Proposed reforms to sharing and upgrading
Overview
Recommendations
Challenges
Comment


Proposed reforms to sharing and upgrading

On February 28 2013 – more than a year ago – the Law Commission published a long-awaited report outlining its recommendations to reform the Electronic Communications Code. The aim of the reforms is to ensure that the code is up to date with modern technology while continuing to balance the rights of landowners and the public demand for modern communications services.

The commission made no recommendations on the wording of the revised code, only the policy that it should embody. It is therefore now up to the government to draft and implement a revised code. It is presently unclear as to whether the Department for Culture, Media and Sport will make any progress on the draft bill before the general election on May 7 2015.

However, it is clear that when the Office of the Parliamentary Counsel (which is responsible for drafting all government bills that are introduced to Parliament) comes to consider the draft bill, it will be required to consider some of the many questions left unanswered by the commission's report – questions which will need to be debated and resolved though the legislative process. What is ultimately required (particularly having regard to the shortcomings of the present code) is a clear and effective code that can cater to the pace of technological change, function with the trust of operators and landowners alike and achieve a balance between the respective rights of those operators and landowners.

The commission's recommendations in relation to sharing and upgrading have been a particular source of debate and speculation among operators and landowners since February 28 2013.

Overview

As a starting point, it is common for agreements governing an operator's use and occupation of a site to restrict the operator from assigning, dealing and sharing with other operators. More recently, such agreements have evolved specifically to prevent consolidation and roaming. Therefore, the written agreement will dictate the operator's right to upgrade or share apparatus and usually the landowner's prior consent is required.

The question that the commission considered was whether the code should make special provision to permit the sharing or upgrading of apparatus, irrespective of the terms of the agreement with the site provider. During the commission's consultation, site providers understandably cited the need to retain control of the level and type of apparatus on their land, the number of operators present and, crucially, the need to preserve the link to revenue in consideration for any consent to a change of arrangements. The core business model of such site providers is that contractual revenues are typically linked to the apparatus installed and the wider rights granted. Accordingly, a proposal to grant ancillary rights to upgrade without the need for the site provider's consent and without charge cuts across that business model.

The commission recognised that both the sharing and upgrading of electronic communications apparatus have serious technical implications and thus cannot be permitted as a matter of course (save for certain exceptional circumstances). The commission pointed to the fact that the possibilities are so complex that no general provision can make an automatic right to upgrade either feasible or safe. The commission therefore concluded that in general, it is impossible for code operators to have an automatic right to share or upgrade equipment. Such rights must be negotiated for or granted by the tribunal; it may be right for there to be additional consideration payable, depending on the market.

The commission reached the same conclusion in relation to rights to maintain and repair equipment, which cannot be conferred automatically; the range of technical implications, from access to safety and structural integrity, is such that automatic rights cannot be given. It is for the parties to negotiate them or for the tribunal to confer them.

Against this backdrop, the commission recognised that there was a concern that the absence of automatic rights may frustrate government policy, hinder competition and lead to implications for the service provided to customers. The commission was convinced that there are clearly identifiable cases where upgrading and sharing have no physical implications at all and cannot be seen, because they are physically confined to a space controlled by the operator. It concluded that sharing or upgrading should be permitted where they take place within certain confines – for example, a cabinet on land, without physical or visual impact on the site provider and without requiring a power supply or the addition of an antenna, and without conferring code rights on additional code operators. These are cases in which the commission considered that there is no possible additional burden on the site provider and no technical or safety issues. If, in the case of sharing, the additional code operator requires code rights, it can negotiate these independently with the site provider or apply for them to be imposed by the tribunal.

Recommendations

The commission therefore recommended that the revised code provide as follows in relation to an agreement or lease commencing after the implementation of the revised code:

  • A code operator will be permitted to upgrade or share electronic communications equipment within a physical structure of which the operator has exclusive possession, provided that the sharing or upgrading:
    • cannot be seen from outside that structure; and
    • imposes no burden on the site provider.
  • A term in an agreement, or in a lease between a code operator and a site provider, will be void if it prevents, or imposes an obligation to pay for, such upgrading or sharing of electronic communications equipment.

If the operator can satisfy these essential 'ingredients', any term which seeks to prevent upgrading or sharing (including the requirement for a payment) is void.

Challenges

Will the onus be on the operator to demonstrate that these essential ingredients are met before such rights can be exercised? How will that be manifested? What form should it take? Should the landowner then have a period to consider and a right to reply? Will any prior notification of the site provider be required? These are just some of the obvious considerations.

It is easy to foresee a scenario in which a dispute arises as to whether:

  • the upgrading or sharing is confined within a physical structure;
  • the operator, as a matter of fact, has exclusive possession;
  • the apparatus can be seen outside the structure; and
  • the proposed sharing or upgrade imposes a burden on the site provider.

Save for one exception in relation to linear obstacles, it has been recommended that the forum for code disputes be the Lands Chamber of the Upper Tribunal. There is likely to be concern as to whether this route will provide swift adjudication for this sort of dispute and an awareness of the time, expense and delay involved in securing a determination by the Lands Chamber. Attempts to exercise such rights will become routine and commonplace. Without an alternative, swift and inexpensive means by which a dispute of this nature can be determined, there is a risk that the Lands Chamber may become awash with such relatively minor disputes.

Whether the government will go so far as to state positively the circumstances of when such rights can and cannot arise and how they should be exercised is unclear, but it is quite possible (and indeed understandable) that any future legislation simply cannot be that prescriptive. It will be a question of fact in each case. Operators may therefore contract with one another for use of the apparatus, rather than with the site provider. The right is then for the operator to share or upgrade. What is not clear is whether a term which requires an operator to contract with its site provider would be void if it did not prevent the sharing/upgrading/payment, but was conditional in the sense that the sharer had to contract with the site provider.

The report recognised that where sharing has been allowed automatically, by way of exception to the general rule and within the confines of another structure, it is important to ensure that the site provider is not required to deal with an additional code operator, and that in requiring removal it can require the removal of all the apparatus subject to the original grant and any sharing under this right. Sharing, in this sense, generates no code rights, because the additional code operator allowed on the site by way of this limited permission to share has no legal relationship with the site provider. The latter is bound by the same code rights as before, and once it is entitled to have apparatus removed, it will encounter the provisions about removal.

It is clear that any revised code will need to manage these challenges carefully, without prejudicing the business models of site providers whose role is key to the success of site sharing in the United Kingdom, and with the flexibility of handling different types of site (eg, fixed-line and mobile sites) in a proportionate way, if it is to be effective.

Comment

On the basis of the recommendations, site providers will still be able to dictate the operator's right to upgrade or share apparatus, requiring consent or additional payment – certainly for antennae or anything else that is not within a physical structure over which the operator has exclusive possession, and which does not impose a burden on the site provider, either visual or physical.

Guidance may be required on how the new code will be interpreted and applied, with practical examples of its application and common scenarios which operators and landowners can refer to and which should be persuasive in determining any disputes on the subject under the new code. In short, a code of practice is needed, with a statutory code approved by the secretary of state and laid before Parliament. The code of practice would not impose legal obligations; nor would it be an authoritative statement of the law – only the courts and tribunals can provide such authority. However, the code of practice could be used in evidence in disputes under the new code, and courts and tribunals could be required to take into account any part of the code of practice that appears relevant to any questions arising in proceedings.

The new code will undoubtedly bring about a change for the better, but as always, the devil will be in the details and the real challenge will be to ensure that the new code is clear and effective in both its drafting and, crucially, its application.

For further information on this topic please contact Damian Hyndman at Eversheds by telephone (+44 20 7919 4500), fax (+44 20 7919 4919) or email (damianhyndman@eversheds.com). The Eversheds website can be accessed at www.eversheds.com.