Antitrust Alert: UK Mobile Operator Challenges OFCOM Decision to Prevent 3G deployment
On 26 May 2010, the UK's Competition Appeal Tribunal published an appeal by mobile operator O2 against the Office of Communications (OFCOM), the UK telecoms and media regulator, challenging OFCOM's refusal to allow deployment of 3G services in 900 Mhz frequencies. In a case likely to have EU-wide implication, O2 argues that OFCOM's refusal is in violation of EU spectrum "re-farming" rules, which are designed to encourage spectrum assignment in ways that enhance mobile operator competition.
OFCOM adopted its refusal decision because, as a result of the recent dissolution of Parliament, the UK government had failed to adopt the implementing legislation that OFCOM deemed necessary to give effect to EU spectrum re-farming rules. O2 argues that such rules are directly applicable and do not need to be transposed into national legislation to have effect. The same issues will arise in other EU Member States that have failed to transpose EU spectrum re-farming rules into their national laws.
EU spectrum "re-farming" rules
The EU spectrum re-farming rules are contained in the new GSM Directive and accompanying Decision on the harmonization of 900 MHz and 1800 MHz frequencies. The new GSM Directive requires Member States to make 900 MHz frequencies available for both 2G and 3G services and for any other application that can coexist with these services. Member States are required to "examine whether the existing assignment of the 900 MHz band to the competing mobile operators in their territory is likely to distort competition in the mobile markets concerned and, where justified and proportionate, they shall address such distortions." The accompanying Decision sets out the relevant technical parameters to avoid harmful interference when using the same frequencies to provide different services.
May 2010 was the deadline for the EU Member States to implement these provisions into their national laws. The UK and other EU Member States failed to meet this deadline, while national regulators in other Member States (including Belgium, Denmark, Finland, France, Germany, and Italy) already had adopted proposals for spectrum re-farming ahead of the implementation of the new GSM Directive.
Although EU Directives are addressed to EU Member States, private parties may rely on a directive's provisions against the State (including national regulatory authorities) if the provisions have "direct effect." EU Directive provisions have "direct effect" if:
- the deadline for implementation of the provisions has passed and the State has failed to implement the Directive, (or has implemented it incorrectly,
- the provisions are sufficiently clear and precise, and
- the provisions leave little or no discretion to the State.
In the telecoms sector, previous examples of Directives that have been found by the European Court of Justice to contain provisions having direct effect include the so-called Telecoms Equipment Directive (Radiosistemi, para. 66); and the Telecoms Services and Interconnection Directives (Arcor & Co, paras. 40-43). In some Member States, national courts also have ruled on the direct effect of EU telecoms Directives (see, for example, Italian courts rulings in Telesystem v Telecom Italia and 3C Communications v SIP in relation to the direct effect of certain provisions contained in the Telecoms Services Directive).
O2's challenge against OFCOM before the Competition Appeal Tribunal may be the first of its kind in relation to EU spectrum re-farming rules. This case is therefore likely to attract interest outside the UK, as mobile operators across the EU face similar issues. However, it remains to be seen whether O2's appeal will be lengthened if the Tribunal makes a reference to the European Court of Justice for a preliminary ruling on whether the provisions contained in the new GSM Directive actually have direct effect.
Meanwhile in the UK, the new coalition government will come under some pressure to address the implementation of the EU Directive. In a joint statement made in response to O2's appeal, Orange and T-Mobile asked the "UK government to address the draft [implementing act] that is sitting with parliament, as a single proposal and as a matter of priority."
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