Hutchison 3G UK Ltd v Office of Communications (BritishTelecommunications Plc and another intervening)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lloyd,Lord Justice Etherton,Lord Justice Ward |
| Judgment Date | 16 July 2009 |
| Neutral Citation | [2009] EWCA Civ 683 |
| Date | 16 July 2009 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: C1 2008/1931 |
[2009] EWCA Civ 683
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE COMPETITION APPEAL TRIBUNAL
(VIVIEN ROSE, PROFESSOR ANDREW BAIN AND ADAM SCOTT TD)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Ward
Lord Justice Lloyd and
Lord Justice Etherton
Case No: C1 2008/1931
Dinah Rose Q.C. and Brian Kennelly, with Keith Jones, solicitor advocate, (instructed by Baker & McKenzie LLP) for the Appellant
Peter Roth Q.C. and Josh Holmes (instructed by the Office of Communications) for the Respondent
David Anderson Q.C. and Sarah Lee (instructed by BT Legal) for British Telecommunications plc
Jon Turner Q.C. and Meredith Pickford ( instructed by T-Mobile) for T-Mobile (UK) Ltd
Hearing dates: 10 to 12 March 2009
Lord Justice Lloyd:
Introduction
This appeal is brought from the Competition Appeal Tribunal, with its permission, and concerns the regulation of the mobile telecommunications sector. Five mobile network operators exist in the UK, of which the Appellant Hutchison 3G UK Ltd (H3G) is the most recent entrant to the market and has the smallest body of customers. The five operate in an extremely competitive way as against each other, not least because of having invested very large sums of money in securing the ability to offer third generation communication facilities. Each operator, however, has a monopoly within its own network, and for each of them there is one very large undertaking with whom they have to deal, namely BT. Each mobile network operator (MNO) sells to other MNOs and to fixed network operators the service of connecting phone calls to its network. That is called mobile call termination (MCT). It is one of the many aspects of the operations of the telecommunications sector which is subject to regulation in the UK in a way which is prescribed by European legislation. The EU legislation is referred to as the Common Regulatory Framework (CRF), and consists of a group of Directives of which three are particularly relevant for present purposes. They are implemented in the UK by the Communications Act 2003, and the national regulatory authority is the Office of Communications (Ofcom), the respondent to this appeal.
The principal issue in this appeal is whether H3G has significant market power (SMP) in the market for MCT on its network. It is the only seller in that market, and BT is overwhelmingly the largest buyer. In a market where there is one buyer and one seller, it does not necessarily follow that the seller has SMP, because the buyer may have sufficient countervailing buyer power (CBP) to balance the seller's monopoly. The possession of SMP is defined in the CRF as the power to behave to an appreciable extent independently of competitors, customers and ultimately consumers. It is equivalent to the concept of dominant position, for the purposes of article 82 of the EU Treaty and section 18 of the Competition Act 1998.
BT might well be regarded as having SMP in markets where it is a supplier, having regard (among other things) to the size of its customer base, and its ownership of much of the infrastructure. It is itself constrained in several relevant respects, including by an obligation to allow other network operators to interconnect with it, on reasonable terms, known as end-to-end connectivity (E2E). Its important position in relation to relevant markets derives not only from its own large customer base, but also from the fact that other operators are able to send calls from their networks via that of BT, under transit arrangements, for an appropriate charge.
One of Ofcom's obligations under the CRF is to analyse telecommunications markets in the UK to see whether they are “effectively competitive”. If they are not, Ofcom must identify undertakings which have SMP on a given market, and must then consider imposing, or amending, regulatory conditions (SMP conditions) on such undertakings. In certain circumstances these conditions may include price controls.
Another of Ofcom's functions which has to be considered in this appeal is the resolution of disputes. The distinction between Ofcom's market review powers and their functions in resolving disputes is significant, and corresponds with a wider distinction between different types of provision for regulatory intervention. One, of which the market review powers is an example, is referred to as “ ex ante”, and empowers the regulator to lay down in advance the conditions under which one or more undertakings are to operate on a market. The other type is called “ ex post”, and in some cases involves action by way of sanction for prior breaches of obligations. Action under articles 81 and 82 of the EC Treaty or, in the domestic context, sections 2 and 18 of the Competition Act 1998 is an example. Ofcom's role in the resolution of disputes is also treated as a power of this kind, even though as between the parties the determination of the dispute may lay down the position for the future as well as for the past.
In 2004 Ofcom investigated the MCT market and concluded that H3G had SMP on its network as regards termination of voice calls. Because H3G's operations (which had started in 2003) were on a small scale, it did not impose price controls at that stage. H3G nevertheless appealed against the finding, to the CAT. The Tribunal allowed H3G's appeal and remitted the matter to Ofcom. In 2007, Ofcom reconsidered the question of H3G's market power as at 2004, and came to the same conclusion. At the same time they also investigated the position for 2007 to 2011. They concluded that H3G (as did all other MNOs on their respective networks) had SMP on the market for MCT on its own network, and this time they did impose price controls on H3G, as they had for the other operators previously and did again on this occasion. H3G appealed against the findings of SMP as at 2004 and 2007. BT and H3G appealed against the levels of price allowed for MCT. The price control aspect of the appeal was referred to the Competition Commission, under section 193 of the Communications Act 2003.
There were also appeals against separate rulings by Ofcom on disputes between BT and various operators, and also between H3G and, respectively, Orange and O2, as to the rates payable for termination; these were known as the Termination Rate Disputes (TRD). Because these did not arise on the exercise of Ofcom's SMP powers, section 193 did not apply and the appeal lay to the Tribunal without further reference to the Competition Commission. The Tribunal dismissed H3G's appeal, and dealt separately with TRD, but it decided on certain core issues in the TRD appeals at the same time as, and following a conjoined hearing with, H3G's MCT appeal. It has been necessary to consider Ofcom's determination in 2004 and each of their determinations in 2007 (the MCT Statement, as regards the position from 2007 to 2011, and the Reassessment Statement as regards H3G's position in 2004), the judgment of the Tribunal in 2005 on H3G's first appeal ( H3G1), [2005] CAT 39, and its TRD Core Issues judgment, [2008] CAT 19, in addition to that from which this appeal is brought, ( H3G2), [2008] CAT 11. This complicated procedural history has led to a large quantity of paper being generated, through which Counsel have sought to guide us, illustrating and supporting their submissions by reference to yet more paper, much of it emanating from the European Commission.
Before the Tribunal on H3G2, there appeared not only H3G as appellant and Ofcom as respondent, but also BT and all the four other MNOs (O2, Vodafone, Orange and T-Mobile) as interveners. On this appeal, BT and T-Mobile took part as interveners, as well as the Appellant and the Respondent. We had the benefit of written arguments which were by no means skeletal, and full and concentrated oral submissions of a very high quality from Counsel for all four parties. None of this made it easier to determine the issues on this important appeal, other than by feeling that, however the parties' positions have developed in the course of the prolonged forensic process from Ofcom's first determination in 2004 to the present appeal, we can be reasonably sure that no material point has been overlooked.
I regret very much that it has taken so long for this judgment to be prepared – even longer than the four months which are laid down as the period within which national regulatory authorities are supposed to complete their process of dispute resolution (see article 20.1 of the Framework Directive, referred to below, and section 188 of the Communications Act 2003). The combination of the substance and power of the respective submissions made to us, and the quantity of documentation supplied and used in connection with the appeal, on the one hand, and the demands of other substantial appeals, on the other, made this a much more protracted task than I would have wished.
This judgment will be found to be strewn with acronyms, without which it would have taken up even more paper. There is a glossary at the end.
The legislation
It is necessary to consider a good deal of the legislation, and I will turn to this without further introduction.
The relevant European Directives are the Framework Directive, 2002/21/EC, the Access Directive 2002/19/EC and the Authorisation Directive, 2002/20/EC.
The starting place is the Framework Directive. Its many recitals include two concerned with the need for ex ante...
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