EE Ltd v Office of Communications Secretary of State for Culture, Media and Sport and Others (Interested Parties)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Cranston |
| Judgment Date | 26 August 2016 |
| Neutral Citation | [2016] EWHC 2134 (Admin) |
| Date | 26 August 2016 |
| Court | Queen's Bench Division (Administrative Court) |
| Docket Number | Case No: CO/6370/2016 |
[2016] EWHC 2134 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Hon. Mr Justice Cranston
Case No: CO/6370/2016
and
Lord Pannick QC, Philip Woolfe and Stefan Kuppen (instructed by James Blendis at EE Ltd) for the Claimant
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 3 rd Interested Party
Tristan Jones (instructed by Constantine Cannon LLP) for the 4 th Interested Party
Hearing dates: 12 July, 13 July and 14 July 2016
Approved Judgment
Introduction
This is a claim for judicial review of the decision of the Office of Communications ("Ofcom"), the defendant, regarding the annual licence fee payable for the use of two bands of radio spectrum, the 900 MHz and 1800 MHz bands. The decision challenged is contained in a statement entitled Annual Licence fees for 900 MHz and 1800 MHz spectrum, dated 24 September 2015 and given legislative force in regulations which were made on 23 September and came into effect on 15 October 2015 (together "Ofcom's 2015 decision"). The decision gave effect to a direction to Ofcom by the Secretary of State for Culture, Media and Sport, contained in Article 6 of the Wireless Telegraphy Act 2006 (Directions to OFCOM) Order 2010, SI No 3024 ("the Secretary of State's 2010 direction") to revise the annual licence fees payable for 900 MHz and 1800 MHz licences so that they reflected the full market value of the frequencies in those bands. The decision increases the annual licence fee payable for these spectrum bands, in the claimant's case from approximately £25 million to £75 million per annum, and for all mobile network operators, from approximately £65 million per annum to £200 million per annum.
The frequency bands used by mobile network operators to provide mobile voice and data services are licensed by Ofcom. It is the statutory body responsible for the management and licensing of radio spectrum in the United Kingdom. In the main, mobile telephony is currently provided in the UK over frequency bands between 800 MHz and 2.6 GHz. The 900 MHz and 1800 MHz bands, with which this claim is concerned, were initially allocated to operators in the 1980s and 1990s at no cost, and for an indefinite period, either on a first-come, first-served basis or by means of "beauty contests". In the 1990s, the mobile operators started using these frequencies to provide the second generation of mobile services ("2G services"). Licences for these frequencies were liberalised, first, in January 2011, to permit use of third generation ("3G") mobile services and then, in 2012–2013, to permit use of fourth generation ("4G") technologies. Frequencies in the 900 MHz and 1800 MHz bands are all now licensed for use by 2G, 3G and 4G technologies.
The claimant is the largest of the four mobile network operators in the UK. Since early this year it has been a wholly owned subsidiary of BT Group Plc. It provides retail mobile services through the EE brand as well as its legacy T-Mobile and Orange brands. It also provides wholesale mobile services to third parties such as Virgin Mobile, which as a mobile virtual network operator is hosted on the claimant's network. As well as 1800 MHz frequency bands, the claimant has been allocated spectrum in other bands, including the 800 MHz, 2.1 GHz and 2.6 GHz bands. The claimant does not hold any 900 MHz spectrum. The claimant obtained these spectrum holdings following auctions in 2000 (for the 2.1 GHz band) and 2013 (for the 800 MHz and 2.6 GHz bands).
The claimant is supported by the interested parties, which are the other mobile network operators holding licences for 900 MHz and 1800 MHz spectrum. Vodafone UK Limited ("Vodafone") and Telefónica UK Limited ("Telefónica") hold predominantly 900 MHz spectrum and very little 1800 MHz spectrum. Hutchison 3G UK Limited ("Three") holds 1800 MHz spectrum but does not hold any 900 MHz spectrum.
The challenge to Ofcom's 2015 decision is advanced on two grounds. In summary, the first is that Ofcom wrongly interpreted the Secretary of State's 2010 direction as requiring it to set the annual licence fees for 900 MHz and 1800 MHz bands at market value, to the exclusion of other factors which Ofcom is required to consider as a matter of EU and domestic law. The claimant's second ground of challenge is that in determining these annual licence fees, Ofcom wrongly failed to consider evidence regarding the value of this spectrum according to cost modelling. Instead, Ofcom relied on a benchmarking exercise using the price achieved in auctions for other spectrum bands in the UK, and in auctions elsewhere for the same and other spectrum bands.
Ofcom's response to ground 1 is that its 2015 decision simply implemented the 2010 direction of the Secretary of State, who was empowered by primary legislation to make it. That direction meant Ofcom had to set annual licence fees at the level of its estimate of the full market value of the relevant frequencies. The direction was not challenged at the time and Ofcom in deciding on fees in 2015 was required by statute and under the English and EU principles of regularity to treat it as lawful. As to ground 2, Ofcom's response is that it considered whether to supplement its benchmarking analysis by reference to cost modelling, and its decision not to use it was a matter of economic judgment on which views may reasonably differ but cannot be said to be wrong.
Legal framework
(a) Domestic legislation
Ofcom is constituted under the Office of Communications Act 2002 and exercises functions under, inter alia, the Communications Act 2003 ("the 2003 Act") and the Wireless Telegraphy Act 2006 ("the 2006 Act").
Section 3(1) of the 2003 Act sets out Ofcom's principal duty, in carrying out its functions, to further the interests of citizens in relation to communications matters and those of consumers in relevant markets, where appropriate by promoting competition. Under section 3(2), Ofcom is required to secure, inter alia, the optimal use of the spectrum, and the availability throughout the UK of a wide range of electronic communications services. In performing its duties, section 3(3) requires Ofcom to have regard to the principles that regulatory activities should be transparent, accountable, proportionate, consistent, and targeted only at cases in which action is needed. It must also have regard to a wide range of matters, including the desirability of promoting competition and encouraging investment and innovation in relevant markets: section 3(4). In performing the duty of furthering the interests of consumers, Ofcom is required to have regard, in particular, to the interests of consumers in respect of choice, price, quality of service and value for money: section 3(5).
Section 4(1)(b) of the 2003 Act requires Ofcom to perform its functions under enactments relating to the management of the radio spectrum (which by definition in section 405 includes the Wireless Telegraphy Act 2006) in accordance with specified EU requirements. These, as stated in section 4(2),
"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.
There is a power of the Secretary of State in section 5 to give directions to Ofcom but this is confined, in section 5(3), to the interests of national security, foreign relations, securing compliance with international obligations and public safety and health.
Where Ofcom makes a proposal the implementation of which would be likely to have a significant impact on business, it must carry out an impact assessment: section 7(2)(b), (3)(a). Otherwise it must publish a statement to explain why it is unnecessary to do so: section 7(3)(b).
Appeals against Ofcom's decisions and the Secretary of State's directions under both the 2003 Act and the 2006 Act are provided for in section 192 and Schedule 8.
The 2006 Act consolidates enactments about wireless telegraphy. Part 1 contains general provisions about the radio spectrum. Part 2 deals with the regulation of radio spectrum, including the licensing provisions of section 8.
Sections 1–6 in Part I fall under the heading "Radio spectrum functions of Ofcom". Under section 3(1), Ofcom must have regard primarily to the extent to which the electromagnetic spectrum is available for use, or further use, for wireless telegraphy, and to the current and likely future demand for such use. Under section 3(2), Ofcom must also have regard, in particular, to the desirability of promoting the efficient management and use of the part of the electromagnetic spectrum available for wireless telegraphy, the economic and other benefits that may arise from the use of wireless telegraphy, the development of innovative services, and competition in the...
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