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Appendix C |
THE UK REGULATORY REGIME
The Department of Trade and Industry (the "DTI") is the Government department responsible for the development of telecommunications policy and the promotion of the telecommunications industry. The Communication and Information Industries Directorate of the DTI deals with national and international policy and regulatory issues.
The Radiocommunications Agency (the "Agency") is an Executive Agency of the DTI, with responsibility for management of most non-military radio spectrum throughout the UK (management of spectrum has not been devolved to the regional assemblies). The main functions of the Agency are formulating policy on the planning and management of the radio spectrum within the UK; co-ordination of UK views and participation in international negotiations on the use of radio; authorising use of radio by licensing or exemption; formulating technical and operating standards for radio; enforcement of legislation on the use of radio equipment and investigation of radio interference. The Agency is responsible for issuing licences to use the radio spectrum under the WT Acts and for monitoring compliance with those licences and taking enforcement action where necessary.
The Office of Telecommunications ("Oftel") was established by the T Act to support the Director General of Telecommunications (the "Director General") in the performance of his duties. The Director General and the Secretary of State have a joint duty to exercise their respective functions under the T Act, for example to secure the provision of telecommunication services throughout the UK and, subject to this, to promote the interests of telecommunications users in respect of the prices charged for, the quality and variety of telecommunication services provided and telecommunication apparatus supplied and to maintain and promote effective competition in the telecommunications market. The Director General has a duty to give the Secretary of State advice and information with respect to licensing of telecommunication systems, at the request of the Secretary of State or where the Director General considers it expedient. Oftel performs the function of the UK's regulatory authority in telecommunications, monitors compliance with licences issued under the T Act and takes enforcement action where necessary.
The Director General has extensive powers under the T Act, particularly when enforcing or modifying licence conditions. If a condition is breached, he can require the licence holder to comply by making an order. This is enforceable by third parties or the Director General through civil action. He can also make determinations, – for example, to set out the terms for interconnection between networks where the two operators cannot agree between themselves. The Director General can also require operators or other parties to supply the information needed in order to come to a decision.
The Competition Commission ("CC") is a public body which rules on competition issues referred to it by the Secretary of State and (among others) the Director General. The CC replaces the Monopolies and Mergers Commission ("MMC"), which was dissolved by the Competition Act 1998 and whose functions were transferred to the CC. The Director General may require the CC to investigate and report on whether the actions of a telecommunications operator licensed under the T Act operate, or may be expected to operate, against the public interest and, if so, whether this could be remedied or prevented by modifications of the conditions of its licence. The CC would also be responsible for considering any competition concerns arising from mergers and acquisitions of or by winners of WT Act Licences, if the Secretary of State, acting on the advice of the Director General of Fair Trading (the "DGFT"), refers such mergers or acquisitions to the CC for investigation.
C2.1 Wireless Telegraphy Acts
C2.1.1 Wireless Telegraphy Acts
The Wireless Telegraphy Acts make it a criminal offence to establish or use any station for wireless telegraphy or install or use any apparatus for wireless telegraphy except under the authority of a licence granted by the Secretary of State or in accordance with an appropriate Exemption Regulation for that class of apparatus. A licence granted under the Wireless Telegraphy Acts also defines the frequencies at which equipment may operate, specifies the equipment that may be used and sets maximum permitted signal levels.
The WT Act 1998 allows the Secretary of State to charge fees related to the value of the spectrum available for WT Act Licences in order to improve spectrum efficiency. These charges can be set administratively or by means of an auction. Licences for 3G mobile spectrum were the first to be auctioned under the WT Act 1998. This BFWA auction will be the second such auction.
C2.1.2 Regulations and Notice
Subsection 3 (1) of the WT Act 1998 states that "...the Secretary of State may by regulations provide that [in certain cases]... applications for the grant of [WT Act Licences] must be made in accordance with a procedure which:
In order to hold an auction for WT Act Licences, the Secretary of State has to issue two documents: the Regulations and the Notice. The Regulations state which licences shall be the subject of the Auction, and set out the matters to be dealt with in the Notice and the manner in which the Notice shall be published. They state that detailed provisions for the Auction will be found in the Notice. The Regulations are subject to statutory consultation. The Regulations should come into force by mid-October 2001 and a copy of the draft as at the time of publication of this Memorandum is at Appendix G.
It is expected that the Notice will be issued on the date on which the Regulations come into force. The Notice establishes the rules for the Auction including (amongst other things) pre-qualification, payment of deposits and fees and the conduct of the Auction itself. A copy of the draft Notice is at Appendix H.
C2.2 Telecommunications Act
The T Act paved the way for competition in the provision of telecommunication services in the UK by establishing a system for licensing network operators and setting up Oftel to promote effective competition. The T Act establishes procedures for the grant and modification of T Act Licences and requires that all telecommunication systems be licensed by a class licence ("general authorisation" in EU legislation) or an individual licence. Individual T Act Licences are generally reserved for PTOs which are subject to additional public service obligations but may also enjoy rights to install networks without the need to comply with certain planning consents. The rights and obligations associated with PTO status are dealt with in sections 8-11 of the T Act.
C.2.3 Competition Act
The UK's new Competition Act came into force in March 2000. Oftel has taken over various powers that used to be held by the Office of Fair Trading (OFT). The OFT has published guidelines on how the Competition Act will apply to the Telecommunications Sector (reference OFT 417). The Competition Act is based on Articles 81 and 82 of the Treaty Establishing the European Community ("The EC Treaty"). It contains two prohibitions:
a prohibition of agreements between undertakings, decisions by associations of undertakings or concerted practices which have the object or effect of preventing, restricting or distorting competition in the United Kingdom (or a part thereof) and which may affect trade within the United Kingdom ('the Chapter I prohibition');
a prohibition of conduct by one or more undertakings which amounts to the abuse of a dominant position, in a market in the United Kingdom (or a part thereof) which may affect trade within the United Kingdom ('the Chapter II prohibition').
Articles 81 and 82 of the EC Treaty will continue to apply to:
which may affect trade between Member States of the European Union.
In the telecommunications sector, the Director General of Telecommunications ('DGT') and the Director General of Fair Trading ('DGFT') have concurrent jurisdiction to apply and enforce the Competition Act.
C2.3.1 Oftel
The Competition Act strengthens Oftel's (as well as the DGFT's) powers to prevent anti-competitive behaviour. It gives the Director General the power to investigate any such behaviour if the Director General considers that there are reasonable grounds for suspecting that a company has infringed the Chapter I or Chapter II prohibitions. In certain circumstances, a fine of up to 10% of a company's UK turnover could be imposed if the company is found to have breached the prohibitions. Decisions of Oftel (and DGFT) will be subject to appeal to an Appeals Tribunal within the CC.
Oftel will retain its powers under the existing licensing regime to take enforcement action in respect of breaches of an operator's T Act Licence.
C2.4 Broadcasting Acts 1990 and 1996
The Broadcasting Acts provide for:
A licence from the ITC or the Radio Authority, as the case may be, is required for the provision of services of the types described in the Broadcasting Acts. In general, television and sound programme services which are conveyed by means of a telecommunication system are licensable under the 1990 Act if they are intended for reception in two or more dwelling-houses, by people who do not have a business interest in receiving the transmissions. Similarly, the use of a telecommunication system for the purpose of the delivery of one or more services specified in the relevant provisions of the Broadcasting Act 1990 for simultaneous reception in two or more dwelling-houses in the UK may require a local delivery licence under this Act. It will be the responsibility of each Bidder to consider whether it additionally requires a licence issued by the ITC or the Radio Authority in order to carry lawfully over its network any particular services, or whether the provider of any service it proposes to carry requires such a licence.
C2.5 Regulation of Investigatory Powers Act 2000 (Chapter 23)
Successful applicants for WT Act Licences will need to be able to meet the provisions of the Regulation of Investigatory Powers Act 2000 in so much as it protects the integrity of public and private telecommunication services by providing a statutory framework for legitimate intrusive investigative techniques.
C3 EU regulatory regime and relevant EU directives
C3.1 EU regulatory regime
Directives and Decisions which have been made by the Council of Ministers of the European Union, or by the Council and the European Parliament, or by the EC Commission, are usually incorporated into UK legislation by means of Regulations made under section 2(2) of the European Communities Act 1972. Regulations of the Council or of the Council and the Parliament automatically have legal force in the UK without the need for implementing legislation.
Each Member State is responsible for applying the legislation and associated regulation to handle the introduction and maintenance of competition in telecommunications. The UK's judicial system applies to telecommunications as to all other sectors, with the right to refer issues to the European Court of Justice if necessary on questions of interpretation of EC law. There is no central EU regulatory authority for telecommunications but, as stated above, issues regarding the interpretation of EC legislation can be referred to the European Court of Justice. The possibility of a European regulatory authority has been considered and rejected by the EC Commission as part of the review described in C4.2.5.
C3.2 Relevant EU directives
There have been a number of Directives and Decisions made to promote the introduction and maintenance of competition in the operation of networks and provisions of telecommunications services. Those of relevance to the implementation of BFWA are briefly described in the following sections.
C3.2.1 The Services Directive
Commission Directive 90/388/EC of 28 June 1990 on competition in the markets for telecommunications services (as amended) (the "Services Directive") requires Member States to withdraw all special and exclusive rights for the supply of telecommunications services (other than voice telephony) and to take measures necessary to ensure that any operator is entitled to supply such telecommunications services.
In addition, where Member States make the supply of such telecommunications services subject to a licensing or declaration procedure, conditions for the grant of licences must be objective, non-discriminatory and transparent. Reasons for any refusal to grant must be given and an appeal procedure must be established.
C3.2.2 The Licensing Directive
Directive 97/13/EC of the European Parliament and of the Council of 10 April 1997 on a common framework for general authorisations and individual licences in the field of telecommunications services (the "Licensing Directive") is a key part of the EU-wide liberalisation of telecommunications. It is intended to prevent any excessive or unjustified regulation through licensing of telecommunications services and networks. It creates a common framework for the granting of general authorisations (normally referred to in the UK as "class licences") and of "individual licences". It requires the use of general authorisations (or no licensing at all) unless the licensee is to be given access to scarce resources, is subject to particular obligations or enjoys particular rights. It limits the type of conditions which can be included in both general authorisations and individual licences, and requires those conditions which are included to be objectively justified, transparent, proportionate and non-discriminatory. Licence fees must only cover administrative costs incurred in the issue, management, control and enforcement of the applicable licences, although charges can be imposed where scarce resources are used, so as to ensure the optimal use of those resources. It also imposes minimum standards for the processing of licence applications. Licences granted after 31 December 1997 must comply with this Directive, and licences issued before that date were brought into line with the requirements of this Directive.
C3.2.3 The Interconnection Directive
Directive 97/33/EC of the European Parliament and of the Council of 30 June 1997 on interconnection in telecommunications with regard to ensuring universal service and interoperability through application of the principles of Open Network Provision (ONP) (the "Interconnection Directive") concerns the harmonisation of conditions for open and efficient interconnection of, and access to, public telecommunication networks and publicly available telecommunications services. It sets out the rights and obligations of national and EU operators to negotiate interconnection agreements, prescribes principles for charging for interconnection and provides for resolution of disputes by national regulatory authorities (Oftel for the UK).
C3.2.4 Radio Equipment and Telecommunications Terminal Equipment Directive
Directive 1999/5/EC of the European Parliament and of the Council of 9 March 1999 on radio equipment and telecommunications terminal equipment and the mutual recognition of their conformity (the "R&TTE Directive") brought significant changes to the way manufacturers of radio and telecommunications terminal equipment gain access to the European marketplace for their products. The Directive superseded the various national type approval regimes within the EU and also the requirements of Directive 98/13/EC (the consolidated TTE/SESE Directive) and replaced them with a conformity assessment regime that relies much more heavily on manufacturers' declarations of conformance. The protection requirements of the EMC Directive (Directive 89/336/EC) and the Low Voltage Directive (Directive 72/23/EEC) are also subsumed within the R&TTE Directive and, therefore, do not have to be applied separately. During the transitional period, at the choice of the manufacturer, equipment that was approved before 8 April 2000 under the regime existing at that time can continue to be placed on the market.
C3.2.5 The 1999 Communications Review
Many of the Directives comprising the 1998 package that opened up the EU's telecommunications markets to competition include provisions requiring the re-evaluation by the EC Commission by the end of 1999. Consultants were engaged on some 16 studies to look at the details, and the exercise has been expanded to incorporate the EC Commission's follow-up to its Green Papers on the convergence of the telecommunications, media and information technology sectors and on radio-spectrum policy. The resultant "1999 Communications Review" will lead to the negotiation of a new framework for EU communications legislation that is expected to come into force from around 1 January 2003.
On 12 July 2000, the EC Commission adopted five draft Directives that, subject to negotiations in the Council of Ministers and the European Parliament, will enact this framework:
Adoption of a further Directive under Article 86 of the Treaty which will therefore be adopted by the EC Commission without negotiations in the Council or the Parliament, and which will address competition in the markets for electronic communications services, will be adopted at a later date. Together, these six Directives as well as a proposed Decision of the Council and the Parliament on a regulatory framework for radio spectrum policy in the EC will replace existing EU legislation in the telecommunications sector [c.f. section 3.3.1 of the Communication from the Commission to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions "Towards a new framework for Electronic Communications infrastructure and associated services: the 1999 Communications Review" (COM(1999)539)].
As already described, the time necessary for negotiation and implementation of these proposals means that the new framework is unlikely to come into force significantly before 1 January 2003.
The Government will be looking for an outcome to the review that completes the single market in telecoms while preserving the ability of national regulatory authorities to apply solutions most appropriate to the markets within their jurisdiction.
The EC Commission also adopted a draft Regulation on 12 July on unbundled access to the local loop.
C3.2.6 Green Papers
In December 1997, the EC Commission published a Green Paper on the convergence of the telecommunications, media and information technology sectors. This paper considered and invited comments on the nature and pace of convergence, the economic and social impact of convergence, barriers to convergence, and the future approach to regulation. In July 1998, the EC Commission published a Working Document (SEC(98)1284) summarising the results of the public consultation and identifying areas for further reflection. (These documents can be found at www.ispo.cec.be/convergencegp/). This was followed by a Communication in March 1999 which sets out proposals for action on regulatory reform of infrastructure and content services.
The Government published its conclusions on convergence in June 1999 following a consultation on the July 1998 Green Paper. The policy statement "Regulating Communications: The Way Ahead" confirmed the Government's evolutionary approach to communications regulation in response to convergence. The document is on the Web at www.dti.gov.uk/cii/convergence-statement
The EC Commission published a Green Paper on Radio Spectrum Policy on 9th December 1998. Although containing no specific proposals, this raised a number of important questions about how the spectrum should most effectively be managed at a time of rapidly growing demand and technological convergence. In its response, the Government has emphasised the importance of effective, strategic spectrum management, taking account of national circumstances; the importance of building, so far as possible, on existing arrangements for international harmonisation, through the ITU and CEPT, and the value of selective EU intervention to provide an impetus to harmonisation where rapid international agreement is desirable, as has been done, for example, for 3G through the UMTS Decision. It is clear from other responses that these views are widely shared by other Member States.
In November 1999, the Commission published a Communication, "Next Steps in Radio Spectrum Policy" (COM(1999) 538), following up the results of public consultation on the Green Paper. It set out proposals for further action intended to improve strategic spectrum management at the EU level, including the creation of a high level group of national experts to advise the Commission, and measures aimed at achieving more effective spectrum harmonisation.
The approach in the Communication is reflected in the draft Decision of the European Parliament and the Council on a Regulatory Framework for Radio Spectrum Policy in the European Community (COM(2000) 407 final) which was adopted by the EC Commission on 12 July 2000.
The UK response to the Green Paper is available on the RA website (radio spectrum section). All the responses are also on the DG Information Society website at www.ispo.cec.be/infosoc/telecompolicy/en/commen.htm
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