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A Digital Future: The New Electronic Communications Code's Impact on Landowners

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About The Author

Dena Anee (Regular Writer)

Dena is a law graduate currently working as a Commercial Real Estate Paralegal within the Real Estate department of a top 20 international law firm. She is an aspiring solicitor with a keen interest in Commercial and Real Estate law. Outside of the law, Dena enjoys music, reading, and learning languages.

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To thrive in the 21st Century, you have to be a savvy citizen of the digital economy or risk being left behind.

Leila Janah

Given the constant upsurge and advancement of technology, it is unsurprising that changes to the law are needed to keep abreast of an ever-changing world. Society has, after all, now entered into the digital era: technology forms an imperative part of everyday life and the vast majority of the population now rely heavily on the new advancements it has heralded.

Electronic communication is one such advancement. It has facilitated the fast and widespread sharing of ideas, and is increasingly the dominant means by which people connect with others. For example, the number of internet users in the UK has dramatically increased in recent years, with figures showing that more than 80% of the population are now online.

The importance of electronic communication to consumers explains why the telecoms sector is having to go to great length to adapt in an increasingly technological world. Mobile operators must respond to the changing expectations of consumers, who are constantly demanding better, faster and a more reliable mobile coverage.

Telecom companies are thus investing heavily in wireless broadband that will grant consumers access to the next-generation network and bring drastic change to the way in which people communicate. These consistent attempts to innovate reflect current trends in this sector: since 2015, there has been exponential growth in the extent to which newer and faster data networks are provided by mobile telecom operators.

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Communication is certainly pervasive in the business world, with businesses heavily relying on electronic communication to interact with their customers and as a means of generating and attracting new investment. As a result, the government proposed a Digital Strategy in December 2017, with one of its aims being the introduction of ultra-fast 5G connectivity to everyone by 2020.

Set to become the next ‘buzzword’, 5G networks have greater capacity to handle a vast amount of information and are expected to offer faster speeds to create an overall better user experience. Because of this, in his 2017 Autumn Budget, Chancellor Philip Hammond MP outlined his intention to transform the UK a ‘world leader’ in 5G.

The implementation of this Digital Strategy – working alongside the creation of a new £1 billion Digital Infrastructure Investment Fund intended to strengthen the long-term security of Britain’s economy – saw £16 million injected by the government into research institutions to develop a 5G test network. As Matt Hancock MP, Secretary of State for Digital, Culture, Media and Sport, explains:

This funding will support the pioneering research needed to ensure we can harness the potential of this technology to spark innovation, create new jobs and boost the economy.

As far as the law is concerned, the Digital Economy Act 2017 (DEA 2017) was introduced to support the government's intention to make the UK a world leader in the digital economy. It brings into effect a new ‘Electronic Communications Code’ – set out in Schedule 1 to the DEA 2017 – that revokes the previous version contained in Schedule 2 of the Telecommunications Act 1984 (the TA 1984).

In light of this, this article examines the effect of these reforms, commenting in particular on how the new ‘Electronic Communications Code’ impacts upon landowners upon whose land the infrastructure necessary to facilitate the 5G revolution is, or will be, installed.

What is the ‘Electronic Communications Code’?  

An electronic communications network is defined under Section 32(1)(a) of the Communications Act 2003 (CA 2003) as constituting:

[A] transmission system for the conveyance, by the use of electrical, magnetic or electromagnetic energy, of signals of any description.

The ‘Electronic Communications Code’ is of vital importance to those companies which operate such electronic communications networks (the Operators). It provides them with the ability to access rights to install and maintain electronic communication apparatus (the Apparatus) – such as wires, masts, cables or optic fibres – under, on, over or across private land as well as to inspect, maintain, adjust, alter, repair, upgrade or operate the Apparatus where necessary.

For Operators to enjoy these rights, however, they need to first apply to the Office of Communication (Ofcom) under Section 106(3)(a) of the CA 2003 in order to secure a direction that the ‘Electronic Communications Code’ will have effect.

Humble Beginnings: The Previous Law

The TA 1984 came into force at a time when an array of vital issues were influencing the digital world. Like the Ministers of today, the government at the time had plans to develop and advance digital communication in the UK in an attempt to attract new investment and create more networks. This also coincided with the height of privatisation – British Telecom was privatised in 1984 – in an attempt to create a more innovative high tech market, to cut broadband charges, and to pave the way for a more competitive telecommunications sector.

However, the invention of the World Wide Web in 1989 revolutionised the face of communication and information-sharing across the world. Unsurprisingly, this resulted in the Code under the TA 1984 quickly being perceived by many as outdated and unable to keep pace with the advancement and innovation of technology. For many years, it is been in need of serious refinement. In fact, Lewison J – in the case of the Bridgewater Canal Company Limited v GEO Networks Limited [2010] – described the Code under the TA 1984 as:

[N]ot one of Parliament’s better drafting efforts… it must rank as one of the least coherent and thought-through pieces of legislation on the statute book. 

Recognising the importance of adapting to new developments and providing greater coherence and clarity in respect of the rights and interests available to the Operators, the DEA 2017 was passed by Parliament to bring into effect a new version of the Code (the New Code). The New Code offers Operators with greater flexibility to relocate, share and re-assign the Apparatus they own, and provides stronger protection to the Operators by allowing them to remain longer on an occupier’s land without running the risk of eviction.

On the face of it, the New Code will enable the Operators to make investments that should see telecommunication access to reach as many people as possible, thereby fulfilling the aims of the government to enhance the UK’s 5G potential.

However, this focus on extending the rights of the Operators potentially comes at a cost for those landowners upon whose land the Apparatus is, or will be, installed. Indeed, questions can be raised as to what extent the reforms introduced by the New Code will positively affect and provide benefits to landowners, such that they will encourage landowners to enter into telecom agreements with Operators.

The Impact of the New Code on Landowners

Upgrading and Sharing

Under the New Code, the Operators have automatic rights to upgrade and share the Apparatus they own without the need to obtain consent from the landowners with whom they have entered into agreements under the ‘Electronic Communications Code’. For the purpose of revolutionising the UK’s 5G capacity, this will be a vital change: it will remove one of the hurdles – refusals of consent by landlords – that may have been preventing the Operates from spreading their network coverage efficiently.

However, for the Operators to gain the benefits of these rights, they will need to comply with two conditions set out in Paragraph 17 of the New Code. The first condition, outlined in Paragraph 17(2) of the New Code, requires that any changes which result from the upgrading or sharing the Apparatus must have ‘no adverse impact, or no more than a minimal adverse impact, on its appearance’.

The second condition, set out in Paragraph 17(2) of the New Code, requires the upgrading or sharing of the Apparatus to ‘impose no additional burden’ on the landowner as the ‘other party to the agreement’. This, as explained by Paragraph 17(3) of the New Code, protects landowners from upgrading or sharing that results in ‘additional adverse effects’ on their enjoyment of their land or that causes ‘additional loss, damage or expense’.

These new automatic rights provide the Operators with newfound flexibility to updating and adapt their networks in response to any new changes in the technology market, as well as widening their coverage across various sites. Indeed, it will facilitate joint venture arrangements used by mobile phone companies like O2 and Vodafone who share a large number of their telephone masts.

For landowners, the conditions provide some necessary limitations on the rights of the Operators; the sharing and upgrading arrangements that can be entered into cannot be ones that negatively impact upon them or their use and enjoyment of their land. For example, the condition in regards to appearance means a landowner can be safe in the knowledge that an upgrade to a mast will not result in damaging aesthetics.

However, there remains some elements of concern: so long as the Operators do not breach the conditions, the landowner will no longer have complete control over who occupies their land. In addition – unlike under the provisions of the old version of the ‘Electronic Communications Code’ from Schedule 2 of the TA 1984 (the Old Code) – a landowner will no longer be in a position to demand extra income for an Operators’ site-sharing arrangements, or charge a premium for granting consent to assign the Apparatus to a third party.

No Value Scheme

Under the Old Code, the rent paid by the Operators to use a landowner’s land was based on a fair and reasonable basis. Under the New Code, this has now changed following the implementation of a ‘no scheme valuation’ system. This sees the amount of rent paid to the landowner being calculated based on the market value of the landowner’s land, rather than its value to the Operator on account of their existing use of the land.

The way in which this will impact upon the landowner depends entirely on the value of their land. The Operators will pay less rent to landowners who have land with a low market value, but landowners with freeholds of a high market value – because of its prime location or inherently lucrative development potential – could see higher yield in rent if their land is marketed at a higher value.

Termination of Agreements and the Removal of the Apparatus

The Impact of the Landlord and Tenant Act 1954

The Old Code lacked clarity as to how it interacted with the provisions of the Landlord and Tenant Act 1954 (the LTA 1954) that govern when and how business tenants receive security of tenure: a statutory right to remain in occupation of a property after their lease has expired. Previously, it seemed – but was not explicitly confirmed – that the Operators had the advantage of double-protection: namely, protection under the LTA 1954 as well as protection under the Old Code itself.

The reforms now provide greater clarity as to the link between the LTA 1954 and the New Code. Paragraph 4 of Schedule 3 of the DEA 2017 confirm that agreements between the Operators and a landowner with the ‘primary purpose’ of granting rights under the New Code are excluded from security of tenure under the LTA 1954. Only in the circumstances where the primary purpose agreement is not to grant rights under the New Code will the agreement fall under the provisions of the LTA 1954 allowing the Operators to utilise security for tenure.

From a landowner’s point of view, these reforms are welcome: if they wish to end an agreement with the Operators, they no longer subjected to the legal and practical complexities of having to negotiate two different sets of statutory provisions in order to successfully establish grounds of termination and overcome security for tenure.

Terminating Agreements under the New Code

A landowner has the right to terminate an agreement with the Operators under the New Code, subject to the satisfaction of the conditions listed under Paragraph 31 of the New Code. To bring an agreement to an end, a written notice must be served to the Operator detailing the grounds on which the agreement should come to an end. This is the same procedure as under the Old Code.

However, the New Code will introduce the novel elements in relation to termination that mitigate the Operators’ loss of their rights under the LTA 1954: they are given some new advantageous rights that allow them to remain longer in occupation of the land. For example, the notice period under the New Code is longer: the minimum notice that must be given by landlords now extends to 18 months, a dramatic leap from the 28 days’ notice required under the Old Code.

Furthermore, the termination of a telecom agreement now involves a lengthier process – one that is very similar to the security for tenure process under the LTA 1954 – than applied under the Old Code. After the landowner has served a written notice, if the Operators wish to continue to use the Apparatus on site, they can serve a counter-notice to the landowner within 3 months that requires the landowner to apply to court for a termination order. In order to secure the termination order, the landowner must identify at least one of a number of conditions listed in Paragraph 36 of the New Code apply.

The Future for Landowners?

It is clear that the New Code will create a new set of consequences that landowners will need to consider before entering into new telecom agreements with the Operators. Two key challenges for landowners will be the need to adapt to having less control over their land and having a reduction in the amount of rent they can claim from Operators.

Furthermore, the impacts of the New Code on existing telecom agreements that are due for renewal will need to be reviewed by landlords. Telecom agreements entered into from 28 December 2017 will fall under the New Code. As a result, astute lawyers employed by the Operators may attempt to terminate existing agreements prematurely in order to benefits from the rights available to them under the New Code

Overall, the New Code impose greater restrictions on landowners. They will now face greater difficulties when attempting to terminate a telecom agreement: the 18 months' notice allows the Operators to remain longer on a landowner’s land, while the landowner will also need to satisfy a number of statutory conditions to impose termination of an agreement.

Moreover, the new rules on sharing and upgrading may also pose potential impediments on landowners rights and interests, one of which is the apparent lack of control over their land that undermines their ability to access, maintain and keep secure their land in a way that may potentially impact their own business.

The ultimate consequence of all these negative changes to the position of landowners may be that they are discouraged from entering into new telecom agreement with the Operators. This, in fact, may undermine the government’s objective overall. 

Conclusion

The reforms to the Code clearly support the government's proposals to modernise Britain’s digital infrastructure. By removing outdated restrictions found under the Old Code, it is clear that the new changes to the DEA 2017 could facilitate the deployment of 5G networks and also contribute to the strength of Britain's economy by encouraging considerable investments in the UK's digital infrastructure market.

With the exceptional growth of technology, landowners and the Operators will need to adapt and embrace the opportunities that are likely to arise from emerging technology. They could be the key to attaining the government’s overall objective in creating a stronger economy, and transforming the UK into a world-class digital economy. This will inevitably result in a higher demand for the Operators and landowners entering into telecom agreements to support the government's future digital infrastructure plans.

It is concerning, then, that the New Code seems to align more favourably towards the Operators rather than landowners. This is undoubtedly intentional, representing part of the government’s strategy to encourage the Operators to create further telecommunication networks. However, this could ultimately undermine the government’s goal: landlords may be hesitant to enter into new agreements with the Operators because they could undermine the landowner’s sense of security and control as to who occupies their land and what apparatus is being upgraded and shared without their consent.

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Tagged: Environmental Law, Land Law, Media, Property Law, Technology

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