Is the Telecoms Code impeding progress?

Posted on 24 October 2018 by Isabel Lich

Is the Telecoms Code impeding progress?

Telecommunication technology is rapidly progressing. The government has recently announced plans to facilitate the nationwide rollout of 5G networks, but landlords and operators are locked in a stand-off due to the impact of the new Electronic Telecommunications Code. Although it is impossible to say with any certainty at this stage, the new Code may be hampering the 5G rollout. 

Having a good internet connection is now classed as an essential of daily life. Earlier this year the government set out plans to support a nationwide roll-out of 5G networks to ensure that the UK is not left behind in the global race for faster and better connections.

It has now been suggested that the new Electronic Communications Code (the "Code") may be impeding the nationwide roll-out of 5G. The Code is designed to ensure that the public have access to a choice of high quality electronic communications services. It does this by giving operators the right to install or keep apparatus on land after their contractual rights have been terminated.

The original Code, which came into force in 1984, was widely decried as confusing and unclear. Both landlords and telecommunications operators lamented the gaps in the legislation, but only very few were willing to risk a judicial decision that might upset the delicate balance between the parties. 

In 2017, the government sought to address the legislation's failings by introducing a new Code. It is generally agreed that the new Code favours operators. Landlords have historically seen telecoms as a necessary evil, which they have to allow onto their properties in order to be able to let them. With advances in technology, telecommunications equipment has changed and the needs of operators to install or upgrade equipment have steadily increased. The large amount of kit which is likely to be required for the proposed roll-out of 5G is unlikely to alter this trend, but certain features of the new Code are increasingly making landlords wary of allowing operators onto their sites unless absolutely necessary.

One of the biggest bones of contention is the valuation mechanism, which the Code envisages for land. The "no scheme" basis of valuation disregards the value of the land to the operator with their equipment in situ and calculates payments by reference to the underlying value of the land. This means that in many cases operators have been arguing for significantly lower rents.

It has been argued that lower rents are needed to encourage operators to invest in the 5G rollout.  Conversely, it could be argued that the income landlords receive from operators needs to compensate them for the inconvenience of dealing with the Code and its trappings; otherwise there is no incentive to allow the installation of the equipment.

The other major stumbling block is the 18 month notice period, which the Code requires landlords to give operators when terminating their agreements, and the inability for either party to contract out of the Code. In the past, developer landlords who had not decided what to do with a site would often bridge the gap with short-term lettings.  Nowadays no tenant would sign a letting if it were barred from accessing telecommunications services. However, landlords are increasingly wary that their "stop-gap" solution, which brings in some extra income, might end up delaying their development if the operator remains in situ once the tenant leaves.

Landlords may therefore choose to miss out on potentially lucrative short-term lettings, rather than run the risk of being stuck with operators' equipment long-term. Although in practice the operators may move willingly, the risk is often enough to scare off landlords and builds landlords' resentment towards operators.

The tension the new Code is creating between landlords and operators may well slow down the process of installing thousands of bits of telecoms kit all over the UK. On the other hand, landlords will be very aware that the value of their properties will be impacted by access to electronic communications services.

How exactly the new Code will impact the roll-out of 5G remains to be seen. The legislation has not been in force long enough and the 5G scheme is not far enough advanced to be able to draw precise conclusions. For now (and for the foreseeable future) landlords and operators remain in a marriage of convenience as neither wants, but both need, the other.

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