High Court rejects £413m damages claim over 1999 GSM Gateways ban


Dealers lose claim after taking the Department for Culture, Media and Sport to court over its interpretation of the law surrounding GSM Gateways

Six telecoms dealers have failed in their attempt to claim £413 million in damages from the Government.

The case came before the High Court in July and relates to the banning of GSM gateways in 1999, which led to a number of dealers going out of business.

GSM gateways, which help businesses reduce call costs from landlines to mobiles using embedded SIMs, were banned in the UK after operators claimed their use was affecting the quality of service they were able to give to their mobile customers – something the dealers strongly denied.

The six telecom firms – Recall Support Services, Floe Telecom, EasyAir, Packet Media, VIP Communications* and Edge Telecommunications** – took the Department for Culture, Media and Sport (DCMS) to court over its interpretation of the law, which has not been imposed in Europe.

The dealers claimed the DCMS’s ‘Commercial Use Restriction’ on GSM gateways from 1999 thus breached EU law and entitled them to compensation based on projected potential earnings.

Both sides produced evidence which they said proved or disproved the harmful effects of GSM gateways.

On October 17, Mrs Justice Rose dismissed the dealers’ claims, saying she found “clear evidence” that the use of SIM cards in a GSM gateway was likely to create problems for the network operators and have a harmful effect on performance levels.

She told the court: “The presence of a large GSM gateway in a cell can quickly occupy the majority of channels available for calls on that network in that location. This causes disruption for other people trying to use their mobile phones in the vicinity of a GSM gateway because they are more likely to find that their call is dropped or blocked.

“I have no difficulty in finding that the use of an MNO’s SIM cards in a GSM gateway has the potential to cause congestion on that MNO’s network and this may result in other subscribers suffering blocked or dropped calls.”

However, although Mrs Justice Rose dismissed the companies’ damages claims, she said DCMS was not without fault.

She rejected the government department’s claim that the use of SIM cards on an operators’ network to provide GSM gateway services resulted in an inefficient use of mobile spectrum which telecoms regulator Ofcom had a duty to investigate.

She said: “The commercial use restriction is not justified by the duty to ensure the efficient use of spectrum. As a result of these findings, my conclusion is that Commercial Use Restriction is and was a failure by the UK to implement Article 5 of the Authorisation Directive in so far as it applied to COSUGs [single-use gateways].”

Damages claims
Recall Support Services £36m
Floe Telecom £41m
EasyAir £46m
Packet Media £89m
VIP Communications* £62m
Edge Communications** £141m

* No association with VIP Communications Group of Hull
** No links with Edge Telecom (UK) of Surrey