Judgment (Disposal of the Appeals)

Neutral citation:

[2009] CAT 11

Published:

2 Apr 2009

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Summary:

Judgment on the disposal of the appeal.

H3G and BT appealed against the price control conditions contained in OFCOM’s 2007 Statement on mobile call termination (MCT) rates (the 2007 Statement). Those price control conditions set a target average charge (TAC) for each mobile network operator for each of the years of the price control, covering the period from 2007 to 2011. The price control matters raised in the appeal were referred to the Competition Commission (CC) under section 193 of the Communications Act on 8 March 2008 (see [2008] CAT 5).

On 16 January 2009 the CC notified the Tribunal of their determination of those price control matters. Broadly, the CC rejected H3G’s appeal. In relation to BT’s appeal the CC upheld two of BT’s grounds finding that OFCOM had erred in its approach to the inclusion of spectrum costs and in its inclusion of a network externality surcharge in the TAC. The CC went on to consider what action should be taken to rectify these errors. As regards the second error the correction to be made and the consequential adjustment to the price control was straightforward: the amount that OFCOM had included for the externality surcharge could just be deducted from the TACs. But the question of remedy, in relation to the errors found in OFCOM’s approach to the inclusion of spectrum costs was more complicated and is, in large part, the subject of the Tribunal’s Judgment.

The criticisms made of the CC Determination by the Interveners Vodafone, T-Mobile and Orange focused on three aspects of the Determination. The first was the way in which the CC applied the 2G cap when assessing the value of 3G spectrum to the MNOs. The second was the asymmetric treatment of H3G, namely the fact that H3G’s final year TAC was set at a higher level than the TAC of the 2G/3G MNOs because of the CC’s approach to the inclusion of spectrum costs and network operating costs. The third was the fact that the CC concluded that OFCOM should be directed to redetermine the TACs for all four years of the price control and not just for the period that remains unexpired at the time when the redetermination takes place.

For the reasons given in the Judgment, the Tribunal unanimously rejected the challenges that have been made to the CC’s Determination of the price control matters in these appeals. However, all parties were agreed that the CC had made an error in the calculation of H3G’s final year TAC and that the CC’s conclusion should have been that the final year TAC was 4.3 ppm not 4.4 ppm.

Pursuant to sections 193(6) and 195(2) of the Communications Act 2003, the Tribunal unanimously decided that in accordance with the CC’s determination of specified price control matters, the remainder of H3G’s appeal should be dismissed (the Tribunal had previously dismissed the non-price control matters raised by the H3G appeal: see [2008] CAT 11). The Tribunal concluded that BT’s appeal should be upheld to the extent set out in the CC’s Determination.

Further, pursuant to section 195(4) of the Communications Act 2003, paragraph [82] of the Judgment sets out the directions which the Tribunal considers appropriate for giving effect to the decision and directs OFCOM accordingly.

This is an unofficial summary prepared by the Registry of the Competition Appeal Tribunal.