Wednesday, 4 August 2010

A Suit of Chocolate Armour?

Apologies for the hiatus since my last blog, but until recently a state of purdah has held back any important initiatives in the telecoms sector and we have had to wait for the Coalition Government to get into the saddle and take up the reins again in order for it to produce something worthy of comment.
The last significant thing the previous Government tried to do, by way of implementation of the Digital Britain report, was to create an entirely new beast, "Directions to Ofcom" to implement the so-called Wireless Radio Spectrum Modernisation Programme. The shorthand for this is that the Government wanted to use never-before wielded statutory powers to clear the legal/technical log-jam around harmonisation of the 900 and 1800 MHz wireless spectrum bands for UMTS (i.e. 3G) and GSM systems and to have Ofcom run a combined auction of 800 MHz and 2.6 GHz spectrum, which had proved particularly controversial. As part of this, the Government sought to equalise spectrum holdings, in particular using spectrum caps.
When Ofcom originally planned to implement GSM system refarming, as well as auctioning new 2.6 GHz spectrum, it was confronted with legal challenges from e.g. O2. So the blunt instrument of statutory Directions to Ofcom was deployed by the Government, ostensibly to avoid the need for further consultations and no doubt protect Ofcom from renewed legal challenges: a legal 'suit of armour' if you will.
However, the statutory instrument containing the Directions failed to come into force before the May election and it has fallen to the new Minister for Communications, Ed Vaizey, to consider whether to revive it, produce a new version of the Directions or abandon this stratagem altogether.
Following talks with the wireless industry, the Government has in fact now issued a new form of draft Directions (for approval by Parliament) which is much simplified and shortened compared with its immediate predecessor. Essentially they set out (belatedly) to implement the GSM amending Directive, provide for variations to the existing 900 MHz, 1.8 GHz and 2.1 GHz licences and reintroduce the central concept of a combined auction of the 800 MHz and 2.6 GHz bands.
Crucially, as regards the auction, the new Directions throw this rather hot potato back into the lap of Ofcom, in that they require Ofcom first of all to carry out a forward-looking assessment regarding the likely future competitiveness of mobile markets after the conclusion of the Auction, taking into account the possible effects of the Auction. They then require that Ofcom should put in place 'appropriate and proportionate measures' to promote competition in those markets after the conclusion of the Auction, which measures could be included in the rules governing the Auction.
Consequently it is clear that if the main purpose of the original Directions was indeed to protect Ofcom from legal action regarding the Auction conditions, nothing in the new Directions will provide any such protection this time around.
There is no real hard deadline for the Auction provided in the Directions, even though the Government have indicated elsewhere that this should take place before the end of 2011: Ofcom is simply required to make the Auction regulations as soon as reasonably practicable after concluding its competition assessment, but this of course does not dictate the timing of the Auction itself.
Other parts of the Directions, notably the variations to existing 3G licences to impose service coverage requirements, extend their duration and impose annual charges after 2021, are expressly subject to the licensees consenting, which of course is no different to the position that would have applied even without the Direction.
So all in all, I am really left questioning the utility of the Directions and whether very much, if any, of significance remains of their predecessor's main legal purpose, namely of providing to Ofcom a suit of armour against legal challenges. A suit of chocolate armour might be more apt, as certainly this whole area remains something of a confection.

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