In December 2017, Ofcom published the final Code of Practice and further documents that support the Government’s reforms to the Electronic Communications Code. This article provides a high level summary of these supporting documents and their likely implications for network operators.
The new framework
Under the electronic communications code, Ofcom can grant certain companies rights to build communications infrastructure on public and private land. The Digital Economy Act (DEA), which came into force in April 2017, introduced a new Code (the New Code) which contains wide-ranging, operator-friendly reforms to the old regime, such as:
- Landowners are now prohibited from negotiating rents any higher than the underlying value of the land; the value of the land will be based on its value to the landowner (not the operator). In addition to reducing rents payable by operators, this change is likely to reduce any compensation awarded to landowners in disputes.
- Operators may now automatically upgrade and share apparatus without needing to: (1) seek landlord consent; or (2) make payments to the landowners, provided that the upgrading or sharing has “no more than a minimal adverse impact” on the apparatus’ appearance or imposes no “additional burden” on the landowner.
- The landowner notice period for removing apparatus has been extended to 18 months - granting operators further protection to retain their apparatus on site.
- Landowners are explicitly prohibited from attempting to negotiate more favourable terms than those set out in the New Code.
Under the old regime, the imbalance in power between operators and landowners, coupled with the lack of effective restrictions on the cost of access to private land, presented a significant barrier to investment in fixed and mobile communications networks.
By making mast-sharing easier and infrastructure deployment cheaper, these reforms will likely facilitate: (1) an increase in operators’ coverage (even in hard to reach areas) by enabling the expansion of operators’ existing infrastructure networks; and (2) investment in new technologies such as 5G. Furthermore, the promotion of rural connectivity will likely render the UK telecommunications industry a more attractive market for funds looking to invest in communication technology infrastructure.
Under the DEA, Ofcom is required to issue the following documents in order to assist negotiations between operators and landowners:
- A Code of Practice
- Standard terms (Standard Terms) which may be used by operators to assist them with negotiating agreements with landowners, and
- Template notices which may or must be (depending on the circumstances) used by operators and landowners.
In March 2017, Ofcom issued a consultation paper containing drafts of each of the three supporting documents and final versions were issued in December 2017.
The final documents issued in December remained broadly the same as the drafts and as such, the generally positive responses to the consultation from various stakeholders (including operators, law firms and landowner lobby groups) should still apply to the finalised framework. At a high level:
- stakeholders viewed the Code of Practice as a useful tool for setting out good practice markers for the behaviour of landowners and operators throughout the contracting process
- the replication of large parts of the Central London Forward standardised wayleave within the Standard Terms was welcomed by some stakeholders as a sensible approach, and
- there was general consensus that Ofcom prepared a comprehensive set of draft notices.
However, there was also a significant degree of industry opposition to the draft Code of Practice and Standard Terms in the consultation responses. Given that Ofcom chose to not incorporate many of the respondents’ suggested amendments, a number of the respondents’ concerns will still remain now the finalised documents have been published. Examples of the concerns with the relevant documents have been set out below:
1. Code of Practice
- The Code of Practice states that whilst operators and landowners may choose to negotiate directly with each other, they may alternatively seek professional advice. Several respondents felt that this fails to encourage landowners and operators to negotiate directly with each other and could prevent the development of good relationships between the parties.
- By failing to state that landowners should incur only reasonable costs when engaging advisors, there is the risk that landowners may use professional fees as a tactic to leverage better terms from operators.
- The Code of Practice does not place any obligation on landowners to permit reasonable requests for access for site surveys, nor does it emphasise that where the operator’s requests for access are resisted, that landowner will be penalised in any subsequent court proceedings.
- Whilst the Code of Practice recognises that different apparatus would require “different consultation processes”, it does not provide guidance on how such processes would differ.
- The Code of Practice provides that operators must notify landowners of any upgrades to apparatus in advance of their installation. Although this notification requirement is included for the landowner’s security purposes, there is concern that it could lead to protracted discussions relating to whether the installation creates “minimal adverse impact” or “additional burden” on the landowner. Some stakeholders have commented that this requirement could cause added delay, cost and burden on the operator’s upgrade programs.
2. Standard Terms
- Some stakeholders believe that Ofcom’s obligation to draft Standard Terms would have been better met by the drafting of standard clauses for incorporating into an agreement, rather than the drafting of an entire agreement. Respondents were concerned that by producing a near-full legal agreement, Ofcom have created the following risks:
- Rather than negotiating commercial agreements, landowners may be reluctant to agree variations to the standard agreement on the basis that, by virtue of Ofcom having drafted it, the agreement must be fit for purpose. As a result, debates over suitability may entrench discussions, and cause undue delay to the contracting process.
- Parties may end up with inappropriate agreements. The considerations for mobile operators and fixed line operators are often very different, and as such, a “one-size-fits-all” approach to all agreements is impracticable, particularly for mobile installations. For example, whilst the definition of “Term” (which states that the agreement runs indefinitely until it is terminated) may be appropriate for fixed line infrastructure, it would be contrary to practice for mobile telecoms installations which are usually granted for a fixed term, with subsequent successive renewals. With the launch of 5G technology now imminent, this lack of flexibility may impede (rather than facilitate) the introduction of future networks.
- The Standard Terms do not include a minimum period of occupation. This deprives operators of certainty over occupation which is required to enable such operators to amortise the cost of investment.
- There is no definition of “minimal adverse impact” and “additional burden” in the New Code or the Standard Terms. As a result, it is unclear when this restriction on an operators’ new right to upgrade and share equipment will apply in practice.
- The Standard Terms do not highlight to landowners that consideration will not be payable in all circumstances. As such, they do not account for situations where a landowner may well gain a significant benefit from the new communications apparatus and would be prepared to agree a wayleave with no fees attached.
- By including heads of loss such as indirect losses and consequential/economic loss, the indemnity in the Standard Terms is quite broadly drafted, which could leave the operator exposed to significant liability. Additionally, there is no obligation on the landowner to mitigate their loss.
- Whilst the Standard Terms give the landowner the right to terminate the wayleave if they intend to redevelop their land, there is no corresponding obligation on the landowner to try to relocate the apparatus. Furthermore, the Standard Terms give a landowner the right to take action which would affect the continuous operation of the apparatus, provided they notify the operator of their intention to do so. This would be highly disruptive to the operator and as such, this right should be caveated to specify when the landowner may not take such action.
- The Standard Terms do not include a provision for the reimbursement for rental payments which were paid in advance for any post-termination period.
In conclusion, whilst the Code of Practice is likely to provide some guidance on navigating operator-landowner negotiations, some stakeholders (particularly operators) have commented that it may not go far enough to encourage robust, commercial negotiations between the parties. Additionally, there are significant concerns around whether the Standard Terms accommodate the diverse needs of different communications infrastructure. Indeed, many industry stakeholders have commented that the Standard Terms add an additional layer of complexity, ultimately adding cost, burden and delay to the negotiating process.
As the final documents were only published in December 2017, it remains to be seen whether the concerns raised by respondents to Ofcom’s consultation to the reforms as a whole will materialise in practice.
This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.