Product Security and Telecommunications Infrastructure Bill

Earl of Devon Excerpts

2nd reading
Monday 6th June 2022 Lords Chamber

[The Earl of Devon (CB)]

My Lords, I, too, welcome the Bill and I look forward to adding a Cross-Bench voice during its passage through this House. While my principal focus will be on Part 2, I offer a few thoughts on Part 1 and product security. As an IP and technology litigator both in California and here, I have represented a number of consumer electronics firms in both jurisdictions, and I am aware of the remarkable technological opportunities presented by smart technology and the internet of things, as well as the risks inherent in such ground-breaking technology being admitted into our homes, our most private and domestic spaces. Who has not been thrown by Alexa or Siri offering an answer to an innocuous question directed to a family member? They are always listening.

I note the Government’s aim to ensure that smart technology becomes available in a way that is safe for consumers, but I am also mindful of the law of unintended consequences, as referenced by the noble Lord, Lord Fox, and the danger of government intervention to control and/or manage such technological advances. Such intervention must not become a drag on innovation; we do not want the UK to become the safest place to interact with modern technology simply because there is no cutting-edge technology with which to interact. Can the Minister explain what co-ordination there has been with other jurisdictions on this legislation? Will the UK be an outlier in introducing these product security requirements, or is this consistent with requirements due to be introduced elsewhere? Is it sensible to go it alone? The obvious risk is that cutting-edge consumer products simply will not be introduced to the UK market, causing us to fall behind in a key technological sector. I note that the legislation is specific as to what technology is to be included and what is to be exempted. How do the Government intend to ensure that these provisions are kept up to date in such a fast-moving industry? How will the legislation capture nascent technologies and new means of connectivity?

I note that the legislation and its enforcement powers extend to relevant persons, as defined in Clause 7, such as manufacturers, importers and distributors. How does the legislation impact the second-hand and grey market in consumer electronics? Does it impact products acquired by consumers overseas and brought to the UK and sold here? Also, how do the Government intend to deal with existing products on the market that may not satisfy these legislative requirements? Will they be allowed to become obsolete through the passage of time? One of the major concerns of consumers is how quickly consumable technology products become obsolete. Will this legislation increase that speed of obsolescence, with the requisite cost, both financial and environmental?

Turning to Part 2 of the Bill, on telecoms infrastructure, I note a number of further interests. In my capacity as a technology lawyer, I represent a number of infrastructure providers, mostly in the south-west of England. As the Earl of Devon, I am a champion of rural connectivity and the vital need to end the discrimination experienced by the dispersed population of Devon. I am surprised by quite how many friends and neighbours living in the middle of our local village, only five miles from Exeter, are unable to receive any mobile signal whatsoever in their homes. However, I am also a farmer and a land manager and, in that capacity, I inherited a telecoms mast tenancy of an area of woodland granted by my father some years ago under the 1954 Act. This tenancy has for some time been due for renewal, but it has been stuck in protracted and thus far incomplete negotiations due to the crippling uncertainty caused by the 2017 amendments to the Electronic Communications Code which is only compounded by this pending Bill. As a local resident frustrated by a lack of signal, I am keen as mustard to encourage more masts and better coverage. As a lawyer representing telecoms companies, I see the benefit in strengthening their hand in renewing leases and saving them money. However, as a site provider, if I were ever asked to grant further leases, I would likely decline, as I simply would have no confidence that the rights granted would be honoured or that the rent negotiated would ever be paid.

Therefore, I see the complicated issues raised by the telecoms infrastructure provisions of this Bill first-hand and from pretty much all sides. The one thing of which we can be certain is that the current legislative structure and the 2017 amendments in particular are simply not fit for purpose. As we have heard, some site providers record telecoms operators seeking to decrease rents by up to 90%. There has clearly been a breakdown in trust between operators, providers and their respective professional advisers. Unfortunately, I am not sure that Part 2 of this Bill will do anything to fix that, and it may even make it worse.

As I think we have all stated, our principal concern must be to ensure that the rollout of mobile connectivity across the country is completed as quickly and efficiently as possible to ensure that hard-to-reach communities do not fall further and further behind. The 2017 amendments sought to achieve this by, in part, seeking to decrease the rent payable for telecoms infrastructure and so to decrease the cost to consumers. The actual impact of the 2017 amendments has been the exact opposite: as telecoms companies have sought to renegotiate leases entered into on the open market, at dramatically decreased rents, the take-up of new masts has slowed. The market for telecoms infrastructure has largely ground to halt as property owners—be they farmers, sports clubs, community centres, charities or churches—think very hard before renewing and/or granting new leases in such an uncertain market. The provisions of Part 2 will only exacerbate this problem, causing property owners to withhold their consent and to terminate already-granted leases where possible. The Government’s laudable aim of increasing connectivity will be frustrated if this legislation, in its current form, is passed—to the detriment of us all: communities, telecoms companies and proprietors alike. This is a return to the law of unintended consequences.

A broad array of stakeholders has questioned the wisdom of this legislation, from the NFU and CLA, to the CAAV, the BPF and the Law Society. Of particular concern are the changes in Clause 61 to the way land is valued under telecoms leases, so that they are no longer at market value but now merely bare land value. By these provisions, the Government will be intervening in long-standing existing leases, freely negotiated between willing participants, to dramatically decrease rental values, often years after the fact. That is no way to encourage the rollout of digital infrastructure, and it takes a sledgehammer to existing property rights.

The Law Society noted that the 2017 reforms

“have tilted the balance of rights too heavily in favour of operators to assist them in securing site facilities”.

The result has been many site providers

“reacting with obstruction, unwillingness to cooperate and litigation.”

Despite this, it appears that the Government have failed to assess the impact of the 2017 reforms at all. What analysis has been conducted prior to seeking to extend those controversial reforms to historic leases, as proposed?

I note that the Government consulted in 2021 on changes to the ECC but did not consult on the issue of valuation and compensation to providers. The Government recognised

“that the 2017 Code reforms had an impact on … providers’ willingness to agree or renew Code rights.”

They also noted that changes to the valuation provisions

“have made entering these agreements significantly less attractive for site providers.”

Despite this, the Government’s policy position has not changed. Why?

The Government identified other reasons for lease negotiations failing including, as I said, lack of trust and poor communications between advisers. They are therefore focused on achieving faster and more collaborative negotiations but this entirely misses the point. If the financial underpinnings of those negotiations remain as one-sided as they are, no amount of ADR will help. The Government state that they wish with these provisions to make it easier for digital networks to be installed and encourage stronger and more collaborative relationships between telecoms operators and site providers, but the fact that they seek to backdate claims to rental discounts and permit the ability of operators to add infrastructure to existing sites fundamentally undermines the collaborative relationships that were well established before 2017.

These retrospective amendments ensure that any prospective site provider, properly advised, will be reluctant to grant such telecoms leases, frustrating the Government’s well-intended ambitions. This cannot be in anyone’s interests.

Product Security and Telecommunications Infrastructure Bill

Earl of Devon Excerpts

Lords Hansard - Part 1 & Committee stage
Wednesday 29th June 2022 Lords Chamber

[Baroness McIntosh of Pickering (Con)]

My Lords, I am delighted to speak to the amendments in my name and that of the noble Earl, Lord Devon. I thank him for his support. We are having a short debate on why Clauses 66 and 72 should stand part of this Bill. I will briefly take each in turn.

As the noble Lord set out in moving Amendment 19 from the other Benches, the problem we are dealing with is getting on to land where people have possibly not had notification that their land is going to be entered. It also raises the possible cost of applying to the court in such circumstances, which begs the question: if, eventually, those who own the land are made aware, would the alternative dispute resolution procedure apply? I am not sure which of my noble friends is replying, but if my noble friend Lord Sharpe could kindly take that and give me a response, I would be most grateful.

The powers that we are allowing to the department and the Government in Clauses 66 and 72 are very wide ranging. Will Parliament have the right to scrutinise these regulations and at what stage? Do the Government intend that the regulations will be widely consulted on? At what stage would we have the right to scrutinise regulations under both clauses, as the devil will be in their detail?

Regarding Clause 66, I am most grateful to the noble Earl, Lord Lytton, for sharing the briefing we received from the Central Association of Agricultural Valuers, which has been extremely helpful in helping us prepare for today’s debate. In relation to Clause 66 and the issue of unresponsive occupiers, it sets out:

“Understanding the point of this Clause, it should require the operator to have taken particular efforts to establish direct contact with the proposed grantor rather than allow this to be a convenient route to impose on off-lying land by the use of a succession of notices.”


It hopes that discretion is provided to the court by new paragraph 27ZE of the code inserted by Clause 66. That would allow it to regulate the use of this power appropriately and recognise what might be particular personal circumstances. It refers in particular to the 2020 case of EE v Cooper and notes that the tribunal felt that it had to deny an operator’s application for “interim rights” when it pleaded an unresponsive occupier, as it considered that the operator needed to show that

“far more had been done to contact the occupier than has been done in this case, where there has not even been an attempt to knock on the respondents’ door”.

It appreciates the compensation provisions set out in new paragraph 27ZG of the code.

In sum, I felt that it was necessary to ask why it is right that Clauses 66 and 72 should form part of the Bill primarily because we are granting the Government extensive powers that are not set out in the Bill, so we should reserve the right to consider them when they are set out in regulations. I would like confirmation that that is the case. Even more substantially and significantly, I am concerned about the lengths that an operator will be forced to go to before it is deemed to call an occupier an “unresponsive occupier”. I look forward to my noble friend the Minister’s response.

[The Earl of Devon (CB)]

My Lords, I will speak briefly in support of the two proposals from the noble Baroness, Lady McIntosh, to which I have added my name, that Clauses 66 and 72 do not stand part of the Bill. As I noted at Second Reading, I am a landlord to a telecommunications mast, granted by my father under the 1954 Act. The renewal of this has been complicated considerably by the 2017 reforms and the huge uncertainty that has followed.

Just last week, the Supreme Court ruled on a group of three cases involving the last set of amendments to the Electronic Communications Code. The lead case was Cornerstone Telecommunications v Compton Beauchamp. The court ruled that, among other things, a landlord under a “subsisting agreement” is entitled to insist on renewal under the 1954 Act and the operator cannot insist on a code renewal by application to the Upper Tribunal. It seems ironic timing that, just as the highest court in the land has finally got to grips with those 2017 amendments and provided a little clarity, we are seeking to make yet further changes and further confuse the issue.

Since Second Reading, I have been in contact with a number of groups representing site owners, and all have reported incidents of unprecedented dispute and considerably challenging renewals. As I said at Second Reading, this cannot have been the intention of the 2017 amendments and should not be the result of this legislation either, which is why I put my name to the proposals that Clauses 66 and 72 do not stand part.

I think that we all agreed at Second Reading that we wish Project Gigabit to succeed, and my intention is to ensure that landlords and site owners are encouraged to grant leases to telecoms masts and other infrastructure. The recent soundings of the market suggest that this is not currently the case and that the granting of new leases has slowed considerably since the 2017 amendments and the decrease in rents and increase in disputes that have resulted.

On these clauses, the draconian access provisions for unresponsive occupiers and the rights of network providers in relation to infrastructure are simply too broad and uncertain and, as the noble Baroness, Lady McIntosh, stated, they will serve only to discourage the granting of leases for further network infrastructure. I do not think that that is in anyone’s interest.

Specifically on Clause 72, the noble Baroness, Lady McIntosh, raised the regulations. I note that new subsection (7) says:

“Before making regulations under subsection (1) the Secretary of State must consult … OFCOM”


and

“such other persons as the Secretary of State considers appropriate.”

In responding, can the Minister clarify who that would be, because surely representatives of the site providers should be consulted? We should get an opportunity to understand exactly what these regulations will entail; otherwise, we seem to be providing Ofcom carte blanche to do whatever it likes. As we have seen, whatever it likes has not resulted in a satisfactory outcome for connectivity.

[Lord Clement-Jones (LD)]

My Lords, I want to mainly talk about Amendment 19 put forward by the noble Lord, Lord Bassam. Before doing so, I say that I have some considerable sympathy for the noble Baroness, Lady McIntosh, and the noble Earl, Lord Devon, because one of the themes we are very much going to come to with the coming amendments is this steady shift in the bargaining power away from site providers towards the operators over a period of years, which started in 2017 and culminates in the current Bill. We had a number of debates on unresponsive occupiers when we last debated this on the then Telecommunications Infrastructure (Leasehold Property) Bill. As the noble Earl said, it is ironic that the cornerstone case has decided what it has, yet here we are changing the legislation away from that decision. I hope the Minister will be able to answer some of the questions that have been put to him.

On these Benches, we support Amendment 19. As the noble Lord, Lord Bassam, said, it would mandate operators with agreements under the code that are not subsisting agreements—namely, agreements that came into force before the code was agreed—to give advanced notice to sites that provide and deliver emergency services, such as hospitals, fire stations and ambulance stations. It is clearly important for providers of emergency services to be given advance notice of when work is going to be undertaken, so that they can take appropriate action to ensure that they are not affected.

The noble Lord, Lord Bassam, mentioned the Minister’s response in the Commons; she prayed in aid the rights under paragraph 17 of the ECC,

“which authorise only activity that will have no more than a minimal adverse impact on the appearance of the apparatus”.

However, this takes no account of the fact that, while the works may involve minimal adverse impact, it may actually involve disconnection at the time of installation. The Minister said that she was,

“not aware of any instances in which an operator has relied on its paragraph 17 rights to carry out upgrading and sharing activities that have gone beyond the scope of what that paragraph allows”.—[Official Report, Commons, Product Security and Telecommunications Infrastructure Bill Committee, 22/3/22; col. 120.]

However, that is not the right question. The right question is: what kind of resilience and risk planning do the emergency services have in those circumstances? If they do not know that there is a risk of disconnection, how can they plan for it? This seems an extremely sensible amendment which will allow the emergency services to have notice and to be able to plan for circumstances when they may be disconnected.

--- Later in debate ---

[Lord Northbrook (Con)]

My Lords, I apologise for not being able to take part at Second Reading and in the first day of Committee. Like the noble Earl, Lord Devon, we all want Project Gigabit to succeed. I support my noble friend Lady McIntosh and the noble Earl, Lord Devon, in their proposals to delete Clauses 61 and 62. If they do not find favour, I would support cross-party Amendments 20 and 22.

I must first declare an interest as an NFU member and the landlord of two telecom masts. One rent review has already taken place. The original offer was a 95% rent reduction. I could probably have got rid of the mast, but as it borders the M3 I did not think that it was in the public interest. Having negotiated for 21 months, I got the reduction down to only 73%, but my legal fees in doing that exceeded my first year’s new rent, and it was quite stressful.

That is quite unimportant compared with the huge loss of income to community projects, clubs, churches, social clubs, hill farmers and others. As other noble Lords have mentioned, the organisation Protect and Connect, set up last year to give a voice to property owners in rural and urban communities who rent their land for mobile phone masts, has highlighted this real problem for these categories of landlords.

It is not just individual landowners who are affected. I quote a March 2022 cutting from the Daily Express, “Mobile masts firms branded ‘Goliath bullies’”:

“Thousands of churches, charities, hospitals and sports clubs face reductions in mast rents—and a social club popular with pensioners has had rent slashed from £3,500 to around £550 a year, an 85 per cent cut.”


The Daily Mail online said:

“Hundreds of sports clubs, farmers, charities, churches … and community groups with mobile phone masts on their property … have seen a drop in rents of … 90 per cent”.


In January 2022, the Sun said that thousands of churches, charities and social clubs face a cut of up to 90%. The headline in the Edinburgh Evening News was: “Edinburgh pastor fears for church’s future after ‘bullyish’ EE slashes mast rent by 96 per cent”. In Property Week it was: “Telecoms Bill set to enforce huge rent cuts for landlords”.

For these reasons, I believe that the amendments I have mentioned give a fairer outcome to the balance between landlords and tenants. As noble Lords have already heard, it is not only me who believes this. The respected Centre for Business & Economic Research has calculated that the 2017 reforms have not delivered a faster 5G rollout. As the noble Lord, Lord Clement-Jones, stated, providers have lost £200 million of income, including £60 million of lost local authority income and £44.2 million of lost agricultural or rural site income.

The Government’s proposed reforms would cause rents to fall by a further 41% from their post-2017 levels. On a 10-year basis, this is equivalent to a cut in local authority funding of £645 million and a cut to sports centres, social hubs and hospitality of £158 million. The CEBR says that site rental was not unfair before 2017 and that mobile operators have not used savings to invest in communications networks; nor do rent costs impact their profitability materially.

The noble Earl, Lord Devon, emphasised at Second Reading that a “broad array of stakeholders” oppose this legislation,

“from the NFU and CLA, to the CAAV, the BPF and the Law Society … By these provisions, the Government will be intervening in long-standing existing leases, freely negotiated between willing participants, to dramatically decrease rental values, often years after the fact.”—[Official Report, 6/6/22; cols. 1053-54.]

It is another blow to farmers’ diversified income and, in my experience, will further delay mast development. I will not want to go through 21 months of tortuous negotiation again for a new mast, particularly having just heard about the access issues in Clause 66. That is why I support a fairer method of rent calculation, as proposed in the amendments.

I am disappointed that a Conservative Government reject an amendment on market value and wish to proceed with extending the unfair 2017 Act to the Landlord and Tenant Act 1954 and the Business Tenancies (Northern Ireland) Order 1996.

[The Earl of Devon (CB)]

My Lords, I support the amendments from the noble Earl, Lord Lytton, and much appreciate his extensive exposition of them. I have also put my name to the stand part notices from the noble Baroness, Lady McIntosh.

I am grateful to the noble Lord, Lord Parkinson, for meeting me and the noble Earl, Lord Lytton, since Second Reading. I note from that discussion that DCMS was largely unaware of the impact of the 2017 amendments on the negotiation of lease renewals. I wonder whether that is, as the noble Baroness, Lady McIntosh, indicated, because no consultation was undertaken on them. It really is important for such considerable and important amendments to be consulted on.

I also noted earlier, in response to Amendment 18, as proposed by the noble Baroness, Lady Harding, that the noble Lord, Lord Parkinson, resisted it on the basis that he wanted to ensure sufficient protection for those with poles on their land. If this were the Government’s justification for resisting Amendment 18, why do they not have the same concern of providing sufficient protection for those with masts on their land, which are so considerably more impactful and damaging? Can the Government explain why they refused to consult on this?

--- Later in debate ---

[Lord Clement-Jones (LD)]

My Lords, I shall speak to Amendments 28, 29, 30, 31, 32, 33 and 34. This may well be another part of the Bill where we have differing views about the balance to be struck between site providers and operators, and whether the Bill’s provisions will actually hamper the rollout of 1-gigabit connectivity.

In the consultation response that accompanies the Bill, the Government stated explicitly that agreements could not be changed by court order during the course of a contract, but changing the definition of a person able to grant code rights to an operator is likely to allow the cancellation or modification of agreements that were agreed in good faith and still have years to run and impact every single relationship between site owners and operators. This is because of the changes made by Clause 67, which do not limit an application to a situation where the existing agreement has expired. Telecoms companies, the operators, will now be able to choose which method of renewal or modification they wish to use. Moreover, site owners are unable to remove operators from their land if negotiations break down. Given this, it is likely that operators will seek to review all contracts they have on their books, allowing for retrospective application of the changes.

Site owners and operators should have certainty of contract. If an agreement has been reached, the terms of this should be settled and respected until the end of the agreement. If they are to be changed, it should be by mutual consent and commercial negotiation rather than by this type of intervention. Rents should be changed only from the point at which courts have made a decision, respecting existing contracts. Site providers are routinely being taken to court by operators to reduce the prices they pay, using, as we have heard, the changes made in 2017 that inserted a no-scheme or no-network valuation methodology into the code. This tactic is used to drive down rents to the lowest possible level.

The Bill gives operators sweeping new powers, which would mean that when the parties to an expired agreement are unable to agree on the terms of any renewal agreement, operators can seek modified terms to code agreements on an interim basis, including reducing the level of rent they pay. This change is likely to lead to a substantial number of claims by operators as a matter of course, regardless of the state of negotiations in individual cases. If an operator is able to fast track a no-scheme reduction, there is little incentive to reach a consensual deal at a potentially higher level. What is more, when a case does get to court and a renewal agreement is subsequently imposed, the court will be able to retrospectively backdate any new financial terms of that code agreement to the date that an initial notice was made, not the date of a court judgment. Some of these notices could have been served years ago, leading to sudden, huge repayments from site providers to operators. This retrospective application of court-ordered rent reductions cuts against legal norms and a common understanding of fairness.

Many site providers already face severe financial pressure as a result of the 2017 reforms, as we have heard. This could lead to unnecessary financial difficulties or even bankruptcies, given the huge disparity between the market-based rent they have been receiving and the rent obtained through the courts. These amendments, however, are not intended to prevent courts imposing rent reductions in line with the workings of the code. In all situations, operators would still be able to obtain savings on rent payments. These are merely trying to ensure that these savings are not imposed retrospectively on contracts entered into in good faith by site providers.

Amendments 28, 29 and 32 to 34 aim to address in its entirety the issue of backdated payments made on the basis of interim orders. Amendment 28 would prevent courts retrospectively imposing rent reductions made on the basis of no-scheme valuation. Amendment 29 would mirror the impact of Amendment 28 of removing the risk of backdated payments being imposed on site providers by ensuring that operators are unable to seek interim orders simply to agree a lower rent. Amendment 34 is intended to apply to sites governed by the Landlord and Tenant Act 1954.

Amendment 30 would ensure that where interim orders are made and a consideration is imposed on the basis of the code, the retrospective application of the reduction in rent achieved does not automatically go back to the time at which the initial notice was made. Instead, it would go back to that point or a maximum of 12 months, whichever is the shorter.

Finally, Amendment 31 would ensure that where interim orders are made and a consideration is imposed on the basis of the code, the cumulative total of the retrospective application of the reduction in rent achieved is limited to £l,000.

These amendments are all designed, as I mentioned in opening, to redress the balance and make sure that this kind of retrospectivity is not taken advantage of by the operators against the site providers. I hope they commend themselves to the Committee.

[The Earl of Devon (CB)]

My Lords, I rise briefly to support the noble Baroness, Lady McIntosh, once more, and the noble Lord, Lord Clement-Jones. I note in response to the Minister on the last group of amendments that I am not parroting the words of lobby groups; I am reporting personal experience to your Lordships, and that of people personally known to me. I am not a mouthpiece of some body.

On the prevalence of litigation, the Minister pointed out in his last summation that it may be for the courts to provide definition. The Supreme Court ruled on three separate cases last week; clearly, there is far too much of this renewal debate going on in the courts system—that is coming from a litigator. The Supreme Court should not be ruling on three cases in one go. It should be possible to handle this in the marketplace, as the noble Earl, Lord Lytton, said. It is indicative of a broken system.

I reiterate in the context of this further valuation group a question I posed before that has not yet had an answer. Given that landowners have such a plethora of tradeable ecosystem services to provide from their landscape, why on earth would they commit these days to a telecoms lease, with all the nefarious impacts of these amendments—the access rights that have been given and the heavy burden of renewal requirements—when they have so many other options to consider? I would like an answer to that point.

[The Earl of Lytton (CB)]

My Lords, I support Amendments 28, 30, 31 and 34, to which I have added my name. I also express my support for the clause stand part amendment spoken to by the noble Baroness, Lady McIntosh. I have very little to add to the reasons the noble Lord, Lord Clement-Jones, so ably set out. The outcome of the Electronic Communications Code 2017, especially its retrospectivity, as he outlined, is to destabilise relationships. There is no question about that. These commercial relationships are important, as I set out earlier, because they relate to the rollout, consistency and security of site provision for these masts on which 4G and 5G will ultimately rest.

With a level of, say, £750 per annum—I believe that figure has been much put about—the other provisions of the lease may be the only things of real value left to the provider. The money, relatively speaking, may be a row of beans. If those provisions are set aside, the provider does not even have a reduced rent which the Government or code operators discern as being fair because that is the only use of the land—it completely annihilates the rest of any benefit in the deal. At these levels, that marginal element will be significant. I said earlier that the balloon has gone up; I suspect the message is being received loud and clear.

Product Security and Telecommunications Infrastructure Bill

Earl of Devon Excerpts

Report stage
Wednesday 12th October 2022 Lords Chamber

Moved by

[The Earl of Devon]

19: Clause 61, page 46, line 14, at end insert—
“(4A) Where the assumptions in subsection (4) cause the market value of a landlord’s agreement to decline, the consideration payable under a new tenancy granted by order of the court under this Part may not decline by more than 50% relative to the previous consideration for the period of five years beginning with the day on which the new tenancy is agreed.(4B) Where subsection (4A) applies, the consideration must be reduced in even increments over the course of five years, from the level of the previous consideration to the level of the new court consideration.”

[The Earl of Devon (CB)]

My Lords, in the absence of my noble friend Lord Lytton, I rise to move Amendment 19, to which I added my name somewhat late. I shall speak also to Amendments 20, 21, 22 and 24 in this group to which I added my name too late to appear on the Marshalled List.

The valuation provisions of the Electronic Communications Code as extended in 2017 are not working well. I think we are all agreed on that. The number of disputes coming before the lands tribunal has increased from approximately 40 to more than 120 already this year, and we have no idea how many additional disputes are taking place in county courts. This is because we have no record. The Government have not consulted on this issue before proposing this far-reaching, retrospective legislation. Indeed, the Bill has been introduced based upon a cacophony of anecdote, conjecture and vested misinformation. It seeks to address the issue not by improving the damaging “no scheme” valuation provisions but by extending their application to approximately 15,000 long-established and well-settled 1954 Act leases. This is a mistake, and it will have a chilling effect on the rollout of digital infrastructure which we will regret.

My noble friend Lord Lytton is, as I said, unfortunately committed elsewhere today and we are therefore deprived of his wisdom and subject matter expertise. I am by no means an adequate substitute and refer your Lordships to his excellent contributions in Committee.

I also remind the House of my own interests, and particularly note that while formerly a property barrister I now work as a technology litigator for a firm that represents telecoms companies as well as site owners. As a Devon resident with poor mobile coverage, I am desperate to see an increase in rural connectivity, with the social and economic benefits that flow therefrom. As a farmer, I am also a site owner of a 1954 Act telecoms lease granted many years ago. This has been bogged down in renewal due entirely to the uncertainties of this legislation. I see this issue therefore from many sides, both personal and professional.

I too welcome the noble Lords, Lord Kamall and Lord Harlech, to their new roles and thank them and the whole Bill team for their time in discussing these issues. It is not ideal to change Ministers half way through the Bill’s progress, and I am disappointed that between Committee and Report we have not been provided with information that was requested. Despite no formal consultation, I understand the Government are confident that the valuation issue is now settling down and that the provisions in the Bill are largely welcomed by stakeholders. We have not seen the information relied on to reach these conclusions because it is cloaked in confidentiality.

From recent discussions, it appears that this evidence has largely been provided by the telecoms mast operators. It is no surprise that they approve of Clauses 61 and 62, as these will allow them to decrease rents payable on historic leases by over 90%, which is a huge cost saving; yet they provide no concurrent obligation on them to pass those savings on to phone companies and their consumers. The result will be that infrastructure companies benefit financially while owners see dramatic rent decreases and are discouraged from letting sites for telecoms masts, and consumers see no financial benefit and, more importantly, no increased coverage. There is a risk that only the corporate middlemen, who often take their profits overseas, will benefit. Surely this cannot be the Government’s intention.

There are other beneficiaries: the professionals, lawyers and surveyors advising those in dispute. Judges dealing with the Electronic Communications Code have criticised the intensity of these disputes and the Institute of Economic Affairs recently noted that since 2017

“there has been much litigation, apparent ill-will, and consequential delays”.

At the 2021 RICS Telecoms Conference it was shown that, while site payments have indeed reduced since 2017, the costs of transacting for sites have more than doubled in that time, meaning that the decrease in site rents has actually resulted in no savings at all for the market.

The 2017 amendments made parties increasingly antagonistic, and the provisions in this Bill will only add to that. The amendments in this group seek to address this. Amendments 20 and 21 from the noble Baroness, Lady McIntosh, seek to remove Clauses 61 and 62 entirely. Given what I have said, this is my preferred solution. Unless and until a proper consultation is undertaken and the impact of the “no scheme” valuation methodology is properly understood, we should not be extending it to 1954 Act leases and undermining long-established landlord and tenant relations. This is government by diktat, riding roughshod over private contractual interests at the behest of undisclosed and well-funded commercial enterprises. It is not in the public interest.

Amendments 19 and 22 propose alternative remedies to ameliorate the problem of dramatic and sudden decreases in rents payable under telecoms leases. As currently drafted, site owners, many of which are community centres, charities, sports clubs, farmers and small businesses, will see a collapse in rental income that could be very damaging. Amendment 19 proposes that this decrease be limited to 50% of the current rent within the first five years, while Amendment 22 requires that the rent is decreased in even increments during that same period. Neither amendment seeks to prevent the “no scheme” valuation methodology that the Government prefer, they simply soften the impacts to protect the interests of the individual landlord. These are modest and, I suggest, sensible proposals and they should be adopted if Clauses 61 and 62 are to remain.

Meanwhile, Amendment 24 seeks to avoid the invidious prospect of backdated rent decreases which may result in landlords having to pay substantial sums back to telecoms mast operators under interim orders applicable to 1954 Act tenancies. As currently drafted, rent decreases take effect from the date the notice is served, not from the date the new lower rent is determined. A contentious lease renewal can take many years to resolve and, as we have heard, the decreases in rent can be more than 90%. This means that a poor landlord may be obliged to pay back many thousands of pounds in rent previously received, which may not be possible if that money has been budgeted for and spent. This could drive small enterprises and individuals into bankruptcy. Is this what the Government intend? Amendment 24 would ensure that this will not happen, and that the newly decreased rent is not backdated but payable from the date of the court order. Backdating the rent only adds insult to injury.

I urge the House to consider and support these important amendments. If the Bill is unamended, no landowner will welcome telecoms infrastructure and our digital rollout will fail. I beg to move.

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[Lord Kamall (Con)]

I thank the noble Lord for his question. I am interested in the point he makes about the amount or proportion of rent in the overall agreement. Whatever happens in this debate, I would be very happy to continue that conversation with him and my officials to make sure that we can close any gap in understanding.

The noble Lord will recognise that I have to defend the Government’s position as the Minister, so I continue to say that the Government cannot accept these amendments, but we hope, perhaps vainly, that the noble Lords who tabled them will consider not pressing them.

[The Earl of Devon (CB)]

I thank noble Lords for the unified support from across the House. It came from all Benches, it seems, other than perhaps one—and even that Bench seemed to be wavering a little at the end there.

I am surprised that a Conservative Government extolling growth want to undermine property rights and cost the economy billions of dollars. There is no explanation given other than the whispers of these undisclosed stakeholders. The Minister kindly explained that he has been listening and that there have been discussions and workshops, but we simply have not seen what those were and what the stakeholders said. I have to ask where they are holding the stake to convince the Government to persevere despite your Lordships’ consistent opposition to these provisions.

I note the Minister’s desire for fairness. As the noble Lord, Lord Cromwell, has just noted, it seems that the Government want this provision to be equally unfair to every single site owner across the country.

The Minister also noted that the Government are trying to avoid costs going up. However, as we have seen, and as the RICS report stated, costs have risen exponentially as a result of the 2017 amendments, and here we are, doubling down on those, therefore only to increase costs further.

I think I heard the Minister accept that it will impact landowners’ desire to provide sites. I think he also noted that when you enter a lease you do so with the knowledge that the market might change and therefore the rent might change. I do not think that anyone entering a 1954 Act lease in 2015 would have expected that the rent would decrease by over 90% by 2022. I am sorry, but if the Minister suggests that that was a real expectation of the parties, it is simply not true.

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[The Earl of Devon (CB)]

My Lords, I will speak briefly. It is wise for the Government to make this amendment, given the dangers that have been identified to national security infrastructure of unfettered telecoms operator access.

This necessary amendment highlights two key issues. First, it highlights the broad powers conferred by the ECC on mast operators to access to public and private property and undertake works on it. It is not just the national security infrastructure that is threatened by the code provisions but private and public interests of many types. Secondly, the fact that the Government have become aware of this important concern only now, in the final stages of the Bill’s passage, is a compelling illustration of how totally inadequate the consultation process has been and how essential it is to conduct a proper review, an issue that we will come back to.

[Lord Fox (LD)]

My Lords, the noble Lord, Lord Kamall, has demonstrated a prodigious ability to outsource the responsibility for presenting the government amendments. We welcome the noble Lord, Lord Sharpe, to this Bill.

As the noble Earl, Lord Devon, pointed out, this is late to the party. It is also the first time we have heard the explanation for this Bill, though others may have been lucky in having it. We had a meeting with the noble Lord, Lord Kamall. No one from the Home Office was there to give us the information we have just received, so I am absorbing it for the first time—a relatively unsatisfactory process. That said, this is an important area. I am surprised that the code has somehow been allowed to continue for as long as it has without this issue cropping up. Have there been specific issues which have caused this to happen, or is it still a hypothetical matter that the Government are seeking to deal with?

Everybody can appreciate the problems of sticking a 5G tower on top of GCHQ. No one wants to see it, but I can imagine that the reality is a more subtle set of problems. We on these Benches seek a better sense of the real-life cases which the new clause seeks to stop. The Minister singled out technical risks in particular. Those exist beyond the site itself, on the environs. I am interested to hear from the Minister how the clause deals with a 5G site put adjacent to a security site. What thresholds are the Government going to expect its security services to run when it comes to implementing the clause? It will not just be on the site itself.

I understand that quite a lot of this will be enshrined in a digital toolkit. It would help us all if the process of developing that digital toolkit was one with a collaborative approach. The noble Earl, Lord Devon, also highlighted that this problem of overriding access from the operators extends beyond the security environs. This is not just a security issue; it spreads into other places. Like many other Peers, I received a letter from the fire and rescue service. While this is not a security issue, it falls within the purview of the noble Lord, Lord Sharpe, and the Government should consider it, because it raises the problems of putting network equipment on fire and rescue service land and the fact that it would impede the training and preparation of that service.

This is even later than the Government’s amendment, and I recognise that it is not even part of this amendment, but it is a specific concern, and the Minister would do well to undertake to your Lordships’ House to talk to the fire and rescue service, to understand their problem and, if necessary, I am sure that we would all tolerate a late insertion at Third Reading. I say this without having spoken to the Opposition, but if it was an issue, I think that we would discuss it.

We understand that national security issues must be taken into consideration. We do not understand how this will work, what the thresholds will be, and what sort of cases it is seeking to avoid. More explanation is required.

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[Baroness McIntosh of Pickering (Con)]

My Lords, I am grateful for the opportunity to raise what is quite a difficult situation in Amendments 25, 26, and 27. What I seek to address here is the fact that while it is welcome that there is an alternative dispute resolution process, it would be preferable that this was mandatory. I would also like to raise other issues, such as the imbalance between the funds available to operators bringing such a case and to landowners, who may be of quite modest means and modest size in being able to defend against such actions.

I welcome the inclusion in the Bill of an alternative dispute resolution mechanism. Could my noble friend the Minister take this opportunity to explain why it is merely optional for operators to use it, given—as I referred to a moment ago—the disparity in resources between operators and landowners in many cases? Is he not concerned that the incentive to use such an alternative dispute resolution mechanism for operators is low, given that they have the resources to take potentially multiple landowners to tribunal? Also, while the overall market for new sites for masts has slowed down, some small landowners have been unable to afford the cost of being taken to a tribunal to seek to defend their property rights. They have essentially been forced to agree to host mobile apparatus on unfavourable terms.

I propose Amendments 25, 26 and 27 to make it mandatory for telecoms operators to engage with an alternative dispute resolution mechanism before threatening to take a landowner to court for an agreement to be imposed. I beg to move.

[The Earl of Devon (CB)]

My Lords, I strongly support these amendments, to which I have added my name. As I have said, I am a litigator, and it is a tremendous help to get parties together in some form of alternative dispute resolution before a matter is litigated. Compelling ADR as step 1 in an escalating dispute is common, and indeed is often to be found within contractual obligations themselves, particularly between parties of disparate size and resource. Given all that has been said about the fractious and broken market, and the huge number of disputes that are occurring, the more that can be done to head these off before litigation costs escalate, the better.

I was referred to a decision this morning of the Lands Tribunal where a lease negotiation had been settled at the door of court: the decision focused only on the issue of costs. The tribunal awarded £5,000 in costs, but the total bill was over £100,000. Litigation costs can be huge and, as the noble Baroness, Lady McIntosh, has indicated, that can keep small site owners out of litigation: they have to just roll over. ADR can occur in the form of mediation, arbitration or simply expert determination on a specific technical or legal issue in contention. It is key to greasing the wheels of these challenging transactions and, given the difference in size and resource between site owners and telecoms operators, it would be most helpful.

[Lord Cromwell (CB)]

My Lords, I was in two minds about these amendments, but I will support them in the final analysis. ADR is of course a good thing if it avoids lengthy and costly court proceedings. My concern is that it can also become a token activity, backed by the threat of subsequent court action to intimidate site owners, reflected in the inequality of arms between the parties, which others have already referred to.

I would greatly prefer an outcome where disputes can be resolved between the parties, and perhaps their respective agents, where the balance of negotiation is fair. I made a proposal in my earlier remarks on this, to which I have received no response.

The Bill, as drafted, sets site owners and operators needlessly on a collision path. No disputes will be resolved; they will simply be won by brutal compulsion that will lead to delay and protracted proceedings. If the Bill goes ahead as is, ADR should be mandatory as a first step in at least seeking some resolution. I therefore support the amendments in this group.

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[Baroness Merron (Lab)]

My Lords, I am pleased to speak to Amendment 28, which we have tabled in an attempt to find a constructive way forward to perhaps the greatest area of discussion throughout this Bill which has not yet been resolved—how we bring together the balance, the fairness and the efficiency that we all say we are looking for. This amendment is an attempt to amalgamate various others that were debated at Committee stage. I am very grateful to colleagues across your Lordships’ House who have worked with us on the draft or have indicated their support for this approach. In particular, I thank the noble Lord, Lord Fox, for adding his name, and, of course, my noble friend Lord Bassam.

Since taking office, the new Prime Minister has made a lot of her commitment to rolling out high-speed broadband and 5G. We welcome that commitment and would like to see it come into reality, particularly as, regrettably, the former Prime Minister repeatedly watered down the targets. We want to see modern infrastructure installed and want that to happen quickly, but we also want the system to be fair—to operators, yes, but also to the landowners who host equipment and consumers who are in the midst of a cost of living crisis.

The Government, we understand, will say—and I hope the Minister will not be going down this road—that a review as proposed in this amendment would only slow things down. Let me deal with that. This amendment does not prevent any of the Bill’s provisions coming into force. The Government, we understand, are also minded to say that they are confident in their approach in this area and therefore no review is necessary. If that is the case, I suggest that an independent review would give their policies a clean bill of health. However, I suspect an independent review would conclude that all is not as well as has been presented, and its recommendations could therefore be a very helpful resource for the new Secretary of State and the Government.

We see no reason why the Government could not simply accept this amendment and get on with appointing somebody independent to lead a review. If the Government are not willing to do that, we will be minded to test the opinion of the House. I beg to move.

[The Earl of Devon (CB)]

My Lords, I added my name to this amendment at the last minute and I am very pleased to support it. From my earlier contribution, the House will be aware of my concerns about the lack of consultation prior to the passage of this Bill. The contributions of many noble Lords and the Ministers’ responses have only increased those concerns. I did not push for a vote on the prior amendments regarding valuation and ADR because I believe those issues will properly be considered in the context of this independent review.

The Government have suggested in discussions that a review will unduly impact the market and slow the rollout of digital infrastructure. This is not possible. We have established that the market is already broken and the costs of transacting telecoms sites have more than doubled since 2017, as reported in the RICS conference, and the number of cases before the lands tribunal has more than tripled. The ECC is not working and expanding its broken application to historic 1954 Act leases will only increase the challenges. A review is urgently required, and I urge that this be voted on.

[Lord Northbrook (Con)]

My Lords, I speak in support of this amendment. The noble Baroness has rightly underlined the importance of ensuring that the code is actually having the impact the Government tell us it is having.

This legislation is controversial because it proposes to erode property rights in the public interest. For this to be a viable proposition for a Government who support individual rights and freedoms, it must be absolutely clear that the public benefits considerably outweigh the private cost and the resulting redistribution is as fair and equitable as it can be. Any such policy must therefore be based on robust evidence.

A recent contentious legal ruling in a case brought by Vodafone has underlined that the Electronic Communications Code does not reach this bar. As a brief summary, the legal judgment has created significant real-world issues for the ability of landowners to develop sites, damaging local economic growth but also disincentivising site owners from agreeing to host telecoms sites at all. This risks stalling the rollout of new telecoms sites, putting in jeopardy the Government’s ambitious 5G targets. The judge said that this ruling identified a “potentially important structural defect” in the code. I am aware that this case has been brought to the attention of the Government, but they have chosen not to act. Issues such as this illustrate precisely why the review proposed by this amendment is vital.

Product Security and Telecommunications Infrastructure Bill

Earl of Devon Excerpts

Consideration of Commons amendments
Tuesday 22nd November 2022 Lords Chamber

[The Earl of Lytton (CB)]

My Lords, I greatly support this amendment, as I did at an earlier stage of the Bill. Therefore, I have to say that I do not agree with the Motion in the name of the noble Lord, Lord Parkinson.

I detect in the brevity of the reasons given for why the Government were not able to accept any of the matters put forward—and mentioned just now by my noble friend Lord Cromwell—the same endeavour to deny due process. Blocking the evidential basis in what has been brought before this Bill will then affect the process of getting a fair deal at the end. Exactly the same process will be relied on in any tribunal case or in any alternative dispute resolution forum. This is why proper access to an independent adjudicator is, in my estimation, already prejudiced by the processes in this Bill.

Seen in the context of the transfer of private rights from individuals and small property owners to an influential and well publicly funded band of corporate middlemen, the site companies, this, I am afraid, bodes ill. Certainly, I as a property professional and valuer can see this very much in the economic context—of course, valuers do not make the rules; they simply interpret what others are doing outside. This is why I have consistently said that this is something that will adversely move the goalposts, if not the whole playing field.

The measure in this Bill rolls back 60 years of compulsory acquisition and compensation practice. I am not clear that the subsequent need, as will occur as a result of the Bill, to claim damage occurring at a later date does anything other than reverse the burden of proof in favour of the state—or, in this case, the operatives of the state, and against the individual. I think that alters the parameters of fair compensation.

I wish the proposed alliance that the Minister referred to every good fortune, but I do not believe that it will do anything to improve on what has been nothing short of a land rights grab. I predict that a great number of the claims made in support of this will not be borne out by the facts when we look back in due course. On the delivery of the demonstrable public interest benefits, also referred to by the noble Lord, Lord Cromwell, where is the objective evidence? I predict that it will not even be visible in the corporate operation of the telecoms industry. So it is no good looking for that particular needle in that particular haystack.

What about the public utility performance by those not subject to public utility oversight and objectives? That was a point mentioned by the noble Lord, Lord Fox, at an earlier stage in our deliberations. If there is an impression of site providers being turned over, to use the cant of the trade, I am equally certain there will be a similar attempt to turn over the public interest in due course, which will be equally devoid of any evidence base or provable cause and effect. From a valuation standpoint, the absence of evidence, cloaked as it is often in confidentiality, forms a useful basis neither for the processes of this Bill nor for ADR or before a tribunal.

The basic premise of altering the valuation principle from market value to, effectively, land value—or, to put it in my terms, existing use value—is undefined as a concept. It is haphazard in practice, because it will relate simply to the actual use at any given time, so there will be very little consistency involved there. It is a basic denial of core transactional philosophies that sit behind all valuation and all transactions in the marketplace, and all confidence in the handshake that I have mentioned before in this House that is between the parties. The consideration is always—has to be, by definition—worth more to the recipient than the asset itself. It cannot be otherwise. I see this as a denial of that principle.

This has significance. Although outside people may think this is a wonderful idea, when it comes to the individual deals that needs to be done, it will have a chilling effect—I think it can be no other than that. I believe that sentiment is already actively moving against it. I do not know, because the Minister has not come up with it, where the evidence of the deals being successfully done has come from. For all I know, it may be generated by housebuilders keen to get good 4G coverage for their latest new housing development. That is fine, but it does not make the daisy chain of 5G connectivity across the country successful, and I think we really have to consider that.

I would still be very supportive of a review. If anything, I would like it to start a bit later and be more searching. That is essential, because we are sleepwalking into the unknown in terms of valuation technology, market sentiment and, above all, the evidential base. I would not be doing my duty in this House if I did not say that that fills me with considerable concern. This is no way to produce results that command universal buy-in, bearing in mind that everybody agrees that 5G and the better rollout of 4G are desirable in their own right. If what is happening before us is not snatching defeat from the jaws of victory, dissent and disillusionment from what should be a common purpose, I do not know what is.

[The Earl of Devon (CB)]

My Lords, I will briefly add my disappointment to that voiced by a number of other noble Lords. I note, as previously, my various interests relevant to this legislation. I also welcome the noble Lord, Lord Parkinson, back to his seat and thank him for the time he took to meet me and the noble Lord, Lord Cromwell, last week.

I asked in Committee, as long ago as June, for the data on which the Government were basing their approach to valuations in this legislation. I was promised it nearly six months ago. We finally received it last week—two pages of rather thin A4 paper which say that the Speed Up Britain campaign presented evidence to the House of Commons committee that average rent reductions are in the region of 63%. That is it—the evidence on which the entirety of this valuations issue is based. It is incredibly disappointing that it took so many months to get it and that there is really no evidence whatever.

I note also, as the noble Earl, Lord Lytton, just stated, that we are given numbers of 39 agreements in 2018 and 1,015 in 2021. To what extent do those agreements fulfil the Government’s connectivity and Project Gigabit ambitions? Where are they taking place? Are they rural or urban agreements? It is of no use simply to give us bare numbers.

The noble Lord, Lord Parkinson, undertook from the Dispatch Box that the Government would provide regular updates to relevant committees. I would like a bit more specificity, if he can, on exactly which committees the Government will provide updates to, how regularly they will be provided, what their content will be and whether they will be published to the whole House, as I imagine they should be. Just undertaking to provide updates is simply not sufficient.

[Lord Clement-Jones (LD)]

My Lords, I am grateful to the Minister for his earlier engagement on the issues represented by this amendment and for outlining why the Government will not accept it. It was rather fuller, I am glad to say, than the embarrassingly short set of reasons set out, as he almost admitted himself.

The noble Lords, Lord Northbrook and Lord Cromwell, and the noble Earls, Lord Lytton and Lord Devon, have very cogently explained why they believe—as we do on these Benches—that an independent review of the Electronic Communications Code is needed to get our telecoms legislation to the right place. Indeed, the noble Baroness, Lady Stowell of Beeston, said on Report that

“the case for Parliament imposing this independent review is compelling.”—[Official Report, 12/10/22; col. 834.]

I absolutely agree. We have heard powerfully today why there is such a strong view that this Bill is unfairly skewed against site owners, many of which are small societies and clubs. We must get the balance right for the Electronic Communications Code between operator and landowner and ensure that it is fit for purpose in delivering broadband and 5G rollout targets.

These targets have changed markedly over time. There has been a continual shifting of the Government’s gigabit target, which it seems has now shifted from over 99% to 85% of premises by 2025. There is a continuing rural/urban divide, and real problems with latency in rural areas.