Telefónica O2 & others v British Telecommunications

The Court of Appeal has restored Ofcom’s decision to prevent BT from introducing variable wholesale termination charges for calls to 080, 0845 and 0870 numbers.

Those number ranges are intended to be free (080) or charged at local (0845) or national (0870) rates, but mobile operators charge considerably higher retail prices for calls to those numbers. BT introduced a system of “ladder pricing” for BT-hosted 08 numbers, where the wholesale charge payable to BT by the caller’s network would vary according to the average retail price charged by that network. The mobile operators opposed the charges and the dispute was referred to Ofcom under s.185 of the Communications Act 2003. BT argued that the new charges would benefit consumers, but Ofcom was not convinced of this and disallowed the charges. BT appealed to the Competition Appeal Tribunal which agreed that it was not possible to say whether the charges would benefit consumers but ruled that Ofcom should have allowed BT to introduce the charges anyway. The mobile operators appealed to the Court of Appeal.

The Court of Appeal (Lloyd, Etherton and Elias LJJ) allowed the appeals and restored Ofcom’s decisions. It held that the Tribunal had been wrong to rely on BT’s contractual right to vary charges unilaterally, the absence of other regulatory constraints on charges of this kind, or the promotion of competition as a good in itself, as pointing in favour of allowing the new charges.

The Court also made some important observations about the standard of review in an appeal to the Tribunal. Lloyd LJ said that “if the regulator has addressed the right question by reference to relevant material, any value judgment on its part, as between different relevant considerations, must carry great weight… it does not seem to me that it was open to the Tribunal to balance the various potentially conflicting considerations… in a different way from that adopted by Ofcom, unless an error could be shown in Ofcom’s approach.”

Javan Herberg QC and Mark Vinall acted for OFCOM.