EE Ltd v Office of Communications & Ors

A statutory direction requiring radio-spectrum licence fees to reflect full market value requires valuation by reference to market value or opportunity cost. It does not, without clear words, remove the regulator’s duty to take account of the wider objectives governing spectrum regulation.

A power to direct how a regulator carries out its statutory functions does not, by neutral language alone, transfer the function to the Secretary of State or relieve the regulator of duties expressly imposed on it. Delegated legislation should, where possible, be construed to avoid exceeding the parent Act and to achieve compliance with EU-law requirements.

EE challenged Ofcom’s 2015 decision to increase annual licence fees for the 900 MHz and 1800 MHz spectrum bands. Ofcom considered itself bound by article 6 of the Wireless Telegraphy Act 2006 (Directions to OFCOM) Order 2010 to set fees at full market value without considering the objectives in article 8 of the Framework Directive.

Cranston J dismissed EE’s judicial-review claim in the Administrative Court: [2016] EWHC 2134 (Admin). He held that the direction displaced Ofcom’s domestic and EU-law duties. The central issue on appeal was whether the direction required an unqualified market-value fee and, if so, whether it could lawfully displace Ofcom’s regulatory duties.

1. Appeal allowed. The court unanimously held that Ofcom had misconstrued article 6 of the 2010 Direction. The requirement that fees should reflect full market value meant that market value or opportunity cost was the valuation basis. It did not require a fee fixed at that value regardless of the article 8 objectives.

2. The direction formed part of a wider package designed to accelerate spectrum liberalisation. Neither its text nor the surrounding material clearly required Ofcom to disregard competition, investment, consumer and other regulatory considerations when applying its valuation. Ofcom was therefore still required to undertake the second-stage assessment necessary to decide how the valuation should affect the fees.

3. Article 13 of the Authorisation Directive permitted Member States to authorise the national regulatory authority to impose fees, but required compliance with the article 8 objectives. Article 7(1) of the Framework Directive also required national regulatory authorities to take utmost account of those objectives. The United Kingdom had assigned the fee-setting function to Ofcom and had expressly imposed the corresponding duty on it.

4. Section 5 of the Wireless Telegraphy Act 2006 empowered the Secretary of State to direct Ofcom about the carrying out of its spectrum functions. It did not transfer the section 12 function to the Secretary of State or, absent clear language, authorise Ofcom to ignore its duty under section 4(2) of the Communications Act 2003. Construing article 6 otherwise would render it ultra vires. On its lawful construction, it was also EU compliant.

5. Ofcom had failed to give effect to the direction as properly construed. The court therefore allowed EE’s appeal.

• Court of Appeal (Civil Division): Allowed EE’s appeal and held that Ofcom had misconstrued article 6 of the 2010 Direction: [2017] EWCA Civ 1873.
• High Court, Administrative Court: Cranston J dismissed EE’s judicial-review claim, holding that the direction required fees at full market value and displaced Ofcom’s other duties: [2016] EWHC 2134 (Admin).