The Digital Economy Bill

10 May 2017

The Digital Economy Bill rings in new changes affecting Landowners with telecoms masts on their land and buildings.

The Digital Economy Bill

The skyline of Belfast city centre is peppered with telecoms installations, most masquerading as flagpoles.  Landlords usually want to be able to strike a balance between achieving the highest possible rent for the equipment or telecoms installation from the telecoms operator while ensuring, as much as possible, that they are not fettered unduly in terms of their own objectives for their asset or on their ability to redevelop. 

Telecoms operators largely have security of tenure having the benefit of not only business tenancies legislation but also their own industry specific legislation as provided by the Electronic Communications Code and Code Powers.  The Code, which is contained in Schedule 2 to the Telecommunications Act 1984 as amended by the Communications Act 2003 contains a number of powers.

The Telecommunications Act came into law in 1984 at a time when the then Government was seeking to develop the telecoms industry and stimulate investment in building new networks.  It was therefore agreed that legislation would be required to make it easier for these networks to be built.  The overriding principle behind what became known as "Code Powers" was the right of the public to have access to an electronic communications network/electronic communications services (the reference to "electronic" communications came in with the 2003 Act). 

In 2013, the Law Commission completed a detailed consultation and set out recommendations to Government for a revised Code. The current Code is considered to be out of date with current technology and the evolution of the telecommunications market, which has evolved considerably since the initial legislation was enacted.

Following consultation, the government published its proposals for a revised Code in May 2016.  In the Queen's Speech on 18 May 2016, the Digital Economy Bill was presented as legislation. 

The Digital Economy Bill 2016-17 has been published and had its first reading in the House of Commons on 5 July 2016. The Bill contains a new draft electronics communications code to replace the existing code.

Digital Economy Bill

The aim of the Digital Economy Bill is to make the UK a world leader in digital provision.

How will the new code affect landlords?

Under the proposed new code, operators will have almost unrestricted rights, and once they are on a site they will be extremely difficult to remove.

Some of the key points to be aware of under the new code are as follows.

1. Apparatus limits

Currently, a Landlord can restrict the apparatus limits on a particular site.  In future, there will be no scope for contractual restrictions on   the type and quantity of equipment or access routes and that is the big change.

2. Assignation of Code Rights, upgrading and site sharing

Under the new Code, any clause which seeks to limit or prevent assignment whether by way of site sharing or upgrading will be  unenforceable.  The new Code will in effect give mast operators carte blanche in assigning their leases to another network operator or third   party. 

More importantly, an operator will have a statutory right to share the apparatus with another network operator and as such, site share licence fees will be swept away. This significantly changes the current position as pay-aways for site sharing to landlords have been common practice to date with a maximum of up to 30% of the rental income receivable by the operator from the sharer being made over to the Landlord.   This may appear to be unfair to the Landlord but simply reflects the continued consolidation of operators within the sector.

The Code, as drafted, is not retrospective and therefore existing site sharing arrangements will remain in place until the existing lease terminates and there are transitional provisions but that is outside the scope of this article but further advices can be given to those interested parties who have telecoms arrangements in place on their land currently.

3. Effect on rental income

Most commentators believe that the new legislation will potentially affect rental levels which appear to be reducing in any event and   certainly over the last 10 years as operators have increasingly sought to reduce costs resulting from technology improvements. Operators  are routinely looking for consolidation of use of equipment and site – sharing for no fees.

4. New Method of valuing compensation payable to landlords

Under the new Code, where an agreement is imposed on a particular Landowner, the Landowner will still be entitled to legislation under the new regime but the valuation of that compensation will be limited to the diminution in the value of the land but the same test will be applied as for the compulsory purchase of any interest in land.    Further research has indicated that it will only be akin to the level of rent payable for a wayleave for electricity cables or gas pipelines.

One thing is certain it will remain important for landowners to seek professional advice to ensure they secure the terms being offered are at least fair within the seemingly limited negotiating structure.

Conclusion

Many landowners had hoped the new Code would readdress the imbalance between landowners and operators.  However, the UK government is keen to ensure that landowners should not have a share of the economic value created by higher public demand for services provided by the operator. The new valuation system is likely to see sums paid by operators to landowners dramatically reduced.

Finally, it will not be possible to contract out of the New Code at all and operators cannot be charged penalties for exercising their Code rights.

David Wilson is commercial partner at Worthingtons Solicitors specialising in property and telecoms matters.

 

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