My Lords, perhaps I can clear up one thing for the noble Lord. I have not been in this House much longer than he has but I was in the Whips’ Office for two years and I have a vague understanding of what is going on. The noble Lord, Lord Foster, obviously missed my thrilling answer on the last group but I responded to it and the House resumed before the Deputy Chairman called the amendment. Therefore, the amendments in that group were dealt with and we resumed the Committee stage of the Bill with the Front Bench withdrawing their amendment. That got us back to where we should be, which is with this group. Therefore, I think that everything is in order.
Amendment 26 seeks to alter the definition of electronic communications apparatus. I too was rather surprised by some of the things that the noble Lord, Lord Grantchester, said. I shall try to explain where we are on this subject, although I think that the noble Lord, Lord Foster, made my case for me. This is a fairly interesting proposal. I will take a look at what the noble Lord, Lord Grantchester, said in the cold light of day and we will obviously have discussions about it if necessary. I accept that he has made a long case, but I cannot answer it in complete detail today.
We have had many meetings with noble Lords on this subject and we have discussed whether various edifices such as water towers are apparatus. The Government are clear that the code should not interfere with incentives to invest in infrastructure. The reformed code makes a clear distinction between land and apparatus, and an operator cannot exercise code rights against another’s infrastructure. A building used solely for enclosing apparatus is appropriately defined as apparatus. This might include a small brick-built cabin that was part of a site. Permitting operators to secure compulsory access to such a building could encourage one operator to exploit another’s existing investments, and this would naturally create disincentives for future investments in digital communications infrastructure. Here, I agree with the noble Lord, Lord Foster.
Equally, a range of structures are adapted for use in providing a digital communications network. Whether a structure has been adapted so as to make the entire structure “apparatus”—rather than only part or none of it—is a question of fact and degree, having regard to what the parties have agreed, the nature of the installation and the extent of the adaption, as outlined in my letter. These are fact-sensitive questions that should be the proper subject of agreements and, if necessary, determination by the courts or tribunals. As such, I do not consider the amendment to be appropriate or necessary.
Amendment 29 seeks to do two things. It would ensure, first, that the assignor remains liable to the landowner and, secondly, that the assignee does not
have the benefit of the assignment unless the landowner is given notice of it. We want to ensure flexibility for operators and continuity of service for consumers when companies go through mergers or restructuring. This amendment would frustrate that objective, which was based on the Law Commission’s recommendation that code agreements can be freely assigned. Further, the additional protection the amendment seeks to give the landowner is unnecessary: if no notice of assignment is given, the current drafting means that both the assignor and the assignee are liable to the landowner under the terms of the agreement, which is a substantial protection.
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Amendment 30 seeks to limit the exercise of new automatic rights to upgrade and share apparatus. The code already has a process for upgrades, including serving a notice on a site provider; while I hope parties will be able to agree, where they cannot, the matter can be referred to the courts. These new rights are essential to the efficient deployment and maintenance of networks; limiting them is likely to impede the deployment of future technologies and slow progress towards improved connectivity, goals that your Lordships support.
Amendment 31 seeks to include a stipulation that the courts cannot impose code rights where there is a subsisting contractual agreement. The Government are clear that parties should not be able to ask the courts to reopen an existing agreement. However, if an operator requires an additional code right on a site—for example, to add a piece of equipment—it is appropriate that it should be able to seek it, either by agreement with a site provider or by order of the court. If granted, the terms of the original agreement would not be affected and the operator would have to pay for the new right.
Amendments 32 and 42 propose that the code of practice should form part of an agreement unless either the parties or the courts state otherwise. This is likely to cause difficulties. A code of practice is about wider behaviour, rather than contractual rights, and matters that are included in it are unlikely to be appropriate to include in contractual terms. The actual effect of this amendment may, in practice, be to confuse contractual obligations and create more uncertainty. I understand the desire to ensure that Ofcom’s code of practice effects real change in behaviour within industry. It will have weight. Indeed, failure to abide by it could be taken into account by a court or tribunal in the event of a dispute.
Amendment 33 deals with the valuation of code rights. The requirement to take into account all the terms of the agreement in arriving at the market value is expressly set out in paragraph 23(2)(c) of Schedule 1, and paragraph 23(2) includes the requirement to take consideration of the date the market value is assessed. Therefore, the amendment is unnecessary.
Paragraph 23 of Schedule 1 sets out the basis on which the consideration for the agreement of code rights is assessed; namely, on a no-scheme basis. I will look closely at what the noble Lord, Lord Grantchester, said on this subject but the rationale behind the provision is that landowners should be paid appropriately for
use of their land, but not be able to extract additional revenue from its value by the provision of electronic communications services.
Amendment 34 details what the court should take into consideration when assessing the market value on the new no-scheme basis. This is unnecessary because under paragraph 23 of Schedule 1 the court is already instructed to assess value based on all the terms of the agreement. The amendment then seeks to limit the application of new reforms to land which has not previously been subject to code rights. This would essentially establish two separate markets for access to land, which it appears would never merge. This could create distorted incentives. Furthermore, the amendment would significantly reduce any real savings from reforms, and could well risk our ambitions for greater UK connectivity and coverage. Limiting new rights to upgrade and share in this way will make it even harder to deploy new technologies like 5G.
We understand your Lordships’ concerns about land valuation. However, the reforms introduced will not apply retrospectively and existing contracts will remain unaffected. Equally, the Government are confident that market incentives will limit any rapid or stark reductions in rates. It clearly remains in the interests of both operators and site providers to continue to make consensual agreements and use the courts only as a last resort. Under these circumstances, our commissioned analysis suggests that market rents may reduce by up to 40%.
Amendments 35 and 36 seek to remove the no-scheme valuation basis by stipulating that market value should be assessed based on the value of the right to the operator and not the “relevant person”. The amendments would essentially reverse government policy to introduce significant savings to the cost of infrastructure deployment. The impact of these reforms would risk the opportunity to effectively expand UK coverage and connectivity. Given the demand for digital communications services, it is time for real reform in the way that digital communications networks are deployed. We cannot accept the amendments.
Amendment 40 deals with the right to install overhead lines. I responded to this in the previous group. To summarise, we consider that the code provides sufficient protection for landowners who may be affected by overhead lines, and therefore the amendment is not necessary.
Amendment 41 seeks to create a code adjudicator to examine breaches of the code of practice and impose sanctions. The Law Commission reported on the need for a code of practice and concluded that:
“Mindful of the move towards de-regulation, and of the resource implications of closer supervision, we are not making any recommendation that Ofcom’s supervisory role should increase”.
In the same spirit, we do not consider that a costly and resource-intensive statutory code of practice or adjudicator is necessary. The courts, as a matter of general practice, will consider compliance with existing codes of practice when awarding costs.
Amendment 43 seeks the inclusion of a specific reference to “representative landowners” and “third party infrastructure providers” as parties that Ofcom is obliged to consult when undertaking duties at paragraph 103
of Schedule 1. In practice, Ofcom has worked closely with representatives from all the groups proposed by the amendment, as well as with other experts and interested parties, in developing the draft code of practice, which will be subject to a further, and public, consultation in the near future. As such, the Government do not consider that this amendment is necessary.
Again, I apologise for the length of my response, but in the light of these explanations, I hope that the noble Lord will feel able to withdraw his amendment.