A recent decision by the UK's highest court looks at the telecoms regulatory framework and how compliance with the key objectives in those laws limits a contractual freedom to vary pricing.
British Telecommunications plc (BT) notified mobile network operators in 2009 that it was planning changes to the charges it made for calls to numbers starting with ‘08’. BT wanted to charge mobile operators an amount that would vary with the charge made to the caller. So a higher charge to the caller would mean a higher fee payable to BT.
The UK mobile operators (Telefónica O2, EE, Vodafone and Hutchison 3G) objected and asked UK telecoms regulator Ofcom to review the decision. Ofcom disallowed the new scheme, but on appeal, the Competition Appeal Tribunal allowed it.
Again reversed in the Court of Appeal, the question made its way eventually to the Supreme Court for a final ruling.
UK telecoms regulation is based on a series of 2002 EU directives; among them the Framework Directive (2002/21/EC) and the Access Directive (2002/19/EC). These were introduced to achieve end-to-end connectivity without national market distortions. The key objectives of these directives are found in Article 8 of the Framework Directive. These include the promotion of consumer welfare along with maintaining efficient and competitive telecoms markets.
BT’s Standard Interconnect Agreement gives it the right to unilaterally vary its charges. But BT’s discretion is this area is not completely free - it is limited by the Article 8 objectives. So BT was entitled to vary its charges, but only in a way consistent with Article 8.
Ofcom had rejected the proposed changes on the ground of consumer welfare ‘simply because they might have adverse consequences for consumers, in the absence of any reason to think they would’. This, the Supreme Court said, was wrong. It involved applying ‘an extreme form of the precautionary principle to a dynamic and competitive market’. If major adverse effects were to appear in future, Ofcom could intervene at that stage.
The Supreme Court did not think there was anything in its ruling that needed to be referred up the the European courts. If its decision had turned on the question of whether price controls could be imposed on a player without market power then there might have been a need to refer.