Communications policy

Regulatory and institutional structure

Summarise the regulatory framework for the communications sector. Do any foreign ownership restrictions apply to communications services?

Communications law and regulation in the UK is principally founded on the Communications Act 2003 (the Act). This legislation implemented a number of EU laws aimed at harmonising, simplifying and increasing the usability of telecoms regimes across all European Union member states. The Act also grants authority to the Office of Communications (Ofcom), the UK’s national regulatory authority for communications.

The role of Ofcom is to set and enforce regulatory rules in all sectors for which it is responsible and, along with the Competition and Markets Authority (CMA) (see question 28), to promote fair competition across the industry by enforcing competition laws.

As part of Ofcom’s regulatory principles, Ofcom must take the least intrusive approach to intervention and will only do so where the intervention would be evidence-based, proportionate, consistent and transparent.

Although Ofcom is accountable to Parliament, the Department for Culture, Media and Sport is the UK government department with overall responsibility for developing the telecoms regulatory framework within the UK. Ofcom is restricted to acting within the powers conferred on it by Parliament.

The proposed Ofcom 2019/2020 Annual Plan focuses on supporting investment in infrastructure (moving towards universal availability of high quality and secure communication networks), maintaining high quality broadcast content for audiences, protecting consumers from harmful pricing practices, and reviewing their approach to the potential regulation of harmful online content.

Although there are currently no restrictions on foreign ownership of telecoms services within the UK, the current UK government pledged to introduce new rules on foreign control for the telecoms industry as part of its election manifesto in May 2017.

If the UK leaves the EU without a deal in place, parts of the UK electronic communications regulatory framework would no longer be appropriate without corrections. For example, the requirement to notify matters to the European Commission would not be applicable because the UK would cease to be a member of the EU. On 13 September 2018, the UK government published guidance for the telecoms industry, which stated that, under the EU Withdrawal Act 2018, it would correct references within the UK’s regulatory framework to EU bodies, processes and legislation, to ensure that the regulatory framework remains operable come exit-day. At the time of writing, the draft Electronic Communications (Amendment etc) (EU Exit) Regulations 2019 had been laid before the UK Parliament and the Broadcasting (Amendment) (EU Exit) Regulations 2019 had been made but were not in force. Both of these statutory instruments would amend certain deficiencies within the Communications Act 2003.

Authorisation/licensing regime

Describe the authorisation or licensing regime.

The general authorisation regime under the Act does not make a distinction between fixed, mobile and satellite networks and services. All electronic communications networks (ECNs), electronic communication services (ECSs) and associated facilities (AFs) fall under the scope of the Act, irrespective of the means of transmission. Moreover, under the general authorisation regime, there is no requirement for specific licensing of ECNs, ECSs and AFs.

The broad definition of ECN to include any transmission system for the conveyance of signals between a transmitter, a medium and a receiver, by use of electrical, magnetic or electromagnetic energy, is in line with the EU’s overarching principle of technology neutrality. Equally widely defined, an ECS is a service that has as its principal feature the conveyance of signals by means of an ECN, excluding content services (the provision of material such as information or entertainment). Under the Act, an AF is a facility, element or service that is, or may be, used to enable the provision of an ECN or ECS or other services on that network or service, or supports the provision of such services.

ECNs or ECSs are able to provide networks or services to the public without the need for prior authorisation from Ofcom where they have complied with the General Conditions of Entitlement (the General Conditions). A revised version of the General Conditions came into force on 01 October 2018. In more limited circumstances, the ECNs or ECSs may also need to comply with specific conditions. The General Conditions apply to ECNs irrespective of whether a provider owns or rents some or all of the network in question. The ECS will generally be the entity with a direct contractual relationship with the end user, or the reseller or other intermediary in the case of a wholesale provider. Ofcom provides further guidelines on which organisations will fall within these categories.

Entities using radio spectrum, such as mobile network operators or satellite service providers, will require the grant of a licence from Ofcom under the Wireless Telegraphy Act 2006 (the WTA). Each grant will detail the specific frequency, use, fees and duration of the licence. Some services, such as receive-only earth stations, may not fall within the scope of the WTA licence condition, but still require Ofcom to authorise any such use under a scheme of recognised spectrum access. Operators of set-top boxes that convert signals for viewing will also need an operating licence under the Broadcasting Act 1996. The use of certain frequencies in the radio spectrum for short-range devices, such as alarms and radio frequency identification equipment, is exempt from the need to obtain licences.

Ofcom’s approach to spectrum award is to allow the market as much flexibility in how the spectrum is used without assigning it to a particular technology or application. While spectrum licences are most commonly awarded via auction, Ofcom is able to design these in such a way as to ensure that there is the greatest possible competition within the market. The UK’s 4G spectrum was auctioned by Ofcom in 2013, with a further 4G and 5G spectrum auction in April 2018.

There are currently 17 General Conditions in force, the majority of which must be complied with by all ECNs and ECSs. The remainder apply in more limited circumstances, such as for public pay telephones. The most recent iteration of the General Conditions was published on the Ofcom website on 01 October 2018. Under the Act, Ofcom has the power to amend or revoke any of the General Conditions as appropriate.

In the smaller number of cases where an ECN or ECS is subject to specific conditions, Ofcom will notify that provider of the fact that those conditions are to be imposed. A summary of the main types of specific condition is given below.

Universal service conditions

The basis for this condition is to ensure that everyone within the UK is afforded basic access to telephony. In the UK, the designated service providers are KCOM in the Hull area and BT for the rest of the UK. See question 6 for more detail.

Access-related conditions

To ensure end-to-end connectivity for end users through the interconnection of different networks, Ofcom may impose specific conditions relating to access on ECNs.

Privileged supplier conditions

Where a supplier has special or exclusive rights in relation to the provision of any non-communications service (services other than ECNs or ECSs) then Ofcom must ensure that the privileged supplier complies with specific accounting requirements under the Act.

Significant market power conditions

An operator will have significant market power (SMP) if it is in such a position to act independently of its competitors and consumers or end users. See question 4 for more detail.

Licence duration

Licences issued by Ofcom under the WTA have varying durations depending on the type of licence granted. The mobile 3G licences granted in 2000 were subject to a fixed term of 20 years. Following the WTA (Directions to Ofcom) Order 2010, and subsequent consultation by Ofcom, mobile licences will continue for an indefinite period but be subject to annual renewal fees. ECNs and ECSs provided under the general authorisation regime are not subject to licensing requirements and, therefore, there is no set licence duration applicable to the provision of ECNs and ECSs.

Modification of licences

Although ECNs and ECSs will not be subject to any direct licence modification, under the Act Ofcom may impose changes to the General Conditions or specific conditions from time to time. The Act requires that Ofcom publish a notice, outlining the proposed changes and justifying its reasons for these, providing a period for proposals from those providers affected of not less than one month. Variations to SMP conditions are subject to additional requirements, including consultation with the European Commission and the EU independent advisory body for telecoms regulations, the Body of European Regulators in Electronic Communications (BEREC). Licences under the WTA may be varied by Ofcom providing written notice to the licence holder or publishing a general notice to all holder of a class of licence.

Fees

As a result of the passing of the Digital Economy Act 2017, Ofcom is entirely funded through industry fees and charges. Communications service providers (with a revenue of more than £5 million) must pay a fee based on 0.1160 per cent of relevant turnover for the year ending 31 December 2016. Operators that have code powers under the Electronic Communications Code (conferring benefits such as not having to apply for a street works licence to install certain equipment) will also have to pay an annual fee to Ofcom. The charge for 2018/2019 was £1,000. Operators also have to pay a one-off charge of £10,000 for Ofcom’s cost of dealing with the application for code powers.

Radiocommunications

Ofcom has the power under the WTA to set fees in relation to wireless telegraphy licences, other than for those awarded by auction. Under the WTA, Ofcom is able to prescribe ‘Administered Incentive Pricing’, allowing for fees to be set at above administrative costs so as to encourage efficient use of the spectrum. Ofcom must set out the fees through published regulations. Ofcom is able to either update existing regulations or publish new ones. Since the Wireless Telegraphy (Licence Charges) Regulations 2011, Ofcom has taken the former approach of prescribing new fees by means of updates. The latest changes were made in 2016. Ofcom held consultations on proposed Annual Licence Fees for mobile network operators of 900MHz and 1800MHz frequency bands, which closed on 3 August 2018 and for UK Broadband’s 3.4GHz and 3.6GHz spectrum, which closed on 11 February 2019. See Ofcom’s website for more details.

Television and radio

Ofcom also charges licence fees for the radio and television sectors. The percentage of annual turnover payable varies according to the turnover of the operator. Further details can be found on Ofcom’s website.

Public Wi-Fi

The Investigatory Powers Act 2016 (IPA) applies to public Wi-Fi providers, which may result in them being required to retain and disclose communications data to authorities.

Flexibility in spectrum use

Do spectrum licences generally specify the permitted use or is permitted use (fully or partly) unrestricted? Is licensed spectrum tradable or assignable?

In its 2014 Spectrum Management Strategy statement, Ofcom highlighted the importance of providing as much flexibility as possible in spectrum licence conditions to liberalise the rights of the licensee, allowing that user to re-purpose the use of its spectrum without needing to seek a licence variation. Subject to certain boundaries (such as interference risks), licensees are afforded the ability to determine how that licence should be used without referral to Ofcom. Defining interference parameters remains an important tool for allowing licence owners to understand how they can use their own network and the possible interference levels they may experience. In its 2014 statement, Ofcom indicated that the process of liberalising certain classes of mobile and business radio services was already complete.

Spectrum trading

Spectrum trading is allowed in the UK, with the prior consent of Ofcom only required for the trading of mobile licences. The laws governing such trading are: the WTA, the Wireless Telegraphy (Spectrum Trading) Regulations 2012 (the Trading Regulations) and the Wireless Telegraphy (Mobile Spectrum Trading) Regulations 2011 (the Mobile Trading Regulations). The parties to the transfer must notify Ofcom with certain information about the trade before Ofcom can then publish a notice setting out information on the trade and basic details about the licence. For mobile transfers, Ofcom must consent to the transfer, possibly giving further directions to the parties. Ofcom is consulting on an update to the Mobile Trading Regulations to include 700MHz and 3.6-3.8GHz bands in preparation for the future rollout of 5G mobile connectivity. The consultation closed on 12 March 2019. Certain types of partial transfers are also permissible under the Mobile Trading Regulations, although these may be restricted to limit the number of available licences in the band.

Ex-ante regulatory obligations

Which communications markets and segments are subject to ex-ante regulation? What remedies may be imposed?

Ofcom has powers to impose ex-ante regulations on markets where that market is found not to display effective competition. The range of markets that the EU believes should be subject to ex-ante regulation has been reduced over the years to just four:

  • wholesale call termination on individual public telephone;
  • wholesale voice call termination on individual mobile networks;
  • wholesale local access provided at a fixed location or wholesale central access provided at a fixed location for mass-market products; and
  • wholesale high-quality access provided at a fixed location.

Jurisdictions may, however, extend the number of markets. As discussed in question 2, under these ex-ante regulatory powers, Ofcom may impose certain SMP conditions on a communications provider where that provider is deemed to have SMP such that it is able to dominate a market. In 2002, the European Commission published guidance on how national regulators should approach imposing SMP conditions on a provider. Following a consultation by the European Commission in June 2017, revised draft guidelines were published by the European Commission in February 2018 to reflect the changes to EU competition law generally as well as changes to the telecoms sector. The European Commission launched a consultation on 15 February 2019 (which closes on 10 May 2019) to review the relevant markets in the electronic communications sector, to take into account major market and technological developments (such as the deployments of 5G networks, internet-based applications and services, the convergence between different types of networks and services and the development of Next Generation Access Networks and Services). The results of the consultation are expected to inform a new recommendation on relevant markets that will be adopted by 21 December 2020. At the time of writing, it is unclear whether the UK will adopt the recommendations on relevant markets because of uncertainty in relation to the outcome of the Brexit process.

SMP conditions may only be imposed on a communications provider where the relevant market has been properly identified and reviewed by Ofcom, and, where necessary, a consultation with the European Commission and BEREC has been undertaken. Under the EU framework, Ofcom must review these markets, along with any other markets it deems necessary, every three years. The current position is as follows:

  • wholesale broadband access (WBA) markets - Ofcom consulted in 2017 and its preliminary conclusion was that BT retained SMP in a small proportion of the WBA market;
  • business connectivity markets - on 02 November 2018 Ofcom published a draft consultation following its latest review of the business connectivity market and is expected to publish a final statement in Spring 2019;
  • mobile call termination markets - Ofcom published a statement in March 2018 with network access and charge control obligations imposed on mobile operators;
  • narrowband markets (a review of the products and services underpinning the delivery of retail fixed telephony services in the UK) - Ofcom published a statement in November 2017 applying SMP conditions to BT and KCOM in Hull; and
  • physical infrastructure market - Ofcom has set out proposals to give companies unrestricted access to Openreach’s network of underground ‘ducts’ and telegraph poles.

On 6 February 2019, Ofcom imposed reporting directions across all markets in which KCOM is regulated (the wholesale local access market, the business connectivity markets, the narrowband markets and the wholesale broadband access market).

In the event of the UK leaving the EU without a deal, Ofcom’s decision making in relation to SMP markets and related conditions will no longer be subject to the oversight of the European Commission.

Structural or functional separation

Is there a legal basis for requiring structural or functional separation between an operator’s network and service activities? Has structural or functional separation been introduced or is it being contemplated?

In 2005, BT gave binding undertakings to Ofcom under the Enterprise Act 2002 (the EA) under which it agreed to implement a ‘functional separation’ of its network division - Openreach - from the rest of the BT group. Organisational boundaries and information barriers comprised the basis of this functional separation, with Openreach obliged to deliver products providing access to the ‘first mile’ infrastructure to all communications providers on a non-discriminatory basis.

The status and operation of Openreach was reviewed in 2016 with Ofcom considering proposals, including retaining functional separation with increased independence of Openreach’s governance, along with stricter access and quality requirements for Openreach (following a number of criticisms levelled at BT for abuse of their Openreach monopoly, underinvesting in the UK’s broadband infrastructure and charging high prices with correlating poor customer service). Following Ofcom’s announcement of its intention to file a formal notification to the European Commission to commence the separation process, in March 2017, BT Group agreed to implement a legal separation of Openreach from the BT group. On 31 October 2018, Ofcom published a notice confirming that BT was released from its Enterprise Act undertakings given in respect of Openreach.

Universal service obligations and financing

Outline any universal service obligations. How is provision of these services financed?

As mentioned in question 2, under the Universal Service Order (SI 1904/2003) (USO) BT and KCOM must comply with conditions aimed at ensuring the provision of universal service. The obligations include: special tariff schemes for low-income customers, reasonable geographic access to public call boxes, a connection to the fixed network (including functional internet access), as well as the provision of a text relay service for customers with hearing impairment. There is no universal service funding and the costs to fulfil the obligation are borne by BT and KCOM on the basis that the revenue generated by supplying the services exceeds the costs of providing them.

The Digital Economy Act 2017 established a USO for a legally binding minimum level of broadband service with a connection of at least 10Mbps and upload speeds of at least 1Mpbs by giving each household and business a new legal right to demand an affordable broadband connection up to a reasonable cost threshold. With the Broadband Delivery UK (BDUK) programme (as referred to in question 11) expected to bring fixed-line superfast broadband to 97 per cent of the UK by 2020, the USO will be geared towards achieving the final 3 per cent. While a 30Mbps USO was dropped, despite being voted through the House of Lords, a new mechanism was nonetheless introduced that will allow the UK government, once 75 per cent of households have upgraded to a ‘superfast broadband’ service, to raise the USO’s minimum speed beyond 10Mbps. With regard to funding this new obligation, a final public consultation will be needed to decide the exact specification and funding mechanism to be employed. The Electronic Communications (Universal Service) (Broadband) Regulations 2018, which came into force on 4 December 2018, set out the process Ofcom will use to designate the persons it considers as universal service providers and to whom broadband conditions are to be applicable.

Number allocation and portability

Describe the number allocation scheme and number portability regime in your jurisdiction.

Under European law, end users have a right to keep their original telephone number when switching communications provider. In accordance with its powers under the Act, Ofcom has laid out the conditions for number portability under General Condition B3. Under this condition, an end user’s original service provider must provide them with a Porting Authorisation Code in the shortest possible time when requested. The end user may then pass this code to a new provider and the porting must then take place within one business day.

Ofcom has, however, outlined its preferred view that number portability should, in fact, be ‘gaining-provider led’. Under this approach, the transfer of a number would be controlled by the new provider, with the consumer only needing to contact this party. Ofcom believes that this would allow for easier and quicker transferring of numbers. Ofcom started a consultation on the mobile switching process (including number portability) in 2016/2017 and in December 2017 published the decision to reform the process for switching mobile provider. In January 2019, further guidance was published relating to requests for switching multi-SIM contracts and accounts. See the Ofcom website for more details.

Customer terms and conditions

Are customer terms and conditions in the communications sector subject to specific rules?

Part C of the General Conditions impose consumer protection conditions. Condition C1 imposes minimum information provision requirements in consumer contracts, including a maximum initial duration of two years and conditions for termination. One of the matters to be disclosed includes details of prices and tariffs, which is further extrapolated under Condition C2. Under this Condition all ECN operators must make available, clear and up-to-date information on their prices and tariffs, as well as on their standard terms and conditions of access to, and use of, publicly available telephone services.

Condition C4 and the Act further require that dispute resolution mechanisms provided by the communications provider or otherwise are accessible to their domestic and small business customers (ie, businesses with 10 or fewer employees). The two dispute resolutions schemes approved by Ofcom for this purpose are the Ombudsman Services and the Communication and Internet Services Adjudication Scheme.

Net neutrality

Are there limits on an internet service provider’s freedom to control or prioritise the type or source of data that it delivers? Are there any other specific regulations or guidelines on net neutrality?

The 2015 EU Roaming and Open Internet Access Regulation (the 2015 Regulation) (implemented in the UK by the Open Internet Access (EU Regulation) Regulations 2016 - necessary for the purposes of designating Ofcom as the UK national regulatory authority) prohibits discrimination, interference or paid prioritisation affecting end-user access. It includes transparency rules requiring internet access services to publish information on any traffic management measure that could affect end users (in terms of quality, privacy and data protection), as well as information on fair use policies, actual speeds, data caps and download limits (among others). It further requires Ofcom to monitor and enforce the rules. Ofcom published its first report on compliance in June 2017, finding no major causes for concern but highlighting some areas in need of better ISP compliance. See the Ofcom website for more details.

The UK government has published a draft Open Internet Access (Amendment etc) (EU Exit) Regulations 2018 (draft SI) to address issues arising from the UK exiting the EU. The draft SI provides for amendments such as removing references to ‘national regulatory authority’, ‘common rules’ and requirements for Ofcom to follow requirements set by the European Commission and BEREC. Again, it is unclear whether the UK would adopt similar requirements post-Brexit.

Platform regulation

Is there specific legislation or regulation in place, and have there been any enforcement initiatives relating to digital platforms?

While there is, at present, no legislation or regulation specifically governing digital platforms in the UK, general authorisation provisions under the Act will apply. Ofcom’s remit covers the following platforms: digital terrestrial television, digital audio broadcasting (DAB), radio and video-on-demand (VOD) services. Any other digital platforms are subsequently only subject to general competition law and sector-specific regulations.

The complex nature of digital platforms and the difficulties in understanding their competitive effects has led the UK government and CMA to take a flexible and case-by-case approach to policing digital platforms.

The UK, along with a number of other member states, advised in an open letter dated 4 April 2016, that while the Commission is right to emphasise the importance of the issue of digital platforms and collect evidence to inform and define the role of such platforms within the Digital Single Market Strategy, care should be taken to avoid excessive regulation that could end up harming rather than furthering the initiative.

On 1 March 2018, the European Commission issued a Recommendation regarding measures to tackle illegal content online. On 26 April 2018 the Commission proposed an EU Regulation of fairness and transparency in online platform trading. These legislative instruments aim to address unfair contractual clauses in platform-to-business relationships, and make progress with procedural aspects and principles on removal of illegal content. The proposed regulation will apply to providers of online intermediation services and online search engines.

As part of the report published on 13 March 2019 by the Digital Competition Expert Panel, led by Jason Furman, ‘Unlocking digital competition’ (the Furman Report), the panel recommended that a new code of conduct should be established for companies designated as having ‘strategic market status’ on acceptable norms of competitive conduct on how they should act with respect to smaller firms and consumers. Further details on the report can be found in question 30.

Next-Generation-Access (NGA) networks

Are there specific regulatory obligations applicable to NGA networks? Is there a government financial scheme to promote basic broadband or NGA broadband penetration?

There is currently no legislation or regulation covering NGA networks in the UK. Indeed, Ofcom has stated its role is not to provide operators with incentives to make particular investments, but rather to attempt to ensure that the incentives for efficient investment are not distorted as a result of disproportionate regulation.

Pursuant to the undertakings entered into between BT and Ofcom in 2002, BT must allow its competitors access to its virtual unbundled local access points to foster competition over the supply of superfast broadband services to consumers. BT is also required to allow other providers the option of investing in NGA by giving access to its ducts and poles and other physical infrastructures. On 20 April 2017, Ofcom published a consultation on opening up BT’s infrastructure to improve access to Openreach’s underground ducts and poles for competing providers of fibre broadband.

There is a general EU prohibition restricting the UK government’s ability to invest directly in broadband infrastructure in the UK. However, the UK government is, through BDUK, supporting investment in: the provision of superfast broadband coverage to 95 per cent of the UK (achieved by December 2017); the provision of access to basic broadband (2Mbps) for all; and the stimulation of private investment in full fibre connections by 2021. The UK government announced, in November 2017, that local bodies could apply for funding for investment in fibre networks, the Local Full Fibre Network challenge fund. In August 2018, the third and final allocation of funding, worth £95 million, was opened up to bidding. At the time of writing, the UK government had confirmed nine winning bidders who cumulatively had secured £53 million of the total available.

Ofcom plays a key role in facilitating both investment and competition in superfast broadband. March 2017 saw Ofcom announcing plans to cut the wholesale price that Openreach can charge telecoms companies for its superfast broadband service to allow cheaper prices to be passed on to consumers and promote further competition and thus investment and development. The rules also include stricter requirements on Openreach to repair faults and install new broadband lines more quickly.

The Body of European Regulators for Electronic Communications (BEREC) released a draft report, dated 6 December 2018, concerning access to physical infrastructure in the context of market analyses, citing that physical infrastructure (such as ducts and poles) represent a significant proportion of the investment in NGA networks. The report emphasises the benefits of measures that are aimed at facilitating greater use of existing physical infrastructure that can reduce the civil engineering works required to deploy new networks, significantly lowering costs. In time, this may see regulatory change around access to physical infrastructure supporting NGA networks.

Data protection

Is there a specific data protection regime applicable to the communications sector?

The General Data Protection Regulation (GDPR) governs data protection in the UK with effect from 25 May 2018. The GDPR generally imposes more stringent compliance obligations on both data controllers and data processors, alongside more onerous information requirements, to ensure that the personal data of data subjects is afforded an adequate level of protection. The scope of the regulation is also expanded and may, therefore, affect telecoms providers located outside the EU.

The GDPR is supplemented by the Data Protection Act 2018 (DPA), which received Royal Assent on 23 May 2018 and came into force on 25 May 2018. The purpose of the DPA includes: incorporating elements of the GDPR into UK law, meaning that the UK and EU data protection regimes are aligned after Brexit (which may increase the likelihood of an adequacy decision from the Commission); exercising derogations to the GDPR in certain areas; clarifying the role of the Information Commissioner’s Office (ICO); and consolidating data protection enforcement, by increasing fines and introducing two new criminal offences.

The GDPR is complemented by the Privacy and Electronic Communications (EC Directive) Regulations 2003 (as amended) (the PEC Regulations). The PEC Regulations (which implement E-Privacy Directive (2002/58/EC)) provide for measures such as the safeguarding of security of a service by public ECSs; notice requirements, should there be any breaches of security; prohibitions on unsolicited or direct marketing communications; restrictions on the processing of user identity and location; and how long personal data may be held or held without modification.

In 2017, the European Commission published a draft of the E-Privacy Regulation to bring the provisions of the existing E-Privacy Directive in line with the GDPR and to take account of technology changes. Failure to comply with either of these Regulations could lead to fines being imposed on a business of the higher of 4 per cent of worldwide annual turnover or €20 million. If the E-Privacy Regulation has not come into effect prior to the UK’s departure from the EU, then it will not form part of UK law automatically by virtue of the Withdrawal Act. In this case, organisations may need to comply with dual regimes under UK and EU law to the extent that the E-Privacy Regulation differs from the PEC Regulations.

The IPA deals with data retention, interception and acquisition. Some of the key changes introduced by this legislation included: an extension of government powers to require telecoms operators to retain data about users including their web-browsing history; the potential for communications providers to be prevented from implementing end-to-end encryption of user data; and an expansion of the types of operators that will be affected by such investigatory powers to include by public and private telecoms operators. The UK government is legislating to bring elements of the IPA into force (the most recent update being on 4 February 2019) but the IPA is also being challenged in the courts and in November 2018 a human rights group won the right to a judicial review of Part 4 of the IPA, which gives government agencies powers to collect electronic communications and records without reason for suspicion.

Additionally, Ofcom offers guidance as to how communications providers should implement technical and organisational security measures to manage the security risks of public ECNs and ECSs. This guidance was updated in December 2017.

Cybersecurity

Is there specific legislation or regulation in place concerning cybersecurity or network security in your jurisdiction?

There is no single piece of legislation or regulation in place concerning cybersecurity or network security in the UK. It is instead covered by several pieces of legislation, such as the Act, PECR, GDPR and also the Network and Information Systems Regulations 2018 (NIS Regulations). The NIS Regulations impose cybersecurity and incident reporting obligations on two classes of operator in the UK: relevant digital service providers; and operators of essential services (provided they operate in certain sectors and meet threshold requirements).

The Act requires public ECN and ECS providers to take appropriate technical and organisational measure to manage the ECNs and ECSs, the focus of which is to minimise the impact of security breaches on end users and on the interconnections of public electronic communications networks. The Act also imposes a number of notification requirements on these providers. The PEC Regulations similarly impose obligations on public ECSs to ensure that personal data is handled appropriately and subject to appropriate security policies.

Under the GDPR (see question 12) data controllers and data processors have to ensure that appropriate technical and security measures are put in place when handling a data subject’s personal data.

Big data

Is there specific legislation or regulation in place, and have there been any enforcement initiatives in your jurisdiction, addressing the legal challenges raised by big data?

While general data protection legislation applies to big data, no particular UK legislation or regulation covers big data specifically. However, a number of inquiries have been conducted by UK bodies into benefits and challenges arising from the exponential growth in the use of big data (and its link to the Internet of Things). In November 2018, the UK government created the Centre for Data Ethics and Innovation which aims to assist the UK government with identifying and addressing areas where clearer guidelines or regulation in relation to data and data-related technologies are needed.

Furthermore, the fallout from Cambridge Analytica harvesting data from Facebook on a large scale has turned the spotlight on big data collection and processing activities and, in November 2018, the ICO produced a report into this subject entitled ‘Investigation into the use of data analytics in political campaigns’.

In its Furman Report, the Digital Competition Expert Panel recognises the importance of data as a competitive tool in the UK’s digital market. Specifically, it has seen how digital markets can often tend towards concentration, with limited degrees of in-market competition, leading to significant barriers to entry because of the accumulation of data by incumbent firms. Some recommendations, therefore, seek to enable greater personal data mobility and systems with open standards. The Panel also encourages policies of data openness in granting access to non-personal or anonymised data to new market participants.

Data localisation

Are there any laws or regulations that require data to be stored locally in the jurisdiction?

There are no data localisation requirements in the UK. There are, however, rules in the GDPR that require personal data transferred outside the European Economic Area to be subject to ‘adequate protection’.

Key trends and expected changes

Summarise the key emerging trends and hot topics in communications regulation in your jurisdiction.

Brexit

As noted in question 1, the Act, and much of the regulation surrounding the telecoms market, has its foundations in EU law. Following the UK’s decision to leave the EU on 23 June 2016 (Brexit), it is somewhat unclear how the regulatory system will operate after the UK leaves the EU. Although there is unlikely to be any immediate change to the relevant existing UK legislation, Ofcom will not be subject to EU oversight and the considerations that influence its regulation of the market will likely be more UK-centric as a result. Consequently, it is possible that a more divergent approach will be seen between the UK and the EU over time. For example, aspects such as the general conditions and specific conditions could be altered to better serve the interest of the UK public, rather than having a broader EU focus.

In March 2018, the EU Commission published a summary of the likely implications of Brexit on communications service providers. In summary:

  • communications service providers established in the UK would cease to benefit from the general authorisation regime in the EU-27 member states (and vice versa); and
  • fixed and mobile termination rate and roaming regulation would cease to apply to the UK and EU-27 relationship. As a result, call charges between the UK and EU-27 and roaming charges for visitors in either direction could increase.

Although the UK government has stated its commitment to certain areas of current and future EU legislation (such as the GDPR), the lack of certainty for many areas of the law means that any changes will have to be closely monitored in the future.

The European Electronic Communications Code (EECC) (Directive 2018/1972) came into force on 20 December 2018. This Directive will replace and reform existing directives (the Framework Directive (Directive 2002/21/EC), the Authorisation Directive (Directive 2002/20/EC), the Access Directive (Directive 2002/19/EC) and the Universal Service Directive (Directive 2002/22/EC), which were all transposed into UK law through national legislation (mainly the Communications Act 2003 and Wireless Telegraphy Act 2006) and incorporate them into a single document on 21 December 2020. The UK government indicated in its ‘no deal Brexit’ technical notice on telecoms that if the Code is adopted before exit day but with a transposition date post-exit it would be minded to implement the Code’s substantive provisions according to a similar timetable.

Spectrum changes

Spectrum allocation and bandwidth remains a major issue in the UK market both to manage existing capacity and coverage constraints and requirements, but also to prepare for 5G service roll out. Ofcom expects to start taking applications for an auction for the 700MHz and 3.6-3.8GHz spectrum bands in December 2019.

Ofcom Proposed Annual Plan 2019/20

The Ofcom Proposed Annual Plan for 2019/20 focuses on:

  • moving towards universality in broadband and mobile service;
  • promoting investment in fibre network infrastructure;
  • spectrum auctions (see above);
  • preparing for the launch of 5G mobile services;
  • building cyber-security capability and ensuring providers are managing security risks;
  • review of the BBC’s news and current affairs output; and
  • improving pricing for bundled mobile airtime and handset contracts.

There have also been important market reviews conducted by Ofcom that aim to assess and address competition issues in the fixed line and mobile markets (see question 4).

Following the legal separation of BT and Openreach agreed in March 2017, Ofcom is continuing to monitor progress and plans to publish a report on the overall outcomes in 2020/21.

Media

Regulatory and institutional structure

Summarise the regulatory framework for the media sector in your jurisdiction.

Question 1 of this chapter outlines the regulatory framework for the media and telecoms sector within the UK. Press Regulation is set out later in this chapter, in question 26. Regulatory Agencies are also set out in question 28.

Broadcasting is regulated by the legislation set out in the above question with additional regulation from the Broadcasting Act 1990 (as amended by the Broadcasting Act 1996 and the Act). There have also been some minor changes to the regulatory regime through the Digital Economy Act 2017.

Subject to the outcome of Brexit, regulatory changes may come in the future as a part of the Commission’s Digital Single Market Strategy.

Ownership restrictions

Do any foreign ownership restrictions apply to media services? Is the ownership or control of broadcasters otherwise restricted? Are there any regulations in relation to the cross-ownership of media companies, including radio, television and newspapers?

Restrictions as to who can hold a broadcasting licence and control a broadcaster are set out in both the 1990 and 1996 Broadcasting Acts; these were revised by the Act, which relaxed these provisions. If at any point there is a change in control over the licence or the owner of the licence, they must notify Ofcom, which will ensure that no person disqualified from holding the licence has taken control. Ofcom will also undertake a review to ensure that change of control will not negatively affect the programme content. If Ofcom does believe certain aspects of the programming may change, it could vary the licence.

Those who will be disqualified from holding a broadcasting licence will generally fall under two categories: religious or political groups and advertising agencies.

Although religious bodies are generally restricted from holding a broadcasting licence, there are exceptions to this rule. They may own local analogue radio and satellite, cable broadcasting, local digital sound programme, national digital sound programme, television restricted service, digital programme service and digital additional service licences.

Licensing requirements

What are the licensing requirements for broadcasting, including the fees payable and the timescale for the necessary authorisations?

BBC

The main document that regulates the BBC is the founding charter. The revised charter came into force on 1 January 2017. This revised charter made multiple changes to the regulation of the BBC. A unitary board was formed to replace the BBC Trust and BBC Executive; this new board ensures that the BBC’s strategy, activity and output are in the public interest. From 2017, the BBC fell under the remit of Ofcom.

Channel 4

The most recent licence for Channel 4 came into effect in January 2015 and was varied in December 2017 following a 2014 spectrum management decision by OFCOM. Channel 4 previously operated on a digital replacement licence that replaced its original analogue broadcasting licence in 2004. The most recent licence keeps things essentially the same, although the 2017 variation provides for the clearance of the 700MHz band for mobile data use by 1 May 2020.

Channels 3 and 5

The most recent licences for both Channels 3 and 5 came into effect in January 2015 and were varied in December 2017 following a 2014 spectrum management decision by OFCOM. Channels 3 and 5 previously operated on digital replacement licences, which came into effect in 2004 and replaced the analogue Channel 3 and 5 licences. The current licence includes amendments to the regional programming commitments in Channel 3 licences for English regions; and creates a more localised Channel 3 news service, while also lowering obligations. The 2017 variations also provide for the clearance of the 700MHz band for mobile data use by 1 May 2020.

Digital television programme services (DTPS)

Other than those provided by Channel 3, 4 or 5, DTPS licences cover the provision of television programmes services. The broadcasts covered will be in digital form for general reception on a digital television terrestrial multiplex. They will also cover ancillary services such as subtitling.

Digital television additional services (DTAS)

DTAS licences cover television services text and data services including teletext and electronic programme guides. These are not covered by DTPS licences as they are not considered an ancillary service or digital television programme services. They are broadcast in a digital form on a digital television multiplex.

Television licensable content services (TLCS)

A TLCS licence covers services broadcast from a satellite, distributed using an ECN or ECS made available by a radio multiplex. Its principal purpose must be the provision of television programmes or electronic programme guides, or both. The service must also be available for reception by members of the public.

Services such as Channels 3, 4 and 5, covered by the other licences outlined in this section, do not require a TLCS licence. Internet services, pure video-on-demand services and two-way services, such as videophone, do not require a TLCS licence.

A new local television licence regime was created as part of the Local Digital Television Programme Services (L-DTPS) Order 2012. An L-DTPS will have sufficient capacity at its location for one standard definition digital service on the local multiplex. These are operated on Multiplex L with 29 L-DTPS licences awarded.

Under the Broadcasting Act 1990, Ofcom must not grant a licence to any person unless it is satisfied that the person is a ‘fit and proper’ person to hold it and is not disqualified by statute from holding the licence. The proposed service cannot be contrary to the standards objectives laid out in the Act.

The complete Ofcom tariff table is available on its website.

Radio

Under the Act, Ofcom has the authority to regulate the following in relation to independent radio services:

  • analogue sound broadcasting services at a national or local level;
  • radio licensable content services (services provided in digital or analogue form, broadcast from a satellite or via an ECN, for use by the public and consisting of sound programmes);
  • additional radio services (a service consisting of the sending of signals for transmission by wireless telegraphy using space capacity within signals carrying any sound broadcasting service);
  • digital radio multiplex services;
  • digital sound and digital additional sound services at both a national and local level (text and data services not intended to be related to programming); and
  • radio restricted services (licences intended to cover small-scale community uses).

Fees, duration and permissible content vary depending on the type of licence to be granted. Ofcom suggests that the easiest way to set up a radio service is to start an online radio station. Ofcom currently does not regulate online-only radio services which, therefore, do not require a licence from Ofcom.

Foreign programmes and local content requirements

Are there any regulations concerning the broadcasting of foreign-produced programmes? Do the rules require a minimum amount of local content? What types of media fall outside this regime?

The Act contains a limited number of provisions covering the broadcasting of foreign programmes. Regulations set out in the Audiovisual Media Services Directive 2010/13/EU (as amended by Directive (EU) 2018/1808 and incorporated into the Broadcasting Code), require that, where practicable, European production should account for over 50 per cent of the transmission hours of each broadcaster established in that market (subject to certain exclusions). The amending Directive (EU) 2018/1808 provided, among other things, for an increased European content quota for on-demand services, raised from 20 per cent to 30 per cent. In addition, the Secretary of State maintains powers under the Act to disallow foreign television and radio should it fall foul of provisions in the Act (such as those that offend against taste or decency). Regarding online and mobile content, there are no equivalent foreign restrictions.

The Act gives Ofcom the power to require local programming be included in the output of broadcasters where appropriate. An example of this is in Ofcom’s inclusion in every Channel 3 licence of a condition requiring a regional channel with programmes targeted at persons living in the area.

Advertising

How is broadcast media advertising regulated? Is online advertising subject to the same regulation?

Ofcom’s role under the Act is to regulate advertising on broadcast media to ensure advertising rules and standards are met. These rules and standards can be found across a number of instruments. Primarily broadcast media must follow the UK Code of Broadcast Advertising (the BCAP Code) which covers misleading advertising, protection of children, harmful and offensive content, a ban on political advertising, and rules on environmental claims, to name but a few. Additional rules are contained in Ofcom’s Broadcast Codes, which cover issues such as taste, decency and product placement. Enforcement of the aforementioned rules, while ultimately Ofcom’s responsibility, has been largely contracted out to the Advertising Standards Authority and its associated bodies.

One of the key amendments to the Audiovisual Media Services Directive, which were approved by European Parliament in October 2018, was to introduce new rules concerning the proportion of daily broadcasting time that would be taken up by advertisements. Under the new rules, advertising can take up a maximum of 20 per cent of the daily broadcasting period between 6.00 am and 6.00 pm, but broadcasters can adjust their advertising slots within this time period so long as they do not exceed the total 20 per cent limit. The new rules also introduce a prime-time window between 6.00 pm and midnight, during which advertising will also only be allowed to take up a maximum of 20 per cent of broadcasting time.

Product placement, while allowed in films, series made for television, sports programmes and light entertainment programmes (both foreign and national), is prohibited in news and children’s programmes. This was a change brought in during Ofcom’s February 2011 change to the Broadcasting Code, and includes rules requiring special logos to be shown at the beginning and end of the programme, as well as at the end of each advertising break to signify the use of product placement.

There are strict rules on advertising and product placement in children’s television programmes and content available on video-on-demand platforms introduced under the amendment to the Audiovisual Media Services Directive approved in November 2018.

Online advertising is subject to the CAP code which imposes similar standards and rules. The CAP code also contains the rules that apply to video-on-demand services. While there are some differences between the codes, the BCAP Code states that BCAP works closely with CAP to provide, as is practicable and desirable, a consistent and coordinated approach to standards setting across non-broadcast and broadcast media. The CAP code was amended in November 2018 to align with the GDPR and provide rules and guidance in respect of use of data for direct marketing generally and the rules on the transparency and control of data collected and used for the purpose of delivering ads based on web-users’ browsing behaviour.

As of 14 June 2019, advertisements containing gender stereotypes will be banned in both broadcast and non-broadcast media (including online and social media).

On 13 March 2019, Phillip Hammond, chancellor of the exchequer, wrote to the CMA asking them to carry out a market study of the digital advertising market as soon as is possible. Such a market study would seek to explore: (i) the importance of data in digital advertising including in programmatic trading; (ii) whether the market is sufficiently transparent, including to advertisers and publishers as well as to consumers in how their data is used; and (iii) the extent to which digital platforms grant preferential treatment to their own businesses across the value chain or act in other ways which are likely to disadvantage third-party competitors. This market study was a recommendation of the Furman Report.

Must-carry obligations

Are there regulations specifying a basic package of programmes that must be carried by operators’ broadcasting distribution networks? Is there a mechanism for financing the costs of such obligations?

Under the Act, public service broadcasters, including (but not limited to) the BBC, ITV, Channel 4 and Channel 5, must provide public service broadcasting (PSB) channels to all the main distribution platforms. As a result, such channels have a right to be carried on all the main platforms on a ‘free-to-air’ basis. Ofcom has a responsibility under the Act to review and report on the extent to which the PSBs have fulfilled the purposes of PSB and make recommendations regarding how to maintain and strengthen the quality of PSB in the future, with reviews taking place every five years. The purposes of PSB in the UK are:

  • to provide a variety of programmes on a wide range of subject matters;
  • to provide television services that are likely to meet the needs and interest of as many different audiences as practicable (as well as those of the actual available audiences); and
  • to maintain high standards in respect of programme content, development and skill, and editorial integrity.

In March 2018, Ofcom published a review of PSB. It concluded that PSB fulfils an important and valued role in broadcasting in the UK. However, it also noted the greatly increased choice of platforms and content available to viewers. It also commented on the ‘rush to scale’ through M&A activity, such as the Fox and Comcast bids for Sky and the Disney bid for Fox. Despite such challenges, Ofcom believes that PSB in the UK has fared well. PSB television channels still account for 50 per cent of viewing and revenue streams (advertising and the licence fee for the BBC) providing a consistent and reasonably resilient revenue stream.

Regulation of new media content

Is new media content and its delivery regulated differently from traditional broadcast media? How?

New media content is regulated under the same broadcast content rules and legislation as broadcast media, so, for example, internet protocol television services simply require the same licences as they would for the same content offline. Following the Audiovisual Media Services Directive, the UK must regulate VOD content and advertising. Ofcom brought regulation of VOD in-house in January 2016 to ensure the efficient and effective control of regulating VOD programme services. Rules include a number of minimum content standards, and on-demand services are subject to the UK Code of Non-Broadcast Advertising, Sales Promotion and Digital Marketing. The amendments made to the Audiovisual Media Services Directive in November 2018 extend its scope to video-sharing platforms in addition to VOD providers, such as Netflix and YouTube.

In February 2019, the Culture, Media and Sport Committee published its report into the dissemination of ‘fake news’ published predominantly in non-traditional news media outlets and via social media. The report calls for social media companies to be obligated to take down known sources of harmful content, including proven sources of disinformation and a Code of Ethics for tech companies overseen by an independent regulator.

Digital switchover

When is the switchover from analogue to digital broadcasting required or when did it occur? How will radio frequencies freed up by the switchover be reallocated?

The UK digital television switchover commenced in 2008 and was completed in 2012. The 600MHz band was auctioned in 2013 and the remaining freed analogue television channels have yet to be allocated.

Under the Digital Economy Act 2010, the Secretary of State is given the power to nominate the digital switchover for radio broadcasting. The UK government has set criteria to be met before the switchover can commence: digital listening must reach 50 per cent of all radio listening (including via television and DAB); national DAB coverage must be equal to analogue coverage and local DAB reaches 90 per cent of the population. Ofcom’s Communications Market Report, published on 2 August 2018, indicates that DAB radio listening had reached 50.9 per cent.

Digital formats

Does regulation restrict how broadcasters can use their spectrum?

Although licences may set out certain restrictions in terms of information requirements and governing codes or guidance, broadcasting licences are not restrictive in terms of how the spectrum may be used.

Media plurality

Is there any process for assessing or regulating media plurality (or a similar concept) in your jurisdiction? May the authorities require companies to take any steps as a result of such an assessment?

In its fifth report to the Secretary of State, dated 23 November 2018, Ofcom stated its statutory duty to review, at least every three years, the operation of Parliament’s ‘media ownership rules’ as found under section 391 of the Communications Act 2003. Ofcom note that the aim of the rules is to protect the public interest by promoting plurality and preventing undue influence by any one, or certain types of, media owner.

There are currently four broad media ownership rules that Parliament has put in place in the UK (and which are set out in Ofcom’s November 2018 report to the Secretary of State):

  • the national cross-media ownership rule: preventing a newspaper operator with a 20 per cent or more market share of newspaper circulation from holding a Channel 3 licence or a stake in such a licence of more than 20 per cent; and preventing the holder of a Channel 3 licence from holding an interest of 20 per cent or more in a large national newspaper operator;
  • the Channel 3 appointed new provider rule: requiring regional Channel 3 licensees to appoint a single news provider among them;
  • the Media Public Interest Test: which allows the Secretary of State to intervene in a merger involving a broadcaster or newspaper enterprise, where that merger meets certain value or market share requirements. The Secretary of State may choose to issue an intervention notice triggering a review if a merger might result in harm to the public interest (see further below); and
  • the Disqualified Persons Restrictions: where certain bodies or persons must first be approved by Ofcom prior to holding certain kinds of broadcast licence to prevent undue influence over broadcasting services.

Intervention by the Secretary of State on the grounds of public interest under the EA includes the need for accurate presentation of news and free expression of opinion in newspapers, the need for plurality of persons who control the media and the need for UK-wide broadcasting that is both of high quality and likely to appeal to a variety of tastes and interests. Where a public interest ground applies, it is not necessary for the Secretary of State to carry out an assessment as to whether there would be a substantial lessening of competition by the merger (as would otherwise be required).

Detailed guidelines from 2004, by the former Department for Trade and Industry, set out those situations where the Secretary of State may intervene in merger situations involving media organisations, including cross-media mergers (where there is a merger between a newspaper and a Channel 3 or 5 licence holder, for example). The Secretary of State may intervene where the merger involves entities from outside the EEA. The policy is not for the Secretary of State to intervene where the mergers are related to satellite and cable television and radio services.

Key trends and expected changes

Provide a summary of key emerging trends and hot topics in media regulation in your country.

Brexit

As with telecoms, broadcasting regulation is founded on EU law. Although in the short to medium term there are unlikely to be any significant changes to these laws, the UK government may choose to take a more divergent approach in the future. For example, whereas television broadcasting is subject to greater levels of regulation than over-the-top services (such as VOD), the UK government would have the freedom to regulate more closely the laws on VOD services.

Brexit would also likely impact on the current ‘country of origin’ principle whereby broadcasters that are regulated in one member state do not need to apply for additional licences to transmit in another member state. As this is set out in the current Audiovisual Media Services Directive, the UK could lose this benefit going forward, increasing the regulatory burden on UK broadcasters and making it harder for UK broadcasters to sell their content in the EU. The UK government recently published the Broadcasting (Amendment) (EU Exit) Regulations 2019, which will come into force in the event of a no-deal Brexit and will make a number of changes to primary and secondary legislation to address certain deficiencies arising from the UK’s withdrawal from the EU. The Regulations will amend the UK’s authorisation system to a ‘country of destination’ principle, whereby any television services available in the UK must be licensed and regulated by Ofcom. However, the Regulations also implement the European Convention on Transfrontier Television (ECTT) which, in effect, would mean the country-of-origin principle would be retained in relation to ECTT countries.

At the time of writing, the UK’s future relationship with the EU remains uncertain. With the original date for the UK’s departure of 29 March 2019 having passed, it is unclear whether the UK will now leave the EU on 12 April 2019, or whether a ‘long’ extension to Article 50 may be sought and granted by the EU to extend the period for the UK’s exit.

The battle for Sky

As noted above, there is a rush to scale in the broadcasting sector and this was evidenced recently in the tussle between Fox and Comcast to acquire ownership of Sky. In a rare blind auction process set by the UK’s Takeover Panel in September 2018, Comcast outbid Fox with a bid of £30.5 billion, which equated to £17.28 per share. This was £1.61 per share higher than Fox offered at £15.67 per share.

Taxation on social media

There has been some indication that new taxes will be introduced in the near future to target social media companies. In the UK Budget 2018, delivered on 29 October 2018, the Chancellor of the Exchequer, Philip Hammond, announced plans to introduce a digital services tax from April 2020 following a consultation. The proposed tax would be a 2 per cent tax rate against the sales that large digital companies make in the UK and would be levied against social media platforms, as well as internet marketplaces and search engines. The Chancellor emphasised that start-ups would be protected from the levy. The consultation ran from 7 November 2018 to 28 February 2019 and, at the time of writing, the UK government were reviewing public feedback. A similar proposal from the European Commission, which would tax revenues for some digital services at 3 per cent, has thus far not been agreed upon by the member states.

On 18 March 2019, the All-Party Parliamentary Group on Social Media and Young People’s Mental Health and Wellbeing released its report on the effects of social media on mental health problems in young people. The report called for a tax of 0.5 per cent of social media companies’ profits to create a Social Media Health Alliance. At the time of writing, the UK government has not yet published its own proposals.

Regulatory agencies and competition law

Regulatory agencies

Which body or bodies regulate the communications and media sectors? Is the communications regulator separate from the broadcasting or antitrust regulator? Are there mechanisms to avoid conflicting jurisdiction? Is there a specific mechanism to ensure the consistent application of competition and sectoral regulation?

Ofcom and the CMA have been the bodies responsible for the regulation of the media and communications sectors in the UK since 1 April 2014.

Ofcom

Aside from its regulatory functions, Ofcom also has competition law enforcement powers, which it holds concurrently with the CMA. These concurrently held powers allow the CMA and sector-specific regulators in their respective areas to enforce the competition law prohibitions contained in the Competition Act 1998 (CA 1998) and articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU). In Ofcom’s case, these concurrency powers operate in ‘activities concerned with communications matters’.

The Act sets out Ofcom’s principal duty of furthering citizen and consumer interests by regulating communications, protecting consumers from harm and by promoting competition. The Secretary of State retains some powers in certain circumstances - for instance, where a merger may raise public interest questions relating to plurality of the media or national defence, or if the Secretary of State considers it is necessary to remove any concurrency functions.

Ofcom’s competition law powers cover the prohibitions against anticompetitive agreements and abuse of a dominant position. These powers are derived from the CA 1998 and the corresponding provisions in the TFEU. Ofcom also has investigative powers over markets, with the ability to make references to the CMA for an in-depth market investigation under the EA.

One of Ofcom’s competition law functions is to ‘further the interests of consumers in relevant markets, where appropriate by promoting competition’. Both the Enterprise and Regulatory Reform Act 2013 (ERRA 2013) and the Government’s 2015 Strategic Steer encourage all the concurrent regulatory authorities to coordinate in the exercise of their general competition powers, rather than their purely sector-specific regulatory powers. To facilitate this, the ERRA 2013 encourages information-sharing between Ofcom, the CMA and the other regulatory bodies. The UK Competition Network and UK Regulator’s Network provide the fora within which this improved coordination can take place such that cases may more effectively be resolved.

CMA

The CMA is the overarching UK competition regulatory body, coordinating competition policy and encouraging consistent enforcement between itself and the sector-specific regulators. The CMA was established by the ERRA 2013, which put together the Office of Fair Trading and the Competition Commission. ERRA 2013 grants the CMA stronger powers to coordinate competition cases with its main function being the promotion of ‘competition, both within and outside the United Kingdom, for the benefit of consumers’. The CMA’s powers include the ability to act on a case after a consultation with the sectoral regulators if the CMA believes that the case would be better tackled centrally and the ability to withdraw a competition case from a sectoral regulator and progress the case itself.

Details of the relationship between Ofcom and the CMA with regard to competition law can be found in the ‘Memorandum of understanding between the [CMA] and [Ofcom] - concurrent competition powers’ (published 2 February 2016). The memorandum sets out how the concurrency regulations are to be applied to the Ofcom-CMA relationship. Both will endeavour to reach an agreement as to which body will exercise its concurrent competition powers in any given case, which will include taking into consideration the relative expertise and circumstances of the bodies. On an occasion where a decision is not adequately reached within two months, the CMA ‘must notify [Ofcom] that it intends to determine which [of the bodies] is to exercise’ their concurrent powers. The concurrency regulations expressly prevent the possibility of ‘double jeopardy’ (where two regulatory bodies review the same case simultaneously) and also provide for rules regarding case transfers between concurrent regulatory bodies. According to the CMA’s 2018 ‘Annual report on concurrency’ (most recently published on 30 April 2018), there has been smooth cooperation between the two bodies, with regular discussions on best practices for procedural issues, frequent secondment opportunities between staff members, and significant cooperation in complex cases.

CMA Panel

If it is reasonably believed that certain characteristics or conduct within a communications market may be harmful to competition, either Ofcom or the CMA can bring a ‘cross-market reference’ to the attention of an impartial CMA Panel - consisting of members not involved with the initial investigations. This Panel may then investigate (potentially through a Phase II enquiry under the EA) and can decide whether it should take action to mitigate, prevent or remedy any adverse competition effect or negative impact on consumers - including higher prices, lower quality, reduced variety of goods or services and stifled innovation. Alternatively, it may recommend another body take remedial action or can instead indicate what type of remedial action needs to take place to rectify any issues that are uncovered.

Appeal procedure

How can decisions of the regulators be challenged and on what bases?

The Act and the Digital Economy Act 2017 outline the appeal mechanisms for Ofcom and CMA decisions in relation to ECNs, ECSs and AFs. Additionally, the Act offers appeal mechanisms to those wishing to appeal decisions relating to television and radio broadcasting.

ECN, ECS and AF appeal regime

Certain Ofcom decisions may be appealed to the Competition Appeal Tribunal (CAT) on judicial review grounds, namely: illegality, irrationality and unfairness. Decisions taken by the Secretary of State can also be appealed, including decisions concerning networks and spectrum functions, any restrictions or conditions set by regulators on electronic communications, a direction of Ofcom regarding its powers to suspend or restrict electronic communications, or a specific direction under the Secretary of State’s powers under the WTA 2006. Under the CAT Rules (2015), where an appeal is made with regard to price control matters, the CAT must refer the case to the CMA. The CMA will then deliberate and decide on an outcome in accordance with the Act.

Schedule 8 of the Act lists certain types of decisions by the CMA, Ofcom and Secretary of State that are not appealable, except by way of judicial review to the Administrative Court. These include, inter alia, the instigation of any criminal or civil proceedings, decisions relating to administrative charges orders, the publication of the UK Plan for Frequency Authorisation, recovery of sums payable to Ofcom, giving effect to regulations and imposing penalties.

Prior to the passage of the Digital Economy Act 2017, the appeal process for appealing Ofcom’s decisions was on the merits. It was cumbersome, permitting considerable new evidence and new parties to an appeal. Ofcom potentially had no knowledge of these additional factors at the consultation phase and these could be introduced mid-process. The Digital Economy Act 2017 makes substantial alterations to the way an appeal is brought under the Act. The new regime attempts to streamline the process of gathering evidence, including for the cross-examination of witnesses and experts, and the general treatment of that evidence. The CAT must apply the same principles as would be applied by a court on an application for judicial review. The CAT may dismiss the appeal, or quash the whole or part of the decision to which the appeal relates, remitting the matter back to the decision-maker with a direction to reconsider and make a new decision.

The Digital Economy Act 2017 (Commencement No. 1) Regulations 2017 (SI 2017/675) state that the new standard of review will apply to all new appeals from 31 July 2017. The judgment of the first case to benefit from this new standard of review (Viasat v Ofcom [2018] CAT 18) was published in December 2018.

Television and radio broadcasting appeal regime

Owing to the changes enacted by the Digital Economy Act 2017, the appeals process for television and radio broadcasting-related decisions is similar to the ECN, ECS and AF appeal regime. Ofcom must have first complied with its powers under the Broadcasting Act 1990 (BA 1990) and have considered whether there is a more appropriate way of proceeding in relation to some or all of the matters in question. A party affected by an Ofcom decision may appeal to the CAT only that part of the decision relating to Ofcom’s competition powers under the BA 1990. If a party wishes to appeal any other type of Ofcom decisions, this must be done in accordance with standard judicial review procedures.

Competition law developments

Describe the main competition law trends and key merger and antitrust decisions in the communications and media sectors in your jurisdiction over the past year.

Mergers

Furman report

On 13 March 2019, the Government’s Digital Competition Expert Panel, led by former chief economic adviser to president Barack Obama, Jason Furman, published a report setting out a number of recommendations to address competition issues across the digital economy. With respect to merger control, the panel has encouraged the CMA to intervene more frequently and with greater force in merger scenarios where threats to consumer welfare and innovation are at stake. It also recommends that firms holding a ‘strategic market status’ in the digital sector should be placed under an obligation to report all proposed acquisitions.

Experian / ClearScore merger prohibition

Following a Phase 2 investigation, on 28 November 2018 the CMA released its provisional findings in the merger between the UK’s two largest free credit rating agencies. Experian agreed to purchase the three-year-old fintech group, ClearScore, for £275 million in March 2018. However, despite ClearScore’s start-up status, the regulator identified that the transaction could result in a substantial lessening of competition and that the only effective remedy is to prohibit the merger. On 27 February 2019, Experian and ClearScore abandoned the transaction.

PayPal / iZettle

On 26 November 2018, the CMA found a number of potential competition concerns with Paypal’s acquisition of iZettle, a Swedish payments start-up that was set to be the biggest FinTech company in Europe to list. The regulator determined that the £2.2 billion transaction between the UK’s two largest suppliers of mobile point of sale devices could lead to a decline in innovation, higher prices or a reduction in the range of services for customers (namely small and medium-sized businesses).

Under the Enterprise Act 2002, the regulator may decide to accept undertakings in lieu of a reference to a Phase 2 investigation. However, as PayPal did not offer proposals to address the CMA’s concerns, the merger has been be referred for a Phase 2 investigation by an independent group of CMA panel members. The CMA published its issues statement on 15 January 2019, with the deadline for the final decision being 21 May 2019.

Nielsen / Ebiquity merger inquiry

On 22 November 2018, the CMA published its final report on the acquisition by Nielsen Media Research Limited of the advertising intelligence division of Ebquity plc. The CMA found that, although both Nielsen and Ebiquity sell advertising intelligence products to UK and international customers, the design of the products, how they are used and the fact that very few customers switch between the companies meant that they do not closely compete. This finding was supported by the fact that the companies have not invested significant amounts of money or resources in competing for each other’s customers and, according to internal documents, are unlikely to do so in the future.

Trinity Mirror / Northern & Shell Media Group

On 20 June 2018, the CMA cleared the acquisition by Trinity Mirror plc (owner of the Daily Mirror) of certain assets of Northern & Shell Media Group (including the Daily Express), which completed in February 2018. The CMA began the merger inquiry on 10 April 2018, notifying the Secretary of State of the potential public interest considerations, who subsequently issued an intervention notice on media plurality and free expression of opinion public interest grounds.

The CMA held that the newspapers published by the two parties target different demographic groups and differ in content and tone. In relation to advertising and online presence, the CMA found that the parties were not particularly close competitors (in that they did not compete more closely with each other than with other tabloids) and that they faced significant competitive constraints from other national print newspapers and other forms of newspaper media.

Sky / Fox / Comcast

On 5 June 2018, and following receipt of the CMA’s final report on the proposed acquisition by 21st Century Fox of the shares of Sky plc that it does not already own, the Secretary of State for Digital, Culture, Media and Sport, Matt Hancock, accepted the CMA’s recommendation that the anticipated acquisition was not in the public interest because of media plurality concerns, and accepted the CMA’s recommendation that the most effective and proportionate remedy was for Sky News to be divested to a suitable third party.

Mr Hancock also confirmed that, having taken into consideration the need for a sufficient plurality of people with control of media enterprises, the need for a wide range of high-quality broadcasting, and the need for a genuine commitment to broadcasting standards, and concluding that it did not meet the threshold for intervention, the government would not intervene in Comcast’s competing bid for the acquisition of Sky.

Antitrust

Furman report

The panel has called for the establishment of a Digital Markets Unit, an independent body tasked with designing and implementing pro-competition rules. Other recommendations outlined in the report include policies of data openness and ‘aggregator services’ that could allow users to switch between search engines and social media sites by transferring their data (such as search histories or friends lists). Where appropriate, the revised policy regime should be supported by legislative changes.

The panel calls on the government to engage with regulators internationally to coordinate and develop a consistent approach to the regulation of international digital markets.

Finally, the report addresses the potential anticompetitive and consumer welfare concerns raised by the development of machine learning algorithms and artificial intelligence, particularly through their use in the development of dynamic pricing models and the digital advertising market. The panel have recommended that these markets should be subject to ongoing monitoring to ensure that they do not create detriment to consumers or lead to anticompetitive activity.

ComparetheMarket home insurance

On 2 November 2018, the CMA issued to ComparetheMarket a ‘statement of objections’ in the context of its investigation into the company conducted under the Competition Act 1998, setting out its provisional view that clauses in many of the company’s contracts with home insurers break competition law and could lead to higher premiums.

The CMA found that these ‘most favoured nation’ clauses prevent rival comparison sites and other channels from trying to win home insurance customers by offering cheaper prices than ComparetheMarket. It also means home insurance companies are more likely to pay higher commission rates to comparison sites with the extra costs potentially being passed on to customers.

The company will now have an opportunity to respond in detail and the CMA will consider the response and any further evidence before reaching a final decision.

This investigation continues the CMA’s work following a market study into digital comparison tools. The study, which concluded in September 2017, showed that many people visit more than one comparison site as they shop around for the best deals. It also laid out clear guidelines for price comparison sites on how to use people’s personal data and how to display important information such as price and product description.

Pricing algorithms

On 8 October 2018, the CMA published a study into pricing algorithms in the digital markets. The CMA’s study identifies various ways in which pricing algorithms could be used to support anticompetitive practices, in particular:

  • the enforcement of collusion within cartels: cartelists could use algorithms to automatically detect competitor pricing changes, identify instances in which their fellow cartel members deviate from an agreed pricing model, and ‘punish’ them accordingly; and
  • personalised pricing (use of data relating to an individual consumer’s behaviour to set prices for that consumer): while this can be used to ease market entry for new firms and increase competition (for example, by offering targeted discounts), it can also cause obvious consumer harm.

The study is another example of the CMA’s efforts to increase its expertise in the digital sector.

Consumer protection

Social media influencers

On 16 August 2018, the CMA announced that it has launched an investigation under its consumer protection powers into concerns that social media stars are not properly declaring when they have been paid, or otherwise rewarded, to endorse goods or services. The CMA claims that if such social media ‘influencers’ do not label their posts properly, fans or followers may be led to believe that an endorsement represents the star’s own view, rather than a paid-for promotion. They are then more likely to place trust in that product, as they think it has been recommended by someone they admire. They might not do so, however, if it was made clear that the brands featured have paid, or in some other way rewarded, the celebrity in return for endorsement.

The CMA investigation is considering the extent to which influencers are clearly and accurately identifying any commercial relationships, and whether people are being misled. If the CMA finds practices that break consumer protection law, it can take enforcement action.

On 23 January 2019, the CMA reported that it had secured formal commitments from 16 celebrities to ensure they will now say clearly if they have been paid or received any gifts or loans of products which they endorse, including singers Ellie Goulding and Rita Ora, models Alexa Chung and Rosie Huntington-Whiteley, former Coronation Street and Our Girl actress Michelle Keegan, and TV reality stars Millie Mackintosh and Megan McKenna. Warning letters have also been sent to a number of other celebrities, urging them to review their practices where some concerns have been identified.

Further investigation work will look at the role and responsibilities of social media platforms more broadly.