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Is it too early to celebrate the code's 3rd birthday?

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Is it too early to celebrate the code's 3rd birthday?

Is it too early to celebrate the code's 3rd birthday?

Happy birthday... or is it?

The Electronic Communications Code (or simply the “Code”), as we all know, came into force on 28 December 2017 so its third birthday is now on the horizon.  I think it’s fair to say though, that there is little to celebrate in the world of telecoms and this birthday is unfortunately, not an excuse for a party! 

Without wishing in any way to water down the lifeline that connectivity has provided to so many this year, enabling both essential and non-essential services and businesses to operate, those who work in the sector will know that this year has been another tough year.  It’s been frustrating, tumultuous at times and remains uncertain as we head into 2021. The market remains stagnant, with landowners and network operators still largely polarised and, quite ironically in a sector that delivers communication services, unable to yet collaboratively agree terms for consensual code agreements.

Current effect of reforms

The reforms made to the Code were intended to make it quicker, easier and cheaper for network operators to deploy digital communications which are now very much a basic need that should be accessible to all.  Currently, that intention is clearly not working.  The market is frustrated and, looking at the bigger picture, the situation is holding the UK back from fulfilling the Government’s digital growth ambitions with regard to 5G and the need to put an end to network poverty for those who work or live in rural areas with poor or no mobile coverage. 

Story so far

So what has happened in the last 3 years?  Has anything moved on?

Well… the answer to that is yes insofar as the Upper Tribunal (Lands Chamber) has heard a number of references in an effort to help landowners and network operators get to grips with the new legislation and has provided clarification in respect of those areas that are in dispute.  At times, it has to be said, this has however resulted in unexpected decisions but, where are we at and what do we know? 

Where are we at and what do we know?

Well… without wishing to report on each and every case, the main points of interest for me, to date, are:     

  1. Preliminary Surveys or ‘MSVs’ are code rights

The right to undertake preliminary surveys or multi skilled visits has been confirmed as a code right.  This means that network operators can access potential sites by agreement with the landowner or, in the absence of agreement pursuant to an order imposed by the Tribunal, in order to ascertain its suitability as a host of electronic communications apparatus.

  1. The importance of identifying who is in occupation

The Code does not provide for the conferral of code rights by a landowner or landlord who is not in occupation, to a network operator who is already in occupation.  In the case of Compton Beauchamp, the network operator (A) sought code rights over farmland that was let to another network operator (B) pursuant to a 2004 lease.  The lease had expired in 2014 but network operator (B) had remained in occupation and therefore, as occupier of the land, it was network operator (B) and not the landowner who was capable of conferring the code rights sought by network operator (A).

  1. Satisfaction of a two-stage test to successfully object to the grant of code rights

An opposition to code rights on the grounds of paragraph 21(5) (redevelopment) requires landowners to demonstrate an intention to carry out development works (the subjective test) and a reasonable prospect of being able to do so (the objective test).  In the case of Meyrick, the landowner was said to have ample financial resources to carry out the development works, together with planning permission to do so (thereby satisfying the objective test) but, failed to satisfy the subjective test.  The landowner’s plans to carry out development works were considered to be a mere ploy to prevent the network operators from acquiring code rights which were likely to lower the rent receivable and limit the landowner’s control over the land.  Indeed, the intention established in the case of Meyrick, to carry out developments works to frustrate code rights, was quite rightly frowned upon.

  1. Renewing agreements
  • 4.1 Agreements which expired prior to enforcement of the Code but which are not protected by the Landlord and Tenant Act 1954

Network operators with agreements that fall into this category of site currently have no rights to renew them nor seek the imposition of a new agreement to remain on site.  This is essentially a category of agreements that fall into a ‘black hole’.    

The Queens Oak Farm case determined that a network operator in occupation pursuant to an unwritten tenancy at will, arising by implication whilst renewal terms were being negotiated, has no entitlement to apply for code rights under the transitional provisions in Part 5 of the Code in the absence of a ‘subsisting agreement’ in writing and, following the judgement in the case of Compton Beauchamp, we know that currently a network operator already in occupation has no entitlement to apply for code rights under Part 4 of the Code.  The Queens Oak Farm decision is, we know, being appealed and in light of the fact it completely frustrates the objective of the Code, it is considered likely that it’ll be overturned.

  • 4.2 Agreements which are protected by the Landlord and Tenant Act 1954

Network operators with agreements that fall into this category of site are required to renew them under Part 2 of the Landlord and Tenant Act 1954 as the transitional provisions of the Code exclude the renewal process set out in the Code in circumstances where the existing lease is a protected tenancy. 

One question for the court to consider in the Hanover case was determination of the rent and it was held that new rents, for agreements falling into this category of site, are determinable by the application of the usual assumptions and disregards in s34 of the Landlord and Tenant Act 1954.  The court also determined the term of the agreement and contractual break rights, ordering a 10 year term with a 6 month rolling break exercisable after 5 years.  It was noted that a minimum term certain of 5 years was common practice in the industry, but it also acknowledged the desire of the network operators to take advantage of the code rights which Government intended it to have upon termination of its 1954 Act tenancies and completion of a new agreement, negotiated exclusively within the parameters of the Code.

  • 4.3 Agreements which are not protected by the Landlord and Tenant Act 1954

Network operators with agreements that fall into this category of site will be required to justify their need for a new agreement if they serve notice pursuant to paragraph 33 of the Code, seeking modification of an existing code agreement (and vice versa if such notice is served by the landowner).

Whilst this was determined by the Scottish case of Duncan, it’s thought likely to be a decision followed by the Tribunal for sites in England and Wales.

  1. Upgrading and Sharing

Paragraph 17 provides that network operators are entitled to upgrade and share their apparatus if two conditions are satisfied namely, (1) if there’s no adverse impact, or no more than a minimal adverse impact, on the appearance of the electronic communications apparatus and (2) that no additional burden is imposed on the other party to the agreement. 

In the case of Quadrant Housing it was made clear that the conditions set out in paragraph 17 are an irreducible minimum.  They do not prevent network operators from requesting a specific right to upgrade or asking for unqualified rights which, if granted in unrestricted terms, will not then be limited by paragraph 17.  The conditions set out in paragraph 17 are intended to reflect the lowest common denominator for sharing and upgrading so should be interpreted as a floor rather than a ceiling. Further and ‘hot off the press’, in the most recent case of Dale Park it was determined that in the context of the rural setting, upgrading and sharing rights should not be limited which will be welcome news for network operators.

Summary

So, in summary, whilst we have some clarity on certain points that are in contention between the network operators and the landowners, we’re some way off from seeing the world of telecoms thaw out. 

"Applications to the Tribunal continue to be made and some decisions coming out of the Tribunal are also, of course, being appealed which may or may not change the current position, as we head into the New Year."

This somewhat litigious playing field that we find ourselves in, is not only costly but has the effect of significantly delaying vital deployment and upgrades needed to the UK’s digital growth. 

There’s also of course the issue of site valuations being battled out between the opposing parties and although the Tribunal has provided the market with some guidance on rooftop valuations and more recently (in the case of Dale Park) greenfield valuations, there remains some reluctance for current principles to be applied given the continued level of uncertainty, with a lot of the populace taking the ‘wait and see’ approach just in case other decision or an appeal comes along that betters the position. 

Future

It certainly feels as though there is still a long way to go before we see some real buoyancy in the world of telecoms and start to see the same level of deals being done, year on year, that we came to expect prior to the end of 2017.  There’s potentially further roadblocks in its path, particularly if further reforms are made to the Code as it’s likely that all stakeholders will want to test any legislative changes before resuming ‘business as usual’.  That said, with so much growth and benefit possible from this market and so much technological innovation at our fingers tips as a consequence of 5G which will impact so many aspects of our day to day lives once this current polarisation is behind us, the world of telecoms really does look exciting and will, in time, give us all something to celebrate.

Get in touch

For more information on this update, please contact Legal Director, Victoria Dobson.