An early case on the new Electronic Communications Code suggests that landowners can expect to receive far lower payments from mobile phone network operators who want to install electronic communications apparatus on private land.
I am sure we all get frustrated when we can’t get a mobile phone signal. Or when it takes longer than we expect to open a webpage on our phone. Our insatiable demand for greater mobile phone coverage and faster downloads necessitates a corresponding expansion of the infrastructure that provides the service.
Ofcom estimates that there are over 33,000 telecoms sites in the UK, supporting 75 million active mobile phones. 22,000 of those sites are leased or licensed directly to a network operator, with the remainder leased or licenced to wholesale infrastructure providers. Of the 22,000 sites leased or licensed directly to operators, 4,000 are rooftop sites and 18,000 are greenfield sites.
The code in theory
The Electronic Communications Code exists ‘to facilitate the installation and maintenance of electronic communications networks’. The code entitles network operators and wholesale providers to install and retain electronic communications apparatus on private land. If a landowner won’t voluntarily enter into an agreement with the operator, the operator can apply to the Upper Tribunal to impose an agreement.
The code is updated periodically, to reflect advances in technology and changes in the market. The current version took effect on 28 December 2017. As well as giving operators greater powers to upgrade, share and assign their sites, one of the more controversial aspects of the new code concerns the calculation of the payments that operators must make to landowners.
Paragraph 24 of the new code requires the consideration to be assessed on the assumption that the agreement doesn’t relate to the provision or use of an electronic communications network and that the landowner doesn’t have a monopoly on suitable sites. This is similar to the ‘no scheme’ assumption that applies on compulsory purchase. The operator must pay the market value of what is usually a very small piece of land for which there would usually be little or no demand in a ‘no network’ world.
The impact assessment for the new code estimated that consideration would ‘reach an equilibrium at up to 40% lower than current rates’. However, the first case on valuing code rights suggests that may have been optimistic, and payments to landowners may be slashed to minimal levels.
The code in practice
In EE Limited & Hutchison 3G UK Limited -v- LB Islington , the operator needed to relocate its apparatus from a nearby building that was being redeveloped. It identified Threadgold House, a ten-storey block of flats owned by Islington Council, as a suitable alternative location. The matter came before the Tribunal twice, with one of the many issues at stake being how much the operator should pay Islington.
The parties had agreed an annual payment of £21,000 under the old code, but had never concluded the necessary agreement. The operator had now offered a settlement at a much lower figure around £2,500, but Islington claimed £13,250 (approximately 40% less than had previously been agreed).
Applying the ‘no network’ test required by the new code, the judge assessed the market value of the small area of roofspace as a purely nominal £50. However, he increased this to £1,000 in recognition of the wear and tear on the roof, the landowner’s obligations to maintain the building and the loss of freedom to deal with the roofspace. Ultimately the judge awarded £2,551 per annum, being the sum that the operator had already offered.
The first 18 months of the new code have already generated more reported cases than we witnessed in over 30 years of the previous codes. The Royal Institution of Chartered Surveyors has referred to ‘paralysis’ as parties take widely divergent positions, especially on valuation. Uncertainty and the fear of setting an unwelcome precedent is leading to delays and disagreements.
It is apparent from these early cases that the Upper Tribunal will not allow anything or anyone to obstruct ‘the speedy and economical delivery of communications networks in the public interest’. In particular, it appears that valuations under the new code will be much lower. Not just lower than under the old code, but lower than anyone expected under the new code.
This case may help clear the logjam, as landowners reluctantly come to terms with the harsh new reality. There is however a risk in driving payments too low. Faced with the double whammy of increased rights for operators and diminishing returns, landowners may feel less inclined to engage with operators. This in turn is likely to result in even more applications to the Tribunal, as operators seek to impose code agreements on recalcitrant landowners.