The Electronic Communications Code - Are changes afoot?

The current  Electronic Communications Code came into force on 28 December 2017 (2017 Code).  The 2017 Code enacted significant Government reforms designed to support the roll-out of digital communications infrastructure across the UK.  As a result it has become easier for communications providers to deploy and maintain their infrastructure. Some notable changes in the 2017 Code included the move to a "no scheme" basis for valuation and the introduction of new rights to upgrade and share equipment.  There were also administrative changes to court processes to speed up dispute resolution.

The shift from a market value approach to a ‘no scheme valuation’ approach inevitably reduced the commercial incentive for landowners to enter into Code agreements and perhaps not surprising that a radically different legislative landscape would result in disputes between operators and landowners.  Indeed we have already seen more court decisions under the 2017 Code than were generated  during the entire 30 years the previous Code was in force. 

It is, course, not easy to strike  the right balance between site providers, communications providers and the public interest in ensuring communications services meet the needs of UK in the digital era and although we now have some judicial clarity as regard the interpretation of the 2017 Code the Government has decided that the time is right to consider whether legislative changes may be necessary to ensure that the 2017 Code is fit for purpose.  The Department for Digital, Culture Media & Sport published their consultation on 27th January 2021 seeking views on possible legislative changes to the 2017 Code.

Consultation proposals

Based on its discussions with stakeholders the Government has set out three main problem areas. These are:

• issues relating to obtaining and using Code agreements
• rights to upgrade and share; and
• difficulties specifically relating to the renewal of expired agreements.

This consultation explores each of these areas, but it does not set out detailed proposals for legislative reform, and instead sets out a range of potential means to address them. It outlines what Government believes are the key issues impacting the effectiveness of the Code, and the potential changes needed to make the Code work effectively for both landowners and operators.  Let's take a more detailed look at each of these three areas.

Obtaining Code Agreements

The consultation reports that it has received feedback from code operators, occupiers and site providers that negotiations of a code agreement can often be protracted and the absence of an agreement can result in a costly dispute.

The consultation does acknowledge that the 2017 Code's changes to the valuation provisions has made agreements significantly less attractive for landowners.  However the consultation makes it absolutely clear that it will not be revisiting the valuation framework in the Code.  Instead the consultation identifies three possible options for reform in this area:

• A statutory process for monitoring raising complaints about non-compliance with the Ofcom Code of Practice; 
• The introduction of an Alternative Dispute Resolution Scheme;  
• Fast track court procedures.

Another thorny issue which the courts have had to grapple with is the necessity for Code rights to be granted by the actual occupier of the site.  As a consequence of this requirement the Court of Appeal – perhaps controversially -  decided in Cornerstone v Compton Beauchamp [2019] that where an operator is already in occupation of a site then they cannot use the 2017 Code to obtain Code rights where the site provider is unwilling to enter into an agreement. This decision has resulted in a number of subsequent decisions which have caused further problems for operators in situ and even prompted the following judicial comment in a later case:

"I suggest, with great respect to the Court of Appeal [in Compton Beauchamp], that a wrong turn may have been taken, and that the narrow interpretation of the requirement of occupation in the Code leads to results that are unacceptable in terms of the policy of the Code." Judge Elizabeth Cooke, Arqiva Services Ltd v AP Wireless II (UK) Ltd [2020].

It is therefore no surprise that the consultation suggests there should be a change to the definition of an occupier or a change to who is able to confer Code rights where an operator is seeking 2017 Code rights but is already in occupation of the site.

Of course negotiation and engagement is only possible if the party whose agreement is required can be identified. Operators have reported there are  occasions where they are unable to identify whose agreement must be obtained. Reasons for this may be because  there are several layers of ownership, a mixed ownership structure  or the land is unregistered and the Government has already introduced the Telecommunications Infrastructure (Leasehold Property) Bill to address this.  The Bill provides a mechanism for an operator to apply to court for interim Code rights where the property in question is a multi-dwelling leasehold building and where the grantor fails to respond to the operator's requests for access. However the Government is concerned that this does not go far enough and is  therefore considering introducing an alternative procedure for Code rights to be obtained if an operator can demonstrate that reasonable efforts have been made to secure an agreement, but the occupier or landowner has failed to respond to repeated requests.

Of course once the parties do agree terms and the agreement is concluded it should not be possible for either party to ask the court to re-open that agreement simply to secure more favourable terms.  However the consultation is proposing that in certain circumstances it may be appropriate that a court should have jurisdiction to  decide whether to impose modified rights or terms, for example, if an operator needs an additional right to optimise the use of an existing site, or if an unexpected change in circumstances  means a site provider is genuinely unable to comply with the original terms and the parties cannot agree on changes to the existing agreement.    As a safeguard the consultation suggests that the court could be required to take into account a public benefit test similar to that used for the imposition of Code rights, in order to maintain an appropriate balance between the rights of the parties.

Upgrading and sharing rights

The upgrading and sharing rights in the Code have been a source of a number of disputes that have come before the courts.

Paragraph 17 of the Code provides that when an agreement is in place - whether this has been reached through negotiation or imposed by a court - operators have automatic rights  to upgrade their apparatus and share the use of it with other operators, providing two conditions are satisfied. These conditions are:

• That the upgrading or sharing has no adverse impact or no more than a minimal adverse impact on the appearance of the apparatus; and 
• That the upgrading or sharing imposes no additional burden on the site provider. 

The legislation does not define “adverse impact”, but specifies that an “additional burden” will include anything that has an adverse impact on the site provider's enjoyment of the land and would cause the site provider additional loss, damage or expense.  Provided these conditions are met, the operator can upgrade or share use of their apparatus without needing to obtain the site provider’s consent, or having to make additional  payments. 

There have been a number of disputes relating to the extent of these upgrading and sharing rights which have come before the courts.  The most recent being On Tower UK Ltd v J H & F W Green Ltd [2020].  The judicial view in these cases is that  Paragraph 17 of the 2017 Code sets out the minimum rights operators have in respect of the ability to upgrade its equipment on a site, and to share that site with other operators.  Therefore the Upper Tribunal can proceed on the basis that, when imposing a new agreement, they do have jurisdiction to impose upgrading and sharing rights that are not limited by paragraph 17 of the 2017 Code. 

The consultation confirms that the underlying policy rationale behind automatic rights to upgrade and share is unchanged but the Government's objective now is to  provide sufficient clarity and certainty to allow appropriate automatic upgrading and sharing to happen in practice.  The consultation does acknowledge that any changes to the conditions attached to the automatic rights to upgrade and share will need to take account of the impact that such rights have on a landowner's control of their land.

The consultation also considers legislative changes to make it clear that a court does indeed have jurisdiction to impose rights to upgrade and share beyond those contained in paragraph 17.  Specifically the consultation sets out suggestions for specific factors that a court would be required to take into account when  considering whether to impose additional upgrading and sharing rights. For example: the specific public benefits of sharing in relation to the reduction in installation and building work this involves; the benefits of improved coverage and connectivity that upgrading can provide; and the possibility that additional consideration and compensation should be proportionate to any additional impact or burden on the site provider.

Perhaps one of the most controversial suggestions in the consultation is that operators should be given automatic rights to upgrade and share apparatus installed under an agreement reached before the 2017 Code came into effect.  Applying these rights retrospectively could have major implications for both operators and site providers.  However the consultation does make the following key point:

"………Our aim is solely to understand the overall impacts and benefits of retrospectivity in relation to upgrading and sharing rights. We wish to assure all stakeholders that we are only considering retrospective measures in the strictly limited scenarios………and that, even in relation to these, we will only proceed further with this if we believe it is in the public interest to do so. Any proposals involving retrospective measures would be subject to scrutiny by Parliament."

Expired agreements

The Court of Appeal decision in Compton Beauchamp has had consequences for operators seeking new Code rights whilst they remain in occupation following the expiry of an agreement entered into before the 2017 Code came into force. 

Under the transitional provisions in the 2017 Code any subsisting agreement entered into before the 2017 Code came into force remains in place. This means that the Tribunal has had to consider the operation of the transitional provisions in a number of cases and decide what , if any, Code rights operators have when they remain in occupation following the expiry of a subsisting agreement.

The Upper Tribunal is, of course, bound by the Court of Appeal ruling in Beauchamp and has therefore been followed in subsequent decisions.  As a consequence, some sitting operators may find themselves in a "black hole" without the ability to claim 2017 Code rights. In Cornerstone Telecommunications Infrastructure Limited v Ashloch [2019] the Upper Tribunal found that where an operator is holding over under a subsisting agreement which is protected by the Landlord and Tenant Act 1954 then the operator must renew that agreement under the LTA 1954 and because the operator is in situ it cannot obtain a new agreement under paragraph 20 of the 2017 Code.  

Subsequently, in the case of Arqiva Services Ltd v AP Wireless II (UK) Ltd [2020]  the Upper Tribunal had no choice but to find that the operator did not have a subsisting agreement as their occupation was as a tenant at will only.  Therefore the operator had no Code rights and as an operator in situ (following Beauchamp) it was also unable to  impose an agreement on a landowner pursuant to paragraph 20 of the 2017 Code.  This is a significant decision for operators who remain  in situ under agreements that expired prior to the 2017 Code coming into force and  we have definitely not heard the last word on the issue.

At the time of writing we know that the Court of Appeal has dismissed the appeal in Ashloch.  However Compton Beauchamp appears to be heading to the Supreme Court.
To address the difficulties in relation to the renewal of expired agreements the consultation makes a number of proposals:

• because greater certainty is needed for operators and site providers about what will happen when the agreement ends, a potential solution would be if Part 5 were to apply in all cases so that, unless new terms have been agreed, the operator’s rights should continue to be exercisable and the site provider should remain entitled to payment in accordance with the expired agreement, but with either party being able to seek a modified agreement or the site provider being able to seek termination of the agreement under Part 5;
• to achieve greater consistency in the way disagreements over the renewal of Code rights are dealt with the Government is considering introducing a requirement for all Code disputes to be heard and decided on within 6 months of the date the application to a court is made;
• consideration is being given to a procedure permitting either party to request an interim order in relation to a request for a renewal agreement and where a renewal agreement is subsequently imposed, permitting the court to backdate the financial terms of that agreement to the date that the request for an interim order was made.

How to respond to the consultation

The consultation can be accessed here. And the closing date for responding is 24 March 2021.

The consultation is lengthy and wide-ranging and there is no doubt that the Government will be hoping the responses will help it determine the scope and scale of any legislative changes to the 2017 Code.