28 Mar 2017

Given the significant advances in the telecoms industry over the last 30 years, the Government has set about reforming the Existing Code. The Code regulates the basis on which telecoms operators can install apparatus on a landowner's land, and restricts the rights of landowners to rely on the strict terms of any occupancy agreement entered into with telecoms operators. It is therefore highly relevant to landowners and operators alike.

Following consultation by the Law Commission and the Department for Culture, Media and Sport, the proposed new Telecommunications Code (the New Code) is set out in the Digital Economy Bill (which has now had its third reading and will go to the House of Lords for a second report stage on 29th March 2017). The New Code will be inserted as Schedule 4 to the Communications Act 2003.

It is anticipated that the new Bill could receive Royal Assent as soon as April 2017.

As currently drafted, the Bill seeks to introduce many changes some of the most significant of which are:

  • Para 15 - any agreement which prevents or limits assignment to another operator, or seeks to impose conditions, will be void.
  • Para 16 - subject to certain provisions any operator will be entitled to upgrade its apparatus or to share such apparatus with any other operator
  • Para 19 - subject to certain conditions the Court may impose an agreement which confers code powers
  • In cases where the Court imposes an agreement under Para 19, Para 23 provides that the consideration payable shall be the "market value" which:
    • Must be assessed on the basis of the value of the right or agreement to the relevant person, and
    • Must not be assessed on the basis of the value to the operator of the right or agreement or having regard to the use which the operator intends to make of the land in question.

The Government has stated that "… site providers should get fair value for the use of their land, but considers that this should not, as a matter of principle include a share of the economic value created by very high public demand for services that the operator provides."  

There is a clear risk that this approach to valuation may dissuade land owners from making sites available.

  • Under the Existing Code, when a Code agreement expires parties face the potential complication of both renewal proceedings under the Landlord and Tenant 1954 Act as well as the exercise of the operator's rights under the Existing Code.
  • Para 28 - provides that the Code will not apply to a lease if:
    • "Its primary purpose is not to grant code rights, and
    • It is a lease to which Part 2 of the Landlord and Tenant Act 1954 (security of tenure for business, professional and other tenants) applies."
  • Para 30 - where a landowner wishes to terminate a Code Agreement, the landowner must give at least 18 months' notice from the date that the notice is served and state that the Code Agreement should come to an end on one of the following grounds:
    • Substantial breaches by the operator
    • Persistent delays by the operator in making payments
    • Site provider intends to redevelop all or part of the land

The operator is entitled to serve a counter-notice within 3 months of receipt and then within 3 months of the date when the counter-notice is served can apply to Court.

  • Transitional arrangements - a subsisting agreement under the Existing Code will, after the New Code comes into effect, take effect as an agreement under the New Code but subject to the modifications set out in Schedule 2. For example:
    • Part 3 - assignment of code rights and upgrading and sharing apparatus does not apply to a subsisting agreement
    • Part 5 - termination and modification of agreements does not apply to a subsisting agreement

Summary

Some commentators have suggested that the changes in the New Code, as currently drafted, are not radical enough. However, there will clearly be some significant changes including in relation to:

  • Rights to assign, upgrade or share apparatus
  • Valuation of consideration, and
  • Application of the 1954 Act/the New Code and Termination

The New Code will almost certainly be an improvement on the Existing Code. However, it remains to be seen whether it will deliver the Minister of State for Culture and the Digital Economy's vision that:
"property owners will be fairly compensated for use of their land, but also explicitly acknowledge the economic value for all of society created from investment in digital infrastructure. In this respect it will put digital communications infrastructure on a similar regime to utilities like electricity and water." 

For a more detailed analysis please click here. We shall also update further as to progress of the Bill.