The Digital Economy Act received Royal Assent on 27 April. Whilst many aspects of the bill received considerable press coverage and will therefore come as no revelation to telecoms operators, other aspects have been less publicised and may therefore come as more of a surprise. In this leader, we will consider both the more and less surprising key points.
Need for Speed
The initial aspects of the Act aim to improve access to high speed broadband.
The first provides for an amendment to the Communications Act 2003 (the Act) which facilitates the introduction of a ‘universal service order’ (USO) to be made by the Secretary of State in respect of broadband speeds. The initial speed to be set out in the order must be at least 10mbps. Additionally, if the speed stipulated under the USO is less than 30mbps, then at the point where 75% of premises in the UK have a minimum download speed of 30mbps, Ofcom must report again to the Secretary of State on whether it would be appropriate to raise the minimum download speed in the USO. Ofcom will remain responsible for designating the communications providers responsible for delivering the order, with the caveat that they must have regard to any guidance that is contained in the universal service order in making such a designation.
The ability to impose such a USO will be important in helping to deliver effective broadband services to the approximately 1 million premises which the Department for Culture Media and Sport (DCMS) expects will be unable to access 10Mbits services by 2017. How the USO will work in practice, however, is still the subject of uncertainty.
Of particular importance for many communications providers is the question of funding for this USO. Will funding only be drawn from communications providers? Given that the benefits of extending broadband services should accrue to society more broadly, there is a strong argument for suggesting that the USO should be funded from the public purse. However, the Government clearly favours an industry fund. Ofcom has, in its recent report on the USO, addressed what impact such an industry fund is likely to have on prices for consumers.
The second aspect is the long awaited revisions to the Electronic Communications Code (the Code). The Code is the key document regulating arrangements between network operators and site providers (typically the owners of the land on which telecommunications apparatus are installed). The Code, first developed in 1984, has long been acknowledged as being unfit for purpose in today’s world. Indeed in 2010 a judge described the Code as “one of the least coherent and thought-through pieces of legislation on the statute book.”1 This was hardly surprising given that it had its antecedents in 19th century statutes concerned with telephone wayleaves.
On the back of this damning indictment, in 2011 the Law Commission examined the 2003 iteration of the Code on the request of DMCS, publishing its report in February 2013. In December 2014, DCMS under the then coalition government announced that they would legislate to reform the Code as part of the deal with mobile operators relating to ‘not spots’ – areas with limited or no mobile network coverage. Under that deal, each mobile operator agreed to increase voice and text coverage to 90% of the UK by 2017, and to extend full coverage (i.e. including data) to 85% of the UK by 2017.
The mobile operators agreed to have their licence conditions amended to reflect these commitments, and in return the Government agreed to reform the Code (and to also ease access to government freehold buildings as sites for infrastructure).
Consequently, legislation to reform the Code was tabled as an amendment to the Infrastructure Bill, but this fell flat and was later withdrawn. Further consultation on draft legislation took place in early 2015 and the Government also received independent advice from Analysys Mason in April 2016. In May 2016 the Government published its final response setting out the key aspects of the reform of the Code, which are now encapsulated in the Digital Economy Act (amending the Communications Act). The revisions try to balance the competing interests of site owners and network operators and the interests of society as a whole in respect of access to high speed broadband. Whether this is achieved will be seen over the coming years.
Itch to Switch
In addition to facilitating access to better quality broadband, the Digital Economy Act also provides Ofcom greater powers in relation to setting conditions around consumers’ ability to switch providers, and also to require providers to pay automatic compensation on request. Both of these requirements had been trailed in Ofcom’s Digital Communications Review, and will have been keenly anticipated by communications providers.
Red, White and Blue Telecoms policy
Provisions which had not been so reported in the public debate are those allowing the Secretary of State to set out the strategic priorities of the Government in respect of telecommunications and the management of the radio spectrum and postal services. They allow the Government to set out “particular outcomes with a view to achieving the strategic priorities.”
Once such a statement is made, Ofcom is obliged to ‘have regard’ to it in carrying out its functions. In particular, within 40 days of the statement Ofcom must explain what it is that they are going to do as a result of the statement, and then publish a review of what they have consequently done every 12 months. In light of the UK’s imminent departure from the European Union, this provision appears to be setting the scene for the Government to have a much more hands-on roll in telecoms policy post-Brexit. Whilst currently the European directives require Ofcom’s independence to be preserved and the strategic priorities of the telecommunications regime are currently very much set by the European Union, the insertion of these provisions prima facie appears to limit the independence of Ofcom, tying them more closely to Government policy. How these provisions bear out in practice, however, remains to be seen.
The sky is no longer the mobile bill limit
Another area of the Act that crept in without much fanfare was the provision dealing with billing limits on mobile phone contracts.
The billing limit provisions require that a mobile phone provider must give their customers an opportunity to specify a billing limit in the contract before it is concluded. The limit is specified in respect of each ‘billing period’, typically a month, and acts as a cap on the amount the customer may be charged for the service for that period. The provisions grant additional flexibility to customers, allowing them on reasonable notice to introduce, remove or amend billing limits for a given period. Providers will be obliged to give the customer notice if the limit is likely to be reached before the end of the period or if the limit is reached. This will likely require the mobile operators to keep an adequate record of communications with their customers to ensure they can prove compliance with the new obligations.
These provisions follow from the voluntary Code of Practice agreed on in 2015 by the five key mobile operators at the time, which deal with ‘out of bundle’ charges, roaming, and stipulated a £100 liability cap in respect of lost or stolen mobile phones. The introduction of the provisions in the Digital Economy Act suggests that the Government did not consider the voluntary Code sufficient to deal with the issue of bill shock.
To predict that one or more mobile operators will fall foul of these new, potentially onerous obligations in the near future – and be aggressively fined for it – does not seem too outlandish given the recent fines Ofcom has doled on mobile operators for their failure to meet existing consumer protection obligations.
Judicial review standard, but is it judicious?
The Government and Ofcom’s desire to change the standard of appeal in respect of appeals under the Communications Act was formerly a ‘hot topic’, with at least two public consultations chewing over it, but had largely left the public consciousness by the time the Digital Economy was passed. Stiff opposition to the proposals nevertheless remained from the bar council, the Competition Appeal Tribunal (CAT) and the majority of industry players. The Government has, however, persisted in it’s goals of removing what it considered to be a ‘gold plating’ of the European requirements and has seemingly won in this battle.
Under the amendments, the CAT will have to decide appeals under the Communications Act by applying the ‘judicial review’ standard, narrowing considerably the grounds of appeal by industry players against Ofcom decision. It is in stark contrast to the previous standard whereby the CAT considered appeals ‘on the merits’. The Government and Ofcom have argued that this is in the interests of consumers, as it will make it harder for communications providers to challenge the (as proclaimed by Ofcom) proconsumer decisions of the regulator.
There is therefore considerable debate on what the change will mean in practice, as the European Framework currently requires that Member States “shall ensure that the merits of the case are duly taken into account and that there is an effective appeal mechanism”. The CAT should therefore remain obliged to take due account of the merits in its decision making, and this is something the telecommunications operators are likely to heavily rely on. Indeed, the Government in its explanatory notes on the original form bill stipulated that it was their view that ‘judicial review’ was flexible, and could allow for merits to be taken into account where appropriate – albeit no further explanation of when it would be appropriate is provided.
The lack of clarity suggests that the first case to be brought under the new appeal standard is likely to include a hard-fought battle on this point. However, as this specific amendment will only be brought into force upon regulation made by Statutory Instrument, it is not yet known when this first battle will occur.
Another controversial provision will enable courts to make a so called ‘Drug Dealing Telecommunications Restriction Order’. The order will oblige the relevant telecommunications operator to take specified action, including disabling devices. Such an order may be imposed even where an end-user is even suspected of committing or facilitating a drug related offence – an unprecedented move heralded by some critics as draconian.
For your information
Of particular concern to many operators is the expansive new provision granting Ofcom the power to require a communications provider to publish any information held by that provider, or to provide such information to Ofcom to be published by it. This may include information that Ofcom has required the communications provider to “produce, generate or obtain” for provision or publication. It furthermore grants Ofcom the ability to oblige communications providers to collect or retain information they would not normally collect, amongst other actions. It is safe to say that this provision represents a considerable extension to Ofcom’s information gathering powers, given that the only limit is that the power must be exercised “in such a way as to be proportionate to the use to which the information is to be put in the exercise of Ofcom’s functions.”
This is unlikely to give operators much comfort. Even under its present powers, Ofcom has not been shy in asking for operators for information they do not retain or collect (typically because there was no commercial reason for them to do so). Armed with these new powers to require providers to produce, generate or obtain information, Ofcom will no doubt be like a child in a candy store, wanting to sample and purchase everything. Juxtaposed with the new appeal standard, this provision is one in respect of which operators should be very wary.