In a world where businesses and consumers alike view access to communications networks as an essential part of everyday life, it is vital that there is a suitable statutory framework to govern and support the provision of electronic communications services.
The current Electronic Communications Code has long been seen as unfit for purpose, and in the years since it was introduced in 2003, the Code has struggled to keep up with the rapid advances in technology and the digital market. The Code is relatively untested, with only a handful of cases ever having made it before the courts, and landowners and telecom operators have typically worked together to bypass the uncertainties of the court process and reach a commercial solution.
In recognition of this need for a modern and robust legal framework that will support the rollout of electronic communications services throughout the UK, the government has reformed the existing Code and introduced the new Digital Economy Act 2017. The aim is that this new Code will promote network connectivity, expand coverage and take into account the legitimate interests of all parties.
THE NEW CODE
So has the new Code actually lived up to this promise?
The answer in the legal press has been almost universally “no”, but the new Code is in many ways not in fact a radical departure from the existing legislation.
There are however some notable exceptions, and prospective developers should be particularly aware of the following important new provisions:
1. New Code Rights
The new Code expands on the rights already granted to telecom operators, and has corrected the somewhat glaring omission in the old Code by expressly granting operators the right to connect to a power supply.
It is not clear from the Code itself or the accompanying explanatory notes whether operators are entitled to all of these rights automatically, or if (more likely) each right must be individually negotiated.
The new automatic rights for operators to upgrade, assign and share the use of apparatus have caused particular alarm amongst landowners.
2. Upgrading and sharing telecoms kit
As part of the reform of the existing Code, the government viewed the ability for operators to upgrade and share telecoms kit as vitally important to ensure the provision of widespread network coverage.
Accordingly, the new Code grants operators the power to upgrade and share their telecoms kit, so long as certain (limited) conditions are met. This is an automatic right granted to operators; it does not need to be included in the relevant agreement or conferred by the court.
Any attempt to prevent or limit this right (for instance by imposing additional payments to the landowners in return for another operator sharing the site) will be void – so landowners cannot even benefit financially from multiple operators sharing their site.
Aside from the lack of financial benefit, landowners will also face various practical challenges if operators choose to exercise these rights. This could include problems with roof overloading if extensive additional kit is installed, security issues with maintenance personnel trying to access parts of their properties and, generally, a feeling of a lack of control over who is occupying their property.
The new Code does attempt to address some of these issues by requiring Ofcom (the regulator of all registered operators) to draft a Code of Practice to accompany the new Code. Ofcom’s first draft of this new Code of Practice encourages parties to “treat each other professionally and with respect”, and attempts to plug some of the gaps in the new Code. For example, it requires parties to:
- Provide each other with up-to-date contact information; and
- Consult and co-operate with each other regarding operator access to apparatus for maintenance etc., and in relation to redevelopment of a site by a landowner.
In theory, the Code of Practice does address some concerns, but there is a question mark over its status and how it might be enforced in the event of non-compliance.
This links into a wider point about the financial benefit (or lack thereof) for landowners in providing sites to telecom operators. Compensation and consideration payable by telecoms operators to landowners will now be calculated by reference to the open market value of the land from the perspective of the landowner only. The value of the land to the operator, which could be quite substantial if it is a strategically important site, is wholly disregarded.
In practice, this is likely to reduce the rental stream from telecoms agreements, as many of the sites that are the subject of telecoms agreements (typically roof space) will have little intrinsic value to landowners.
4.Interaction with the Landlord and Tenant Act 1954
A more positive development (for all parties) is that the new Code has addressed the uncertainty around how the provisions of the Landlord and Tenant Act 1954 apply to Code agreements; the new Code excludes any tenancy which has as its “primary purpose” the grant of Code rights from the remit of the 1954 Act. This means that an agreement cannot have both Code and 1954 Act rights.
This is a real benefit for landowners who, rather than having to run 1954 Act and Code proceedings in parallel, will only need to prove a ground of termination under one statutory regime.
In addition, the new Code expressly provides for termination of Code agreements if a landowner intends to redevelop the site – which is another piece of good news for developers.
5. Termination and Removal
Arguably the biggest change introduced by the new Code, and one that has caused considerable alarm, is the revised termination and removal process.
Under the existing Code, landowners are required to give operators just 28 days’ notice if they want to terminate a Code agreement. The new Code requires a much longer notice period – operators must be given 18 months’ notice just to terminate a Code agreement.
In addition, in the new Code termination is not the same as removal, and landowners must serve a further notice specifying a “reasonable” period for removal of the apparatus from the site in question.
Practically speaking, taking into account the possible court delays and the time needed for operators to safely decommission and remove apparatus, it could take up to two years (if not longer) for landowners to recover their site free from telecoms kit. Developers should bear in mind this new elongated timescale when considering redevelopment plans and likely timelines.
That said, although operators frequently take longer than the 28 day notice period to remove their equipment, they have so far been generally willing to negotiate a timeline for removal with landowners. So, in practice, developers may see little change in the time periods for removal.
The new Code cannot be simply applied wholesale to all existing telecoms agreements; there is a complex set of transitional provisions that apply to some (but not all) existing provisions, (which also come into force on 28 December 2017). For instance, upgrading and sharing rights will not be read into existing agreements, and operators will not automatically enjoy the new rights conferred by the new Code.
There are detailed provisions setting out which termination procedure should be followed, and specialist advice should be sought to ensure that all Code agreements are properly brought to an end in order to obtain vacant possession; it is important that this process is managed with care.
WHERE DO WE GO FROM HERE?
The new Code will inevitably give rise to considerable uncertainty, so it is crucial that landowners take the time now to take stock of which operators are in occupation of their properties and any planned/potential developments in the pipeline to consider the impact of the new Code.
The new Code includes obligations on Ofcom to publish:
• a Code of Practice to accompany the new Code;
• standard terms which may (but need not) be used by Code operators and landowners or occupiers when negotiating agreements to confer Code rights; and
• a number of template notices which must or may (depending on the circumstances in question) be used by Code operators and landowners/occupiers.
Earlier this year, Ofcom published a consultation on the above draft documents, and made a small number of changes in line with stakeholder comments. These documents will sit alongside the new Code, and are a helpful starting point, but significant questions remain about how the new Code will operate in practice.
Much will of course depend on the operators and the approach they decide to take. We hope that the good working relationships between operators and landowners will continue, and we will see parties co-operating to support the provision of electronic communications services well into the future.
If you have a question and would like to learn more, please do get in touch. Email me at Jessica.Hopewell@blplaw.com. Alternatively, we would be delighted to come and talk to your team in more detail about what to expect from the new Code and transitional provisions.