The approach adopted for the telecommunications sector in the FTA is not overly ambitious and rather limited in scope. There are a number of reasons for this. Telecoms was not a key focus of the negotiators, alongside much of the services sector.

It is also the case that many of the main regulatory principles are embedded in detail in the European Electronic Communications Code (“EECC“) which was due to be implemented by all Member States (including the UK) by 21st December 2020. As such the high-level rules of the FTA provisions are already some redundant in the face of these more detailed implementation elements.

This also explains the rather succinct provisions on consumer protection, which are extensively covered by the EECC.

The need for and effectiveness of the FTA will only become clear if and when divergences appear in the application of the relevant rules in the UK and FTA. We set out below our core observations on the FTA with a focus on the impacts for telecoms operators with offerings across the EU.

In our opinion, the key impacts are on international roaming with operators already rolling back on EU packages, as well as on net neutrality and enforcement mechanisms. We set out more on these below.

The new regime:

The key aspect of the new regime is a mutual commitment to provide fair and equal access to public telecommunication networks and services to each other’s service providers and that each party has models in place to address anticompetitive practices by dominant providers as well as transparent authorisation regimes.

The FTA arrangements reflect, to a large extent, the provisions in the EU-Canada arrangements (CETA), with a hint back to the original WTO White paper on telecoms service provision. They however go further than those in some other arrangements such as the EU-Singapore FTA.

General implications for cross-border provision of services – continued divergence of rules and divergence likely to increase

In the first instance, there is limited change for providers of telecoms services. There is already some divergence in regulation between all EU countries even in an EECC environment.  For example, we have already noted (available at this link)) that the UK implementation of the wider EECC goes substantially less far in the regulation of Number Independent Interpersonal Communications (NI-ICS) in the UK than in the EU and means that VoIP providers will not face the same regulatory regime here as in the EU (at least for now).

For enterprise providers, the changes mean likely increasing divergence on the application of rules to services so pan-EU service offerings will remain complex but this has been the case for a while and enterprise operators are well used to differential application of even supposedly unified rules (e.g., on emergency calling, etc.). It however is a cost of doing business for carriers that will remain and increase.

The FTA is unlikely to help operators who wish to challenge such differences. In the same way that the present EC regime has posed material challenges in securing Commission intervention in securing a level playing field, the proposed new regime is unlikely to help carriers press for changes to telecoms rules in the other parties’ territory.

The major issues will centre on the personnel side and people movements rather than directly on telecommunication service provision (especially where the UK operators already have an establishment in the EU). In other words, the restrictions on skilled labour transfers and import and export of equipment will have an impact on the ability of carriers to operate in the UK.  This is however well documented elsewhere.

Mutual authorisation regime

The EU and UK are to allow the provision of telecoms networks or services in their respective markets, without prior formal authorisation to provide telecoms networks or services, meaning providers are not required to wait for authorisation from regulators before the deployment and offering of services. Any authorisation requirements are to be made as transparent (publicly available) and as simple as possible, to ensure there are no unnecessary regulatory hurdles for service providers.

Interconnection & Access

The FTA should maintain the general interoperability regime in that the suppliers of public telecommunications networks/services in their territory will be entitled and, when so requested by another such supplier, obliged to negotiate interconnection for the purposes of providing public telecommunications networks/services.

Additionally, the FTA provisions allow EU and UK providers to have access to and use of each other’s networks on reasonable and non-discriminatory terms and conditions.

This obligation extends to the provision of private leased circuits and suppliers are permitted:

• to purchase or lease and attach terminal or other equipment which interfaces with the network and which is necessary to conduct their operations;
• to interconnect private leased or owned circuits with public telecommunications networks or with circuits leased or owned by another covered enterprise or service supplier; and
• to use the operating protocols of their choice in their operations other than as necessary to ensure the availability of telecommunications services to the public generally.

Spectrum Auctions

Spectrum auctions will also be available meaning spectrum may be bid on by providers in both the EU and UK.

There are general requirements on the conduct of such auctions including allocation of other scarce resources, including numbers and rights of way, by either party is carried out in an open, objective, timely, transparent, non-discriminatory and proportionate manner and by taking into account general interest objectives. Also, the procedures, and conditions and obligations attached to rights of use, shall be based on objective, transparent, non-discriminatory and proportionate criteria.

These requirements do not prevent either party from establishing and applying spectrum and frequency management measures that may have the effect of limiting the number of suppliers of telecommunications services, provided that it does so in a manner consistent with the FTA.

Significant market power, incumbents and Reference Offers

Consistent with the principle of fair and equal access, the agreement also contains provisions on regulation of entities with significant market power/incumbents (the “SMP Operators”) and the obligations imposed on the EU and the UK to ensure there are rules in place to prevent anti-competitive behaviour.

The FTA thus imposes an obligation on each party to require the SMP operators to make their essential facilities available to other suppliers of telecommunications networks or telecommunications services on reasonable, transparent and non-discriminatory terms and conditions for the purpose of providing public telecommunications services. The term ‘essential facilities’ should not be construed in the traditional sense of the Bronner case law, but refers generally to network elements, leased circuits services and associated facilities.

The details on how this is to be achieved, via current competition law rules or by way of newly enacted legislation, is left up to each of the parties. Incumbent suppliers will have to continue to allow access to their networks via Reference Interconnection/Access Offers meaning service providers will continue to have access to incumbent suppliers’ networks to ensure they may offer services.

In the context of EU-UK relations this is clearly relevant for either party’s operators including the incumbents, which are simultaneously access seekers in the other party’s territory.

Roaming

For consumers, the key issue will be the explicit recognition that nothing in the wider FTA arrangement requires either party to regulate rules or conditions on international roaming between EU and the UK. Between EU and the UK, Roam-like-at-home (RLAH) has expired as of 31 December 2020 and as of 1 January 2021, the UK became a “third country” for the purposes of the RLAH provisions of the Roaming Regulation.

Unless specific agreements are reached between the parties, it will be for the markets, vis-à-vis the mobile operators, to decide if they wish to re-establish tariffs for mobile roaming service provision between the UK and rest of the EU. This will be particularly sensitive going forward as a bell weather for the regime in telecoms and the extent of divergence. It should also be noted that the agreement actually goes further than noting that the market will dictate the outcomes on roaming to explicitly allow divergence from the existing rules.[1]

Net Neutrality

The single provision on net neutrality in the FTA is very generic but could have far reaching implications in the UK.  Article 5.33 (Net Neutrality) reads as follows:

“Each Party shall ensure that, subject to its laws and regulations suppliers of internet access services enable users of those services to:

• access and distribute information and content, use and provide applications sand services of their choice, subject to non-discriminatory, reasonable, transparent and proportionate network management; and
• use devices of their choice, provided that such devices do not harm the security of other devices, the network or services provided over the network.

For greater certainty, nothing in this Article shall prevent the Parties from adopting measures with the aim of protecting public safety with regards to users online. ”

If applied as they stand, these rules would permit the UK to allow their Internet Service Providers to offer packages with preferential treatment of certain services and applications, or based on other commercial arrangements between the ISPs and third parties that would not be permitted under the EU regime as interpreted most recently by the BEREC Net Neutrality Guidance or the last year’s CJEU judgment on zero rating in Joined Cases C-807/18 and C-39/19 Telenor Magyarország Zrt. v Nemzeti Média- és Hírközlési Hatóság Elnöke.

This is in our view possible not only because these provisions in the FTA differ from the substantive provisions of the EU Open Internet Regulation, in particular the key provisions of Article 3.3., but more importantly because these provisions are subject to either party’s laws and regulations.

It however remains to be seen how Ofcom will apply and interpret the existing rules going forward.

Ban on restrictions on foreign ownership

The FTAA bans both the UK and the EU from imposing restrictions on (foreign) shareholding of companies operating telecommunications networks or providing telecommunications services (similar to the CETA). Accordingly, neither party can impose joint venture requirements or limit the participation of foreign capital in terms of maximum percentage limits on foreign shareholding or the total value of individual or aggregate foreign investment.

This, however, does not exclude the application of the relevant EU and UK merger rules. Where a telecom business falls within the scope of the UK’s National Security and Investment Bill, currently going through the UK Parliament, there may be a need for UK government approval for a change of control or another qualified event. The same applies for the EU merger rules (whether at national or EU level).

Dispute Resolution

The governance mechanism of the future relationship between UK and EU was one of the main areas of contention during the negotiations. The UK and EU have eventually chosen a standard form of international arbitration. The arbitration mechanism, the appointment of arbitrators and other key procedural issues are provided for under Article 29 of the FTA.

Arbitral decisions are binding on UK and EU only, and the arbitration is ‘State-to-State’ as suggested by Article INST.29(2) pf the FTA:

“The decisions and rulings of the arbitration tribunal shall be binding on the Union and on the United Kingdom. They shall not create any rights or obligations with respect to natural or legal persons.”

This would necessitate individuals or companies lobbying either side (i.e. the Commission for the EU and the UK Government for the UK) in order to have a case brought in. There is no standing for legal and natural persons.

For the telecom operators on either side this means that if they are unhappy with the application of the FTA regime (e.g., application of access rights or conditions for notification of ECS to the local regulator) in the EU or the UK, then they would need to persuade their government/the Commission to start international arbitration proceedings under the FTA.

This also means that UK operators will be prevented from submitting a complaint to the Commission (or bringing a case before the ECJ) based on breach of FTA rules on telecoms. While the former process has been criticised for its speed, the alternate here is unlikely to be any quicker and significantly less accessible to companies.

Furthermore, the arbitration tribunal’s decisions and rulings “shall not create any rights or obligations with respect to natural or legal persons”, which raises another set of questions regarding possible follow-on claims and the benefit of such rulings for individual companies.

We are proposing to set out more detail on particular elements of the arrangements over the next few months.

[1]See, the wording of the FTA Article SERVIN.5.36: (International mobile roaming), sub-para (3), in our view, implies such outcome, whereas sub-para (4) makes clear that neither part is obliged to regulate rates or conditions for international mobile roaming services.