It’s often stated that regulators struggles to keep pace with changes in technology. This is perhaps nowhere truer than in the world of communications technology. The 1984 Electronic Communications Code (ECC) gave statutory “code rights” to telecoms operators (before Ernie Wise made the UK’s inaugural mobile phone call), when industry and regulators were unaware of the subsequent revolution in mobile technology. The 2003 Communications Act later brought about the creation of Ofcom but didn’t affect the principles of the ECC.
Code rights allow operators to execute any works on land for the installation, maintenance, adjustment, repair or alteration of electronic communications apparatus; keep electronic communications apparatus installed on, under or over that land; and enter that land to inspect any apparatus kept or installed (whether on, under or over that land or elsewhere) for the purposes of the operator’s network.
Whilst the 1984 ECC made it easier for mobile operators to acquire sites, they often complained that landowners required unreasonable terms or rents in agreements, affecting operators’ ability to meet the coverage obligations attached to spectrum licences. On the other hand, some landowners were reluctant to enter into agreements with an operator due to concerns over future restrictions on the landowner’s ability to redevelop the land and/or exposure to pay compensation to the operator for any alteration costs.
Mobile and other electronic communications have become increasingly essential services since 1984. And just as in other sectors such as air, rail and road transport, the rights of citizens to enjoy improved services often conflict with the rights of landowners to maximise the opportunities of their land.
Now a new ECC, which came into force on 28th December as part of the Digital Economy Act (DEA), shifts that balance firmly in favour of communications providers. The DEA includes a number of regulations aimed at driving forward the UK’s modern digital economy.
The new ECC is not an easy read, contained in 3 schedules to the Act with 75 pages of complex legal terminology and referencing, detailing the principles of all new “code agreements”, the methodology of how a code operator can resort to the courts to have a code agreement imposed upon an unwilling landlord, and the transitional rules that apply to “subsisting” agreements. It includes obligations on Ofcom to publish a Code of Practice and other documents to aid agreement between operators and landowners, which they did in December.
So, what’s changed and what’s the likely impact?
Changes
The new ECC is designed to make it easier for operators to roll out or upgrade their services. Key changes include a right for an operator to assign their rights to another operator without the landowner’s consent, and to be able to upgrade and/or share their apparatus with another operator provided that the change will have no significant impact on the landowner. These changes do not apply to subsisting agreements prior to their transition into new code agreements.
Perhaps of the most significant is that rent will now be determined by the market value of the land for non-telecoms purposes, rather than what the operator may be willing to pay. So, for example the rent for a site in a field may be based on the small profit the farmer would otherwise get from growing crops, whilst a roof top in central London may potentially have no alternative use value. This loss in potential revenue removes what was historically the driving incentive behind a landowner’s willingness to permit an operator to install apparatus.
There are also now constraints on the ability of landowners to relocate operator equipment under what would previously have been dealt with via lift & shift provisions, along with revised termination rights, which is effectively limited to redevelopment purposes only and requires the landowner to give a minimum of 18 months’ notice of termination. The operator then has 3 months to serve a counter-notice, after which both parties are drawn through a 2-stage court process.
Impact
In the short term the impact of the new ECC is likely to be delays in reaching agreements whilst the landowner and operator communities assess the implications of the new code and adjust their expectations and terms accordingly.
In the longer term it is expected that these changes will speed up the site acquisition process for operators and drive down rents where sites have a low non-telecoms market value, allowing reinvestment in the UK’s telecoms infrastructure. Landlords can expect operators to exploit opportunities to force rent reductions as agreements come up for renewal, and will have to demonstrate alternative non-telecoms uses in a bid to retain any element of rent.
Previously common terms, which allow the landowner to increase the rental as new operators or antennas are added, will be explicitly banned in new agreements, giving the operator much more flexibility to upgrade and share sites. This will be important as operators deploy new spectrum and new services such as 5G.
What is less clear is the impact on shared systems owned and/or operated by a neutral host or by a lead operator. The new code rights cannot be used against a “wireless infrastructure provider” or by one operator against another code operator, and there is uncertainty on how this will play out in scenarios concerning neutral host/lead operator systems. These are commonplace in large corporate buildings and public venues such as stadia and are likely to increase in number as densification of sites continues. In these scenarios consensual agreement is thought to be more likely given the common ground shared between all parties in the provision of services and their ongoing improvement.
There is no doubt that for the immediate future the implications of the ECC will be a key factor in most commercial negotiations. But if the ECC does deliver on its intention to dramatically improve the UK’s communications infrastructure to the benefit of all, and the operators deliver this infrastructure without significant detriment to the landowning community, then the ECC will have proved to be a success.
We will be closely following the implementation of the new ECC and will share any further insights and updates. To make sure you don’t miss anything keep an eye on our News page or follow us on Twitter and LinkedIn.
