Gibfibre Ltd v Gibraltar Regulatory Authority (Gibraltar)

The appellant, the Gibraltar Regulatory Authority (“the GRA”), is the regulator of the telecommunications industry in Gibraltar. It is the appointed national regulatory authority in accordance with the Communications Act 2006 (“the Act”) which transposes into Gibraltar law the provisions of Framework Directive 2002/21/EC on a common regulatory framework for electronic communications networks and services (“the Framework Directive”).

The respondent, Gibfibre Ltd (“Gibfibre”), is an authorised operator of a public electronic communications network in Gibraltar and a provider of electronic communications services, having built its own fibre optic system.

The intervener, Gibtelecom Ltd (“Gibtelecom”), is also an authorised operator of a public electronic communications network and an electronic communications services provider in Gibraltar. It was formerly the state monopoly provider of telecoms services in Gibraltar. It is wholly owned by the government of Gibraltar.

As well as its activities as an electronic communications network operator and service provider, Gibtelecom’s wholly owned subsidiary, Rockolo Ltd, also operates a data centre at Mount Pleasant in Gibraltar (“the data centre”). A data centre is a building which houses computer servers, arranged on racks. The servers are owned by third parties who have rented space on the racks. The data centre provider is responsible for providing a highly secure, climate-controlled environment, providing electrical power to the servers, including backup power systems, and for monitoring relevant systems. The creation of a data centre requires a significant capital investment.

The servers in a data centre are connected to the outside world by means of electronic communications services. At Mount Pleasant, those services are provided by Gibtelecom itself, as well as by Sapphire Networks Ltd (“Sapphire”). Sapphire has contracted with Gibtelecom to be allowed access to the data centre to place its own servers in a dedicated carrier room, which can then be connected through the data centre’s internal cabling to the appropriate customer servers.

Gibfibre wished to provide its electronic communications services to potential customers whose servers and related equipment were hosted at the data centre. For that purpose, Gibfibre asked Gibtelecom for access to the data centre on like terms as those afforded to Sapphire. This involved (i) having access to the data centre via certain ducts which are used by Gibtelecom as part of its network, (ii) placing Gibfibre’s own server in the data centre, and (iii) connecting that server to the customers’ servers, so as to provide electronic communications services directly to those customers over its own network, without connecting via Gibtelecom’s network (save for the use of the ducts) (“the requested access”).

Gibtelecom refused Gibfibre’s request, initially denying that the ducts had the requisite capacity, but later conceding that its true reasons were purely commercial. In consequence, in or around November 2015, Gibfibre sought the GRA’s assistance and intervention, as the national regulatory authority. Based on information provided to it by Gibfibre and investigations carried out by the GRA itself, the GRA engaged with Gibtelecom in a bilateral regulatory enforcement process in respect of Gibtelecom’s refusal to grant the requested access. After extensive and detailed exchanges with Gibtelecom and consideration of the matter by the GRA in the light of counsel’s advice, the GRA (having initially taken a different view) concluded that it did not have the legal powers to require Gibtelecom to grant Gibfibre the requested access. This was because it considered that the request was not for access to or interconnection of public electronic communications networks or public electronic communications services or associated facilities thereof, as explained in the GRA’s decision letter dated 16 February 2017 (“the decision”).

Gibfibre appealed the decision to the Supreme Court of Gibraltar under the appeal provisions in the Act. The appeal came before Butler J who dismissed it in a judgment dated 30 November 2018 on the following grounds: (i) the GRA did not have power to order the requested access under article 12 of Directive 2002/19/EC on access to, and interconnection of, electronic communications networks and associated facilities (“the Access Directive”) as the data centre was not part of Gibtelecom’s communications network or its associated facilities and (ii) the GRA did not have power to order the requested access under article 5 of the Access Directive on the ground that access could only be required under article 5 for one of the purposes specified in paras (a), (ab) and (b) of article 5, which were not engaged by the requested access. He further held, rejecting the GRA’s argument to the contrary, that the telecommunications market known as “Market 4” was not limited to the local loop, and was capable of being engaged by the requested access.

Gibfibre appealed the decision of Butler J to the Court of Appeal and the GRA cross appealed on the Market 4 issue. In a judgment dated 26 April 2019 the Court of Appeal (Sir Maurice Kay P, Sir Patrick Elias JA and Sir Colin Rimer JA) dismissed the appeal on ground (i), allowed the appeal on ground (ii) and dismissed the cross appeal. With the permission of the Court of Appeal the GRA appeals to the Board against the decision to allow the appeal on ground (ii) and the dismissal of its cross appeal. There is no cross appeal by Gibfibre against the Court of Appeal’s dismissal of its appeal on ground (i).

The EU has adopted a common regulatory framework for the regulation of telecommunications throughout the EU. There are five Directives, all issued on 7 March 2002, which lay down the relevant legal rules. The appeal concerns two of those Directives, the Framework Directive and the Access Directive. These have been implemented in Gibraltar through the Act and the Communication (Access) Regulations 2006. The parties agree that Gibraltar law has properly implemented EU law and the case has been argued below and before the Board by reference to EU law. Since the date of the decision the five Directives have been replaced by a single Directive, Directive (EU) 2018/1972 of 11 December 2018 establishing the European Electronic Code, known as “EECC”. The appeal, however, falls to be decided by reference to the law prevailing at the date of the decision.

As explained at para 6 of the judgment of Sir Patrick Elias JA, with whose judgment the rest of the court agreed:

Under the Framework Directive and the Access Directive the ex ante regulation of undertakings which have significant market power is carried out under the following regime:

The EU Commission identifies (by formal recommendations) “markets” (ie sectors, activities, products and services within the telecommunications industry) which, by virtue of the application of EU competition principles, are apt for ex ante regulation.

In respect of these “markets”, national regulatory authorities, such as the GRA, are required to intervene to impose obligations on undertakings only where the markets are considered (in that country) not to be effectively competitive as a result of such undertakings being in a position of dominance. This requires the national regulatory authority to assess their telecommunications “markets” (as identified by the EU Commission) in their country for competitiveness and, if found not to be, to impose conditions and obligations on any operator with significant market power within them.

Article 16 of the Framework Directive establishes the procedure known as the “market analysis procedure” whereby the national regulatory authority is empowered to assess the “market” and to establish whether any “operator” within it exercises significant market power. Articles 7 and 8 of the Access Directive require the national regulatory authority to impose at least one of the specific conditions/obligations contained in articles 9-13 of the Access Directive on operators with significant market power.

Articles 9-13 of the Access Directive concern different obligations which may be imposed on an operator which has been designated as having significant market power: namely, transparency (article 9); non-discrimination (article 10); accounting separation (article 11); access to, and use of, specific network facilities (article 12); and price control and cost accounting (article 13). As Lord Sumption observed in British Telecommunications plc v Telefónica O2 UK Ltd [2014] UKSC 42; [2014] Bus LR 765 at para 9, articles 9-13 “represent the most intrusive parts of the regulatory scheme”.

Under article 8(3) of the Access Directive national regulatory authorities are not to impose the obligations set out in articles 9-13 on operators that have not been designated as having significant market power, although this is stated to be “without prejudice to the provisions of articles 5(1), 5(2) and 6”. Article 8(3) further provides that “in exceptional circumstances, when a national regulatory authority intends to impose on operators with significant market power obligations for access or interconnection other than those set out in articles 9 to 13”, it shall submit a request to the Commission which will decide whether or not to authorise the taking of such measures.

In the present case, Gibfibre contended that the GRA had the power to order Gibtelecom to provide the requested access under both article 12 and article 5 of the Access Directive. It contended that the article 12 power arose because Gibtelecom had been designated as having significant market power in a relevant market, namely Market 4 - “Wholesale (physical) network infrastructure access (including shared or fully unbundled access) at a fixed location in Gibraltar”. Although the GRA disputed that this was a relevant market for the purpose of the requested access, the courts below held otherwise. Article 12 concerns obligations of access and provides:

The power to impose an obligation under article 12 therefore only arises in respect of a request “for access to, and use of, specific network elements and associated facilities”. “Associated facilities” are facilities which enable or support the provision of services via the network or which have the potential to do so. The phrase is defined in article 2(e) of the Framework Directive (which definitions apply to the Access Directive under article 2 thereof) as follows:

Both the judge and the Court of Appeal held that elements (ii) and (iii) of the requested access, namely placing Gibfibre’s own server in the data centre, and connecting that server to the customers’ servers, were not a request “for access to, and use of, specific network elements and associated facilities”. As Sir Patrick Elias JA explained at paras 39 and 40 of his judgment:

This finding is not challenged and so it is not in dispute that there is no power to require that the requested access be granted under article 12 and that elements (ii) and (iii) of Gibfibre’s request do not involve a request “for access to, and use of, specific network elements and associated facilities”.

The Court of Appeal held, however, reversing the decision of the judge, that the GRA nevertheless had power to require the requested access to be granted under article 5. This provides:

Article 5(1) refers to the objectives set out in article 8 of the Framework Directive, which provides:

The Court of Appeal held that under article 5(1) there is a general power “to ensure … adequate access” and that access covers all the matters set out in the definition in article 2(a) of the Access Directive which provides that:

The Court of Appeal held that this embraces access to facilities other than “network elements and associated facilities”, including “physical infrastructure” such as the data centre, and that the requested access did involve “the making available of facilities … for the purpose of providing electronic communications”. There was accordingly power to order the requested access under article 5.

The issues arising from the grounds of appeal are:

The Board proposes to address Issue 2 first. It is a logically prior issue to Issue 1 and it is also the ground of appeal principally relied upon by Gibtelecom.

The case of the GRA and Gibtelecom is that article 5 cannot and does not endow the GRA with the power to require an operator to allow access to physical infrastructure where the relevant infrastructure could not be described as being part of Gibtelecom’s own electronic communications network or its associated facilities as that would be outwith the scope of the Access Directive.

The title of the Access Directive is that it is a directive “on access to, and interconnection of, electronic communications networks and associated facilities”.

Recital (1) of the Access Directive provides that:

Article 1 of the Access Directive defines the scope of the Access Directive as follows:

The GRA and Gibtelecom contend that the scope of the Access Directive is accordingly limited to regulation of access to electronic communications networks and associated facilities. In so far as article 5 confers a power which goes beyond the purposes/circumstance listed in paragraphs (a), (ab) and (b) of article 5 (Issue 1), it cannot extend beyond the scope of the Access Directive itself.

In the present case, in deciding that there is no power to require access under article 12, the Court of Appeal held that elements (ii) and (iii) of the requested access were not a request for access to any element of Gibtelecom’s electronic communications network (“specific network elements”) or its associated facilities. In the light of this unchallenged finding, it is contended that the requested access falls outside the scope of the Access Directive.

Gibfibre supports the reasoning and decision of the Court of Appeal on this issue. In particular, it is submitted that the case of the GRA and Gibtelecom is inconsistent with both the wording and the purpose of the relevant provisions.

It is said to be inconsistent with the wording of the relevant provisions because the definition of “access” in article 2(a) of the Access Directive makes clear that “access to network elements and associated facilities” is just one example of access within the meaning of the Access Directive, another of which is “access to physical infrastructure including buildings, ducts and masts”. Moreover, recital (3) of the Access Directive emphasises the importance of the definition of “access”, explaining that as “the term ‘access’ has a wide range of meanings … it is therefore necessary to define precisely how that term is used in this Directive …”.

It is said to be inconsistent with the purpose of the relevant provisions because the purpose of the common regulatory framework, as set out in article 8(2) of the Framework Directive, is to ensure that all reasonable measures are taken to ensure that there is no distortion of competition in the provision of electronic communications services for the benefit of end users.

Gibfibre points out that the case of the GRA and Gibtelecom means that unless physical infrastructure forms part of its network or an associated facility, then the GRA has no power to intervene. It is submitted that that would put a substantial proportion of the market for electronic communications services in Gibraltar beyond the reach of the regulatory framework in a manner inconsistent with both the wording and the purpose of the common regulatory framework and the Access Directive.

After careful consideration of the competing arguments, which have been persuasively presented by counsel for all parties, the majority of the Board has reached the clear conclusion that the appeal should be allowed on Issue 2. There are several reasons for so concluding.

First, an article, such as article 1 of the Access Directive, which defines the scope of a Directive is of fundamental importance. Whilst a definitions article, such as article 2, is important for the proper application of a Directive, it does not seek to define its ambit, as article 1 does.

Article 1(1) states that the Access Directive regulates “access to … electronic communications networks and associated facilities”. Article 1(2) states that the Access Directive “establishes rights and obligations” in relation to “access to [operators’] networks or associated facilities”. This is stated to be the “scope” of the Access Directive, consistent with its long title.

Whilst the definition of “access” in article 2 is widely drawn, it does not determine the rights and obligations of operators to request/grant access. It determines what needs to be given, but not the obligation to give it or the circumstances in which it needs to be given. In so far as article 5 confers a general power to grant access, consistently with the defined scope of the Access Directive, that means “access” to the “electronic communications networks and associated facilities” of the requested operator. It does not mean access to a building or other physical infrastructure that is neither of those things, as the Court of Appeal has held elements (ii) and (iii) of the requested access to be. However broad the definition of “access” may be, it cannot enlarge the scope of the Access Directive itself.

Secondly, “operator” is defined in article 2 of the Access Directive as meaning “an undertaking providing or authorised to provide a public communications network or an associated facility”. The operators’ “networks” referred to in article 1(2), in relation to which rights and obligations of access are established by the Access Directive, must therefore mean public communications networks. This is consistent with recital (1) of the Access Directive which states in terms that it applies to “networks that are used for the provision of publicly available electronic communications services” and that “non-public networks do not have obligations under this Directive”. It is also consistent with the “rights and obligations for undertakings” in relation to interconnection set out in article 4, which apply in terms to “operators of public communications networks”.

“Public communications network” is defined in article 2(d) of the Framework Directive as meaning “an electronic communications network used wholly or mainly for the provision of electronic communications services available to the public which support the transfer of information between network termination points.”

“Network termination point” is defined in article 2(da) of the Framework Directive as meaning “the physical point at which a subscriber is provided with access to a public communications network; in the case of networks involving switching or routing, the NTP is identified by means of a specific network address, which may be linked to a subscriber number or name.”

The network termination point therefore marks the boundary of a public communications network. Beyond that boundary will lie private networks and telecommunications terminal equipment, which are not subject to regulation under the common regulatory framework.

At the material time, telecommunications terminal equipment was subject to regulation under Directive 1999/5/EC of the European Parliament and of the Council of 9 March 1999 on radio equipment and telecommunications terminal equipment and the mutual recognition of their conformity. Article 2(b) of that Directive defines telecommunications terminal equipment as being:

That the network termination point marks the regulatory boundary of the common regulatory framework is confirmed by recital (6) of Directive 2002/22/EC (the Universal Service Directive), one of the five Directives of 7 March 2002 which set out the common regulatory framework. It provides:

The customer servers located on the data centre’s racks lie beyond the network termination point, as the Court of Appeal held at para 39. They therefore form no part of any public electronic communications network and lie outside the regulatory boundary of the common regulatory framework. As the Court of Appeal stated at para 39: “the hosted servers are not themselves part of the network”.

The domestic equivalent of a server would be a personal desktop computer which is connected to a router and a modem (now usually combined in one machine) which is in turn connected to a telephone wall terminal where it joins a public communications network. That is where the network termination point would be. The personal computer is not itself part of the network.

The requested access therefore falls outside the scope of the Access Directive not only because it does not seek access to an electronic communications network or associated facility but also because it does not seek access to a public communications network or associated facility, but rather to a private network and to telecommunications terminal equipment which lie beyond the network termination point, the regulatory boundary of the common regulatory framework.

Thirdly, the main focus of the Framework Directive and the Access Directive is the ex ante regulation of undertakings which have significant market power. As explained in recital (27) of the Framework Directive:

At the same time, it is recognised that there should not be over-regulation of markets where one or more undertakings has significant market power and so the obligations set out in articles 9-13 of the Access Directive are described in the recitals as “maximum obligations”. As stated in recital (14):

Against that background, it would be very surprising if there was a general power under article 5 to impose obligations of access on an operator which did not have significant market power which went beyond the “maximum obligations” which may be imposed on an operator with such market power under article 12, one of the range of obligations which represents the most “intrusive” part of the regulatory scheme. That, however, is the consequence of the Court of Appeal’s decision. Although it was held that there was no power to require the requested access on an operator with significant market power under article 12, it was held that there was a power to do so under article 5 regardless of whether or not that operator had significant market power. If, on the other hand, any general power to require access under article 5 is limited, in accordance with the scope of the Access Directive, to access to the requested operator’s electronic communications network or associated facilities then there is no inconsistency with article 12, and rights to and obligations of access are treated consistently and harmoniously across the Access Directive as a whole.

Fourthly, the Court of Appeal recognised that it would be “curious” if an operator with significant market power was subject to “less rigorous regulation” than one without such power but considered that this inconsistency was avoided if the general power which they held to be available under article 5 could be imposed on both types of operator (para 45). Obligations of access which go beyond those set out in article 12 cannot, however, be imposed on operators with significant market power without the prior approval and authorisation of the Commission, as stated in article 8(3). On the Court of Appeal’s own findings in relation to Market 4, this is a case in which Gibtelecom has significant market power in the relevant market. The general power under article 5 which the Court of Appeal held could be exercised against Gibtelecom in the present case accordingly ignores, is inconsistent with and subverts the important requirement of prior Commission approval and authorisation under article 8(3).

Fifthly, as held by the courts below in relation to article 12, elements (ii) and (iii) of the requested access do not involve access to any element of Gibtelecom’s electronic communications network or any associated facility thereof. As the GRA put it, far from seeking to access Gibtelecom’s network, Gibfibre is seeking to bypass it altogether by connecting its own network directly to the hosted customers’ servers. As the judge stated at para 71, “it is effectively a request to [Gibtelecom] for it to grant access to its premises in order that [Gibfibre] can access the servers of third parties”. The logic of Gibfibre’s argument, as was accepted before the courts below, is that Gibtelecom could be required to grant access to its premises even if no part of its electronic communications network was housed there. If, for example, the only electronic communications services at the data centre were those provided by Sapphire, on Gibfibre’s case Gibtelecom could still be required to grant access simply because it was the owner of the building. The same would seemingly apply to any building or physical infrastructure which happened to be owned or controlled by a public communications network operator, and to anything within it regardless of whether it plays a role in the provision of that network. This strays far beyond the scope and aim of the Access Directive.

Sixthly, although it may be said that having the power to require the GRA to grant access to the data centre will promote competition in the provision of electronic communication networks and services, the Framework Directive and the Access Directive are concerned with promoting competition in markets which require ex ante regulation. If it be the case that Gibtelecom’s behaviour is anti-competitive or that it is abusing its dominant position then that is a matter which can be addressed by ex post regulation under competition law. The mere fact that there may be such behaviour does not require or justify a power of intervention under the Access Directive.

The fact that on Gibfibre’s case access may be required to a building in which the operator has no electronic communications network or services highlights that the underlying market which is being targeted is the hosting services market rather than the electronic communications market. As the judge observed at para 83 of his judgment:

Seventhly, we have not been referred to any case in which it has been held that there is a power to require access which goes beyond the access obligations which may be imposed on an operator with significant market power under article 12.

Eighthly, there is support in the commentaries for the obligation of access being limited to access to networks and associated facilities. For example, Garzaniti , Telecommunications, Broadcasting and the Internet: EU Competition Law and Regulation , 3rd ed (2010), states:

Finally, it is to be observed that the general power under article 5 which the Court of Appeal found to exist is not only unconstrained by the stated scope and aim of the Access Directive but is of remarkable width. It is an “anything and everything” or omnibus power that can seemingly be exercised in relation to all electronic communications service providers, for all purposes and by all and any means, provided only that the access sought comes within the very broad definition in article 2(a), and the obligation and condition imposed promotes competition and meets the requirements of article 5(2) (objective, transparent, proportionate and non-discriminatory and implemented in accordance with the procedures referred to in the Framework Directive). It is difficult to see how this is consistent with the carefully structured and balanced regime for operators with significant market power set out in articles 8-13, and the recognised need to avoid over-regulation. Indeed, as the judge observed, if article 5 is as broad as Gibfibre contends there is force in the submission that there would no real need for the detailed regime governing operators with significant market power (para 91).

For all these reasons, the majority of the Board is satisfied that article 5 does not endow the GRA with the power to require Gibtelecom to allow access to physical infrastructure where the relevant infrastructure could not be described as being part of Gibtelecom’s own electronic communications network or its associated facilities. Lord Sales reaches the same conclusion for the reasons which he gives. The Board would therefore allow the appeal on Issue 2.

In these circumstances, it is not necessary for the Board to address Issue 1 or Issue 3 (which is in any event academic as the Court of Appeal held that there was no power to require access under article 12 even though access was being sought in the relevant market). The abstention of the Board should not, however, be interpreted as an endorsement of the Court of Appeal’s conclusion on either issue.

The Board will humbly advise Her Majesty that the appeal should be allowed.