Friday, September 23, 2016

Brexit for telecommunications markets – where we stand three months after the vote

It is now three months since the shocking United Kingdom vote for Brexit, during which time there has been the appointment of a new prime minister and cabinet, with three leading Brexiteers in cabinet positions charged with the negotiations. Aside from the “Brexit means Brexit” tautology, little formal progress has been made. The invocation of Article 50 TEU is strongly hinted for early 2017, with the prospective use of the Royal Prerogative presently being judicially reviewed. There remains the distinct possibility of a ‘hard Brexit’, closer to the Albanian than the Norwegian option, meaning only access to the single market with tight migration controls.

Attention to telecommunications came, rather briefly, this week, when the European Commission adopted revised guidelines on international mobile roaming. The question arose of whether, post-Brexit, UK-based customers would be able to roam continental Europe without paying surcharges. Given that UK-based operators would no longer have access to the regulated wholesale prices, then the logical answer must be that customers will revert to paying roaming charges, unless the operators can negotiate deals with their continental counterparts that they have failed to do for the last quarter century. Business users will be able to buy subscriptions in the remaining EU27, while consumers will have to rely on Wi-Fi, which Jean-Claude Juncker has promised to expand to all towns in the EU27, in competition with 4G networks.

British influence is already diminishing, notably in the recent Bratislava Summit of the EU27 leaders. The effect on the European Commission, European Parliament and European Council will change policies, directives and regulations, including pending proposals for the Digital Single Market. After Brexit, Her Majesty’s Government (HMG) will be reduced to lobbying the EU institutions in the hope of them changing the single market rules. For example, this could mean higher levels of mandatory European content in the revisions to the Audio-Visual Media Services Directive (AVMS), while British content might cease to be ‘European’.

The state aid rules exist only in EU treaties and EC rules, thus upon Brexit HMG will be free to spend money on rural broadband and mobile coverage as it wishes. How much might be available to spend and how it might allocate such funds is presently impossible to say. In the absence of the rules, any operator feeling aggrieved or disadvantaged by funds given to a rival would be reduced to judicial review, the outcome of which is very hard to predict. Doubtless, it would end up in the Supreme Court, subject to interim relief to suspend funding until finally decided. Existing state aid for rural broadband relies on EU funds, which local authorities match with the funds from HM Treasury, clearly this will be lost.

Brexit would take the United Kingdom out of the various EU directives and, especially, regulations. A review of all the statutes and statutory instruments that transpose the EU acquis would be necessary, in order to identify provisions that would no longer be relevant or necessary, such as references to the single market or the involvement of the EC in decision making. An obvious question is who would replace the EC in drawing up the list of markets to be analysed by OFCOM?

Lord Lawson has called for a completion of the Thatcher Revolution, with the sweeping away of many of the EU rules, though others have been more cautious. Given the expectations of economic growth and of the increased exercise of sovereignty, HMG might undertake wider legal reforms, which would open the way to lobbying by vested interests, primarily the large operators. In the absence of alternative proposals, the risk is of ministers succumbing to promises of better outcomes if regulatory burdens devised by the EU were to be judiciously raised or swept away. There is very little capacity in non-governmental bodies or in universities to analyse such proposals and the few discussions presently underway are exclusively in London and already dominated by vested interests.

One concern across the ICT sector is the prospective loss of access to the EU-wide pool of highly skilled labour needed in new ventures, in operators and in OFCOM. Loss of easy access to skilled labour could present significant problems, not least since it would take considerable time to train alternatives from the domestic labour pool.

The Brexit debate points to significant failings by the EC in the completion of the single market. It does not presents serious challenges for telecommunications, there being relatively few pan-European services that would be disrupted. The single markets for the various service sectors all look remarkably different.

The Department of Culture, Media and Sport needs to produce a green paper on telecommunications policy as quickly as practicable, with the parliamentary Culture, Media and Sport Committee conducting an inquiry that draws on a very wide range of inputs, much more than the ‘usual suspects’. The OECD should be invited to undertake a peer review of the regulatory system.


Ewan Sutherland A short note on Brexit: Telecommunications issues after the Referendum. (30 June 2016).

Ewan Sutherland A short note on telecommunications issues related to Brexit. (18 April 2016).

The Queen on the application of Santos v Chancellor for the Duchy Lancaster, CO/3281/2016, High Court of Justice, Queen’s Bench Division, Administrative Court (19th July 2016), before Sir Brian Leveson PQBD and Mr Justice Cranston.

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