
ficers 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 inter-
national 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 organ-
ization; although prior to privatization, more than 20 other UK-​based operators
were designated as ‘investing entities’. In July 2001, Intelsat became a private com-
pany 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 be-
came 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 organiza-
tional 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 sig-
natory is the European Telecommunications Satellite Organization (Eutelsat), es-
tablished 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 provi-
sion of the space segment required for international public telecommunication
services in Europe’ (Article III(a)). As with Intelsat and Inmarsat, Eutelsat was pri-
vatized 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.
80

800 Part VI  International Regulatory Regimes

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 sys-
tems could be utilized by incumbent operators to restrict access to space segment
capacity and satellite services. In particular, a service provider wanting to pur-
chase 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 pro-
posed 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 rele-
vant 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 organ-
izations, the European Commission believed it was necessary to ensure that ‘users
obtain direct access to space segment capacity, while providers of this space seg-
ment should obtain the right to market space capacity directly to users’.37 Such

34
  See <http://​w ww.eutelsat.com/​>: ‘Introduction to Eutelsat’.
35
  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, espe-
cially 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.
810

16  International Regulatory Law 801

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 ap-
plications 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 pri-
vatization 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 sat-
ellite 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 net-
works 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.
820

802 Part VI  International Regulatory Regimes

terms of offering services on a non-​d iscriminatory basis, as well as specific ser-

vice offerings, such as Inmarsat’s maritime distress and safety services. Whether
the privatized entities will continue to adequately fulfil such public service obli-
gations 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 telecommunica-
tions 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 tele-
phone 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 pri-
vate 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 con-
ventions. 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.

45
  Sagar, n 42.
46
  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.
830

16  International Regulatory Law 803

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 subse-
quent 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 na-
tional marine law, in respect of landing rights. The establishment of cable landing
stations usually involves a complex array of national and (or) local planning, de-
velopment and environmental laws. The provisioning of capacity and ‘backhaul’
facilities, as well as access to landing stations, has come to the attention of tele-
communications 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 ex-
ploring 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 mat-
ters for which it has competence (Council Decision 98/​392/​EC, OJ L 179/​1, 23 June 1998).
804

804 Part VI  International Regulatory Regimes

• 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, pro-
vided 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 in-
jure 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 pre-
cautionary 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

52
  Paris, 14 March 1884 (75 BFSP 356; C 5910). It has 40 state parties.
53
  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), refer-
ring to CPSC. Section 8(1A) extends the protection to submarine cables under territorial waters and the exclu-
sive economic zone. See Agincourt Steamship Co Ltd v Eastern Extension, Australasia and China Telegraph Co
Ltd [1907] 2 KB 305, CA.
55
 <http://​w ww.iscpc.org>. There are also national committees, such as the UK Cable Protection Committee
<http://​w ww.ukcpc.org.uk/​>.
56
 <https://​w ww.iscpc.org/​publications/​recommendations/​>.
850

16  International Regulatory Law 805

Although recognition of the public interest need to protect submarine cables

dates back to the CPSC, our increasing dependence on cable infrastructure, espe-
cially for internet traffic, has led to them being designated as ‘critical communi-
cations 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 protec-
tion 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 en-
vironment, 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 inter-
connection 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 con-
cept 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.

57

  See, for example, ACMA media release 126/​2007: ‘Protection zone declared for submarine telecommuni-
58

cations 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
  Ibid, at Sch 1, Pt 1, ss 36–​37. 61
  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.
806

806 Part VI  International Regulatory Regimes

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; al-
though 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, particu-
larly 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 estab-
lishment 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 il-
lustrates 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 member-
ship 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 peri-
odic review. The ‘supreme organ’ within the ITU structure is the Plenipotentiary
Conference, which comprises every Member State and meets every four years

66
  Cityhook Ltd v OFT and ors [2007] CAT 18.
67
  See USTR, ‘Results of the 2007 Section 1377 Review of Telecommunications Trade Agreements’, at p 14–​
15. Available from <https://​u str.gov/​sites/​default/​fi les/​Resultsof%20the%202007%201377%20Review.pdf >.
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.
870

16  International Regulatory Law 807

(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 exam-
ining 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, al-
though 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 organiza-
tions, 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 en-
able 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 partici-
pate 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 <http://​w ww.itu.int/​en/​membership/​Pages/​sector-​members.aspx>.
80

808 Part VI  International Regulatory Regimes

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 mem-
bers, subject to relevant provisions of this Constitution and the Convention:
they may provide chairmen and vice-​chairmen of Sector assemblies and meet-
ings 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 deci-
sions 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 en-
hanced 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 ex-
clusive 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 prolifer-
ation 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 involve-
ment dominated the 1998 Plenipotentiary Conference in Minneapolis, where a
single category of industry membership was finally recognized:

74
  See Section 16.3.4.
75
  See Resolution 110 (Marrakesh, 2002): ‘Review of the contribution of Sector Members towards defraying
the expenses of the International Telecommunication Union’.
809

16  International Regulatory Law 809

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 rec-
ommendation 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 pro-
cedures 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: standardiza-
tion, 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 <http://​w ww.itu.int/​newsroom/​reform/​rapmembers.html>.
77
  ITU Reform Advisory Panel (RAP), Observations and Recommendations for Reform, 10 March 2000.
801

810 Part VI  International Regulatory Regimes

which has extended its potential to influence or interfere (depending on your per-
spective!) in sectoral developments.78
Over recent years, the ITU’s position in the standards-​setting field has dimin-
ished 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 rap-
idly that formal bodies such as the ITU. Recognizing such developments, the ITU in-
stituted 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 be-
tween 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 im-
plies that the ITU is entirely neutral in its role as facilitator, which has not al-
ways 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 be-
tween the ITU and the other entity. A leading example concerns the standard
for Multiprotocol Label Switching (MPLS), a transport management protocol,

78
  ie ITU-​T D-​Series Recommendations: ‘General Tariff Principles’. See further Section 16.3.5.
79
  eg the European Telecommunications Standards Institute (ETSI): <http://​w ww.etsi.org>.
80
  eg the GSM Association: <http://​w ww.gsma.com> 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
  Ibid, at 1.2. 84
  RAP n 77, at 3.
85
  See Ryan, P, ‘The ITU and the Internet’s Titanic Moment’, (2012) Stan Tech L Rev 8.
81

16  International Regulatory Law 811

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 cen-
tury also gave rise to the need for international cooperation to avoid harmful inter-
ference. 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 im-
prove 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 con-
cerns 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 pro-
cedures cover both geostationary and non-​geostationary satellite systems.
89
  See the ITU ‘Space Network Systems Online’, at <http://​w ww.itu.int/​sns/​>.
90
  Harmful interference is defined as ‘Interference which endangers the functioning of a radionavigation ser-
vice 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 inter-
ference’ (ie interference which falls within certain parameters) and ‘accepted interference’ (ie interference
greater than certain parameters, but accepted by two or more administrations).
821

812 Part VI  International Regulatory Regimes

Any emission capable of causing harmful interference to distress, alarm, ur-

gency 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 eco-
nomically’ 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 re-
sources 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 dis-
tributed 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 fre-
quency 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 con-
cern in the Radiocommunications Sector over the past two decades has been the
problem of overfiling of requests for orbital slots with associated frequencies for

91
  Article 4, at 4.22. See further Section 16.3.4.
92
  Article 44(2). Introduced in the 1973 ITU Convention.
93
  ITU, ‘Overview of the Radio Regulations’, available at <http://​w ww.itu.int/​sns/​radreg.html>.
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’.
831

16  International Regulatory Law 813

satellite systems. In particular, Member State administrations have been accused

of filing for ‘paper satellites’ that have little or no real prospect of becoming oper-
ational. 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 ex-
pected 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 satel-
lite 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 re-
quired to provide specific evidence of the proposed satellite system, through ad-
ministrative and financial ‘due diligence’ procedures. Under administrative due
diligence, Member States are required to make regular submissions on the imple-
mentation 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 de-
cide 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 de-
cision 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 al-
lotment 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
  Radio Regulations, Resolution 49, at Annex 2. 99
  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).
841

814 Part VI  International Regulatory Regimes

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 re-
quired Protostar to shut down its transponder operations and look for a new spon-
soring 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 coordin-
ation and registration charge, as well as a refundable deposit. The financial due
diligence proposals were, however, rejected over concerns that this would effect-
ively 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 re-
sulting 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 spec-
trum. In November 2007, for example, at the ITU’s WRC, it was agreed that spec-
trum 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 tele-
vision 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 propaga-
tion 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.
851

16  International Regulatory Law 815

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 telecommunica-
tions development with standards-​ setting and radiocommunications. The
Telecommunication Development Sector operates through a Telecommunication
Development Bureau, Telecommunication Development Conferences and associ-
ated 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 es-
tablish 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 telecommuni-
cations activities that ‘engage in international services or which are capable of

  Financial Times, ‘Radio spectrum freed for mobiles’, 19 November 2007.

108

 ITU Press Release WRC-​

109
12, ‘World Radiocommunication Conference sets future course’, 17
February 2012.
110
  This provision was further amended in 1998. 111
  RAP, n 77.
861

816 Part VI  International Regulatory Regimes

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 ob-
ligation for ‘ensuring the secrecy of international correspondence’, although sub-
ject 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 imple-
mentation and have immediate provisional application unless the revision is for-
mally 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 reserva-
tions 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 imple-
mentation 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 reser-
vations in respect of any of the existing Administrative Regulations (Article 54(2)).

112
  ie 27 June 1994 in the case of the UK.
871

16  International Regulatory Law 817

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 revi-
sion (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 broad-
casting 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 of-
fice 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 ter-
ritory. (Constitution, Annex)

Historically, ROAs were generally the State-​owned incumbent operator. However,

in liberalized markets, the categories of ROAs could potentially extend to any pro-
vider 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

 <http://​w ww.itu.int/​cgi-​bin/​htsh/​m m/​scripts/​m m.list?_ ​search=SEC&_ ​languageid=1>.

113

  Final Acts, at Art 14.1. By virtue of Art 54.5bis of the Constitution, signatories are deemed to have con-
114

sented 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).
81

818 Part VI  International Regulatory Regimes

three appendices,116 while the 2012 ITRs comprise fourteen articles and two ap-
pendices.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 ap-
plicable 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 fu-
ture 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 re-
form 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, al-
though the 2012 amendments can be broadly sub-​d ivided into updates to existing
provisions to reflect the changing environment, and the insertion of new provi-
sions. In addition, the Final Acts included five non-​binding Resolutions.

116
  Available at <http://​search.itu.int/​history/​HistoryDigitalCollectionDocLibrary/​1.1.48.en.100.pdf>. They en-
tered into force on 1 July 1990.
117
  Available at <http://​search.itu.int/​h istory/​H istoryDigitalCollectionDocLibrary/​1.42.48.en.101.pdf>.
118
  See <http://​w ww.itu.int/​en/​wcit-​12/​Pages/​t reaties-​signing.aspx>.
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 <http://​
www2.itif.org/​2012-​gathering-​storm-​wcit-​regulations.pdf>.
121
  Hill, R, ‘WCIT:  Failure or Success, Impasse or Way Forward’, (2013) International Journal of Law and
Information Technology 1–​16, 3.
891

16  International Regulatory Law 819

Criticisms primarily revolve around concerns that the ITRs may disturb current
governance arrangements for the internet, facilitating greater (repressive) govern-
mental input, and the threat that rules designed to regulate the provision of tele-
communication 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 tele-
communications’ (Article 1.1(a)). Despite this, however, two new provisions ad-
dressing 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 environ-
ment, 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 nu-
merous resolutions and recommendations. Second, although they contain no en-
forcement or dispute resolution mechanisms, compliance remains high primarily

122
  eg Internet Society submission to the WCIT, <http://​w ww.internetsociety.org/​doc/ ​WCITSubmission>
October 2012.
123
  Hill, n 121.
802

820 Part VI  International Regulatory Regimes

due to the ‘law of physics’,124 since non-​compliance can result in harmful inter-
ference 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: ‘allo-
cation’, ‘allotment’, and ‘assignment’ (RRs, Article 1, 1.16–​1.18). ‘Allocation’ con-
sists 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 condi-
tions. 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 sta-
tions, 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 re-
commendations, 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 ‘admin-
istrations’ ‘should comply with, to the greatest extent practicable, the relevant’
recommendations (Article 1.6).129 Draft recommendations are prepared within

124
  Lyall, F and Larsen, P, Space Law: A Treatise (Ashgate, 2009), at 230.
125
  Available free of charge at <http://​w ww.itu.int/​pub/​R-​R EG-​R R/​en>.
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.
812

16  International Regulatory Law 821

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 instru-
ments, Constitution Convention or Administrative Regulations, settlement should
either be achieved through mutually agreed bilateral or multilateral arrange-
ments 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 mech-
anism is available in the event of non-​compliance. A compulsory arbitration pro-
cedure 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 trans-
mission of messages between different networks, such international traffic also
raised the issue of payments to be made between national operators for the car-
riage 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 prin-
ciples 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 oper-
ator 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.
130

  Either direct transit or switched transit.

131

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.
28

822 Part VI  International Regulatory Regimes

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 telecommu-
nication 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 consider-
ation 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 telecommunica-
tions 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 juris-
dictions, of which it was estimated that 70 per cent constituted ‘an above-​cost sub-
sidy from US consumers to foreign carriers’.136
Indeed, the co-​existence of liberalized telecommunications markets with trad-
itional 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 oper-
ator could lease their own circuit in the liberalized terminating regime, therefore

  See further Section 16.4.1.

133 134
  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
135

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.
823

16  International Regulatory Law 823

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 invest-
ment 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 tele-
communications 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 telecommuni-
cations 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 bene-
fiting end-​users through a reduction in the cost of international telecommuni-
cations. In addition, market liberalization and technological developments have
resulted in a proliferation of alternative calling procedures designed, either dir-
ectly 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 par-

ticular 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.
842

824 Part VI  International Regulatory Regimes

• ‘by-​
pass’ techniques, which completely circumvent the international ac-
counting 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 regu-
lations 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 na-
tional 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.

143
  Very Small Aperture Terminals, used for satellite-​based telecommunications direct to home.
144
  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
  Resolution 21, n 144. 146
  Similarly under the 2012 ITRs, at Art 8.2.2.
147
  ITU Recommendation D.140, 6th edn, ‘Accounting rate principles for the international telephone ser-
vice’ (06/​2002).
148
  ITU-​T Recommendation D.150, ‘New system for accounting in international telephony’ (06/​99).
149
  See further Chapter 8. 150
 Ibid.
852

16  International Regulatory Law 825

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 recog-
nized that the WTO ‘basic agreement’ had the potential to sharply worsen the
US’s balance of payments deficit on international services, since incumbent op-
erators 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 cat-
egorized 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 meth-
odology were dismissed on the grounds that the FCC had acted reasonably, whilst

151
  Benchmark Order, n 136. It was reformed in 2004 (FCC 04-​53) and 2012 (FCC 12-​145).
152
  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).
862

826 Part VI  International Regulatory Regimes

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 effect-
ively 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 insuf-
ficient 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 pay-
ment 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 inter-
national transmission  . . .  (Recommendation D.50 (10/​00) International Internet
Connection)156

This represented a shift from the mandatory wording of the draft, ie ‘will be com-
pensated’, 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 cur-
rent 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 ac-
cordance 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

  See further Chapter 8, at Section 8.7.1.2.

155 156
  The latest version, 3rd edition, is dated April 2011.
  Quoted in FCC Public Notice, IB Docket No. 10-​67, 16 March 2010.
157
872

16  International Regulatory Law 827

in recent years from the ITU to the WTO. A moratorium was agreed between cer-
tain 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 ar-
gued 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 tele-
communications 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 facili-
tator 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 es-
tablished 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 fea-
ture of the WTO is the establishment of a dispute settlement body to enforce the

158
  See WTO Report of the Group on Basic Telecommunications (S/​GBT/​4), 15 February 1997.
159
  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.
82

828 Part VI  International Regulatory Regimes

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 liber-
alization coincided with the Uruguay Round, which commenced in 1986. A key fea-
ture 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 tele-
communications sector. The General Agreement on Tariffs and Trade (GATT)164
is concerned with trade in goods and, as such, impacts on trade in telecommu-
nications 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’ sched-
ules 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

163
  See Section 16.4.5. 164
  TS 56 (1996) Cm 3282; 33 ILM 28 (1994).
165
  Ministerial Declaration on Trade in Information Technology Products (Singapore, 13 December 1996), at
<https://​w ww.wto.org/​english/​docs_​e/​legal_​e/​itadec_​e.htm>.
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).
829

16  International Regulatory Law 829

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 ar-
chaic 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 owner-
ship 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 commit-
ments 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 con-
sumption 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, there-
fore only involving some members; currently 47.
170
  TS 58 (1996) Cm 3276; 33 ILM 44 (1994). 171
  MTN.GNS/​W/​120, 10 July 1991.
172
 <http://​w ww.wto.org/​english/​t ratop_​e/​serv_​e/​telecom_​e/​telecom_​coverage_​e.htm#basic>.
173
 Ibid. 174
  This concept was examined in the Telmex case at para 7.25 et seq.
175
  GATS, Art I(2).
830

830 Part VI  International Regulatory Regimes

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 supple-
mented by specific commitments accepted by a Member in a Schedule of commit-
ments 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 cer-
tain measures listed in an Annex on Article II Exemptions.176 Such MFN exemp-
tions 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 re-
spect 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.
177
813

16  International Regulatory Law 831

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 ei-
ther 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 agree-
ments 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 favour-
able 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 obvi-
ously 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 pos-
ition or restrictive trade practices. These provisions can be seen as being of poten-
tial value to telecommunication operators trying to provide services into countries
whose legal systems have historically had no legal rules addressing general com-
petition issues.179

  See GATT (1947), Art III, ‘National Treatment on Internal Taxation and Regulation’.
178

  eg Asian countries.
179
832

832 Part VI  International Regulatory Regimes

The other key specific commitment under the GATS concerns ‘market access’
(Article XVI), under which Members detail those service sectors into which ser-
vice 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 unjustifi-
able 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 re-
spect to measures affecting access to and use of public telecommunications trans-
port networks and services’ (paragraph 1). The Annex is concerned with the supply
of any service over such public networks and services, including the basic tele-
communication services of another Member State,181 rather than any right to pro-
vide 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 inter-
faces 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 net-
work; interconnect private circuits and utilize any operating protocols that do not

  See further Chapter 13.

180 181
 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
182

and Communications Report, July–​August 1994, p 24.

83

16  International Regulatory Law 833

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, compli-
ance 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, devel-
oped 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 nego-
tiations, Members were granted a MFN exemption for measures affecting the provi-
sion 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 con-
tinued 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 agree-
ment consists primarily of a series of ‘Schedules of Specific Commitments and
a List of Exemptions from Article II concerning basic telecommunications’ sub-
mitted by some 69 Members.187 These commitments supplement or modify any

183
  See Chapter 4, at Section 4.4.3. 184
  33 ILM 144 (1994).
185
  GATS, Annex on Negotiations on Basic Telecommunications.
186
  For a detailed history of the negotiations, see Sherman, L, ‘ “Wildly Enthusiastic” about the first multilat-
eral 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 <https://​w ww.wto.org/​english/​t ratop_​
e/​serv_​e/​telecom_​e/​telecom_​commit_​exempt_​l ist_​e.htm>. The then 15 EU Member States submitted one
384

834 Part VI  International Regulatory Regimes

existing submissions made by Members and are annexed to the existing sched-
ules 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 ap-
plicable to the scheduling of commitments. First, a ‘basic telecom service’ was de-
fined 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 tele-
communications.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 intro-
duction of competition into the four biggest bottleneck markets within telecom-
munications:  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 satel-
lite 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 be-
half of the European Community, as regards matters within its competence, of the results of the WTO negoti-
ations on basic telecommunications services; OJ L 347/​45, 18 December 1997.
188
  Note by Chairman, S/​GBT/​W/​2/​Rev.1, 16 January 1997.
189
  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.
853

16  International Regulatory Law 835

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 com-
prises 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 tele-
communications sector, of considerably greater significance than the ITU con-
stitutional 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 con-
cepts, ‘essential facilities’ and ‘major supplier’:
Essential facilities mean facilities of a public telecommunications transport net-
work 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 domin-
ance, and is similar to the current EU concept of an ‘organization with signifi-
cant 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.

  This has since risen to 82 Member States.

191 192
  Council Decision, see n 187, at p 52.
  See Section 16.3.4.
193

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.
836

836 Part VI  International Regulatory Regimes

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 sup-
plier’ must be subject to ‘appropriate measures’ to prevent anti-​competitive prac-
tices, whether current or future. Three specific anti-​competitive practices are then
listed:

• cross-​subsidization;
• the use of ‘information obtained from competitors with anti-​competitive re-
sults’, 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 tech-

nically 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, rea-
sonable, having regard to economic feasibility, and sufficiently unbundled so that
the supplier need not pay for network components or facilities that it does not re-
quire 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 arrange-
ments for interconnection with a major supplier must be transparent, including
publication of ‘either its interconnection agreements or a reference interconnec-
tion 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-​competi-

tive per se’, provided they are addressed in a transparent and non-​d iscrimin-
atory 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 avail-
able, 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);
873

16  International Regulatory Law 837

• 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 na-
tional legislators are likely to reflect and incorporate such principles into domestic
law. Third, the Reference Paper represents a baseline from which future multilat-
eral negotiations depart.

16.4.4  Status of WTO law

The Reference Paper, as a unique set of international legal principles for the tele-
communications sector, is not only pro-​competitive, but would also seem suf-
ficiently 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) tele-
communications regulations; and
• whether the Reference Paper could be used as the basis for initiating proceed-
ings 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 en-
tered 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
83

838 Part VI  International Regulatory Regimes

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 le-
gislation ‘as far as possible, in the light of the wording and purpose’ of the agree-
ment (paragraph 28). Therefore, a court should consider the principles contained
in the Reference Paper when interpreting the application of European telecommu-
nications 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 ex-
ample, 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 recog-
nized 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:

197
  [1998] ECR I-​3603.
198
  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 be-
half 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.
839

16  International Regulatory Law 839

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 institu-
tions. (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 juris-
prudence 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 agree-
ments’ 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 equip-
ment.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 agree-
ments back into the limelight, as the UK will be required to submit its own ‘sched-
ules’ 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).
804

840 Part VI  International Regulatory Regimes

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 un-
likely 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 estab-
lishment 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 agree-
ment/​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 ap-
point 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 in-
tention 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, <https:// ​blogs.fco.gov.uk/​julianbraithwaite/​2017/​01/​2 3/​ensuring-​a-​smooth-​t ransition-​i n-​t he-​
wto-​a s-​we-​leave-​t he-​eu/​>.
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.
814

16  International Regulatory Law 841

issue. A Member, against whom a decision has been reached, is obliged to imple-
ment 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 ob-
viously plays an important role in bringing such matters to the attention of gov-
ernments. 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 con-
ducting its annual analysis of the operation and effectiveness of any trade agree-
ment 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 telecommu-
nications 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.
824

842 Part VI  International Regulatory Regimes

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 obli-
gations 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 method-
ology 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 conclu-
sion 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 discrim-
inatory, 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 re-
gulations 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 de-
terminations 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 ar-
guing 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 termin-
ation of communications into Mexico, as argued by the US.221 The Panel accepted
US evidence that demand substitution was essential to the market definition

216
  See 1998 Annual Report of the President of the United States on the Trade Agreements Program, at 257.
217
  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): <http://​w ww.totaltele.com>.
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.
834

16  International Regulatory Law 843

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 re-
quired by law. Surprisingly, the European Commission, as a third party to the pro-
ceedings, 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 rea-
sonable and non-​discriminatory terms. Under the Reference Paper, Mexico’s obliga-
tions 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 par-
ties 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 liber-
alization 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
  Ibid, at paras 7.149–​7.152. 223
  Ibid, at paras 7.153–​7.155. 224
  Ibid, at para 7.244.
225
  WT/​DS204/​7, S/​L/​162, 2 June  2004.
84

844 Part VI  International Regulatory Regimes

greater significance for the legal and regulatory frameworks of developed coun-
tries.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 re-
gional and bilateral trade agreements with trading partners, at a level that gener-
ally 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 com-
mitments or to make an initial commitment to telecommunications liberaliza-
tion.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 fundamen-
tally 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 <https://​w ww.wto.org/​english/​
tratop_​e/​serv_​e/​telecom_​e/​telecom_​e.htm>.
854

16  International Regulatory Law 845

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 telecommunica-
tions industry.
The process of liberalization has resulted in the demise in importance of the
international satellite conventions, which may eventually disappear as instru-
ments 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 some-
what, as open competitive markets have become the international norm and en-
thusiasm for trade liberalization has waned.
864
874

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 Introduction  847

17.2 First-​Generation Reforms  848
17.3 Foundational Regulatory Components  857
17.4 Broadband—​Redefining the Role of the State  882
17.5 Second-​Generation Reforms  887
17.6 Concluding Remarks  892

17.1 INTRODUC TION

For much of the latter half of the twentieth century, the provision of telecom-
munications 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 telecom-
munications operations, and liberalized markets as part of wide-​ranging sector
reforms.
As a result of this initial wave of sector reform, global teledensity and pene-
tration materially increased. Global mobile subscriptions alone are now esti-
mated 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 neces-
sarily 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.
84

848 Part VI  International Regulatory Regimes

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 authentica-
tion, cloud services and storage, data security, privacy, access to (and freedom of)
information and cybercrime, which were previously viewed as ancillary to, ra-
ther than part of, the core telecommunications legal and regulatory framework.
In developing countries, the International Telecommunication Union (ITU) esti-
mates 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 re-
forms 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 telecommuni-
cations providers to a regulatory regime that opens telecommunications mar-
kets to competition and strives to level the playing field for new entrants to the
market.

2
 ITU World Telecommunication/​ICT Indicators Database, at <http://​w ww.itu.int/​en/​I TU-​D/​Statistics/​
Pages/​facts/​default.aspx>. In contrast, in 1995 the number of global mobile subscriptions was 90.7  million
and the penetration rate was 1.585%. <https://​data.worldbank.org/​i ndicator/​I T.CEL.SETS>.
3
 ITU World Telecommunication/​ICT Indicators Database, at <http://​w ww.itu.int/​en/​I TU-​D/​Statistics/​
Pages/​facts/​default.aspx>.
894

17  Telecommunications Reform in Emerging Markets 849

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 en-
joyed 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 mo-
tivated 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 gen-
eral 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 regu-
latory harmonization in all EU Member States. The experience of regulatory
reform in some southern European markets was particularly relevant, as it dem-
onstrated 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 coun-
tries and the ensuing explosion in the number of mobile subscribers. This dra-
matically 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).
580

850 Part VI  International Regulatory Regimes

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 telecommuni-
cations 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 transi-
tion 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 tele-
communications 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 telecommunica-
tions markets and the Agreement on Basic Telecommunications continues to form
an important foundation of many regulatory regimes. Other multilateral develop-
ment institutions9 have also played a role in shaping the evolution of developing
countries’ telecommunications sectors often by providing financing for invest-
ment, technical assistance (such as advice on policy or regulatory reform, pri-
vatization 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

6
  Defined as including fixed voice telephony and other core telecommunications services.
7
  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 tele-
communications 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:  <http://​w ww.wto.org/​english/​t ratop_​e/​serv_​e/​telecom_​e/​tel23_​
e.htm>.
9
  In this section, we use the term ‘multilateral development institution’ to cover both international finan-
cial institutions (IFIs) and national bilateral aid agencies or programmes providing grant funding for tech-
nical 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.
815

17  Telecommunications Reform in Emerging Markets 851

market-​liberalizing legislation, privatizing the incumbent or undertaking other

sector reforms.
Sector reforms may also be driven by other country-​specific factors. For ex-
ample, 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 telecommu-
nications in enabling other rebuilding efforts, restoring order, supporting hu-
manitarian 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 telecommuni-
cations markets to competition (including the corporatization, commercializa-
tion,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 govern-
ment objectives in the form of a sector policy statement. Publishing a formal
sector policy statement can increase the transparency and consistency of policy-
making, reflect government commitment, encourage stakeholder ‘buy-​in’ to re-
forms, 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 frame-
work, 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 en-
able its subsequent privatization.
852

852 Part VI  International Regulatory Regimes

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, telecommu-
nications services is at the heart of the first objective, reflecting the nature of tele-
communications services as a public good. If a country’s telecommunications
infrastructure is inadequate to secure that access, or where services are inef-
ficient, 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 telecommuni-
cations, 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 li-
cences can be won or lost on an investor’s ability or willingness to make these in-
tangible 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 <https://​openknowledge.
worldbank.org/​handle/​10986/​26447>.
853

17  Telecommunications Reform in Emerging Markets 853

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, dis-
cussed in more detail in Section 17.3.12. In Europe and North America, ‘universal ser-
vice’ has traditionally meant ensuring that all citizens can receive affordable, high
quality telecommunications services, typically through the incumbent fixed oper-
ator. 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 regu-
latory reforms in developing countries have increasingly encouraged infrastruc-
ture 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 sup-
port 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 re-
spectively. See ITU World Telecommunication/​ ICT Indicators database:  <http://​w ww.itu.int/​en/​I TU-​D/​
Statistics/​Pages/​facts/​default.aspx>.
13
  Some developing countries, such as Timor-​L este, emphasize ‘access’ in a technology-​neutral way, recog-
nizing 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.
584

854 Part VI  International Regulatory Regimes

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 au-
thority 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 regu-
latory 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 in-
crease 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 oper-
ators 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 sub-
ject 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. <https://​openknowledge.worldbank.org/​bitstream/​handle/​10986/​25737/​9781464810282.
pdf>. 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.
85

17  Telecommunications Reform in Emerging Markets 855

assumed in developed country regulation), and therefore the regulatory frame-

work 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 some-
times given considerable latitude as to how these are implemented under the
rubric of ‘subsidiarity’, and Member States have sometimes interpreted and ap-
plied provisions of these EU directives in divergent ways. Still, developing coun-
tries 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 transi-
tional market regulation (1997–​2001), during which a series of directives and re-
gulations (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 tele-
communications markets (the ‘2002 package’). This second phase was aimed at
creating the conditions for sustainable competition, with a view to enabling na-
tional 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 com-
plexities 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 sub-
sequent 18 months.
586

856 Part VI  International Regulatory Regimes

package’), was designed, among other things, to respond to the challenges posed
by the growth in broadband internet usage, next-​generation networks, and net-
work 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 po-
tentially bringing into the scope of consumer regulation certain ‘over the top’ or
online communications services that are currently outside the scope of telecom-
munications regulation.
Central to the 1998 package were the requirements to establish a national regu-
latory 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 in-
tegrity 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-​gen-
eration 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 spe-
cific 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
857

17  Telecommunications Reform in Emerging Markets 857

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 formu-
late regional policy and the existence of underlying regional institutional struc-
tures 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 coun-
tries is to combine the lessons learned from international experience with a deep
understanding of local circumstances and priorities. Yet, despite the best of in-
tentions 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, re-
quires 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 <http://​w ww.comm.ecowas.int/​dept/​stand.php?id=f_ ​f 1_​act_​add&lang=en>;
SADC Protocol on Transport, Communications and Meteorology is available at <http://​w ww.sadc.int/​key-​
documents/​protocols/​protocol-​on-​t ransport-​communications-​a nd-​meteorology/​>.
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).
58

858 Part VI  International Regulatory Regimes

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 attract-
iveness, development, and growth of the sector or conflict with the proposed ap-
proach for sectoral reform.
The respective roles and importance of primary legislation, regulations, or-
ders, guidelines, and licences will also need to be considered as part of the
regulatory design. Ideally, core principles and the basic framework of the re-
gime should be enshrined in primary legislation, leaving the detail to sec-
ondary 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 auc-
tions 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 administra-
tive instrument that can be amended by any legislative or regulatory instrument
having primacy under local law.22 Secondly, this approach hampers the develop-
ment of a modern regulatory framework, as bespoke, often conflicting, arrange-
ments 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 ‘regu-
larised’ 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.
859

17  Telecommunications Reform in Emerging Markets 859

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 supple-
ment and complement sector-​specific regulatory frameworks. The EU ex ante
framework is designed to allow for the gradual rolling back of sector-​specific regu-
latory controls as sustainable competition is established, because ex post compe-
tition 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 for-
bearance.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 com-
petition 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 ex-
pertise or resources to monitor and enforce competition laws.
A second common strategy, drawn from the EU model, is for regulatory frame-
works 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 con-
text.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 <http://​w ww.pirp.harvard.edu>) for a com-
prehensive 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 forbear-
ance 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).
860

860 Part VI  International Regulatory Regimes

amount of economic analysis. For a developing country, therefore, it might be pref-

erable 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 de-
signed to control anti-​competitive behaviour of licensees. These could include
prohibitions on unfair cross-​subsidies or undue discrimination, or require-
ments 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 ab-
sence 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 telecom-
munications 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.
816

17  Telecommunications Reform in Emerging Markets 861

17.3.3  Independent regulatory authority

Central to almost all sector reform efforts is the creation of an independent regu-
latory authority, which has day-​to-​day regulatory responsibility for the telecom-
munications 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 in-
dustry 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 govern-
ment 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 liberal-
ization and privatization initiatives, and responsibility for any inter-​governmental
matters. Separating policy from regulatory functions should enable sector regula-
tion 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

29
 <http://​w ww.itu.int/​en/​I TU-​D/​Statistics/​Pages/​l inks/​nta.aspx>.
30
  The concept of ‘independence’ is mutable, being affected by heterogenous factors apart from formal in-
stitutional 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 func-
tion independently.
862

862 Part VI  International Regulatory Regimes

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 com-
monly, the regulatory authority is given responsibility solely for the telecommuni-
cations 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 re-
sponsibility of different line ministries, the use of a multi-​sectoral model can re-
duce 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 telecommu-
nications, 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 ex-
ample 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 au-
thority for digital signatures.
The legislation creating a regulatory authority should specify the scope of its au-
thority and powers. Sector-​specific powers should cover licensing, interconnection

32
  ICT Regulation Toolkit, <http://​w ww.ictregulationtoolkit.org/​en/​P racticeNotes.html#1254> (Toolkit).
33
  See eg Schwarz and Satola, n 21.
34
  ‘Driving Performance at Latvia’s Public Utilities Commission’ (Paris: OECD Publishing, 2016).
863

17  Telecommunications Reform in Emerging Markets 863

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 respon-
sible 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 in-
clude the rights to acquire and dispose of property and to borrow funds (some-
times 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 polit-
ical or industry influence and control. An independent regulator increases confi-
dence 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 deci-
sions, 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 appoint-
ment criteria. Political appointees or ministerial representatives are likely to re-
duce 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, <http://​w ww.itu.int/​net4/​itu-​d/​icteye/​Default.aspx>.
37
  Telecommunications Regulation Handbook, 21 (The World Bank, infoDev and the ITU, 2011).
684

864 Part VI  International Regulatory Regimes

authority. Commissioners’ terms should preferably be fixed and end dates stag-
gered 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 per-
ceived conflict of interest. The telecommunications law should include controls
on conflicts of interest (applicable to both commissioners and their direct fam-
ilies), and bar the appointment and authorize the removal of commissioners
with a clear conflict of interest (eg due to political involvement or material in-
vestments or involvement in market participants). Often commissioners are re-
quired 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 ab-
stain from any related decision-​m aking.
Independence is also enhanced if the regulator is financially autonomous
from the telecommunications ministry and from government budget  alloca-
tions. 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 trans-
parency 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 con-
sultation 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.
856

17  Telecommunications Reform in Emerging Markets 865

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 au-
thorities 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 fol-
lowing 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 eco-
nomic 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 previ-
ously 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 na-
tional 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 <http://​icttoolkit.infodev.org/​en/​i ndex.html>. The Regulators’ decisions data-
base can be accessed at: <http://​web.archive.org/​web/​20130606011411/​http://​w ww.ictdec.org:80/​ictdec-​web/​
en/​i ndex.html>.
39
  ECTEL has actual regional (ie supranational) regulatory powers (<http://​w ww.ectel.int/​>).
40
  Pacific ICT Regulatory Resource Center <https://​pirrc.org.fj/​>.
86

866 Part VI  International Regulatory Regimes

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 net-
works 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 collect-
ively refer to as ‘licences’ in this section). As licences control market entry, good
regulatory practice dictates that both the licensing procedures and licence docu-
ments be straightforward, clear, and streamlined and be issued on the basis of ob-
jective 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 cre-
ates 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 minis-
terial 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 corrup-
tion, and also to minimize licensing delay.
Licence availability should reflect government liberalization policy. As a gen-
eral 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 re-
quired to operate key public networks (eg fixed and mobile network infrastructure
licences, international gateways, and frequency usage). Entities wishing to pro-
vide 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 <http://​w ww.paclii.org/​>.
867

17  Telecommunications Reform in Emerging Markets 867

or even be exempted from licensing requirements altogether. Different licence

categories, if used, should be kept to a minimum to avoid unnecessary licence du-
plication and to avoid the need for carriers to hold multiple licences (such as sep-
arate 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 liberal-
ization 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 uni-
fied 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 li-
cence 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 reinfor-
cing its independence. Fees are usually calculated as a percentage of a licensee’s

42
 See NCC, ‘Unified Access Service’, <http://​w ww.ncc.gov.ng/​component/​docman/​doc_​download/​45-​
unified-​access-​service.html>.
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.
68

868 Part VI  International Regulatory Regimes

total revenue, though ideally this should be specified as a cap with the regula-
tory 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 alter-
native approach is to separate the regulatory cost attributable to each industry,
and set licence fees for each industry accordingly. This process can become un-
necessarily complex where the majority of regulatory costs are common across in-
dustries. Where a multi-​sectoral regulator is responsible for information services,
data protection, and e-​commerce, these areas of regulation might in practice be fi-
nanced 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 commer-
cial incentive to keep tariffs low, and therefore regulatory controls are often re-
quired 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 trad-
itionally been seen as one of the most important, and politically charged, func-
tions 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 regu-
latory 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 protec-
tion of retail tariff controls on the incumbent. Furthermore, where the incumbent
fixed operator has been privatized and is in genuine competition with other oper-
ators 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.
896

17  Telecommunications Reform in Emerging Markets 869

reason, as competition in the telecommunications markets of developing coun-

tries evolves, a system of regulation based on the concept of market dominance
becomes more appropriate, providing a more systematic way for regulators to de-
cide which licensees will be subject to retail tariff controls.45 Although retail tar-
iffs 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 intro-
duction of new technologies, new operators and a proliferation of new tariffs,
including through service bundling, has made this form of tariff control increas-
ingly unworkable. It both imposes an impossible burden on the regulatory au-
thority 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 regu-
lated 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 tech-
nologies 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 regula-
tory 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 calcula-
tions 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 ef-
ficiencies, 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.
807

870 Part VI  International Regulatory Regimes

these factors can materially distort retail tariff regimes. This is one reason why
many developing countries resort to international benchmarks to set some re-
tail 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 dispropor-
tionately 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 profit-
able markets and undermined the benefits of cross-​subsidization. Accordingly,
governments and regulators have been forced to reconsider their policies on man-
datory 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 telecommu-
nications services, most commonly long-​d istance and international calls, from a
provider other than the operator that provides the access line. The terms and con-
ditions 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 regu-
lator with regard to interconnection, and the basic principles for setting inter-
connection 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.
871

17  Telecommunications Reform in Emerging Markets 871

Most of the detailed implementation of interconnection arrangements is

done through interconnection agreements, which contain the specific commer-
cial, 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 par-
ticular, the use of model agreements or a shorter, streamlined form of RIO, with
greater emphasis on interconnection regulations and guidelines for detailed regu-
lation, might be more appropriate.
Interconnection payment arrangements vary greatly around the world, de-
pending 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 al-
ternative 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 net-
work would generally expect to receive an interconnection payment from the
originating network to cover the cost of carrying the call from the point of inter-
connection to the receiving party. However, if the traffic flows between networks

46
 ITU World Telecommunication/​ ICT Indicators Database, <http://​w ww.itu.int/​en/​I TU-​D/​Statistics/​
Documents/​statistics/​2017/​Mobile_​cellular_ ​2000-​2016.xls>.
47
 Oman Mobile, Reference Interconnection Offer,  <https://​www.omantel.om/​wps/​wcm/​connect/​0cfe943a-​
fda0- ​ 4 ccb- ​ b ed1- ​ 9 1740d124743/ ​ 1 .+Main+Agreement_ ​ 2 0160614.pdf?MOD=AJPERES&CONVERT_ ​ T O=
URL&CACHEID=0cfe943a-​fda0-​4ccb-​bed1-​91740d124743>.
48
  National Information and Communication Technology Authority of Papua New Guinea, ‘A public con-
sultation document on a draft rule specifying the acceptable form for reference interconnection offers’, 15
November 2011.
782

872 Part VI  International Regulatory Regimes

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 intercon-
nection 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 com-
petitors 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 suf-
ficiently 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 cap-
acity. 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, conse-
quently, 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, <http://​w ww.fcc.
gov/​document/​press-​release-​fcc-​releases-​connect-​a merica-​f und-​order>.
52
  FCC, ‘Order and Further Notice of Proposed Rulemaking’, 27 October 2011 [738], <http://​h raunfoss.fcc.
gov/​edocs_​public/​attachmatch/​FCC-​11-​161A1.pdf>.
53
  See GSMA publication:  Economic Study on IP Interworking:  White Paper Prepared for GSMA by CRA
International and Gilbert + Tobin, February 2007, <http://​w ww.itu.int/​I TU-​D/​t reg/​Events/​Seminars/​
GSR/​G SR07/ ​D ocuments_ ​p resentations/ ​I P%20Interconnection%20-​% 20GSMA%20White%20paper%20-​
%20FINAL.pdf>.
783

17  Telecommunications Reform in Emerging Markets 873

benchmarking as a proxy for price data. The experience of regulating intercon-

nection in the EU has provided a substantial body of evidence on the cost of inter-
connection, 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 intercon-
nection 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, net-
work 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 be-
come more widespread, the demand for international bandwidth rapidly in-
creases. 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 rea-
sonable 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 infor-
mation 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.
847

874 Part VI  International Regulatory Regimes

Similarly, sharing of passive infrastructure (such as ducts and towers) and

active infrastructure (backbone networks) is also essential for the develop-
ment 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 in-
frastructure 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 ap-
pears 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 en-
sure its most efficient possible use. Radio spectrum is used by multiple govern-
ment 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
875

17  Telecommunications Reform in Emerging Markets 875

a high level, carried out according to standards set by the ITU.55 In practice, spec-
trum 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 re-
location 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) spec-
trum 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 bureaucrat-
ically defined spectrum allocations, thereby discouraging innovation and techno-
logical 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 com-
petitors, 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; alter-
natively, 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.
867

876 Part VI  International Regulatory Regimes

where the spectrum use is not highly localized. In practice, spectrum manage-
ment 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 essen-
tial adjunct to the operating licence (such as the uplink and downlink frequencies
for satellite and mobile networks) should ideally be incorporated in the oper-
ational 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 wire-
less 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 (particu-
larly to support mobile applications) there are recent trends towards allocation
initiatives that seek to maximize the use of unlicensed spectrum for spectrum re-
served 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 bene-
fits 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 innov-
ation (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 mo-
bile penetration, allocating the digital dividend spectrum for the deployment of
4G networks has the potential to lower the cost of provisioning additional cap-
acity on existing mobile networks. The growth in demand for mobile broadband
services and associated spectrum requirements mean that governments can po-
tentially receive significant financial gains, especially if done through spectrum
78

17  Telecommunications Reform in Emerging Markets 877

auctions (as was recently the case in India), from repurposing broadcast transmis-
sion spectrum.

17.3.11  Numbering and number portability

In a post-​l iberalization environment, responsibility for numbering plans is gener-
ally 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 avail-
able 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 incum-
bent 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 in-
cumbent 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 op-
erator on the basis of forecast need, with the rest reclaimed by the regulatory au-
thority. 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 ex-
pressly 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 com-
petitive market (as the inability to keep one’s number can often act as a disin-
centive 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 im-
provements 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
87

878 Part VI  International Regulatory Regimes

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 fo-
cused on providing communities with access to basic telecommunications
facilities and services (‘universal access’), rather than providing service at an in-
dividual household level (‘universal service’). In rural areas, this might take the
form of telecentres or community phones, or special subsidized ‘rural access’ net-
work 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 house-
holds falling below the poverty line.
Typically, the government will be responsible for sector policy and the regula-
tory 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 attain-
ment 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 ex-
perience of designing such programmes in both developed and developing coun-
tries, 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 dis-
bursed or, where they have, they have not been effective at meeting their object-
ives (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 mo-
bile licences, and in particular through network roll-​out and coverage obligations
in those licences. Generally, the more onerous the roll-​out and coverage obliga-
tions, 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
879

17  Telecommunications Reform in Emerging Markets 879

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 sophis-
ticated, firstly, to accommodate multiple and regionally based universal service
providers (often selected via auction-​based systems to select providers) and sec-
ondly to accommodate a changing technology landscape that involves conver-
gence 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 pri-
vate 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 infra-
structure 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 de-
sign.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: <http://​w ww.itu.int/​I TU-​D/​t reg/​publications/​I TU_​
WB_​Dispute_​Res-​E .pdf>.
80

880 Part VI  International Regulatory Regimes

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 regu-
latory environment that encourages the prevention, early identification, and reso-
lution 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 cer-
tainty 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 ex-
isting rights or a nationalization of core telecommunications infrastructure, the
affected foreign investors might find local courts or regulatory bodies unsym-
pathetic. Accordingly foreign investors might seek to protect their investments
in high-​r isk markets by requiring disputes relating to their investments to be re-
solved 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

58
 Ibid. 59
  For further information cf <https://​icsid.worldbank.org/​en/>.
60
  For further information cf <http://​w ww.iccwbo.org/​policy/​a rbitration/​id2882/​i ndex.html>.
61
  For further information re cf <http://​w ww.uncitral.org/​u ncitral/​en/​about_​u s.html>.
81

17  Telecommunications Reform in Emerging Markets 881

local norms. Launching an international arbitration can also be extremely costly,

and be of limited effect if the relevant government refuses to recognize the arbitra-
tion 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 telecom-
munications sector.63 USA v Mexico, a dispute over the interconnection rates be-
tween 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 dis-
pute resolution process can be complex, this case showed that the dispute reso-
lution 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 <http://​i nvestmentpolicyhub.unctad.org/​I IA>.
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).
82

882 Part VI  International Regulatory Regimes

clear that a country that had submitted its schedule of commitments was not ex-
cused 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 intro-
duce 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 internation-
ally. Governments are once again and increasingly becoming investors, oper-
ators, and managers of telecommunications networks through the deployment
of broadband enabled submarine and terrestrial fibre networks. This phenom-
enon 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), <http://​documents.worldbank.org/​c urated/​en/​556361495708776351/​Montenegro-​Policy-​note-​
on-​broadband-​achieving-​u niversality- ​of-​h igh-​s peed-​broadband-​r eview-​a nd-​application- ​e xperience- ​of-​
the-​E U-​State-​a id-​f ramework>.
83

17  Telecommunications Reform in Emerging Markets 883

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 tech-
nology. 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 invest-
ment) 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 increas-
ingly focused on securing widespread end user access to high-​speed broadband
access technologies, as these are increasingly seen as necessary inputs for eco-
nomic and civic engagement and growth in the wider economy. In practice, given
the scale and cost of the capital investments needed, improving national broad-
band access requires full market liberalization (with new entrant operators being
licensed as needed to roll out broadband access technologies, backbone infra-
structure, and international gateways), robust access regulation (enabling new
entrant operators to access and share domestic, cross-​border, and undersea back-
bone infrastructure on fair and reasonable terms), access to spectrum to support
wireless access technologies, and any minimal barriers to entry (such as adminis-
trative approvals or rights of way, etc.).
In addition to these regulatory measures, governments seeking better broad-
band 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.
84

884 Part VI  International Regulatory Regimes

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 telecommu-
nications 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 pri-
vatized 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 effect-
ively and fairly without distorting the market. Operators could, for example, find
themselves under increasing political pressure to purchase backbone transmis-
sion 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 ac-
cess to international connectivity. Such interventions might come at a cost to the
public purse given the cost of financing network construction. Government in-
volvement in rolling out these networks might also have implications on public
procurement rules.
Increasing government involvement and the potential for new national monop-
olies 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.

66
 <http://​w ww.macrolan.co.za/​blog/​fibre-​optic-​networks-​reach-​4 4-​of-​t he-​a frican-​population/​>.
67
  ‘South Africa: Infraco Plans New Submarine Cable’, Global Insight, 3 August 2007.
85

17  Telecommunications Reform in Emerging Markets 885

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 ar-
rangement 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 on-
going 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 pen-
alties 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 sev-
eral 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 participa-
tion where a state wishes or is required by law to regain infrastructure owner-
ship. 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 fre-
quent. The BOT-​t ype concession arrangement granted to Timor Telecom (owned
86

886 Part VI  International Regulatory Regimes

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 re-
ducing investor risk: the investor’s ‘exit strategy’ being guaranteed at the date of ex-
piry 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 com-
plex, acrimonious, and protracted. This is in part because, at the end of the BOT con-
tract, 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 oper-
ation 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 ex-
ample, it is important to ensure that a PPP does not result in the creation of new mon-
opolies 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,  <http://​w w w-​w ds.worldbank.org/​s ervlet/ ​ W DSContentServer/​I W3P/​I B/​2 005/​0 3/​3 0/​0 00012009_​
20050330161732/​Rendered/​I NDEX/​31819.txt>.
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.
87

17  Telecommunications Reform in Emerging Markets 887

and that PPPs are subject to the same regulatory controls as other market partici-
pants. Additional questions about on-​going investment in the underlying infra-
structure, 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 pro-
curement constraints, and will subject the entity to corporate accounting and re-
porting 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 motiv-
ated by a desire to maximize revenue from the sale of shares, introduce manage-
ment 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 gen-
eration of legal and regulatory reforms were based. The old telecommunica-
tions 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
8

888 Part VI  International Regulatory Regimes

advertising revenues that come with the content (and, by extension, in the cus-
tomer data that enables the targeting of that advertising). Online content stand-
ards, questions around freedom of information and expression (including ‘net
neutrality’), and data protection have therefore appeared on the agendas of tele-
communications 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 tele-
communications regulation, the responsibility to address these non-​telecom
specific areas of regulation of modern communications often falls to the tele-
communications regulator.

17.5.1  Convergence and technological neutrality

The predictions in the early 2000s about the prospect of convergence are now set-
tled reality, largely as a result of the deployment of broadband infrastructure and
services. The most common regulatory response to convergence is primary legis-
lation that is technology-​neutral and covers all electronic communications trans-
mission 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 communica-
tions transmission networks (whether fixed, mobile, satellite, internet or broad-
casting 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 in-
quiry 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 elec-
tronic 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.
89

17  Telecommunications Reform in Emerging Markets 889

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 coun-
tries 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 increas-
ingly 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 se-
curity),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 telecom-
munications 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 <http://​documents.worldbank.org/​c urated/​en/​961621467994698644/​pdf/​102724-​W DR-​
WDR2016Overview-​E NGLISH-​WebResBox-​394840B-​OUO-​9.pdf> (‘WDR’).
71
  See, ‘Combatting Cybercrime:  Tools and Capacity Building for Developing economies’:  <http://​w ww.
combattingcybercrime.org> (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, <http://​eur-​lex.europa.eu/​
legal-​content/​E N/​T XT/​PDF/​?uri=CELEX:32016R0679&from=EN> (GDPR).
890

890 Part VI  International Regulatory Regimes

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 fun-
damental 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 man-
agement 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 dif-
ferent price points. President Obama’s ‘Open Internet’ rules prohibited this prac-
tice 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

75
  Combatting Cybercrime, n 71, at 184.
76
 See World Bank, World Development Report 2016: Digital Dividends, (Washington, DC: World Bank,
2016), at 221 et seq., at <http://documents.worldbank.org/curated/en/961621467994698644/pdf/102724-WDR-
WDR2016Overview-ENGLISH-WebResBox-394840B-OUO-9.pdf> (‘WDR’).
77
  WDR, at 227.
819

17  Telecommunications Reform in Emerging Markets 891

infrastructure and the communications (ie the data) flowing over them. Whether
these issues are undertaken by telecommunications regulators or not, today’s net-
works and services demand a more holistic, comprehensive, and coherent regula-
tory 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 cap-
ability. 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 infrastruc-
ture protection and data and privacy protection), enabling them to remain good
‘citizens’ in the global community. Increasingly, elements of cybercrime legisla-
tion (eg penalties for unauthorized access to networks or data, or interference with
networks, data or communications) will need to be included in telecommunica-
tions 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 (par-
ticularly 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 im-
plemented, 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 be-
yond the historical focus on information disclosure and dispute resolution pro-
cedures 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 regula-
tions and policy instruments to address and manage evolving consumer protec-
tion 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.
829

892 Part VI  International Regulatory Regimes

Privacy obligations in relation to consumer information, and in particular re-

strictions on an operator’s use and disclosure of consumer information without
the consumer’s consent (other than for the purposes of providing a requested ser-
vice, 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 imple-
ment new systems and processes to ensure compliance with these regulatory obli-
gations. 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, legisla-
tive, and industry self-​regulatory approaches will be required.

17.5.6  Internet governance issues

Increasingly, telecommunications regulators have been asked to regulate an-
other ‘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 al-
located to countries by the Internet Assigned Numbers Authority (IANA), a sub-
sidiary 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 contrac-
tual arrangements with ICAAN/​I ANA would need to be changed. Some countries
have attempted to assign or transfer these ccTLD functions to the telecommunica-
tions 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 mech-
anism 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,
839

17  Telecommunications Reform in Emerging Markets 893

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 devel-
opment. A comprehensive reform agenda will include the formulation of a clear
sector policy statement, managed liberalization of all telecommunications mar-
kets, the enactment of a modern regulatory framework, the creation of an autono-
mous regulatory authority, modernization and privatization of the state-​owned
incumbent, and the holding of transparent competitive selection processes to en-
sure new licences (where licence numbers are limited) are allocated to the most
appropriate candidates.
The deployment of fibre networks and the increasing availability and import-
ance 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, increas-
ingly regulatory reforms in developing countries also need to address issues re-
garding 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)  EU regulation 

see also Agreements in restraint of trade current regulatory obligations  453–​65
(Art 101); Merger control lead-​up to Access Directive  451–​3
‘abuse’ defined  evolving policy within EU  149
access  561–​3 interconnection between networks 
no legislative definition  557–​8 cost methodologies  64– ​8
pricing  558–​61 key issues  97
barriers to entry  37–​9 UK approach  68–​96
countervailing buyer power  39–​40 Interconnection Directive 
defining the relevant market  554–​5 general principles  445–​6
‘dominance’ defined  555–​7 UK implementation  446–​51
electronic content  571–​4 UK position prior to  444–​5
general principles  29 key powers  17
importance of market structure  36–​7 multinational enterprises (MNEs)  634–​6
key issues  40 overview  435–​7
rationale for economic reform in emerging markets  890
regulation  28–​9 regulatory interventions 
‘significant market power’  173–​8 local loop bundling  138–​9
three-​step analysis  553–​4 reliance on sector-​specific rules  489
Access  spectrum management  424–​7
abuse of dominance (Art 102)  561–​3 switching systems 
applicability of competition law  534–​5 interconnection of circuit switched
capacity agreements  613–​14 networks  438–​9
competition law  444–​5 interconnection of packet-​s witched
contractual issues for IP agreements  networks  439–​41
overview  481–​2 other access arrangements  441–​3
paying transit agreements  487–​9 packet-​s witched and circuit-​s witched
peering agreements  482–​7 networks distinguished  438
reliance on sector-​specific rules  489 United Kingdom 
contractual issues for switching systems  Art 5 access-​related conditions  474–​5
bespoke contracts  478–​81 Art 6 access-​related conditions  476–​7
overview 478 broadband  477–​8
reference offers  482 dispute resolution  477
convergence in UK  706–​8 facility sharing  466–​7
different transmission systems  6 general interconnection obligation  467–​8
Equality of Access Board  127 overview  465–​6
EU licensing regime  SMP obligations  469–​74
Authorisation Directive  316–​18, 322 US approach 
Licensing Directive  311 fixed networks  242–​57
UK implementation of Authorisation history and development  197–​9
Framework  341, 345 mobile networks  242–​57
896

896 Index

Accounting  Authorisation Directive  317

access and interconnection  473 licensing 
capacity agreements  607 early powers and purposes  294–​5
establishing costs  21 overview  285–​7
international rates  821–​7 notification of ‘significant market
peering agreements  482 power’  174–​5
separation  46, 69 spectrum  131–​2
soft law measures  158–​9 Billing systems 
Advertising regulation  fundamental technology  5
broadcasting  importance 7
advertising regulation  724 subscriber–user privacy relationship  674
content 724 UK consumer protection provisions  523
general application  723–​4 UK implementation of Authorisation
scheduling  724–​5 Framework  349–​50
consumer protection provisions  Body of European Regulators for
EU protection provisions  504 Electronic Communications
UK provisions  505–​11,  519–​22 (BEREC)  185–​6,  777–​9
non-​broadcast advertising  721–​2 Brexit 
other schemes  719–​20 impact on broadcasting regulation  692
television  key issues  143–​5
participation in programmes  726–​7 probability of continued
sponsorship 727 harmonization 788
teleshopping 726 British Broadcasting Corporation  14, 119, 377,
UK consumer protection for broadband 502, 684, 698–701, 703–4, 706, 708–9,
speed  507–​9 711, 730 
VOD advertising  722–​3 British Telecom (BT) 
Agreements in restraint of trade (Art 101)  convergence 52
infrastructure sharing agreements  545 industry developments 
IP licensing  547–​51 BTA 1981  111–​12
network interconnection agreements  543–​5 establishment of DGT  114
overview  538–​42 privatization  112–​13
premium content  569–​70 statutory reform under
roaming agreements  545–​7 1984 Act  113–​17
standard setting agreements  551–​3 interconnection between networks 
Appeals  594–​5 early days of local loop unbundling
Australia  (LLU) 72
licensing  leased lines regulation  72–​4
legal issues  303 strategic review of digital
policy objectives  11 communications  84–​8
protection of submarine cables  805 wholesale broadband access market
Universal Services Obligation (USO)  61 reviews  80–​2
Authorities see Institutions and authorities wholesale local access (WLA) market
Authorization see Licensing reviews  78–​80
Autorité de Régulation des wholesale narrowband market
Télécommunications 19 reviews  76–​7
liberalization of EU competition
Barriers to entry  law  160–​1
abuse of dominance  37–​9 number portability  133–​5
879

Index 897

privatization and early development of ex ante/​ex post controls  163

competition 49 future directions  193–​4
recognition of global issues  24–​5 liberalization 169
relationship between liberalization and licensing 308
privatization 11 sector regulation  14
strategic review by Ofcom  123–​8 spectrum management  16–​17
tariff rebalancing  59 terminology  5–​8
Universal Services Obligation US approach  207–​9, 232
(USO) 134 BT see British Telecom (BT)
Broadband 
access and interconnection  477–​8 Cable networks 
Deployment Directive  463–​5 applicability of competition
industry developments  111 law  534–​5
reform in emerging markets  capacity agreements  599
divesting state ownership of PPPs  887 dark fibre  607
emergence of PPP models  885–​7 indefeasible rights of use  604–​7
new dynamics  882–​4 industry developments  109
revenue maximizing  300 US approach 
UK consumer protection for broadband history and development  200–​3
speed  507–​9 Caller identification 
US approach  privacy 
deployment of IP  209–​19 subscriber–​user relationship  675
evolution of wireless broadband  206–​7 user–user relationship  677–​8
regulatory debate  196–​7 UK implementation of Authorisation
Broadcasting  Framework 352
advertising regulation  Capacity agreements 
content 724 contractual issues 
general application  723–​4 access  613–​14
participation in programmes  726–​7 mobile networks  616–​18
scheduling  724–​5 particular terms  613
sponsorship 727 relocation of apparatus  614
teleshopping 726 satellite networks  614–​16
Authorisation Directive  314 service levels  611–​13
capacity agreements  616 testing 614
carriage and content distinguished  8–​9 contractual issues for switching
competition law  534, 541–​2, 556–​8 systems 480
convergence  emerging trends  566–​7
AVMSD approach generally  684–​93 history and development  600–​2
AVMSD requirements for TV  708–​11 meaning and scope  599–​600
Broadcasting Code  711–​14 reform in emerging markets  865–​6
on-​demand programmes  714–​19 regulatory issues  618–​21
other schemes  719–​20 types 
overview  683–​4 dark fibre  607
premium rate services  728–​30 indefeasible rights of use  604–​7
television licensing in UK  693–​703 leased lines  602–​3
convergence with IT and telecoms in mobile networks  608–​11
UK  51–​4 satellite networks  608
EU law  152 Cellular networks see Mobile networks
89

898 Index

Cleanfeed  748, 750, 756, 760–​1 definition of markets  567–​9

Competition and Markets Authority (CMA)  impact of convergence  566–​7
BT undertaking in lieu of reference  125–​6 enforcement 
enforcement  592–​4 appeals  594–​5
licensing 299 concurrent powers  592–​4
market investigations  585–​91 importance 596
merger control  575–​9 overview  591–​2
mobile network charges  156–​7 ex ante/​ex post controls  21
notification of ‘significant market general principles  29
power’  173–​8 government management of
powers 125 markets  481–​2
price review  91 harmonization measures  170–​3
sectoral inquiry  158 importance 596
Competition Directorate-​General 156 liberalization within EU 
Competition law  equipment  165–​8
abuse of dominance  impact on BT  160–​1
‘abuse’ defined  557–​63 key concept of essential
barriers to entry  37–​9 requirements  164–​5
countervailing buyer power  39–​40 services  168–​70
defining the relevant market  554–​5 withdrawal of ‘special or exclusive
‘dominance’ defined  555–​7 rights’  162–​3
general principles  29 main concerns  8–​9
importance of market structure  36–​7 market investigations 
key issues  40 Competition and Markets Authority
rationale for economic regulation  28–​9 (CMA)  585–​91
remedies  563– ​6 European Commission  583–​5
‘significant market power’  173–​8 general powers  582–​3
three-​step analysis  553–​4 merger control 
access  444–​5 changes to market structure  574–​9
agreements in restraint of trade  full function joint ventures  579–​81
infrastructure sharing agreements  545 media plurality  581–​2
IP licensing  547–​51 rationale for consumer protection  493–​4
network interconnection reform in emerging markets  859–​60
agreements  543–​5 regulation distinguished 
overview  538–​42 enforcement  537–​8
premium content  569–​70 key questions  535–​6
roaming agreements  545–​7 potential for overlap  536–​7
standard setting agreements  551–​3 sources of EU law  155–​6
applicability to telecommunications  533–​5 tariff controls  21
authorization powers  14 United States 
competition law and regulation anti-​competitive agreements  267–​8
distinguished  investigations  269–​70
potential for overlap  536–​7 licensing of common carriers  234–​5
role of NRAs  537–​8 merger control  270–​4
electronic content  penalties for non-​compliance  269
abuse of dominance (Art 102)  571–​4 price discrimination  268–​9
anticompetitive agreements and regulatory double jeopardy  270
premium content  569–​70 role of DoJ  267
89

Index 899

Competition Commission see difficulties of distinguishing carriage and

Competition and Markets content  8–​9
Authority (CMA) evolving policy within EU  152–​3
Consortia  ISP liability 
capacity agreements  601 conclusions  787–​8
privatization of BT  48 defining ISPs  734–​5
Consumer protection  EU approach to network
conclusions  479–​80 neutrality  775–​87
‘consumer’ defined  494 EU regulation  739–​52
EU protection provisions  French ‘HADOPI’ law  753–​4
bundled offers  504 graduated national response  752–​3
minimum contract terms  495–​500 hotlines for illegal content  756–​8
non-​d iscrimination  504 legal debate regarding traffic
number portability  503–​4 management  763–​8,  768–​75
service levels  502–​3 UK response  754–​5
switching providers  503 US approach  735–​9
transparency  500–​1 television 
licensing 297 advertising regulation  724
rationale  AVMSD requirements  708–​11
competition  493–​4 Broadcasting Code  711–​14
utility 492 Contractual issues 
reform in emerging markets  891–​2 see also Agreements in restraint
shift in focus  491–​2 of trade (Art 101)
UK provisions  access to switching systems 
contracts  511–​23 bespoke contracts  478–​81
implementation of Authorisation overview 478
Framework  338–​40,  345–​6 reference offers  482
marketing  505–​11 capacity agreements 
United States  access  613–​14
legal constraints on regulation of mobile networks  616–​18
telemarketers  274–​5 particular terms  613
overview 274 relocation of apparatus  614
proprietary network satellite networks  614–​16
information  279–​8 2 service levels  611–​13
unsolicited calls and texts  275–​7 testing 614
unsolicited emails  278–​9 consumer protection provisions 
unsolicited faxes  278 EU protection provisions  495–​500
Content  UK provisions  511–​23
competition law  IP interconnection agreements 
abuse of dominance (Art 102)  571–​4 paying transit agreements  487–​9
anticompetitive agreements and peering agreements  482–​7
premium content  569–​70 reliance on sector-​specific
definition of markets  567–​9 rules 489
impact of convergence  566–​7 licensing  302–​3
convergence  multinational enterprises (MNEs) 
AVMSD requirements for TV  708–​11 commercial clauses  640–​1
Broadcasting Code  711–​14 problem of multiple locations  637–​8
on-​demand programmes  718–​19 technical clauses  638–​40
90

900 Index

Convergence  peering agreements  487

advertising regulation  price capping 
non-​broadcast advertising  721–​2 consumer choice  45
other schemes  719–​20 movements of costs and productivity  43
VOD advertising  722–​3 valuation basis for capital costs  44
AVMSD  transmission systems  6
adoption 685 Universal Services Obligation (USO)  60–​1,
applicability  685– ​6 134,  190–​1
country of origin and freedom of US approach to USO 
reception  688–​90 E-​rate  263–​4
jurisdiction rules  690–​1 funding difficulties  265–​7
key debate  687 high-​cost scheme  262–​3
scope  686–​8 low-​i ncome scheme  260–​2
source of law  684–​8 Countervailing buyer power  39–​40
summary table  692 Courts see Judicial challenges
Television without Frontiers  686 Criminal sanctions  738–​9
content 
AVMSD requirements for TV  708–​11 Dark fibre 607
Broadcasting Code  711–​14 Data protection see also Privacy
continued adoption of on-​demand ‘controllers’ and ‘processors’
services  730–​1 distinguished  664–​5
evolving policy within EU  149 Data Protection Directive  649
industry developments  119 data security  667–​8
on-​demand programmes  714–​19 different facets  681–​2
overview  683–​4 processing restrictions  665–​6
premium rate services  728–​30 reform in emerging markets  889
reform in emerging markets  888 Deep Packet Inspection (DPI) 750
technologies 730 Deregulation see Liberalization
UK law  Developing countries 
infrastructures  705–​8 absence of competition law  22
radio licensing  703–​5 broadband 
television licensing  693–​703 divesting state ownership of PPPs  887
video recordings  719–​20 emergence of PPP models  885–​7
Cookies  675–​6 new dynamics  882–​4
Cost  first-​generation reforms 
see also Accounting; Economic design and process  851–​5
regulation EU model  855–​6
abuse of dominance  28–​9 impetus for reform  849–​51
accounting requirements  21 regional influences  856–​7
auction of spectrum  130–​1 foundational regulatory components 
capacity agreements  613 capacity-​building  865–​6
interconnection between networks  competition law  859–​60
fully allocated costs (FAC)  64–​5 dispute resolution  879–​82
marginal and incremental costs  65–​7 facility-​sharing and co-​location  873–​4
mark-​ups for common cost recovery  67–​8 interconnection between
local loops  65 networks  870–​3
number portability  133, 253–​4 licensing  866–​8
910

Index 901

number portability  877–​8 Authorisation Directive  319

pricing  868–​70 common carriers  197
property rights  879 competition law  587
regulatory architecture  857–​88 consumer protection provisions 
regulatory authorities  861–​4 EU protection provisions  504
roaming 874 effect of convergence  52
spectrum management  874–​7 Equality of Access Board  127
Universal Services Obligation functional separation  53
(USO)  878–​9 interconnection between networks 
national frameworks for regulation  14 access 81
public policy concern  8–​9 charge controls  83
reform in emerging markets  leased lines  73
broadband  882–​7 on-​going concerns about non-​price
conclusions  887–​93 discrimination 75
first-​generation reforms  849–​57 wholesale broadband market
foundational regulatory review 74
components  857–​82 ISPs 768
introduction  847–​8 models of separation  46
second-​generation reforms  887–​93 price discrimination  31
second-​generation reforms  ‘significant market power’  172
access 890 UK implementation of Authorisation
consumer protection  891–​2 Framework 344
convergence and technological voice telephony  187
neutrality 888 Dispute resolution 
data protection and privacy  889 access and interconnection  477
internet governance issues  892 foundational regulatory component for
security  890–​1 emerging markets  879–​82
Director General of Telecommunications  Ofcom function  122
concerns about BT merger  25 UK consumer protection  523–​9
duties  115–​16 UK implementation of Authorisation
establishment 113 Framework 350
influence of personality  19 World Trade Organization  840–​3
judicial challenges  116–​17 Dominance see Abuse of dominance
local loop bundling  138 (Art 102)
number portability  133–​5
powers  116–​17 Economic regulation 
statutory provisions  114–​17 see also Licensing
take-​over by Ofcom  120 Authorisation Directive  314–​15
Directories  fast-​moving sector  97–​8
additional services  188 first-​generation reforms in emerging
service provider–​user privacy markets 852
relationship  671–​2 forms of control  40–​1
Disabled persons see Persons with general principles  29
disabilities interconnection between networks 
Discrimination  cost methodologies  64–​8
access and interconnection  446, 449, 472 need for effective interconnection  63–​4
accounting separation  69 UK regulation  68–​97
920

902 Index

Economic regulation (cont.) copyright liability against ISPs  713–​19

introduction  27–​8 L’Oréal v eBay  745–​7
models of regulation  Newzbin  749–​52
separation  46–​8 Scarlet Extended (2011)  747–​9
various forms  46 DGT role  116–​17
price capping  EU initiatives 
consumer choice  45 European regulatory authority and
duration of control  43 advisory bodies  185–​7
grouping of services  42–​3 ex ante/​ex post controls  175
impact on quality  44–​4 NRA independence and
importance  41–​2 harmonization  179–​8 4
movements of costs and productivity  43 EU licensing regime 
valuation basis for capital costs  44 Authorisation Directive  330–​1,  365–​76
rationale  28–​9 Licensing Directive  312
scope  Federal Communications
assessment of competition in each Commission  222–​3
market  36–​41 layering of regulatory bodies  14
market definition and SSNIP test  34–​5 licensing  298–​9
sector controls  proceedings before ECJ  156–​7
common costs  30–​1 Entry barriers see Barriers to entry
economies of scale and scope  33–​4 Environmental protection 17
network externalities  32–​3 Equipment see Technologies
pricing when demand exceeds capacity European Bank of Reconstruction and
levels  31–​2 Development (EBRD) 14
tariff rebalancing  58–​9 European Union (EU) 
UK  access 
convergence between telecoms, current regulatory obligations  453–​65
broadcasting, and information lead-​up to Access Directive  451–​3
technology  51–​4 Authorisation Directive 
end of duopoly policy  49–​51 amendments and modification of
privatization and early development of rights  328–​9
competition  48–​9 application and scope  314–​15
retail price regulation  54–​7 billing requirements  349–​50
tariff rebalancing  59 calling line identification  352
Universal Service Obligation (USO)  59–​62 conditions of entitlement  319–​28
Emergency planning 343 dispute resolution  350
Emerging markets see Developing countries enforcement  330–​1
Enforcement  evolution of law and practice  379–​80
competition law  fees 332
appeals  594–​5 framework  313–​14
concurrent powers  592–​4 general authorizations  316–​18
importance 596 horizontal approach  315–​16
overview  591–​2 individual rights  318–​20
United States  268–​70 mobile networks  354–​5
competition law and regulation persons with disabilities  351
distinguished  recent developments  333–​5
key questions  535–​6 reporting obligations  329–​30
930

Index 903

switching systems  352–​4 harmonization measures  170–​3

transparency  347–​9 incorporation of Directives into
UK implementation  336–​46 Communications Act 2003  120
competition law  Interconnection Directive 
market investigations  583–​5 general principles  445–​6
merger control  575 UK implementation  446–​51
consumer protection provisions  UK position prior to  444–​5
bundled offers  504 ISP liability for content 
minimum contract terms  495–​500 copyright enforcement  745–​52
non-​d iscrimination  504 Directive on Electronic Commerce
number portability  503–​4 (ECD)  739–​42
service levels  502–​3 French ‘HADOPI’ law  753–​4
switching providers  503 graduated national response  752–​3
transparency  500–​1 hotlines for illegal content  756–​8
convergence (AVMSD)  network neutrality  775–​87
adoption 685 recent developments  761–​3
applicability  685– ​6 revision of ECD  744–​5
content requirements for TV  US approach compared  742–​4
708–​11 liberalization of competition law 
country of origin and freedom of equipment  165–​8
reception  688–​90 impact on BT  160–​1
jurisdiction rules  690–​1 key concept of essential
key debate  687 requirements  164–​5
on-​demand programmes  714–​15 services  168–​70
scope  686–​8 withdrawal of ‘special or exclusive
source of law  684–​8 rights’  162–​3
summary table  692 licensing 631
Television without Frontiers  686 Authorisation Directive  313–​79
convergence between telecoms, current relevance  293–​302
broadcasting, and information early trade restrictions  287–​90
technology 51 forms and processes  304–​8
enforcement  legal issues  302
European regulatory authority and Licensing Directive  310–​11
advisory bodies  185–​7 overview  285–​7
ex ante/​ex post controls  175 overview of Framework  310
NRA independence and Licensing Directive 
harmonization  179–​8 4 conditions of entitlement  310–​11
evolving policy  148–​55 enforcement 312
future directions  193–​4 harmonization 312
harmonization  scope 310
future directions  193–​4 model for developing countries  855–​6
licensing 304 national frameworks for regulation  14
national regulatory authorities  New Regulatory Framework for
179–​8 4 interconnection  72–​4
public policy drive towards privacy 
liberalization 12 Data Protection Directive  649
sources of EU law  156 user–State privacy relationship  654–​7
904

904 Index

European Union (cont.) capacity agreements 

public policy drive towards liberalization  13 dark fibre  607
recognition of global issues  24 indefeasible rights of use  604–​7
‘significant market power’  173–​8 leased lines  602–​3
sources of law  155–​60 government management of
spectrum management  402–​8 markets  435–​7
Universal Services Obligation industry developments  108–​10
(USO)  186–​93 interconnection between networks in UK 
Ex ante/​ex post controls  early days of local loop unbundling
broadcasting 163 (LLU)  71–​2
EU law  149–​54 evolution of regulation  75–​8 4
future directions  193–​4 history and development  68–​9
importance 21 implementation of European
notification of ‘significant market Directives  72–​4
power’  173–​8 key considerations  88–​90
terminology 21 leased lines regulation  72–​4
user–​State privacy relationship  new regime of controls  70–​1
interception, acquisition and equipment strategic review of digital
interference  662–​3 communications  84–​8
technical capability and data UK consumer protection  515–​16
retention  659–​62 Universal Services Obligation (USO)  188
US approach 
Federal Communications Commission  calls to mobiles  250
bureaux and offices  221–​2 co-​location  245– ​6
Commissioners  220–​1 dialling parity  253
enforcement powers  222–​3 intercarrier compensation  247–​50
jurisdiction  212–​13 interconnection  246–​7
key debate on deregulation  10 licensing of common carriers  234–​5
merger control  273–​4 network neutrality  258
network neutrality  number portability  253–​4
enforcement actions  769–​70 poles ducts and rights of way  251–​3
Open Internet Order 2015  771–​2 re-​sale  250–​1
Open Internet Report and Order 2010  770 unbundled elements  243–​5
zero-​rating  772–​5 ‘Four Freedoms’ policy 2004–5 768
pre-​emption doctrine  230–​2 Frameworks 
recognition of global issues  24 evolving policy within EU  149–​54
review of actions  229–​30 varied approaches  14–​16
role 220 France 
spectrum management  398 Autorité de Régulation des
structure and method  19 Télécommunications 19
Fees  Universal Services Obligation
see also Pricing (USO) 137
EU licensing regime  Full function joint ventures  579–​81
Authorisation Directive  329, 332 Fully allocated costs (FAC)  64–​5
Licensing Directive  311–​12 Functional separation  47, 53
spectrum management  411–​12
revenue maximizing  300 General Post Office 
Fixed networks  evolution  106–​7
950

Index 905

history of spectrum management  400–​2 key debate on liberalization  9–​11

origins 102 key powers  17
Globalization  network management systems  5, 7
expansion of sector regulation  4 next generation networks  139–​41
issues arising from  24–​5 outsourcing 
collaborative environments  633
Harmonization  free movement of service  631
EU licensing regime  PPP arrangements  885
Authorisation Directive  317 reform proposals  852
Licensing Directive  312 regulatory capacity-​building  865
future directions  193–​4 special treatment of MNEs  627–​9
Interconnection Directive  445 technical clauses  638
licensing 304 US approach 
national regulatory authorities  179–​8 4 carrier rule-​making  199
public policy drive towards liberalization  12 poles, ducts, and rights of way  251–​3
sources of EU law  156 siting of towers and antenna  254–​7
spectrum management  402–​17, 432 Institutions and authorities 
High seas  Body of European Regulators for Electronic
key powers  17 Communications (BEREC)  185– ​6
protection of submarine cables  804 Competition and Markets
Human rights  Authority (CMA) 
increased concerns  17 BT undertaking in lieu of
privacy  reference  125– ​6
EU approach to user–State privacy  655 licensing 299
scope  648–​9 merger control  575–​9
user–State privacy relationship  653 mobile network charges  156–​7
notification of ‘significant market
Indefeasible rights of use  604–​7 power’  173–​8
Information technology  powers 125
convergence with broadcasting and price review  91
telecoms in UK  51–​4 sectoral inquiry  158
Infrastructure  different regulatory models  19–​21
agreements in restraint of trade Director General of Telecommunications 
(Art 101)  545 concerns about BT merger  25
Infrastructures  duties  115–​16
convergence in UK  705–​8 establishment 113
EU licensing regime  influence of personality  19
Licensing Directive  311 judicial challenges  116
facility-​sharing and co-​location in local loop bundling  138
emerging markets  873–​4 number portability  133–​5
harmonization measures  171–​2 powers  116–​17
interconnection between networks  statutory provisions  114–​17
cost methodologies  64–​8 take-​over by Ofcom  120
need for effective interconnection  63–​4 European Bank of Reconstruction and
UK regulation  68–​97 Development (EBRD)  15
international networks  Federal Communications Commission 
satellite regulation  793–​802 bureaux and offices  221–​2
submarine cables  802–​6 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 separation  69
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  rebalancing 59
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
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
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 907

GATS Fourth Protocol  833–​7 switching systems 

impact on EU law  149 interconnection of circuit switched
licensing requirements  304 networks  438–​9
ongoing liberalization  801–​2 interconnection of packet-​s witched
role  828–​9 networks  439–​41
spectrum management  390 other access arrangements  441–​3
status of WTO law  837–​40 packet-​s witched and circuit-​s witched
telecommunications Annex  832–​3 networks distinguished  438
US licensing of common carriers  240–​1 UK approach 
Intellectual property  fixed communications  68–​90
copyright enforcement against ISPs  key issues  97
L’Oréal v eBay  745–​7 mobile networks  90– ​6
Newzbin  749–​52 UK implementation of Authorisation
Scarlet Extended (2011)  747–​9 Framework 342
licensing  547–​51 United Kingdom 
Interception, monitoring, and recording  Art 5 access-​related conditions  474–​5
current relevance of licensing  300–​1 Art 6 access-​related conditions  476–​7
Deep Packet Inspection (DPI)  750 broadband  477–​8
service provider–user privacy dispute resolution  477
relationship  669–​71 facility sharing  466–​7
UK reform  787–​8 general interconnection
user–State privacy relationship  662–​3 obligation  467–​8
Interconnection between networks  overview  465–​6
Access Directive  SMP obligations  469–​74
current regulatory obligations  453–​65 US approach 
lead-​up to  451–​3 fixed networks  242–​57
agreements in restraint of trade history and development  197–​9
(Art 101)  543–​5 mobile networks  242–​57
contractual issues for IP agreements  International Finance Corporation
paying transit agreements  487–​9 (IFC) 14
peering agreements  482–​7 International regulation 
reliance on sector-​specific rules  489 see also International
contractual issues for switching systems  Telecommunication Union
bespoke contracts  478–​81 conclusions 802
overview 478 infrastructure network 
reference offers  482 satellite regulation  793–​802
cost methodologies  submarine cables  802–​6
fully allocated costs (FAC)  64–​5 overview  791–​3
marginal and incremental costs  65–​7 spectrum management 
mark-​ups for common cost radio communications  393– ​6
recovery  67–​8 telegraph systems  391–​3
Interconnection Directive  US licensing of common
general principles  445–​6 carriers  234–​5
UK implementation  446–​51 WTO 
UK position prior to  444–​5 defining moment for sector
need for effective interconnection  63–​4 development 4
reform in emerging markets  870–​3 dispute resolution  840–​3
reliance on sector-​specific rules  489 establishment  827–​8
908

908 Index

International regulation (cont.) reform in emerging markets 

GATS  829–​32 governance issues  892
GATS Fourth Protocol  833–​7 security  890–​1
licensing requirements  304 technological phenomenon  9
ongoing liberalization  843–​4 third party content 
role  828–​9 conclusions  787–​8
status of WTO law  837–​40 EU approach to network
telecommunications Annex  832–​3 neutrality  775–​87
US licensing of common EU regulation  739–​52
carriers  240–​1 French ‘HADOPI’ law  753–​4
International Telecommunication graduated national response  752–​3
Union (ITU)  hotlines for illegal content  756–​8
accounting rates  821–​7 legal debate regarding traffic
establishment 806 management  763–​8
financial contributions  809 UK response  754–​5
fundamental principles  806–​7 US approach  735–​9
legal instruments  815–​21 US approach to network
membership  807–​9 neutrality  768–​75
radiocommunications  811–​15 unsolicited emails in US  278–​9
as a regulatory institution  827 VoIP  137–​9
spectrum management  396 wholesale local access  76
standards  809–​11 Internet Watch Foundation  758–​61
Internet  IP-​enabled services see Internet
competition issues  23
competition law  Joint dominance  174–​5
definition of markets  567 Joint ventures  579–​81
impact of convergence  566–​7 Judicial challenges 
continued adoption of on-​demand Director General of
services  730–​1 Telecommunications 116
contractual issues for IP interconnection key powers  18
agreements  United States  225
paying transit agreements  487–​9
peering agreements  482–​7 Kingsbury Commitment 197
reliance on sector-​specific rules  489
convergence  715–​16 Law see Sources of law;
domain name and IP addressing Telecommunications law
scheme 17 Legal activism see Judicial challenges
fundamental technologies  5, 7 Legal separation 47
global communication systems  15 Liberalization 
importance of standards  22–​3 EU competition law 
increasing use  5–​7 equipment  165–​8
key issues  139–​41 impact on BT  160–​1
local loop unbundling (LLU)  72 key concept of essential
market disruption  10 requirements  164–​5
multinational enterprises (MNEs)  services  168–​70
need for special type of service  628–​9 withdrawal of ‘special or exclusive
voice and video communications  631–​2 rights’  162–​3
90

Index 909

evolution of GPO  106 evolving policy within EU  149

evolving policy within EU  148–​55 history 
first-​generation reforms in emerging evolution of GPO  106
markets 853 radio  107–​8
future directions  193–​4 telegraph systems  104–​5
impact on ITU  808 history and development 
impetus for reform in developing current relevance  293–​302
countries 851 early powers and purposes  290–​3
industry developments in UK  early trade restrictions  287–​90
BTA 1981  111–​12 forms and processes  304–​8
establishment of DGT  114 legal issues  302–​3
privatization of BT  112–​13 industry developments 
statutory reform under 1984 Act  113–​17 fixed networks  108–​10
key policy debate  9–​11 mobile networks  109–​10
need for legal intervention  8–​9 international law and standards  308–​10
need for privacy protection  646 key powers  16
relationship with privatization  11–​12 mobile networks  131–​2
‘significant market power’  174 multinational enterprises (MNEs) 
spectrum management  collaborative environments  633–​4
overview  387–​8 cross-​border authorization  630–​1
UK framework  427–​32 voice and video communications  631–​2
UK developments  overview  285–​7
convergence between telecoms, radio licensing in UK  703–​5
broadcasting, and information reform in emerging markets  866–​8
technology  51–​4 role of law  13
end of duopoly policy  49–​51 spectrum  131–​2
privatization and early development of UK implementation of Authorisation
competition  48–​9 Framework 
United States  billing requirements  349–​50
carrier rule-​making  199 calling line identification  352
competition 1950–​1996  197–​9 conditions of entitlement  337–​65
local-​exchanges  199–​200 dispute resolution  350
WTO  828,  843–​4 enforcement  365–​76
Licensing  fees  376–​9
access and interconnection  449 future revisions  379
agreements in restraint of trade (Art mobile networks  354–​5
101)  547–​51 notification procedure  336–​7
common carriers in US  234–​5 persons with disabilities  351
convergence in UK  statutory provisions  335–​6
radio licensing  703–​5 transparency  347–​9
television licensing  693–​703 UK TV 
EU regime  DTPS and DTAS  698
Authorisation Directive  313–​79 fit and proper persons  695–​6
evolution of law and practice  379–​80 ITV  701–​2
Licensing Directive  310–​11 local TV  702
overview of Framework  310 multiplexes and digital TV  698–​9
spectrum management  402–18 overview  693–​4
901

910 Index

Licensing (cont.) business connectivity market reviews

programme services  703 (BCMR)  82–​4,  87–​9
public service television  699–​701 wholesale broadband access market
TLCSs  696–​8 reviews  80–​2,  86–​7
US approach  wholesale local access (WLA) market
common carriers defined  233 reviews  78–​80,  85–​6
domestic fixed services  234 wholesale narrowband market
foreign ownership requirements  reviews  76–​7,  84–​5
239–​41 general principles of economic
international services  234–​5 regulation 29
local entry licences  239 investigations 
spectrum licensing  235–​9 Competition and Markets Authority
Local loops  (CMA)  585–​91
abuse of dominance (Art 102)  556–​7 European Commission  583–​5
access and interconnection  436, 442, general powers  582–​3
449–​50,  459 market definition and SSNIP test  34–​5
costs 65 merger control  574–​9
EU licensing regime  232 mobile voice call termination  129–​30
key issue  133 rationale for consumer protection  493–​4
local loop unbundling (LLU)  71–​2, 89 ‘significant market power’  173–​8
shift in policy  138–​9 abuse of dominance  173–​8
US approach  243–​5 current regulatory obligations  456–​8
reference offers  482
Mark-​ups  47,  67–​8 sources of EU law  155–​6
Market issues  spectrum management 
see also Liberalization EU licensing regime  413
abuse of dominance (Art 102)  UK framework  427–​32
defining the relevant market  554–​5 Media plurality  581–​2
electronic content  567–​9 Merger control 
three-​step analysis  553–​4 see also Abuse of dominance (Art 102)
access and interconnection  changes to market structure  574–​9
market definitions  473–​4 full function joint ventures  579–​81
applicability of competition law  533–​5 media plurality  581–​2
assessment of competition in each market  recognition of global issues  25
barriers to entry  37–​9 United States 
countervailing buyer power  39–​40 role of FCC  273–​4
importance of market structure  36–​7 statutory provisions  270–​2
key issues  40 Mobile networks 
barriers to entry  Access Directive  462–​3
licensing  285–​8 agreements in restraint of trade
notification of ‘significant market (Art 101)  545–​7
power’  174–​5 capacity agreements 
spectrum  131–​2 contractual issues  616–​18
first-​generation reforms in emerging regulatory issues  618–​21
markets 852 types of agreement  608–​11
fixed network interconnectivity in UK  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  protection of submarine cables  805
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)  foundational regulatory component for
contractual issues  emerging markets  877–​8
commercial clauses  640–​1
problem of multiple locations  637–​8
technical clauses  638–​40
licensing  Framework  344–​5
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
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
key issue  133–​5
multinational enterprises (MNEs)  636–​7
UK implementation of Authorisation
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  (USO)  188–​9,  322
assessment of market power  40
ISP liability  744
market investigations  586
powers to enforce consumer law  721
Oftel  Pricing
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  convergence  728–​30
international law  794–​8
key powers  17
Outsourcing  retail price regulation in UK
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
Policy see Public policy
Pools see Consortia
Pre-​emption doctrine  230–​2
Premium rate services  728–​30
 
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 
rebalancing of prices  58–​9
reform in emerging markets  868–​70
 
core principle  54–​6
key issues  57
operation of regime  57
931

Index 913

tariff controls  cookies  675–​6

importance 21 limited direct impact  675
importance of regulation  21 unsolicited communications  679– ​81
provision of universal services  191 Privatization 
tariff rebalancing  58–​9 British Telecom (BT)  112–​13
Privacy  early development of competition in
see also Data protection UK  48–​9
Deep Packet Inspection (DPI)  750 impetus for reform in developing
different facets  681–​2 countries 851
evolving policy within EU  149 need for privacy protection  646
historical development  645–​7 relationship with liberalization  11–​12
reform in emerging markets  889 Public policy 
scope  see also Universal Services
content  651–​3 Obligation (USO)
Data Protection Directive  649 changes within the EU  148–​55
‘electronic communication service’  649–​50 drive towards liberalization  12–​14
human rights  648–​9 duopoly  117–​18
operators and suppliers  651 EU advisory bodies  186
‘public availability’  650–​1 licensing 
service provider–user relationship  early trade restrictions  290
‘controllers’ and ‘processors’ main concerns  8–​9
distinguished  664–​5 recognition of global issues  24–​5
data security  667–​8 role of FCC  220
directories  671–​2 Public security see Security
monitoring  669–​71 Public Utility Commissions  226–​7
processing restrictions  665–​6
transparency 669 Quality of service see Consumer protection
subscriber–user relationship 
call-​blocking  675 Radio see Broadcasting; Wireless networks
complexities 672 ‘Ramsey pricing’  31,  67–​8
itemized billing  674 Rate-​of-​Return (RoR) regulation 41
lawful business practices  672–​4 Rebalancing of prices  58–​9
US consumers  Recording see Interception, monitoring,
legal constraints on regulation of and recording
telemarketers  274–​5 Reference offers 482
overview 275 Revenue maximizing 300
proprietary network Rightswatch 742
information  279–​82 Roaming 
unsolicited calls and texts  275–​7 access and interconnection  475–​6
unsolicited emails  278–​9 agreements in restraint of trade
unsolicited faxes  278 (Art 101)  545–​7
user–State privacy relationship  obligation to provide  130–​1
EU law  654–​7 reform in emerging markets  874
relevance  653–​4 sources of EU law  157
UK law  657–​63 US approach  257
user–user relationship  Routing systems see Switching systems
caller identification  677–​8 ‘RPI –​X’ formula 41
941

914 Index

Satellite networks  operation in UK  61–​2

capacity agreements  public policy concern  8–​9
contractual issues  614–​16 social obligations on retail
types of agreement  608 prices  59– ​6 0
international regulation  Service provider–​user privacy
international conventions  798–​802 relationship  675–​6
overview  793–​4 see also User–​State privacy relationship;
space law  794–​8 User–user privacy relationship
United States  207–​9 ‘controllers’ and ‘processors’
Sector regulation  distinguished  664–​5
defining moment  4 data security  667–​8
economic controls  directories  671–​2
common costs  30–​1 monitoring  669–​71
economies of scale and scope  33–​4 processing restrictions  665–​6
network externalities  32–​3 transparency 669
pricing when demand exceeds capacity ‘Significant market power’ 
levels  31–​2 abuse of dominance  173–​8
Security  access and interconnection  469–​74
see also Data protection; Privacy Access Directive  456–​8
access and interconnection  486 EU licensing regime  324–​6
capacity agreements  613 reference offers  482
data security  667–​8 Sound broadcasting see Broadcasting
importance  164–​5 Sources of law 
improvements 6 European Union (EU)  155–​60
reform in emerging markets  890–​1 World Trade Organization 
Service levels  GATS  829–​32
capacity agreements  611–​13 GATS Fourth Protocol  833–​7
consumer protection provisions  status  837–​40
EU protection provisions  502–​3 telecommunications Annex  832–​3
UK provisions  463–​4,  506–​7 Space 
effect of price capping  42–​3 international law  794–​8
liberalization of EU competition key powers  17
law  168–​70 Spectrum management 
paying transit agreements  489 see also Broadband
special treatment of MNEs  conclusions  394–​5
cross-​border nature  626–​7 control through licensing  286
mobile networks  629–​30 EU framework  402–​18
outsourcing  627–​9 expansion of mobile telephony  131–​2
system integration  628 foundational regulatory component for
unified communications  628–​9 emerging markets  874–​7
UK implementation of Authorisation history of regulation 
Framework  342–​3 international radio
Universal Services Obligation (USO)  communications  393–​6
costs  60–​1 international telegraphy
drive towards liberalization  12–​14 regulation  391–​3
funding 61 national frameworks for
importance of regulation  19–​21 regulation  396–​400
951

Index 915

licensing  call-​blocking  675

current relevance  295 complexities 672
legal issues  303 itemized billing  674
revenue maximizing  300 lawful business practices  672–​4
Licensing Directive  310 Surveillance see Interception, monitoring,
overview  and recording
allocation for public sector Switching between providers 
purposes  386–​7 EU provisions  503
benefits of technology  382–​3 UK provisions  522–​3
harmonization  384–​5 Switching systems 
importance of medium for Authorisation Directive  315
transmission  381–​2 fundamental technologies  5–​7
increased demand  381 interconnection of circuit switched
liberalization  387–​8 networks  438–​9
regulatory options  383–​4, 387 interconnection of packet-​s witched
trading and farming  413 networks  439–​41
UK approach  131–​2 packet-​s witched and circuit-​s witched
UK framework  networks distinguished  438
grants of recognized access  424–​7 UK implementation of Authorisation
market mechanisms and Framework  352–​4
liberalization  427–​32
Ofcom powers  420–​4 Technologies 
regulatory scope and powers  419 access and interconnection  470–​2
statutory provisions  418–​19 barriers to entry  38
US approach  challenges for UK 
history and development  206–​7 internet telephony  139–​41
licensing  235–​9 next generation networks  139–​41, 141–​2
overview  241–​2 competition issues  23
wave frequencies  388–​90 convergence 730
WTO regulation  390 Deep Packet Inspection (DPI)  750
SSNIP test  34–​5, 556, 567 difficulties created for public policy  8–​9
Standards  evolving policy within EU  152
agreements in restraint of trade importance of standards  22–​3
(Art 101)  551–​3 imposition of eligibility
contractual issues for switching requirements  297–​8
systems 480 internet 9
harmonization measures  170–​3 liberalization within EU 
importance  22–​3 ‘essential requirements’
International Telecommunication Union approach  164–​5
(ITU)  809–​11 primary focus on free movement  165–​8
licensing  308–​10 multinational enterprises (MNEs) 
recognition of global issues  24–​5 contractual issues  638–​40
Structural separation 47 need for special type of service  628
Submarine cables  802–​6 need for effective interconnection  64
Subscriber–​user privacy relationship  radio 108
see also User–State privacy relationship; rapidly changing environment  5
User–​user privacy relationship reform in emerging markets  888
961

916 Index

Technologies (cont.) early history  101–​2

spectrum management  key issues  133–​45
EU framework  403–​4 late 20th century development  112–​17
importance  382–​3 Telegraph systems 
wave frequencies  388–​90 history 
underlying fundamentals  5 introduction of railways and
Telecommunications law  electricity  101–​2
see also Competition law regulation  102–​3
EU initiatives  introduction of radio  107–​8
enforcement  185–​7 licensing  104–​5
future directions  193–​4 spectrum management 
harmonization measures  170–​3 international regulation  391–​3
notification of ‘significant market UK development of regulation  400–​2
power’  173–​8 United States  196–​7
sources of law  155–​60 Telephony 
Universal Services Obligation EU licensing regime 
(USO)  186–​93 Authorisation Directive  314–​15
impact of broadcasting on convergence  evolution of GPO  106–​7
advertising regulation  720–​7 evolving policy within EU  148–​55
AVMSD  684–​93 fundamental technologies  7
content  708–​14 history  103–​5
infrastructures  705–​8 Licensing Directive  310
on-​demand programmes  714–​19 numbers 
overview  683–​4 key powers  17
premium rate services  728–​30 Open Network Provision  172–​3
radio licensing in UK  703–​5 service provider–user privacy relationship 
television licensing in UK  693–​703 directories  671–​2
importance of standards  22–​3 monitoring  669–​71
key powers  17 transparency 669
licensing  special treatment of MNEs  628–​9
international law and standards  308–​10 subscriber–user privacy relationship 
nature of licences  302–​3 call-​blocking  675
national frameworks for regulation  14 itemized billing  674
ongoing liberalization  843–​4 lawful business practices  672–​4
pace of change  25–​6 United States  196–​7
preferred terminology  5–​8 user–​user privacy relationship 
recognition of global issues  24 caller identification  677–​8
sources  unsolicited communications  679– ​81
European Union (EU)  155–​60 Television 
sources of international regulation  advertising regulation 
GATS  829–​32 ASA and associated bodies  720–​1
GATS Fourth Protocol  833–​7 content 724
status of WTO law  837–​40 general application  723–​4
telecommunications Annex  832–​3 on-​demand programmes  714–​18
structure and method  19–​21 other schemes  719–​20
UK regime  participation in programmes  726–​7
development of industry  108–​11 scheduling  724–​5
971

Index 917

sponsorship 727 service provider–​user privacy

teleshopping 726 relationship 669
content regulation  UK approach  124
AVMSD requirements  708–​11 UK implementation of Authorisation
Broadcasting Code  711–​14 Framework  347–​9
on-​demand programmes 
implementation of directive  714–​15 United Kingdom 
Scope Guidance  715–​18 see also Ofcom
UK licensing  access and interconnection 
DTPS and DTAS  698 Art 5 access-​related conditions  474–​5
fit and proper persons  695–​6 Art 6 access-​related conditions  476–​7
ITV  701–​2 broadband  477–​8
local TV  702 dispute resolution  477
multiplexes and digital TV  698–​9 facility sharing  466–​7
overview  693–​4 general interconnection obligation  467–​8
programme services  703 overview  465–​6
public service television  699–​701 SMP obligations  469–​74
TLCSs  696–​8 challenge of new technologies 
Terminal equipment  internet telephony  139–​41
evolving policy within EU  152 next generation networks  139–​41, 141–​2
fundamental technologies  5–​8 consumer protection provisions 
Termination charges  marketing  505–​11
charge controls on mobile convergence 
networks 130 infrastructures  705–​8
contractual issues for switching radio licensing  703–​5
systems  479–​80 television licensing  693–​703
‘significant market power’  176 development of industry 
Terminology  fixed networks  108–​10
evolving policy within EU  152–​3 early history 
ex ante/​ex post controls  21 evolution of GPO  106–​7
telecommunications  5– ​8 introduction of radio and mobile
Transparency  communications  107– ​8
access and interconnection  472 origins of GPO  102
consumer protection provisions  telegraph systems  102–​3
EU protection provisions  500–​1 telephony  103–​5
UK provisions  508–​10 economic regulation 
customer choice  45 convergence between telecoms,
EU approach  172 broadcasting, and information
EU licensing regime  technology  51–​4
Authorisation Directive  317, 319 end of duopoly policy  49–​51
Licensing Directive  311 privatization and early development of
UK implementation of Authorisation competition  48–​9
Framework 343 implementation of Authorisation
licensing  294, 304–​5, 308 Framework 
objectives 21 billing requirements  349–​50
Ofcom’s strategic review  124 calling line identification  352
removal of anti-​competitive practices  20 conditions of entitlement  337–​65
981

918 Index

United Kingdom (cont.) early trade restrictions  287–​90

dispute resolution  350 forms and processes  304–​8
enforcement  365–​76 market investigations  585–​91
fees  376–​9 merger control  575–​9
future revisions  379 national frameworks for regulation  14
mobile networks  354–​5 Ofcom 
notification procedure  336–​7 comments on USO  134
persons with disabilities  351 digital communications review  127–​8
statutory provisions  335–​6 functions  120–​2
switching systems  352–​4 national frameworks for regulation  14
transparency  347–​9 strategic review of industry  123–​8
industry developments  take-​over of DGT’s functions  120
broadband 111 recognition of global issues  24–​5
Communications Act 2003  120–​3 regulatory interventions 
converged networks  119 local loop bundling  138–​9
duopoly  117–​18 retail price regulation 
expansion of mobile telephony  128–​32 core principle  54–​6
mobile networks  109–​10 key issues  57
strategic review by Ofcom  123–​8 operation of regime  57
interception, monitoring, and recording  spectrum management 
reform of law  787–​8 grants of recognized access  424–​7
interconnection between networks  historical development  400–​2
fixed communications  68–​90 interpretation of ‘Refarming
implementation of EU Directive  446–​51 Directive’  385–​7
key issues  97 market mechanisms and
mobile networks  90– ​6 liberalization  427–​32
position prior to EU Directive  444–​5 Ofcom powers  420–​4
ISP liability for content  regulatory scope and powers  419
application of ECD  744 statutory provisions  418–​19
copyright enforcement  749–​52 structure and method  19–​21
Internet Watch Foundation  758–​61 tariff rebalancing  58–​9
legal debate regarding traffic telegraph systems 
management  763–​8 licensing  104–​5
statutory provisions  754–​5 TV licensing 
key debate on deregulation  10 overview  693–​4
key issues  UK licensing 
Brexit  143–​5 DTPS and DTAS  698
internet telephony  139–​41 fit and proper persons  695–​6
next generation networks  141–​2 ITV  701–​2
number portability  133–​5 local TV  702
Universal Services Obligation multiplexes and digital TV  698–​9
(USO) 134 programme services  703
liberalization  public service television  699–​701
establishment of DGT  114 TLCSs  696–​8
privatization of BT  112–​13 Universal Services Obligation (USO) 
licensing (see also implementation above) costs  60–​1
current relevance  293–​302 funding 61
91

Index 919

operation in UK  61–​2 importance of ex ante controls  21

social obligations on retail institutions and authorities (see
prices  59– ​6 0 also Federal Communications
user–State privacy relationship  Commission)
interception, acquisition, and equipment Congress and President  225–​6
interference  662–​3 courts 225
range of powers  657–​9 National Association of Regulatory
technical capability and data Utility Commissioners  227
retention  659–​62 National Telecommunications and
United States  Information Administration  223
access and interconnection  Public Utility Commissions  226–​7
fixed networks  242–​57 ISP liability for content 
mobile networks  242–​57 EU approach compared  742–​4
administrative procedure  intermediary liability  735–​9
issuance of orders  229 legal debate regarding traffic
review of FCC action  229–​30 management  763–​8
rulemaking  228–​9 network neutrality  768–​75
statutory basis  227–​8 licensing 
competition law  common carriers defined  233
anti-​competitive agreements  267–​8 current relevance  294
investigations  269–​70 domestic fixed services  234
merger control  270–​4 foreign ownership
penalties for non-​compliance  269 requirements  239–​41
price discrimination  268–​9 forms and processes  306–​7
regulatory double jeopardy  270 history and development  287–​90
role of DoJ  267 international services  234–​5
consumer privacy  legal issues  302
legal constraints on regulation of local entry licences  239
telemarketers  274–​5 powers and purposes  292
overview 275 spectrum licensing  235–​9
Federal Communications Commission  spectrum management  295
key debate on deregulation  10 licensing of common carriers  234–​5
merger control  273–​4 national frameworks for regulation  14
overview  219–​20 paying transit agreements  487
recognition of global issues  24 pre-​emption doctrine  230–​2
spectrum management  398 provision of universal services  190
structure and method  19 relationship between liberalization and
future challenges  282 privatization 12
history and developments  spectrum management  241–​2
cable networks  200–​3 Universal Services Obligation (USO)  137
carrier rule-​making  199 E-​rate  263–​4
competition 1950–1996  197–​9 funding difficulties  265–​7
local-​exchanges  199–​200 high-​cost scheme  262–​3
overview  196–​7 low-​i ncome scheme  260–​2
satellite networks  207–​9 policy and legislative
telegraph and telephone pre-​1934  196–​7 background  258–​60
wireless networks  204–​7 rural health care programme  264
290

920 Index

Universal Services Obligation (USO)  cookies  675–​6

Authorisation Directive  327–​8 limited direct impact  675
consumer protection  492 unsolicited communications  679– ​81
costs  60–​1
drive towards liberalization  12–​14 Virtual separation 46
emerging markets  Voice telephony see Telephony
first-​generation reforms in  853 VoIP 
foundational regulatory UK consumer protection  530
components  878–​9 US approach  209–​19
EU initiatives  186–​93
evolving policy within EU  149 Weighted average cost of capital (WACC) 41
funding 61 Wireless networks 
future directions  193–​4 convergence in UK  703–​5
importance of regulation  19–​21 expansion of mobile telephony  128–​32
key issue  134 fundamental technologies  5–​7
licensing  importance  107–​8
current relevance  297 licensing 
operation in UK  61–​2 current relevance  295–​7
public policy concern  8–​9 revenue maximizing  285–​8
social obligations on retail prices  59–​60 radio licensing in UK  703–​5
United States  spectrum management 
E-​rate  263–​4 international regulation  393–​6
funding difficulties  265–​7 UK development of regulation  400–​2
high-​cost scheme  262–​3 US approach 
low-​i ncome scheme  260–​2 history and development  204–​7
policy and legislative World Bank 
background  258–​60 strategic role  14
rural health care programme  264 World Trade Organization (WTO) 
User–State privacy relationship  defining moment for sector
see also Service provider–​user privacy development 4
relationship; User–user privacy dispute resolution  840–​3
relationship establishment  827–​8
EU law  654–​7 impact on EU law  149
relevance  653–​4 impetus for reform in developing
UK law  countries 850
interception, acquisition, and equipment licensing 630
interference  662–​3 licensing requirements  304
range of powers  657–​9 ongoing liberalization  843–​4
technical capability and data role  828–​9
retention  659–​62 sources of law 
User–​user privacy relationship  GATS  829–​32
see also Service provider–​user privacy GATS Fourth Protocol  833–​7
relationship; Subscriber–​user privacy status  837–​40
relationship; User–State privacy telecommunications Annex  832–​3
relationship spectrum management  390
caller identification  677–​8 US licensing of common carriers  240–​1