By Mike Conradi, Partner and Eamon Holley, Senior Legal Consultant
A recent and interesting case (Colt v Office of Communications  CAT 29) has shed some light on when and in what circumstances the decisions of the UK’s telecoms regulator can be appealed.
Colt Technology Services (“Colt”) challenged the UK’s Office of Communications (“Ofcom”) decision to implement a requirement on BT (and, in the Hull area, on KCOM) to offer various “active” wholesale services, and not to impose passive infrastructure access (“PIA”) requirements on them, in the Business Connectivity Market Review (“BCMR”) Statement that Ofcom issued on 28 March 2013 (“Statement”).
The Statement was the culmination of Ofcom’s review of the Business Connectivity Market, which commenced with Ofcom’s Call for Inputs in April 2011.
In 2010 Ofcom reviewed the Wholesale Local Access market (“WLA Review”) and imposed limited PIA remedies requiring BT to provide access to its ducts and poles, but not to its dark fibres, to allow competing communications providers (“CPs”) to deploy networks to support superfast broadband services in the residential sector.
By contrast the BCMR focussed on the business sector and here Ofcom determined that, on balance, the “active” remedies that it proposed were sufficient for the purposes of establishing sustainable competition in the relevant business markets, and that, whilst there were undoubted benefits to PIA remedies, concerns regarding PIA remedies outweighed their benefits in this context. These concerns included that PIA remedies could lead to a duplication of investment, discourage future investment, encourage inefficient entry to the markets and disrupt BT’s recovery of common costs by encouraging arbitrage.
Colt had four broad grounds for complaint. These were:
- Ofcom was wrong to view passive and active remedies as necessarily alternatives, rather than complementary, and to reject PIA remedies as a result;
- Ofcom was wrong as a matter of fact and/or assessment to reject passive remedies on the basis of a supposed lack of demand for them;
- Ofcom erred as a matter of law and/or assessment in not proceeding from the starting point that it should regulate as far “upstream” as possible; and
- Ofcom was wrong as a matter of assessment to believe that active remedies were likely to promote innovation and competition at least as effectively as passive remedies.
During the course of the hearing Colt alleged that with respect to the first and third grounds Ofcom had, in effect, taken a prejudicial approach against PIA, and not therefore given the issue proper consideration.
The CAT decision
The CAT provided a neat summary with respect to its jurisdiction, which is to review sector regulatory decisions on their merits. It cited observations from two previous Court of Appeal decisions, namely:
- that the applicant must show that the decision of Ofcom itself is wrong; and
- that if Ofcom addressed the right question by reference to relevant material, any value judgment on its part must carry great weight.
The CAT concluded that Ofcom had in fact conducted a thorough market review process, consulting with all stakeholders, with BEREC and the EC and publishing a number of consultation documents, as well as holding meetings. During the course of its review Ofcom had taken into account the various benefits and concerns it had with respect to PIA and had invited responses from the industry on them.
The CAT concluded that this process provided Ofcom with sufficient information with which to approach with an open mind the question of whether PIA remedies should or should not be included.
With this in mind Ofcom took into account and assessed the various benefits and concerns with PIA remedies. For example Ofcom was concerned that, amongst other things, PIA remedies could lend themselves too easily to other CPs “cherry picking” good markets and creating arbitrage, which would threaten BT’s common cost recovery and, overall, damage competition in a mature, large and “world-class” (to quote Colt) business connectivity market. In other words, Ofcom had asked itself the right questions.
Finally the CAT concluded that Colt had not shown that Ofcom’s cautious approach was, all things considered, “wrong”, particularly when it was setting remedies in a market for the next three years and bearing in mind that there could be multiple “right” answers. Ofcom’s standing as an expert regulator meant that, after having sourced the relevant information, taken into account all the relevant considerations and having asked the “right” questions, its value judgement in assessing what would be the appropriate remedies must carry great weight.
As the CAT noted, although a party is perfectly entitled to disagree with a regulatory decision, to succeed in an appeal against that decision before the CAT the party must show that the decision is “wrong”. In assessing this, the CAT will consider how the regulator obtained the information, whether it had sufficient information to approach the considerations with an “open mind” and whether it then asked itself the correct questions. If these criteria are met and the regulator has to make a “value judgement” when making its decision, then that judgment will carry great weight.