Ee Ltd v Office of Communications Secretary of State for Culture, Media and Sport and Others (Interested Parties)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Patten,Lord Justice Henderson,Lady Justice Asplin |
| Judgment Date | 22 November 2017 |
| Neutral Citation | [2017] EWCA Civ 1873 |
| Docket Number | Case No: C1/2016/3784 |
| Court | Court of Appeal (Civil Division) |
| Date | 22 November 2017 |
and
[2017] EWCA Civ 1873
lord Justice Patten
Lord Justice Henderson
and
Lady Justice Asplin
Case No: C1/2016/3784
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Mr Justice Cranston
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Pannick QC, Philip Woolfe and Stefan Kuppen (instructed by James Blendis at EE Ltd) for the Appellant.
Pushpinder Saini QC and Jessica Boyd (instructed by Ofcom) for the Respondent.
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: 10, 11 and 12 October 2017
Introduction
This is an appeal by EE Limited ("EE") against the dismissal by Cranston J ( [2016] EWHC 2134 Admin) of its claim for judicial review of the decision of the Office of Communications ("Ofcom") in September 2015 setting the annual licence fees for the 900 MHz and 1800 MHz bands of radio spectrum used for mobile communications. The decision resulted in increases in the licence fees charged to EE from about £25m to £75m per annum and for all mobile operators from approximately £65m to £200m per annum. The licence fees were fixed by Ofcom at these levels in compliance with a Direction made in 2010 by the Secretary of State for Culture, Media and Sport under the powers contained in s.5 of the Wireless Telegraphy Act 2006. The Direction is contained in Article 6 of the Wireless Telegraphy Act 2006 (Directions to OFCOM) Order 2010, SI No 3024 ("the 2010 Direction"). The issue on this appeal (as it was before the judge) is whether Ofcom correctly interpreted and applied the 2010 Direction and if they did whether, more fundamentally, the 2010 Direction, properly read, failed to comply with the relevant obligations imposed on Ofcom under both domestic and EU law.
Ofcom is the statutory body charged under the provisions of the Communications Act 2003 ("CA 2003") and the Wireless Telegraphy Act 2006 ("WTA 2006") with functions which include the management and licensing of radio spectrum in the United Kingdom. It is also the National Regulatory Authority ("NRA") for the purposes of the relevant EU legislation; in particular the Directives known as and comprising the Common Regulatory Framework ("CRF") for electronic communications. These include what I shall refer to as the Framework Directive (2001/21/EC) and the Authorisation Directive (2002/20/EC).
Radio spectrum describes the radio bands used to provide various forms of communication services including mobile telephones and wireless broadband. They are measured in megahertz (MHz) frequencies. 1000 MHz equals 1 gigahertz (GHz). Frequencies between 200 MHz and 3 GHz are considered to be the most valuable because they have what the evidence describes as good propagation characteristics and a large enough bandwidth to make them suitable for accommodating the quantities of information now in demand by the users of the internet.
In the 1980s and 1990s mobile operators were allocated the 900 MHz and 1800 MHz bands on what was essentially a first-come, first-served basis. Vodafone UK Limited ("Vodafone") and Telefónica UK Limited ("O2") obtained licences for 900 MHz spectrum in 1985, and in 1991 licences were granted for the 1800 MHz band, most of which is now allocated between EE and Hutchison 3G UK Limited ("Three").
From the 1990s onwards the 900 MHz and 1800 MHz bands have been used to provide second generation ("2G") mobile services but the licences for these frequencies have subsequently been liberalised in order to accommodate (in 2011) third generation ("3G") services and (in 2012–13) fourth generation ("4G") services, both of which use new forms of technology in order to provide high-speed data transfer.
This process of liberalisation began in 2007 when member states of the EU agreed to allow the 900 MHz and 1800 MHz bands to be made available for 3G services and to repeal Council Directive 87/372/EEC ("the GSM Directive") which had restricted the 900 MHz band to GSM (Global System for Mobile Communications) technology that was suitable only for voice and low-speed data services. As a result, Ofcom decided to release part of the 900 MHz band for 3G use but at a fee which would value the available band by reference to what it referred to as the opportunity cost of the spectrum. This means the value of the spectrum in question by reference to its best possible alternative use.
Broadly speaking, this is a form of market value in contrast to what is referred to as a "costs recovery" calculation based on the level of fees needed to recover the costs of running and administering the system. It is common ground that since 1998 when the Wireless Telegraphy Act 1998 came into force it was permissible for the Secretary of State (and now Ofcom as the regulator) to set licence fees at a level above costs recovery. The CJEU has also confirmed by its decision in Telefónica Móviles España SA v Administración del Estado and Secretaría de Estado de Telecomunicaciones (C-85/10) [2011] ECR I-1575 that the licence fees permitted by the Authorisation Directive may reflect the value and advantages of the use of the band to the licensed operator compared with other operators who are also seeking to use and exploit that resource: see Telefónica Móviles España at [27].
Ofcom therefore sets licence fees in accordance with what it calls Administered Incentive Pricing ("AIP") which requires the regulator to calculate the value of the spectrum by reference to various factors which include its opportunity cost or scarcity value. The power to set licence fees is, however, derived from Article 13 of the Authorisation Directive which provides:
"Member States may allow the relevant authority to impose fees for the rights of use for radio frequencies or numbers or rights to install facilities on, over or under public or private property 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 Directive 2002/21/EC (Framework Directive)."
Article 8 of the Framework Directive is in these terms:
"1. Member States shall ensure that in carrying out the regulatory tasks specified in this Directive and the Specific Directives, the national regulatory authorities take all reasonable measures which are aimed at achieving the objectives set out in paragraphs 2, 3 and 4. Such measures shall be proportionate to those objectives.
Unless otherwise provided for in Article 9 regarding radio frequencies, Member States shall take the utmost account of the desirability of making regulations technologically neutral and shall ensure that, in carrying out the regulatory tasks specified in this Directive and the Specific Directives, in particular those designed to ensure effective competition, national regulatory authorities do likewise.
National regulatory authorities may contribute within their competencies to ensuring implementation of policies aimed at the promotion of cultural and linguistic diversity, as well as media pluralism.
2. The national regulatory authorities shall 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.
3. The national regulatory authorities shall contribute to the development of the internal market by inter alia:
(a) removing remaining obstacles to the provision of electronic communications networks, associated facilities and services and electronic communications services at European level;
(b) encouraging the establishment and development of trans-European networks and the interoperability of pan-European services, and end-to-end connectivity;
(d) cooperating with each other, with the Commission and BEREC so as to ensure the development of consistent regulatory practice and the consistent application of this Directive and the Specific Directives.
4. The national regulatory authorities shall promote the interests of the citizens of the European Union by inter alia:
(a) ensuring all citizens have access to a universal service specified in Directive 2002/22/EC (Universal Service Directive);
(b) ensuring a high level of protection for consumers in their dealings with suppliers, in particular by ensuring the availability of simple and inexpensive dispute resolution procedures carried out by a body that is independent of the parties involved;
(c) contributing to ensuring a high level of protection of personal data and privacy;
(d) promoting the provision of clear information, in particular requiring transparency of tariffs and conditions for using publicly available electronic communications services;
(e) addressing the needs of specific social groups, in particular disabled users, elderly users and users with special social needs;
(f) ensuring that...
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