Telecoms regulation: legal implications of Brexit for your business

While much will depend on what form Brexit ultimately takes, there are a number of possible implications of the UK’s exit for UK telecoms regulation.

• The telecoms regulatory landscape will be affected in some areas where the EU regulation will no longer apply in the UK, such as net neutrality and mobile roaming charges. However we expect the effect to be limited and the UK is likely to enact parallel legislation, albeit with minor amendments.

• Similarly, proposed reform through the Digital Single Market and the Audio Visual Media Services Directive has largely been supported by the UK government. We therefore expect similar legislation to be adopted in the UK.

• Spectrum policy and harmonisation is unlikely to change as this is also dealt with through trade organisations such as CEPT in Europe and ITU internationally.

• The removal of EU state aid rules may make it easier for Government backed infrastructure to be built which will address not-spot areas for fixed broadband networks and will help operators to meet the newly introduced 10Mbps universal service obligation.

• The overall shape of UK regulation, which is based on competition with general authorisation, is unlikely to change. Especially given Ofcom’s view on the ‘perfect mobile market’ of 4 operators – so we are unlikely to see a deviation in the approach to market consolidation.

Regulatory framework

• There might be greater flexibility for Ofcom to deviate from the current EU telecoms regulatory framework.

• Ofcom may no longer be bound by any initiatives arising out of the European Commission’s Digital Single Market programme. For example, Ofcom could take its own decisions – entirely independent from other European National Regulatory Authorities – on whether or not “over-the-top” services and/or online platforms should be subject to any form of telecoms regulation.

• Forbearance here could potentially enable the UK to gain a competitive advantage over counterparts in Europe. 

Roaming

• Following Brexit, UK telecoms operators will no longer be restricted by the roaming provisions in the EU’s Connected Continent Regulation 2015/2120, which is intended to culminate in a complete ban on roaming charges from June 2017. 
  • This could give UK telecoms providers an opportunity to extract additional revenue from EU visitors making calls home from the UK.
  • However, this might be a double-edged sword: UK operators could expect ‘reprisals’ from EU Member States when UK customers travel abroad.

Net neutrality

• Ofcom could decide to step away from the net neutrality provisions in the Connected Continent Regulation.

• For example, Ofcom could take a more relaxed view on matters such as paid prioritisation deals between internet service providers and businesses seeking access to the ISP’s network. 

• This could see a number of new business and commercial models (including more use of promotions and zero-rated offers) emerging in the UK, which might be useful for UK businesses looking to benefit from the rapid growth of the Internet of Things. 

UK broadband strategy

• The UK government is likely to have greater flexibility to develop its own broadband strategy.

• This could provide opportunities to UK-based business, as the UK would enjoy greater flexibility to support roll-out of high speed broadband, with the UK government potentially no longer being bound by the EU State aid regime.

• Conversely, UK telecoms operators could struggle to leverage cost savings in the roll-out of high speed broadband that were previously guaranteed under the EU’s directive on reduction of costs for deploying high-speed electronic communications networks. 

Future consolidation

• Future consolidation in the UK telecoms market (if this were attractive to UK operators) could be affected by Brexit.

• Further consolidation could become more difficult where such deals are reviewed at a purely national UK level. For example, Ofcom Chief Executive Sharon White has been particularly critical of so-called “four-to-three” mergers at a UK level.

• Brexit may also result in less certainty for UK operators considering M&A activity in the tech sector generally if they are unable to rely on the one-stop shop principle under the EU Merger Regulation. If so, the legal and administrative costs in complying with both UK and EU merger regimes would also be likely to increase. 

Visit our Brexit page for more on the legal implications of Brexit for your business, or register to receive regular Brexit updates by email.