This Communications & Media e-bulletin contains summaries of recent developments in law and regulation in the EU and the UK:
- Is the Future Really Bright for Telecoms Mergers?
- Googling compensation: Google granted leave to appeal Vidal-Hall decision
- Ringing in the Changes? EU consultation on telecoms reform
- L-Band trade: Qualcomm applies to transfer its L-Band spectrum
- Sharing the Airwaves: Ofcom publishes spectrum sharing plans
- RIP Licence Fee? The debate over BBC Charter renewal begins
- AVMS answers asap: European Commission reviews the AVMS Directive
- Digital Decisions: Update on Ofcom's Strategic Review of Digital Communications
1. Is the Future Really Bright for Telecoms Mergers?
Consolidation in the European telecoms market is continuing apace. In recent months the European Commission has cleared Orange's acquisition of Jazztel in Spain (subject to conditions). However, in the UK, BT's acquisition of EE has been fast-tracked to a Phase 2 competition investigation and, in Denmark, TeliaSonera and Telenor have abandoned their proposed Danish merger, unable to alleviate the European Commission's competition concerns.
The acquisition of Jazztel by Orange follows a spate of telecoms consolidation in Europe, with the European Commission having cleared the following major telecoms acquisitions since December 2012:
- Hutchison 3G Austria's acquisition of Orange Austria;
- Hutchison 3G Ireland's acquisition of O2 Ireland; and
- Telefónica Germany's acquisition of E-Plus.
However, with further consolidation in the pipeline including, in the UK, BT's acquisition of EE (see further below) and Hutchison Whampoa's acquisition of O2 (recently notified to the European Commission), there have been comments to suggest that future consolidation may not be approved so easily. In a recent Financial Times interview, the relatively new European Commissioner in charge of competition policy, Margrethe Vestager stressed the need to avoid price increases and commented that competition rather than consolidation would lead to investment in infrastructure. This is a view she repeated at the recent New Frontiers of Antitrust conference in Paris in June 2015, and has been evident again in the recent abandonment of the proposed merger between TeliaSonera and Telenor in Denmark.
Orange acquisition of Jazztel
In May 2015, the European Commission approved the proposed acquisition of Jazztel plc, a telecommunications company registered in the UK but mainly active in Spain, by rival Orange SA of France. The approval is conditional upon the full implementation by Orange of a number of commitments that the Commission believes will ensure that a fourth nationwide operator can enter the Spanish market and be able to compete effectively in markets involving fixed internet access services.
The Commission had concerns that the takeover, as initially notified, could have led to higher prices of fixed internet access services for Spanish consumers. The Commission considered, in particular, that:
- the merged entity would have had fewer incentives to compete aggressively against the remaining operators;
- the remaining major competitors - Telefónica and Vodafone – would have been unlikely to replace the competitive pressure formerly exercised by Orange and Jazztel because they would also have stood to benefit from the reduced price pressure; and
- new players would have faced significant difficulties in entering the relevant markets due to the high investments needed to enter the retail markets involving fixed internet access services.
To address the Commission's concerns, Orange submitted commitments based on two different technologies:
- on optical fibre: Orange has committed to divest an independent Fibre-To-The-Home ("FTTH") network covering 700 000 - 800 000 building units, which is similar to the size of Orange's current FTTH network in Spain.
- on copper: Orange has committed to grant the purchaser of the FTTH network wholesale access to Jazztel's national ADSL network for up to eight years. The pricing for this wholesale access to Jazztel's ADSL network is designed to allow the new player to compete as aggressively as Orange and Jazztel do today.
In addition, if the purchaser does not already benefit from access to a mobile telecommunications network (including 2G, 3G and 4G services), Orange will provide the purchaser with wholesale access on competitive terms and, in any case, on terms as favourable as those that Orange is currently granting to Jazztel.
BT acquisition of EE
In the UK, the Competition and Markets Authority ("CMA") has referred BT's anticipated acquisition of EE for an in-depth Phase 2 investigation, fast-tracking the reference procedure following a request from BT.
For a case to be fast-tracked, the CMA needed evidence to objectively justify a belief that the test for reference to Phase 2 is met. The CMA found that the transaction met the test for reference in that it gives rise to a realistic prospect of a substantial lessening of competition in relation to the supply of wholesale access and call origination services to mobile virtual network operators and fibre mobile backhaul services to mobile network operators in the UK.
The CMA also noted that significant concerns were raised in relation to other markets, including the retail mobile market in the UK. However, given that the test for a fast-track reference had been satisfied in relation to the two markets mentioned above, there was no need for the CMA to reach a conclusion at Phase 1 in relation to these other market issues.
TeliaSonera and Telenor
In the midst of this current spate of European telecoms mergers, TeliaSonera and Telenor announced on 11 September 2015 that they are abandoning plans to merge in Denmark. In a statement, the companies said that they had not been able to agree with the European Commission on acceptable conditions to go ahead with their plan to create a robust mobile operator. This was despite them having previously offered to the Commission commitments to divest certain infrastructure in order to attempt to allay potential concerns.
In the European Commission’s own press release on the decision, Commissioner Margrethe Vestager said that in this specific case the Commission was convinced that the significant competition concerns required an equally significant remedy. For the Commission, this meant the creation of a fourth mobile network operator and what the parties had offered was not sufficient to avoid harm to competition in Danish mobile markets.
The Danish case perhaps reflects a hardening of the approach being taken by European regulators, although Commissioner Vestager reiterated in the Commission's press release on the matter that each case will be considered on its own facts and merits.
To view a copy of the European Commission press release on the Jazztel acquisition, please click here.
To view a copy of the CMA decision, please click here.
To view a copy of the European Commission press release on the TeliaSonera/Telenor decision, please click here.
2. Googling compensation: Google granted leave to appeal Vidal-Hall decision
The Supreme Court has given leave for Google to appeal certain aspects of the Court of Appeal's decision earlier this year in relation to the use of personal data collected via the so-called "Safari workaround".
The original case related to Google's collection - via the Apple Safari browser - of personal data about consumers' internet usage.
In March this year, the Court of Appeal issued a landmark ruling in the case, allowing claims for financial compensation for distress caused by breaches of the Data Protection Act 1998 ("DPA") despite there being no pecuniary loss or other material damage. In doing so, the Court of Appeal held that section 13(2) of the DPA was incompatible with Article 23 of EU Data Protection Directive and should be disapplied on the grounds that it conflicts with the rights guaranteed by the EU Charter of Fundamental Rights.
This left many commentators to speculate if the decision would result in a large increase in litigation claiming compensation under the DPA, as claimants would no longer need to prove pecuniary loss in order to claim damages for distress.
However, the story is not yet over as the Supreme Court has now granted leave for Google to appeal the decision on the following grounds:
- whether the Court of Appeal was right to hold that section 13(2) of the DPA was incompatible with Article 23 of the Data Protection Directive; and
- whether the Court of Appeal was right to disapply section 13(2) of the DPA on the grounds that it conflicts with the rights guaranteed by Articles 7 and 8 of the EU Charter of Fundamental Rights.
To view a copy of the Court of Appeal's judgment from March this year, please click here.
3. Ringing in the Changes? EU consultation on telecoms reform
The European Commission has published a consultation reviewing the regulatory framework for electronic communications networks and services.
In May 2015, the European Commission published its Digital Single Market ("DSM") Strategy (for further details, please see our eBulletin, available here). The roadmap for completing the DSM included 16 actions, with a review of the telecoms regulatory framework being one of the key actions under the second pillar of the DSM.
The telecoms regulatory framework in the EU was last reviewed in 2009. However, since that time, there have been significant changes in the market. In particular, more complex competition as a result of the convergence of fixed and mobile networks, the increase in retail bundles and the emergence of new online players (so-called "OTTs") along the value chains. The Commission notes that OTT services are not currently subject to the same regulatory regime as traditional electronic communications services because the current scope of the EU regulatory framework is centred on the definition of electronic communications services, which requires inter alia "conveyance of signals".
In addition, the Commission questions whether or not the regulatory framework has sufficiently promoted the transition towards high-capacity next generation access networks fit to meet future needs.
The consultation focusses on the original instruments forming the regulatory framework, being the Framework Directive, the Authorisation Directive, the Access Directive, and the Universal Services Directive. The Privacy and Electronic Communications Directive is considered out of scope because of the on-going legislative process in relation to the proposed EU general data protection regulation (for further information, please see our eBulletin, available here).
The purpose of the consultation is twofold. First, it aims to gather input in order to assess the telecoms regulatory framework against the evaluation criteria set out in the EU's "Better Regulation Guidelines":
- Effectiveness (Have the objectives been met?)
- Efficiency (Were the costs involved reasonable?)
- Coherence (Does the policy complement other actions or are there contradictions?)
- Relevance (Is EU action still necessary?)
- EU added value (Can or could similar changes have been achieved at national/regional level, or did EU action provide clear added value?)
Second, the questionnaire is designed to seek views on issues that may need to be reviewed with a view to reforming the regulatory framework in light of market and technological developments, with the objective of achieving the ambitions laid out in the Digital Single Market Strategy.
The Commission invites responses by 7 December 2015.
To view a copy of the Consultation, please click here.
4. L-Band trade: Qualcomm applies to transfer its L-Band spectrum
Ofcom has confirmed that it has received applications from Qualcomm to transfer its L-Band spectrum to Vodafone and Three, as the spectrum could also be identified for mobile broadband at the WRC-15 this November.
Ofcom has issued a statement confirming that Qualcomm has applied to transfer the L-Band spectrum it is currently licensed to use at the 1452 – 1492 MHz frequencies. Qualcomm is applying to transfer to Vodafone the rights and obligations which relate to the 1452-1472 MHz frequencies and to Three the rights and obligations which relate to the 1472-1492 MHz frequencies.
In the UK, this spectrum may be used for mobile or fixed communication network supplemental downlink ("SDL"). SDL is a new mobile broadband technology which, using a mobile base station transmitter network, provides additional bandwidth to deliver improved capacity for consumer mobile broadband services.
Under the Wireless Telegraphy (Mobile Spectrum Trading) Regulations 2011, Ofcom must consent to any trading of mobile spectrum (including Qualcomm's licensed spectrum) and undertake a competition assessment to consider whether competition is likely to be distorted as a result of the transfer. Ofcom is therefore now considering comments from interested parties detailing competition concerns they might have about the proposed trade.
Details of the proposed trades are available here.
5. Sharing the Airwaves: Ofcom publishes spectrum sharing plans
Ofcom has published a consultation on its proposed new framework for assessing options for spectrum sharing.
Demand for spectrum in the UK is growing significantly and is expected to continue to do so, meaning that spectrum sharing will become increasingly important to serve that demand. By allowing different users to offer more wireless applications, spectrum sharing can bring benefits to citizens and consumers as well as contributing to optimal use of the spectrum.
Ofcom's consultation document outlines its intention to consider sharing options systematically when defining new spectrum authorisation, and when Ofcom seeks to identify spectrum to meet new demands. The proposed framework is intended to ensure that: (i) Ofcom considers the potential for sharing when it thinks about any new spectrum authorisations; and (ii) Ofcom builds in the right flexibility, opportunities and incentives in relation to spectrum use.
The proposed framework has three elements, being:
- identifying potential barriers to sharing, such as technological challenges;
- introducing a set of regulatory tools and market and technology enablers that could facilitate or enable further sharing; and
- setting out how Ofcom will consider sharing on a case by case basis, taking into account the characteristics of both incumbent use, where there is any, and proposed new use.
The consultation closes on 2 October 2015. Ofcom then plans to update the framework in the light of comments from stakeholders and may consult again on a more refined framework in the future. Ofcom expects to publish its follow-up document by the end of 2015.
To view a copy of the consultation, please click here.
6. RIP Licence Fee? The debate over BBC Charter renewal begins
The Government has set out a number of topics for debate as part of the process to review the BBC’s Royal Charter to make sure it remains a valued public broadcaster.
The BBC is governed by a Royal Charter, with the current Charter due to expire at the end of 2016. The Government’s consultation paper - a "Green Paper" - is the first stage of the process in setting a new Charter and sets out four broad issues for public discussion:
- BBC’s mission, purpose and values: The BBC currently has six public purposes that were set out at the last Charter Review in 2006. The consultation paper looks at whether these purposes are still relevant and, in the context of recent challenges the organisation has faced, if there should be more direction set about how the BBC works by defining its values in the next Charter.
- Scale and scope of the BBC’s services and operations: Twenty years ago the BBC had two television channels and five national radio stations. It is now the largest public service broadcaster in the world, with nine television channels, ten national radio stations, and a major online presence. The consultation paper looks at whether this particular range of services best serves licence fee payers and the impact it has on the commercial sector.
- The way in which the BBC is funded: The BBC is currently funded via the TV licence fee. The Charter Review will look at how to modernise the current system, including to take into account online television access.
- BBC’s governance and accountability: The BBC Trust – established by the current Charter - exists to represent licence fee payers and hold the BBC to account. There are three broad alternative options – (i) reform the Trust model; (ii) create a unitary board and a new standalone oversight body; or (iii) move external regulation wholesale to Ofcom. The Government is seeking views on these models and the wider issues of how the BBC’s transparency and accountability can be improved.
The consultation closes on 8 October 2015. The Government will then put forward proposals based on the consultation in Spring 2016.
To view a copy of the consultation, please click here.
7. AVMS answers asap: European Commission reviews the AVMS Directive
The European Commission is consulting on a number of issues to be considered in an evaluation and review of the Audiovisual Media Services Directive.
The Audiovisual Media Services Directive ("AVMS Directive") was adopted in 2007 and codified as Directive 2010/13/EU in 2010. It applies to television broadcasters and to providers of on-demand programmes that are similar to or compete with television content. In 2013, the European Commission adopted a Green Paper, "Preparing for a Fully Converged Audiovisual World: Growth, Creation and Values" asking for stakeholder views on the changing media landscape and its implications for the AVMS Directive.
The Commission has now undertaken a public consultation and identified several key issues on which the AVMS Directive is to be reviewed, including:
- Ensuring a level playing field: The AVMS Directive applies to television broadcasts and on-demand services. It does not apply to content on online video-sharing platforms. The consultation asks whether there are any issues arising out of the fact that some audiovisual services are not regulated by the AVMS Directive.
- Geographical Scope of AVMS Directive: The AVMS Directive only applies to operators established in the EU. Operators established outside the EU can still target EU audiences but do not fall within the scope of the AVMS Directive. The consultation asks about concerns in relation to this geographical issue.
- Strengthening the single market: Currently, audiovisual media companies can provide their services in the EU by complying only with the rules within the member state under whose jurisdiction they fall. The AVMS Directive lays down criteria to identify which member state has jurisdiction over a provider. The consultation asks whether these rules should still apply.
To view a copy of the consultation, please click here.
8. Digital Decisions: Update on Ofcom's Strategic Review of Digital Communications
Ofcom has published a discussion document on its Strategic Review of Digital Communications.
The document outlines the challenges facing the UK in ensuring that consumers and businesses receive high-quality digital communications services over the next decade.
The Strategic Review of Digital Communications, announced in March 2015, is examining competition, investment, innovation and the availability of all digital communications services. These include broadband, mobile, landline and bundled services.
Ofcom is now seeking views on its review, which is focusing on four main areas detailed in the discussion document:
- investment and innovation in the market, which can help make services widely available;
- competition, to deliver quality services and affordable prices;
- empowering consumers and businesses, particularly making sure they have the information and means to choose and switch between providers; and
- keeping regulation targeted at areas of concern, and deregulating where possible to allow markets to function well.
The closing date for responses to the discussion document is 8 October 2015.
To view a copy of the discussion document, please click here.