A New Electronic Communications Era

It is clear in the modern age that telecommunications technology and digital communication is widely considered as a fundamental need for both businesses and inpiduals alike.

The UK Government brought in the Electronic Communications Code (the “Code”) in 1984 at a time when mobile phones cost £2,000 and weighed 11 kg each.

Helpfully, modern mobile phones are much smaller, cheaper and accessible for all. We are now all connected to the network in some way or another, whether we like it or not. Electronic communications have become an inescapable part of our lives.

What is the Electronic Communications Code?

The purpose of the Code was to give Ofcom registered telecommunications operators (“Operators”) rights to install and keep telecommunications equipment on private land, by giving statutory powers to install, expand and maintain telecommunications equipment and the network across private land in the UK.

The previous Code was regarded as out of date, overly complex and badly drafted. It was famously judicially quoted as “one of the least coherent and thought through pieces of legislation on the statute book”.

There has been very little litigation and, in turn, a lack of binding decisions. It seemed to be the case that parties would rather agree terms outside the Code than push them through the statutory process. However, all is set to change.

Contained within the Digital Economy Act 2017 was a brand new Code for a new digital era. The new Code came into force on Thursday 28 December 2017.

What has stayed the same?

• Code agreements must be in writing and signed by both parties to be valid and Code agreements will continue to be bind successors in title and other parties.
• Operators retain the power to impose agreements on landowners through the courts, where commercial terms cannot be agreed.
• Operators also retain the right to leave equipment on land where the fixed term of an agreement ends.
• the new Code will remain compulsory and parties cannot contract out by agreement.

What are the key changes?

Valuation

• the new Code brings rents payable by Operators into line with those paid by other statutory undertakers by imposing a “no scheme” valuation method, similar to that used under compulsory purchase powers.
• rents are to be assessed by reference to the value of the land to the landowner and not the Operator.
• there is an assumption that more than one site is available and that the agreement itself does not relate to the provision of an electronic communications network, or have the free right to share, assign and upgrade imposed by the Code.
• it is envisaged these changes will ultimately result in a reduction in the rent paid to landowners for sites.
• it is possible there may be some litigation around how the new valuation method is applied, particularly where the proposed reduction in rent is substantial, and negotiations break down.

Landlord and Tenant Act 1954 (“the 1954 Act”)

• the new Code removes the ability for Operators to rely on the security of tenure provisions provided by both the 1954 Act and the Code.
• from 28 December 2017 agreements will either have security of tenure under the 1954 Act, or under the Code, but not both.
• this solves a problem under the previous Code whereby difficulties arise for a landlord proving an opposed business lease renewal under the redevelopment ground where a business tenant is also an Operator and therefore has benefit of the security of tenure provisions under the Code and the 1954 Act.

Sharing, assigning and upgrading

• as part of the Government’s mission to improve network coverage and broadband speeds Operators will now have the free right to share sites with other operators, upgrade apparatus and assign electronic communications agreements freely.
• to the extent that any term attempts to restrict these provisions it will be void.
• these provisions will only apply to new agreements commencing after 27 December 2017 and not subsisting agreements.

Termination provisions

• agreements under the Code will now continue notwithstanding the contractual expiry date passing.
• a minimum of 18 months’ notice must now be given by a landowner to end an agreement and notice cannot expire before the contractual expiry date of the agreement.
• termination is now a two stage process 1) the agreement must be brought to an end; and 2) the parties must agree a date for the equipment to be removed. At each stage both parties can apply to court for an order if agreement cannot be reached.
• where a site provider intends to redevelop premises the court must order that the agreement comes to an end. This is a welcome change from the previous Code, as it provides a landlord with absolute certainty that it can remove Operators from a site provided the required notice is given.
• it is hoped that the substantial notice period will give Operators enough time to make the necessary arrangements to provide suitable coverage and move the site. It is unknown to what extent a site provider may have to go through both stages in order to secure vacate possession of a site, or how long it could take if the court process has to be followed at both stages.

The impact of these changes

Until the new provisions are tested, it is difficult to ascertain what the real impact will be. I suspect that the new valuation scheme will lead to some litigation, as some landowners may want to challenge significant reduction in rent and Operators may want to test the application of the new scheme.

I also expect there to be an increase in applications to court to impose agreements as landowners will be put off by the potentially long lead in times to get sites back if they intend to redevelop.

In turn, at least landowners now have absolute certainty that the court must order an agreement ends if the landowner intends on redeveloping and perhaps the free rights to assign, upgrade and share sites may result in a reduced need for new sites.

The reality is that the UK has some of the worst network coverage and slowest broadband speeds in Europe and so the steps that the Government has taken to try to improve that situation with the changes to the Code make absolute sense.