PLEASE NOTE THIS AREA OF THE LAW IS IN THE PROCESS OF BEING UPDATED AND CHANGED – FOLLOW THE BLOG OR SEE HERE FOR DETAILS.
When the UK first liberalised its telecoms market in the 1980s, the Government wanted to stimulate investment and network build. As part of that process, they put in place some rules in the UK to make it easier for new entrants to build new networks. Amongst those rules were statutory entitlements for specified telecoms companies to install, maintain, adjust, repair or alter electronic communications apparatus on public and private land (“Code Powers“).
The Electronic Communications Code can be found in Schedule 2 to the Telecommunications Act 1984, being one of the few provisions not repealed by the Communications Act 2003, although it was updated by the Communications Act 2003.
Obtaining Code Powers
If a Communications Provider wants to obtain Code Powers they need to apply to Ofcom. Prior the the grant of Code Powers, Ofcom will carry out a public consultation. In considering whether to apply the Code in any person’s case, OFCOM must have regard to the following matters:
- the benefit to the public of the Electronic Communications Network or conduit system by reference to which the Code is to be applied to that person;
- the practicability of the provision of that network or system without the application of the Code;
- the need to encourage the sharing of the use of electronic communications apparatus; and
- whether the person, in whose case it is proposed to apply the Code, will be able to meet liabilities arising as a consequence of:
(a) the application of the Code in his case; and
(b) any conduct of his in relation to the matters with which the Code deals.
What are Code Powers?
The Code sets out the rights and powers from which an operator, with the benefit of an OFCOM direction, may benefit in order to provide an electronic communications network.
The first key right is contained in paragraph 2 of the Code. The rights falling within paragraph 2(1) are to:
- execute any works on any land for or in connection with the installation, maintenance, adjustment, repair or alteration of electronic communications apparatus;
- keep electronic communications apparatus installed on, under or over that land; and
- enter that land to inspect any apparatus kept or installed (whether on, under or over that land or elsewhere) for the purposes of the operator’s network.
“Electronic communications apparatus” is defined as:
(a) any apparatus (within the meaning of the 2003 Act) which is designed or adapted for use in connection with the provision of an electronic communications network;
(b) any apparatus (within the meaning of the 2003 Act) which is designed or adapted for a use which consists of or includes the sending or receiving of communications or other signals which are transmitted by means of an electronic communications network;
(c) any line which means any wire, cable, tube, pipe or similar thing which is designed or adapted for use in connection with the provision of any electronic communications network or service; and
(d) any conduit, structure, pole or other thing in, on, by or from which any electronic communications apparatus is or may be installed, supported, carried or suspended.
The rights under paragraph 2(1) are wide ranging and apply to any land and not only cover the execution of works but also the retention of apparatus on land and the right of entry to inspect.
A constraint on an operator’s rights is contained in paragraph 2(1) which states that the written agreement of the occupier of the relevant land is required for the operator to be conferred such rights. The agreement does not have to be a deed but there must be consideration and a written agreement. Without the occupier’s written agreement, the operator will not have the benefit of the Code’s rights.
What happens if the occupier refuses to provide his agreement to the installation of electronic communications apparatus?
Under paragraph 5 of the Code an operator may serve a notice on the occupier or other relevant person specifying the right it requires. If the occupier does not provide its agreement within 28 days, the operator may apply to Court for an order conferring the right, thereby dispensing with the need for the occupier’s agreement. For the Court to make an order it must be satisfied that any prejudice caused by the order:
- is capable of being adequately compensated for by money; or
- is outweighed by the benefit accruing from the order to the people whose access to an electronic communications network or electronic communications services will be secured by the order
In determining the extent of the prejudice and the weight of that benefit, the Court will have regard to all the circumstances and to the principle that no person should unreasonably be denied access to an electronic communications network or electronic communications services.
The terms of the order should seek to minimise loss and damage caused to the occupier or other relevant person. It should be noted that to the owner/occupier the benefits of the apparatus installed may be outweighed by the inconvenience of the apparatus and the restrictions that the Code may impose on their dealings with the property. A potential sop to the owner/occupier is paragraph 7 of the Code which provides that the courts, in determining the terms of an order dispensing with the need to the occupier’s agreement, may provide in the order for the payment of “fair and reasonable” consideration to the occupier in respect of the operator’s rights and adequate compensation for loss or damage sustained by the occupier.
The Mayor’s and City of London Court in Mercury Communications Limited –v- London & India Dock Investments Limited  considered what is “fair and reasonable” in the context of the ascertainment of the correct level of compensation to be awarded to an owner conceding a wayleave to a telecommunications operator. The Court rejected compulsory purchase principles and a ransom value approach as the basis of assessing the compensation. Instead, the judge held that the compensation should “reflect the anticipated use of the right and thus its importance and value to the grantee”. This is likely to be based on evidence from comparable transactions. In the recent case of “Welford –v- EDF Energy Networks (LPN) [April 2007], the Court of Appeal discussed what can be recovered as compensation by the owner of land over which a statutory wayleave (in this case relating to electricity) is granted. The compensation included loss of profits where money had been spent on the development of a business on the land. This is recoverable as a separate head of damages from any diminution in the value of the land itself.
A general point to note is that an owner or occupier’s refusal to negotiate with an operator may not pay off. If the operator is insistent on exercising its powers, the owner may receive less money from the Court under the Code than it would have done if it had negotiated the deal with the operator.
Rights to alter or remove installed apparatus
Once electronic communications apparatus has been installed, the owner/occupier may have rights under the Code to alter or remove the apparatus if it, for example, wishes to redevelop the property, free of the apparatus.
There are two Code provisions in that regard – Paragraphs 20 and 21.
Right to require the alteration of apparatus (paragraph 20): Where electronic communications apparatus has been installed on the land, any person with an interest in that land or adjacent land may require the operator to alter the apparatus. Under this paragraph of the Code, the reason has to be that the alteration is necessary to enable the person to carry out an improvement of the land. “Alteration” is defined to include the moving, removal or replacement of the apparatus. “Improvement” is to defined to include development and change of use. If the owner/occupier requires such alteration, he may serve a notice on the operator. The operator then has 28 days in which to object by serving a counter-notice. If it does so, it only has to make the alteration if required to do so by a Court order made on the application of the person requiring the alteration.
When deciding whether to make an order, the Court must have regard to all the circumstances and to the principle that no person should unreasonably be denied access to an electronic communications network or electronic communications services. The Court will only make an order if, in that context, it is satisfied that the alteration is necessary to carry out the relevant improvement and will not substantially interfere with any service using the operator’s network. Usually, the order will require the person requiring the alterations to reimburse the operator’s expenses in carrying them out.
Right to require the removal of Apparatus (paragraph 21): If the owner/occupier wants the apparatus removed, it must give a notice to the operator requiring its removal. If the operator wishes to retain the apparatus, it must give a counter-notice within 28 days which must state that the landlord is not entitled to require the removal of the apparatus and/or specify the steps which the operator proposes to take to keep the apparatus on the land. In practice, the operator is likely to state that it will apply to Court under paragraph 5 of the Code to dispense with the need for the landlord’s agreement. If the operator gives the counter-notice, then the apparatus can only be removed if a Court so orders.
If the Court does order that the apparatus is to be removed and the operator fails to comply with the Order, then the owner/occupier can, with the Court’s further authority, remove it itself.
Can the code be excluded?
The answer to this question lies primarily in paragraph 27(2) of the Code. That paragraph provides that with the exception of three provisions, the operation of the Code can be excluded or, more specifically “the provisions of the Code…… shall be without prejudice to any rights or liabilities arising under any agreement to which the operator is a party”.
Two of the provisions are:
- paragraph 8(5) – a covenant, condition or agreement which would have the effect of preventing or restricting the taking by any person as a potential subscriber of any step under this paragraph shall be void to the extent that it would have that effect; and
- paragraph 21 – what this means is that the owner and operator cannot agree that a Court Order does not have to be obtained before the operator can be required to remove the apparatus.
(The third provision relates to enactments passed before the Telecommunications Act 1984 and is no longer practically relevant.)
Paragraph 20 (as referred to above) is not specifically mentioned in paragraph 27(2) although paragraph 20(1) does provide that the right to give the notice requiring alterations under paragraph 20 applies, notwithstanding the terms of any agreement binding the person requiring the alterations. It would therefore appear that the right cannot be “contracted out” although some of the detail of paragraph 20 may be amended by contract through for example a “lift and shift” provisions (which enables conduits and other apparatus to be moved). The contractual provision may, for example, change the paragraph 20 starting position that the owner/occupier bears the operator’s expenses of altering the apparatus, although query why an operator would agree to this at its own cost where the owner/occupier wants the alteration.
Paragraph 27(2) in effect provides that paragraph 21 is not without prejudice to rights or liabilities arising under any agreement to which the operator is a party. That in effect is operator’s “security of tenure” in relation to the apparatus that they have installed at the owner/occupier’s property.
If an owner/occupier cannot fulfil his plans for the property because of the operator’s code powers, he may be able to claim compensation. If the value of the owner’s interest depreciates because of this, then the owner is entitled to compensation from the operator equal to the amount of the depreciation (paragraph 4.4). The amount of compensation is a matter for agreement between the operator and the relevant party and, in the absence of agreement, it is for the Lands Tribunal to determine.
The claim must be made through the giving of a notice to the operator containing certain required particulars. There is a time limit on the giving of that notice and it must be given no later than within three years of the Claimant becoming the occupier of the relevant land.
Funds for liabilities
Following the dot.com crash (and the experience with Ionica and KPNQwest), there was concern that Communications Providers might become insolvent and that any resultant works to their networks would fall to the public purse. As a result the Electronic Communications Code (Conditions & Restrictions) Regulations 2003 were made which require, amongst other things, Communications Providers with Code Powers to ensure that sufficient funds are available to meet any ‘specified liabilities’.
Communications Providers are required to assess the level of funds required themselves and to put in place appropriate arrangements.
Oftel, Ofcom’s predecessor, published guidelines on how operators could assess the requisite level of funds. Suggested potential valuation methodologies include:
- the acquisition costs of the infrastructure;
- the book value of the infrastructure assets, adjusted for depreciation;
- the annual maintenance cost of the infrastructure assets;
- the depreciated replacement costs of the infrastructure; and
- the rateable value of the infrastructure assets as determined by the District Valuer.
Communications Providers are free to put in place whatever arrangement they choose for the funds, albeit that Ofcom have suggested a form of specimen bond.
Ofcom assess compliance by reference to each Communications Provider’s annual self-certification.
A Communications Provider must submit a certificate to the Director which states that in the reasonable opinion of the board (in the case of a company) the Communications Provider has fulfilled its duty (‘primary duty’) to ensure that sufficient funds for liabilities are available. In the case of a company the certificate must be approved by a resolution of the board, and before making the statement in the certificate the board must have first made appropriate enquiries exercising due diligence into whether the Communications Provider has fulfilled the primary duty. The certificate must also state the amount of funds which have been provided for, and the systems and processes which have enabled the board to form its reasonable opinion referred to above. The director or company secretary, in the case of a company, signs the certificate, and it must be approved by the board. It must then be provided to Ofcom. A short statement describing the methodology used to assess liability may also be supplied but detailed calculations are not required. The statement could either be in the certificate itself or it could accompany it.
(With thanks to Warren Gordon for his input on Code Powers)