Packet Media Ltd v Telefonica UK Ltd

On an application for an interim injunction, the court applies the American Cyanamid sequence: a serious issue to be tried, adequacy of damages, and, if necessary, the balance of convenience. Regulation 7 of the Radio Equipment and Telecommunications Terminal Equipment Regulations 2000 protects the connection of compliant equipment at an interface. It does not confer a right of access to the mobile network or prevent suspension of network services because of the use made of connected equipment. For competition-law purposes, the relevant market must reflect the service allegedly withheld and the alleged abuse. Where an arguable case of dominance and abuse is shown, disputed issues of objective justification should ordinarily be resolved at trial. The least irremediably prejudicial course may be to preserve the status quo, subject to safeguards and a fortified cross-undertaking.

Packet Media Ltd sought an interim injunction restraining Telefonica UK Ltd, trading as O2, from suspending or disconnecting SIM cards used in GSM Gateways. PML alleged breach of regulation 7 of the Radio Equipment and Telecommunications Terminal Equipment Regulations 2000 and abuse of a dominant position contrary to section 18 of the Competition Act 1998.

O2 disputed the characterisation of the relevant services, contending that PML sought access to call and SMS origination services rather than termination services. It also relied on the absence of O2 consent, alleged network harm and the availability of a more expensive cabled alternative. The central issues were whether there was a serious issue to be tried, whether damages were adequate, and where the balance of convenience lay.

1. Interim injunction granted. O2 was restrained from discontinuing service to the disputed SIM cards. O2 was entitled to apply to discharge the injunction on evidence addressing alleged abuse of dominance in the call and SMS origination markets. PML’s cross-undertaking in damages was to be fortified by a personal undertaking from its managing director.
2. The court applied the sequence in American Cyanamid v Ethicon [1975] AC 396. There was a serious issue to be tried on re-seller consent and on whether the use of the Gateways caused network congestion. The court did not resolve those disputed factual matters summarily.
3. Regulation 7 of the Radio Equipment and Telecommunications Terminal Equipment Regulations 2000 confers a right to connect compliant telecommunications equipment at an interface, and a right not to have a connection lawfully made discontinued. It does not confer a right of access to the GSM network itself. The proposed suspension of services to SIM cards, considered in the context of the Regulations and the RTTE Directive, did not fall within regulation 7(1)(b). The RTTE claim therefore disclosed no serious issue to be tried.
4. The relevant competition-law market was the wholesale provision of access to call and SMS text origination on mobile networks serving customers in the United Kingdom. The pleaded termination markets were not the relevant markets for the alleged refusal of access and origination services. The originally pleaded case therefore disclosed no arguable dominance. However, the proposed amended pleading raised a seriously arguable case in the origination market.
5. Once an arguable case of dominance was raised, the issues of abuse and objective justification were triable issues of fact and law. The evidence did not establish at the interim stage that network protection objectively justified the disconnection. The materially more expensive alternative service also raised a serious issue. The court treated the question whether tariff restructuring, congestion or a duty to invest could justify the conduct as matters for trial.
6. Applying the least-irremediable-prejudice principle explained in National Commercial Bank Jamaica Ltd v Olint Corp Ltd [2009] 1 WLR 1405, damages were inadequate for PML because immediate disconnection could cause substantial loss of income, customers and employees. O2’s potential loss was financial and quantifiable. Preserving the status quo was therefore the course likely to cause the least irremediable prejudice.
7. O2 was awarded 50% of the costs of the application on the standard basis. The balance was costs in the case.