![]() |
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback] [DONATE] | |||||||||
England and Wales High Court (Administrative Court) Decisions |
||||||||||
PLEASE SUPPORT BAILII & FREE ACCESS TO LAW
To maintain its current level of service, BAILII urgently needs the support of its users.
Since you use the site, please consider making a donation to celebrate BAILII's 25 years of providing free access to law. No contribution is too small. If every visitor this month gives just £5, it will have a significant impact on BAILII's ability to continue providing this vital service.
Thank you for your support! | ||||||||||
You are here: BAILII >> Databases >> England and Wales High Court (Administrative Court) Decisions >> EE Ltd v Office of Communications (Rev 1) [2016] EWHC 2134 (Admin) (26 August 2016) URL: https://www.bailii.org/ew/cases/EWHC/Admin/2016/2134.html Cite as: [2016] EWHC 2134 (Admin) |
[New search] [View without highlighting] [Printable RTF version] [Help]
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Strand, London, WC2A 2LL |
||
B e f o r e :
____________________
EE LIMITED |
Claimant |
|
- and - |
||
OFFICE OF COMMUNICATIONS - and - (1) SECRETARY OF STATE FOR CULTURE, MEDIA AND SPORT (2) VODAFONE LIMITED (3) TELEFÓNICA UK LIMITED (4) HUTCHISON 3G UK LIMITED |
Defendant Interested Parties |
____________________
Pushpinder Saini QC and Jessica Boyd (instructed by Ofcom) for the Defendant
Michael Fordham QC and Emily Neill (instructed by Towerhouse LLP) for the 2nd Interested Party
Thomas de la Mare QC and Tom Richards (instructed by DWF LLP) for the 3rd Interested Party
Tristan Jones (instructed by Constantine Cannon LLP) for the 4th Interested Party
Hearing dates: 12 July, 13 July and 14 July 2016
____________________
Crown Copyright ©
Mr Justice Cranston:
Introduction
Legal framework
(a) Domestic legislation
"give effect, amongst other things, to the requirements of Article 8 of the Framework Directive and are to be read accordingly."
As expressed in section 4(3) the EU requirements are sixfold and include promoting competition, securing that Ofcom's activities contribute to the development of the European internal market, promoting the interests of EU citizens, not favouring particular networks, services or facilities, encouraging network access and interoperability, and encouraging compliance with EU and international standards.
"Where it appears to Ofcom that a duty under this section conflicts with one or more of their duties under sections 3 to 6 of [the 2003 Act], priority must be given to their duties under those sections".
"(a) in such cases, (b) in such manner, (c) subject to such restrictions and constraints, and (d) with a view to achieving such purposes, as may be specified in, or determined by the Secretary of State in accordance with the order".
"(2) Ofcom may, if they think fit in the light (in particular) of the matters to which they must have regard under section 3, prescribe sums greater than those necessary to recover costs incurred by them in connection with their radio spectrum functions."
Auctions for licences are provided for in section 14 "[h]aving regard to the desirability of promoting the optimal use of the electromagnetic spectrum". Under section 15 fees are payable to Ofcom as soon as they become due. Fees are set out in regulations made in accordance with sections 16 and 122.
(b) EU law
"1. Member States shall ensure that effective mechanisms exist at national level under which any user or undertaking providing electronic communications networks and/or services who is affected by a decision of a national regulatory authority has the right of appeal against the decision to an appeal body that is independent of the parties involved. This body, which may be a court, shall have the appropriate expertise available to it to enable it to carry out its functions. Member States shall ensure that the merits of the case are duly taken into account and that there is an effective appeal mechanism…"
"to promote competition in the provision of electronic communications networks, electronic communications services and associated facilities and services by inter alia
(a) ensuring that users, including disabled users, elderly users, and users with special social needs derive maximum benefit in terms of choice, price and quality;
(b) ensuring that there is no distortion or restriction of competition in the electronic communications sector, including the transmission of content;
...
(d) encouraging efficient use and ensuring the effective management of radio frequencies and numbering resources."
"apply objective, transparent, non-discriminatory and proportionate regulatory principles by, inter alia,
(a) promoting regulatory predictability by ensuring a consistent approach over appropriate review periods;
(b) ensuring that, in similar circumstances, there is no discrimination in the treatment of undertakings providing electronic communications networks and services;
(c) safeguarding competition to the benefit of consumers and promote infrastructure-based competition;
(d) promoting efficient investment and innovation in new and enhanced infrastructures ...;
(e) taking due account of the variety of conditions relating to competition and consumers that exist in the various geographic areas within a Member State;
(f) imposing ex ante regulatory obligations only where there is no effective and sustainable competition and relaxing or lifting such obligations as soon as that condition is fulfilled."
"Member States may allow the relevant authority to impose fees for the rights of use for radio frequencies… which reflect the need to ensure the optimal use of these resources. Member States shall ensure that such fees shall be objectively justified, transparent, non-discriminatory and proportionate in relation to their intended purpose and shall take into account the objectives in Article 8 of [the Framework Directive]."
"46. Article 13 ... require[s] Member States to ensure that fees for the use of radio frequencies are objectively justified, transparent, non-discriminatory and proportionate in relation to their intended purpose and take into account the objectives, including the promotion of competition and efficient use of radio frequencies, as laid down in Article 8 of the Framework Directive.
47. It is also apparent from Article 13 of and recital 32 in the preamble to the Authorisation Directive that a fee charged to operators of telecommunications services for the use of resources must pursue the purpose of ensuring optimal use of such resources and not hinder the development of innovative services and competition on the market…
49. … the Authoritative Directive lays down the requirements with which Member States must comply in determining the amount of a fee for the use of radio frequencies, without thereby expressly providing a specific method for determining the amount of such a fee…
50. It should be remembered that the authorisation to use public property which constitutes a scarce resource enables the holder of that authorisation to make significant economic gains and grants that holder advantages as compared with other operators who are also seeking to use and exploit that resource, which justifies imposing a charge which reflects, inter alia, the value of the use of the scarce resource at issue…
54. In the light of all the foregoing considerations, the answer to the first two questions is that Articles 12 and 13 of the Authorisation Directive must be interpreted as not precluding a Member State from charging mobile telephone operators holding rights of use for radio frequencies a one-off fee payable for both a new acquisition of rights of use for radio frequencies and for renewals of those rights, in addition to an annual fee for making the frequencies available, intended to encourage optimal use of the resources while at the same time also covering the cost of managing the authorisation, provided that those fees genuinely are intended to ensure optimal use of the resource made up of those radio frequencies and are objectively justified, transparent, non-discriminatory and proportionate in relation to their intended purpose and take into account the objectives in Article 8 of the Framework Directive, which it is for the national court to assess.
55. Subject to that same condition, the fixing of the amount of a one-off fee for rights of use for radio frequencies by reference either to the amount of the former one-off licence fee calculated on the basis of the number of frequencies and months to which the rights of use relate, or to the amounts raised through auction, may be an appropriate method for determining the value of the radio frequencies."
(c) The Secretary of State's 2010 direction
"The Secretary of State gives these directions for the purposes of: ensuring the release of additional electromagnetic spectrum for use by providers of next generation wireless mobile broadband; allowing early deployment and maximising the coverage of those services; creating greater investment certainty for operators; and implementing Directive 2009/114/EC and the Decision on the liberalisation of frequencies in the 900MHz and 1800MHz bands."
"4. OFCOM must exercise their powers under –
(a) section 2 of the [2006 Act] to designate the 900MHz and 1800MHz bands for use for both GSM and UMTS systems;
(b) section 10 of and paragraph 6 of Schedule 1 to the WTA to vary each 900MHz and 1800MHz licence to permit the licensee to use the licensed frequencies for both GSM and UMTS systems…"
"(1) After completion of the [4G] Auction, Ofcom must revise the sums prescribed by regulations under section 12 of the [2006 Act] for 900 MHz and 1800 MHz licences so that they reflect the full market value of the frequencies in those bands.
(2) In revising the sums prescribed Ofcom must have particular regard to the sums bid for licences in the [4G] Auction..."
(d) Ofcom's 2015 decision
Secretary of State's 2010 direction in context
The Secretary of State's 2010 direction
"3.15 The Government has decided that the most effective way of implementing these proposals, and therefore delivering its policy objectives, is through a Direction. Having decided to intervene, and decided that it should support this package of proposals, it would not be sensible to ask Ofcom to consider implementation. This is because Ofcom would be required to meet their statutory duties and there is no guarantee that the outcome of this would be a full implementation of the proposals. In the Digital Britain Report, the Government stated that it saw the proposals as an integrated package and so it is using the power of Direction to ensure they are delivered as a package."
"compliance with relevant national and European law (including obligations to promote competition)": paragraph 3.18.
The government considered a regulatory approach by Ofcom would take too long, and a market-based solution would be unlikely to materialise. It had concluded that its integrated proposals were proportionate, for the reasons given in paragraph 3.20. Answer D, on the proposal regarding spectrum for the next generation mobiles, contained this passage:
"In recognition that these licences [2G] were not awarded through spectrum auctions granting indefinite licences, they will be subject to revised licence fees reflecting their full economic value, and so provide an appropriate return for taxpayers and correctly incentivise the holders."
"17. Finally an important element that will contribute to the balance referenced above is the revision of licence fees for this liberalised spectrum. Liberalised licences in the 900 MHz and 1800 MHz bands would have an enhanced value and the circumstances in which the fees were originally set would no longer apply. The Government will therefore direct Ofcom, consulting as required, to revise these fees to reflect the full market value of the spectrum, taking into account a number of factors including the amounts bid for spectrum in the combined auction. This revision will take place after the combined auction."
"The UK Government has been considering possible solutions to the complex set of challenges hindering the release and use of additional spectrum that could support the deployment of next generation mobile broadband and ensure that the UK mobile sector remains highly competitive. These challenges have centred around the change in use of 2G spectrum to deliver 3G mobile services.
Government intervention through a Direction to the regulatory body, Ofcom, is deemed necessary to avoid further delay. Acting now will help accelerate the process of releasing existing and new spectrum, and thereby progress towards universal coverage in 3G and next generation mobile services and the transition to next generation high speed broadband services."
"would also set revised licence fees to reflect the full economic value".
"Government action through a Direction to the regulatory body, Ofcom, is deemed necessary to avoid further delay. Appropriate intervention now will accelerate the process of releasing existing and new spectrum, and thereby progress towards universal coverage in 3G and next generation mobile services and the transition to next generation high-speed broadband services. It would also serve to help safeguard competition in the UK mobile sector.
Without government intervention, more time could elapse before an appropriate solution is agreed and implemented. As a result, the benefits to businesses and consumers of a modern effective wireless communications infrastructure would be delayed even further. These benefits would include efficiency gains, increased innovation and investment in mobile networks and services, including mobile broadband, and greater consumer choice."
"1.9 …When discussing setting AIP fees to reflect the value of spectrum we usually meant that these fees would be set at the price that would emerge in a well-functioning market. In a well-functioning market, the price of spectrum would be equal to the value of that spectrum in the next highest value use, rather than the value that the current user (for example, a company) might place on the spectrum. Given the possibility of continuing confusion about our meaning of the term "value" in the context of AIP fees we have redrafted our AIP principles and methodologies to clarify that we set AIP fees on the basis of opportunity cost."
"informed, where appropriate, by the available market information (if any) and economic studies of the value of spectrum in different uses."
The least cost alternative method was the preferred method for estimating opportunity cost over the discounted profit method. Least cost alternative modelling was sensitive to input assumptions but Ofcom believed that it was the best available to estimate the price which would emerge in a well-functioning market. Reference rates should seek "to reflect the opportunity cost of spectrum…". Methodology 4, impact assessments, stated that these were required regarding fee proposals to identify potential detrimental impacts to spectrum users, consumers and citizens.
From the Secretary of State's 2010 direction to Ofcom's 2015 decision
"8.21 We consider that our proposals for calculating [annual licence fees], which amongst other things take account of article 6 of the Direction, are compatible with our statutory duties under the domestic and EU legislative framework. As we have said, we will consult on our exact proposal for calculating [annual licence fees] after the auction."
"3.47 Taking into account each of the above duties and the relevant facts and circumstances, we consider that our principal duty to further the interests of citizens, and the interests of consumers where appropriate by promoting competition, is of particular importance to the Auction."
The statement referred to other duties which it considered particularly relevant. Later in the statement, Ofcom explained that at that stage it would not detail its methodology for setting annual licence fees after the 4G auction since that would risk fettering the taking account of all relevant factors.
"A12.54 We do not agree that Ofcom has failed to explain why it is considering using a different methodology to set fees for 900 MHz and 1800 MHz spectrum. We have explained that the Direction requires us to revise those fees to reflect the full market value of the frequencies in those bands, and that in doing so, we must have particular regard to the sums bid for licences in the Auction. The Direction was made by the Secretary of State fully cognisant both of the duties set out in the Community law framework, and the nature of the spectrum that would be the subject of bids in the Auction."
"A12.55 We remain of the view that our proposals (which we note will be subject to further consultation by us before we make any final decisions on revised licence fees) are consistent with our obligations both under the Direction as set out above, and the European framework which permits us to set fees which reflect the need to ensure optimal use of spectrum, provided that we do so in an objectively justified, transparent, non-discriminatory and proportionate manner. We agree with Vodafone that the Direction must be interpreted consistent with the European framework. We do not however consider that the requirements of the Direction, nor our intention to set [annual licence fees] after the Auction, are inconsistent with those European law requirements."
"It is government policy to use spectrum pricing as one of the tools to ensure efficient use of radio spectrum. That's why it is essential that the licence fees for the 900MHz and 1800MHz licences are updated to properly reflect the full market value of that spectrum. This is consistent with legislation which encourages securing optimal use of the spectrum… [T]he Government directed Ofcom to have particular regard to the prices paid for spectrum in the forthcoming auction of 800MHz and 2.6 GHz spectrum in setting the [annual licence fees] for 900MHz and 1800MHz. This is because in the Government's view this provides the best available comparator for the full market value of the spectrum in the absence of direct evidence based on an auction price or trade in the market…"
"3.35 …In making these proposals we have considered our principal duty to further the interests of citizens, and the interests of consumers where appropriate by promoting competition, and we have considered our duties relating to the optimal use for wireless telegraphy of the electro-magnetic spectrum, the desirability of encouraging investment and innovation, the desirability of encouraging competition, having regard to the interests of consumers in respect of choice, price, quality of service and value for money. We consider that our proposals for implementing the requirement in the Direction are consistent with our statutory duties."
"highly sensitive to the range of assumptions that need to be made, such that we consider that an attempt to derive point estimates of value based on this approach would be of limited additional benefit": paragraph 4.11.
"we consider that the range of evidence on this matter from UK and international benchmarks has enabled us to take a balanced view of the market value of spectrum in the 900 MHz and 1800 MHz bands. It is far from clear that generating additional estimates of spectrum value based on network cost modelling would allow us to reach a better-informed view, particularly because of the complexity of the modelling, the sensitivity of any such estimates to assumptions about the underlying parameters, and because the intrinsic value of spectrum may not be fully captured by such modelling, which typically focuses on the scope for reductions in infrastructure costs."
"1.42 In response to our October 2013 consultation, a number of stakeholders said that we should carry out a full impact assessment of our proposals for revising [annual licence fees]. In essence, their view was that we should not revise [annual licence fees] to reflect full market value unless we could demonstrate that taking this approach to setting [annual licence fees] (and the specific levels of [annual licence fee] that we propose) was necessary to promote efficient use of spectrum, and that the potential benefits in terms of spectrum efficiency would outweigh any potential adverse effects on consumer prices, investment in infrastructure, innovation and competition. They considered that unless we did carry out such an impact assessment any decision we made would be unlawful.
1.43 We do not agree with this view. We have been directed by the Government to revise [annual licence fees] to reflect full market value, and we are required to implement that direction. We do not have any discretion to decide whether or not to set [annual licence fees] at full market value. For this reason, we consider it is unnecessary for us to carry out an impact assessment of the type argued for by stakeholders (and to this extent this is a statement for the purposes of section 7(2)(b) of the Communications Act 2003."
Ofcom's 2015 decision
"1.4 As a result of this agreement, we confirmed in an exchange of letters with the Secretary of State of 17 December 2014 our view that all interested parties should be given a reasonable opportunity to comment on whether they consider that the geographic coverage obligation, taking account of the associated incremental costs incurred by the [mobile network operators], should impact future [annual licence fees].
1.5 This consultation is intended to afford all interested parties that opportunity to comment."
"A9.42 We remain of the view that a purpose-built 900 MHz model would be subject to significant uncertainty about the specification of the model and appropriate parameter assumptions, and would be unlikely to be helpful in deriving a point estimate lump-sum value for the [annual licence fees] bands. Therefore, we do not place significant weight on modelling results in informing our estimates."
"we would not argue that the action should have been brought against our provisional decision on the level of ALF set out in the February Document. We reserve our position on any other procedural matter and ground."
Three responded to the February 2015 provisional decision and consultation that the 90 percent geographic coverage obligation would have a disproportionate impact on it, and thus Ofcom should phase in annual licence fees over a longer period than a year.
"1.22 …because we did not have any discretion to decide whether or not to set [annual licence fees] at full market value, since we had been directed by the Government to do so and we were required to implement that direction.
…
1.25 None of the comments provided in response to the August 2014 and February 2015 consultations have caused us to change our decision in relation to impact assessments as set out in the August 2014 consultation. Further, having now concluded that the geographic coverage obligation is unlikely to have a material effect on the market value of either 900 MHz or 1800 MHz spectrum for the purpose of [annual licence fees], we remain of the view as set out in the February 2015 consultation that it is unnecessary for us to carry out an impact assessment in that regard."
The statement explained that a conservative approach to the assessment of the evidence had been adopted:
"1.41 …We have always recognised that there is inherent uncertainty in deriving [annual licence fees] for the 900 MHz and 1800 MHz bands to reflect full market value. Nevertheless, in order to implement the Government Direction we must conclude on an appropriate amount for [annual licence fees] going forward, and that process necessarily involves us exercising regulatory judgment when considering the evidence.
1.42 Where there are alternative approaches to interpreting the available evidence that we consider could be appropriate for the purpose of deriving revised [annual licence fees] that reflect full market value, we have taken into account whether the alternative approaches are more likely to understate full market value or to overstate it. We have generally preferred approaches which we consider are more likely to understate full market value than to overstate it, where such a choice arises."
"Having concluded that the geographic coverage obligation is unlikely to have a material effect on the market value of either 900 MHz or 1800 MHz spectrum for the purpose of [annual licence fees]… and noting that the licensees agreed with Government the inclusion of the geographic coverage obligation in their licences, we do not consider it appropriate to modify our approach of adopting a two-stage phase…"
Ground 1: interpretation and application of Secretary of State's 2010 direction
The claimant's case
"In my opinion, there is nothing in the Prison Act 1952 that confers power to make regulations which would deny, or interfere with, the right of the respondent, as a prisoner, to have unimpeded access to a court. ... The Regulations themselves must be interpreted accordingly, otherwise they would be ultra vires. ... The standing orders, if they have any legislative force at all, cannot confer any greater powers than the Regulations, which, as stated, must themselves be construed in accordance with the statutory power to make them."
The interested parties
"[30] Thus it appears from the case law, first, that all administrative bodies, including decentralised authorities, are subject to that obligation as to primacy, and individuals may therefore rely on such a provision of Community law against them (Case 103/88, Fratelli Costanzo v. Comune di Milano, [1989] ECR 1839 ).
[31] Secondly, provisions of national law which conflict with such a provision of Community law may be legislative or administrative (see, to that effect, Case 158/80, Rewe v. Hauptzollamt Kiel, [1981] ECR 1805).
…
[34] It follows from the foregoing that a prohibition which is contrary to the freedom to provide services, laid down before the accession of a Member State to the European Union not by a general abstract rule but by a specific individual administrative decision that has become final, must be disregarded when assessing the validity of a fine imposed for failure to comply with that prohibition after the date of accession."
Discussion
Delay
Ground 2: cost modelling
Conclusion