Did you know that the now extinct mammoth is closely related to the Asian elephant? Apparently so, according to the good people at National Geographic.
There’s an elephant in the telecommunications industry room which might as well be a woolly mammoth; but it’s sneaky. It’s hiding in plain sight and its most effective camouflage is its esotericism. Yes that really is a word. So, I am going to open with the shock and awe in the hope I’ll keep your attention as I walk you through the logic.
There is a very real risk that the Government’s plans for ubiquitous fibre to the premises in the UK can be torn up if the incumbents don’t like how they progress.
Bear with me on this – it’s only two or three pieces of legislation that I need to take you through to get there.
The first is the snappily titled Directive 2002/21/EC of the European Parliament and of the Council of 7 March 2002 on a common regulatory framework for electronic communications networks and services. Thankfully, it is more commonly referred to as the “Framework Directive”. Articles 3 and 3a are pertinant to my argument and state as follows;
Member States shall ensure that national regulatory authorities exercise their powers impartially, transparently and in a timely manner. [..] national regulatory authorities responsible for ex-ante market regulation or for the resolution of disputes between undertakings in accordance with Article 20 or 21 of this Directive shall act independently and shall not seek or take instructions from any other body in relation to the exercise of these tasks [..]
The requirement for the independence (and impartiality) of Ofcom as the national regulatory authority is referenced in other places too.
I have yet to come across anyone that would disagree with the sentiment behind the European legislation here. The independence of a regulatory body is a crucial requirement for the delivery of good outcomes for society. So far, so good.
Unfortunately, in 2017, new domestic legislation was passed. The Digital Economy Bill, passed into law as the Digital Economy Act 2017, inserts sections 2A-2C into our beloved Communications Act. In the interests of brevity, only section 2B(2)(a) need be referenced here – it is in relation to new power for the Secretary of State to outline its strategic policies in a statement;
Ofcom must have regard to the statement when carrying out their functions relating to telecommunications.
It should be apparent that there is a faint whiff of conflict between these two quoted provisions. Could Parliament really make such a mistake? Surely the scrutiny by both Houses would’ve dealt with such glaring issues? Well, unfortunately, the Bill was rushed through Parliament so it was passed before the 2017 General Election; it didn’t receive anywhere like the amount of scrutiny it should have done, let alone how much the industry would have liked.
OK, but hang on…… I thought that the independence of Ofcom was assured? Ah – the eagle-eyed amongst you will have noticed that the Framework Directive guarantee I quoted only applies to dispute resolution and ex-ante market regulations.
Well, that’s the problem. Article 15(1) of the Framework Directive requires that the European Commission publish a Recommendation which identifies those product and service markets within our industry which may justify the imposition of regulatory obligations set out in the specific Directives. If you’re interested, you can find the even snappier-ly (disappointingly, that isn’t a word) titled 2014/710/EU Commission Recommendation of 9 October 2014 on relevant product and service markets within the electronic communications sector susceptible to ex ante regulation in accordance with Directive 2002/21/EC of the European Parliament and of the Council on a common regulatory framework for electronic communications networks and services here.
Markets 3a, 3b and 4 start to enter into the gamut of scenarios from broadband through to business connectivity.
So, we have a situation where data infrastructure, or parts of it at least, are considered by the European Commission to be susceptible to ex ante regulation in order to secure good outcomes for society. We have law that requires the independence of Ofcom in these matters and the ability for the Government to require Ofcom to have regard for Parliament’s view. It’s a bit of a muddle.
Maybe the Government will see sense and not use this power where domestic law comes into conflict with the European law? Unfortunately, that ship sailed when the Department for Culture, Media and Sport fired the first shot in creating a Statement of Strategic Priorities in this area. This was evidently lapped up by Ofcom and the day after, they published the ironically entitled Regulatory certainty to support long-term investment in full-fibre broadband: Ofcom’s full-fibre broadband implementation plan.
Nothing yet has crossed the line drawn by the European legislators on the independence of Ofcom because so far there has been no ex ante obligations imposed or a dispute resolved with weight placed on the Government’s priorities; but that’s only a matter of time. There is a growing risk that the conflict in legislation, however esoteric, however far-fetched, is sufficient ammunition for the likes of BT or Virgin (or others) to bring a case to the courts and overturn a decision they don’t like as a result.
That’s why the Ofcom document is ironically titled; the direction of travel does anything but bring regulatory certainty if litigation comes into the equation. I am told that the average time for the Competition Appeal Tribunal to reach a judgment following a decision from Ofcom that’s challenged is around 12 months. The only telecommunications case that went all the way to the Supreme Court took 5-6 years to reach its crescendo.
The only saving grace is that the Digital Economy Act 2017 also varied (specifically tried to limit) the right to appeal the decisions of Ofcom, potentially in conflict again with the Framework Directive (that’s a blog for another day), so we’ll have the joys of unravelling that before the next case is heard too.
As ever, if anything in this piece affects your company, do feel free to reach out for a chat!