Digital Economy Bill

Written evidence submitted by David Redford-Crowe, LL. B (Hons.), Solicitor (DEB 68)

DIGITAL ECONOMY BILL

1. Summary

1.1 These submissions are in response to the Committee’s welcome call for written evidence upon the Digital Economy Bill.

1.2 All of the comments (set out in Section 3 below) relate exclusively to certain provisions found in the new Electronic Communications Code (as set out in Schedule 1 to the Bill) which upon enactment will be inserted as Schedule 3A to the Communications Act 2003 thereby replacing the existing Electronic Communications Code (found in Schedule 2 to the Telecommunications Act 1984 as amended by Schedule 3 to the Commun ications Act 2003).

1.3 More specifically, the comments (as set out in Section 3 below) relate to the following provisions of the new Code:

(a) the new right for an Operator to assign Code rights (Paragraph 15);

(b) the new right for an Operator to upgrade or share apparatus (Paragraph 16); and

(c) the relationship between the new Code and exist ing law (Paragraph 95).

2. Introduction: brief overview of writer’s expertise

2.1 The writer of these submissions is a practising solicitor (admitted in 1993) who has spent most of his practising career advising upon telecom-related issues especially in the context of what was originally called the Telecommunications Code but which is now known as the Electronic Communications Code (commonly referred to as "C ode Powers") .

2.2 He held various senior In-House legal roles for almost a decade with one of the UK’s mobile network operators (MNOs), namely, Orange Personal Communications Services Limited (which is now part of EE) which, amongst other things, covered providing high-level strategic advice upon preserving network integrity through reliance upon Code Powers, working closely with Ofcom (and its predecessor Oftel ) on various regulatory issues (especially the content of the prescribed forms of statutory notices under the Code) as well as serving Code Powers in relation to a range of individual sites deemed critical to the Orange network. It also covered writing a detailed Handbook on the law, policy and procedure for exercising Code Powers which became the definitive reference guide for other members of the In-House Legal Departme nt at Orange and which earned him the un official acco lade of Code Powers guru from his peer s. He was the lead In-House solicitor in successfully resisting a novel Court of Appeal challenge concerning the use of Code Powers in a planning law context [1] , one of the few decided cases on the existing Code.

2.3 The writer is currently employed as a Consultant with a leading international firm of solicitors. He exclusively acts for telecommunications comp anies. However, the views expressed in this document remain solely the writer’s own and are not given on behalf of any client or the Firm .

3. Comments on the new Code

3.1 The new right for an Operator to assign Code rights (Paragraph 15)

3.1.1 It is to be welcomed that the new Code contains a new, express right for an Operator to be able to assign the entirety of its Code rights in an individual telecoms agreement (which governs the siting of its apparatus in a particular l ocation ) to another Operator h aving the benefit of Code rights without the other party to the relevant agreement (known as the Site Provider) being able to prevent the assignment altogether or else make it subject to the satisfaction of onerous conditions. This reform add resses what has become a recurrent problem in recent years especially with the growing trend within the telecoms industry of market consolidation. In the absence of such an express right to assign, the writer has experienced a number of occasions when negotiations for new telecom s agree ments have become protracted due to certain Site Providers wishing to either restrict or prohibit an Operator’s legal ability to assign its rights which has adversely impacted upon the speed of network roll-out in relation to 3G (and more recently) 4G apparatus.

3.1.2 Notwithstanding the comments made in paragraph 3.1.1, the new right to as sign is not, however, unqualified in the sense that, by virtue of Paragraph 15(2), a Site Provider can still (a) require the assignor Operator to enter into an Authorised Guarantee Agreement (AGA) pursuant to the provisions of Section 16 of the Landlord and Tenant (Covenants) Act 1995 in respect of the assignee Operator and/or (b) impose terms in an agreement other than a lease which have a "similar effect".

3.1.3 It is submitted that further clarity in the wording is need ed in relation to Paragraph 15(2 )( a) and ( b) to ensure that certain Site P roviders do not seek to use either or both of these exceptions to frustrate the underlying purpose of thi s new, express right to assign which, and as was stated by the current Government in the recent DCMS document [2] , promotes "the efficient use of assets across the communications sector" [3] .

3.1.4 It is submitted that where the proposed assignment is to another Opera tor with Code rights then it should be presumed that the proposed assignee is of equivalent financial standing to the assignor having regard to the fact that it will already be subject , amongst other things, to the statutory obligations for maintaining a suitable fund for meeting its liabilities pursuant to the Electronic Communications Code (Conditions and Restrictions) Regulations 2003 (as amended). The onus should be upon the Site Provider to demonstrate by objective evidence that the proposed assignee Operator is not of sufficient financial standing as the assignor Operator thereby justifying the imposition of an AGA ( or including terms in a telecoms agreement (drafted other than as a formal lease ) which have similar effect) .

3.2 The new right for an Operator to upgrade or share apparatus (Paragraph 16)

3.2.1 It is to be welcomed that the new Code contains a new, express right for an Operator to be able to automatically upgrade or share apparatus (subject to the satisfaction of two conditions discussed below). The writer is personally aware of numerous examples where the absence of such an automatic right has historically proven costly to telecoms clients (both in terms of time and money) in negotiating telecom s agreements which has resulted in either significant delays to network roll-out or even, in some cases, to individual sites effectively being "sterilised" either because the particular Site Providers have insisted on the apparatus being restricted to a specific technology (e.g. 3G but not 4G) or consent to upgrade (and/or share) being conditional upon further monetary payment in addition to the annual re nt .

3.2.2 It is further welcomed that the number of conditions needing to be satisfied by an Operator has been reduced from three to two i n that reference to the main Operator having exclusive possession of the apparatus [4] has now been removed from this new Code right. It is also to be welcomed that the current Government has chosen to remove the reference to "inconvenience" from the statutory definition of what is meant by "additional burden" .

3.2.3 Even so , it is submitted that the two remaining conditions for the exercise of this new Code right, namely, (1) that "no adverse impact, or no more than a minimal adverse impact" will affect "its appearance" [5] and (2) that the proposed upgrade or sharing will not lead to the imposition of "an additional burden " on the Site Provider [6] need further clarification . Whilst it is accepted that the Site Provider on whose land the upgrade or sharing will take place is entitled to some degree of control, it is submitted that, as currently drafted, both of the conditions are somewhat vague and could lead to potential disputes between the parties as to whether either or both of them have been sufficiently satisfied which could thereby result in the frustration of the underlying policy of the new Code right which, and as stated by the current Government in the recent DCMS document [7] , is to enable Operators "to quickly update their networks when new technology becomes available, and help facilitate more efficient use of infrastructure through greater sharing" [8] . In relation to the condition concerning visual appearance [9] , it is submitted that this element of control is in any event already covered by existing planning legislation. In relation to t he second condition concerning additional burden [10] , it is noticeable that it is not qualified in the same way as the first condition (which disregards de minimis considerations ). Furthermore, Paragraph 16(4) (which contains an expansive definition of "additional burden" ) remains fairly wide in scope by use of the words " includes anything that – (a) has an additional adverse effect on the other party’s enjoyment of the land, or (b) causes additional loss, damage or expense to that other party" (emphasis added). The words highlighted in bold are unlimited and/or subjective.

3.3 The relationship betwee n the new Code and existing law ( Paragraph 95)

3.3.1 Paragraph 2(7) of the existing Code [11] provides that Code rights are "not subject to the provisions of any enactment requiring the registration of interests in, charges on or other obligations affecting land" .

3.3.2 Th e current Government stated in the recent DCMS document [12] that Paragraph 2(7) of the existing Code meant that Code rights are not subject to land registration legislation. In its view, it stated [13] that "the intended meaning is that Code rights are binding on a purchaser in the same way as an interest in land, but without any additional requirement for land registration so that a failure to register would not prevent the Code right binding a successor in title" . The current Government went on to conclude [14] that "Code rights should be binding on successors without any requirement to register those rights. New legislation will accordingly make similar provision to the Government’s understanding … of Paragraph 2(7) of the existing c ode" .

3.3.3 It is submitted that Paragraph 95 of the new Code does not fulfil the Government’s stated intention of transposing an equivalent form of wording to Paragraph 2(7) of the existing Code. If anything, the meaning of Paragraph 95 of the new Code is less clear than Paragraph 2(7) of the existing Code not least by reason of the noticeable absence of any reference to land registration itself .

3.3.4 The writer is conscious of the fact that the majority of telecom s agreements are now drafted as formal leases (and that a proportion of these have the benefit of the business security of te nure provisions found in Part 2 of the Landlord and Tenant Act 1954) as a precautionary response to the reforms introduced by the Land Registration Act 2002 . Even so, it is submitted that there are a number of reasons why Code rights found in telecom s agreements should not be subject to land registration even if they are drafted as formal leases. Firstly, Paragraph 12(2) of the new Code expressly provides that "[a] nything done by an operator in the exercise of a code right … in relation to any land is to be treated as done in the exercise of a statutory power" . In other words, Code rights amount to statutory wayleaves which bind automatically. Secondly, Paragraph 28 of the new Code now makes it clear that a telecom s agreement drafted as a formal lease cannot enjoy the benefit of the business security of tenure provisions found in Part 2 of the Landlord and Tenant Act 1954 if its "primary purpose" is to grant rights under the new Code [15] . This suggests that current Government policy is to now keep the two statutory forms of security of te nure entirely distinct. Thirdly , one of the historical justifications for requiring telecom s agreements to be registered is that this thereby provided clarity to Site Providers as to the presence and ownership of apparatus on any given piece of land. Paragraph 37 of the new Code contains a new right for Site Providers to find out whether apparatus is installed pursuant to a Code right which is a much more effective means of ascertain ing the most up-to-date factual position . Fourthly, it has already been recognised during the course of the debates in the Second Reading of the Bill on 13 September 2016 that , "[a]s we move into the next generation of 5G services, a huge number of very small transmitters are going to be required" [16] . The public registers kept pursuant to the Land Regis tration Act 2002 will risk becoming overly cluttered and thereby meaning less if all of these telecom s agreements will need to be registered. Fifthly, dispensing with need for registration of telecom s agreements made pursuant to the new Code will eliminate the administrative burden and cost of the Operators having to submit individual applications for land registration.

4. Closing remarks

The writer would like to thank the Committee for being given the opportunity to make written submissions on the new Code and will gladly afford it any further reasonable assistance should this be felt necessary.

October 2016


[1] St Leger-Davey and Harrison v. First Secretary of State (Winchester City Council and Orange PCS Ltd (interested parties)) [2004] EWCA Civ 1612

[2] "A New Electronic Communications Code" (published in May 2016)

[3] Ibid . at paragraph viii, page 6

[4] which was found in an earlier version of the new Code which the previous Coalition Government had sought to introduce as part of the then Infrastructure Bill in the early part of 2015 prior to dropping the same shortly afterwards in response to criticisms from key stakeholders

[5] Paragraph 16(2) of the new Code

[6] Paragraph 16(3 ) of the new Code

[7] "A New Electronic Communications Code" (published in May 2016)

[8] Ibid. at page 17

[9] Paragraph 16(2) of the new Code

[10] Paragraph 16(3 ) of the new Code

[11] found in Schedule 2 to the Telecommunications Act 1984 (as amended by Schedule 3 to the Communications Act 2003)

[12] "A New Electronic Communications Code" (published in May 2016)

[13] Ibid. at Paragraph 42 on page 19

[14] Ibid. at Paragraph 47 on page 20

[15] Paragraph 28(2) of the new Code

[16] per Mr John Wh ittingdale MP (Maldon)(Con), the former Secretary of State at DCMS and the promoter of the Bill

 

Prepared 26th October 2016