On 21 March 2013, following a request for a preliminary ruling from Belgium, the Court of Justice of the European Union (“ECJ”) issued a judgment on the rules regarding the setting of spectrum licence fees by national regulatory authorities (NRAs) under Directive 2002/20/EC (the “Directive”). The ECJ in its judgment affirmed the broad discretion enjoyed by NRAs in determining the form and amount of fees once they comply with certain general principles set out in the Directive.
At the outset, in finding that the renewal of previously-allocated rights of use involved the granting of new rights for a new period, the ECJ held that the procedure set out in Article 13 of the Directive for granting rights of use must be applied in the same way to the renewal of those rights.
Structure and purpose of fees
In considering the structure of licence fees, the ECJ noted that Article 13 does not provide expressly for either the specific form that a fee must have or how frequently it must be charged but that recital 32 does state that fees may be charged as a lump sum or in periodic payments. Furthermore, the ECJ noted that the Directive does not circumscribe the purpose for which the fees must be collected.
Level of fees
The ECJ also observed that the Directive does not expressly provide a specific method for determining the amount of such a fee. However, spectrum licences enable a licence holder to make significant economic gains and grants that holder advantages over other operators seeking to exploit that resource, which justifies imposing a charge which reflects, among other things, the value of the use of that scarce resource, i.e. the “foreseeable profits” from that resource. In calculating the appropriate value, account should be taken of the economic and technical situation of the market concerned.
It follows that the fixing of a licence fee by reference either to the amount of a former one-off licence fee calculated on the basis of the number of frequencies and months to which the rights of use relate, or to the amounts raised through auction, may be an appropriate method for determining the value of a licence.
Despite this broad discretion enjoyed by NRAs in determining the form and amount of fees, they must still satisfy the following general requirements:
- the fees must be objectively justified, transparent, non-discriminatory and proportionate in relation to their intended purpose and take into account the objectives, including the promotion of competition and efficient use of radio frequencies, as laid down in Article 8 of the Framework Directive; and
- the fees must pursue the purpose of ensuring optimal use of such resources and not hinder the development of innovative services and competition on the market.
This judgment is interesting in light of the recent high profile and lucrative 4G spectrum auctions held in Ireland and the UK. For example, spectrum fees for Irish 4G licences, which were determined by auction, are split between a one-off upfront payment and annual spectrum fees.