Regulation of mobile phone services in the UK

Reproduced from PLC IPIT & Communications with the permission of the publishers. For further information visit www.practicallaw.com or call 020 7202 1200.

This practice note describes the regulation of mobile phone services in the UK. It summarises mobile regulation under the EU regulatory framework for electronic communications services, termination charges, international roaming charges, content and consumer issues. The note also discusses radio spectrum regulation, particularly in the context of the proposed realignment of certain frequency bands in connection with a move towards a "Digital Britain". There is a sections on the regulation of GSM gateways, and the note also looks at newer developments such as mobiles on aeroplanes, mobile satellite systems and using mobiles for banking and payment services.

• Introduction
• The mobile market and technologies
  • Mobile virtual network operators (MVNOs)
• Regulatory bodies
• Telecoms regulation − general
• Telecoms regulation − economic
  • Termination charges
  • International roaming charges
• Telecoms regulation - wireless
• Spectrum liberalisation and changing regulation
• Digital Britain
  • 800MHz band
  • Amending the GSM Directive − 900MHz refarming
  • Digital dividend award
  • 3G expansion band
• Telecommunications data regulation
• Other regulations
  • Dedicated spectrum for the emergency and public safety services (E&PSS) and military
• Content
  • Premium-rate services
  • Mobile TV
  • Consumer-protection
• Consumer contracts and sales and marketing
  • Rules on consumer contracts
  • Rules on misselling
  • Porting
• GSM gateways
  • What are GSM gateways?
  • Public
  • Private
  • Regulation of GSM gateways
• Equipment
• Other areas
  • Mobiles on aeroplanes
  • Mobiles on boats
  • Mobile satellite systems
  • Micro and mobile payments

Introduction

The mobile sector currently represents 51% of the UK telecommunications market. Voice calls remain the main revenue source for mobile network operators (MNOs), but mobile data services have grown significantly over the past 18 months. Users can connect to the internet via a mobile network using a mobile phone or by connecting a dongle (USB modem) to a laptop or PC. In the twelve months to February 2009, there were two million new connections to mobile broadband in the UK. An expansion of mobile networks is required to accommodate this growth in mobile broadband, and the development of regulation is important for this growth.

The development of mobile broadband has led to some exciting new services, such as mobile TV. Other services newly available to mobile users include facilities for using mobiles on aeroplanes, and for making payments using mobiles. These developments are discussed further in this note.

The mobile market and technologies

Mainstream mobile-phone services currently operate on second generation (2G) technology, which replaced analogue with digital radio during the 1990s. 2G technology operates on the Global System for Mobile Communications (GSM) standard in the 900MHz and 1800MHz spectrum frequency bands. There has been a subsequent transition to third generation (3G) technology, the technology that has allowed the move to data services on mobiles. This move is widely considered to have been more of an incremental improvement of 2G networks. 3G technology uses the Universal Mobile Telecommunications Service (UMTS) standard, operates in the 1900MHz and 2100MHz bands, and allows more efficient use of spectrum than GSM use of the 2x200kHz wide radio channels. Certain evolved 3G technologies (such as Long Term Evolution (LTE)) are already being termed fourth generation (4G), which is a strong indicator that the line between 3G and 4G will also be blurred. Ofcom predicts that the introduction of 3.5G and 4G will increase data-rates and network capacity over the coming years, while reducing the cost of delivering existing services and enabling new services and applications to be developed.

There are currently five MNOs in the UK, which is a relatively high number given that mobile networks rely on radio spectrum, which is a limited resource. (For more information on radio spectrum, see Practice note, Radio spectrum regulation.) Of these five MNOs, Orange, O2, T-Mobile and Vodafone have both 2G and 3G licences and "3" has a 3G licence only. In the UK, Vodafone and O2 have licences to use the 900MHz spectrum for 2G services, and T-Mobile and Orange use the 1800MHz spectrum for 2G services. However, France Telecom and Deutsche Telekom, the owners of Orange and T-Mobile respectively, announced in September 2009 that they were in merger talks and in February 2010 their plans were approved by the EU and UK competition authorities, so the number of UK MNOs will reduce to four. As part of the merger approval, Orange and T-Mobile have agreed to divest themselves of about a quarter of their combined spectrum in the 1800MHz band.

The provision of mobile-phone services in the UK is subject to general communications regulation to the extent it applies, and wireless telegraphy licensing, details of which are set out below.

Regulatory bodies

There are a number of regulatory bodies responsible for aspects of the activities of the mobile sector: Ofcom (the Office of Communications) is the main regulatory body for the mobile-communications sector, having replaced Oftel, the Radiocommunications Agency, the Radio Authority, the Broadcasting Standards Commission and the Independent Television Commission in 2003. Ofcom derives its powers from the Communications Act 2003 and is an independent body. Ofcom is also a competition authority and shares this remit with the Office of Fair Trading, with both entities able to make references to the Competition Commission.

PhonepayPlus (formerly known as the Independent Committee for the Supervision of Standards in the Telephone Information Services (ICSTIS)) regulates premium-rate communications services, including those provided via mobile phones.

The Information Commissioner's Office is responsible for data protection and freedom of information in the UK.

The European Commission overseas the regulation of telecommunications in Europe by ensuring the effective implementation and enforcement of the relevant directives.

The Body of European Regulators in Electronic Communications (BEREC), which replaced the more loosely organised European Regulators Group (ERG) in January 2010, acts as an independent advisory body. It assists harmonisation between NRAs by formulating guidelines on regulatory best practice. It has a formal role in providing opinions and recommendations to assist the Commission (and, upon request, the European Parliament and the Council) in applying the regulatory framework effectively and consistently. Both the Commission and NRAs are obliged to take the "utmost account" of BEREC's views.. An improved Europe-wide body is widely considered to be necessary in the current converging market. For more information on BEREC, see Legal update, European Council adopts Regulation establishing BEREC.

The Communications Committee, which was established by the Framework Directive (for more information on the Framework Directive see below), brings senior members of national regulatory bodies together to assist the Commission in carrying out its regulatory function.

The International Telecommunications Union (ITU) is a specialised agency of the United Nations, which was established in 1865 to standardise and regulate radio and telecommunications at an international level.

Telecoms regulation − general

The European telecoms regulatory framework was established to harmonise the telecommunications regulatory regime across Europe, and consists of four Directives:

• Framework Directive (2002/21/EC), which establishes the framework for the other three directives.
• Authorisation Directive (2002/20/EC).
• Access Directive (2002/19/EC).
• Universal Services Directive (2002/22/EC).

The Framework Directive defines the concepts of "electronic communication networks" (ECNs) and "electronic communications services" (ECSs). ECNs are transmission systems that allow the conveyance of signals by wire, radio, optical or other electromagnetic means, including mobile terrestrial networks (Article 2(a)). An ECS is a service (other than a content service) that conveys signals via an ECN (Article 2(c)). The Authorisation Directive provides the minimum obligations that ECN and ECS operators must carry out in order to be authorised to provide their services. The Access Directive sets out how access to ECNs should be regulated. The Universal Services Directive stipulates end-users' rights to a choice of publicly available telecommunications systems across Europe.

In the UK, the Communications Act 2003, which came into effect on 25 July 2003, implements the European telecoms regulatory framework and sets out the bulk of the regulatory regime for the provision of telecommunications services. It contains a general authorisation regime for the provision of ECNs and ECSs. Providers of ECSs and ECNs are authorised if they comply with the General Conditions of Entitlement set by Ofcom (the General Conditions), without having to apply for a bespoke licence. Certain ECN and ECS providers with significant market power may also have to comply with specific conditions as notified to them by Ofcom.

The regulation of ECSs and ECNs can be divided into five categories:

• Private ECSs and ECNs.
• Public ECSs and ECNs.
• Publicly available telephony services (PATS).

For further detail, see Practice Note, Overview of telecoms regulation in the UK.

Mobile-phone services fall within the definition of ECSs and ECNs, and therefore fall within the ambit of the Communications Act and are subject to the General Conditions.

Telecoms regulation − economic

Operators of mobile-telephony networks are also subject to specific economic regulation, in matters such as termination charges and access to network elements.

Termination charges

Termination charges are the rates paid by one network operator to another for connecting calls made by a caller on the first network to a call recipient on the second.

Ofcom conducts regular market reviews of various markets within the telecoms sector, and can impose regulatory conditions on telecoms operators with significant market power (using its powers under the Communications Act). It has found that each MNO has 100% share of the market for wholesale voice call termination on its own network, and has therefore imposed an RPI-X cap on each MNO's termination charges.

In the UK, in May 2008, the Competition Appeal Tribunal (CAT) resolved a dispute about mobile termination charges. The CAT upheld the validity of challenges to Ofcom's determinations regarding disputes on wholesale mobile termination charges between BT and the five MNOs, which were brought by twelve communications providers. For further information, see Legal update, CAT judgment on core issues in mobile termination rate dispute appeals. At the same time, the CAT rejected Hutchinson 3G's (H3G) appeal of Ofcom's decision that H3G had significant market power in the market for termination of calls on the H3G network and the consequent conditions imposed on H3G (see Legal update, CAT dismisses H3G's wholesale mobile call termination appeal in relation to non price control matters).

On 7 May 2009, the European Commission adopted a recommendation (C(2009) 3359 final) and accompanying explanatory memorandum (SEC(2009) 600) on the regulatory treatment of fixed and mobile termination rates in the EU. The aim of the recommendation was to introduce a common approach to the regulation of termination rates in the fixed and mobile markets across the EU in order achieve greater consistency and more effective regulation of termination rates, which vary widely between member states. The recommendation must be implemented by 31 December 2012. For more details on the recommendation, see Legal update, Commission adopts recommendation on the regulatory treatment of fixed and mobile termination rates.

In the UK, the current caps will expire on 31 March 2011. In May 2009, Ofcom conducted a preliminary consultation on options for regulating wholesale mobile-voice-call termination after this date, and has made six broad proposals, from setting mobile charges at the same rate as fixed charges, to complete deregulation. For more information on the consultation, see Legal update, Ofcom reviews regulation of mobile call termination charges. Ofcom's 2009 second consultation on the regulation of the mobile sector also addressed termination charges, and suggests that all options should be considered in the context of minimising the regulatory burden on the mobile industry (see Legal update, Ofcom publishes second consultation on mobile sector). These proposals conform with the European Commission's recommendation and explanatory memorandum.

In March 2010, Ofcom published a further consultation, following on from its May 2009 consultation, on its conclusion that there are 50 separate markets, each of which comprises all calls to a given UK mobile number range for which a communications provider can determine the termination rate. Ofcom considers that one individual mobile communications provider (MCP) has SMP in each of these separate markets. Ofcom considers that regulation of these markets is still necessary. For all the smaller and new entrant MCPs, Ofcom is proposing to impose SMP obligations relating to transparency and requiring the provision of termination on fair and reasonable terms. In relation to the large national MCPs (Vodafone, O2, H3G, Orange/T-Mobile), Ofcom proposes also to impose undue discrimination conditions and charge controls. For more information, see Legal update, Ofcom consults on wholesale mobile call termination market review.

International roaming charges

When subscribers to a domestic mobile-phone network travel to another country they are able to receive or make calls from their mobile phone, despite the fact that their own network operator has no network in that country. This is because domestic MNOs have agreements with foreign MNOs that they will terminate one another's calls on their respective networks. They pay each another a charge for this service, and this charge is passed through to the customer by the customer's own MNO. This facility is known as "international roaming".

The amounts MNOs may charge for roaming outside a customer's home territory are regulated in the EU and the UK. In 2007, an EC Regulation (717/2007/EC) (the Roaming Regulation) capped wholesale and retail roaming prices for mobile voice calls (see Legal update, International mobile roaming regulation adopted).

On 30 June 2009, a regulation amending the original Roaming Regulation came into force (544/2009 amending 717/2007 and 2002/21 Framework Directive) imposing further reductions in the maximum charges that can be made for voice roaming services. It also introduced retail and wholesale regulation for SMS roaming and per-second billing for voice calls. Most of the revised provisions came into force on 1 July 2009. The amended Roaming Regulation sets out maximum roaming costs for retail customers (the cost (excluding VAT) of sending a text must not be more than €0.11, the cost of making a call must not be more than €0.28 per minute and the cost of receiving a call must not be more than €0.19 per minute).

The amended Regulation also applies to data roaming services, applying a cap of €1 per megabyte downloaded. The amended Regulation has reduced roaming charges by approximately 60%.

The revised Regulation also contains provisions to prevent "bill shock" (arriving home from a trip abroad to find a shockingly large bill for downloading a picture or film when abroad), which came into force on 1 March 2010. Roaming customers must be allowed to set a maximum financial limit for charges they may incur, and providers must warn customers both when 80% of the agreed limit has been reached, and when the limit is reached. The provider must indicate how the customer should proceed if they want to continue roaming. If the customer does not respond, the provider must cease providing roaming services. Customers who do not indicate a financial limit must be subject to an automatic limit of €50.00 (excluding VAT) or the corresponding data volume. From 1 July 2010, operators must apply the €50 limit to all customer accounts.

Telecoms regulation - wireless

The Wireless Telegraphy Act 2006 (WTA) (consolidating the Wireless Telegraphy Acts 1949 and 1998, aspects of the Telecommunications Act 2003, and three other Acts) imposes a licensing regime on services and networks that use radio spectrum. Under section 8 of WTA it is unlawful to establish or use a wireless telegraphy station, or install or use wireless telegraphy apparatus, except under and in accordance with a WTA licence granted by Ofcom. Mobile-phone services are subject to the WTA because they use radio spectrum. There are two public wireless-network licence classes, one for 2G and one for 3G operators.

Ofcom has the power to pass regulations making certain uses of spectrum exempt from requiring a WTA licence either absolutely or subject to conditions. It has passed the Wireless Telegraphy (Exemption) Regulations 2003 (SI 2003/74), which exempt various classes of telecommunications apparatus, including mobile phone handsets, from the need for a WTA licence.

Spectrum liberalisation and changing regulation

As has been mentioned earlier in this note, the current European telecoms regulatory package has been revised, and there are various amendments that will mean changes at domestic level. Furthermore, in the UK, Ofcom is in the process of implementing many of its plans set out in, or contemplated by, its 2005 Spectrum Framework Review: Implementation Plan in 2005 and subsequent documents. The Spectrum Framework Review introduced a policy of encouraging market-based management tools to be used as far as possible to determine assignment and allocation of radio spectrum.

Digital Britain

In June 2009, the Department for Business, Innovation and Skills (BIS) and the Department for Culture Media and Sport (DCMS) published the Digital Britain report. One of the government's proposals is to provide universal access to a minimum of 2Mbps broadband connection by 2012. The report sets out the government's targets for wireless infrastructure, which include a rapid transition to next-generation high-speed mobile broadband and ensuring that a highly competitive mobile market is retained. Next-generation mobile coverage is likely to be important in fulfilling the government's universal access targets in some more remote parts of the country, where it is less likely that a fixed-telephony solution will be economic. Ofcom aims to ensure that the spectrum is available to stimulate competition and innovation and improve mobile coverage in the UK to make spectrum available for mobile broadband.

Digital Britain endorsed many of the proposals of the government-appointed Independent Spectrum Broker's (ISB's) report, which was published in May 2009. Digital Britain's integrated package included a recommendation for a "Big Auction" of the paired 2.6GHz spectrum and the 800MHz spectrum as soon as possible before mid 2010 (see Practice note, Radio spectrum regulation: Future spectrum awards). Digital Britain endorsed a cap of 2x65MHz of sub-3GHz spectrum being imposed on MNOs bidding in the Big Auction. The ISB recommended that consensus should be reached on the earliest date at which the 800MHz spectrum will become available for next-generation mobile use. However, in February 2010, the competition authorities approved a merger between Orange and T-Mobile on condition that they divest about a quarter of their 1800MHz holdings, and in the light of this the government has concluded that a cap is no longer necessary. This decision was contained in the government's March 2010 proposals to require Ofcom to run a combined auction of 800MHz and 2.6GHz spectrum. The government has also laid Directions to Ofcom to implement its plans before Parliament (see Legal update, BIS publishes response to consultation on spectrum modernisation and makes directions to Ofcom).

800MHz band

Ofcom issued a statement on 30 June 2009 confirming that it will clear the 800MHz band (790-862MHz, channels 61, 62 and 69 in UHF Bands IV and V) of previous planned users and setting out its proposed approach to achieving this. This band one of the bands known as the "digital dividend", because it consists of the radio spectrum that is being made available by the switch from analogue to digital television broadcasting, which uses less spectrum than analogue. The UK plans to reserve some spectrum for mobile broadband and related services, in common with the approach of many European countries. One of the advantages of clearing the 800MHz band across many European countries is that manufacturers will be able to produce reduced-cost equipment suitable for use in all countries with this cleared portion of spectrum. The clearance does have short-term associated costs, however, in the form of moving the existing DTT users of channels 61 and 62 and programme making and special events users of channel 69. There will be a limited adverse impact on the number of users who will operate at the lower end of the spectrum however.

Amending the GSM Directive − 900MHz refarming

Until autumn 2009, the 900MHz band was reserved exclusively for 2G mobile-phone use under the GSM Directive (87/372/EEC). However, the Directive has been amended to allow other services including mobile services using 3G UMTS and 4G technology to use the 900MHz band as well. These amendments recognise that it is no longer appropriate to reserve the 900MHz band solely for GSM because of the development of digital technologies that are capable of providing innovative pan-European broadband services that co-exist with GSM in the 900MHz band. Extending the Directive will allow the development of a wider choice of services and technologies and therefore maximise competition in the use of the 900 MHz band. The revised Directive came into force in November 2009, along with a European Commission Decision setting out the technical measures for the co-existence of GSM and UMTS systems. Member states have six months to transpose the Directive and implement the Decision.

The 900MHz band is licensed to Vodafone and O2, who wish to "refarm" (that is, "reallocate") the spectrum for 3G services. T-Mobile and Orange have also expressed an interest in using this spectrum for 3G services. In March 2010, the government confirmed that it will direct Ofcom to liberalise existing 2G licences. In particular, this requires variation of the licence to make it clear that the licence can be used for both GSM and UMTS systems. The Government will also direct that these licences be made indefinite, subject to revocation with five years notice for spectrum management reasons. Ofcom will be directed to use its powers to amend the trading regulations to make these licences tradable. These licences will be subject to a condition which requires the licence holders to comply with a process of creating contiguous spectrum blocks, known as defragmentation. For more information, see Legal update, BIS publishes response to consultation on spectrum modernisation and makes directions to Ofcom.

Digital dividend award

As has been mentioned (see above) earlier in this note, the UK has begun a process of switching from analogue to digital terrestrial television (DTT) in 2008, which is scheduled to conclude in 2012. DTT will use only 256MHz of the 368MHz of spectrum which is currently used by analogue broadcasting. 112MHz of cleared spectrum will be released by this more efficient use, which has become known as the "digital dividend". Ofcom plans to auction this spectrum, which may be used from 2012, as part of the Big Auction.

The digital dividend is a sought-after infrastructure opportunity, due to the capacity, coverage and the amount of spectrum that will be made available. Ofcom is taking a market-led approach to releasing the digital dividend and plans to offer it on a fully liberalised basis so as to create freedom and flexibility for users to make decisions about the use of the spectrum and opportunities for different technologies and services.

"Interleaved spectrum" (spectrum in the buffers between the spectrum re-allocated for DTT) is already being released on a geographic basis. The first interleaved spectrum licences were released in February 2009 in Manchester and Cardiff. The fees for the licences were £10,000, and the terms are that they are geographically limited, but tradable, technology and service-neutral, and of indefinite duration with an initial term lasting until 2026.

3G expansion band

The ITU's World Radiocommunication Conference 2000 identified the 2.6GHz, or "3G expansion band", specifically for advanced mobile technologies, such as 3G, on a worldwide basis. Ofcom envisages significant benefits from the use of 2.6GHz band, which is to be made available in EU member states on a harmonised basis. The band is considered to be key in the development of mobile broadband services using new technologies, including LTE and WiMAX (Worldwide Interoperability for Microwave Access), due to its large, high-frequency bandwidth (2500−2690MHz), which improves the rate at which data can be transferred.

In the UK, Ofcom announced its intention to release 3G expansion band spectrum in April 2008 and it is keen to make this available as soon as it can. The release was delayed by a legal challenge to the timing of the release by T-Mobile and O2, who objected to the auctions taking place before the regulator had made a decision regarding refarming 900MHz GSM spectrum. They argued that the "refarming decision" had the potential to change their spectrum holdings and requirements for 3G expansion band spectrum. The government announced its plans for the release of the 2.6GHz spectrum, in its March 2010 announcement, and, as mentioned earlier in this Practice note, has laid Directions to Ofcom in relation to the release of the spectrum before Parliament (see Legal update, BIS publishes response to consultation on spectrum modernisation and makes directions to Ofcom).

Telecommunications data regulation

The retention of traffic, location and subscriber communications data by MNOs is strictly regulated in the UK under the UK and EU data protection regimes. The UK has implemented the Data Retention Directive (2006/24/EC) into national law through the Data Retention (EC Directive) Regulations 2009 (SI 2009/859). These Regulations apply to communications data that is generated or processed in the UK by public communications providers in the process of supplying communications services. MNOs must retain the calling and dialled telephone numbers, the name and address of each subscriber or registered user of the telephones, the date and time of the start and end of each call, the telephone service used, the data necessary to identify the users' communication equipment, and the data necessary to identify the location of the equipment for twelve months from the date of the communication (Schedule, Part 2). The communications service provider would also be subject to the provisions of the Data Protection Act 1998.

There is also a voluntary code of practice for communications service providers who provide public telecommunications services in the UK and who retain data for the purposes of the Anti-Terrorism Crime and Securities Act 2001, which sets out the retention periods for various pieces of communications data, and was passed under the Anti-Terrorism Crime and Securities Act 2001 (Retention of Communications Data (Code of Practice) Order 2003). While it is not legally binding, this code of practice may be adduced as evidence in justifying the retention of communications data.

For more information, see Practice note, Data protection aspects of the retention of communications data.

The new European regulatory framework (see above) imposes obligations on MNOs regarding data security. MNOs will have to protect the personal data of their customers including their names, email addresses and bank account details, in addition to communications data. The new framework mandates that MNOs should notify their customers of data security breaches and warn them of any security threats. It will also fall to MNOs to increase protection against spam.

The European Network and Information Security Agency (ENISA) has warned of the security and privacy issues involved in a range of new services that will involve using mobile devices for authentication purposes. These include theft of mobile devices, breaches of smart card security, viruses, and SMS scams. ENISA called for guidelines for near field communication (NFC) (communication between devices about 10 centimetres apart) payments with mobile devices, non-payment NFC mobile applications, national ID cards stored in mobile devices, location traces created by mobile devices, globally accepted standards for telecoms, data transfer, over the air (OTA) downloading, security and payments.

Other regulations

MNOs are also subject to general regulation on the disposal of electrical equipment. The Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment Directive (2002/95/EC) and the Waste Electrical and Electronic Equipment Directive (2002/96/EC), both of which have been implemented in the UK, impose obligations on the producers and retailers of telecommunications equipment in relation to the disposal of waste electrical and electronic equipment (WEEE). Producers must join an approved producer-compliance scheme, which registers the producer with the appropriate regulator. The producer will make a financial contribution to the recycling of all domestic WEEE, non-domestic WEEE purchased after 13 August 2005, and all non-domestic WEEE for which the producer is providing replacement WEEE, in proportion with its market share.

MNOs are also subject to general environmental regulations restricting emissions and on product liability (see Practice note, Product liability: international overview to the extent that they apply.

Content

Different forms of content are increasingly being made available on mobiles.

Premium-rate services

Premium-rate services (PRS) are built on a simple payment mechanism that involves a user receiving content or services for which a charge is applied to their phone bill by way of an increased call charge. PRS encompass a range of services from phone-information services to methods of interacting with television programmes (for example, voting or entering competitions). As the PRS industry has grown in recent years so has the controversy surrounding it. The main television broadcasters in the UK have been heavily fined for PRS-related breaches of the Broadcasting Code, with ITV receiving a £5.675 million fine for "abuse of premium-rate services".

Ofcom retains responsibility for the regulation of PRS under the Communications Act 2003 but has delegated its day-to-day running to PhonepayPlus.

Premium-rate telecommunications service providers, network operators and information providers must adhere to the relevant parts of the PhonepayPlus Code of Practice (the Code), which is approved by Ofcom. The 11th edition of the Code is the current version, and Phonepay Plus is consulting on version 12, which it hopes to ratify in 2010.

PRS service providers must register with PhonepayPlus prior to starting their service. The Code requires that clear and accurate pricing information must be provided to consumers, advertising must be honest, and promotions must be targeted and appropriate. The Consumer Protection from Unfair Trading Regulations 2008 (SI 2008/1277) also apply to the provision of PRS. The Regulations outlaw misleading and prohibited trading practices, including falsely representing a consumer's chances of winning a prize and incorrectly using the word "free", the breach of which attracts criminal penalties.

In January 2009, PhonepayPlus published a statement setting out a number of new measures intended to improve various aspects of PRS. Providers offering mobile subscription services charging over £4.50 a week or applying pay-per-page charges on the mobile internet now have to apply for prior permission from PhonepayPlus. They must also make sure that consumers joining a subscription service first receive a free confirmation text message detailing the cost and conditions of the service; consumers must not be charged until they have confirmed their subscription by replying to the text. PhonepayPlus also published a Statement of Expectation containing further rules on price transparency, promotional text messages, the STOP command, marketing lists and chat services. For more information, see Legal update, PhonepayPlus publishes statement in mobile content PRS review.

Ofcom is undertaking a PRS Scope Review, the results of which are expected before the end of 2009 following the end of the consultation in July 2009. The review includes proposals to introduce pre-call announcements, expand the use of PhonepayPlus's number-checker service and introduce a reputational PRS database. For more information, see Legal update, Ofcom consults on premium-rate services regulatory scope review.

Mobile TV

Each of the MNOs has a mobile-television capability. However, the market for mobile television has not been taken up as quickly or widely as initially anticipated. Since its introduction in 2003, the commercial model for mobile television has moved towards open access with rights to broadcast certain sporting events being granted to cable and satellite providers and being made available to each of the MNOs. In March 2008, the European Commission announced the addition of the Digital Video Broadcasting Handheld (DVB-H) Standard to the EU list of Standards published in the EU's Official Journal, setting it as the preferred standard for terrestrial mobile broadcasting. (See Legal update, European Commission to add mobile television standard DVB-H to EU List of Standards). The Commission may make use of the standard compulsory if member states fail to encourage its use to the extent required to harmonise mobile television services across Europe.

Mobile television is currently provided using the MNOs' 3G networks. There are some limitations with this technology (for example, the low capacity of 3G cells), which would result in the viewing quality being reduced if the number of viewers were to increase significantly, so MNOs are investigating new technologies to deliver mobile television. This raises spectrum capacity issues, see Digital Britain above.

The future of mobile-phone services in the UK is likely to be driven by convergence and the development of 3G and 4G services such as mobile TV. For more information see Practice note, IPTV and mobile TV.

Consumer-protection

In Ofcom's review of its code of practice for self-regulation of new forms of content on mobiles (Content Code), published on 11 August 2008, it concluded that the self-regulatory regime for mobile content was broadly effective. The regulator's major concern is limiting young persons' access to inappropriate content. Each of the MNOs was involved in the formulation of, and subscribe to, the Content Code, whose provisions have been augmented by many of the MNOs. The Content Code sets out that MNOs are responsible for classifying all commercial content, co-operating with law enforcement agencies in connection with reporting illegal content, will take action against unsolicited bulk communications, and will place all un-moderated chat rooms with commercial content behind access controls. The Content Code recognises that MNOs have no control over content offered over the internet and does not therefore hold them accountable for this.

Ofcom also reviewed the Classification Framework for UK Mobile Operator Commercial Content Services (the Framework), drafted by the Independent Mobile Classification Body (IMCB), a subsidiary of PhonepayPlus. The Framework was established pursuant to the Content Code and sets out a framework for MNOs to classify commercial mobile content that is unsuitable for minors. Ofcom concluded that the Framework was also well observed by MNOs and adequately protected young people from accessing inappropriate images via mobile phones.

Consumer contracts and sales and marketing

Rules on consumer contracts

Ofcom has published guidance on how the Unfair Terms in Consumer Contract Regulations 1999 (SI 1999/2083) apply to communications providers' standard consumer agreements. This non-binding guidance applies to mobile and fixed-line contracts, setting guidelines on additional charges in communications services agreements, which include not charging customers who do not pay their bill by direct debit extra. (See Legal update, Ofcom publishes guidance on unfair terms in communications contracts).

Rules on misselling

A new General Condition 23 came into force in September 2009, following what Ofcom perceives as the failure of the MNOs' own voluntary code of practice to tackle misselling and cashback issues.

Under the new rules contained in General Condition 23, mobile communications providers must:

• Not engage in dishonest, misleading or deceptive conduct and must put provisions in place to ensure that those selling their products and services similarly do not missell.
• Make sure the customer intends to, and is authorised to, enter into a contract.
• Make sure consumers get the information they need at the point of sale.
• Make sure that the terms and conditions of cashback deals offered by their retailers are not unduly restrictive.
• Carry out due-diligence checks in respect of their retailers.

Providers in breach of the General Conditions could be fined up to 10% of their relevant turnover by Ofcom.

Prior to the implementation of General Condition 23, Ofcom took action against Phones 4U Limited under the Enterprise Act 2002. Phones 4U Limited gave undertakings to Ofcom under Part 8 of the Enterprise Act 2002 committing it to stop selling mobile phones and mobile-phone contracts in ways that breach consumer protection legislation. For more information, see Legal update, Phones 4U undertakes to stop misselling.

Porting

Customers are free to move between MNOs, subject to the constraints of their contracts. Ofcom has reviewed the porting process for mobile numbers (the technical process of moving a customer's telephone number from one provider to another), which needs to happen for consumers to transfer between MNOs. Ofcom has concluded that there should continue to be a donor-led process (the end-user has to contact his old network to get the Porting Authorisation Code (PAC) to give to the new network) for mobile number portability, but that the time for the porting process should be reduced from two days to one day (with PAC codes being provided within two hours). Ofcom is consulting on the changes to General Condition 18 necessary to introduce this change and on the implementation period (six or nine months). In relation to routing of calls to ported numbers, Ofcom has concluded that it should not intervene to require the introduction of direct routing at this time (ported calls are routed via the old network). On the basis of a revised cost benefit analysis, showing only marginal benefits for consumers, Ofcom has decided that the case for regulatory intervention has not been made. . For details of Ofcom's consultation and statement, see Legal updates, Ofcom consults on mobile number portability and routing options and Ofcom announces decisions on mobile number porting process and routing calls to ported numbers.

GSM gateways

What are GSM gateways?

A GSM gateway is a device that enables calls from a fixed network to be routed via a GSM link to a mobile network to take advantage of cheaper mobile-to-mobile call tariffs. The gateway contains at least one SIM for at least one mobile network on which calls are to be delivered. GSM gateways use the same set of frequencies as mobile phones on the relevant networks to communicate with the base transceiver stations.

There are two forms of GSM gateway, a distinction which is important for determining whether a GSM gateway is lawful or not.

Public

A public GSM gateway allows a telecommunications service to be provided by way of business to a party other than the party who installed the GSM gateway on the mobile network. It is also called a commercial multi-user GSM gateway, or "COMUG".

Private

Private GSM gateways connect the customer's telecommunications apparatus or telecommunications system to a MNO network for the customer's own use. To be classified as such, the private GSM gateway must not provide commercial services to any party other than the customer who bought, installed and uses the GSM gateway. Ofcom considers that there are two types of private GSM Gateway, a self-use gateway and a commercial single-user group gateway (or COSUG). 

A COSUG is a GSM gateway where a person other than the ultimate end user uses the GSM gateway equipment to provide an electronic communications service by way of business to one single end-user, whether the GSM Gateway equipment is located at the end-user's premises or elsewhere.

Regulation of GSM gateways

GSM gateways fall within the definition of wireless telegraphy apparatus under the WTA. It is therefore unlawful to install or use GSM gateways except under and in accordance with a wireless telegraphy licence granted by Ofcom under section 8 of the WTA, unless otherwise exempt from this requirement.

GSM gateways fall under the definition of relevant apparatus in the Wireless Telegraphy (Exemption) Regulations 2003: mobile stations for wireless telegraphy designed to be connected by wireless telegraphy to one or more relevant networks and to be used solely for the purpose of sending and receiving messages conveyed by a relevant network by means of wireless telegraphy. A relevant network is a network established in accordance with a licence under the WTA, that is, by one of the MNOs.

Ofcom has found self-use gateways, which are single-user gateways where a single end-user uses GSM gateway equipment for their own purposes to be exempt from the requirement for a WTA licence.

The exemption does not apply to apparatus that is established, installed or used to provide or to be capable of providing a wireless telegraphy link between a system/apparatus and another system/apparatus, where a commercial telecommunications service is provided to another person. Therefore, public GSM gateways are not exempt and are unlawful. Ofcom has also found COSUG GSM Gateways to fall within this description and therefore to be illegal.

This position was confirmed recently by the Court of Appeal, in Office of Communications, T-Mobile (UK) Limited v Floe Telecom Limited (in liquidation) [2009] EWCA Civ 47, which held that in the absence of a licence or exemption granted or made under section 8 of the 2006 Act, the use of GSM gateways for the purpose of providing a telecommunications service by way of business to another person is unlawful. In light of this recent decision, Ofcom plans to re-open its consultation on the future regulation of GSM gateways, which concluded 29 June 2005. This may result in changes to the regulatory position.

Equipment

The Radio Equipment and Telecommunications Terminal Equipment (R&TTE) Directive (1999/5/EC) contains standards to ensure the safety of radio equipment and eliminate interference generated by it. Mobile phones fall within the broad definition of radio equipment, which encompasses all components of equipment capable of communication through the emission or reception of radio waves. The Directive also sets out the procedures for placing R&TTE on the market and putting it into service. The European Technical Standards Institute produces mandatory technical standards for equipment. The Radio Equipment and Telecommunications Terminal Equipment Regulations 2000 (SI 2000/730) were published on 13 March 2000. The regulations transpose the provisions of the R&TTE Directive into UK law.

One of the major issues in relation to equipment is standards and standardisation. To this end, mobile equipment industry players – Apple, LG, Motorola, NEC, Nokia, Qualcomm, Research in Motion (RIM), Samsung, Sony Ericsson and Texas Instruments – have signed a Memorandum of Understanding to harmonise mobile-phone chargers across the EU. It is hoped that it will be possible to charge these manufacturers' mobile phones using a universal charger with a micro-USB connector from 2010. This solution was reached through self-regulation but will be supplemented by a new European Standard to be developed by the European Commission. This will reduce the amount of environmental waste generated through users changing their mobile phones to handsets with incompatible chargers (see Legal update, Universal mobile-phone charger agreement).

Other areas

Mobiles on aeroplanes

It is now possible on certain aircraft for passengers to make and receive calls and texts on their mobile phones once the aeroplane reaches a height of 3,000 metres. These aircraft contain a pico-cell base station and a Network Control Unit (NCU) both of which require WTA licences. The Wireless Telegraphy (Mobile Communication Services on Aircraft) (Exemption) Regulations 2008 (SI 2008/2427) (which enact the European Commission Decision (2008/294/EC) of 7 April 2008) exempt the use of mobile terminals on aircraft from requiring a licence under section 8(1) of the WTA. In order to be exempt under the regulations, wireless telegraphy apparatus must be on board an aircraft which is registered in the UK, and the exemption applies when the aircraft is flying over the UK or UK territorial sea or beyond the UK and the UK territorial sea. Mobile handsets connect to the base station and access the network service to make and receive calls which are routed to the conventional networks via a satellite link. The NCU prevents terrestrial networks from being accessed. Calls made from the aircraft are billed through the caller's usual MNO. The relevant aircraft operator's existing licence can be varied by the Civil Aviation Authority.

Mobiles on boats

To date, mobile communication services on-board vessels (MCV) have only been available in Europe to a limited extent and usually only in international waters. This means that mobile phone users on board vessels in EU waters receive only sporadic coverage. In order to provide MCVs, the mobile phones of those onboard a vessel must be linked to on-board cellular base stations that use the 900 MHz and 1800 MHz radio wave bands (the GSM frequencies). These base stations are in turn connected to a land-based core network via satellite. This allows communication with users of all telecommunications networks using a normal mobile phone. The same range of services (voice calls, text messages) normally provided on a land-based mobile network should be offered by on-board MCV systems, but at a higher cost (explained by the need to use satellite) and with less capacity for advanced services such as mobile data. Until now, there has been a divergence between the current regulatory regimes of different EU member states both in terms of technical and operational conditions for the use of radio spectrum and with respect to the types of authorisations, especially when it comes to provision of MCV services within a member states' territorial waters. In order to facilitate the use of MCVs in the EU's territorial waters, in March 2010 the European Commission adopted a Decision that guarantees the availability of 900 MHz and/or 1800 MHz GSM radio frequencies for on-board communication services under harmonised technical and operational conditions, and a Recommendation that EU member states liberalise their authorisation regimes so that any on-board services operator authorised in one country can provide services in the territorial waters of other EU countries without the need for further licences. For more details, see Legal update, Commission adopts new rules for use of mobile phones on ships.

Mobile satellite systems

Mobile Satellite Systems (MSS) are used to provide voice, video and data digital services. Both the mobile and the satellite elements of these systems are subject to regulation. The mobile element is regulated as any other mobile service and is subject to the provisions discussed above. Earth stations, which operate in the fixed satellite service frequency to connect the MSS to public networks, are also subject to regulation. It is difficult for any MSS to operate at the same frequency as another MSS or radio service in the same area. The use of the 2GHz spectrum for MSS, including complementary ground components (CGC), was harmonised across Europe by the ITU and member states have renounced their rights to it. European Commission Decision on the selection and authorisation of systems providing MSS (626/2008/EC), which came into force in July 2008, sets out the criteria for selecting MSS operators, a process which will be performed by the Commission after the publication of an invitation to tender in the Official Journal, and the provisions for coordinated authorisation of the selected operators to use the 2GHz spectrum for MSS.

One of the advantages of this use of the 2GHz band is high-speed internet access for mobile television. Ofcom has addressed the terms of the licences for MSS, including those set out in the EC Decision 626/308/EC regarding how to select MSS operators.

Ofcom issued a statement in November 2008 in response to its consultation on proposals for licensing CGC for MSS in January 2008. The statement sets out the licence terms for CGC, which incorporate EC Decision 626/308/EC. The additional licence terms set out in Ofcom's statement include that the licences will be tradable, will as far as possible be service and technology neutral and will incur a licence fee based in Administered Incentive Pricing. Ofcom has opened two further consultations into CGC licence terms which will close on 1 December 2009.

Micro and mobile payments

Significant developments in mobile-phone technology and the services this can deliver to consumers are anticipated. Customers of many UK banks are already able to check their account balances and make transfers to accounts with the same bank through their mobile phones, using the mobile number in place of the customer's account number. The technology to use this capability between accounts from different banks already exists and is likely to be introduced gradually, subject to security requirements. Certain companies are already offering the facility for users to make payments and purchases via their mobile phones. MNOs are offering their customers debit cards that can be pre-loaded. Each time the cards are used the customer will receive a text message containing the details of the transaction. These developments will require corresponding changes to all aspects of the regulatory framework, at a European and UK level.

Charity donations via mobile phones are increasing in popularity due to the convenience it offers users. A mobile platform can be used to make donations on a subscription basis or through sending a one-off text message, with the cost of the donation (including a percentage paid to the MNO) being applied to the user's mobile phone bill. This structure involves a UK mobile billing standard and an accredited payment intermediary. The popularity of making charity donations via a mobile phone is set to increase following the Mobile Data Association's announcement on 27 July 2009 that donations to charity made by text message are no longer subject to VAT.

This use of mobile phones has been developed further in Japan than the UK, where Osaifu-Keitai (wallet mobile) has been adopted by many mobile phone manufacturers. The handsets are equipped with a contactless IC (integrated circuit) or "smart" card, which allows it to be used as a debit card, credit card, electronic ticket, membership card and airline, rail and bus ticket by swiping it over a reader.

The structure of all mobile-payment arrangements must take into consideration financial-services regulation, which in recent times is ever more pervasive. Increased financial activity could result in MNOs having to be authorised by the Financial Services Authority under the Financial Services and Markets Act 2000 if they conduct the regulated activity of issuing e-money.

For further information, please contact Katrina Dick.