What terms can be imposed on site providers under the Electronic Communications Code?

United Kingdom

Summary

The recent Upper Tribunal decision, Cornerstone Telecommunications Infrastructure Limited v London & Quadrant Housing Trust, is significant in its detailed consideration of the terms to be included in an agreement imposed by a tribunal on a site provider in favour of an operator, under Part 4 of the Electronic Communications Code. Of particular note are the Tribunal’s observations on the level of consideration payable by the operator and rights to upgrade and share the electronic communications apparatus.

Context

The case related to a new telecommunications site on the roof of a large block of flats in South London. Cornerstone Telecommunications Infrastructure Limited (CTIL) sought the right to install electronic communications apparatus on the roof through an application under Part 4 of the Electronic Communications Code contained in Schedule 3A to the Communications Act 2003 (Code) for the Tribunal to impose an agreement containing Code rights on the property owner, London & Quadrant Housing Trust, known here as the site provider. CTIL is an infrastructure provider and does not provide an electronic communications network of its own, but installs and maintains apparatus which it makes available to its two shareholders and to others for the purpose of their providing their own networks. The case was regarded by CTIL as an important test case concerning the terms to be imposed in respect of sharing and upgrading.

Under the Code the site provider is entitled to consideration under the agreement being imposed. The consideration is determined by the tribunal by reference to the amount willing parties would agree in a transaction subject to the provisions of the agreement. The determination is to be made on certain assumptions, the most significant of which is the “no-network” assumption, that the rights conferred by the transaction do not relate to the provision or use of an electronic communications network. The tribunal may also order the operator to pay compensation for any loss or damage that has been or will be sustained by the site provider.

In this case, CTIL considered that the sum properly payable as consideration should be £1,618.45 a year. The only compensation proposed was a modest contribution towards professional fees. The site provider suggested a combined figure for consideration and certain items of compensation of £16,000 a year. Much of the analysis on which that figure was based had been rejected in an earlier tribunal decision in Vodafone v Hanover Capital [2020] EW Misc 18 (CC). The Tribunal also determined certain other terms of the agreement being imposed, in particular relating to CTIL’s rights to upgrade and share the apparatus.

Tribunal’s judgment

The Tribunal’s comments on consideration and upgrade/sharing rights are of great interest in indicating the approach the tribunals may take when considering applications for the imposition of an agreement under Part 4 of the Code.

Consideration and compensation

The headline point here is that the Tribunal determined that the consideration under the agreement would be £5,000 per annum. This reflected a nominal site value, but also took account of:

  • the benefit to CTIL of the site provider’s responsibilities for building maintenance and insurance;

  • the additional burdens of managing access across the common parts and onto the roof; and

  • an allowance to reflect the anticipated costs to the site provider of the operator’s rights to share the benefits of the agreement with up to two others and to upgrade the apparatus at the site without restriction.

Compensation was also awarded for the site provider’s reasonable legal expenses in advising on and completing the agreement, of £3,068.

Of particular interest was the Tribunal’s observation, stated to be for the assistance of parties in other cases, on the market value of a site provider’s agreement to confer code rights over a roof top site on a residential building. They stated that, while each reference must be determined on the basis of the evidence presented, the evidence they considered in this case gave them no reason to expect that the market value of a site provider’s agreement on any other residential building would be much more or less than the £5,000 they determined in the case. There may be features of a particular building, which justify a modest range, but the Tribunal would not expect variations to be significant one way or the other. So £5,000 a year seems now to be a ballpark figure for the consideration for rooftop installations on residential buildings.

The availability of compensation that may be ordered by the tribunal is an important distinction between an imposed agreement and an agreement negotiated between the parties. This means that evidence of a headline figure payable under a negotiated agreement is unlikely, without access to a detailed breakdown, to provide much useful evidence for the tribunal, nor are tribunal awards likely to provide a complete guide for parties negotiating terms.

Terms of the imposed agreement generally

The Code involves no presumption in favour of the operator’s preferred or standard terms. While, practically, they are likely to provide a template for negotiation, there is no onus on the site provider to justify a departure from those standard terms.

Para 23(5) of the Code does not prohibit the imposition of rights, which may cause loss and damage to the owners and occupiers of the land. It is instead a direction to the tribunal to incorporate terms intended to minimise loss and damage as part of an agreement, which will also include terms as to consideration and compensation.

In the case, the main disputed terms were whether there should be a cap or restriction on the equipment that could be installed at the site and whether there should be restrictions on CTIL’s rights to upgrade and share such equipment. The Tribunal did not accept an equipment cap, because the site provider provided no details in the written reference. In any event, the Tribunal was not sympathetic to a cap in the circumstances of the case.

Operator’s upgrade and sharing rights

CTIL wished its upgrading and sharing rights to be unrestricted. It argued that the right to “upgrade” apparatus, which is already on the land, is one of the code rights listed in paragraph 3 of the Code. The site provider argued that the upgrade right sought by CTIL should be qualified to refer to upgrade in accordance with paragraph 17 of the Code, which requires specified conditions (in relation to no/no more than a minimal adverse impact on apparatus’s appearance and no “additional burden” (as defined in paragraph 17(4)) on the site provider) to be satisfied for the operator to be able to upgrade or share.

The Tribunal commented that paragraph 17 represents the irreducible minimum, in terms of upgrading and sharing rights, which an operator is entitled to under a Code agreement. An operator may request a specific Code right to upgrade, and if it is granted in unrestricted terms, paragraph 17 will not limit its exercise. It is open to an operator to ask the Tribunal for unqualified rights, or for a site provider to seek to impose conditions as stringent, but not more stringent, than those in paragraph 17. When either party makes such a request, the Tribunal must determine what is appropriate having regard to paragraphs 23(2) to (8) of the Code. The Tribunal’s jurisdiction allows for the imposition of terms regarding upgrading and sharing which are less restrictive than paragraph 17 allows.

The Tribunal did not regard the minimal rights conferred by paragraph 17 as appropriate for an agreement between an infrastructure provider and a site provider for a term of 10 years. The facilitation of new technology for the public benefit is one of the Code’s objectives and to impose terms which may significantly impede upgrading (because of the conditions that paragraph 17 requires to be satisfied) would diminish that benefit and, therefore, be inappropriate.

The terms which the Tribunal considered appropriate were terms which permitted upgrading without limit, but which caused the least possible loss and damage (consistent with the achievement of the agreement’s purpose) by curtailing the number of persons entitled to make use of CTIL’s infrastructure. The Tribunal, therefore, permitted sharing by not more than two operators, likely to be CTIL’s shareholders but whose identity may change over the term of the agreement. Additional sharing would be permitted within the limits imposed by paragraph 17.

Disclosure

While the Upper Tribunal does not order disclosure as a matter of course and leans against indiscriminate disclosure, the Tribunal cautioned parties generally not to lose sight of the Tribunal’s power to direct disclosure where it is necessary to do so.

Click here for a link to the judgment in Cornerstone Telecommunications Infrastructure Limited v London & Quadrant Housing Trust, [2020] UKUT 282 (LC) (14 October 2020).