Brexit: Telecommunications Regulation in the UK implications

This briefing note advises readers on the immediate considerations and anticipates how Brexit will impact on the telecommunications industry in the UK. This note discusses the effect that Brexit is likely to have on telecommunications market regulation in the UK, and also the potential implications for stakeholders in the industry both within and beyond the UK.

The revised Withdrawal Agreement is implemented into UK law by means of the European Union (Withdrawal Agreement) Act 2020 which amends the European Union (Withdrawal) Act 2018 ("the EU Withdrawal Act").

With effect from the end of the transition period, the EU Withdrawal Act (as amended) repeals the European Communities Act 1972 ("ECA 1972") and converts the existing body of currently directly applicable EU law into domestic UK law, subject to amendments (to remove EU and cross-border references) by means of statutory instruments. This will mainly apply to EU Regulations which would otherwise cease to directly apply on Brexit, and also to statutory instruments implementing EU Directives, where the statutory instruments were adopted pursuant to the ECA 1972 and would otherwise fall away on repeal of that Act. For the purposes of the transition period, EU law will generally continue to be applicable to and in the United Kingdom.

According to the Withdrawal Agreement, during the transition period, EU law that remains applicable in the UK will produce in respect of and in the UK the same legal effects as those which it produces within the EU and its Member States. The interpretation of these laws needs to also be considered in light of EU case law and general principles.

Telecommunications-specific regulation under EU law

The provision of telecommunications services in the EU is subject to a sector-specific regulatory regime established mainly by a set of EU Directives. These Directives collectively comprise the core regulatory framework for electronic communications in Europe (the "Framework") and are required to be transposed into and applied in Member State law by the national legislators. In the UK, this has mainly been done through the Communications Act 2003, although other legislation is also relevant (including the Wireless Telegraphy Act 2006 and the Privacy and Electronic Communications (EC Directive) Regulations 2003). The Directives will continue to be relevant to the interpretation of the UK statutes where there are ambiguities in the UK legislation, insofar as the UK legislation was intended to transpose the EU Directives. However, post-transition period, the UK would in principle be free to change the laws that were originally introduced in accordance with EU Directive requirements.

The Framework is aimed at harmonising national telecommunications regulatory rules across the EU, promoting harmonisation of telecommunications regulation, liberalisation and competitiveness of telecommunications markets and protection of customer and end-user rights. The issues addressed under the Framework range from mandating telecommunications network access, to radio spectrum management, and to data privacy, use of electronic communications data, number portability and consumer access to emergency services.

In 2014, the EU Commission also adopted the Cost Reduction Directive with an aim to reduce the cost of deploying high-speed electronic communications networks with a focus on access to passive network infrastructure (including masts, ducts, towers and poles). The UK will no longer be required to maintain laws in the terms of this Directive once it ceases to be a Member State of the EU.

In order to ensure the harmonised application of the Framework at the Member State level, national regulatory authorities are required to notify to the Commission all proposals to analyse telecommunications markets and all proposed regulatory conditions to be imposed on operators designated as having significant market power, for prior review/consultation. Consequently, Ofcom as a Member State regulatory body in the UK was required to notify the Commission of any draft proposals that it has for regulating national electronic communications markets, such as the markets for broadband access or voice call termination, but will no longer need to do so following the UK's exit from the EU.

A number of additional instruments have been enacted at the EU level which are directly applicable to the provision of telecommunications services in the EU. These include the Roaming Regulations, for example, which regulates wholesale and retail roaming charges within the EU. Another example is the Open Internet Regulation (2015/2120), which enshrines the principle of net neutrality in EU law. Further, the Commission has issued Recommendations on a number of regulatory issues, including on non-discrimination obligations and costing methodologies for network access. All of these measures will cease to apply in the UK when it leaves the EU.

The effects of Brexit on telecommunications regulation in the UK

• Overview

A UK withdrawal from the EU will mean that the Framework will cease to be applicable in the UK. This is unlikely to give rise to any immediate consequences, however, as the Framework has already been transposed into UK law through national legislation. This national legislation will continue to be valid and applicable following a UK exit. However, the UK government will, by means of secondary legislation under the EU Withdrawal Act, remove from the current UK legislation the provisions referring to the EU institutions and processes that will no longer be appropriate following the UK's exit, such as the requirements on Ofcom to notify certain proposed measures to the European Commission in advance of their implementation. This was stated in a technical notice concerning the position in the event of a "hard Brexit" which the government published on 13 September 2018, and which remains relevant.

Some of the instruments enacted by the Commission fall outside of the Framework, but are aimed at harmonising telecommunications regulatory requirements across the EU, which Ofcom will no longer need to comply with and which will no longer be applicable in the UK. These include the Commission's Recommendations on non-discrimination obligations and costing methodologies for network access, as mentioned above.

• The European Electronic Communications Code

The new EU Directive known as the European Electronic Communications Code (or "EECC") repeals and replaces the existing Directives of the Framework (excluding the ePrivacy Directive). The EECC addresses a number of important issues, including access to network infrastructure, the regulation of new services and technologies, such as over-the-top ("OTT") communication services, and spectrum assignment and management. The EECC must be transposed into national law by each Member State by 21 December 2020, just ten days before the end of the transition period.

The UK government stated in the above mentioned notice of 13 September 2018 that the government would be minded to implement the EECC on the basis that "it would support the UK's policy objectives". In July 2019, the government conducted a consultation on implementing the EECC and commented that it proposes to implement the EECC "with as little impact as possible on businesses, whilst ensuring that they and consumers can make the most of the opportunities the EECC provides". In this consultation, the government set out its intentions for implementation, including where it proposes to i) amend the Communications Act 2003, ii) divide powers between the government and Ofcom, and iii) require Ofcom to amend the General Conditions of Entitlement ("GCs"). The closing date for comments was 10 September 2019 and there will be more concrete proposals in 2020.The consultation also referred to the UK Telecoms Supply Chain Review and noted that this will have an impact on the transposition of the security elements of the EECC.

Following on from the UK government consultation, Ofcom is also in the process of consulting on the consumer protection provisions of the EECC as part of its consultation on fair treatment and easier switching for broadband and mobile customers. The government considers that Ofcom’s existing powers to set GCs are generally sufficient to enable it to implement a large part of the EECC’s new provisions on end-user rights, but noted that some legislative changes may also be required. The proposals on the comparison tools required by the EECC are set out in Ofcom's consultation on "Digital comparison tools for telephone, broadband and pay-TV".

• Digital Single Market measures

The new Commission of Ursula von der Leyen may also change the digital landscape in the EU, which may prove to be an area of divergence from the UK. However, the current stated priorities of the new Commission are the Internet of Things and joint standards for 5G networks together with investment in blockchain, high-performance computing, quantum computing, algorithms and tools to allow data sharing and data usage. These priorities are similar the world over and will undoubtedly form part of the UK's ongoing priorities as well.

Directives planned under the DSM project concerning contracts for the supply of digital content and for sales of goods may not find their way into UK law where the implementation dates are set for after the transition period. These measures are currently seen as consumer-friendly and as relatively onerous for businesses. Similar considerations apply to other customer protection-orientated reforms contained in the DSM initiative. The new Commission is also seeking to introduce a Digital Services Act, which could result in horizontal EU legislation in order to "upgrade [EU] liability and safety rules for digital platforms, services and products, and complete our Digital Single Market" and to require internet platform operators to take down illegal content. This new Digital Services Act could have ramifications for the current e-Commerce Directive, illegal content, online advertising and platform workers. The Digital Services Act may come into force only after the end of the transition period and it remains to be seen whether the UK’s Online Harms white paper will lead to parallel legislation in the UK and how comparable such legislation would be.

• Roaming

Another important consequence of Brexit is that UK consumers may no longer be able to rely on the Roaming Regulation in respect of their use of international roaming services, when travelling within the EU. UK operators will also no longer be subject to regulated roaming tariffs at the wholesale level. However, the issue of roaming charges for UK users across the EU will be a matter of individual operators' commercial arrangements and any agreements that may be made between UK mobile operators and their counterparts in the EU (as the government has stated in its above notice). The major mobile network operators provide their services in the UK and many other EU Member States, which may have an impact on their desire to increase prices in the UK because of the reciprocal nature of these arrangements. Also, some providers already offer free roaming beyond the EU and may not want to lose this competitive advantage.

• Spectrum

A further area where there could be some divergence between the UK and the EU is spectrum management and assignment. Following Brexit, the UK will no longer be subject to Commission decisions and initiatives on the harmonisation of spectrum allocations and use across the EU. It will, however, continue to cooperate with other Member States on some of these issues through membership of other organisations, including the European Conference of Telecommunications and Postal Administrations or CEPT, which is not limited to EU Member States. The UK can be considered unlikely to diverge substantially from the position in the EU because spectrum usage is, by its nature, an international concern and any major changes would equipment becoming more expensive (because they would have to be specifically designed for the UK), raise the risk of cross-border interference from the divergent use of bands and reduce long-term certainty.

• Net neutrality

Following the end of the transition period, the Open Internet Regulation will no longer be directly applicable in the UK, although its content could be preserved at UK level under the EU Withdrawal Act. Alternatively, the UK could enact similar domestic legislation (or perhaps choose to address the issue by way of non-binding guidelines) to take effect following Brexit. If neither of these legislative options were pursued, the principle of net neutrality would no longer be safeguarded under law in the UK.

Longer term divergence

In the longer term, Brexit is likely to lead to a divergence in regulation between the UK and the rest of the EU. Following Brexit, the UK Parliament will be free to legislate for the regulation (or de-regulation) of the national telecommunications markets as it wishes. Moreover, Ofcom will no longer be required to notify the Commission of any draft proposals for the regulation of telecommunications markets in the UK. The UK will essentially have a "free hand" in market regulation, provided that it complies with WTO requirements. An early example of where such divergence might occur is the e-privacy regime. On 10 January 2017, the Commission published proposals for a substantial overhaul of the existing privacy legal framework for electronic communications, which, if enacted, would replace the current e-Privacy Directive with an EU Regulation. If this Regulation is adopted after the end of the transition period, the proposed changes will not take effect in the UK, unless the UK chose to adopt parallel legislation in similar terms (see our article on the impact on telecommunications arising from the failure to adopt the ePrivacy Regulation here).

This offers the UK the opportunity to move faster than the EU in loosening the restrictions on the use of cookies and electronic communications data (for example, for the purposes of fraud detection), should the UK government be so inclined.

Implications of Brexit for telecommunications companies

• UK companies:

Companies established in the UK can, until the end of the transition period, avail themselves of the rights to free movement granted under the Treaty on the Functioning of the European Union, including the freedom to provide services and freedom of establishment. This means that any entity incorporated in the UK has the right to provide telecommunications services in any other Member State, assuming that it complies with the national law requirements that apply to domestic companies in that Member State. Brexit will remove this EU law right in respect of UK-established companies and they will be treated the same as any non-EU entity. In practice, this does not necessarily mean that they cannot provide services in an EU Member State, as only some but not all Member States require telecommunications services providers to be established in an EU member state. According to the UK government statement of September 2018, UK telecommunications operators will continue to be able to provide cross-border telecoms services and operate within the EU, under the World Trade Organisation’s General Agreement on Trade in Services ("GATS"), though these WTO rules are not directly enforceable by companies as EU Single Market rules are.

During the transition period, Article 127(6) of the Withdrawal Agreement applies:

"Unless otherwise provided in this Agreement, during the transition period, any reference to Member States in the Union law applicable pursuant to paragraph 1, including as implemented and applied by Member States, shall be understood as including the United Kingdom."

Therefore, until the end of the transition period, UK telecommunications providers should, in principle, be treated as the same as a company incorporated in an EU Member State.

Any regulatory divergence between the UK and the EU following Brexit will also have a direct impact on telecommunications service providers in the UK. Divergences may, for example, arise over time in respect of the regulation of OTT communication services. The UK may take a more liberal approach towards these services than the Commission or certain other national regulatory authorities. The UK may also favour a more pro-investment policy on regulation than certain other Member States.

• EU companies operating in the UK:

Similar logic applies for companies established in any Member State other than the UK. Such companies will no longer have the virtually automatic right under EU law to provide electronic communications services in the UK. However, in contrast to some Member States the UK does not operate a registration or notification regime or specify that services can only be provided by UK- (or EU-) established entities.

• Non-EU companies operating in the UK:

Brexit is also likely to have an important impact on companies from outside of the EU that are considering doing business in the UK and/or the EU. Such companies sometimes choose the UK as a stepping stone or "springboard" into the greater EU-wide market. There are a number of important reasons for this, including language, relative ease of doing business in the UK and the significant size of the UK domestic market. From a compliance perspective, this strategy can be particularly effective in a regulated environment, such as the market for electronic communications. The harmonisation of telecommunications regulatory regimes across the EU has meant that a new market entrant in the UK will be subject to broadly similar regulatory requirements anywhere in the EU. Brexit will, for obvious reasons, now undermine the rationale for using the UK as a springboard into the greater EU-wide market. This is because of the loss of the EU "passport" to the EU internal market that has been available through establishment in the UK and compliance with EU requirements in the UK as a Member State. This “passporting” will no longer be possible from the UK after the end of the transition period.

This article is part of our Brexit series