Committee (1st Day) (Continued)
I am sorry, my Lords, but I am in some disarray, because my noble friend Lord Grantchester is about to walk in and take over.
Clause 4 agreed.
Amendments 24 and 25 not moved.
26: Schedule 1, page 94, line 3, at end insert—
“(4) For the avoidance of doubt—(a) neither the inclusion of such a building within the meaning of a structure, nor anything else in this code, shall prevent any code right for further electronic communications apparatus being conferred on any operator in respect of the roof or external walls of such building; and (b) any structure, whether or not a building, which would not otherwise be considered electronic communications apparatus, shall not be considered as falling within sub-paragraph (1)(d) simply by reason of the installation upon that structure of any operator’s electronic communications apparatus under this Code or other lawful agreement.”
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 have the benefit of the rights only once a site provider is notified by the assignment. Secondly, the notice would state that there is an assignment and 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 to 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, for example, school governors, 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.
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 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 or 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.
My Lords, I have been a Member of your Lordships’ House for just 14 months, so I am relatively new. That probably explains my confusion as to what exactly happened to the previous string of amendments. I look forward to the Minister’s response to them, even though they appear to have been withdrawn at a later stage—but I am sure it is all very simple.
Another surprise is that I never thought I would hear a debate in which a spokesman on the Front Bench, in this case the noble Lord, Lord Grantchester, would appear to be singing the tune of the Country Landowners’ Association. I say openly to the Minister that, on these Benches, we are broadly supportive of the new Electronic Communications Code. The noble Lord, Lord Grantchester, is absolutely right to ask a number of questions about some of the details of it, and concerns have been raised about some aspects by a number of organisations. However, we believe it is vital that the new code is brought in quickly, because we want to see an expansion of the infrastructure that will enable us to deliver the increased connectivity that this country desperately needs.
I do not want to go through all the amendments in this group in the way that the noble Lord, Lord Grantchester, did. We look forward to the Minister going through them—and the previous ones—in a few minutes. However, I want to pick up one amendment. It is probably the one that has most surprised me—the lead amendment in this group, Amendment 26. The noble Lord, Lord Grantchester, acknowledged that this was a probing amendment. But, at the same time, he made it fairly clear that he was quite supportive of what was contained within it.
On these Benches, we believe that independent wireless infrastructure providers have benefited this country enormously by investing in the development of alternative structures—water towers, pylons and so on—to make them some of the most productive telecommunications facilities in the country and improve connectivity, not least in rural areas. Our real concern about Amendment 26 is that, if accepted, it could alter investment planning by independent infrastructure providers in a way that would curtail much of the development we want to see.
I believe the issue raised in Amendment 26 was adequately addressed in a letter that the Minister sent to many of us some time ago. For the benefit of Members who do not have the letter in front of them, he said:
“Code rights can only be obtained to install apparatus on, under or over land. Where operators have invested significantly in the physical apparatus that underpins coverage they should be able to achieve appropriate commercial returns. Alternative structures that have been adapted for the purpose of delivering network coverage are essential to connectivity and there will be cases where code rights do not apply”.
He said that questions had been asked,
“about whether code rights apply to various structures such as church steeples and water towers”—
and so on. But he goes on to make it very clear when he states:
“Whether a water tower has been adapted to the extent to which it can be considered to be electronic communications apparatus will depend on the specific circumstances of the adaptation … We have established a clear and robust legal framework within which parties can resolve matters by agreement and if necessary apply to courts to resolve any disagreements”.
That is very clear—we want to protect these sorts of developments because we do not want to attack the investment that we hope will be made in the future.
That position is exactly the same as the one taken by the Labour Party Front Bench when this issue was debated in another place. Louise Haigh said:
“We would also like to explore what consideration has been given to how we can ensure that independently-owned infrastructure can have a significant role in the sector and, if possible, make up a larger proportion of our infrastructure in line with the global market. The much-discussed difficulties of the broadband roll-out highlight the issues when infrastructure is owned by a private monopoly. We should seek to break up this market as much as possible. For that to happen, investment incentives for independent infrastructure need to be maintained”.—[Official Report, Commons, Digital Economy Bill Committee, 20/10/16; col. 165.]
I entirely agree with the Front Bench of the Labour Party in another place on this issue—but I confess that I am concerned and confused by the Labour Party Front Bench in this House. I look forward to hearing where the Minister stands on this.
Perhaps I may give the Minister notice that, having said that we are very supportive, on the next group of amendments we may have a slight disagreement—but we will have that debate a little later this evening.
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.
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 such as 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.
I am very grateful to the Minister for his reply. This group hangs together as quite a difficult jigsaw of amendments. To go through them again in replying to his reply would be excessively tedious, I am sure, because they interrelate in many different ways. We are happy to look at the Minister’s reply and, no doubt, will meet later to try to understand our way through it all.
I say to the noble Lord, Lord Foster, that my brief did not come only from the Country Land and Business Association. I am glad that he received its communication, just as I did, but he may not have received the much wider range of submissions I did from many others who have to adjudicate between interests en masse, in urban and rural areas, including local authorities, health authorities and many more. If one of their buildings hosts such an apparatus, they may face many complexities in wanting to develop their operations and around the rights that operators will have in determining how that apparatus is maintained. The CLA did not endorse any of my comments in the amendments on the market value. Like Members from all around the House, it wishes the rollout of communications to proceed as fast as possible.
I merely wished to draw out some of the difficulties in the Government’s drafting. That has been achieved tonight, but I would be very grateful to the Minister if we could look at it all again to make sure there are no unintended consequences in any of the provisions. I am very glad of his clarifications and notifications—for example, on Amendment 31—which were very helpful. With those comments, I am very happy to withdraw the amendment tonight.
Amendment 26 withdrawn.
27: Schedule 1, page 95, line 34, at end insert—
“(e) must be notified to Land Registry, Registers of Scotland or Land and Property Services, whichever is appropriate.”
My Lords, the Minister will be aware that at Second Reading I argued that there should be a public record kept of when rights over land are granted under the Electronic Communications Code. The Minister said that he was not minded to do that. He told me that,
“prospective buyers will be able to ascertain what code rights might apply to land by inspecting the land”.
If I went to see a field or a piece of land that I owned and saw nothing on it, it would not mean that there were no fibre-optic cables underneath it, and I am not sure how I would find that out by inspection. He gave me another option of,
“making appropriate inquiries before the contract”.
If I have a piece of land with nothing apparently on it, I have absolutely no idea of to whom I would start making those inquiries. Perhaps the Minister can assist me. He also said—presumably it was the basis of his reply—that the Law Commission had considered this issue, and as a result the Government were going to stay where they were, maintaining,
“the position under the existing code”.—[Official Report, 13/12/16; col. 1226.]
I therefore thought it would be a good idea if I looked at what the Law Commission said about this matter and the existing code. It said in its report:
“Paragraph 2(7) of the 2003 Code states:
‘It is hereby declared that a right falling within sub-paragraph (1) above is not subject to the provisions of any enactment requirement the registration of interests in, charges on or other obligations affecting land’”.
That is what is to be continued, according to the Minister, in the new arrangements. Yet the Law Commission said of this:
“It is not clear what this means”,
“RICS noted that: ‘the current situation, whereby Code Operators are unsure as to the correct interpretation of paragraph 2(7) of the Code, has led to some Code Operators registering their legal agreements and others deciding not to do so’”.
Following that, the Law Commission proposed a significant change to the arrangements. That appears in paragraph 2.116 of its report. In coming to that conclusion, it noted that some organisations proposed that we change the situation. For instance, Mobile Phone Masts Development Ltd said:
“There is no reason why rights created or granted should be exempt from the LRA 2002”—
the Land Registration Act 2002—and that:
“It is in the public interest for the rights/obligations to be recorded on the register”.
Some, including the Agricultural Law Association, took the view that it should go even further and that some things that currently would not be covered under the code should also be covered by land registration. Others, as the Law Commission pointed out, had a completely opposite view. The Country Land and Business Association, to which I referred earlier, and BT,
“suggested that a requirement to register would place an unwelcome administrative burden on Code Operators”.
I can see that the Minister was in a difficult position because some people wanted one thing and some wanted the other, but his solution has landed us back at the very thing that currently exists, of which the Law Commission says:
“It is not clear what this means”,
and which others say is a confused situation. In that difficult position, the Minister would no doubt look to the Law Commission’s final conclusions. I shall read two of them out and ask the Minister to tell me which of them will be registered in the Land Registry and which will not, and why he will not support my simple amendment, which would require that all rights conferred through the ECC be registered in the relevant Land Registry, depending on the system the devolved Administrations have.
The two recommendations from the Law Commission are, first:
“We recommend that where Code Rights are conferred by a lease, the revised Code should make no special provision as to who should be bound by the lease and its provisions, and should not amend or disapply the normal rules of land registration”;
“We recommend that where Code Rights are conferred otherwise than in a lease, the revised Code should provide for them to bind successors in title to the Site Provider who granted them, and those with an interest subsequently derived from the title of the Site Provider, as if they were property rights”.
Can the Minister tell me which of those two should be registered and why we should not just register all of them for simplicity?
My Lords, I start with the noble Lord’s test of which of the two should be registered. The answer is none because we do not think we should have registration of these rights. However, I accept that there are many issues about the Law Commission, which I will investigate and come back to him because I do not have all the answers at the moment. I am not by that guaranteeing that we will accept the amendment but I accept that he has made some points that deserve a closer look before Report.
The amendment proposes to include a requirement for code agreements to be notified to the Land Registry. The noble Lord will not be surprised to know that we have not changed our opinion on this. We held a consultation on the code in February 2015 and one of the issues consulted on was land registration. We concluded then that code rights should not be subject to a requirement that they are registered. This reflects the position under the existing code, which the noble Lord mentioned, which has worked effectively since 1984 and avoids creating unnecessary administrative burden.
When buying land it is usual to inspect the physical property and to make inquiries before contract to establish what burdens may be on the land that are not registered rights. These include standard checks by purchasers and conveyancers which should identify whether there are any existing code rights over the property, in the same way that when a property is bought in other circumstances the onus is on the seller to inform, and that becomes part of the contract.
However, as I have said, I accept that the noble Lord has made extra points about the Law Commission and so, on the basis that I will look at those before Report, I hope he will be able to withdraw his amendment.
I am grateful to the Minister for his helpful reply that he will look at the matter further. With that assurance, I beg leave to withdraw the amendment.
Amendment 27 withdrawn.
I should inform the Committee that if Amendment 28 is agreed I cannot call Amendment 29 by reason of pre-emption.
28: Schedule 1, page 97, leave out lines 11 to 40 and insert—
“(1) Any agreement under Part 2 of this code is void to the extent that—(a) it prevents or limits assignment of the agreement to another operator, or(b) it makes assignment of the agreement to another operator subject to conditions (including a condition requiring the payment of money).(2) Sub-paragraph (1) does not apply to a term that requires the assignor to enter into a guarantee agreement (see sub-paragraph (5B)).(3) In this paragraph references to “the assignor” or “the assignee” are to the operator by whom or to whom an agreement under Part 2 of this code is assigned or proposed to be assigned.(4) From the time when the assignment of an agreement under Part 2 of this code takes effect, the assignee is bound by the terms of the agreement.(5) The assignor is not liable for any breach of a term of the agreement that occurs after the assignment if (and only if), before the breach took place, the assignor or the assignee gave a notice in writing to the other party to the agreement which—(a) identified the assignee, and(b) provided an address for service (for the purposes of paragraph 91(2)(b)) for the assignee.(5A) Sub-paragraph (5) is subject to the terms of any guarantee agreement.(5B) A “guarantee agreement” is an agreement, in connection with the assignment of an agreement under Part 2 of this code, under which the assignor guarantees to any extent the performance by the assignee of the obligations that become binding on the assignee under sub-paragraph (4)(the “relevant obligations”).(5C) An agreement is not a guarantee agreement to the extent that it purports—(a) to impose on the assignor a requirement to guarantee in any way the performance of the relevant obligations by a person other than the assignee, or(b) to impose on the assignor any liability, restriction or other requirement of any kind in relation to a time after the relevant obligations cease to be binding on the assignee.(5D) Subject to sub-paragraph (5C), a guarantee agreement may—(a) impose on the assignor any liability as sole or principal debtor in respect of the relevant obligations;(b) impose on the assignor liabilities as guarantor in respect of the assignee’s performance of the relevant obligations which are no more onerous than those to which the assignor would be subject in the event of the assignor being liable as sole or principal debtor in respect of any relevant obligation;(c) make provision incidental or supplementary to any provision within paragraph (a) or (b).”
My Lords, in moving Amendment 28 I shall speak also to Amendments 37 and 38.
Paragraph 15 of the new Electronic Communications Code provides protections for landlords when a code agreement is assigned from one operator to another. This might occur when an operator is bought by another company or an operator transfers infrastructure assets to another company. Amendment 28 extends these protections to landowners in Scotland. This follows extensive discussion with the Scottish Government on how to bridge the differences in land law across the United Kingdom. In applying these protections to Scotland we have removed the reference to the Landlord and Tenant Act 1995 and instead replicated the relevant provisions in paragraph 15.This improves clarity and avoids reference to a law which is applied only in England and Wales. Paragraph 15 does not affect the position of third-party guarantees that may have been given in relation to the original agreement.
Amendment 38 removes paragraph 59, which deals with what happens to electronic communications infrastructure installed on or under a road which then ceases to be a road. An unintended consequence of paragraph 59 is that it transfers the costs associated with the alteration of equipment found on a stopped-up road from the landowner to the operator. Removing this paragraph preserves the status quo arrangement that the Law Commission seeks to maintain. Amendment 37 is consequential to Amendment 38. I beg to move.
Amendment 28 agreed.
Amendments 29 to 36 not moved.
Amendments 37 and 38
37: Schedule 1, page 113, line 15, leave out “or 59(8)”
38: Schedule 1, page 127, line 32, leave out from beginning to end of line 17 on page 128
Amendments 37 and 38 agreed.
Amendments 39 to 43 not moved.
44: Schedule 1, page 149, line 4, at end insert—
“Code of Practice Adjudicator
The Secretary of State must appoint a person who shall act as an adjudicator with the powers—(a) to determine the validity of complaints as to breaches of the code of practice; and(b) on finding a breach of the code of practice, to determine whether it warrants an award of compensation, costs between the parties or a penalty as the adjudicator shall deem appropriate and proportionate.Status of the Code of Practice
Compliance with the Code shall be a material consideration—(a) by the court in considering disputes referred to it under this Schedule as may be relevant to both the determination of the dispute and any ancillary matters including the award of costs between the parties; and (b) by the adjudicator in considering any question arising over the grant or retention of a licence to Operator enabling it to have the benefit of Code Rights under this Schedule.”
My Lords, I will move Amendment 44 and my noble friend Lord Stevenson will speak to Amendments 47 and 48. Paragraph 103 requires Ofcom to ensure the preparation of a code of practice as to behaviour regarding information in negotiations and operations under this schedule. Ofcom, new to this level of detail in this sector, has commenced that process and a working party is well advanced in drafting. It is clear that the Government set considerable store by the potential of these codes of practice to lubricate the operation of the statutory Electronic Communications Code in practice. By setting out expectations on behaviour and conduct, the codes of practice are intended to address concerns that many stakeholders expressed about the imbalance of power between operators, which are usually very large corporations, and those with an interest in the site on which the apparatus is sited, who may be individuals, small businesses or local authorities.
I am reminded of the Groceries Code Adjudicator, where the Government were resistant to introducing the power to fine transgressions, believing that reputational damage was enough. I am pleased to reflect that the Government reconsidered and, in that piece of legislation, allowed supermarkets to be fined for unfair practices.
There is also a parallel in the water industry. Written in the early 1900s, its guidance is still relevant and practical today. It is very largely ignored in practice, meaning that much work results in damage to property and business. The problems arise in part because of the strength of the water companies’ statutory powers and in part because the work is increasingly carried out by contractors and sub-contractors who are either not aware of the code of practice or whose contracts do not make reference to it. Breaches of the code of practice can only be taken to Ofwat, which will occasionally uphold a complaint and issue a minor financial penalty. In practice, few complaints are made to Ofwat, and as a result, it is not seen to be worth the effort involved.
I am concerned here that we draw lessons from both these codes as we try to decide how the Electronic Communications Code can operate effectively. In the communications industry, consumers already have the benefit of a referral to one or two ombudsman schemes if telecommunication companies do not deal with their complaints, but there is no parallel scheme in place for those whose land or buildings might be used or abused by telecommunications operators and their contractors.
With the model of the Groceries Code Adjudicator in mind from a sector with similar imbalances of power, our first proposed paragraph would provide for an adjudicator to hear complaints about breaches of the code of practice, with powers to make awards for restitution or penalties. Such a forum—especially if it is, as suggested, independent and accountable to the Secretary of State—would give all the more confidence that the code might be remembered so that it can, as intended, support better behaviour.
The second proposed paragraph would make compliance with the code a material consideration when awarding licences to a code operator or determining the grant or renewal of a code agreement. I suggest that the harder it is for these issues to be referred to independent resolution, the worse the operators will tend to behave. This perspective should also apply in this sector. I beg to move.
My Lords, we are now in our final group on the Electronic Communications Code, so I will spare noble Lords further explanation of what the code seeks to achieve. Amendment 44 is similar to Amendment 41, which we recently discussed. It seeks to create a code adjudicator to examine breaches of the code of practice and impose sanctions. I repeat that I will examine what the noble Lord, Lord Grantchester, said. However, we do not consider that a costly and resource-intensive statutory code of practice and adjudicator are necessary, for the reasons that I outlined on the last but one group.
Amendments 47 and 48 relate to points made by—
The Committee may have picked up that my noble friend was at pains to say that he was speaking only to Amendment 44 and that I would give a brief introduction to Amendment 47. I can almost anticipate what the Minister will say but I will still do that.
Would you like to do that now, before I reply?
The Clerk of the Parliaments has said that is all right, so obviously it is—he is the boss.
I will probably say what the Minister was about to say: that Amendments 47 and 48 are drawn from the reports of the Constitution Committee and the Delegated Powers and Regulatory Reform Committee. Both committees stated that they took a dim view of the way in which the powers expressed in Clause 6, on page 4, suggest that it would be possible for Ministers to make and pass secondary legislation that has not even been discussed with the Ministers of the devolved Assemblies and Parliaments. I would be grateful to hear what the Minister intends to do about that.
My Lords, it was worth hearing what the noble Lord, Lord Stevenson, said before I replied to it—although he may not agree by the end. As he mentioned, these amendments relate to points made by the DPRRC and Constitution Committee reports. I will take this appropriate opportunity to thank the members of those committees. We will be responding in full shortly, before Report.
Any amendments to devolved legislation would be related to telecommunications legislation, which is a reserved area of competence. As a matter of good practice, officials would consult with the devolved Administrations if we intended to make changes to devolved legislation. This commitment to the principle of good communication is referenced in the memorandum of understanding between the UK Government and the devolved Administrations. We will of course provide a fuller response once we have completed consideration of the DPRRC and Constitution Committee reports.
As this is the final group on the Electronic Communications Code, I will take this opportunity to assure noble Lords that there will be further opportunities for interested parties to shape the way that the new code is implemented. As I have already mentioned, Ofcom will hold a full public consultation on the code of practice that it is developing. Industry representatives have also agreed to work with DCMS to develop an industry code of practice, covering matters such as best working practices. So I hope that in the light of this, the noble Lord will be able to withdraw his amendment tonight.
I thank the Minister for his reply and in doing so, recognise his answer to Amendment 41. On Amendment 44, I will further draw out that there are many issues involved with this code which give operators quite extensive powers to assign without recognising or even informing site owners. They could lead to many problems further down the field. At some point, a code of practice might need a body other than Ofcom, which has no experience of any adjudication in this field.
Nevertheless, the Minister has replied extensively. We will look at all our amendments and, as I said in withdrawing my earlier amendments, take due cognisance of his remarks in considering how we might propose amendments on Report. If we can secure some agreement with him to some of our more challenged considerations, it would be much the better way to proceed. We shall see how we proceed. We will have the opportunity to look at these issues again on Report. With that, I beg leave to withdraw the amendment.
Amendment 44 withdrawn.
Amendment 45 had been retabled as Amendment 229A.
Amendment 46 had been retabled as Amendment 229B.
Schedule 1, as amended, agreed.
Schedules 2 and 3 agreed.
Clause 5 agreed.
Clause 6: Power to make consequential provision etc in connection with the code
Amendments 47 and 48 not moved.
Clause 6 agreed.
Clause 7 agreed.
Clause 8: Regulation of dynamic spectrum access services
Amendment 49 not moved.
50: Clause 8, page 6, line 5, after “make” insert “written”
I am sorry that we did not have the benefit of the contribution of the noble Baroness, Lady Byford. However, we have three amendments in this group. I will move Amendment 50 and speak to Amendments 51 and 52. These are small amendments that need not detain us long. They were drawn to our attention in correspondence with the Scottish Law Commission, which keeps a beady eye on your Lordships’ work. It has been a useful source of information and helpful advice on many matters, including these. It picks up relatively straightforward, rather minor but none the less important points.
This section of the Bill, on page 6 line 5, does not specify whether representations are to be oral or written. Amendments 50 and 51 suggest inserting the word “written”. Amendment 52 would ensure that the notices issued by Ofcom contain specifications about any right of appeal. At the moment there is silence on that. Clause 8 inserts a new section into the Wireless Telegraphy Act 2006 but it does not say how appeals should be made. It should do. I beg to move.
My Lords, these amendments relate to Clause 8, which enables Ofcom to register dynamic spectrum access service providers. Amendments 50 and 51 require representations to Ofcom about, for example, a possible breach of a registration condition to be made in writing. We do not want to constrain people from making representations in other suitable ways. Having this flexibility could enable minor infringements to be dealt with swiftly by Ofcom where appropriate. It wants to keep this flexibility. We are therefore minded to disagree with these amendments.
Amendment 52 would require a right of appeal to be specified in any notification to a DSA provider about a contravention of its terms of registration. Ofcom is already required to give the provider the opportunity to make representations about a notification before it can make a confirmation decision under new Section 53G. Decisions taken by Ofcom under Section 53G are appealable. However, the right of any notified provider to appeal to the Competition Appeal Tribunal against a decision would depend on whether the appellant properly followed the tribunal’s rules. It is for the tribunal to decide whether it has jurisdiction to hear the appeal.
Ofcom’s other enforcement powers do not require it to notify a provider of the right to appeal to the tribunal. This is consistent with the approach taken by other regulators, for example, Ofgem and the Competition and Markets Authority. For that reason, I hope that the noble Lord will be able to withdraw his amendment tonight.
I am grateful to the noble Lord for his comments. I am sure that the Scottish Law Commission stayed up to listen to them and we will be getting a pigeon at any minute. In the circumstances, I beg leave to withdraw the amendment.
Amendment 50 withdrawn.
Amendments 51 to 53 not moved.
Clause 8 agreed.
54: After Clause 8, insert the following new Clause—
“OFCOM power to impose caps upon wireless telegraphy licenses
In paragraph 3 of Schedule 1 to the Wireless Telegraphy Act 2006 (information to be provided in connection with applications), at the end insert “, or(b) that the applicant owns more than 30% of the total useable mobile phone spectrum in the UK and OFCOM has a reasonable belief that the award of further licences would have a damaging impact upon competition in a given electronic communications market.””
My Lords, this is an interesting issue which has been drawn to our attention, and we thought it would be worth putting a probing amendment down. I am grateful that grouped with it is a more substantial amendment in many ways tabled by our colleagues from the Liberal Democrat Benches. Both bear on much the same thing.
It is quite common in commercial arrangements to find that there are limits set on ownership and control in proportions which are often around 30%, to reflect the ways in which people might control a market. Yet the way in which the Governments of the day have set up regulations to control the spectrum has not introduced any official cap. Amendment 54 suggests that it might be time now, given the intensity of concern about how much the spectrum is valued and how it is used, to have some form of competition cap, of about 30%. This probing amendment is there to invite the Government to comment on that.
Having said that, I am sure the Minister will want to cover another point, which I think will be the subject of other amendments later. We will come back to this, but I want to flag up now that the spectrum is not a single thing—I cannot think of the right word—and its value depends on which part of the spectrum we are talking about. Lower frequencies and higher frequencies are different, so to impose a 30% limit on the spectrum that any company can own would be slightly perverse, but the issue is important enough to raise the point. Future amendments may deal with the dispersion of the higher-value spectrum among operators, particularly in mobile telephony, where there is concern—I am sure that the Minister expects us to raise this at the appropriate point in the Bill—over the current way in which spectrum has been allocated among the existing players in this field, so that the larger ones tend to have more of the higher-value spectrum. This is an issue we will need to come back to, but it is not the subject of this amendment, which deals with a general concern about the possibility of a monopoly operating within this area, which might be dealt with perfectly properly by a regulator, but where it might also help if there was a specific cap. I beg to move.
As the noble Lord, Lord Stevenson, intimated, Amendment 54A comes out of the same concern, but takes a slightly different view of the problem, placing the onus on the Secretary of State rather than Ofcom. The noble Lord, Lord Mitchell, spoke about fixed and mobile convergence, and at the heart of the concern here is that we are not talking about two separate markets when we talk about broadband and wireless; with the approval of BT’s acquisition of EE, one player not only has a dominant position in fixed line but already has the lion’s share of the spectrum already allocated, at 42%. As the noble Lord, Lord Stevenson, has said, this may come up in a different place, but it is at the heart of concerns expressed here.
Clearly the two weaker players were not allowed to join together, so we have an asymmetry in the wireless market, with two strong players and two weaker operators, which adds to the imbalance of spectrum allocation. We should be aware that spectrum allocation imbalance can clearly affect prices. It could affect access and also the speed with which technologies are rolled out: a land bank, or the equivalent, could be created.
It seems that Ofcom has already recognised this issue and is seeking to limit access to one of the bandwidths—the 2.3 gigahertz—but has not covered bands in the 3.4 gigahertz range so the principle appears to have been acknowledged by Ofcom but the measure has not been fully thought through. In a sense, we are debating how much of a problem this is, given that Ofcom has acknowledged that it is a problem.
This is, therefore, also a probing amendment, and it would place a requirement on the Government, rather than Ofcom, to assess the situation and come back with a thorough review of whether this really is an issue. Clearly there is a perception, but we need to measure that perception and publish some sort of assessment of whether 30% is the right limit and, indeed, whether there is a problem at all. I therefore ask your Lordships to consider this as a way of teasing out issues that, if they are not dealt with now, will come back to haunt us much later.
My Lords, these two amendments concern the allocation of spectrum for mobile telephone networks. There are two main issues: the percentage amount of the cap; and the role of Ofcom as opposed to the Secretary of State, as dealt with in the amendment of the noble Lord, Lord Fox.
First, on the amendment of the noble Lord, Lord Stevenson, the Government have released a considerable amount of spectrum for mobile broadband. Ofcom has just concluded a final consultation on rules for allocating it through an auction. The intention of the amendment—to ensure that Ofcom can enforce competition in the mobile market—is a worthy one. Ofcom already has the power to set appropriate rules for its spectrum licensing, taking due account of competition implications. Ofcom must award licences by processes that are open, objective, transparent and proportionate in what they are intended to achieve, without unduly discriminating against particular persons or a particular description of persons.
In principle, Ofcom could make a similar rule for its forthcoming auction to that proposed in the new clause. Indeed, it considered a number of possible spectrum caps in its consultation. The provision allows Ofcom to reject some possible results of the auction on competition grounds. Ofcom already has competition powers which would bear in such a situation. It also strikes us as unlikely that Ofcom, having determined appropriate rules for an auction, would immediately nullify the results.
Amendment 54A, from the noble Lord, Lord Fox, proposes that the Government commission an evaluation of the current usage and allocation of mobile spectrum. Ofcom already has a responsibility, when carrying out its functions, to consider competition issues and whether radio spectrum is being used efficiently. Ofcom considered many of these issues in its recent consultation on the forthcoming auction. In future, it may well wish to review the state of competition in the mobile market—perhaps on similar terms and to a similar timescale to those proposed by the noble Lord—but in our view, that is for Ofcom to decide.
Given those issues, it seems to me that the proposed new clauses do not help Ofcom to carry out its duties, and I hope that noble Lords will therefore agree not to press them.
My Lords, I thank the Minister for his comments. I think we are trying to achieve much the same aim here. The judgment will be whether Ofcom has sufficient powers to achieve that shared objective. I will look carefully at what he said in Hansard but, in the meantime, I beg leave to withdraw the amendment.
Amendment 54 withdrawn.
Clauses 9 to 14 agreed.
Amendment 54A not moved.
House adjourned at 9.46 pm.