Vodafone Ltd v T-Mobile (UK) Ltd [2004] CAT 18 (19 November 2004) [2004] CAT 18

"5. Indeed, with the liberalisation of the telecommunications market in the UK, and with the multiplicity of network operators and service providers, there are numerous opportunities for users to reduce their overall telephone bills by choosing the cheapest ways of making calls. There are active in the UK market various companies providing so-called least cost routing services. They tend to market their services to corporate customers, who incur relatively high telephone bills, and offer them cheaper charges by routing their calls across transit networks and through other devices which offer cheaper prices than conventional carriers' charges. A least cost routing company will generally connect is own equipment to the customer's switchboard equipment (PABX) and carry the traffic itself, up to a point of handover to third party network operators for on-delivery to its destination. The carrier will arrange for the traffic to be carried, in each case, by the lowest cost route. The company will charge for its services, at a price which effectively allows the end user to achieve an overall reduction in its telephone bills, whilst remunerating the routing company for its services. This activity is generally perfectly legal, provided that all the carriers involved operate within the terms of applicable authorisations and licences. 6. In 2002, I learned that some such companies also establish and use public GSM gateways. These are devices which may hold a substantial number of SIM cards (e.g. Vodafone SIM cards, 02 SIM cards, Orange SIM cards, T Mobile SIM cards). A telecommunications operator carries relevant call traffic to the gateway. At the gateway, the call is routed through a SIM card associated with the network to which the call is destined to be delivered (so, a call to a Vodafone subscriber is routed via a Vodafone SIM card). (The gateway operator can select the correct network SIM card by finding out the number ranges allocated to particular networks.) The call routed through the SIM card is treated, by the Vodafone network, like any outgoing call originated on a Vodafone handset and is delivered to the called party, in all respects as if it were an on-net call from one Vodafone subscriber to another. If the gateway operator has acquired the SIM card as part of a package offering cheaply-priced on-net calls, he will pay only that cheap on-net call price for the delivery of the call from the gateway to the called party. Where a gateway operator provides services to numerous customers, it will be able to pass large volumes of traffic through the gateway. Vodafone's subsequent investigations revealed that public GSM gateway operators were contracting to carry a variety of kinds of call traffic through their gateways, including internationally-originating calls, calls originating on fixed UK networks (which the fixed network operator hands over to the gateway operator for routing through the gateway) and calls originating from a corporate customer's switchboard, and routed to the gateway by the use by the corporate customer of a special 4 digit dialling prefix (1xxx). Vodafone believed that the use of such public GSM gateways for all these purposes was illegal. After drawing attention to various technical problems which such GSM gateways allegedly cause, Mr Rodman continued at paragraphs 11 to 12: "11. For completeness, I should also mention the use of so-called private GSM gateways. A private GSM gateway is a device containing a single SIM card, which may be attached directly to a corporate customer's switchboard (PABX) and used to route outgoing calls from the switchboard through the gateway, and through a particular SIM card for on-delivery of the call to a subscriber to the network with which the SIM card is associated. It serves the same purpose as a public GSM gateway – namely to convert a fixed-to-mobile call, for charging purposes, to an on-net call. 12. I had been familiar with private gateway devices when I worked in the mobile telecoms sector in South Africa, before joining Vodafone. In the UK, Orange had been the first mobile network operator to offer private gateways, using Premicell devices. Vodafone's own in-house service provider business, Vodafone Corporate, found that it also had to offer private gateway devices to its corporate customers, in order to compete effectively with Orange."

"19. John Overton, Johnathan Young and I were in attendance at the meeting on 6 February, from the Vodafone side. Simon Taylor and Graham Ward, a former executive of Vodafone, attended on behalf of Floe. At the meeting I explained our concerns with respect to the illegal operation of public GSM gateways and the associated problems with congestion, CLI and interception. I stressed that the use of public gateways was illegal. Simon Taylor did not take issue with this. Instead, he assured us on more than one occasion that Floe was only engaged in providing private GSM gateways. He explained that Floe's business was focused on serving small and medium sized enterprises with private gateway solutions. He expressed sympathy with any network congestion problems which Vodafone was encountering, and offered to help to find ways of solving them. 20. Absent any precise data as to Floe's usage, I did not question Simon Taylor any further on this at the meeting. I was aware that, having worked with Telecom FM, Simon Taylor would be fully familiar with private gateway devices, and there was no question of his having misunderstood what I was saying."

"Floe Telecom supplies a whole range of telecommunications services to UK based businesses. Included in the service portfolio is a fixed to mobile service solution, all of which was covered with Vodafone in great detail during the six months or so it took to agree and sign the contract. The only thing that has changed since that time is the type of customer we have been able to attract. Initially as you rightly state, we were targeting the ME and SME type business. However, it has turned out that the customer that has been most attracted to our services has been major corporates and blue-chip organisations, which enabled us to build an impressive customer list. This has meant that we have had to reassess our service delivery mechanisms in order to meet with the additional needs of this type of customer. I am surprised that Vodafone needed to go through the activity of analysing traffic data associated with our SIM's in order, to come to the conclusion that the activity patterns of 14 th November were indicative of the use of Gateways. You were eminently aware of this during our contract negotiations… Our corporate customers being mainly City-based organisations, presented us with a problem with connection, as we knew that (especially) the City of London was an area of extremely high mobile activity. Our solution to this problem was to invest heavily in switching and network infrastructure in order to move the activity to areas where the impact on the viability of the Vodafone network would be less apparent. (You will be aware of this from your network activity records that Floe does not operate a single gateway in the centre of a city). The result of all this is that in order to reduce the pain for your network planners, Floe "extends" the corporate customers premises by the use of leased lines and indirect access switching, to terminate traffic in areas of lower mobile activity. Hence the conclusions you reached (incorrectly) in your analysis of our traffic in November… We are all aware of the current activities being undertaken by the Radiocommunications Agency (RA) with regard to the use of 'fixed user stations' and Floe has held a number of meetings with the DTI, RA and OFTEL on the subject. You will also be aware that, until a judgment is forthcoming from the Secretary of State, the RA have stated publicly that 'it would be inappropriate to take precipitous action against their use during the consultation period'."

"Vodafone did not state that Floe's business with Vodafone " is going to be suspended due to the use of 'illegal gateways' which are causing Vodafone network problems… Instead, Vodafone asked Floe Telecom to demonstrate, to our satisfaction, that the 29 SIMs registered to your company showing unusually high traffic patterns were not being used for illegal purposes, namely the supply of GSM gateway services to third parties…Your two letters do not address this point. The clear inference from your letters is that you acknowledge that you are operating a wholesale supply of gateway services, and you do not claim to have a licence to do so (which is hardly surprising as the stated view of the Radiocommunications Agency (RA) is that such activities cannot be licensed under the current regime). In the light of this failure to satisfy us that you were not using the SIMs for illegal purposes, we were fully entitled to terminate the contract without further notice and with immediate effect under clause 16.2 of Schedule 6. We are therefore within our rights to suspend service to you… Vodafone is well aware that GSM Gateways are the subject of an RA consultation. Vodafone is also aware that the RA has stated on its website that the use of such devices is currently illegal. Vodafone has no reason to believe that the outcome of the RA's review will be that the provision of wholesale gateway services will be legalised."

"My understanding is that, for the moment, the RA has not sought to enforce the breach of the law by GSM Gateway operators while the consultation is continuing. However I believe that the RA is well aware that this illegal activity is causing damage to customers using the network legitimately."

"Our policy is to engage in a constructive dialogue and where possible [ensure] [3] [4] that these operators are able to route their calls legally. I can confirm that this has been done [in an] even handed manner"

"John RA can only speak for itself in its decision to forbear enforcement of the Exemption Regulations pending the outcome of the consultation. From the outset we have said we will only act if we received complaints of interference due to unlicensed use. That said, individuals, (including companies) are perfectly entitled to act on the law as its stands. If they do act, that is a contractual matter between them and their customer."

"For WT purposes: (i) A PRIVATE mobile radio system is a self provided and self used mobile radio system. A private radio system is one where the purpose and the exclusive benefit of the use of the radio system is solely in the interests of the individual/business. Such systems may interconnect with telecommunications systems such as the Public Switched Telephone Networks, provided that the only traffic which is carried over the radio element of the communications path is concerned solely with the individual/business and will receive no payment, consideration or other benefit from any third party in respect of the provision of radio telecommunications facilities; (ii) A PUBLIC mobile radio system is a mobile radio system provided commercially for use by others. A public radio system is one where the beneficiary of use of the system might not be anyone concerned with the business of the provider. The provider may receive a payment, consideration or other benefit, either directly through a contractually managed fee or indirectly through standing charges levied at point of sale of any equipment to be connected to the system or by any other means, in payment of the service of providing and maintaining the radio facility for use by third parties. To answer your last point, under the Wireless Telegraphy Act 1949 all use of the radio equipment must be either licensed or specifically exempted from licensing. The mobile operators are not operating illegally as the GSM spectrum has been licensed to them on a nationally exclusive basis and cannot therefore be licensed for commercial purposes to anyone else."

"put an authorised SIM card into the GSM gateway and it works. Take it out and the device can only be used to call the emergency services. The SIM card belongs to Vodafone and the main purpose of it is to identify and authorise the subscriber. Without the authorisation of Vodafone the GSM gateway will not know the frequency to use for its return path or the level of power to use."

" 5. - (1) …a person who runs a telecommunications system within the United Kingdom shall be guilty of an offence unless he is authorised to run the system by a licence granted under section 7 below."

"14 The term "to run a telecommunications system" is used, though not defined, in the Act and is therefore used in all licences granted under it. At the time of writing the Act's meaning of "run" had not been tested by the courts and so only informal guidance can be given. "

"Subsection (1) of this section shall not apply to the installation or use of any television receiver by a person who is a dealer in such receivers where the installation or use is solely for the purpose of doing any one or more of the following in the course of his business as such a dealer, namely, demonstrating, testing or repairing such receivers"

"Any person who has any station for wireless telegraphy or apparatus for wireless telegraphy in his possession or under his control and either: - a. intends to use it in contravention of section 1 of this Act; or b. knows or has reasonable cause to believe that another person intends to use it in contravention of that section, shall be guilty of an offence."

"3. A GSM gateway is a Mobile Station (in the same way that a mobile phone is a Mobile Station for these purposes), which communicates via radio with the mobile operator's network. A Mobile Station is defined in terms of the radio frequencies at which it transmits and receives, and the signalling interface used to control those transmissions. In both those respects a GSM gateway complies with the definition of a Mobile Station. If it did not, it would not function. A Mobile Station is not required to be mobile at the time it transmits or receives a call, though the specification is designed so as to support mobility. Floe Telecom seeks to argue that there is a looser definition of such terms as "

"(2) With the exception of relevant apparatus operating in the frequency bands specified in paragraph (3), the exemption shall not apply to relevant apparatus which is established, installed or used to provide or to be capable of providing a wireless telegraphy link between telecommunications apparatus or a telecommunication system and other such apparatus or system, by means of which a telecommunication service is provided by way of business to another person."

"(8) Whereas, given the increasing importance of telecommunications terminal equipment and networks using radio transmission besides equipment connected through wired links, any rules governing the manufacturing, marketing, and use of radio equipment and telecommunications terminal equipment should cover both classes of equipment. (12) Whereas Community law provides that obstacles to the free movement of goods within the Community, resulting from disparities in national legislation relating to the marketing of products, can only be justified where any national requirements are necessary and proportionate; whereas, therefore, the harmonisation of laws must be limited to those requirements necessary to satisfy the essential requirements relating to radio equipment and telecommunications terminal equipment; (13) Whereas the essential requirements relevant to a class of radio equipment and telecommunications terminal equipment should depend on the nature and the needs of that class of equipment; whereas these requirements must be applied with discernment in order not to inhibit technological innovation or the meeting of the needs of a free-market economy; (21) Whereas unacceptable degradation of service to persons other than the user of radio equipment and telecommunications terminal equipment should be prevented; whereas manufacturers of terminals should construct equipment in a way which prevents networks from suffering harm which results in such degradation when used under normal operating conditions; whereas network operators should construct their networks in a way that does not oblige manufacturers of terminal equipment to take disproportionate measures to prevent networks from being harmed; whereas the European Telecommunications Standards Institute (ETSI) should take due account of this objective when developing standards concerning access to public networks; (22) Whereas effective use of the radio spectrum should be ensured so as to avoid harmful interference; whereas the most efficient possible use, according to the state of the art, of limited resources such as the radio frequency spectrum should be encouraged; (23) Whereas harmonised interfaces between terminal equipment and telecommunications networks contribute to promoting competitive markets both for terminal equipment and network services; (24) Whereas, however, operators of public telecommunications networks should be able to define the technical characteristics of their interfaces, subject to the competition rules of the Treaty; whereas, accordingly, they should publish accurate and adequate technical specifications of such interfaces so as to enable manufacturers to design telecommunications terminal equipment which satisfies the requirements of this Directive; (27) Whereas it is in the public interest to have harmonised standards at European level in connection with the design and manufacture of radio equipment and telecommunications terminal equipment; whereas compliance with such harmonised standards gives rise to a presumption of conformity to the essential requirements; whereas other means of demonstrating conformity to the essential requirements are permitted; (32) Whereas radio equipment and telecommunications terminal equipment which complies with the relevant essential requirements should be permitted to circulate freely; whereas such equipment should be permitted to be put into service for its intended purpose; whereas the putting into service may be subject to authorisations on the use of the radio spectrum and the provision of the service concerned; (36) Whereas the measures which are appropriate to be taken by the Member States or the Commission where apparatus declared to be compliant with the provisions of this Directive causes serious damage to a network or harmful radio interference shall be determined in accordance with the general principles of Community law, in particular, the principles of objectivity, proportionality and non-discrimination; The operative provisions: "

"a legal framework established by the Member State ensuring rights for the provision of electronic communications networks or services and laying down sector-specific obligations that may apply to all or to specific types of electronic communications networks and services, in accordance with this Directive"

"Member States may restrict the putting into service of radio equipment only for reasons related to the effective and appropriate use of the radio spectrum…"

"if operators choose to connect customers to the network, does it matter if the traffic carried is a public or a private service?" (see paragraph 58 of the November 2002 Consultation). As we understand it from the agreed Statement of Facts, a self-provided private GSM gateway, as defined for the purposes of this case, may in some circumstances involve the same quantitative use of the radio spectrum as a public GSM gateway. It seems to us therefore that in the circumstances the distinction drawn in Article 4(2) of the Exemption Regulations between "self-provision" and "supply by way of business" may be a somewhat arbitrary method of ensuring "effective and appropriate" use of the spectrum under Article 7(2) of the RTTE. However, it seems to us that whether the Exemption Regulations are in conformity with the RTTE Directive depends in part on the matters raised under the First Alternative Argument discussed below. In view of the conclusion we have reached in relation to the First Alternative Argument set out below, including the view we take as to the new position adopted by OFCOM as to what is or is not authorised under the MNO's WTA licence, it is not necessary for us to decide, in this appeal, whether the Exemption Regulations are, on their true construction, in conformity with the RTTE Directive. (ii) The Authorisation Directive The Authorisation Directive, which had to be applied by 25 July 2003, applies to the granting of rights of use of radio spectrum where such use involves the provision of an electronic communications network or service, normally for remuneration. The Authorisation Directive provides for either general authorisation for the use of radio frequencies or for individual rights of use of radio frequencies. Wherever possible Member States are required to make the use of radio frequencies subject only to conditions in a general authorisation and not to make them subject to individual rights of use. Article 5(5) provides that Member States shall not limit the number of rights of use to be granted except where this is necessary to ensure the efficient use of radio frequencies in accordance with Article 7 of the Authorisation Directive. Article 7 sets out the criteria to be applied by Member States wishing to restrict the number of rights of use granted. The conditions which can be imposed in a general authorisation are set out under heading "

"Irrespective of the parties' arguments regarding the use to which the SIMs supplied to Floe were going to be put, the Director has not been provided with any written evidence indicating that Vodafone has at any time authorised Floe in writing to provide Public GSM Gateway services. Although it is possible that at the time of service provision to Floe certain Vodafone personnel may have been aware that Floe was using SIMs supplied by Vodafone in GSM Gateway equipment this does not constitute a formal written arrangement between the parties sufficient to 'legalise' the operation of a Public GSM Gateway." (a) The true construction of the Agreement In making submissions on the true construction of the Agreement all parties referred us to the Business Plan and Vodafone referred us to witness statements provided by certain of its employees who were involved at the time of negotiation of the Agreement and at the time of the decision to disconnect Floe's SIM cards and IMEIs. We have also been provided with documentary evidence, including the documentary evidence before the Director when the Decision was made. We have carefully considered the material before us in particular the Agreement, the Business Plan and Vodafone's witness statements. It is agreed between the parties as set out in paragraph 35 of the Statement of Facts that the Agreement did not expressly authorise Floe to use public GSM gateways. Floe relies on it having been "tacitly agreed" between the parties that Floe were to provide its service using GSM gateways, in particular having regard to the Business Plan. The relevant facts Witness statements were provided by: (a) Mr Johnathan Young who in 2002 was employed by Vodafone Limited as the Relationship Manager in the Facilities Managed Service Providers channel. In that position he dealt with relationships with smaller-sized organisations that could not or did not wish to enter into standard service provider contracts with Vodafone. Mr Young negotiated the Agreement on behalf of Vodafone and became the Relationship Manager for Floe. The Agreement was signed on behalf of Vodafone by Mr Young's manager, Mr Overton. (b) Mr Rodman, Head of Regulatory Affairs in Vodafone's UK business. He has been employed by Vodafone for just over 4 years and has been involved in telecommunications for almost 18 years and in mobile communications for 14 years. (c) David Morrow, employed as an Intelligence Manager in Vodafone's Security and Fraud Department. Mr Rodman in his witness statement gave evidence as to what he understood was meant by a private gateway device, a public gateway device and least cost routing services. We have already referred to some of this evidence. Mr Rodman's evidence on least cost routing services and public gateway devices is as follows: "5. Indeed, with the liberalisation of the telecommunications market in the UK, and with the multiplicity of network operators and service providers, there are numerous such opportunities for users to reduce their overall telephone bills by choosing the cheapest ways of making calls. There are active in the UK market various companies providing so-called least cost routing services. They tend to market their services to corporate customers, who incur relatively high telephone bills, and offer them cheaper charges by routing their calls across transit networks and through other devices which offer cheaper prices than conventional carriers' charges. A least cost routing company will generally connect its own equipment to the customer's switchboard equipment (PABX) and carry the traffic itself, up to a point of handover to third party network operators for on-delivery to its destination. The carrier will arrange for the traffic to be carried, in each case, by the lowest cost route. The company will charge for its services, at a price which effectively allows the end user to achieve an overall reduction in its telephone bills, whilst remunerating the routing company for its services. This activity is generally perfectly legal, provided that all the carriers involved operate within the terms of applicable authorisations and licences. 6. In 2002, I learned that some such companies also establish and use public GSM gateways. These are devices which may hold a substantial number of SIM cards (e.g. Vodafone SIM cards, O2 SIM cards, Orange SIM cards, T Mobile SIM cards). A telecommunications operator carries relevant call traffic to the gateway. At the gateway, the call is routed through a SIM card associated with the network to which the call is destined to be delivered (so a call to a Vodafone subscriber is routed via a Vodafone SIM card). (…) The call route through the SIM card is treated, by the Vodafone network, like any outgoing call originated on a Vodafone handset and is delivered to the called party, in all respects as if it were an on-net call from one Vodafone subscriber to another. If the Gateway operator has acquired the SIM card as part of a package offering cheaply-priced on-net calls he will pay only that cheap on-net call price for the delivery of the call from the gateway to the called party. Where a gateway operator provides services to numerous customers, it will be able to pass large volumes of traffic through the gateway…."

"11. A private GSM Gateway is a device containing a single SIM card, which may be attached directly to a corporate customer's switchboard (PABX) and used to route outgoing calls form the switch board through the gateway, and through a particular SIM card for on-delivery of the call to a subscriber to the network with which the SIM card is associated. It serves the same purpose as a public GSM Gateway – namely to convert a fixed-to-mobile call, for charging purposes, to an on-net call." 12. I had been familiar with private gateway devices when I worked in the mobile telecoms sector in South Africa, before joining Vodafone. In the UK, Orange had been the first mobile network operator to offer private gateways, using Premicell devices. Vodafone's own in-house service provider business, Vodafone Corporate, found that it also had to offer private gateway devices to its corporate customers, in order to compete effectively with Orange."

"Floe undertakes that its End-Users shall use the Services in accordance with such conditions as may be notified in writing to Floe by Vodafone from time to time. Without limiting the generality of the foregoing, Floe undertakes: (a) not to use the services and/or the equipment for any improper, immoral or unlawful purpose including the transmission of defamatory material"

"that is the evidence of Vodafone's witnesses and there is no evidence to the contrary. It makes a big difference, because the Business Plan on the face of it, where they are proposing to sell private gateways, is a perfectly legal business. That is what Vodafone thought they were doing. Vodafone understood that Floe would be using SIMs supplied under the agreement in mobile phones and private gateways. That is the evidence of Mr Morrow. That is obviously on the basis that private gateways were legal, as they are. You will see that Mr Morrow and others refer to Premicell devices – that is what private gateways used to be called, Premicell devices – and they have been around for some years."

"8. The Licensee shall ensure that the Radio Equipment is operated in compliance with the terms of this Licence and is used only by persons who have been authorised in writing by the Licensee to do so and that such persons are made aware of, and of the requirement to comply with, the terms of this Licence."

"The mobile operators' licences allow them to use their assigned spectrum with any equipment that meets the technical specifications in the schedule to the licence. I believe therefore that the network operators have the authority under the W T Act (but not the obligation) to accept by agreement customer equipment that is not covered by the Exemption Regulations. However, the Licensee would remain responsible for compliance with the licence conditions of all equipment used."

"Cliff, You may remember that during our last conversation you mentioned that the mobile operators had the authority to extend their licences for the use of other parties. Is this how the MVNOs work and can you point me to the clause(s) that authorises this?"

"Mobile Network Operators ("

"The RA has confirmed with Oftel that by having such contractual arrangements in place with MNOs, public gateway operators may, in certain circumstances, legally be able to provide telecommunications services to third parties via GSM gateways, as this would be authorised under Vodafone's Wireless Telegraphy Act licence. Can the RA please respond to the following points: 1. What are the circumstances that the RA has in mind where MNOs may be able to purchase products & services from GSM gateway operators in this respect? 2. What are the products and services the MNOs would purchase from GSM gateway operators in order to make these gateway services legal? 3. Under what MNO licence conditions would MNOs purchase these products and services from GSM gateway operators? 4. If different to the answer to question 3, what MNO licence conditions would authorise GSM gateway operators' provision of telecommunications services to third parties via GSM gateways? 5. What sort of contractual arrangements do you envisage being in place between MNOs and GSM gateway operators?"

"Robert Apologies if this seems long-winded but it may help to build up a picture of what goes on before arriving at answers to your 5 questions. The WT licences convey authority to "…establish, install and use radio transmitting and receiving stations…" on the specific radio spectrum channels. They neither prevent nor compel the running of a telecommunications service on the spectrum…the economics of building infrastructure is the driver for getting a return on the huge investment costs. All use of spectrum must be in accordance with a licence under the 1949 Act, unless covered by a specific exemption. For some services, these may be on shared channels where the sharing and coordination criteria will be defined. For most public operators, spectrum is awarded by competitive means and is licensed exclusively to that operator. This is the case with the cellphone networks. They have the exclusive rights to employ the spectrum licensed to them. (…) User Stations I own a personal cellphone handset that transmits on frequencies in the 1800MHz range. I do not have a WT Act licence, neither am I part of nor employed by Orange. However, I am not committing a criminal offence because I am a single private user that is exempted and I do not supply a commercial telecoms service via my handset. A gateway is a type of user station that may use a multiple of subscriber lines (radio channels) and connects a fixed telephone to the mobile network via a radio link i.e. it 'pretends' to be a [batch of] mobile[s]… Where a gateway is used commercially to provide third party services without coordination with or the agreement of the MNO it is not covered by the exemption neither are we able to issue a WT Act licence for the spectrum that is licensed exclusively to the MNO. (…) Legitimate Commercial Gateways in answer to your 5 questions, as the RA understands the position: 1. Floe, MGOA and other gateway operators (GOs) say that congestion and calling line identity problems are capable of solution. If so, the RA has no objection to a MNO authorising a partner company to access its spectrum as authorised by the WT licence to the extent that the MNO must accept responsibility for the transmissions made and remains liable for any infringement of the licence conditions . The MNO bears too the responsibility for complying with other law and regulations. 2. The GOs collect telecommunications traffic by wire, cable and fibre relay it to their gateway and shoot it into a base station of the mobile network. Basically they are providing interconnection between telecommunications networks. RA has no objection to this service being provided as long as where spectrum is used, the licensee (MNO) is happy to take responsibility for compliance with the WT licence terms . RA notes though that this is an inefficient use of spectrum and suggests that interconnection may be better achieved through fixed backhaul means. 3. WT licence conditions neither allow nor prevent the purchase of interconnection services via gateways . The licensee (MNO) remains responsible in law for the correct operation of the Radio Equipment used in accordance with the technical parameters contained in Schedule 1 to the licence. 4. The WT licences contain the following terms: "

"RM stated that Oftel's investigation could be broken down into three stages. First the RA announcement on the 18 July formed the basis for the investigation. Broadly speaking, this announcement stated that Private GSM Gateways were legal and Public GSM Gateways were not. However, Public GSM Gateways could be legal if the companies running these Gateways were expressly authorised by the MNOs to do so and therefore utilise the MNO's spectrum. Second, Oftel's investigation had sought to establish whether Floe had been authorised by Vodafone to operate its Public GSM Gateway Services. RM stated that Oftel had considered the evidence that Floe had provided in this regard including the contract for the supply of SIMs. It was not clear that Floe had an express written authorisation to utilise its GSM Gateways in providing telecommunications services to third parties… JS and DH stated that Vodafone was supplying Floe with SIMs to access network services and that the supply of SIMs under contract was a de facto agreement to use Vodafone's Wireless Telegraphy Act licence. JS and DH also stated that the Private/Public GSM Gateway distinction was irrelevant as it was not a consideration prior to the publication of the Government announcement on the 18 July 2003. Vodafone had disconnected Floe SIMs in April 2003."

"The question of public or private Gateways only arose after services had already been offered and Gateways were in wide use by many people across the UK. To automatically decide Floe was operating illegally and there is no case to answer makes the presumption that Floe was not operating under Vodafone's Licence. However, Vodafone obviously thought that they could block Floe's IMEI numbers lawfully, since they did so unilaterally. If they regarded the Gateway equipment to be part of their network then this course of action would be logical. However, since they felt able to block IMEI numbers lawfully then they must also believed ( sic ) that the equipment was part of their network and therefore that the point of interconnection must have been before the GSM Gateway. Therefore there is no doubt that Floe was operating under Vodafone's licence. No other explanation of which I am aware fits the facts."

" Could Vodafone have simply given its written consent to allow Floe to operate what would otherwise have been an illegal public GSM Gateway service? Oftel's position .1 During the conference call on 13 October, Oftel said that it had always been an option for Vodafone to simply consent to any public GSM Gateway operator operating a public GSM gateway. We have already supplied information to Oftel to the effect that Vodafone has not given its express consent to Floe (or indeed anyone else) to operate a public GSM Gateway. In addition, we would make the following points in respect of this line of argument. View of the RA (…) 3 On 24 July 2003 the RA issued a statement entitled "

" Commercial use of the GSM spectrum is authorised only by the Wireless Telegraphy Act licences of the Mobile Network Operators (MNOs). Subject to the MNOs being able to fulfil all the legal and regulatory requirements of their licences and authorisations, it is conceivable that MNOs may be able to agree commercial ventures with other companies where traffic and connection to a relevant network would be authorised under the auspices of their WT Act licences. As the planning and control of the equipment, spectrum and network needs to be tightly controlled, GSM Gateway companies offering third party commercial services must approach the MNOs to discuss whether their operation can be regularised and accommodated. Operation without the authority and permission of a licensee is unlicensed use and will be illegal." 3.2 As is set out below it is difficult to see how an MNO could give its consent and yet still be able " to fulfil all the legal and regulatory requirements of their licences and authorisation "

"In order to allow two-way communication, it is necessary to distinguish between the transmission path from the Mobile Station to the Base Transceiver Station (known as the uplink) and the transmission path from the base Transceiver Station to the Mobile Station (known as the downlink). The means by which this is achieved is that the Mobile Station and the Base Transceiver Station are required to transmit and receive at different frequencies, a mechanism known as Frequency Division Duplex."

"The detailed way this operates is specified in GSM technical specifications GSM 5.01 and 5.05. In the case of the standard or primary GSM900 band, the system is required to operate in the following bands: • 890-915 MHz: mobile transmit, base receive • 935-960 MHz: base transmit, mobile receive In the case of the extended GSM 900 band, the system is required to operate in the following bands: • 880-915 MHz: mobile transmit, base receive • 925-960 MHz: base transmit, mobile receive In the case of the GSM 1800 band, the system is required to operate in the following bands: • 1710-1785 MHz: mobile transmit, base receive • 1805-1880 MHz: base transmit, mobile receive"

"1816.7-1846.7 MHz: Base transmits 1721.7-1751.7 MHz Base receives"

"1. Description of Radio Equipment Licensed In this Licence, the Radio Equipment means the base transceiver stations or repeater stations forming part of the Network (as defined in paragraph 2 below). 3. Purpose of the Radio Equipment The Radio Equipment shall form part of a radio telecommunications network (the "

"(27) The penalties for non-compliance with conditions under the general authorisation should be commensurate with the infringement. Save in exceptional circumstances, it would not be proportionate to suspend or withdraw the right to provide electronic communications services or the right to use radio frequencies or number where an undertaking did not comply with one or more of the conditions under the general authorisation. This is without prejudice to urgent measures which the relevant authorities of the Member States may need to take in case of serious threats to public safety, security or health or to economic and operational interests of other undertakings. This Directive should also be without prejudice to any claims between undertakings for compensation for damages under national law."

"For private GSM Gateways, SIM cards are put in 'boxes' (sometimes called Premicells) which are located at the customer's premises. The boxes might be described as 'fixed'. The customer self-provisions the service. For public GSM gateways, SIM cards are put in 'boxes' which are not located at a customer's premises. The boxes are (1) fixed; and (2) used to provide a telecommunications service "by way of business to another person" (these words are taken from Regulation 4(2) of the Wireless Telegraphy (Exemption) Regulations 1999, as amended)."

"There is a distinction to be made between private GSM Gateways and public GSM Gateways. Vodafone believed that Floe would be offering a service relating to private GSM gateways, that is that the "box" in which the SIM card(s) would be housed would be at the customer's premises (and used for their own 'office' to Vodafone mobile calls). Vodafone did not supply the SIM cards believing that the SIM cards would be put in "boxes" which were not on individual customer's premises but were in fact located separately to be used for the carriage of third party traffic. Vodafone did not intend that SIM cards would be put in "boxes" to service the needs of many customers, that is "boxes" being used to provide a telecommunications business to third parties i.e. a public GSM Gateway."

"118. As the Commission has established, there are laws in the United Kingdom attaching penalties to the sale of dangerous products and to the use of misleading claims as to the characteristics of any product. There are also authorities vested with powers to enforce those laws. In those circumstances it is clearly not the task of an undertaking in a dominant position to take steps on its own initiative to eliminate products which, rightly or wrongly, it regards as dangerous or at least as inferior in quality to its own products. It must further be held in this connection that the effectiveness of the Community rules on competition would be jeopardized if the interpretation by an undertaking of the laws of the various Member States regarding product liability were to take precedence over those rules. Hilti's argument based on its alleged duty of care cannot therefore be upheld."

"…In those circumstances the infringing undertakings have often claimed that they were engaged in the prevention of unfair competition, dumping or more generally, acting in pursuit of the public interest. The Court and the Commission have consistently held that it is for the public authorities or the courts and not for private undertakings to protect the interests of the public in matters such as product safety or the prevention of unfair competition"

" 1. (1) No person shall establish or use any station for wireless telegraphy or install or use any apparatus for wireless telegraphy except under the authority of a licence in that behalf granted under this section by the Secretary of State...and any person who establishes or uses any station for wireless telegraphy or installs or uses any apparatus for wireless telegraphy except under and in accordance with such a licence shall be guilty of an offence under this Act. Provided that the Secretary of State may by regulations exempt from the provisions of this subsection the establishment, installation or use of stations for wireless telegraphy or wireless telegraphy apparatus of such classes or descriptions as may be specified in the regulations, either absolutely or subject to such terms, provisions and limitations as may be so specified."…(2) A licence granted under this section (hereafter in this Act referred to as a wireless telegraphy licence) may be issued subject to such terms, provisions and limitations…as the Secretary of State may think fit (…) including in particular in the case of a licence to establish a station, limitations as to the position and nature of the station, the purpose for which, the circumstances in which, and the persons by whom the station may be used and the apparatus which may be installed or used and the places where the purposes for which the circumstances in which, and the persons by whom the apparatus may be used."

" 4. – (1) Subject to regulation 5, the establishment, installation and use of the relevant apparatus are hereby exempted from the provisions of section 1(1) of the 1949 Act. (2) With the exception of relevant apparatus operating in the frequency bands specified in paragraph (3), the exemption shall not apply to relevant apparatus which is established, installed or used to provide or to be capable of providing a wireless telegraphy link between telecommunications apparatus or a telecommunication system and other such apparatus or system, by means of which a telecommunication service is provided by way of business to another person."

"1. This Licence authorises [Vodafone Limited] ("the Licensee") of [The Courtyard, 2-4 London Road, Newbury, Berkshire, RG13 1 JI] to establish, install and use radio transmitting and receiving stations and/or radio apparatus as described in Schedule 1 of this Licence (hereinafter together called "the Radio Equipment") subject to the terms set out below." (…) 8. The Licensee shall ensure that the Radio Equipment is operated in compliance with the terms of this Licence and is used only by persons who have been authorised in writing by the Licensee to do so and that such persons are made aware of, and of the requirement to comply with, the terms of this Licence. 13. In this Licence: (a) the establishment, installation and use of the Radio Equipment shall be interpreted as establishment and use of stations and installation and use of apparatus for Wireless Telegraphy as specified in section 1 of the 1949 Act Schedule 1 of the licence provides: "1. Description of Radio Equipment Licensed In this Licence, the Radio Equipment means the base transceiver stations or repeater stations forming part of the Network (as defined in paragraph 2 below). 2. Purpose of the Radio Equipment The Radio Equipment shall form part of a radio telecommunications network (the "

"The distinction between "

"9. Typically, a private GSM gateway is connected to the Private Automatic Branch Exchange ("

"11. A public GSM gateway is likely to generate more traffic than a private GSM gateway and can cause congestion by concentrating significant volumes of traffic in a particular cell site and at particular times of day. Public GSM gateways will usually prevent the mobile operator from providing subscribers with calling line identification."

"RECITALS (A) Vodafone supplies mobile voice and data services to its customers. (B) FLOE supplies a range of telecommunications services to its customers. (C) Vodafone wishes to supply the Services to FLOE and FLOE wishes to provide the same to End Users, in accordance with the provisions of this Agreement. IT IS AGREED as follows: 1. Definitions In this Agreement "

"All of Floe's efforts are concentrated on incrementally growing the number of "

"Floe will use its extensive expertise within the existing mobile regulatory environment and its extensive knowledge of least cost routing within the fixed network environment, to build and manage an indirect infrastructure to deliver its value added services and solutions. Floe will sell its own enhanced mobile routing solutions in a carefully planned manner for Vodafone Corporate, its resellers, dealers and business end-users, employing a strategy of both direct and indirect sales channels. To gain market advantage, Floe has a clearly defined competitive strategy in support of its sales channels, ensuring that it will not become trapped in the mire of the mass mobile handset consumer market. Floe will differentiate by means of packaged service solutions to business that provide customers with significant savings on their current fixed line costs. (…) The senior management team will use an extensive network of contacts to set up supply and distribution agreements and work closely with leading manufacturers of customer premise equipment. Description of Business Activity Floe Telecom will focus on targeted propositions to business. It will be distinct from other companies seeking to capture new markets in the mobile telecommunications arena, in that it has the ability to achieve high market penetration with value pricing, structured channel management and subsequently, low churn and lock-in, with the delivery of value added services to its chosen customer base. The company will use its expertise in the existing mobile regulatory environment to build and manage indirect infrastructure to deliver its value added services and solutions. Floe will sell its own enhanced mobile routing solutions in a carefully planned manner for Vodafone Corporate; its resellers, dealers and businesses end-users, employing a strategy of both direct and indirect sales channels. (…) Level of Stockholding or Ordering Procedure Floe will hold an initial stock of SIM's equal to one and half months of forecast and will order on an ongoing two weekly basis SIM's equal to 50% of the next months forecast. Other Assumptions • Each SIM generates a minimum of 750 minutes per month. • Customers are charged at circa 12p per minute and costs are as per the Cellnet Accredited Service Provider Agreement • The costs of acquiring and installing CPE is capitalised and depreciated over 2 years • The CPE for disconnected customers is recovered and reused in 80% of cases Indirect Pabx Distributors Some of the largest PABX distributors and dealers in the United Kingdom will sell through Floe's solutions to their existing customer base where there is trust and loyalty between the customer and the supplier and intimate knowledge of the PABX installation to be connected to. Systems Integrators Floe has had constructive and detailed negotiations with 2 major Systems Integrators both of whom have expressed a desire to offer telecommunications solutions to their vast existing IT customer bases. Both organisations have stated that a fully managed solution from an external partner would be of great interest. Armed with a Major Business Partner Agreement from Vodafone Corporate, Floe will be in an ideal position to win this business. Vertical Markets Floe will design products and packages aimed directly at certain 'high spending' vertical market sectors. Floe believes that with the right products and pricing, there are a number of exiting opportunities to sell fixed to mobile solutions through non-traditional mediums. Direct Floe 'Own' Packages Floe will employ a small but highly specialised direct sales team that will focus on Floe 'Own Branded' business that will, to ensure differentiation and competitor lock-out, concentrate on providing fixed-to-mobile solutions on a single bill. White Label Floe Telecom's organisation and structure allows the company to offer "

" The manner in which the GSM gateways operated by Floe were connected to and/or disconnected from Vodafone's network How were Floe's GSM gateways connected to Vodafone's network? 13. Floe's GSM gateways were connected to Vodafone's network in the same manner as a mobile handset is connected to a mobile operator's network. 14. When a customer connected to one of Floe's GSM gateways made a call from a fixed phone to a mobile phone on Vodafone's network, the GSM gateway would select a SIM registered to Vodafone's network and transmit the call via radio to a base transceiver station forming part of Vodafone's mobile network. From the base transceiver station the call would then be onward routed via Vodafone's mobile network to the mobile phone being called. 15. When Floe's GSM gateway equipment was first activated, it would emit a signal containing data as to the identifying number of the Vodafone SIM card(s) contained within the GSM gateway and the IMEI number of the GSM gateway equipment itself. This would be received by a Vodafone base transceiver station and relayed to another part of Vodafone's network on which a central register of subscriber data was maintained (the "home location register"). This would 'authenticate' the GSM gateway as a new subscriber i.e. it would recognise that the SIM card was a Vodafone SIM card and record the IMEI number of the GSM gateway. Subsequently, whenever Floe's GSM gateway equipment was turned on, the information stored in the home location register would enable the Vodafone network to 'recognise' the GSM gateway. 16. The manner in which the GSM system operates is specified in a series of reference documents published by the European Telecommunications Standards Institute ("

" Failure to comply will result in the suspension of the service to Floe Telecom without further notice and Vodafone reserves the right to take such further measures as it deems appropriate ". 25. On 13 March 2003, Floe responded to Vodafone and did not deny that it was providing public GSM gateway services nor did it dispute that the use of such services was illegal unless authorized by a licence exemption. 26. On 13 March 2003 Vodafone issued an instruction to its bank to call for payment pursuant to a direct debit arrangement put in place by Floe of approximately £135,000 due from Floe to Vodafone. On 18 March 2003 Vodafone's bank informed Vodafone that the payment had been refused. Vodafone contacted Floe and Floe informed Vodafone that it had cancelled the direct debit. 27. On 18 March 2003 Vodafone suspended the SIMs it had identified as being used in public GSM gateways. It did this by amending its home location register and 'flagging' Floe's SIMs as being suspended. This had the effect that Floe's SIMs were no longer recognised by Vodafone's network, i.e. the SIM card could no longer be used to make or receive calls. These SIMs were not subsequently re-activated. 28. After Vodafone suspended Floe's SIMs on 18 March 2003, Vodafone recorded the IMEI numbers of the GSM gateway equipment in which the SIMs had been used on its Equipment Identity Register ("

" 23 August 2002 GSM GATEWAYS - RA POSITION ON LEGALITY The Radiocommunications Agency (RA) is aware of devices being marketed in the UK which enable fixed telephone networks to connect via a mobile phone radio link directly to mobile networks; these devices are commonly referred to as 'GSM Gateways'. This letter sets out the regulatory position for these devices, and outlines the future plans in relation to GSM Gateways. The GSM spectrum has already been awarded in the UK to the cellular operators by licence on a nationally exclusive basis. This spectrum can not therefore be licensed to other users. Under the current Wireless Telegraphy (Exemption) Regulations 1999 (1999/930) hereafter referred to as "the Regulations", mobile GSM User Stations are exempt from the need for individual licensing under the Wireless Telegraphy Act 1949. The Regulations do not extend to User Stations that are fixed. Companies installing and/or using this type of equipment should be aware that GSM Gateway equipment is therefore not covered by the Regulations as the equipment is fixed and does not comply with the definition of a mobile station. In addition, regulation 4(2) of the Regulations provides that the exemption from licensing with respect to "relevant apparatus" does not apply to equipment where a telecommunications service is provided by way of business to another person. GSM Gateway equipment used to provide a public telecommunications service via a connection to a public network will be captured by regulation 4(2) and is therefore again not covered by the Regulations. Under the Wireless Telegraphy Act 1949 wireless telegraphy apparatus that is not specifically exempted from licensing is required to be licensed, otherwise use of such apparatus is illegal. Anyone installing or operating GSM Gateway equipment without an individual licence will be in contravention of the Wireless Telegraphy Act 1949 and enforcement action may be taken. This can involve seizure of the equipment and prosecution. Due to the wide range of views that have been expressed and the number of representations made to the RA regarding the legality of GSM Gateways the RA plans to hold a consultation that would address the regulatory issues, identify possible options and seek views on any proposals to amend the Regulations. Any initial views and comments on this subject can be sent to: Richard Young Public Wireless Networks Unit Radiocommunications Agency 189 Marsh Wall London, E14 9SX I hope the above information is helpful. Yours sincerely, Cliff Mason Hd Licensing Policy Team Public Wireless Networks Unit"

"The Radiocommunications Agency (RA) has been made aware of devices being marketed in the UK which enable fixed telephone networks to connect via a mobile phone radio link directly to mobile networks. These devices are commonly referred to as 'GSM Gateways'. At present GSM Gateway equipment is not covered by the existing Wireless Telegraphy (Exemption) Regulations as the equipment is fixed and does not comply with the definition of a mobile station. As a result of this the attached letter was sent out by the RA. Under the Wireless Telegraphy Act 1949 wireless telegraphy apparatus is required to be either licensed or specifically exempted from licensing, otherwise use of such apparatus is illegal. As GSM Gateway equipment and fixed "mobile" applications are not covered by the existing Exemption regulations, anyone installing or operating GSM Gateway equipment / fixed "mobile" applications without an individual licence will technically be in contravention of the Wireless Telegraphy Act 1949. The Exemption Regulations (current version: "

" 1 EXECUTIVE SUMMARY 1.2 Under the Wireless Telegraphy Act 1949, wireless telegraphy apparatus that is not specifically exempted from licensing must be licensed, otherwise its use is illegal. The current Wireless Telegraphy (Exemption) Regulations 1999 (SI 1999/930), hereafter referred to as 'the Exemption Regulations', incorporate earlier legislation introduced to exempt mobile user stations – such as Global System for Mobile communications (GSM) handsets – from the need for individual licensing. However, the Exemption Regulations do not extend to fixed user stations (i.e. those that do not comply with the definition of a mobile station). 1.3 RA is aware of devices, being marketed in the UK, that enable fixed telephone networks to connect directly to mobile networks via a mobile phone radio link; these devices are commonly called 'GSM gateways'. Recent years have also seen the development of various fixed 'mobile' telematic applications such as vending machines and automatic transfer machines (ATMs), which use licensed public networks spectrum to deliver a service. Other fixed devices connecting to data, paging or Public Access Mobile Radio (PAMR) networks may also be inadequately covered; their status under the Exemption Regulations needs to be clarified. 1.4 Leaving aside the question of whether they are fixed or mobile, user stations may – depending on the type of use – also fail Regulation 4(2), which precludes the provision of a telecommunications service via exempted equipment. GSM gateways appear to be used mainly for private commercial use (i.e. gateways installed as extensions to PABX ... systems, where companies are self-providing services for their staff). However, some service providers wish to use a gateway as a link from their own network to a cellular network to carry third-party traffic and thus provide a telecommunications service. This is a grey area at present, as these service providers cannot be licensed under the Wireless Telegraphy Act 1949 – the cellular radio frequencies are already licensed to UK cellular network operators on a nationally exclusive basis, so cannot be licensed to other commercial users. 1.5 RA has discussed these issues with representatives from the licensed network operators, manufacturers of telephony equipment and individuals. Because of the wide range of views expressed regarding the legality of GSM gateways, RA issued a statement on 23 August 2002 and a website notice on 4 October 2002. This consultation document seeks to address the regulatory issues, identify the options and seek views on proposals to amend the existing Exemption Regulations. The views and requirements of operators, manufacturers and other interested parties are therefore sought, to find a sensible and proportionate way forward. (…) 3 INTRODUCTION 3.3 Introducing new technologies and services is likely to affect competition in a range of product and service markets. This will have an impact on the various public organizations, individuals and companies that use radio to provide or receive a service. For example, introducing a new technology like GSM Gateways may have the benefit of increasing choice and lowering prices to consumers, but the impact on the integrity and grade of the service delivered by the spectrum provider must also be considered. (…) 4 USER STATIONS 4.3 GSM Gateway technology enables a call from a fixed office phone system to be routed directly via a GSM link to a GSM mobile phone. The gateway is effectively a fixed mobile containing the subscriber identity module (SIM) for a number of networks. The gateway recognizes a mobile endpoint, selects a SIM to correspond and sets up the call. The call appears to the network to have originated from another mobile of the same network, so it enjoys a cheaper call rate. The purpose of the gateway is, therefore, to avoid the higher charges of fixed-line-to-mobile calls and exploit the lower tariff of mobile-to-mobile calls within the same network. (…) 5. REGULATORY ISSUES 5.1 There are two issues concerning the installation and operation of fixed stations, GSM gateways and other fixed mobile applications under the Exemption Regulations: (i) fixed stations, fixed mobile terminals and GSM gateways are not covered by the definition of 'user station' in the existing Exemption Regulations; and (ii) under Regulation 4(2) of the existing Exemption Regulations, user stations may not be used to provide a telecommunications service 'by way of business', i.e. commercially. Fixed Use 5.2 A 'user station' is defined in Part I of Schedule 3 of the Exemption Regulations, as amended by SI 2000/1012, SI 2001/730 and SI 2002/1590, as a mobile station for wireless telegraphy designed or adapted to be: (a) connected by wireless telegraphy to one or more relevant networks; and (b) used solely for the purpose of sending and receiving messages conveyed by a relevant network by means of wireless telegraphy. 5.3 Ordinarily, the term 'mobile station' applies only to equipment that is movable and not fixed. It is therefore difficult to support an interpretation of the term that includes a fixed mobile terminal or GSM gateway equipment (where such equipment is effectively a fixed mobile phone). 5.4 It may be argued that if such equipment is manufactured to the same standards as 'true' mobile user terminals, it will probably cause little or no interference to the networks it uses. There are engineering implications for network operators, as a fixed station within a cell can affect traffic flow and capacity, and therefore has the potential to degrade service to mobile users. However, operators are currently accepting and connecting customers with such equipment, and they might reasonably be expected to provide additional capacity to accommodate the extra traffic. Ultimately, the decision to accept a customer rests with the operator, who may decline connection if the stability of the network is threatened. 5.5 Since there are several instances where network customers will employ fixed data, GSM or other equipment: Proposal 1: It is proposed that the definition of 'user station' be amended to cover any customer of the network, irrespective of its fixed or mobile status. Public/Private Use 5.6 Regulation 4(2) of the Exemption Regulations provides that (with the exception of equipment operating in the 2.4 GHz band) the exemption from licensing of 'relevant apparatus' does not apply to apparatus that provides a commercial telecommunications service to another person via a wireless telegraphy link. This prevents commercial users from usurping spectrum designated for deregulated uses such as low-power devices, cordless telephony and telecommand, as this would be detrimental to the permitted applications in those bands. 5.7 It would therefore appear that equipment such as GSM gateways is permitted (i.e. does not fall within Regulation 4(2)) if it is used to provide a private connection to a public network, as it is not providing a telecommunications service to third parties. However, the use of GSM gateway equipment to provide a public connection to a public network is not permitted (i.e. does fall within Regulation 4(2)) as the link does provide a third-party telecommunications service. 5.8 However, if operators choose to connect customers to the network, does it matter if the traffic carried is a private or a public service? Where large-volume gateway systems might impact on network planning, operators could require users to declare such use before installation to allow for network configuration. In any case, RA believes that relaxing the Exemption Regulations to permit public connections would give the operators a choice, and would also bring potential benefits for consumers in terms of increased competition and reduction of call costs. Proposal 2: It is proposed that the restriction on the type of service that may be provided via network user stations shall be withdrawn. (…) 7 REGULATORY IMPACT ASSESMENT 7.2 The deregulation of fixed user stations should encourage greater use of the radio spectrum and assist the free circulation of radio-based equipment within Europe and beyond. It will benefit UK manufacturers, small businesses, service providers, retailers and consumers by facilitating the use of a new generation of sophisticated telephony terminals. Deregulation – which will affect only user stations, not the provision of the networks to which they are configured – will remove the need for regulatory licensing and fee-paying requirements for UK consumers. Exempting this range of equipment from licensing should provide significant financial benefits to small businesses and the UK economy in general."

" Government announces results of the consultation "

"• evidence submitted demonstrates that Floe has not been authorised by Vodafone, in accordance with either the terms set out in Condition 8 of Vodafone's WTA licence or the Government announcement of 18 July 2003, to provide Public GSM Gateways as defined; • Vodafone had an objective reason to refuse to supply Floe's Public GSM Gateway services; and • the Director does not consider that Vodafone is acting in a discriminatory manner in its treatment of Public GSM Gateway operators."

"55. The Director does not consider that the evidence submitted by Floe meets the requirement set out in Condition 8 of Vodafone's WTA licence. Furthermore, no evidence has been provided regarding the conclusion of an agreement whereby Vodafone purchased Floe's GSM Gateway equipment, thus meeting the requirement set out in the Government announcement of 18 July 2003. 56. Irrespective of the parties' arguments regarding the use to which the SIMs supplied to Floe were going to be put, the Director has not been provided with any written evidence indicating that Vodafone has at any time authorised Floe in writing to provide Public GSM Gateway services. Although it is possible that at the time of service provision to Floe certain Vodafone personnel may have been aware that Floe was using SIMs supplied by Vodafone in GSM Gateway equipment, this does not constitute a formal written arrangement between the parties sufficient to 'legalise' the operation of a Public GSM Gateway. 57. Therefore, as the services which Floe was providing were illegal, Vodafone had an objective reason to refuse to supply Floe."

"1 A failure by OFTEL to investigate "

"11. For completeness, I should also mention the use of so-called private GSM gateways. A private GSM gateway is a device containing a single SIM card, which may be attached directly to a corporate customer's switchboard (PABX) and used to route outgoing calls from the switchboard through the gateway, and through a particular SIM card for on-delivery of the call to a subscriber to the network with which the SIM card is associated. It serves the same purpose as a public GSM gateway – namely to convert a fixed-to-mobile call, for charging purposes, to an on-net call. 12. I had been familiar with private gateway devices when I worked in the mobile telecoms sector in South Africa, before joining Vodafone. In the UK, Orange had been the first mobile network operator to offer private gateways, using Premicell devices. Vodafone's own in-house service provider business, Vodafone Corporate, found that it also had to offer private gateway devices to its corporate customers, in order to compete effectively with Orange."

"19. John Overton, Johnathan Young and I were in attendance at the meeting on 6 February, from the Vodafone side. Simon Taylor and Graham Ward, a former executive of Vodafone, attended on behalf of Floe. At the meeting I explained our concerns with respect to the illegal operation of public GSM gateways and the associated problems with congestion, CLI and interception. I stressed that the use of public gateways was illegal. Simon Taylor did not take issue with this. Instead, he assured us on more than one occasion that Floe was only engaged in providing private GSM gateways. He explained that Floe's business was focused on serving small and medium sized enterprises with private gateway solutions. He expressed sympathy with any network congestion problems which Vodafone was encountering, and offered to help to find ways of solving them. 20. Absent any precise data as to Floe's usage, I did not question Simon Taylor any further on this at the meeting. I was aware that, having worked with Telecom FM, Simon Taylor would be fully familiar with private gateway devices, and there was no question of his having misunderstood what I was saying."

"Floe Telecom supplies a whole range of telecommunications services to UK based businesses. Included in the service portfolio is a fixed to mobile service solution, all of which was covered with Vodafone in great detail during the six months or so it took to agree and sign the contract. The only thing that has changed since that time is the type of customer we have been able to attract. Initially as you rightly state, we were targeting the ME and SME type business. However, it has turned out that the customer that has been most attracted to our services has been major corporates and blue-chip organisations, which enabled us to build an impressive customer list. This has meant that we have had to reassess our service delivery mechanisms in order to meet with the additional needs of this type of customer. I am surprised that Vodafone needed to go through the activity of analysing traffic data associated with our SIM's in order, to come to the conclusion that the activity patterns of 14 th November were indicative of the use of Gateways. You were eminently aware of this during our contract negotiations… Our corporate customers being mainly City-based organisations, presented us with a problem with connection, as we knew that (especially) the City of London was an area of extremely high mobile activity. Our solution to this problem was to invest heavily in switching and network infrastructure in order to move the activity to areas where the impact on the viability of the Vodafone network would be less apparent. (You will be aware of this from your network activity records that Floe does not operate a single gateway in the centre of a city). The result of all this is that in order to reduce the pain for your network planners, Floe "extends" the corporate customers premises by the use of leased lines and indirect access switching, to terminate traffic in areas of lower mobile activity. Hence the conclusions you reached (incorrectly) in your analysis of our traffic in November… We are all aware of the current activities being undertaken by the Radiocommunications Agency (RA) with regard to the use of 'fixed user stations' and Floe has held a number of meetings with the DTI, RA and OFTEL on the subject. You will also be aware that, until a judgment is forthcoming from the Secretary of State, the RA have stated publicly that 'it would be inappropriate to take precipitous action against their use during the consultation period'."

"Vodafone did not state that Floe's business with Vodafone " is going to be suspended due to the use of 'illegal gateways' which are causing Vodafone network problems… Instead, Vodafone asked Floe Telecom to demonstrate, to our satisfaction, that the 29 SIMs registered to your company showing unusually high traffic patterns were not being used for illegal purposes, namely the supply of GSM gateway services to third parties…Your two letters do not address this point. The clear inference from your letters is that you acknowledge that you are operating a wholesale supply of gateway services, and you do not claim to have a licence to do so (which is hardly surprising as the stated view of the Radiocommunications Agency (RA) is that such activities cannot be licensed under the current regime). In the light of this failure to satisfy us that you were not using the SIMs for illegal purposes, we were fully entitled to terminate the contract without further notice and with immediate effect under clause 16.2 of Schedule 6. We are therefore within our rights to suspend service to you… Vodafone is well aware that GSM Gateways are the subject of an RA consultation. Vodafone is also aware that the RA has stated on its website that the use of such devices is currently illegal. Vodafone has no reason to believe that the outcome of the RA's review will be that the provision of wholesale gateway services will be legalised."

"My understanding is that, for the moment, the RA has not sought to enforce the breach of the law by GSM Gateway operators while the consultation is continuing. However I believe that the RA is well aware that this illegal activity is causing damage to customers using the network legitimately."

"John RA can only speak for itself in its decision to forbear enforcement of the Exemption Regulations pending the outcome of the consultation. From the outset we have said we will only act if we received complaints of interference due to unlicensed use. That said, individuals, (including companies) are perfectly entitled to act on the law as its stands. If they do act, that is a contractual matter between them and their customer."

"For WT purposes: (i) A PRIVATE mobile radio system is a self provided and self used mobile radio system. A private radio system is one where the purpose and the exclusive benefit of the use of the radio system is solely in the interests of the individual/business. Such systems may interconnect with telecommunications systems such as the Public Switched Telephone Networks, provided that the only traffic which is carried over the radio element of the communications path is concerned solely with the individual/business and will receive no payment, consideration or other benefit from any third party in respect of the provision of radio telecommunications facilities; (ii) A PUBLIC mobile radio system is a mobile radio system provided commercially for use by others. A public radio system is one where the beneficiary of use of the system might not be anyone concerned with the business of the provider. The provider may receive a payment, consideration or other benefit, either directly through a contractually managed fee or indirectly through standing charges levied at point of sale of any equipment to be connected to the system or by any other means, in payment of the service of providing and maintaining the radio facility for use by third parties. To answer your last point, under the Wireless Telegraphy Act 1949 all use of the radio equipment must be either licensed or specifically exempted from licensing. The mobile operators are not operating illegally as the GSM spectrum has been licensed to them on a nationally exclusive basis and cannot therefore be licensed for commercial purposes to anyone else."

"put an authorised SIM card into the GSM gateway and it works. Take it out and the device can only be used to call the emergency services. The SIM card belongs to Vodafone and the main purpose of it is to identify and authorise the subscriber. Without the authorisation of Vodafone the GSM gateway will not know the frequency to use for its return path or the level of power to use."

" 5. - (1) …a person who runs a telecommunications system within the United Kingdom shall be guilty of an offence unless he is authorised to run the system by a licence granted under section 7 below."

"14 The term "to run a telecommunications system" is used, though not defined, in the Act and is therefore used in all licences granted under it. At the time of writing the Act's meaning of "run" had not been tested by the courts and so only informal guidance can be given. "

"Any person who has any station for wireless telegraphy or apparatus for wireless telegraphy in his possession or under his control and either: - a. intends to use it in contravention of section 1 of this Act; or b. knows or has reasonable cause to believe that another person intends to use it in contravention of that section, shall be guilty of an offence."

"(2) With the exception of relevant apparatus operating in the frequency bands specified in paragraph (3), the exemption shall not apply to relevant apparatus which is established, installed or used to provide or to be capable of providing a wireless telegraphy link between telecommunications apparatus or a telecommunication system and other such apparatus or system, by means of which a telecommunication service is provided by way of business to another person."

"(8) Whereas, given the increasing importance of telecommunications terminal equipment and networks using radio transmission besides equipment connected through wired links, any rules governing the manufacturing, marketing, and use of radio equipment and telecommunications terminal equipment should cover both classes of equipment. (12) Whereas Community law provides that obstacles to the free movement of goods within the Community, resulting from disparities in national legislation relating to the marketing of products, can only be justified where any national requirements are necessary and proportionate; whereas, therefore, the harmonisation of laws must be limited to those requirements necessary to satisfy the essential requirements relating to radio equipment and telecommunications terminal equipment; (13) Whereas the essential requirements relevant to a class of radio equipment and telecommunications terminal equipment should depend on the nature and the needs of that class of equipment; whereas these requirements must be applied with discernment in order not to inhibit technological innovation or the meeting of the needs of a free-market economy; (21) Whereas unacceptable degradation of service to persons other than the user of radio equipment and telecommunications terminal equipment should be prevented; whereas manufacturers of terminals should construct equipment in a way which prevents networks from suffering harm which results in such degradation when used under normal operating conditions; whereas network operators should construct their networks in a way that does not oblige manufacturers of terminal equipment to take disproportionate measures to prevent networks from being harmed; whereas the European Telecommunications Standards Institute (ETSI) should take due account of this objective when developing standards concerning access to public networks; (22) Whereas effective use of the radio spectrum should be ensured so as to avoid harmful interference; whereas the most efficient possible use, according to the state of the art, of limited resources such as the radio frequency spectrum should be encouraged; (23) Whereas harmonised interfaces between terminal equipment and telecommunications networks contribute to promoting competitive markets both for terminal equipment and network services; (24) Whereas, however, operators of public telecommunications networks should be able to define the technical characteristics of their interfaces, subject to the competition rules of the Treaty; whereas, accordingly, they should publish accurate and adequate technical specifications of such interfaces so as to enable manufacturers to design telecommunications terminal equipment which satisfies the requirements of this Directive; (27) Whereas it is in the public interest to have harmonised standards at European level in connection with the design and manufacture of radio equipment and telecommunications terminal equipment; whereas compliance with such harmonised standards gives rise to a presumption of conformity to the essential requirements; whereas other means of demonstrating conformity to the essential requirements are permitted; (32) Whereas radio equipment and telecommunications terminal equipment which complies with the relevant essential requirements should be permitted to circulate freely; whereas such equipment should be permitted to be put into service for its intended purpose; whereas the putting into service may be subject to authorisations on the use of the radio spectrum and the provision of the service concerned; (36) Whereas the measures which are appropriate to be taken by the Member States or the Commission where apparatus declared to be compliant with the provisions of this Directive causes serious damage to a network or harmful radio interference shall be determined in accordance with the general principles of Community law, in particular, the principles of objectivity, proportionality and non-discrimination; The operative provisions: "

"Member States may restrict the putting into service of radio equipment only for reasons related to the effective and appropriate use of the radio spectrum…"

"5. Indeed, with the liberalisation of the telecommunications market in the UK, and with the multiplicity of network operators and service providers, there are numerous such opportunities for users to reduce their overall telephone bills by choosing the cheapest ways of making calls. There are active in the UK market various companies providing so-called least cost routing services. They tend to market their services to corporate customers, who incur relatively high telephone bills, and offer them cheaper charges by routing their calls across transit networks and through other devices which offer cheaper prices than conventional carriers' charges. A least cost routing company will generally connect its own equipment to the customer's switchboard equipment (PABX) and carry the traffic itself, up to a point of handover to third party network operators for on-delivery to its destination. The carrier will arrange for the traffic to be carried, in each case, by the lowest cost route. The company will charge for its services, at a price which effectively allows the end user to achieve an overall reduction in its telephone bills, whilst remunerating the routing company for its services. This activity is generally perfectly legal, provided that all the carriers involved operate within the terms of applicable authorisations and licences. 6. In 2002, I learned that some such companies also establish and use public GSM gateways. These are devices which may hold a substantial number of SIM cards (e.g. Vodafone SIM cards, O2 SIM cards, Orange SIM cards, T Mobile SIM cards). A telecommunications operator carries relevant call traffic to the gateway. At the gateway, the call is routed through a SIM card associated with the network to which the call is destined to be delivered (so a call to a Vodafone subscriber is routed via a Vodafone SIM card). (…) The call route through the SIM card is treated, by the Vodafone network, like any outgoing call originated on a Vodafone handset and is delivered to the called party, in all respects as if it were an on-net call from one Vodafone subscriber to another. If the Gateway operator has acquired the SIM card as part of a package offering cheaply-priced on-net calls he will pay only that cheap on-net call price for the delivery of the call from the gateway to the called party. Where a gateway operator provides services to numerous customers, it will be able to pass large volumes of traffic through the gateway…."

"11. A private GSM Gateway is a device containing a single SIM card, which may be attached directly to a corporate customer's switchboard (PABX) and used to route outgoing calls form the switch board through the gateway, and through a particular SIM card for on-delivery of the call to a subscriber to the network with which the SIM card is associated. It serves the same purpose as a public GSM Gateway – namely to convert a fixed-to-mobile call, for charging purposes, to an on-net call." 12. I had been familiar with private gateway devices when I worked in the mobile telecoms sector in South Africa, before joining Vodafone. In the UK, Orange had been the first mobile network operator to offer private gateways, using Premicell devices. Vodafone's own in-house service provider business, Vodafone Corporate, found that it also had to offer private gateway devices to its corporate customers, in order to compete effectively with Orange."

"Floe undertakes that its End-Users shall use the Services in accordance with such conditions as may be notified in writing to Floe by Vodafone from time to time. Without limiting the generality of the foregoing, Floe undertakes: (a) not to use the services and/or the equipment for any improper, immoral or unlawful purpose including the transmission of defamatory material"

"that is the evidence of Vodafone's witnesses and there is no evidence to the contrary. It makes a big difference, because the Business Plan on the face of it, where they are proposing to sell private gateways, is a perfectly legal business. That is what Vodafone thought they were doing. Vodafone understood that Floe would be using SIMs supplied under the agreement in mobile phones and private gateways. That is the evidence of Mr Morrow. That is obviously on the basis that private gateways were legal, as they are. You will see that Mr Morrow and others refer to Premicell devices – that is what private gateways used to be called, Premicell devices – and they have been around for some years."

"8. The Licensee shall ensure that the Radio Equipment is operated in compliance with the terms of this Licence and is used only by persons who have been authorised in writing by the Licensee to do so and that such persons are made aware of, and of the requirement to comply with, the terms of this Licence."

"The mobile operators' licences allow them to use their assigned spectrum with any equipment that meets the technical specifications in the schedule to the licence. I believe therefore that the network operators have the authority under the W T Act (but not the obligation) to accept by agreement customer equipment that is not covered by the Exemption Regulations. However, the Licensee would remain responsible for compliance with the licence conditions of all equipment used."

"Cliff, You may remember that during our last conversation you mentioned that the mobile operators had the authority to extend their licences for the use of other parties. Is this how the MVNOs work and can you point me to the clause(s) that authorises this?"

"Mobile Network Operators ("

"The RA has confirmed with Oftel that by having such contractual arrangements in place with MNOs, public gateway operators may, in certain circumstances, legally be able to provide telecommunications services to third parties via GSM gateways, as this would be authorised under Vodafone's Wireless Telegraphy Act licence. Can the RA please respond to the following points: 1. What are the circumstances that the RA has in mind where MNOs may be able to purchase products & services from GSM gateway operators in this respect? 2. What are the products and services the MNOs would purchase from GSM gateway operators in order to make these gateway services legal? 3. Under what MNO licence conditions would MNOs purchase these products and services from GSM gateway operators? 4. If different to the answer to question 3, what MNO licence conditions would authorise GSM gateway operators' provision of telecommunications services to third parties via GSM gateways? 5. What sort of contractual arrangements do you envisage being in place between MNOs and GSM gateway operators?"

"Robert Apologies if this seems long-winded but it may help to build up a picture of what goes on before arriving at answers to your 5 questions. The WT licences convey authority to "…establish, install and use radio transmitting and receiving stations…" on the specific radio spectrum channels. They neither prevent nor compel the running of a telecommunications service on the spectrum…the economics of building infrastructure is the driver for getting a return on the huge investment costs. All use of spectrum must be in accordance with a licence under the 1949 Act, unless covered by a specific exemption. For some services, these may be on shared channels where the sharing and coordination criteria will be defined. For most public operators, spectrum is awarded by competitive means and is licensed exclusively to that operator. This is the case with the cellphone networks. They have the exclusive rights to employ the spectrum licensed to them. (…) User Stations I own a personal cellphone handset that transmits on frequencies in the 1800MHz range. I do not have a WT Act licence, neither am I part of nor employed by Orange. However, I am not committing a criminal offence because I am a single private user that is exempted and I do not supply a commercial telecoms service via my handset. A gateway is a type of user station that may use a multiple of subscriber lines (radio channels) and connects a fixed telephone to the mobile network via a radio link i.e. it 'pretends' to be a [batch of] mobile[s]… Where a gateway is used commercially to provide third party services without coordination with or the agreement of the MNO it is not covered by the exemption neither are we able to issue a WT Act licence for the spectrum that is licensed exclusively to the MNO. (…) Legitimate Commercial Gateways in answer to your 5 questions, as the RA understands the position: 1. Floe, MGOA and other gateway operators (GOs) say that congestion and calling line identity problems are capable of solution. If so, the RA has no objection to a MNO authorising a partner company to access its spectrum as authorised by the WT licence to the extent that the MNO must accept responsibility for the transmissions made and remains liable for any infringement of the licence conditions . The MNO bears too the responsibility for complying with other law and regulations. 2. The GOs collect telecommunications traffic by wire, cable and fibre relay it to their gateway and shoot it into a base station of the mobile network. Basically they are providing interconnection between telecommunications networks. RA has no objection to this service being provided as long as where spectrum is used, the licensee (MNO) is happy to take responsibility for compliance with the WT licence terms . RA notes though that this is an inefficient use of spectrum and suggests that interconnection may be better achieved through fixed backhaul means. 3. WT licence conditions neither allow nor prevent the purchase of interconnection services via gateways . The licensee (MNO) remains responsible in law for the correct operation of the Radio Equipment used in accordance with the technical parameters contained in Schedule 1 to the licence. 4. The WT licences contain the following terms: "

"RM stated that Oftel's investigation could be broken down into three stages. First the RA announcement on the 18 July formed the basis for the investigation. Broadly speaking, this announcement stated that Private GSM Gateways were legal and Public GSM Gateways were not. However, Public GSM Gateways could be legal if the companies running these Gateways were expressly authorised by the MNOs to do so and therefore utilise the MNO's spectrum. Second, Oftel's investigation had sought to establish whether Floe had been authorised by Vodafone to operate its Public GSM Gateway Services. RM stated that Oftel had considered the evidence that Floe had provided in this regard including the contract for the supply of SIMs. It was not clear that Floe had an express written authorisation to utilise its GSM Gateways in providing telecommunications services to third parties… JS and DH stated that Vodafone was supplying Floe with SIMs to access network services and that the supply of SIMs under contract was a de facto agreement to use Vodafone's Wireless Telegraphy Act licence. JS and DH also stated that the Private/Public GSM Gateway distinction was irrelevant as it was not a consideration prior to the publication of the Government announcement on the 18 July 2003. Vodafone had disconnected Floe SIMs in April 2003."

"The question of public or private Gateways only arose after services had already been offered and Gateways were in wide use by many people across the UK. To automatically decide Floe was operating illegally and there is no case to answer makes the presumption that Floe was not operating under Vodafone's Licence. However, Vodafone obviously thought that they could block Floe's IMEI numbers lawfully, since they did so unilaterally. If they regarded the Gateway equipment to be part of their network then this course of action would be logical. However, since they felt able to block IMEI numbers lawfully then they must also believed ( sic ) that the equipment was part of their network and therefore that the point of interconnection must have been before the GSM Gateway. Therefore there is no doubt that Floe was operating under Vodafone's licence. No other explanation of which I am aware fits the facts."

" Commercial use of the GSM spectrum is authorised only by the Wireless Telegraphy Act licences of the Mobile Network Operators (MNOs). Subject to the MNOs being able to fulfil all the legal and regulatory requirements of their licences and authorisations, it is conceivable that MNOs may be able to agree commercial ventures with other companies where traffic and connection to a relevant network would be authorised under the auspices of their WT Act licences. As the planning and control of the equipment, spectrum and network needs to be tightly controlled, GSM Gateway companies offering third party commercial services must approach the MNOs to discuss whether their operation can be regularised and accommodated. Operation without the authority and permission of a licensee is unlicensed use and will be illegal." 3.2 As is set out below it is difficult to see how an MNO could give its consent and yet still be able " to fulfil all the legal and regulatory requirements of their licences and authorisation "

"In order to allow two-way communication, it is necessary to distinguish between the transmission path from the Mobile Station to the Base Transceiver Station (known as the uplink) and the transmission path from the base Transceiver Station to the Mobile Station (known as the downlink). The means by which this is achieved is that the Mobile Station and the Base Transceiver Station are required to transmit and receive at different frequencies, a mechanism known as Frequency Division Duplex."

"The detailed way this operates is specified in GSM technical specifications GSM 5.01 and 5.05. In the case of the standard or primary GSM900 band, the system is required to operate in the following bands: • 890-915 MHz: mobile transmit, base receive • 935-960 MHz: base transmit, mobile receive In the case of the extended GSM 900 band, the system is required to operate in the following bands: • 880-915 MHz: mobile transmit, base receive • 925-960 MHz: base transmit, mobile receive In the case of the GSM 1800 band, the system is required to operate in the following bands: • 1710-1785 MHz: mobile transmit, base receive • 1805-1880 MHz: base transmit, mobile receive"

"1. Description of Radio Equipment Licensed In this Licence, the Radio Equipment means the base transceiver stations or repeater stations forming part of the Network (as defined in paragraph 2 below). 3. Purpose of the Radio Equipment The Radio Equipment shall form part of a radio telecommunications network (the "

"(27) The penalties for non-compliance with conditions under the general authorisation should be commensurate with the infringement. Save in exceptional circumstances, it would not be proportionate to suspend or withdraw the right to provide electronic communications services or the right to use radio frequencies or number where an undertaking did not comply with one or more of the conditions under the general authorisation. This is without prejudice to urgent measures which the relevant authorities of the Member States may need to take in case of serious threats to public safety, security or health or to economic and operational interests of other undertakings. This Directive should also be without prejudice to any claims between undertakings for compensation for damages under national law."

"For private GSM Gateways, SIM cards are put in 'boxes' (sometimes called Premicells) which are located at the customer's premises. The boxes might be described as 'fixed'. The customer self-provisions the service. For public GSM gateways, SIM cards are put in 'boxes' which are not located at a customer's premises. The boxes are (1) fixed; and (2) used to provide a telecommunications service "by way of business to another person" (these words are taken from Regulation 4(2) of the Wireless Telegraphy (Exemption) Regulations 1999, as amended)."

"There is a distinction to be made between private GSM Gateways and public GSM Gateways. Vodafone believed that Floe would be offering a service relating to private GSM gateways, that is that the "box" in which the SIM card(s) would be housed would be at the customer's premises (and used for their own 'office' to Vodafone mobile calls). Vodafone did not supply the SIM cards believing that the SIM cards would be put in "boxes" which were not on individual customer's premises but were in fact located separately to be used for the carriage of third party traffic. Vodafone did not intend that SIM cards would be put in "boxes" to service the needs of many customers, that is "boxes" being used to provide a telecommunications business to third parties i.e. a public GSM Gateway."