The new spectrum trading regime in Ireland has the potential to enable valuable spectrum to be used more efficiently and to enable operators to get their hands on spectrum without having to wait until the next spectrum auction or release of spectrum. Efficient use of spectrum should also help Ireland meet its broadband targets set by the European Digital Agenda 2020. However, given the amounts paid by existing operators in the last spectrum auction for spectrum in the 800 MHz, 900 MHz and 1800 MHz bands and spectrum needed for 4G services, it is uncertain whether any operators will have spare capacity to be sold-off.
The Wireless Telegraphy (Transfer of Spectrum Rights of Use) Regulations 2014) (the Transfer Regulations) were signed into law on 29 January 2014. A few days later on 31 January, ComReg published its Spectrum Trading framework and guidance on the new trading regime (the Framework). The Transfer Regulations and Framework reflect the European Parliament’s decision establishing a multiannual Radio Spectrum Policy Programme (RSPP). This decision set out policy objectives for spectrum planning and the harmonisation of spectrum use across the EU. Importantly, the decision mandated the trading of spectrum in the RSPP bands.
The Framework outlines the notification procedures for undertakings intending to transfer rights of use to spectrum to ComReg. It also contains guidance on how ComReg will determine whether or not a proposed transfer should be permitted. The substantive test applied by ComReg is whether the proposed transfer would (in ComReg’s opinion) distort competition. Those familiar with the Irish merger control regime will note similarities between the distortion of competition test to be applied by ComReg and proposed two-phase review process, with the substantial lessening of competition test (SLC) and two phase merger review process applied by the Irish Competition Authority.
Some good news for operators however - the notification regime will not apply to transfers which form part of a wider transaction ie, a merger which is notifiable to the Competition Authority or to the European Commission. In such circumstances the Competition Authority or the European Commission will have responsibility for analysing the transfer from a competition perspective (as part of their review of the overall transaction) and a separate competition assessment by ComReg is not required. In these circumstances, all that is required is for the parties to inform ComReg of the transfer at the same time as notifying the merger to the Competition Authority or the European Commission.
ComReg has published a specific Notification Form. The notification fee to accompany the Form is €5,000 (€3,000 less than the current €8,000 fee for non-media related mergers).
A table summary of the timelines for the two-phase review process is set out at the end of this article.
Phase I review
ComReg will initially conduct a ‘Phase I’ investigation of the transfer within 35 working days of commencing it assessment (referred to as the Commencement Date). This is longer than the period allowed for Phase 1 review of mergers by the Irish Competition Authority, which is currently one month flat, but will be extended to 30-45 working days under the Competition and Consumer Protection Bill (published on 31 March) (theBill). A link to a recent Matheson update on the Bill is available here.
Again similar to Irish merger control, third parties can make submissions in respect of the proposed transfer. ComReg may also request further information from the notifying parties and from other sources to aid its assessment.
Where competition concerns arise all is not lost – as with merger control cases, there is provision for ComReg to discuss with the notifying parties measures which would ‘ameliorate’ any effects of the notified transfer on competition ie, remedies.
Having considered the information provided and submissions received, if ComReg is of the opinion that the transfer will not distort competition, it will determine that the transfer may be put into effect (with or without conditions). As mentioned, a Phase I decision must be made within 35 working days of the Commencement Date. ComReg will publish a notice of its determination on its website.
Phase II review
If at the end of Phase I however ComReg is unable to form a view that the transfer will not result in a distortion of competition (or if any remedies offered are not sufficient), ComReg will carry out a full Phase II investigation. Within five working days of determining to carry out a Phase II investigation, ComReg will publish a provisional time period for the Phase II review – where practicable this should not exceed 105 working days.
The notifying parties (and third parties) are entitled to make submissions within 15 working days from the date of the publication of the notice to conduct a Phase II investigation (referred to as the determination). ComReg then has 40 working days from the date of the determination to make its decision (this is much shorter than the Competition Authority’s current Phase II review period which is an additional three months, but which will soon be extended under the Bill to between 120-135 working days).
Once ComReg has made its assessment, it will furnish a copy to the parties. There is then another opportunity for the parties to reply. Within 15 working days from furnishing the assessment, ComReg may enter into discussions with the notifying parties regarding possible ‘remedies’ to ameliorate the effects of the notified transfer on competition. Once the assessment is delivered to the parties, they have 15 working days to respond.
ComReg has identified a number of factors which it may take into account in reaching any decision. These include the likely concentration of spectrum holdings, the effect on wholesale and retail market shares, and incentives to increase prices post-transfer owing to unilateral effects. Other factors that will be considered include: incentives to coordinate; barriers to entry; changes in potential service quality (eg speeds) post-transfer that could be replicated by competitors, absent increased costs to competitors; and efficiencies arising from the transfer.
At the end of its Phase II investigation, ComReg shall determine either: (a) the transfer may be put into effect; (b) the transfer may not be put into effect; or (c) the transfer may be put into effect subject to conditions (ie, remedies).
When a right of use is transferred, it will remain in effect only for the remainder of the term of the transferor’s licence. The Transfer Regulations do not amend an existing licence condition, or enable a licensee to avoid a licence condition – unless ComReg’s consent is obtained. If ComReg is reviewing the amendment of a licence condition, the time periods mentioned above can be suspended until it has made a decision on this.