The Electronic Communications Code (the Code) has created much debate and opinion. Here, Cornerstone, the UK’s leading mobile infrastructure services company, gives its view on why co-operation between landowners and telecoms operators is key to a productive solution for everyone. 

Integrating new technology to cars, the transport industry, home and commercial security systems, the healthcare sector and other areas of our daily lives will see mobile usage continue to increase across the UK. 

The volume of mobile data is increasing by 60% a year. It will continue to do so as the next-generation mobile network, 5G, will support greater connectivity and far-higher volumes of traffic. This 5G technology presents a huge opportunity for the UK. 

A June 2018 report for the UK government by Deloitte concluded that ‘the capabilities of 5G have the potential to transform key sectors of the UK economy.’ 

However, to meet the increasing growth in demand and provide 5G capability across the UK, all operators must increase the number of masts and significantly upgrade the existing ones. It’s therefore important that we focus on how to invest in cost-effective infrastructure while considering the interests of every party. 

Deployment and maintenance of mobile infrastructure is costly. Operators spend in excess of £2bn a year to provide customers with a reliable network and services. This is not surprising, given that there are tens of thousands of sites across the UK and thousands of miles of fibre required to connect them. But the ongoing cost is unsustainable for an industry that has to meet the changing way we use our mobile devices and the challenging regulatory conditions in which operators have to work to provide coverage, particularly in hard-to-reach rural areas. 

The government has recognised this and, as part of its intention to make the UK a world leader in the digital economy, introduced the Digital Economy Act 2017 to make deployment of masts cheaper, easier and faster.

The Code became effective in December of last year. The government’s ambition was that the new legislation would support improved mobile coverage across the UK and encourage greater investment in this critical national infrastructure.  

Jeremy Wright, secretary of state for Digital, Culture, Media and Sport, wrote in his ministerial foreword to the Future Telecoms Infrastructure Review in 2018 that ‘We want to be a world leader in the next generation of mobile technology, 5G, with deployment to the majority of the country by 2027 so that UK consumers and businesses can take early advantage of the benefits’ (bit.ly/FTIR18).

The Code is wide ranging and covers many issues that are critical to the ability of an operator to build, manage and maintain a site. For example, easier 24/7 access is vital to ensure that when there is a technical failure or damage to the mast or equipment, repairs can be made quickly and easily. Where we need to upgrade the mast, it can also be done speedily and at a sensible cost. 

Since the Code was introduced, the change in the way we value a site has caused considerable debate. The new legislation saw the telecommunications industry moving to a ‘no-scheme’ valuation, whereby payments to a landowner for masts on their land are no longer based on the value to the operator, but on the true value of the land, with fair compensation being paid to the landowner for any loss suffered as a result of the installation. 

While there are other challenges, the issue of valuation has been the primary cause of division, stalling the roll-out of new infrastructure. Some property professionals have been reluctant to adopt the revised method of valuation, not least because they see the income-reducing with the new approach, but also because there are many different interpretations of the Code (see Property Journal March/April, pp.18–19).

Fortunately, recent decisions from the Lands Tribunal are now providing much-needed clarity and guidance on the key issues arising from the new legislation including valuations.

Hopefully, as a result, we will start to see the stagnation in the deployment of new masts which arose immediately following the introduction of the Code become a thing of the past, as we all start to evolve our thinking based on the clarity being provided. [EE Limited and Hutchison 3G UK Limited v The Mayor and Burgesses of the London Borough of Islington [2019] UKUT 53(LC) / Cornerstone Telecommunications Infrastructure Limited v Richard Gregory Keast [2019] UKUT 0116(LC) (Electronic Communications Code)]. But let’s recap what the legislation aimed to do because the government was clear about its intentions. In April 2017, the Department for Digital, Culture, Media & Sport stated: ‘Landowners will receive a fair market value that excludes any additional value generated by the provision of electronic communications. The Government is confident this “no-scheme” approach will reduce the cost of infrastructure roll-out, leading to greater investment, and improved coverage and connectivity.’

Without a doubt, the Code states that all parties must seek to reach a deal by consensual means, and operators have made it very clear that they want to do so. 

But there must be a baseline for any negotiations, as without a place to start parties become increasingly polarised. The operators have been criticised for setting the starting value of the site too low, but it is important to remember that this is based on an interpretation of the Code and is a foundation on which to open negotiations according to the Code’s valuation principles. 

Where these principles have been accepted, great strides have been made and many deals agreed. We are now seeing many local authorities accepting that connectivity is more valuable to them and their residents than the annual rent historically paid. They are being paid a fair amount and are compensated for any loss. In turn, the operators get a site that can provide strong coverage and connectivity for the area. It is a win-win for all parties, achieved by engagement and an open mindset that looks to the future, not the past, seeing the benefits of what a truly digital economy offers. 

However, many landowners and agents are not willing to engage, with some actively seeking to derail the application of the Code. Unfortunately, operators have been given no choice but to refer these matters to the Lands Tribunal for resolution. This is costly and time-consuming for all parties, and in the long run, will only delay the upgrade to a world-class network.

It is also important that all parties acknowledge and adhere to the Ofcom Code of Practice published in December 2017.

The Code of Practice is not designed as a guide to the Code but more to complement the Code by suggesting best practice to facilitate positive and productive engagement between all parties.

Paragraph 1.5 of the Code of Practice states that “All parties to whom this Code of Practice applies should treat each other professionally and with respect, always remembering that the goal is to improve and maintain essential communications services for all.” Landowners and their agents would be well advised to bear this in mind when deciding whether to engage in negotiations.

We all have our own interest to consider. For a landowner, this might be the investment value or return from a property; for operators, concern to the share price and the consumer experience; while an infrastructure provider might focus on the investment value of their portfolio and the connectivity it is enabling. A connected society is what we all want, where mobile communications stand alongside traditional utilities. In a recent report commissioned by Cluttons in association with YouGov, 57% of tenants said they would pay higher rent for better digital connectivity, 73% believed poor connectivity could influence renewal, and 81% of employees are more satisfied when their office is well connected. 

If the pushback against the deployment of new mobile infrastructure continues, the government will have to review the legislation and introduce more stringent controls over the terms on which mobile infrastructure can be deployed on private land. I don’t think this will be in the interests of any party and will only serve to frustrate and delay the roll-out of 5G, which cannot be allowed to happen. 

Connectivity is key and it’s irrelevant whether we’re in the property sector or telecommunications industry, we are all equally invested in providing a first-class mobile experience across the UK that benefits consumers and businesses. Let’s work together to a common interest, overcome the challenges and embrace the new legislation that has been put in place to realise those ambitions.

Belinda Fawcett
General Counsel and Director of Property and Estates at Cornerstone

Simon Oborn, Head of Property & Estates at Cornerstone wrote this recent article for Farmers Weekly, where he discusses the enhanced benefits improved mobile coverage will have on rural communities and businesses.

Poor connectivity in rural areas can have a significant adverse effect on the residents, local farms and businesses who require better mobile coverage to keep pace with today’s evolving digital society.

Changes to the Electronic Communications Code

In response to rural communities’ concerns, the Government made changes to the Electronic Communications Code (ECC) legislation in December 2017, making it easier for telecom operators to install and upgrade mobile infrastructure on sites. By bringing land valuations in line with their actual worth rather than their value to the telecom operators means that greater investment can be put into improving coverage to rural areas. 

The ECC is a mechanism for bringing operators and landlords together to agree consensually on land valuations and rental terms. It’s a way of improving and extending mobile connectivity across the UK. The previous way of valuation would not have been commercially viable to provide the infrastructure now needed to support the demands for connectivity, particularly with data growth increasing exponentially.

The ECC has divided opinion. For some it is seen as a mechanism for building the UK’s digital future, for others, it’s a barrier to installing mobile infrastructure.

Cornerstone, the leader in UK mobile infrastructure, believe that if landlords and telecom operators work collaboratively together, they will create a far more positive change, more quickly, for rural communities to connect wherever and whenever they want.
Recent tribunal cases on the ECC (EE Limited and Hutchison 3G UK Limited vs The Mayor and Burgesses of the London Borough of Islington) point to consensual agreements being the preferred route rather than through the Lands Tribunal.

Better digital access bringing benefits to the rural economy

Significant benefits have already been gained from rural areas that have had mobile masts installed whether for homeowners, farmers, visitors, businesses or tourists. Having digital access saves time, money and effort which wouldn’t be possible with poor or no mobile connection. That’s why reliable mobile connectivity makes such a huge difference to the rural community. 

“Cornerstone is committed to providing high-class mobile connectivity to the UK digital economy. Our mobile infrastructure is placed on rooftops, greenfield sites in rural locations and street work sites including monopoles for our customers Vodafone and Telefónica, amongst others.”

Simon Oborn, Head of Property & Estates, Cornerstone

A customer case study from our partner Telefónica UK Limited (“O2”) about the benefits of bringing connectivity to the rural community of Staylittle. Watch now.

Belinda Fawcett, General Counsel & Director of Property and Estates at Cornerstone, discusses on TechTalk Radio the issues regarding providing connectivity in the UK.

Belinda describes how these challenges have originated from changes in government legislation resulting in a slowdown of infrastructure deals across the country and putting the UK at risk of falling behind other European and global countries. Not ideal with Brexit just around the corner and at a time when mobile and digital connectivity has never been more important.

Listen to the podcast to hear more!

Kye Prigg Head of Networks at Vodafone UK Limited, explains how 5G will open up lots of ideas, enabling the development of new applications and the potential to change the technological world.

With the reform of the Electronic Communications Code (ECC), the Government has updated existing legislation to pave the way for faster mobile and broadband services at lower cost. While network operators have welcomed the changes that came into effect on 28 December 2017, they have had a more lukewarm reception from some landowners and their agents. Here I take a brief look at the key changes.

Why the change?

We are all now reliant on our mobile phones and used to having access to broadband, but the truth is that the UK lags behind Europe when it comes to connectivity. Digital technology and the demand for digital services is developing fast, and we need to be able to move quickly with it. And with 5G around the corner, the industry needs a more straightforward framework under which to operate.

The Government has reformed the previous ECC with the intention of promoting more significant investment in digital infrastructure and encouraging greater network sharing turning connectivity from a luxury for a few to a basic need for all.

What hasn’t changed?

Code agreements must still be in writing, signed by both parties and will continue to bind successors in title and other parties.

Network operators can impose agreements on landowners through the courts where the parties cannot agree on a consensual deal, and operators can retain equipment on land even after the fixed term of an agreement ends.

Code Right

The Code introduces a new framework for agreements between network operators and landowners by giving operators enhanced statutory powers to install, keep, maintain and upgrade equipment as a ‘Code Right’. It also allows operators to assign and share freely. While some of these rights existed under previous legislation, the Code envisages a landowner granting to an operator a much more comprehensive package of rights in return for a payment to the landowner for that agreement and compensating the landowner for its loss – more of that below. In this way, the operator gets what it needs, and the landowner is not out of pocket. Seems to make sense. All ok so far…?

Valuation

This is where it gets a little tricky. In exchange for granting the Code Right, a landowner will receive a payment based on two elements expressly set out in the code: Consideration and Compensation. These two elements seek to bring the payments that operators pay into line with other statutory bodies using compulsory purchase type principles – for example, electricity, gas and water – by imposing a ‘no scheme’ method of valuation.

The Code sets out how consideration – or the price payable for the agreement – is calculated by ignoring the value of the agreement to the operator and how compensation is assessed – that is, the loss to the landowner of the use of that land. These two elements combined, seek to regularise the payment made on each site.

These calculations use established methods of land valuation which are very familiar to the property industry in the UK and are well understood in both compulsory purchase circles and the utility sector. In the telecoms world, however, they are causing some concern to landowners, who are experiencing a reduction in payments. It appears that this is where the battle lines are being drawn.

‘Fair’ sum?

It’s clear that the Government intended operators to pay a ‘fair’ sum to a landowner, but they also recognised that rents would fall considerably. With landowners and their agents now being offered far less than previous rent levels, assessing what that sum might be, and agreeing a figure, is proving a challenge. This is where a dialogue between a landowner and an operator must take place to try and agree on a consensual deal between them. Otherwise, the parties will find themselves in the Lands Tribunal who will ultimately decide for them.

We’re convinced that a constructive dialogue between the parties will help them arrive at a consensual agreement based on a Code calculation of consideration and compensation.

One thing is for sure though; the market needs a stable mechanism for valuing these types of agreements. In nearly everything that we do, we know what a ‘fair price’ is, and digital infrastructure shouldn’t be any different. The sooner we get there, the better!

Sharing, upgrading and assigning

Another hot topic. To encourage greater coverage and network sharing as digital technology evolves, operators now have the right to share, upgrade and assign without consent. This will facilitate advancements in technology and the changing face of connectivity, but it does, however, remove the opportunity for landowners to impose conditions on operators and to earn extra income perhaps. This might be another reason why some landowners and their agents might be feeling a little aggrieved by the Code.

Termination

Code agreements continue until terminated. However, a landowner bound by a new Code agreement will now need to serve a minimum of 18 months’ notice to terminate a Code agreement specifying at least one of four specific grounds – the 18 months cannot expire until after the expiry of the contractual term.

One principal ground for termination is where the landowner intends to redevelop the property. While the same principles are anticipated to apply as those established for ‘Ground (f)’ (Section 30(1)(f) of the Landlord and Tenant Act 1954 after a landlord has served a Section 25 Notice), landowners are nervous about its applicability under the Code. However, if faced with such genuine notice, operators would be well advised to work with the landowner taking into account the redevelopment plans and be prepared to remove their equipment.

Other changes

The Landlord and Tenant Act 1954 does not apply to Code agreements – Code agreements effectively have their own form of security of tenure;

The ability to go to court to have an agreement imposed is not a new concept; only this has now moved from the County Court to the Lands Tribunal.

The Code expressly states that the parties cannot contract out of the Code; and

Broadly speaking, the key changes are not retrospective (there are ‘transitional provisions’ that attempt to govern agreements that fall between the Old Code world and the new Code world).

While operators and landowners might view the Code differently, the Government is expecting its introduction to deliver lower site payments and lead to more significant investment in networks, network sharing and improved connectivity for all of us.

It’s in everyone’s interest to work together for a better connected tomorrow.