T-Mobile (UK) Ltd. & Ors, R (on the application of) v Competition Commission & Anor

Under the pre-implementation telecommunications regime, a national regulatory authority could control mobile call-termination charges even where the operator had not been designated as having significant market power. During the transitional period, the new European directives did not prohibit new regulation, provided that it did not seriously compromise the future regime.

A short-term licence modification could be lawful where it formed part of a proposed continuing regulatory process. Article 7(6) of the Framework Directive permitted proportionate and provisional price regulation without prior SMP designation where exceptional circumstances and an urgent need to act existed. The statutory concept of all reasonable demands was broad and evaluative. It did not require maximum economic efficiency or a Ramsey-pricing approach.

Three mobile network operators challenged recommendations of the Competition Commission concerning mobile call-termination charges and the Director-General of Telecommunications’ consequential licence modifications. They also challenged the proposed continuation of price regulation after the new European telecommunications regime took effect on 25 July 2003.

The applications raised issues concerning significant market power, the transitional operation of the Licensing, Interconnection, Framework and Access Directives, the legality and proportionality of a one-day price cap, the meaning of all reasonable demands under the Telecommunications Act 1984, and the rationality of the Commission’s economic assessment.

1. SMP and the existing regime. The Licensing Directive and Interconnection Directive did not confine tariff control to operators notified as having significant market power. Article 9(3) of the Interconnection Directive, read with paragraph 2 of the Annex to the Licensing Directive, empowered the Director to impose restrictions on termination charges in appropriate cases. The distinction between obligations concerning operators with SMP and wider regulatory powers did not create a prohibition on regulating operators without SMP. The applications based on the absence of SMP were dismissed.
2. Transitional period. The new regime, which came into force on 24 April 2002 but required implementation by 25 July 2003, did not prohibit new price regulation during the intervening period. Applying the principle in Inter-Environnement Wallonie ASBL v Région Wallonne [1997] ECR I/7411, regulation was permissible provided it did not seriously compromise the results prescribed by the new directives.
3. Exceptional circumstances and the one-day cap. Termination charges found to be 30–40 per cent above a fair charge constituted exceptional circumstances. The Commission was entitled to recommend a licence modification lasting a few months, although the Director ultimately imposed it for one day. That modification was lawful because it was made in the context of proposed continuation under the new regime and was not itself a freestanding one-day remedy.
4. Continuation Notice. Article 7(6) of the Framework Directive permitted a proportionate and provisional measure of price regulation without prior designation of the operator as having SMP. The excessive charges, the urgent need to protect competition and users, and the practical impossibility of completing the consultation process before implementation constituted exceptional circumstances.
5. Section 3 of the 1984 Act. Whether a demand was reasonable was an objective question, but the expression all reasonable demands was broad and not hard-edged. The Director retained discretion as to the best means of satisfying such demands. Economic efficiency was only one relevant consideration. Equity, fairness, consumer interests and competition could also be taken into account. The Commission’s cost-causation approach was therefore lawful.
6. Economic assessment and other challenges. The Commission’s treatment of the externality surcharge, network and non-network costs, welfare modelling, T-Mobile’s financing position, Orange’s 3G investment arguments and the expected pass-through of price reductions was reasoned and not irrational. The court would not substitute its own view on matters of evidence, fact or economic merits.
7. Disposition. All three applications were dismissed.

not stated in the judgment.