Have lawyers captured the regulatory castle?
Feb 26, 2014 by PolicyTracker



Telecoms firms have always been a litigious bunch. In Austria last year, they called in the lawyers to fight the terms of the country’s spectrum auction and then challenged its outcome when it was over. The terms of the Czech auction were also challenged.

The latest operator to choose this path is PCCW, which went to court last week over the Hong Kong regulator’s plan to “reclaim” a third of the city’s 3G spectrum and make it available at an auction that will be open to new market entrants (the giant China Mobile is waiting in the wings).

While not all of these challenges are ultimately successful, they do always eat up regulatory time and resources. In the UK, Ofcom has faced 61 appeals over the last five years, with nearly all of its rulings challenged in the country’s Competition Appeals Tribunal. It says fighting these cases has cost between £2 million (€2.4 million) and £4.5 million (€5.5 million) a year.

Chief executive Ed Richards has said that the system is “too legalistic and too open to gaming” by companies able to pay for large legal teams, and that “everything we do now is subject to the huge shadow of threat of litigation”. Consumer groups recently wrote to the UK government to complain that Ofcom’s decisions were “derailed too easily”.

None of this is new. Companies have used the law courts tactically in pursuit of commercial advantage for years. But perhaps now is a good time to rethink the powers of those who are responsible for the efficient use of spectrum.

While no one thinks regulators should be all-powerful, do we really want them to be quite so vulnerable? To be dragged through the courts quite so often?

In the wake of the financial crisis, there has been much talk of “regulatory capture”, whereby companies become so influential over regulators that they effectively control their thinking. Is this so very different to a situation where companies can knock regulators off course with one flick of their legal wrists?