The current Electronic Communications Code (the Existing Code) regulates the relationship between telecoms operators and land owners and is contained in Schedule 2 of the Telecommunications Act 1984.

The Existing Code is criticised for its complexity. In his oft- quoted judgment in the case of Bridgwater Canal Company Limited v GEO Networks Limited [2010] EWHC548(Ch), Lewison LJ said the Existing Code was "one of the least coherent and thought-through pieces of legislation on the statute book."

Given the significant advances in the telecoms industry over the last 30 years, the Government has set about reforming the Existing Code.

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:

Assignment of code rights – Paragraph 15

Para 15 provides that any agreement which prevents or limits assignment to another operator, or seeks to impose conditions, will be void. The site owner can though require the assignor to guarantee the performance of the terms of the agreement by the assignee – similar to an authorised guarantee agreement.

Power for operator to upgrade or share apparatus – Paragraph 16

Para 16 provides that any operator will be entitled to upgrade its apparatus or to share such apparatus with any other operator provided that:

  • the upgrade or sharing of the apparatus will have "no adverse impact, or no more than a minimal adverse impact, on its appearance" and also that
  • "the upgrading or sharing imposes no additional burden on the other party to the agreement."

Accordingly, under Paras 15 and 16, a site owner will be obliged to permit the operator to both assign or share its interest, and to upgrade the apparatus, for no additional consideration.

Power to impose an agreement – Paragraph 19 and valuation of the consideration payable – Paragraph 23

Para 19 provides that, where notice is served by the operator on the site owner and the site owner refuses within 28 days of service of the notice to confer code rights, the Court may impose an agreement which confers code powers where the following two conditions are met (see Para 20):

  • the prejudice caused is capable of being adequately compensated in money
  • that the public benefit likely to result from the making of the order outweighs the prejudice to the relevant person.

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
  • 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."

By proposing this "no scheme" approach to valuation, the government is seeking to reduce the value of the consideration payable more in line, it is said, with payments received from utility providers exercising similar rights. 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 site owners from making sites available.

Where the Court makes an Order to impose an agreement under Para 19, it can also make an order (see Paras 24 and 83) for the operator to pay the site owner compensation for any loss or damage that has/will be sustained as a result of the Court imposing an agreement and/or in the case of removal of apparatus.

Compensation can include (para 83(2)):

  1. "Expenses (including reasonable legal and valuation expenses, subject to the provisions of any enactment about the powers of the court by whom the order is made to award costs or, in Scotland, expenses)
  2. Diminution in the value of the land
  3. Costs of reinstatement"

Such valuation will be assessed on the same basis as compensation for compulsory purchase under the Land Compensation Acts.

Under the Existing Code, parties face the potential complication of both renewal proceedings under the LTA 1954 Act as well as the exercise of the operator's rights under the Existing Code. The New Code goes some way to removing this uncertainty. Para 28 as drafted currently provides that the Code will not apply to a lease if:

  • "its primary purpose is not to grant code rights
  • 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."

It is also currently proposed that there be a consequential amendment to s43 of the LTA 1954 to provide that, where the primary purpose of the lease is to grant rights under the New Code, then automatically the LTA 1954 Act will not apply to that tenancy.

How may a person bring a code agreement to an end? – Paragraph 30

Where an agreement is one to which the New Code applies (a "Code Agreement"), Para 29 provides that when the Code Agreement comes to an end the operator may continue to exercise the rights under the Code Agreement and the site provider remains bound by those rights. Under Para 30, where a site owner wishes to terminate a Code Agreement, the site owner 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:

  • Due to substantial breaches by the operator of its obligations under the agreement
  • Because of persistent delays by the operator in making payments to the site provider under the agreement
  • That the site provider intends to redevelop all or part of the land to which the Code Agreement relates, or any neighbouring land , and could not reasonably do so unless the Code Agreement comes to an end
  • That the test under Para 20 for the imposition of the agreement on the site provider is not met

Under Para 31, the operator is entitled to serve a counter-notice within 3 months of receipt of a notice under Para 30 and then within 3 months of the date when the counter-notice is served can apply to Court.

Schedule 2 of the New Code sets out the transitional provisions. 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 of the New Code (assignment of code rights and upgrading and sharing apparatus) does not apply in relation to a subsisting agreement
  • Part 5 of the New Code (termination and modification of agreements) does not apply to a subsisting agreement if:
    • it is a lease to which the LTA 1954 Act applies and the lease has not been contracted out
    • the primary intention is not to grant code rights and there is an agreement under s38 LTA 1954 to contract the lease out.

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
  • 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."