EE Ltd v Office of Communications (Rev 1)

A statutory direction requiring a regulator to set charges so that they reflect full market value may prescribe a specific outcome, leaving no discretion to dilute that outcome by applying other considerations. Where Parliament has approved such a direction, the regulator must implement it unless the direction itself is successfully challenged. A later challenge to the implementing decision cannot ordinarily operate as a collateral challenge to the earlier direction. On a merits appeal concerning expert regulatory methodology, the reviewing court must take the merits into account but accord appropriate restraint and a margin of appreciation. It should intervene only where the regulator’s judgment is shown to be wrong.

EE Ltd sought judicial review of Ofcom’s 2015 decision revising annual licence fees for 900 MHz and 1800 MHz radio spectrum. The decision implemented Article 6 of the Wireless Telegraphy Act 2006 (Directions to OFCOM) Order 2010, which required the fees to reflect the full market value of the frequencies and required particular regard to sums bid in the 4G auction.

EE argued that Ofcom had wrongly treated the direction as requiring fees to be set at market value without considering domestic and EU regulatory objectives. It also argued that Ofcom should have used cost modelling as a cross-check against auction benchmarking. The central issues were the proper interpretation and legal effect of the direction, and whether Ofcom’s methodological decision was unlawful.

1. Ground 1 dismissed. Article 6 of the Wireless Telegraphy Act 2006 (Directions to OFCOM) Order 2010 required Ofcom to set annual licence fees at a level representing its estimate of the full market value of the spectrum. The reference to fees reflecting market value addressed the absence of a true market and required Ofcom to estimate the market-clearing price in a well-functioning market. It did not permit Ofcom to dilute that outcome by taking other considerations into account ([84]-[88]).
2. The direction had been made under the broad power in section 5 of the Wireless Telegraphy Act 2006 and approved by both Houses of Parliament. That statutory scheme meant that, once the direction was made, Ofcom’s ordinary duties under the Communications Act 2003 and the Wireless Telegraphy Act 2006 were subject to its duty to comply with the direction. Section 3(5) of the 2006 Act did not displace that conclusion ([89]-[93]).
3. The EU-law challenge failed. Articles 8(1) of the Framework Directive and 13 of the Authorisation Directive imposed relevant obligations on Member States. In the statutory scheme used by the United Kingdom, the Secretary of State had determined the basis on which the fees were to be set and Ofcom was left to implement that policy. The obligations in Articles 8(2)-(5), although directed to NRAs, did not alter that conclusion in this case ([94]-[103]).
4. The challenge to the direction through the 2015 decision was impermissibly collateral. Any challenge to the direction itself should have been brought directly. Article 4 of the Framework Directive did not remove that obstacle, although Ofcom’s methodology remained open to challenge ([100]-[103]).
5. Ground 2 dismissed. The court applied the merits-review approach reflected in section 195(2) of the Communications Act 2003, while according Ofcom appropriate restraint and a margin of appreciation on matters involving expert regulatory judgment. Ofcom had carefully considered and consulted on cost modelling. Its conclusion that the accumulated auction evidence was a better indicator of market value, and that cost modelling offered insufficient additional benefit, could not be shown to be wrong ([109]-[113]).
6. The judicial review claim was dismissed ([114]).