New Draft Electronic Communications Code

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

Updated on 09/03/2015: We have previously reported on the publication and subsequent withdrawal of a new draft Electronic Communications Code. The Government has on 26 February 2015 issued a consultation on a new draft Electronic Communications Code and a draft Bill accompanies the consultation. The Bill is in very similar form to the withdrawn Code, on which we have previously reported. The consultation provides an opportunity to reflect on this new important and complex legislation and as such is to be welcomed. The deadline for responses is 30 April 2015 and those interested in or affected by electronic communications apparatus are encouraged to take advantage of this opportunity to contribute to the final form of the new Code.

A key area on which the Government wants feedback is the proposition that large chunks of the Code (covering issues such as assignment of Code rights and upgrading and sharing of apparatus; termination of agreements; and rights to require removal of apparatus) cannot be contracted out by agreement between the parties. This is intended to ensure that the Code will be the foundation that enables infrastructure rollout. The contracting out restriction appears wider than that under the existing Code.

The Government is also interested in views on the application of the revised Code to agreements made under the existing Code and on the transitional provisions that should apply in the move from the existing Code to the revised one.

Updated on 25/01/2015: Further news on the progress or not of the new draft Electronic Communications Code. We commented in our previous update below that it was a curious method to bring in such an important piece of law via a very late amendment to the Infrastructure Bill, a seemingly unconnected piece of new legislation. The Government has had second thoughts and announced on 22 January 2015 that it is withdrawing the new draft Code and that the existing Code will continue in effect. It is somewhat disappointing that the draft Code appears to have been dropped since it offered a number of improvements to the existing one. However, if it is a case of not dropping but merely deferring (and that is not entirely clear at the moment), then the pause for greater reflection and consideration of and consultation on this new, important and complex legislation is to be welcomed.

Introduction

Out of the blue, the latest change introduced on 13 January 2015 to the Infrastructure Bill currently going through Parliament is to include a new Electronics Communications Code to replace the existing one in Schedule 2 to the Telecommunications Act 1984. Please click here for the current version of the new draft Code as of today and this is covered in pages 272-328. This follows on from the Law Commission's report on the current Electronic Communications Code, in which they recommended a number of changes. Many of the Commission's recommendations have been adopted. It is noticeable that the Code is written in Plain English with sections often having headings in the form of a question.

The draft Code is a big improvement on the existing one in terms of greater clarity and certainty, although it remains complex, procedural and will continue to involve the courts. It is also unclear whether there will be enough time before the General Election for this weighty new piece of draft legislation to be enacted. It is a curious method to bring in such an important piece of law via a very late amendment to another seemingly unconnected piece of new legislation.

The following summarises some of the key points in the current draft, although this is a moveable feast since it is still going through Parliament and can change again.

Summary

Code/1954 Act/2002 Act interaction

A key problem with the current Code is the awkward interaction between the Code and Part 2 of the Landlord and Tenant Act 1954 in relation to seeking to recover possession. The current draft of the new Code avoids the problem by amending the 1954 Act to provide that tenancies, the primary purpose of which is to grant Code rights, cannot benefit from the security of tenure rights under the 1954 Act. The Code will not apply to a lease if its primary purpose is not to grant Code rights and it is a lease to which Part 2 of the Landlord and Tenant Act 1954 applies (disregarding the fact that the lease is contracted out).

Code rights (other than rights conferred by a lease) will be a new type of unregistered interest which overrides first registration or registered dispositions under the Land Registration Act 2002.

Conferring of Code rights

The Code right is only conferred by written agreement between the occupier and the operator, which must state how long the right is exercisable and the period of notice required to terminate the agreement. The agreement only binds the occupier's landlord if he agrees to be bound. However, there is a power for the court to impose an agreement and the legislation sets down a twofold test for the court making such an order that the prejudice caused is capable of being adequately compensated by money; and the public benefit in access to a choice of high quality electronic communications services, likely to result from the making of the order, outweighs the prejudice. Importantly, an order may not be made if the court thinks that the relevant person intends to redevelop all or part of the land to which the Code right would relate, or any neighbouring land, and could not reasonably do so if the order were made.

Consideration and compensation

An agreement imposed by a court must include consideration payable by the operator and the Code states how this is determined - it is an amount representing the market value of the relevant person's agreement to confer or be bound by the Code right. The market value must be assessed on the basis of the value to the operator of the agreement (note, not to the relevant person such as a landowner) and having regard to the use which the operator intends to make of the land. The court may also order compensation for loss or damage and the legislation sets out the bases for compensation (compulsory purchase principles for diminution in land value and there is compensation for injurious affection to neighbouring land).

At the core of the new Code is the change to the wayleave valuation regime, which essentially moves valuation away from pure free market principles by requiring the use of the RICS Red Book. According to the Government's Impact Assessment, this is expected to lead to a 10% reduction in wayleave payments (such as lease payments) from operators to landowners. It is expected that this will result in landowners' revenue from wayleave payments decreasing by £30million per annum.

Interim agreement

An operator may apply to the court for an order which imposes on the operator and the relevant person, on an interim basis, an agreement between them which confers a code right on the operator, or provides for a code right to bind that person. This appears novel.

Assignment of Code rights/upgrading or sharing use of apparatus

Operators can assign Code rights (although can be required to enter into an authorised guarantee agreement), upgrade or share the use of electronic communications apparatus and there are certain conditions and anti-avoidance provisions.

Continuation of Code rights and bringing agreement to an end

Code rights continue after they cease to be exercisable under an agreement. However, a site provider who is a party to a Code agreement may bring the agreement to an end by giving a notice to the operator. The notice must state the end date, which must fall no earlier than after the end of 18 months from the day on which the notice was given, although it could be later depending, for example, on the agreement. The notice must also state the ground on which the site provider proposes to bring the agreement to an end (this includes that the site provider intends to redevelop all or part of the land to which the agreement relates or any neighbouring land, and could not reasonably do so unless the agreement comes to an end).

Where such a notice is given, the Code agreement comes to an end in accordance with the notice unless within three months from the day on which the notice is given, the operator gives the site provider a counter-notice, and within three months from the day on which the counter-notice is given, the operator applies to the court for an order. However, if the court decides that the site provider has established the redevelopment or other ground, the court must order that the agreement comes to an end. Otherwise, the court can make one of a number of orders specified in the legislation. The operator may be required to make interim payments. There is also a procedure for changing an agreement, which again may involve applying to court for an order (it appears that there is no equivalent of the existing paragraph 20 "lift and shift" right).

Removal of apparatus

There are also rights to require the removal of apparatus if one or more of five conditions are satisfied, including the apparatus is no longer used for the purposes of the operator's network; or there is no person with a Code right to keep the apparatus on the land. There is a procedure to enforce removal of the apparatus, which ultimately means going to court if agreement cannot be reached.

Not retrospective

The new Code will not be retrospective.

Code rights

Code rights may be granted to wholesale providers as well as service operators.

Existing rights do not become Code Rights if an operator is later granted Code Operator status.

Overall impact

The Government's view is that operators benefit relative to landowners from the changes, both from the changes to wayleave valuations and other Code changes. Given that a primary aim of the Government proposal is to reduce the barriers to infrastructure investment, this outcome is expected. If the Code changes weakened the negotiating position of Operators on balance, thereby increasing the costs of infrastructure, the provision of telecommunications services would not increase and the Government would not achieve its aims.