I am grateful to the Minister for his helpful remarks before the Committee adjourned. I agree that we should not become overly concerned with technical drafting, but in Committee, it is important that we bring out the important issues. Many interested sector representations have been made to us, and the noble Lord, Lord Aberdare, has already raised some of them. I am greatly indebted to Mr Jeremy Moody of the Central Association of Agricultural Valuers, who has immense experience in this field. I shall endeavour to be brief and, as the Minister said, I am sure that a period of reflection and dialogue will become necessary before Report.
In moving Amendment 26 I shall speak also to Amendments 29 to 36 and 41 to 43. It is a huge group, and I will endeavour to be as brief as I can, yet do justice to all the important matters that they raise.
I spoke earlier about the new code, which readjusts the balance of interests in infrastructure between operators and site owners. The code will extend largely untrammelled powers to operate, if the Committee is not careful. The new code makes substantial changes. Operators will have new automatic rights to upgrade and share, and cannot be charged extra for changes where, to their interpretation—the wording is as yet untested—there is minimal adverse visual impact or burden on site providers.
The new code will enshrine reassignment of code rights by the operators to communication providers, with no option for site owners to negotiate new terms for existing contracts. There may be no future bids for further rents to benefit site providers, as well as operators, for new technologies as they come on stream, bringing further income and wealth to operators only.
Code rights will continue to apply on any land transfer without any requirement to register these rights. These are some of the severe implications of all these changes and demand a balance of behaviour reflecting competing responsibilities and objectives in the various rights between the parties which will continue to wish to develop their businesses. The amendments in this group also have the intention of making the code work better in the business environment.
On Amendment 26, the Government’s stated policy intent with regard to the scope of the new EEC is not to disrupt market incentives for investment in passive infrastructure by establishing a legal framework to allow compulsory access to site towns in which infrastructure providers have made a significant investment. The Government seem to look to achieve this through the Bill by developing the definition of land over which operators will have code rights that exclude “communications apparatus” in line 13, page 152. There are questions around whether this does or does not confer mobile operators with code rights over purpose-built masts provided by infrastructure providers as the drafting in line 28 of page 93 goes significantly
further than this, creating the risk that non-telecom infrastructures used for fixed line telephony will fall outside the scope of the code.
On the one hand, I am probing whether it is the Government’s intention to remove a significant proportion of sites from the scope of the code, diluting the impact of the code reforms. On the other hand, it should be made clear that non-telecom structures, such as electricity pylons, water towers, floodlights, church steeples, and so on, do not become electronic communications apparatus when an operator installs a dish or antenna on the structure and is therefore within the scope of the new code, subject to the full force of code powers.
Given the Government’s intention that code operators should be free to assign code agreements between themselves, Amendment 29, replacing paragraph 15(4), would give a better process for the fair treatment of site providers. It does not qualify the intended freedom to assign but it would establish a better process than that proposed by the Government so that, for example, the assignee would only have the benefit of the rights once a site provider is notified by the assignment. Secondly, the notice would state that there is an assignment, to whom and give an address in the United Kingdom for the service of notices on the assignee. The requirement that the address be in the United Kingdom would be consistent with other legislation, such as the Landlord and Tenant Act 1987 which makes rent enforceable against many tenants only when a new landlord has provided such an address. An address outside the United Kingdom would be problematic for many site owners and it would add to a sense that this was opaque.
Amendment 30 is proposed as an alternative to provide a better climate between operators and site providers. Paragraph 16 gives operators substantial but qualified rights to upgrade apparatus where it will have,
“no more than a minimal adverse impact”,
and to share apparatus where this does not impose an adverse burden on the site provider. That, however, could see operators simply proceeding with such plans, careless of the site provider who would only become aware of effects as they arose afterwards, so having to object only when the investment or action has already taken place. Many examples could be provided and I know that the National Trust is very concerned as to what may be interpreted as “a minimal adverse impact” if, in other people’s eyes, the apparatus could be described as a blot on the landscape.
This amendment would resolve this in a practical way, by requiring the operator to notify the site provider beforehand, so that these issues can be considered before the event. It gives a timetabled structure for the site provider to object and refer the matter to arbitration— a more appropriate forum for such an issue than a court or tribunal. Failure to meet that timetable would enable the operator to proceed with the benefit of code rights.
Amendment 31 seeks to underline the Government’s intention that the new code will initially apply only to new sites and new agreements. The Government have yet to clarify the transitional arrangements whereby agreements can be renewed over the longer term, perhaps
taking 15 to 20 years to complete. There is a fear that many existing agreements will potentially be exposed to challenge, on what may be considered rather spurious grounds, in order to be superseded by new agreements under the new code. This amendment will ensure that the focus remains on rollout to new sites and increased coverage, rather than operators tearing up current contracts. This will initially avoid network disruption, protect good working relationships and provide clarity and certainty to businesses and communities.
Amendment 32 makes reference to the code of practice which Ofcom is initially consulting on, to clarify behaviour between the parties, and which we will be discussing when we consider paragraph 103. Experience in other sectors, be it the water industry or even retail supermarkets, shows that however good a code of practice may be it has no merit if it is not remembered and respected. This amendment is one of several which seek to achieve that status. It would give the code of practice default status as part of all agreements, save where, and to what extent, the parties or the court decide otherwise. It does not impose the code of conduct where the parties see parts of it as inappropriate to their specific circumstances.
Amendments 33, 34, 35 and 36 are intended to determine that, under the new code, consideration or price is properly based on the market and agreement, taking into account all the relevant features in the wording of the amendment, and from the fact of the date of the occupation being either before or after the introduction of the new Electronic Communications Code. The amendments refer to paragraph 23 of the schedule and are extremely complex on the issues they raise. They are intended to specify that the value of code rights and agreements still have a reference to the established market-value methodology, reversing out the no-scheme approach of the new code until any reference is needed in any court or tribunal. Under Amendments 33 and 34, any move to a new system of compulsory agreement must offer businesses certainty, while at the same time seeking to avoid dispute. These factors are listed, especially regarding future additional burdens as technology advances and greater access is required.
The proposed new code importantly affirms that the payments for rights, taken under the code, are still to be assessed as a price and not as compensation—as market value, not recognition of loss. That maintains the consistent principle that the code operates on the basis of agreement, albeit that this may on occasion be imposed. In this, we stress that all definitions of market value in professional valuation standards turn on the price expected to be agreed between willing and well-informed parties after suitable marketing and with no compulsion. It is stressed that the concept of market value excludes ransom value—a special category which also includes a marriage value for properties. Market value is the value of a property in a market, not its particular value or worth to any individual. In this case, the market value need not be the value it may have to either the operator or the site provider. This is where the schedule’s current paragraph 23(3) is confusingly worded as it imports a concept that is not market value. Paragraph 23(3) should be deleted as confusing and inappropriate. The Government’s policy, if approved,
would be more clearly stated by a straightforward disregard of the use of the apparatus for electronic communications purposes.
There is no requirement for a market value to be a high price or one that always goes up. Properly functioning markets will see prices reflect their realities and so the value of some sites will be less than others and may, according to circumstances, go down. Thus, sites that can serve only distinctively small or remote areas or those with low populations may naturally have a lower value than ordinary masts, but that is to be found in the market. Ideally, the policy should, as now, be as simple as that. The consideration should be market value. The present arrangement has worked well and with little litigation for perhaps two centuries, and the core concept is an agreement—with recourse to an agreement being imposed by a court—for which the price is market price and market value. That would remain the most satisfactory answer.
However, the Bill’s proposal in paragraph 23 compromises the market value approach to an unknown extent by a change in policy announced in May—that the assessment of market value is to be on a no-scheme basis, making it subject to an awkward series of disregards and special assumptions. The drafting needs significant improvement to assist both the parties and their valuers in applying the intended basis. Many in the sector believe that it would be more rational and practical to stay with the present basis and do not see that that impedes the development of the sector, as rents paid for masts and cables are a very small share of the operational costs of operators and assist affected owners to view the infrastructure positively.
I have already spoken about costs and their relative size in considering an earlier amendment. The valuation change would have a substantial impact on many site providers who may no longer to wish to have their land used in this way, and create issues that operators may not yet have foreseen. It may be much harder for school governors, for example, a village hall committee or a church council to explain why they should enter into an agreement affecting their property if they are not to be properly paid for it, especially if they are aware that it may complicate future plans they may have for the structure. That issue is equally critical for those with valuable buildings offering good sites for infrastructure but for whom it can simply be an ancillary inconvenience, impeding redevelopment or even necessary repairs and maintenance. They are deterred from having code apparatus by such events as expensive and frustrating delays to critical repairs that could be needed to a building, caused by an unresponsive operator.
There is concern in professional practice about the artificiality of the assumption to be imposed by paragraph 23(4)(b) that requires the parties or their valuers to disregard the statutory limitations which the code will apply to agreements in permitting assignment or the sharing or upgrading of equipment. The effect of this is that valuers will be asked to assess the consideration payable for a site on terms that cannot exist in practice because they are not permitted under the code. This is akin to asking for a semi-detached house to be valued as if it was a detached house, but in a world where no detached house exists; or indeed, as I am advised,
to value a horse, whether a racehorse or a nag, by reference to an achieved sale value for a unicorn. I have not seen a unicorn, not even in my dreams.
If agreements are effectively to be all-inclusive on these points, they should be valued as such. Developments in the marketplace may often mean that the current financial conditions or bars on site sharing in agreements are already ineffective, meaning that rental differences between the regimes may, in reality, be less marked than might have been supposed. To expressly recognise the proposed inability to bar assignment, site sharing and upgrading would remove an assumption that is not only artificial but contrary to practical and commercial reality. That would enhance transparency with the use of direct comparables and aid the functioning of the market that delivers this infrastructure.
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Paragraph 24(4)(b) of Schedule 1 should be deleted so that the consideration payable for an agreement is based on actual terms agreed. There would be no disadvantage in doing so, because all agreements will be treated on the same basis, but the valuer can assess what actually exists instead of a hypothetical agreement which can never exist.
Even in implementing the policy stated by the Government, we fear that the present wording of paragraph 23 does not properly deliver the official objective or fit with recognised professional valuation standards. The drafting here represents the simple transfer of parts of the alternative valuation provisions in the Infrastructure Act 2015 into their paragraph 23. This process has resulted in confused wording, which would be better drafted afresh to achieve clarity of concept and effectiveness of application. Redrafting is necessary to enable the Government’s own approach to be delivered in the new code in a way that is clear and comprehensible to professional valuers and the tribunal that is to decide disputed cases. We also suggest further clarification to affirm that the full physical and legal impact of the rights taken is properly assessed—proposed sub-paragraph (3) of Amendment 34 would assist in that.
Even accepting the Government’s policy here, with its special assumptions for the market value approach, the present drafting is an insecure basis for sound valuation by valuers or determination by the tribunal in accordance with professional valuation standards. It should be revised.
Amendment 33 would also assist in clarifying the asset that is to be valued—that is, the rights being granted rather than, as the Bill presently says, the site provider’s agreement.
Amendment 34 offers four replacement sub-paragraphs. Proposed sub-paragraph (3) would be welcome as a useful addition in helping parties, advisers, valuers and the court/tribunal in applying this recast area of the law by drawing attention, in a non-exhaustive way, to the range of possible issues that could be considered and found relevant to the assessment of consideration. The clarity given by that provision would help to minimise early uncertainty and conflict as the new law is first used and custom and practice are identified.
In particular, it makes it clear that rights taken can go well beyond the land occupied by the apparatus. The tribunal has no previous experience of dealing with matters under the code.
However, proposed sub-paragraphs (4) and (5) would repeat the Government’s confusion between market value and worth. Their intended effect is understood to be that, where there are current, subsisting agreements for apparatus, the basis for rent for subsequent agreements should remain as now; where there is a new site, the rent for it should be on the Government’s proposed basis. That would be better achieved by stating the Government’s understood policy objective here, that the use of the apparatus for electronic communications apparatus should be disregarded.
Proposed sub-paragraph (6)(b) would beneficially remove the requirement to disregard the real-world benefits of the intended new powers for operators to assign agreements and upgrade or share apparatus. That would be welcome.
I apologise that that group of amendments has taken quite a long time to expand upon. I am sure that the Minister has got the main thrust of the arguments that are being made.
Turning to paragraph 103 of Schedule 1 and Amendments 41 to 43 in this mini-group, the main thrust of Amendment 41 is introducing the notion of a code adjudicator rather than Ofcom, under the last sub-clause. The amendment would allow the code adjudicator to have matters considered in the preparation and revision of the code of practice, so that it reflects the experience in the market sector.
Ofcom has until now had very little involvement with the Electronic Communications Code beyond its light-touch licensing regime to approve code operators, with no apparent subsequent monitoring of conditions, such as operators’ provision for decommissioning apparatus. It is now being given a serious role in regulating matters where site providers and infrastructure providers should also be treated equitably. Yet historically, Ofcom has had duties only to the operator. This is important. Amendment 43 extends explicitly the range of people it should consult. I beg to move.