The Court of Appeal today dismissed ICO’s appeal against a judgment of the Administrative Court which refused an application for judicial review by ICO. The application was to quash a decision by Ofcom to write to the ITU to request the cancellation of the ICO assignments currently recorded in the ITU master register. This decision confirms Ofcom’s regulatory discretion as a specialist regulator and paves the way for Ofcom to send such cancellation request to the ITU.
Background to the Case
On 30 July 2010, the Administrative Court refused an application by ICO Satellite Limited (ICO) for judicial review of a decision by the Office of Communications (Ofcom) to request the International Telecommunication Union (ITU) to cancel ICO’s filing in the ITU’s Master International Frequency Register (MIFR) for the ICO-P mobile satellite communications system.
ICO appealed this decision on three grounds:
- in making its decision Ofcom failed to take into account relevant considerations – the impact of the decision on (or lack of adverse impact to) third parties and the impact on (severity of the harm to) ICO;
- Ofcom had regard to irrelevant considerations – an erroneous belief that the ITU regime required the cancellation of the assignments; and
- that the decision was not proportionate in the circumstances (Ofcom acted disproportionately).
Ofcom delayed in sending any cancellation request to the ITU pending the appeal.
ICO v Ofcom – the Case
This case highlights the role of Ofcom, as the national administration in the UK for interfacing with the ITU, in monitoring the use of spectrum assignments by satellite operators. Ofcom’s Procedures for the Management of Satellite Filings (Guidance)1 set out details of reports on the status of the implementation of an assignment that operators are required to provide to Ofcom, evidencing any variations from the operator’s business plan, and providing details of the spectrum coordination progress and status. If Ofcom believe that insufficient progress is being made against milestone commitments, based on the information supplied by the operator, they have the power to take action to cancel a filing at the ITU.
At the heart of the dispute between ICO and Ofcom were the following facts.
In January 2004, Ofcom notified the ITU that the ICO-P satellite network had been “brought into use” in accordance with the ITU regulatory regime, an event which resulted in the ICO-P filing being recorded in the MIFR. In the business plan submitted to Ofcom, ICO had indicated that the ICO-P satellite network would comprise a network of 12 satellites, and that all the satellites would be launched by 2005. ICO has launched only one of the ICO-P satellites.
Three days after Ofcom’s notification, ICO terminated its satellite construction and launch contracts with Boeing due to a dispute as to contractual performance. The dispute has since resulted in a judgment for ICO in the first instance before a United States court, but Boeing’s appeal remains pending. At the time, Ofcom were not informed by ICO of the matter, and had instead learnt about the development from media reports.
Correspondence regarding the change in ICO’s circumstances between the parties followed, culminating in a letter from Ofcom to ICO in December 2006 (Ofcom Letter), requesting that ICO provides evidence to Ofcom by June 2007 that ICO has:
- contracts in place to complete and launch the remainder of the ICO-P satellite network; and
- secured the necessary funding to finance the bringing of the ICO-P satellite network into commercial operation.
In April 2008, on the basis that ICO had not provided evidence that sufficient ICO-P satellites were ready to launch, that the necessary contracts were in place to launch the additional satellites or that ICO had funding in place to complete the deployment of its ICO-P satellite network, Ofcom notified ICO of its provisional decision to request the ITU to cancel the ICO-P filing in the MIFR, subject to further representations made by ICO.
In February 2009, Ofcom notified ICO that it had made a decision to write to the ITU to request that the ICO-P filing be cancelled (Ofcom Decision). Central to the Ofcom Decision was a finding that ICO had not shown evidence of the two matters as requested in the Ofcom Letter and that there was no realistic prospect of the assignment being used in any real sense.
The court dismissed ICO’s appeal.
The court concluded the following in relation to each ground of appeal.
- In making its decision Ofcom failed to take into account relevant considerations
Ofcom provided ICO with every opportunity to make the assignments recorded in the MIFR fully operational. ICO’s delay however has been very substantial and has taken the project well beyond the timescales envisaged in the Guidance. ICO has also not sought to minimise the extent of this default.
Ofcom were not required to treat either: (a) the absence of third party interest in the assignment; or (b) financial loss to ICO, as factors which they had to take into account.
“Ofcom cannot… be criticised for basing a decision on the clear and major default of the appellants in the context of an international regime requiring cooperation between states in the rational, efficient and economical use of limited natural resources (article 44(2) of ITU Constitution).”
“Ofcom has a legitimate interest in complying with the letter and spirit of the United Kingdom’s international obligations and thereby promoting that compliance with timetables which may, in other cases, work in favour of United Kingdom consumers and United Kingdom providers of these services.”
The court held that the reasons that Ofcom gave for the cancellation, the absence of the prospect of fulfilment and the absence of evidence of finance, were “lawful and sufficient reasons”; “Necessary funding was not in place.”
Ofcom, as a specialist regulator, are afforded some discretion as to what factors they should take into account. The court referred to R(Corner House Research) v Director of the Serious Fraud Office:
“A discretionary decision is not in any event vitiated by a failure to take into account a consideration which the decision-maker is not obliged by the law or the facts to take into account, even if he may properly do so.”
- Ofcom had regard to irrelevant considerations – that there was an expectation that Ofcom would cancel the assignment
The court held that the decision cannot be challenged on this ground:
“The international regime, reflected in the national regime, does contemplate that there may be cancellations following non-compliance”.
- The decision was not proportionate
The court held that Ofcom’s decision was not disproportionate, and that the need for flexibility was accepted by Ofcom. It was noted that in discussions with Ofcom prior to the Ofcom Decision, ICO did not suggest that possible modifications to the assignment could be made. It was evident that there was no realistic prospect of the ICO assignment being used in any real sense and, therefore, Ofcom had not acted disproportionately.
Conclusion and Implications
It was concluded by the court that the Ofcom Decision was validly made in the context of its duties under the Communications Act 2003 and the Guidance given under it. These provisions were enacted pursuant to international treaty obligations of the UK.
Ofcom have wide discretion as a specialised regulatory institution. This discretion is however, limited by administrative law requirements and Ofcom’s responsibilities at a UK and international (ITU) level. These responsibilities, in relation to satellite filings, are reflected in the Guidance.
For UK satellite operators, which submit filings through Ofcom to the ITU, the ICO v Ofcom judgment would tend to confirm the following.
- Ofcom’s discretion to include due diligence requirements in the Guidance that comply with, yet go beyond the requirements under the ITU regulatory regime. In particular, under paragraph 5.3 of the Guidance, Ofcom requires detailed commercial information from applicants in order to be satisfied that the proposed satellite network has adequate financial backing.2
- Ofcom will monitor the progress of an operator’s “bringing into use” of its spectrum assignments by reference to the business plan (including systems specifications and milestones) that the operator files with Ofcom. Accordingly, care and caution should be taken by a satellite operator in preparing its business plan in support its filing at the ITU.
- The decision highlights the importance of the need for satellite operators to engage appropriately and as early as possible with Ofcom, especially in circumstances where the operator’s ability to deploy its satellite system in accordance with the characteristics notified by the operator has changed beyond its control.
- If there is no realistic prospect of an assignment being used, or brought into use, in any real sense, Ofcom have the power to cancel the assignment, in accordance with the Guidance.