Packet Media Ltd v Telefonica Uk Ltd
| Jurisdiction | England & Wales |
| Judge | His Honour Judge Hodge QC |
| Judgment Date | 20 July 2015 |
| Neutral Citation | [2015] EWHC 2235 (Ch) |
| Docket Number | Case No: HC-2015002463 |
| Date | 20 July 2015 |
| Court | Chancery Division |
[2015] EWHC 2235 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
The Rolls Building
7 Rolls Buildings
London, EC4A 1NL
His Honour Judge Hodge Qc
(Sitting as a High Court Judge of the Chancery Division)
Case No: HC-2015002463
MR. JAMES SEGAN (instructed by Jury O'Shea LLP) for the Claimant
MR. BRENDAN McGURK (instructed by DWF LLP) for the Defendant
This is my extemporary judgment on an interim application by Packet Media Limited (to which I shall refer as "PML") as claimant against Telefonica UK Limited as defendant, claim number HC-2015-002463. By a claim form issued on 17th June 2013 the claimant seeks relief on the basis that the defendant is in breach of the Chapter II prohibition contained within section 18 of the Competition Act 1998 and/or regulation 7 of the Radio Equipment and Telecommunications Terminal Equipment Regulations 2000.
The background to the claim is that PML provides telecommunication services and, in particular, services involving the sale or leasing of global system for mobile telecommunications (or GSM) Gateway equipment and the re-selling of air time so as to enable end customers to engage in what is said to be single-user self-use of GSM Gateways. The defendant is a mobile network operator (or MNO) which functions under the trading name of O2. I shall refer to the defendant by that trading name.
On 5th June 2015 O2 sent a letter to PML's present solicitors entitled Notice of Suspension by which it gave the claimant seven days' written notice of the suspension of the services to the SIM cards (or subscriber identity module cards) that PML and its customers are using in gateways on the network which O2 is currently aware of. The Notice of Disconnection identified 2,045 SIM cards which O2 intended to disconnect. It is said that the action which O2 has proposed to take in the Notice of Disconnection would constitute (a) an abuse of a dominant position contrary to section 18 of the 1988 Act and (b) a breach of regulation 7 of the RTTE Regulations. PML therefore brings these proceedings to restrain O2 from taking that action.
Particulars of claim were served dated 1st July 2015. Having identified the parties, they identify the nature of the claimant's business. PML is said to offer a range of telecommunications solutions to its customers enabling them to "self-use" GSM Gateways. A GSM Gateway is said to be an item of telecommunications equipment that incorporates one or more SIM cards and is thereby enabled to originate calls, or send Short Message Service (or SMS) text messages, on that MNO's network.
A GSM Gateway is not itself a phone but rather is installed as part of the user's switching equipment with the effect that when the user makes a call, or sends an SMS message, from a fixed phone line to a mobile phone number (known for short as "F2M traffic"), that call is diverted from the fixed line through the GSM Gateway connecting with the receiving mobile network via the air interface. The call or SMS then attracts a lower cost than if it had been made as a conventional fixed line communication to be terminated on a mobile network.
In the UK any person who wishes to establish, install or use a GSM Gateway to deliver an electronic communications service by way of business to another person is required to obtain an individual wireless telegraphy licence for that purpose from the Office of Communications (or Ofcom).
In a judgment in October 2013 in the case of Recall Support Services Limited v Secretary of State for Culture, Media and Sport [2013] EWHC 3091 (Ch), reported at [2014] 2 CMLR 20, Rose J held, in proceedings brought by persons including the claimant, that the licensing regime was contrary to Article 5 of the Authorisation Directive 2002/20 in so far as it prevented GSM Gateways from being used to deliver a commercial service to individual end users.
The Court of Appeal upheld this judgment in October 2014: see [2014] EWCA (Civ) 1370, reported at [2015] 1 CMRL 38 However, Ofcom has not yet amended the 2003 Regulations and so the position remains that under domestic United Kingdom law the only lawful use of the GSM Gateway without a licence is "self-use". The claimant's business in GSM Gateways is said to concern such "self-use" of GSM Gateways by PML's customers.
PML's service to such customers, insofar as they use the O2 network, has two elements. First, PML leases or sells GSM Gateways to its customers for them to install and use in their premises and maintains that equipment once sold or leased. Secondly, PML also re-sells air time on O2's network to its customers by providing them with SIM cards to use in those GSM Gateways. PML obtains those SIM cards from two of O2's official authorised re-sellers, 2 Circles Communications Limited (referred to as "2 Circles") and Fidelity Group Limited (referred to as "Fidelity").
PML's customer base is said to include National Health Service Trusts and substantial private companies. Those customers are said to save significant amounts of public and private money by lawfully self using GSM Gateways in this way.
The SIM cards for O2's network which PML supplies to its customers are obtained from 2 Circles and Fidelity. PML has no direct contractual relationship with O2. PML's contracts with 2 Circles and Fidelity both make specific provision for the circumstances in which PML re-sells SIM cards to its customers for those customers to "self-use" a GSM Gateway. Both contracts require the prior written consent of the relevant re-seller. It is said that PML has obtained the consent of both 2 Circles and of Fidelity for PML's customers to install and use SIM cards for the purpose of lawfully "self-using" GSM Gateways.
On 5th June 2015 O2 sent a letter to PML's solicitors entitled Notice of Suspension by which it gave PML seven days written notice of the suspension of the services to the SIM cards that it and/or its customers are using in Gateways on the network which O2 is currently aware of. That notice related to connections through both 2 Circles and Fidelity. It identified 2,045 SIM cards, of which 1,065 are said to be currently being used in PML's customers' Gateways, 43 were not connected with O2, 18 were duplicated numbers and 919 were not used.
The Notice of Disconnection stated that O2 intended to switch off service to the disputed SIMs because PML and/or its customers had not applied, nor been authorised, to use the Gateways on the network pursuant to O2's Gateway Policy. That is said to be reference to an undated policy which was first supplied by 2 Circles to the claimant on 6th October 2014 and by Fidelity on 7th October. Under the O2 policy, self-use of GSM Gateways (called "private" use in the policy) is stated to be permissible so long as authorised in advance by O2, and subject to various technical requirements.
The particulars of claim address the alleged breach of the RTTE Regulations at paragraphs 14 through to 18. O2 is said to be an operator of a public telecommunications network within the meaning of the RTTE Regulations. Regulation 7(1) of those Regulations provides (so far as relevant):
"(1) Operators of public telecommunications networks:
(a) shall connect or permit the connection, at an interface, of any telecommunications terminal equipment which meets the requirements of regulation 4 …
(b) shall not discontinue such connection lawfully made of any such equipment."
Regulation 7 of the RTTE Regulations implements in UK law Articles 7 and 8 of the RTTE Directive. Those articles are said to confer rights on individuals. The GSM Gateways in which the disputed SIMs are installed and used (insofar as they are being used) are CE-certified and comply with the requirements of regulation 4 of the RTTE Regulations. Each of the disputed Gateways has been lawfully connected to the O2 network. In the Notice of Disconnection O2 has proposed to discontinue connection to the disputed Gateways. If enacted, it is said that this proposal will breach regulation 7(1)(b) of the RTTE Regulations.
The case of abuse of dominant position is addressed at paragraphs 19 through to 24 of the particulars of claim. By paragraph 19 it is said that O2 enjoys a dominant position on the following markets (which are described as "the Termination Markets"): (a) the market for the termination of mobile telephone calls on the O2 network; and (b) the market for the termination of SMS messages on the O2 network.
The purpose of the operation of a GSM Gateway is to obtain access to call termination on an MNO's network and specifically to obtain access to "on network" termination rates. In 2005 Ofcom concluded that by supplying SIM cards to a GSM Gateway operator, an MNO was providing "a wholesale access and origination service" which was "used to access mobile termination at on-net rates"; and that by suspending access to those SIM cards, the MNO was "implicitly declining to provide mobile termination at wholesale on-net rates".
The defendant's proposal to disconnect the disputed Gateways by disconnecting service to the disputed SIMs is said to involve, and to further involve if implemented, an abuse of such dominant position contrary to section 18 of the Competition Act 1998. Three particulars of abuse of dominance are given: (a) refusing to continue to supply to an existing customer or customers who have abided by regular commercial practice; (b) refusing to supply an essential facility to PML, that is to say access to the Termination Markets for...
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Packet Media Ltd v Telefonica Uk Ltd
...Regulations 2000 and the second a breach of the Competition Act 1998, section 18. In his judgment of 20 July 2015, reported at 2015 EWHC 2235 (Ch), HHJ Hodge set out the background and I adopt some of his paragraphs: "2. The background to the claim is that PML provides telecommunication se......