Communications: regulation and outsourcing in the UK (England and Wales): overview

A Q&A guide to communications regulation and outsourcing law in the UK (England and Wales): overview.


The Q&A gives a high level overview of communications law, including authorisation and licensing, universal service obligations, spectrum use, access and interconnection, data protection and security, price regulation, subscriber management, and outsourcing and telecommunications.

To compare answers across multiple jurisdictions, visit the Communications: Regulation and Outsourcing Country Q&A tool.

This Q&A is part of the Communications: Regulation and Outsourcing Global Guide. For a full list of jurisdictional Q&As visit www.practicallaw.com/communications-guide.

Contents

The telecommunications market

1. Give a brief overview of the structure of the telecommunications market in your jurisdiction. Briefly set out any major recent developments, such as mergers and acquisitions, restructurings and insolvencies.

Market structure

The main owners of "trunk" or fixed line infrastructure (cables under the ground) are:

  • British Telecom (BT).

  • Virgin Media.

  • Vodafone (formerly Cable & Wireless Worldwide).

These three companies own large tracts of cable around the UK (including state of the art fibre optic cables and traditional copper cables), and some smaller players own this infrastructure too. These companies are also providers of fixed line telephone and broadband services directly to end users. Additionally, a large number of providers of fixed line telephone and internet services use special technology to provide their own telephone and internet services to customers through BT lines. This technology is known as carrier pre-select or access code (for telephones) and digital subscriber line (DSL) for broadband.

BT is the legacy of a fixed line network under public ownership. It was privatised in 1984. In order to ensure fair competition in the market, BT has since agreed to set up Openreach, a separate division of the BT group, which sells capacity on its network to other operators on a wholesale basis.

There are four mobile network operators (MNOs):

  • EE.

  • Vodafone.

  • Telefonica (UK) (branded O2).

  • Hutchison 3G (UK) (branded Three).

These companies are licensed to operate mobile network infrastructure using certain spectrum bands. There are also a large number of "mobile virtual network operators" (MVNOs) that do not have their own spectrum, but choose to provide a white labelled service using the network of one of the main operators. Of these MVNOs, Virgin Mobile and Tesco Mobile have become particularly large players in the market.

The sharing of mobile mast sites is predominant in the UK. In particular, the following have mast sharing joint venture arrangements extending throughout the UK:

  • EE and Three.

  • O2 and Vodafone.

The MNOs purchase large amounts of capacity (leased lines) on the networks of the fixed line operators. This allows them to transport mobile traffic around the UK.

Recent developments

The entry of Vodafone into the fixed line infrastructure space through the acquisition of Cable & Wireless Worldwide is relatively new (2012).

Since then, the following acquisitions have been announced subject to the approval of the competition authorities:

  • BT's acquisition of EE.

  • The acquisition of Telefonica (UK) by Hutchison Whampoa (the Hong Kong owners of Three).

Two principal commercial benefits of mergers of fixed line providers with mobile providers are:

  • They help facilitate "quad play", whereby consumers are offered fixed line telephone, internet, TV and mobile telephone.

  • The mobile business benefits from the trunk infrastructure of the fixed line provider to feed its data hungry business.

 

Restrictions on foreign ownership

2. Are there any restrictions on foreign companies entering the telecommunications market in your jurisdiction?

There is no restriction per se on foreign companies entering the telecommunications market, but there is a detailed regulatory regime that applies to foreign companies and UK companies equally.

Practically, foreign companies generally set up (or purchase) UK subsidiaries to establish a presence in the UK telecommunications market.

 

Regulatory framework

Legislation and regulatory authorities

3. Give a brief overview of the regulatory framework for telecommunications in your jurisdiction. Which authorities regulate telecommunications services in your jurisdiction? Is there a separate regulator for competition law issues in this sector?

Regulatory framework

The following EU legislation is relevant:

  • Directive 2002/21/EC on a common regulatory framework for electronic communication networks and services (Framework Directive).

  • Directive 2002/20/EC on the authorisation of electronic communication networks and Services (Authorisation Directive).

  • Directive 2002/19/EC on access to and interconnection of electronic communication networks and associated facilities (Access Directive).

  • Directive 2002/22/EC on universal service and user’s rights relating to electronic communication networks and services (Universal Service Directive).

  • Directive 95/46/EC on the protection of individuals with regard to the processing of personal data and on the free movement of such data (Data Protection Directive).

  • Directive 2009/140/EC amending Framework Directive, Access Directive and Authorisation Directive (Better Regulation Directive).

  • Directive 2009/136/EC Universal Services and Privacy Directives (Citizens' Rights Directive).

  • Regulation (EC) No.717/2007 on roaming or public mobile telephone networks within the Community and amending Directive 2002/21/EC (Roaming Regulation).

  • Regulation (EC) No 139/2004 on the control of concentrations between undertakings (Merger Regulation).

In addition, in October 2015 the European Parliament approved a new regulation on a European single market for electronic communications (2013/0309 (COD)), that deals with mobile roaming and net neutrality.

The following UK primary legislation is relevant:

  • The Communications Act 2003.

  • The Wireless Telegraphy Act 2006.

  • The Regulation of Investigatory Powers Act 2000 (RIPA).

  • The Data Retention and Investigatory Powers Act 2014 (DRIPA).

  • The Data Protection Act 1998.

  • The Competition Act 1998.

  • The Consumer Rights Act 2015.

The following UK secondary legislation is relevant:

  • The Privacy and Electronic Communications (EC Directive) Regulations 2003 (PECR).

  • The Data Retention (EC Directive) Regulations 2009.

  • The Data Retention Regulations 2014 (DRR).

  • The Electronic Communications (Universal Service) Order 2003 (SI 2003/1904) (the Universal Service Order).

  • Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (SI 2013/3134).

The Communications Act 2003 (Communications Act) forms the cornerstone of the UK regulatory regime.

Broadly, the Communications Act applies to providers of telecommunications services and broadcasters that carry content services.

Carriers of content services include broadcast network providers and satellite network providers (for example, Sky), but not the providers of the content itself (for example, ITV).

The Act distinguishes between (section 32, Communications Act):

  • An electronic communications network (ECN) provider, which provides a telecommunications or broadcasting network.

  • An electronic communications service (ECS) provider, which provides telecommunications or broadcasting services to customers.

An ECS provider can also be an ECN provider or it can have an arrangement to use the network of a third party ECN to provide services to its customers.

The Communications Act implements the following EU directives:

  • The Framework Directive.

  • The Authorisation Directive.

  • The Access Directive.

  • The Universal Service Directive.

The Act sets out the duties and functions of the telecoms regulator: Ofcom.

Regulatory authorities

Ofcom. Ofcom is the regulator of the communications sector. Ofcom's role is set out in the Communications Act. Ofcom's two principal duties are to further the interests of (section 3(1), Communications Act):

  • Citizens on communications matters.

  • Consumers in relevant markets, where appropriate by promoting competition.

In fulfilling these duties, Ofcom must secure the following non-exhaustive list of outcomes (section 3(2), Communications Act):

  • Optimal use of the electro-magnetic spectrum for wireless communications.

  • The availability throughout the UK of a wide range of electronic communications services, including television and radio services.

  • For television and radio services, adequate protection for members of the public from offensive and harmful material, unwarranted infringement of privacy and other unfair treatment.

In fulfilling its duties, Ofcom must have regard to the following non-exhaustive list of considerations (sections 3(3) to 3(5), Communications Act):

  • Best regulatory practice including transparency, accountability, proportionality and consistency.

  • The encouragement of competition, investment and innovation in relevant markets.

  • The different needs of all persons, including those with particular vulnerabilities.

  • The different interests of people of different ethic communities and people living in rural and urban areas.

  • The interests and opinions of consumers.

Ofcom also has the power to set special conditions that only apply to certain operators (section45, Communications Act) (see Question 8).

Competition and Markets Authority. Competition rules are regulated and enforced by the Competition and Markets Authority (CMA), but Ofcom has concurrent powers in a number of areas so the CMA and Ofcom must consult each other on activity in these areas.

European Commission. Mergers, acquisition and full-function joint ventures in the telecommunications sector (and other sectors) above certain financial thresholds must be approved by the European Commission before they can go ahead (Merger Regulation).

PhonePayPlus. An organisation called PhonePayPlus, operating under delegated authority from Ofcom (sections 120 to 124, Communications Act), regulates premium rate services generally. All services provided when a user calls or texts a premium rate number are included. The premium rate numbers are defined by Ofcom, but include most numbers that cost more than 5p per minute to call from a BT landline, as well as mobile text short code numbers. Premium rate services also include "direct-to-bill" services where the customer is billed for third party goods and services via his phone bill. PhonePayPlus operates a Code of Practice that providers must adhere to.

Authorisation and licences

4. What notification, authorisation and licences are required to provide telecommunications services? What is the licence application procedure and fee?

Under the Communications Act 2003, providers can generally operate if they comply with the General Conditions of Entitlement. They do not need any specific permission to operate unless a licence for their specific network or service is required.

Licences are needed for a range of activities including the following key ones:

  • The use of radio spectrum (used for mobile telecommunications as well as analogue, digital and satellite broadcasting) requires a licence from Ofcom (section 8, Wireless Telegraphy Act 2006 (WTA)). Radio spectrum is auctioned by Ofcom from time to time, for vast sums running into billions of pounds.

  • Digital TV and radio broadcasting requires a licence under the Broadcasting Act 1996. This is known as multiplex licensing and it is different from the licence of the relevant spectrum, which is separately licensed under the WTA. Licences are granted by Ofcom. There is a fixed fee payable, and there can also be an annual percentage of revenue payable.

  • Operating a satellite in outer space. The licence is obtained from the UK Space Agency. The current application fee is GB£6,500.

There is no licence as such needed to operate a fixed line telecommunications network. However in practice it is difficult to operate any network (fixed or mobile) without "Code powers" granted by Ofcom under the Electronic Communications Code (see Question 12).

Telecommunications providers also must apply for blocks of telephone numbers (see Question 19).

 
5. How long does a telecommunications licence typically last and what are the usual conditions attached to it? Can conditions be varied? Are licences available for public inspection?

A licence granted by Ofcom usually lasts until it is revoked by Ofcom or surrendered by the licensee. In the licence, Ofcom normally restricts the situations that it can revoke the licence to matters such as:

  • Breach of the terms of the licence by the licensee.

  • Reasons related to the management of the radio spectrum.

  • Infringement of relevant legislation.

The conditions attached to a licence are normally related to the permitted use of the spectrum. For example, a mobile operator is not normally permitted to use the spectrum for radio broadcasting. There may be more specific conditions imposed, for example conditions have recently been imposed on mobile operators to achieve a certain level of geographic network coverage.

Copies of licences can be downloaded from Ofcom's website.

Penalties for non-compliance

6. What are the consequences of non-compliance with the telecommunications regulations?

There are many consequences for non-compliance, but the main ones are breach of conditions set by Ofcom and non-compliance with the PhonePayPlus Code of Practice, which are discussed below. In addition, there are fines and penalties for specific breaches of other regulations.

Ofcom conditions. Usually, the provider can remedy non-compliance before suffering any consequences other than negative publicity (this is a major deterrent in itself). Where Ofcom determines that there are reasonable grounds to believe that a provider has contravened a condition, it notifies that provider in writing, requiring the breach to be remedied (sections 94 and 96A, Communications Act 2003 (Communications Act)). If the provider fails to comply then Ofcom can issue an enforcement notification (sections 95 and 96C, Communications Act). If the provider still fails to comply then Ofcom can seek a court injunction requiring compliance (sections 95 (6) and 96C(6), Communications Act), or impose penalties not exceeding 10% of turnover (sections 96, 96B and 97, Communications Act).

PhonePayPlus Code of Practice. Potential sanctions for breach of the PhonePayPlus Code of Practice include:

  • A requirement to remedy the breach.

  • A requirement to refund customers.

  • Fines.

  • Prohibiting the offender from providing the relevant service.

These sanctions are determined by a tribunal and PhonePayPlus can direct network providers to suspend the offender's access to the service if they do not comply. Many breaches can be resolved through co-operation between PhonePayPlus and the offender, without a tribunal hearing becoming necessary.

Appeals

7. Can decisions of the regulators be appealed and on what grounds?

Most decisions Ofcom makes, including the setting, modification or revocation of general or specific conditions, can be challenged by appeal to the Competition Appeals Tribunal (CAT) (section 192, Communications Act 2003 (Communications Act)). If the decision relates to price control, then the CAT automatically refers it to the Competition and Markets Authority (CMA) for determination, after which the CMA refers it back to the CAT (section 193, Communications Act).

There are some decisions that cannot be appealed to the CAT (Schedule 8, Communications Act).

Any appeal to the CAT must set out the detailed grounds of the appeal, including details of the alleged error of fact or law (or both). Other than that, there is no restriction on the possible grounds for an appeal.

Any decision can be appealed by applying for judicial review at the Administrative Court, although this is an unusual step.

The various possible grounds for an appeal to the Administrative Court are a complicated area of law, but essentially the claimant must show that the regulator acted unlawfully in the way it made the decision, or acted beyond its powers. It is not enough to just show that the regulator should have made a different decision.

After the CAT or the Administrative Court, the next level of appeal is the Court of Appeal. Appeals to the Court of Appeal from the CAT must relate only to a point of law (section 196(2), Communications Act).

It is possible to appeal a decision of the Court of Appeal to the Supreme Court, which is the final court of appeal.

Permission is required in the usual manner for an appeal either to the Court of Appeal or the Supreme Court.

The appeal process on PhonePayPlus decisions is complex. In summary, a range of specific types of decisions (for example, a finding of breach of the PhonePayPlus Code of Practice) can be internally appealed through an oral hearing procedure (see Annex 2, PhonePayPlus Code of Practice), and then appealed to an Independent Appeals Body (see Annex 3, PhonePayPlus Code of Practice). It is also possible to apply to the Administrative Court for judicial review on the correct grounds, either following an unsuccessful appeal to the Independent Appeals Body or even, in rare cases, before that.

Universal service obligations

8. Is the incumbent provider or other large providers with significant market power subject to specific regulations? Do universal service obligations apply? Are there provisions for the structural separation of a network?

Ofcom can set the following types of special condition (section 45, Communications Act 2003 (Communications Act)):

  • Significant market power (SMP) conditions. These can only be imposed where a provider has been found to be dominant (section 78(1), Communications Act). A provider is dominant where it enjoys "a position of economic strength affording it the power to behave to an appreciable extent independently of competitors, customers and ultimately consumers". They can address matters such as:

    • network access;

    • network access pricing;

    • functional separation;

    • services provided to end users; and

    • apparatus supply.

  • Universal service conditions. Under the Universal Service Order, certain services (including telecommunications services on reasonable demand and public pay phones) must be provided on a universal basis throughout the UK. Ofcom can impose obligations on certain providers to ensure that this goal is in fact met. For example, Ofcom has imposed universal service obligations on KCOM (formerly known as Kingston Communications) (in respect of Hull) and on British Telecom (BT) (in respect of the rest of the UK).

  • Access related conditions. These are normally only imposed on providers with SMP. They relate to providers having access to the use of networks of their competitors and to interconnection (physical links between networks to allow them to communicate with each other).

  • Privileged supplier conditions. These can only be imposed on public communications providers that enjoy special or exclusive rights in relation to the provision of any non-communications services. Essentially, there should be accounting and structural separation between the telecoms and other activities of such providers (see section 77(3), Communications Act).

There is no enforced structural separation of a network in the UK. There is functional separation of BT's Openreach division from the rest of the BT Group, which BT must do under undertakings it gave in 2005 following negotiations with Ofcom. Openreach supplies access to BT's network to other communications providers, and the purpose of the functional separation is to impede BT from discriminating against providers that need access to its network.

General conditions

9. What general conditions apply to telecommunications services? Which other regulations must be complied with?

Ofcom can set the General Conditions of Entitlement (section 45, Communications Act 2003 (Communications Act)), and the range of matters that the General Conditions can cover is set out at section 51 of the Communications Act. There are currently 23 General Conditions of Entitlement (http://stakeholders.ofcom.org.uk/telecoms/ga-scheme/general-conditions). They cover the following non-exhaustive list of matters:

  • Interconnection, which is the obligation to interconnect.

  • Effective functioning of networks.

  • Availability of emergency call numbers free of charge.

  • Public pay telephones.

  • Accessibility of directory enquiry facilities.

  • Charging transparency provisions.

  • Metering and billing.

  • Special treatment for end users with disabilities.

  • Provisions dealing with allocation of telephone numbers.

  • Number portability.

  • Service migrations and home moves, including the information to be provided and customer termination rights.

  • Sales and marketing regulations for mobile providers.

See Questions 3 and 8 that refer to other regulations that must be complied with.

 

Spectrum use

10. Which authorities allocate spectrum use and how is it managed?

Ofcom is responsible for the management of the civil radio spectrum (used by public telecommunications providers) and other government departments manage other portions of spectrum including the Ministry of Defence.

Ofcom manages the spectrum by the allocation of licences, usually through auction. It also manages spectrum clearance and re-licensing (otherwise known as re-farming) programmes in response to competing demands from potential users for access to spectrum.

The International Telecommunications Union (established by treaty) co-ordinates the use of spectrum internationally, and the European Commission has produced a radio spectrum policy programme (under the authority of the Framework Directive) that sets policy objectives for member states.

 
11. Can spectrum use be traded or sublicensed?

Spectrum use can be both traded and leased by existing licence holders. Leasing, rather than sublicensing, is the term favoured by UK regulation. This activity is governed by trading rules set out in the Communications Act 2003 and the Wireless Telegraphy Act 2006.

 

Infrastructure and network management

12. Do communications providers have any powers to place their equipment on third party sites?

Network providers can apply for "Code powers", that is, a direction that the Electronic Communications Code (Code) should apply to that provider. When a provider has Code powers, if a fee cannot be negotiated with the provider of the land for the installation of the equipment, then the provider can apply to the court for an order that the rights be granted. The court must make such an order if it is satisfied that any prejudice caused by the order is capable of being adequately compensated for by money and outweighed by the benefit to those whose access to an electronic communications network or service will be secured by the order.

The Code is set out in Schedule 2 to the Telecommunications Act 1984, as amended by Schedule 3 to the Communications Act 2003.

The Law Commission has made recommendations for reform of the Code.

Access and interconnection

13. Does access to infrastructure and a network have to be given to other providers?

Ofcom sometimes sets significant market power (SMP) conditions (particularly on British Telecom (BT)) obliging the provider with SMP to provide network access (such as wholesale access or carrier pre-select access) or setting conditions on the terms to be offered for such access.

Ofcom can set special conditions requiring providers to share apparatus (section 73(3), Communications Act 2003 (Communications Act) to encourage efficient investment in infrastructure and to promote innovation (section 73 (3A), Communications Act). Sharing of infrastructure has become widespread in the mobile sector in any event, largely commercially driven by the cost efficiencies it generates.

For interconnection, see Question 14.

 
14. Is the interconnection of networks required? Are interconnection prices regulated and how are interconnection disputes resolved?

Interconnection of networks is required. All public network providers must negotiate interconnection with any other network provider in the European Community on request, with a view to concluding an agreement within a reasonable period (Condition 1, General Conditions of Entitlement).

Network providers charge other providers for the termination of calls on their networks (that is, the network whose customer receives the call charges the network whose customer makes the call).

Ofcom regulates interconnection pricing in the UK and Ofcom has recently reviewed the position in the UK market for termination of calls to mobile phones. It has concluded that a charge control mechanism based only on the incremental cost of terminating a call (that is without any mark-ups to cover other costs) is appropriate to facilitate effective competition. On this basis, Ofcom has set caps on call termination charges that will be in place until 31 March 2018 (at which point the position will be reviewed again). However, this decision is currently on appeal to the Court of Appeal.

Ofcom has regularly consulted with industry on termination charge caps and there have been a number of appeals against Ofcom's decisions in the past. See Question 7 for information on how the appeals process works.

Data protection and security

15. What data protection or consumer privacy regulations apply to the telecommunications sector, including both generally applicable and sector-specific laws? Are communications providers required to retain communications data? If yes, which data and for how long? What are the penalties for breach of these regulations?

Telecommunications providers process personal data (in particular, the personal data of their customers and end users) and therefore they must comply with the Data Protection Act 1998. This is a large area of law, but what is relevant here is that personal data must be processed fairly. This usually means that it either has to be processed with the user's consent or the processing must be necessary for the performance of a contract, taking steps to enter into a contract or compliance with a legal obligation. There is also a general rule that personal data cannot be kept longer than necessary.

The maximum fine for serious breaches of the Data Protection Act is currently GB£500,000, and affected individuals can also claim for damages in respect of a breach of the Act. Larger fines, based on a percentage of turnover, may be brought in under possible new laws being considered at EU level.

There is an additional communications data retention regime in the UK, but it has been subject to a lot of change and turmoil recently, meaning that it is now somewhat uncertain.

The Data Retention Directive 2006/24/EC provided for a retention period of six months to 24 months in most cases. In April 2014, the European Court of Justice ruled that the Directive is invalid on the grounds that it does not comply with the EU Charter of Fundamental Rights (Digital Rights Ireland and Seitlinger and others, Joined Cases C-293/12 and 594/12, 8 April 2014).

The UK had implemented the above Directive through the Data Retention (EC Directive) Regulations 2009, providing for retention of communications data for 12 months and internet-related data for six months. These were brought in under the powers vested by section 2(2) of the European Communities Act 1972, which requires there to be an EU obligation on the UK to be implemented. As the Directive creating the obligation was held to be invalid, there was a clear risk that these regulations were invalid too.

As a result, Parliament rushed through emergency legislation in the form of the Data Retention and Investigatory Powers Act 2014 (DRIPA) and the Data Retention Regulations 2014 (DRR). This legislation gave the Secretary of State the power to give "data retention notices" to public telecommunications operators, mandating the retention of prescribed types of data for period of up to 12 months (different periods, up to this maximum, could be prescribed for different types of data) (section 1, DRIPA; regulation 4, DRR).

However, in July 2015 the High Court held that section 1 of the DRIPA is inconsistent with EU law on the basis that it is not accompanied by a data access regime that provides adequate safeguards for the rights to privacy and data protection (Article 7 and 8, EU Charter of Fundamental Rights). The High Court made an order disapplying the power to issue retention notices set out in section 1, to the extent that it permits access to retained data in a manner inconsistent with EU law, but it suspended that order until 31 March 2016 (R (on the application of Davies) v Secretary of State for the Home Department [2015] EWHC 2092)).

Therefore, currently the Secretary of State may still enforce data retention orders by seeking a court injunction. In the longer term, this is an area of uncertainty in the law that will have to be resolved. New legislation is expected soon, and the Secretary of State has been granted leave to appeal the decision in Davies.

 
16. What are the rules relating to the interception of calls? How and on what grounds can government authorities require disclosure of communications data? What are the penalties for breach of these rules?

Under the Regulation of Investigatory Powers Act 2000, intentional interception without lawful authority of communications made over public telecommunications systems is prohibited (section 1(1), Communications Act 2003 (Communications Act)), but as an exception, the Secretary of State can authorise interception and disclosure (section 5, Communications Act) if it is necessary:

  • In the interests of national security.

  • For the purpose of preventing or detecting serious crime.

  • For the purpose, in circumstances appearing to the Secretary of State to be relevant to the interests of national security, of safeguarding the economic well-being of the UK.

  • For the purpose, in circumstances appearing to the Secretary of State to be equivalent to those in which he would issue an order by virtue of the second bullet point above of giving effect to the provisions of any international mutual assistance agreement.

This is implemented in practice using a system where civil servants with the authority to do so issue requests to telecommunications operators for the relevant information. For example, call records or text messages that could provide evidence of criminal activity.

The penalties for a breach of the rules are severe. If a person has made an unlawful interception without intent and without an interception warrant, a "monetary penalty notice" of up to GB£50,000 can still be imposed.

A person found guilty of an offence can:

  • On summary conviction (for less serious offences) be liable for a fine (amount at the discretion of the court).

  • On indictment (for more serious offences), be liable for a fine (amount at the discretion of the court) and/or to a prison term of up to two years.

Culpable directors and managers, as well as the body corporate, can be convicted.

 
17. Are there any network or data security obligations imposed on communications providers?

Providers must take technical and organisational measures appropriate to manage risks to the security of public telecommunications networks and services (section 105A, Communications Act 2003). Ofcom has published guidance on the measures that providers should take. The penalty for failure to comply is an amount not exceeding GB£2 million.

 

Price regulation

18. How are prices and charges regulated?

Non-geographic numbers

There are a number of controls on the cost of calls to certain "non-geographic" number ranges. Non-geographic numbers are not mobile numbers but are numbers that are not fixed to a geographical location. Non-geographic numbers are widely used by business and government and account for 12% of call volumes. They are generally more expensive to call than geographic numbers and widespread variation in pricing has caused confusion among consumers. The controls are in summary:

  • A simplified tariff structure for calls to 084, 087, 09 and 118 numbers that separates the Access Charge (paid to the communications provider originating the call) and the Service Charge (passed to the communications provider terminating the call and that can be shared with the organisation using the non-geographic number). The structure, in summary, encourages transparency by providing for consistency of Access Charges for different non-geographic number ranges across a single tariff, and providing for Service Charges to be advertised on presentation of the relevant number.

  • All calls to 080 and 116 numbers must be free of charge.

  • A number of caps on "Service Charges only" for a range of other 08 numbers and all 09 numbers.

  • Calls to 03 numbers must be at up to the same rate that customers would pay for calling geographic numbers.

The controls are set out in the General Conditions of Entitlement and the National Numbering Plan.

Premium rate services

PhonePayPlus does not impose price caps on premium rate services but regulates other matters related to costs (such as informing customers of pricing in a transparent manner).

Roaming

Roaming charges are regulated at EU level by the Roaming Regulation. The Regulation only applies to roaming within the EU (by customers of EU providers) and imposes the following:

  • Caps on roaming retail charges.

  • Caps on the average roaming wholesale call charges that home operators can levy on operators in other member states.

  • A requirement that home providers must offer their customers a Eurotariff.

  • A requirement for home providers to notify their customers by SMS of roaming charges when they visit another member state.

A new regulation on a European single market for electronic communications (2013/0309 (COD)) was approved by the European Parliament in October 2015. This will bring in the following changes in respect of roaming:

  • From 30 April 2016, there will be new retail caps on retail EU roaming charges: the surcharge for roaming over and above what the provider would charge the customer for the same usage in the home country will be capped. In practice this ought to result in lower roaming charges.

  • From 15 June 2017, roaming charges within the EU will be banned so that home providers cannot charge roaming customers more than they would be charged for the same usage in the home country, subject to a "fair use" cap on mobile data to allow operators to charge for excessive data usage.

Interconnection

Interconnection (otherwise known as termination) prices are regulated by significant market power (SMP) conditions (see Question 13). There are also certain SMP conditions applying to British Telecom (BT) and KCOM in respect of wholesale broadband and wholesale trunk segments.

Unfair consumer charges

Consumer law regulates unfair terms in consumer contracts more generally. Much of the consumer law has been consolidated in the Consumer Rights Act 2015 (CRA 2015) (in force from 1 October 2015). The CRA 2015 stipulates that pricing such as non direct debit charges and early termination charges (essentially ancillary and administrative charges, often labelled "non-core" charges) must not be unfair (see section 62-63 and Schedule 2 Part 1, CRA). Ofcom has issued guidance on this subject (pre-dating the CRA 2015, but relying on the previous, similar regime under the Unfair Consumer Contracts Regulations 1999) (see http://stakeholders.ofcom.org.uk/binaries/consultations/addcharges/statement/addchargestatement.pdf).

 

Telephone number and subscriber management

19. How are telephone numbers allocated and managed in your jurisdiction?

Under section 56 of the Communications Act 2003 (Communications Act), Ofcom must publish a National Telephone Numbering Plan setting out:

  • The numbers available for allocation.

  • Restrictions on adoption and use that Ofcom considers appropriate.

  • Consumer protection requirements as Ofcom considers appropriate (that can include price controls and has been used to regulate the pricing of non-geographic numbers) (see Question 18).

Ofcom must also review and revise the National Telephone Numbering Plan from time to time and keep records of the telephone numbers allocated (section 56, Communications Act).

A non-exhaustive summary of number ranges is as follows:

  • 01 and 02 numbers are used for geographic numbers.

  • 03 numbers are non-geographic numbers which cost the same as geographic numbers.

  • 05 numbers are for corporate numbering and VoIP (voice over IP) services.

  • 04 and 06 numbers are reserved for future use.

  • 07 numbers are used for mobile and paging.

  • 08 numbers are special-rate non-geographic numbers.

  • 09 numbers are premium rate numbers.

Condition 17 of the General Conditions of Entitlement also states that:

  • A provider can apply for an allocation or reservation of numbers.

  • An allocation of numbers may be withdrawn if they have not been used within six months.

  • A provider that has been allocated a number can authorise its transfer to another provider (used for the purposes of number porting).

 
20. Does access have to be provided to certain services, such as the emergency services and directory enquiries?

The Universal Services Order provides that:

  • It must be possible to make calls to the emergency services from public pay phones free of charge and without the use of coins or cards.

  • At least one comprehensive telephone directory enquiry facility will be made available to end-users, including users of public pay phones.

In practice, it is possible to dial the emergency services and directory enquiries from virtually any phone, fixed or mobile. However, there is a charge for calling directory enquiries.

 
21. Are there regulations relating to specific consumer services, such as acquiring and transferring subscribers, number portability, complaint handling, and nuisance and silent calls?

Providers must provide number portability when they switch providers on reasonable terms and conditions (including charges) and within defined timescales (Condition 18, General Conditions of Entitlement). There are some more detailed rules about how charges can be applied but in practice, there is usually no charge to consumers.

The majority of number porting is mobile to mobile and fixed to fixed. Porting a geographic (fixed line) number to a mobile phone is also possible, but charges for calls to a geographic number must remain consistent with charges to that local geographic number range.

Within the General Conditions of Entitlement, there are also some telecoms specific obligations on telecommunications providers including:

  • A requirement that providers publish clear and up-to-date information on applicable prices and tariffs.

  • A requirement that providers provide itemised bills to customers on request.

  • A requirement to be transparent in the case of late payment of bills.

  • Rules on the provision of information about quality of service.

  • Rules on fixed line and broadband migrations and home moves, for example, providing for an option to cancel between completion of the sale and completion of the transfer.

  • Rules on special measures for users with disabilities.

  • Rules on sales and marketing of mobile telephony services specifically.

  • Rules about what should be covered in consumer contracts (see Question 22).

There is an Ofcom Approved Code of Practice relating to complaints made by domestic and small business customers.

Ofcom has powers under the Communications Act 2003 (Communications Act) to take enforcement action where it has reasonable grounds for believing that a person has persistently misused an electronic communications network or service, which can include nuisance calls and silent calls (sections 128 to 130, Communications Act). Ultimately, a penalty of up to GB£2 million can be imposed if warnings are ignored.

There is also a Telephone Preference Service, which allows users to list their telephone number as not to be called for unsolicited marketing purposes (Regulation 21, Privacy and Electronic Communications (EC Directive) Regulations 2003).

 
22. Are consumer telecommunications contracts subject to specific regulations?

The General Conditions of Entitlement contain the following requirements on what operators must include in consumer contracts:

  • The minimum subject matter to be covered in consumer contracts, for example, service quality, contract duration and termination charges.

  • A requirement that contract termination conditions do not act as a disincentive to change provider.

Much of general consumer law has been consolidated into the Consumer Rights Act 2015 (CRA). Of course, general consumer law is not specific to telecoms. However, there is the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (SI 2013/3134), which sets out the conditions and circumstances under which consumers can change their minds following a telephone or online purchase.

 
23. Are there restrictions on the use of Voice over IP technology in your jurisdiction?

There are no restrictions on the use of voice over IP (VoIP) technology, but it is subject to some of the same regulation as ordinary telephone services.

Ofcom concluded in 2006 that VoIP services are electronic communication services (as defined by the Communications Act 2003). Under the General Conditions of Entitlement:

  • VoIP providers that originate calls to UK telephone numbers (as opposed to VoIP providers that only originate calls to other users using compatible VoIP services, for example, a Skype to Skype call), must enable calls to emergency numbers.

  • All VoIP providers must specify whether or not the ability to call the emergency services is subject to any restrictions.

 
24. Are there regulations relating to the maintenance of net neutrality in your jurisdiction?

In October 2015, a new EU regulation on a European single market for electronic communications (2013/0309 (COD)) was approved by the European Parliament, which will protect the principle of net neutrality, requiring providers not to block or slow down access to particular internet content or services. The new regulation will enter into force on 30 April 2016. However, it has come under criticism because of some perceived loopholes in the rules; ISPs can agree deals with content providers to deliver services of enhanced speed and quality in some cases, provided that it has no impact on the "open internet".

In the UK, codes of practice have already been agreed at industry level:

  • Voluntary industry code of practice on traffic management transparency for broadband services: most internet service providers (ISPs) have signed up to this, and it commits them to provide information about what traffic management takes place.

  • Code of practice on the open internet: a number of ISPs have signed a code of practice agreeing to make full and open internet access the norm and not to operate traffic management practices to target and degrade the services of specific providers. For example, this means that the signatory ISPs will not degrade access to Skype and other voice over IP (VoIP) services that compete with their own telephony services.

 

Outsourcing and telecommunications

25. Are there specific regulations for the outsourcing of telecommunications services or the management of these services?

The UK has a permissive regime when it comes to outsourcing and has a flourishing marketplace for outsourcing in varying forms and with multiple links in the outsourcing supply chain. There is no specific regulation of telecommunications outsourcing or managed services as such, but these are not terms of art so it is important to understand what is regulated that is relevant to this type of activity.

The Communications Act 2003 regulates electronic communications networks and electronic communications services (see Question 3).

It is a form of outsourcing in the broad sense when a customer sources a telecommunications service or the management of those services or when an electronic communications service provider purchases network services from an electronic communications network provider. The provision of communications services by the service providers to the end customers is generally regulated, and sometimes there are significant market power (SMP) conditions obliging the network providers to provide access (see Question 13). Other than the latter, there is no regulation specific to the act of outsourcing itself, but providers will always want to ensure that the outsourcing facilitates compliance with law and regulation.

There is also no regulation specific to the outsourcing by a network provider of the build, upgrade and maintenance of a network. The network provider must simply ensure that the outsourcing facilitates its compliance with law and regulation.

 
26. Briefly set out the current trends in outsourcing transactions in the telecommunications sector.

The market in unified IT, fixed line telephone and broadband services for industry and government is highly developed, with many providers of unified services competing with each other. This includes large telecoms operators, IT companies and providers, such as Unify, which aggregate services.

However, mobile services are mostly provided to industry and government directly by the mobile network operators (MNOs) independently of fixed line telephone and broadband. This is beginning to change, for example, with Vodafone and BT offering integrated mobile, broadband and fixed line packages.

Of course, the appointment of multiple suppliers for IT, fixed line telephone and broadband is also possible and there is a general trend towards multi-sourcing to enable end customers to obtain the benefits of competition in the voice, mobile, broadband and other sectors of the telecommunications market.

Technological advances are affecting the range of technologies being procured (see Question 28).

 
27. Who are the key providers of outsourced telecommunications?

There is a range of incumbent operators, established IT outsourcing companies and aggregators in the market. The key names include:

  • British Telecom (BT).

  • Vodafone (having taken over Cable & Wireless Worldwide).

  • Cisco.

  • Unify.

  • Verizon.

  • Fujitsu.

There are also mid-market telecommunications companies, such as Colt, in the market.

 
28. What are the current technologies influencing or affecting outsourcing by telecommunications operators?

Cloud based services and voice over IP (VoIP) technologies are becoming increasingly used due to the cost efficiencies they generate. Security in the cloud is a big concern for customers that providers are keen to address.

Bring your own device is an area where providers can add real value. In practice, some employees use their own phones and tablets at work and many employers are trying to accommodate this trend by allowing employees to use their own devices for work purposes in a secure manner. The integration of the right technology to make this work is a challenge.

The technological development of the mobile sector is important. While BlackBerry used to be the business device of choice, modern smartphones are fast overtaking due to vast improvements in their email applications and a better range of other applications. Coupled with this, the introduction of fast LTE or 4G data networks since 2012 has hugely improved the utility of mobile to business and public service users. For example, it can be used for more effective sharing of documents and video calling on the move. This is expected to drive increasing pressure from customers for better integration of fixed and mobile solutions.

 
29. From a contractual perspective, what are the key issues in a typical telecommunications outsourcing transaction in your jurisdiction?

There are two key types of telecommunications outsourcing:

  • Service outsourcing. The purchase of telecommunications services, where the ultimate purchaser could be either:

    • a reseller (for example, a mobile virtual network operator); or

    • a business or public sector end user.

  • Network outsourcing. The purchase of network deployment, upgrade and maintenance where the ultimate purchaser is the network operator.

In either scenario, service levels are a key issue. For service levels to be meaningful, customers expect fixed service credits or liquidated damages as remedies for poor performance (otherwise the customer must make a claim for contractual damages against the supplier the quantity of which will almost certainly be disputed). Exposure to liability is a key cost driver for suppliers, so some suppliers will not move far from standard offerings with very limited service level regimes.

In the service outsourcing area, pricing arrangements vary considerably and are often complex and heavily negotiated. Suspension and termination rights (for example, with non-payment) are important to suppliers. Termination rights, exit and transition are important to customers. The biggest concern is often the cost of early exit particularly in the case of long term contracts. It is important for customers to understand how telephone or fibre lines will be dealt with:

  • Are these being taken over from an incumbent supplier?

  • Will the new supplier operate the lines?

  • Will the new supplier be reliant on a third party supplier to operate the lines by a managed service or sub-contract?

In the area of network outsourcing, contract structure varies considerably to accommodate business requirements, and is often driven by the customer. Termination or order cancellation rights are usually key issues for a buyer, particularly because they can provide negotiation leverage should things go wrong. Transition and the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) can be key issues too, depending on the nature of the contract.

 

Online resources

EU legislation

W http://eur-lex.europa.eu/homepage.html

Description. This website provides free access to the full text of EU legislation in English and a range of other European languages. Amendments can take up to three working days to be published, and it can take two to three weeks for consolidated legislation incorporating amended text to be published.

UK Legislation

W www.legislation.gov.uk

Description. This website provides free access to the full text of UK legislation in English. In many cases, legislation has not been updated to incorporate subsequent amendments (although the amending legislation itself is normally available through the site).

Ofcom

W www.ofcom.org.uk

Description. The website of Ofcom, the UK's communications regulator, which provides information on Ofcom's supervision and licensing of communications providers, as well as the rights of communications users (consumer and business). The General Conditions of Entitlement and the National Numbering Plan can be found here.



Contributor profiles

Diane Mullenex, Partner

Pinsent Masons LLP

T +44 20 7490 9250
E diane.mullenex@pinsentmasons.com
W www.pinsentmasons.com

Professional qualifications. England and Wales, Solicitor, France, Avocat à la Cour.

Areas of practice. Telecommunications; IT; networks security; data privacy; E commerce. Extensive experience advising clients in telecommunications, technology and other highly regulated industries; specialises in complex multi-discipline, cross-border telecom projects which have earned her the reputation as an expert in this field; works in Asia, Europe, Africa and the Middle East.

Non-professional qualifications. Appointed as a Conseiller du Commerce Extérieur (CCE) to the French Prime Minister; awarded Insignia of Chevalier de l’Ordre national du Mérite for her involvement in promoting the French TMT sector.

Recent transactions

  • A Middle East based property developer on its participation in the second national fixed-line licensee in the State of Qatar, involving an assessment of the regulatory, commercial and financial benefits of ICT infrastructure needs through alternative methods, such as deploying its own infrastructure and the drafting and negotiating of transactional documents to reflect the desired extent of participation in the licensee, including a managed services agreement, interim co-operation agreement and incorporation documentation.

  • Sovereign fund: advice regarding the opportunity of an acquisition of holdings in the capital of the incumbent operator in Mali in consideration of the applicable regulations. This involved production of an analysis report of the regulatory framework for telecommunications in Mali, management of a telecommunication regulation audit, and drafting a work paper for the improvement and modernisation of the telecommunication regulations.

Languages. French, English

Professional associations/memberships. Presently an active member of associations such as the IBA, where she is an honorary co-chair of the Communication Law Committee. Also a member of CLUSIF, IAGA, International Masters of Gaming Law, and so on.

Publications. Thomson Reuters Gaming Law.

Daniel O'Neill, Senior Associate

Pinsent Masons LLP

T +44 20 7490 6932
F +44 20 7418 7050
E Daniel.O'Neill@pinsentmasons.com
W www.pinsentmasons.com

Professional qualifications. England and Wales, Solicitor, qualified 2005.

Areas of practice. Technology, media and telecommunications; experience in a variety of complex telecommunications and technology transactions; several years working in-house for a mobile telecoms operator.

Non-professional qualifications. LLB Law and Italian, Cardiff University.

Recent transactions

  • Leading a large legal team including in-house and external lawyers negotiating a complex multi-party turnkey procurement of telecoms infrastructure.

  • Advising on the first UK mobile payments partnership between a mobile operator and a bank.

  • Advising on the set up and break up of a mobile media and payments joint venture.

Languages. English, Italian

Professional associations/memberships. Society for Computers and Law


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