O frabjous day! Callooh! Callay! He chortled in his joy. ‘Twas brillig.
I am willing to bet this is the only time in history that fellow Oxonian, Lewis Carrol’s, famous poem, “Jabberwocky” was used, genuinely, in relation to a decision of Ofcom.
This week, Ofcom finally remembered it is a Competition Act authority and fined Royal Mail a whopping £50m for (I paraphrase) a margin squeeze on new entrant Whistl (a division of TNT Post).
Why is this so radical? Well, DLA Piper LLP Partner Mike Conradi‘s seminal Communications Law Handbook had a single appendix. It listed all of Ofcom’s Competition Act 1998 decisions upto around its publication c2009. There were 13, yes, 13, cases where no foul was considered to be committed. They are cases which are not brought lightly, which makes it very surprising that in thirteen cases, which must’ve started with a whiff of “no smoke without fire” no harm was found. You’ll have to take my word for it that the industry kind of gave up after that point; I believe there were two more complaints. TalkTalk on broadband and BT on TV rights – the former had no grounds for action and the latter was settled prior to a full investigation.
I recall from my own involvement in one of the 13 cases, an alleged margin squeeze by BT on Thus and Gamma, that it managed to get to a Statement of Objections stage before Ofcom finally concluded that, broadly, margin squeezes were OK providing that the entirety of the estate, on balance, was positive in their model. So, BT was granted a licence to bloody their competitors with pricing that many considered to be an abuse of dominance, providing it didn’t hospitalise them. The absurdity of the conclusion still maddens me to this day,
The Royal Mail news should, at least, give BT a sense that there is a new sheriff in town and that that may wish to perhaps sail less close to the wind as they approach the PSTN switch-off.
The hard work involved in these cases is in proportion to the consequences; even those that co-operate and don’t do much actual harm can have eye watering fines, such as the Telefonica/Portugal Telecom EUR 79m case in 2013. The point of the Competition Act is to create an environment where the breach of trust is as serious as tangible consequences, a nuance that the Communications Workers’ Union have somewhat missed in their response to the Royal Mail fine. Otherwise, the very presence of unchallenged abuses of dominance act as a barrier to entry; it’s Economics 101 – barriers to entry and concentrations of market power lead to increased prices for consumers and reduced innovation in the market.
So why is a telecoms guy talking about snail mail? Well, every allocatee of geographic (and mobile) number ranges by Ofcom has been designated to have Significant Market Power and has a series of legal conditions imposed on them to remedy the potential for them to abuse the monopoly in call termination they have been found to have. Other operators, like BT and KCOM have many more conditions to remedy their dominance, but the risks don’t stop with such ex-ante conditions.
Non-compete clauses and exclusivity clauses appear in telecommunications from time to time; the latter is a mainstay in the mobile telecommunications market, for example. The moral hazard of simultaneously wholesaling and retailing telecoms services and how it’s addressed is a situation all the major telecoms operators grapple with. There’s a very fine line between doing such things lawfully and finding yourselves with various regulatory bodies baying for blood.
Even consumer outcome focussed initiatives, such as the OSG enabling mobile portability in the UK, has aspects which will make a competition lawyer uncomfortable.
The collaboration and co-operation that is a feature of the telecommunications industry also leaves it open to accusations or even well-intentioned illegality. This is an issue that’s only going to get worse as the European Commission talks about exempting co-investment from certain remedies, or as the case for regional fibre infrastructure monopolies doesn’t seem to be the worst idea ever.
The GDPR regime has given us “privacy by design” as a concept; now that Ofcom has remembered its other enabling legislation, perhaps it’s time to introduce “compliant by design” too.
As ever, the e-mail and phone lines are open; if you want a quick chat or something more substantial about the issues raised in this piece, do feel free to reach out.
