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Proposed reform to the Electronic Communications Code

 

The relationship between electronic communications network operators and site providers in the United Kingdom is governed by the provisions of the Electronic Communications Code.

However, in the Queen’s Speech of May last year the Government announced plans to reform the Code, where these provisions were included in the Digital Economy Bill. The Department of Culture, Media and Sport anticipate that the new Code will become law in June/July this year.

From a property angle the main points of the Bill are:-

1) How consideration is to be determined:-

The current practice is for the owner and operator to agree a market rent based on how the market is operating in the real world, which allows an owner to seek a rent which reflects the scarcity of potential operating sites and a site’s attraction to an operator as a money making opportunity.

The new Code seeks to change this position though and the Government’s view is that the owner should not be able to seek a share of the economic value created by high public demand. The new Code uses the term, “market values”, but the calculation of rent is moved in favour of the operator by requiring the calculation to be based on certain assumptions and disregards, such as:-

a) The value to the operator of the site is disregarded.

b) An assumption that there is more than one site which the operator could use (even if it is not the case).

An example is a farmer willing to grant a lease for a corner of his field to an operator, where the rent will be calculated by reviewing how much profit the owner could make from the field if he used the land himself or let it to a third party for agricultural use.

It should be the position that the calculation of market rent is only relevant when the parties cannot reach agreement on the terms of the proposed letting and the operator reverts to the court to impose rights. However, the fact that this fall back position exists could lead to an influence on the negotiations where the parties are having difficulty in arriving at a consensual arrangement.

2) Upgrading and Sharing Apparatus:-

Up until the present time this has proved to be an area of great contention between site providers and operators, where:-

a) Operators have sought to bring additional operators onto their sites and to upgrade their service, and

b) Site providers have sought to capture some of the enhanced value as a consequence of sharing or upgrading.

On this point it appears that the Government has taken a strong line where it is proposed that there will be an automatic right for operators to upgrade and share apparatus without prior agreement or payment to site providers if there is minimal adverse visual impact.

In review it is considered that this provision may not have been controversial if it had it been coupled with a proposal for an open market rent. However, if coupled with the proposals in relation to consideration payments this area is also a potential point of contention with land owners.

3) Contracting out of the new Code:-

As is the current position the Government has concluded that there should be no ability for contracting parties to exclude the Code provisions.

4) Land Registration:-

The Government proposes that Code rights should be binding on successors without any requirement to register those rights.

5) Retrospectivity and Transition:-

The new Code will not apply retrospectively, where all agreements made before the new law comes into force will remain unaltered.

6) Ending the Agreement:-

The security of tenure provisions under the new Code are similar to those for business lettings under the Landlord and Tenant Act 1954, where broadly an agreement will continue on a statutory basis after any contractual term specified in the written agreement has ended. However, a party wishing to the end the arrangement can serve 6 months’ notice and propose terms for a new written agreement and failing agreement the operator or owner can apply to the court to settle the terms of the new agreement.

In respect of the land owner wanting the land back there is provision for minimum notice periods of 18 months and the Code sets out grounds for possession which the owner must specify, where the grounds are similar to those in the Landlord and Tenant Act 1954 for business letting and examples would be:-

a) Where the operator has committed “substantial breaches” of the agreement, or

b) The owner “intends to redevelop all or part of the land”.

However, if the operator does not want to go, the court decides the issue, where this provision means an owner who grants Code rights is not guaranteed they will recover possession of the land when the Code agreement comes to an end.

In conclusion the proposals for a new Electronic Communications Code is a move by the Government to shift the emphasis in favour of providing a network service - which is now expected as standard for modern living - where they consider that the proposed reform will assist communication companies with their long-term investment by allowing those companies, who are competing for profit, to drive down a significant element of their overheads at the expense of land owners.

Any site provider considering entering into a new Mast Agreement should consider their position and the proposals very carefully in the light of the proposed new Electronic Communications Code.

Disclaimer: This article is not intended to constitute legal advice.  For legal advice in connection with the above, please contact us directly.

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