Vodafone’s appeal against MTR decision wins in part – but final orders still awaited

matheson-logo-ftsource Matheson written by Helen Kelly

On 14 August 2013, the High Court gave its ruling in Vodafone’s high profile appeal against certain parts of ComReg’s 2012 decision to designate 6 mobile service providers with significant market power (“SMP”) and impose a cost orientation obligation and maximum permitted mobile termination rates (“MTRs”). The Court found in part in favour of Vodafone.

Key to Vodafone’s success was the Court’s finding that ComReg’s use of a benchmarking approach (based on 7 other Member States which employed a bottom up LRIC methodology) to set MTR levels for the Irish market was ultra vires.

The High Court has not yet decided on the final orders that will be made in the case. A further hearing however, has been set for 25 September 2013. In the meantime, the High Court has ordered the status quo to remain (ie, Vodafone should continue to bill other operators on the basis of the maximum MTR permitted in ComReg’s decision, namely €1.04 per minute), with Vodafone’s rights as against the other operators reserved until the final orders are made.

Pending the final hearing it’s a case of “watch this space” to find out what the judgment might mean in practice for other service providers in terms of payments due to Vodafone, and in terms of their own MTRs.

By way of background, on 21 November 2012, ComReg published 2 decisions - D11/12 and D12/12. D11/12 designating the 6 mobile service providers in question (Three, LycaMobile Ireland, Meteor Mobile Communications, Telefónica Ireland, Tesco Mobile Ireland and Vodafone Ireland) as having SMP and imposed a cost orientation on each of them.

The cost orientation obligation was set out in detail in D12/12 and required each provider to ensure its weighted wholesale MTR was no more than €2.60 per minute from the period 1 January – 30 June 2013; and €1.04 per minute from 1 July 2013 onwards. The €1.04 MTR had been set by ComReg using a benchmark of MTRs imposed in 7 other EU Member States where LRIC costs models had been built.

On 18 December 2012, Vodafone appealed the cost orientation obligation imposed on it. The case was heard by the Commercial Court (a specialist division of the High Court) at the end of April – beginning of May, with judgment delivered on 14 August.

The High Court (Cooke J) was particularly critical of ComReg’s use of a benchmarking approach. Although mentioned in the 2009 BEREC Recommendation, the Court found that as the Recommendation does not have binding force, and benchmarking is not provided for in the relevant national regulations (in particular, the Access Regulations 2011 and Framework Regulations 2011) or their parent Directives, ComReg had acted ultra vires in employing a benchmarking approach.

It appears from the statements made by Cooke J that the seemingly ‘random nature’ and ‘inherent lack of robustness’ of the benchmarking exercise were key to the Court’s findings. Cooke J also considered it highly questionable whether the use of benchmarking as an “arithmetical short cut” even constituted a valid methodology; and noted that there was little if any correlation between the 7 Member States chosen and their application to the Irish market. Perhaps a more careful benchmarking exercise would have fared better.

source link via Vodafone’s appeal against MTR decision wins in part – but final orders still awaited

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