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Code changes could put brake on better telecoms

A shake-up in mobile operators' payments could make landowners reluctant to accommodate their masts, says Mike Reid.

In the Queen's speech in May the Government announced plans to reform the Electronic Communications Code, to help "communications companies promote greater long-term investment in digital infrastructure."

Provisions for the Code were included in the Digital Economy Bill placed before the UK Parliament in July. The Department of Culture, Media and Sport (DCMS) anticipates the new Code will become law in June/July 2017.

Better access to digital communications and improving the rate at which these can be rolled out across the UK are excellent objectives, but introducing compulsory powers for the telecom operators and reducing the financial benefit to those affected by their installations may not be the best way to achieve this. It could possibly have the reverse effect.

The new code would introduce a revised market value for mobile-telecom masts and wayleave rights in a "no scheme" world. There is uncertainty over what this means in practice as the Digital Economy Bill proposes site providers will be paid compensation and a consideration assessed on the underlying value of the land without any clear definition of how this is to be assessed.

Details need to be clarified, but it seems certain that this will devastate telecom rents for landowners, including farmers who have become reliant on this revenue.

A standard 15 metre mast on a rural hillside currently attracts an annual rent of between 5,000 and 6,000. This could drop to less than 500.

The proposed code includes no additional payments to site providers for site sharing or upgrading equipment. Assigning sites would also be unrestricted. Landowners would lose control over what happens on their land and may not even know who is occupying the site at a given time, which could have significant health and safety implications. 

The original DCMS announcement stated the new code wouldn't be retrospective and would come into force as existing agreements came to an end. However, this may not actually be the case as the proposed Digital Economy Bill includes provisions for telecom operators to end existing agreements and invoke the new code where the tenant has an unconditional break clause. And most existing telecom agreements have such a clause since it is a standard provision requested by the operator. 

Many landowners could find that current agreements, where the fixed term ends in more than 10 years time, are terminated and a new agreement is requested under the new code. Nothing would physically change on the ground, but the income would reduce to a nominal value as the rent reduces and the landowner is not entitled to a share of any site sharing income. 

If telecom operators start to instigate this break provision once the new code becomes law, we envisage landowners will be less likely to engage in discussions with operators and are likely to withdraw co-operation.

We are already seeing landowners refusing to consider sites on their land (particularly on rooftop sites) due to the implications of the new code. 

Much remains unsettled but the direction of travel from the Government is clear. It wants to open up the market to extend and speed up deployment of digital communications, especially to rural communities, but its proposals may find operators being compelled to rely on the new code - possibly a more costly and slower process than entering into a voluntary agreement. 

Landowners should check all existing telecom agreements to see if these are likely to be affected by the new code and review if any action can be taken now to mitigate the potential impact. Anyone approached about a new telecom agreement, or where changes are requested to existing agreements, should ensure appropriate terms are agreed to take account of the proposal changes.