The Department for Culture, Media and Sport ("DCMS") has published a consultation calling for views on its proposed reform of the Electronic Communications Code (the "Code"), the legislation that deals with the rights of communications operators to access public and private land for the installation of communications apparatus.  

Business Impact

  • Whilst communications operators and site providers alike will undoubtedly welcome the opportunity to reform the existing out-dated Code, the overall feel of the proposals suggests that, in its current proposed form, the new Code will be welcomed more by communications operators than site providers.
  • In today's modern telecoms environment, where the sharing of active as well as passive infrastructure has become the norm, a new right under the Code to share and upgrade apparatus (albeit in limited circumstances) without any obligation to pay additional consideration to site providers is likely to mean that communications operators are able to roll out and upgrade their networks cheaper and more easily.
  • A new more detailed mechanism under the proposed Code for requiring removal of apparatus could be good news for site providers though since it will presumably make it more difficult for communications operators to resist the removal of their apparatus.
  • The proposed provisions concerning the interaction between the Code and the Landlord and Tenant Act 1954 is also good news as it will clarify the position for all interested parties.
  • The DCMS consultation is open until 30 April 2015.  

Background

The existing Code was enacted in 1984 based on several 19th and early 20th century statutes dealing with telephone wayleaves and, although attempts have been made to update it for modern technology - such as broadband, mobile internet and telephone, cable television and landlines - important points remain unclear. For example, it is difficult to discern the relationship of the Code with certain other legislation, such as the Land Registration Act 2002 and the Landlord and Tenant Act 1954 - which is particularly important as the Code regulates the relationship between landowners and communications operators.

The Code has therefore been criticised for many years as being incoherent and out of date and was famously described by Lewison J in 2010 as "not one of parliament's better drafting efforts….. one of the least coherent and thought-through pieces of legislation on the statute book".

In 2011, the Government asked the Law Commission to carry out a review of the Code and make recommendations for reform. The Law Commission published its final report in February 2013.

In January 2015, a new version of the Code was tabled as an amendment to the then Infrastructure Bill progressing through Parliament (now the Infrastructure Act 2015). It was withdrawn just a few days later following criticism from various interested parties, and a decision was taken to consult further.

The Proposed Code

The Code is being proposed by the DCMS in the form of a stand-alone Bill which would introduce the new Code as a schedule to the Communications Act 2003, and repeal the existing Code (currently a schedule to the Telecommunications Act 1984).

The Government has emphasised in the consultation document that its key objective is to provide a modern and robust legal framework for the roll-out of electronic communications apparatus and to provide a revised Code that improves network connectivity and coverage. This sounds like good news for communications operators but perhaps not the news that site providers were hoping to hear.

The core principles of the Code remain unchanged. Communications operators are free to enter into consensual agreements with site providers in relation to the placement of their apparatus on public or private land ("Code Rights"), with a backstop power for the court to impose an agreement by order in certain circumstances. An order may be made if: (i) any prejudice to the site provider is capable of being adequately compensated by money; and (ii) the public benefit in access to a choice of high quality electronic communications services, likely to result from the making of the order, outweighs any prejudice. However, an order may not be made if the court thinks that the site provider intends to redevelop all or part of the land to which the Code Right would relate, or any neighbouring land, and could not reasonably do so if the order were made.

The new Code also continues to include provisions giving communications operators certain rights in relation to streets and roads, tidal water, undertaker's works affecting apparatus, overhead apparatus and lopping trees. In line with the Law Commission's recommendations, these provisions largely replicate the provisions of the existing Code.

The general look and feel of the Code is however fundamentally different. A plain English approach has been taken to the drafting which should be welcomed, although the use of questions as section headings may be a little too modern for some tastes.

The new Code also addresses some key issues:

Determining consideration for Code Rights: One of the key issues with the Code has historically been the amount of compensation a court can compel the communications operator to pay to a site provider in the event that the parties are unable to reach a commercial agreement. The draft Code implements the Law Commission's recommendation that the relevant consideration should be market value, based on the value of the rights to the communications operator (not the site provider).

When calculating the market value, the Code also provides that the court must make the following two assumptions: (i) that there is more than one site available to the communications operator; and (ii) that the ability of the communications operator to assign the agreement to another operator, and the right to upgrade and share apparatus (see below), are not included in the value. According to the Government’s Impact Assessment, this change in valuation is expected to lead to a 10% reduction in wayleave payments (such as lease payments) from communications operators to site providers. It is expected that this will result in site providers' revenue from wayleave payments decreasing by £30 million per year.

The new Code does provide some hope for site providers though since it also includes a mechanism by which the Secretary of State can legislate by regulation to transition to a "no scheme" valuation – i.e. whereby the rights are assessed on the basis of their value to the site provider. However, such regulations may only be made after consultation and the intention is that the power to make this transition would only be exercised when there was evidence to support such a move.

Powers to upgrade and share apparatus: The existing Code does not provide communications operators with any general or automatic power to share or upgrade apparatus, meaning that site providers can restrict their ability to do so by requiring prior consent and additional payments. Agreements can also prohibit outright any upgrading or sharing, which may result in a need to agree new terms or payments for even the smallest changes. Given the current trend for network sharing amongst communications operators and, in particular, sharing of active as well as passive elements of communications networks, this can be a real barrier to network roll-outs.

The new Code provides a power for communications operators to share and upgrade their apparatus without consent or payment of any further consideration to the site provider, as long as certain conditions are met. This power cannot be limited by agreement but can only be exercised in certain circumstances, being when the communications operator has exclusive possession of the apparatus, and the upgrading and sharing will have no more than a minimal adverse impact on the appearance of the apparatus and impose no additional burden on the site provider. In this way, the Government hopes to be able to unlock the potential benefit to consumers of operators being able to upgrade and share apparatus in circumstances where no additional burden is being imposed on site providers. 

Bringing the Agreement to an end/interaction with the Landlord and Tenant Act 1954: One of the key areas of confusion and criticism in relation to the existing Code was the way in which it interacted with the security of tenure provisions in the Landlord and Tenant Act 1954. The new Code proposes that where Code Rights are conferred by a lease the primary purpose of which is not the granting of Code Rights, then the lease should fall within the scope of the Landlord and Tenant Act 1954; and the provisions for the continuity of Code Rights contained in the new Code should not apply. In contrast, leases primarily for the purpose of conferring Code Rights should not fall under the scope of the Landlord and Tenant Act 1954. In such instances, the agreement will continue in effect after termination and there is a procedure set out in the Code which site providers must follow in order to bring the agreement to an end.

According to this procedure, the site provider must provide a notice to the communications operator setting out a date, no earlier than 18 months away, on which the terms of the agreement are to end. The notice must also set out one of the required grounds for termination. Those grounds are that the communications operator has substantially breached its obligations; that the communications operator has persistently delayed payments; that the site provider intends to redevelop the land and could not reasonably do that without ending the agreement; or that the test in paragraph 20 (for conferral of new Code Rights) is not met. The effect of the notice is to end the agreement unless the parties agree otherwise; or the communications operator gives, within three months, a counter-notice proposing that the old agreement continue or proposing new terms, and then applies to the court for an order within a further three months. However, if the court considers any of the required grounds to have been made out by the site provider, it must order the agreement to come to an end.

Removal of apparatus: The new Code also provides rights for site providers to require removal of apparatus. These rights correspond to a certain extent to the rights found in paragraphs 21 and 22 of the existing Code. However, the provisions of the new Code are much more detailed.

The right to require removal of apparatus is available if one of five conditions set out in the Code is met. The first condition is that the site provider has never been bound by a Code Right relating to the apparatus; the second is that the Code Right has ended. These two conditions, however, are not met if the land remains occupied by another person who has conferred Code Rights (and not done so in breach of any covenant to the landowner). The third condition is that the apparatus is not being used and is not likely to be used for the communications operator’s network; the fourth is that: (a) the communications operator has ceased to be an Ofcom designated code operator; (b) Ofcom has not authorised the retention of the apparatus on the land; and (c) no other person has a Code Right to keep the apparatus there. The fifth condition is that a transport or street work right under which the apparatus was installed no longer applies and there is no other person with a Code Right to keep the apparatus there. The Code also sets out a procedure to enforce removal.

To view a copy of the consultation papers, please click here