Product Security and Telecommunications Infrastructure Bill

Earl of Lytton Excerpts

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

[Lord Vaizey of Didcot (Con)]

I take the comments from the chair of my own committee in good heart. Clearly, I am on a learning curve in a very public way.

I simply reiterate that this Bill is about making planning as simple as possible, balancing the interests of landowners and infrastructure providers. The mood of this House is that we support Amendment 18, to allow the upgrade of telegraph poles. We understand that the Government will also support such an amendment if it is appropriately drafted. We look forward to the Minister’s comments on why this is a sensible way forward.

I merely add as an aside that the purpose of the Government’s funding and broadband rollout is to bring broadband to as many premises as possible. We all know from our own experience where the altnets are going. Quite understandably, they want a return on their investment, so they are going to cities and laying fibres in areas where Openreach is already present, where they know that they can get a return. There will be many other areas of the country where, understandably, they will not be able to afford to put in infrastructure. For the Government simply to turn their back on thinking hard about how to upgrade the many multi-dwelling units in different parts of the country simply because it is perceived to be an Openreach problem and not a problem for all telecoms providers is a missed opportunity.

[The Earl of Lytton (CB)]

My Lords, I cannot follow the amusement factor of the noble Lord, Lord Vaizey. As this is my first contribution on the Bill, due to force of circumstances, not least because on our first day in Committee I could not attend due to disruption on the rail system, I declare my interest as a chartered surveyor—still practising, just—with about 47 years’ experience in the public and private sectors. I hope that I can bring some of that to the debate.

As I understood it, in addition to being able to attach things to existing telephone poles, Amendment 18 would provide a right to create new overhead facilities of one sort or another. As a person who, from time to time, has occupied heritage property, I have a particular aversion to overheard telephone lines and to generations of cables being stuck to the outside of buildings—new ones are added but nobody ever removes the old ones. That is the first point that I would question.

The second point goes beyond this amendment but begins to address some of the points mentioned by the noble Lord, Lord Vaizey, on the use of existing facilities. These might be underground ducts. There is a bit of a problem when you get to blocks of flats, because there is a cut-off point at which the rights of, for instance, BT or Openreach end, at which point the wayleave or easement does not pertain. When you get into blocks of flats, there are other criteria. There are many instances of cables being run up, willy-nilly, through communal service risers, with firestopping material being removed and not put back correctly, and so on. No building manager in a block of flats will willingly allow someone from Openreach, who comes with a quite different set of instructions for what they are doing, to just get in there, willy-nilly, as of right. There must be safeguards somewhere along the line.

Further explanation is needed on other things. On numerous occasions I have come across situations where overhead cables have been put underground, perhaps because they were in the way or because it was convenient for visual or other reasons. But you then find that there is no easement or wayleave in relation to the underground bit—the easement or wayleave stops at the last pole, where it goes into the ground. That has certain disadvantages because every time somebody from Openreach wants to do some reconnection or give somebody a better service, they have no drawings of the underground system. I am told that this is an issue where new developments take place and the roads and common areas do not get adopted; they are retained not by the developer but are passed on to some management entity. We have all heard of the fleecehold, where the maintenance of that common realm is then jacked up and recharged through a rent charge.

I absolutely take the point that is being made, but if I am correct a raft of other issues needs to be resolved, including powers to take possession and use of things that are not currently within the existing wayleave horizon. I just flag up the difficulties associated with that.

[Lord Fox (LD)]

My Lords, I remind the noble Earl that Amendment 44 deals explicitly with the safety issues. He might want to reconfigure those points when we get there.

Taking the point from the noble Baroness, Lady Stowell, that we are focusing on Amendment 18, I will not seek to embellish the comprehensive and excellent speech from the noble Baroness, Lady Harding, but we should remind ourselves that the Bill allows for the sharing of historic wayleaves to share BT infrastructure under private land. It does not currently explicitly allow operators to use telegraph pole infrastructure on private land above ground. For places such as Herefordshire, where I come from, pole access is absolutely central to the rollout of fibre and a huge proportion of those poles sit on private land, so this matters quite a lot. I think 50% of premises in Scotland are connected by poles on private land.

As we have heard, the Bill as drafted would allow operators to use existing ducts to reach the base of such a pole, while existing provisions in the code allow for the flying of lines between poles, but no explicit right exists to access the pole itself or place apparatus such as small boxes—in practice, smaller than what is already there—on it. This amendment seeks to remove any ambiguity and make sure that what we believe to be the Government’s objective is fully written into the Bill, and that is why I am a co-signatory.

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Moved by

[The Earl of Lytton]

20: Clause 61, page 46, leave out lines 6 and 7 and insert—
“(a) having regard to the terms of the agreement (other than those relating to the payment of consideration), that the holding might reasonably be expected to be let in the open market by a willing lessor,” Member’s explanatory statement
This amendment, along with the amendment to page 47, line 36 in the name of the Earl of Lytton, would ensure that the value of a consideration imposed by the court should take into account the land’s value if it were used for the provision or use of an electronic communications network (and other uses), if the consideration is governed by the Landlord and Tenant Act 1954 or the Business Tenancies (Northern Ireland) Order 1996. The disregards for assignment and sharing, brought in in 2017, would however be preserved.

[The Earl of Lytton (CB)]

My Lords, in moving this amendment I will also speak to the other amendments in my name in this group. I must first admit that I am a landowner, although I have not had any telecoms masts since 2017, when I sold a farm not very far from an area known to the noble Earl, Lord Devon—the uplands of Exmoor—on which I had three masts. One was a conventional commercial telecoms mast, one was an Airwave emergency services mast and the other was a community Airband mast under construction. I see this across the spectrum of what is necessary, what delivers something to the community—and to me—and is therefore of value and part of the incentive, and what fundamentally does none of the above.

The one that did none of the above was the commercial operator. I was encouraged to give consent on a piece of land because it had trees on it; an upland area was needed and the national park did not want the mast stuck in the middle of a piece of open moorland. That was fair enough, as the idea was that this would improve mobile communications in the area. It did nothing of the sort. Having set off with hope in one’s heart that that would happen, it was something of a delusion. Indeed, I used to have to walk up to the middle of a 30-acre field to pick up mobile phone signal from a different network—probably from south Wales on the other side of the Bristol Channel.

I thank a number of noble Lords from across the House who have been very helpful in formulating my views, as well as a number of external consultants whom I have spoken to. I thank the Protect and Connect campaign for its input and Jeremy Moody of the CAAV, which has already been mentioned, for his invaluable assistance. I also acknowledge the efforts and briefings of Speed Up Britain, although I do not agree with its explanations relating to site value or on matters of fairness and balance. I also ought to say that I am an ordinary subscribing member of the CLA, although I have not communicated with it directly on this Bill. So much for the declarations of interest and so forth.

For all the training and experience one has as a valuer—I am a registered valuer with the RICS—it is acknowledged to be an art, not a science. It is based on many constructs, including market sentiment, risk and a host of other internal and external factors, from which the valuer is seeking to interpret an end-result. They are interpreting what the market is doing and trying to codify and make sense of what is happening in what are sometimes quite random situations.

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[The Earl of Lytton (CB)]

I am indeed. I believe that one of the firms is based in San Diego, in California. One cannot help supposing—I think this is the sentiment in the market—that the driving down of rental figures has been part and parcel of what is actually a very substantial land deal to sell a package based on the profit rent that can be derived. But the crucial thing here is that there does not appear to be any reason why these aggregators—or for that matter the site companies or mast companies—should pass on any of the savings to the network operator and make it cheaper or more competitive for those of us who actually use the service. That is one area where there is a significant disconnect. These things are noted by those who are acting for owners or by the owners themselves.

The intention really is to get some sort of fairness. I understand that, and do not dispute the question of getting a fair balance. However, I am worried that this is beginning to put things into the hands of commercial entities—the aggregators are no different—that may be benefiting from code rights but do not necessarily have the code obligations to deliver for society. I wonder whether these entities are going to end up doing some sort of site-squatting operation, where they tie up as many of the sites as they possibly can, rather in the same fashion as residential property developers might option up bits of land on the outskirts of villages. That would worry me, because it would mean that a cadre of middlemen would effectively be holding things to ransom. I will get on to why that matters in valuation terms in a minute.

The land valuation solution espoused by the communications code and strengthened in this Bill, in terms of having changed from market value to something that looks and feels a bit like existing use value, is, I am afraid to say, the philosophical equivalent of two cans of beans connected by a bit of slack string. It is a very unsophisticated approach for dealing with the land issue which underpins the whole of what we are talking about in the rollout of better 4G and of 5G—both of which I support for the reasons I made clear earlier.

I will move to an overview of the amendments. Amendments 20 and 22 to 27 aim to address the issues of valuation, pure and simple, which is one of the most significant concerns with the Electronic Communications Code. Under the changes the code made in 2017 was the introduction of the no-network valuation methodology for valuing land, which allowed site providers to recover only the raw value of the land rather than receiving a market price. A new line was inserted into the code so that, when setting a site value, the court was prevented from taking into account a site’s potential use for the provision of an electronic communications network. This is notwithstanding that the Electronic Communications Code itself has a reference to market value at paragraphs 24(1) and (2) and sets out in sub-paragraph (2) the criteria—which I understand, as somebody dealing with valuations in terms of the standard RICS specification; the wording is familiar—but then inserts at sub-paragraph (3) a provision relating to the court’s jurisdiction which negates this.

Market value has an internationally recognised definition: it is the price one might reasonably expect in an arm’s-length transaction, following proper marketing, between a willing buyer and willing seller, in which the participants act

“knowledgeably, prudently and without compulsion”.

To include this definition in one part of the code but then to say in the bit that immediately follows that the court must disregard significant parts of it is, in linguistic and market terms—even if not in valuation practice statements—simply incoherent. There is no conceivable middle ground here. It is one thing or the other: remove one leg of the definition and the entire proposition unravels. Effectively, we are left with existing use value, which is not a useful or defined metric so much as a state and condition of land, normally only ever used in taxation and accounting for certain local authority assets.

At the same time, another change was made to the code’s valuation provisions to ensure that site owners could not charge ransom rents. Any valuation must assume that there is another site available to operators so that there is no monopoly in land provision around any site. This change was recommended to the Government by the Law Commission. It is quite an important one. It may be that legal minds can conceive of free markets in which the economics of supply and demand are simultaneously applied and negated, but you cannot then leave the free market to sort it out. It does not happen. It cannot happen, because you have just trashed the open market system.

I thank the Minister for the online meeting we had before Committee. Some mechanism for pegging rents, which I meant to mention, or else some other surrogate comparator, seems to me to be necessary. In the Rent Acts, when there was rent control and security of tenure, there was a person called the rent officer who was supposed to fix the rents on the basis that it was devoid of scarcity. To a degree, that worked. However, as the situation arose, the market, following the introduction of the Rent Acts in 1965, effectively imploded and collapsed. The law can state that one thing means another—that “chair” shall mean “table” and vice versa—but no lawyer in the land is going to alter their respective functional characteristics, nor in the real world of furniture sales will a buyer looking for a traditional chair be satisfied with getting a table instead. So we really need to sort it out.

In the other place, the Minister recognised that rent reductions have been much greater than expected—I do not know whether he admitted that this was the fault of aggressive behaviour by operators. This affects a wide variety of small businesses and others that we heard about at Second Reading and in the previous Committee debate. On the situation today, it seems to me that the Bill will make it easier to go to court while preserving the same valuation regime. As the Law Society said, this appears to be addressing the symptoms rather than the causes.

Plus, it skews the negotiations. If you make it easier for somebody to go to court and that becomes the default, what happens? The more powerful economic party rules it over the less powerful. You do not get equality before the law; you depart even further from a fair market position. Although provisions exist for alternative dispute resolution, there is in fact little or no compulsion for operators to use this, so they default to more costly alternatives, which are of course naturally seen as preferable to anybody aggressive and well-funded. The whole question of ADR can always be sidestepped on the basis that some point of law is at stake or the lessor has jibbed at the “take it or leave it” proposal put to them. It is very easy to avoid ADR in the majority of circumstances.

The Government said they were not going to revisit the valuation regime introduced in the 2017 reforms, but the Bill actually expands the no-network valuation regime into approximately 15,000 agreements governed by the Landlord and Tenant Act 1954 and the Business Tenancies (Northern Ireland) Order 1996. This will allow existing contractual agreements entered into in good faith to be dramatically changed. Bear in mind that rent is merely the financial end-product of a deal involving many covenants, conditions, undertakings and other criteria. The filleting out of consideration on the one hand from compensation on the other, demanding as it does the quantification of many interrelated, non-priced elements, is, I am afraid to say, a very suspect practice.

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[Baroness Stowell of Beeston (Con)]

I am so sorry to interrupt the noble Earl, who is clearly giving us a sense of this important and wide-ranging matter. However, he will know that the Member introducing a group of amendments is asked to stick to 20 minutes maximum—and we are now over 22 minutes.

[The Earl of Lytton (CB)]

My Lords, I have a group of amendments here, all of them covering very technical bits and pieces and, rather than trying to deal with one at a time, disaggregate them and give an individual explanation for each, I felt it would be helpful for the Committee if I put them in context and dealt with in this way. I assure the noble Baroness that I shall be as speedy as I can, but I crave the Committee’s indulgence in that respect, and I should like to continue with what will be my principal contribution on the Bill.

I was talking about the question of fair value and had got to Amendment 24. This amendment would ensure that, where a site agreement is first renewed using part 5 of the code, the courts are unable to impose a rent reduction of more than 40% on the rents that fall under the existing consideration. This would ensure that the Government’s original expectation that rates would fall by no more than a maximum of 40% was delivered by legislation, and would prevent what I described to the Minister as the cliff edge that has occurred in the arrangements. Subsequent renewals under the code would then be made on a no-network valuation. It would also enable consideration of the effects of the policy on rollout and upgrade of sites and whether the objectives were being met.

Amendment 25 would require the Secretary of State to publish guidelines on the level of factors influencing the expected value of the imposed considerations. This would ensure some clarity about the Government’s expected policy. Amendment 26 would phase in the application of a newly fixed rental consideration imposed by the courts. The intention would be for the new consideration to become payable only, if it was a reduction, after 24 months from the date of the court order. Prior to that point, the operator would continue to pay the previous rent. Amendment 27 is similar to Amendment 26. This amendment would create a tiered phase-in period for the application of a new consideration imposed by the court.

The amendments fall under two options. The first tries, as far as possible, to remedy the effects that have occurred under the 2017 code. The second lot gives a sort of halfway house to build in what the Government say they are trying to do but, at the same time, ameliorate the effects with the same long-term result. I apologise for dealing with this at length. I beg to move.

[Lord Clement-Jones (LD)]

My Lords, on these Benches, we support the amendments introduced by the noble Earl, Lord Lytton, with his expertise both as a valuer and surveyor and as a site provider. I well understand why he has taken the trouble to take us through the amendments in the way he has, because they lie absolutely at the core of the Bill, of the relationship between site providers and operators over a long period, and of Protect and Connect’s campaign. It is quite reasonable to unpack the valuation system that has been in place and explain in some detail his proposals by way of the amendments for a new valuation system, or at least an alternative way to deal with the current one.

I start by quoting the Central Association of Agricultural Valuers:

“The tragedy of the 2017 Code is that, far from encouraging collaboration over sites assisting roll-out, some leading operators have made heavy handed, confrontational and attritional use of the powers and privileges they were given by it, very largely to reduce the cost of renewing existing agreements rather than winning new ones or make themselves attractive as tenants. The irony is that, as reported to November’s RICS Telecoms Conference, even if rents may now be much reduced, the overall cost of securing a site has doubled and timescales lengthened.”


That seems very paradoxical. This refers to the fact that, as the noble Earl said, under changes made to the code in 2017, a no-scheme or no-network valuation methodology for valuing land was introduced. As he also explained, this allowed site providers to recover only the raw value of their land, rather than receiving a market price. It did this by inserting a new line into the code that, when setting the value of a site, prevents courts from taking into account a site’s potential use for the provision or use of an electronic communications network.

At the same time, as the noble Earl has also explained, another change was made to the code’s valuation provisions to ensure that site owners cannot charge ransom rents. Any valuation must assume that there is another site available to operators so there is no monopoly in land provision around any site. As he also mentioned, this was recommended to the Government by the Law Commission. Operators have been able to use these changes to drive down the rents that they pay to site providers, often to peppercorn rents. In 2017, the Government said that they expected that rent reductions should be no more than an absolute maximum of 40%, and that has been cited at Second Reading and on many other occasions. However, we know from data cited by the operators that reductions have at best averaged at 63%, a huge sum for many of the people who rent their land to be used for telecoms infrastructure, and in many cases, as we have also heard, reductions have been much higher—in the region of 90%.

The Minister will be aware of the Protect & Connect campaign, and many Members around the House will have had communication with it. It cites the Fox Lane Sports & Social Club, which had a mast on its land for 12 years owned first by Orange and now by EE. The club was getting £7,800 a year but it has now been told that it will get only £794 a year from 2023. Billericay Rugby Football Club had a mast for over 20 years and allowed Vodafone—now Cornerstone—to attach infrastructure to the mast. It paid the volunteer-run club £8,500 a year. However, with the changes to the code, EE says that it will cut the rent by more than 90% to £750 a year. There are many such case histories worth looking into. The evidence is there.

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[Lord Vaizey of Didcot (Con)]

We ought to remember that Vodafone is a global company and a great British success story. I congratulate the noble Lord, Lord Northbrook, on reading out the successful efforts of the Protect and Connect PR campaign in picking individual stories that appear to show rapacious mobile operators riding roughshod over small community organisations.

The key point is that, if you put a mobile mast in a rural area, it is not going to be a significant generator of revenue for you as a company because it will be used by only a few people. If the market is left entirely to its own devices, most of the masts—as with most of the fibre that is going into the ground—will go into our main metropolitan areas. That is why if you walk down Oxford Street, you will see a mast pretty much every 10 or 15 metres because that is where the revenue is generated. If one insists on charging very high rents in rural areas, we will slow down the connectivity and build-up of rural networks. I simply want to make the point that mobile operators do not exist, much as one would wish them to, to supplement the income of community sports clubs, much as I love and admire the work that they do.

[The Earl of Lytton (CB)]

In saying that mobile operators are very large and substantial companies, does the noble Lord accept that only part of what they do fulfils the same sort of social benefit commonly associated with a traditional utility company? A very large amount of what they do and propose to do is the selling of very large amounts of bulk data for all sorts of commercial purposes, not least streaming information to parts of the entertainment business. Why is the claim made that they should be treated in the same way as a utility, when a data centre, battery storage facility or even a wind or solar farm would not qualify in the same way? I put it to him that some of the arguments put forward, and which appear to have influenced government, do not stand up to scrutiny.

[Lord Vaizey of Didcot (Con)]

I do not want to be sidetracked into a debate on the classification of wind or solar farms, but I would describe mobile phones as an essential utility. The noble Earl himself pointed out what pleasure he got from having an emergency services Airwave mast on his land and how important that is. Rural connectivity is becoming absolutely essential, which is why the Government have put £5 billion into supporting the shared rural network.

My noble friend Lord Northbrook spoke about his row about the mast on the M3. What he should also have pointed out about the reduction in rents perhaps reducing the opportunities for farmers to diversify is that it is a complete red herring. The opportunities for farmers to diversify are provided by giving better mobile connectivity. Anyone who knows Jeremy Clarkson and has watched his incredible programme “Clarkson’s Farm”—maybe he is one of the 50 rumoured Peers who will be coming into this House shortly and will give us the benefit of his views personally—will know that what is really holding back diversification are small, conservative, small-minded district councils that will not give planning permission for much needed restaurants, car parks and farm shops.

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[Lord Parkinson of Whitley Bay (Con)]

My letter that was sent just before Committee outlined some of the engagement that the department has had and listed some of the groups with which we have spoken. That goes some way towards that, but I will certainly see whether there is anything further that I am able to share with noble Lords in addition to that table, which was appended to the letter I sent yesterday.

As I say, we believe that the measures in the Bill will address the complex areas that have led to protracted litigation and emphasise the value of collaborative relationships between operators and site providers. I therefore invite noble Lords to withdraw or not to press their amendments in this group.

[The Earl of Lytton (CB)]

My Lords, I thank the Minister for that detailed reply. I will obviously not try to cover everything he said, but just touch on one or two points.

The Minister referred to the RICS, and it is true that the RICS produced a guidance note in relation to code changes. It was of course produced in the light of those changes, rather than in an attempt to influence them, and it points out the strong likelihood of very low rents resulting from those changes. Of course, being a guidance note, it does not predict or advise on what the market outcomes are likely to be in practice. I have not had a moment to check, but it is my belief that the manual of valuation and appraisal—otherwise known as the Red Book—produced by the RICS and Institute of Revenues, Rating and Valuation, has made the valuation of mast sites an exception to the market value criteria within the Red Book. It is, if you like, a derogation from that market value principle.

I go back to the point that I made: you cannot have market value in the terms that I described it and the internationally recognised specification and then say that you disregard it and the matter gets to court. So what does that mean? You go to court because you can get it disregarded. Is that the way that the world functions? I am sorry, but I just do not get it—this is an oxymoron of a principle.

That apart, there still remains the fact that reducing rents to around about £750 or so per annum—if that is indeed what will happen, because all these things are hemmed in by confidentiality clauses so that the information does not get out, thus preventing any sort of transparency that would give rise to a market in those terms—calls into question the existence of willing participants, regardless of the valuation assumptions to the contrary. You can make all the assumptions you like, but the market will tell you what it is going to do. If you have people who are disengaged, then that is it.

The Minister is in denial that the market is moving towards, or is effectively at, a point at which it is bust. I hope that he will be able to produce some statistics to back what he says. While he says that, on one hand, the comments from organisations such as the CAAV may be regarded as apocryphal, I have difficulty in understanding that what he says his department is receiving is of any better or worse quality than that. We are in a land of the unknown, with people saying one thing and meaning another. We are effectively relying on a lack of evidence. That really is not good enough.

If we are getting to a stage where the market is not functioning, what then? How long will the Government wait before they decide that something needs to be done? And what will they do—more compulsion, more work for the law courts and legal profession, more time spent getting these masts in place and rolled out? I do not see it. I would really love to know what the greater vision is. The Minister referred to “greater collaboration”; I am sorry, but I do not see it. I see anything other than greater collaboration coming out of this. It takes two to tango—the old business about taking a horse to water may well apply.

I will not press these amendments and will withdraw them at this juncture; they can be resisted, but the real world outside will continue notwithstanding. It does not matter what sort of bubble you live in and what sort of vision you create—whether the commercial vision of code operators or the vision of what is happening from the point of view of the department that wishes to defend the policy that it has had in place since 2017—the situation on the ground will work out the way that it will work out. There is no changing that any more than one can change the basic DNA of transactional analysis in property markets. I beg leave to withdraw Amendment 20.

Amendment 20 withdrawn.

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[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.

[Lord Northbrook (Con)]

Does the noble Earl not think it most unusual for commercial contracts to be interfered with in this way? Is it not almost unprecedented to have such retrospective actions on them?

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[The Earl of Lytton (CB)]

There have been instances where contracts of all sorts have been interfered with by government—for example, the Landlord and Tenant Act 1954. There have been instances where rent control came in, nearly always for social reasons. I always like to compare the Rent Acts and rent control and security of tenure, which caused the collapse of the private rented sector for about 25 years, and the Landlord and Tenant Act 1954, where the contracts were largely left in place and statutorily continued, but at a market rent and the market was not interfered with. By and large, it worked and investment continued. Contrast and compare those two situations.

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[Lord Sharpe of Epsom (Con)]

I thank all noble Lords who have spoken to this group, which concerns both compensation and backdated payment. I shall start with the former. One of the main aims of the Bill is to ensure that where an agreement to which the code applies is renewed, there is a consistent approach in calculating the financial aspects and terms of that agreement.

Before I get on to the details, I will answer my noble friend Lady McIntosh, who strayed back into the general valuation principles. I note that my noble friend Lord Parkinson has committed to see what else can be distributed in terms of the evidence that she seeks. I reassure her that we have had extensive engagement with the NFU, but I will write to her with details of that.

The last group dealt with how Clause 61 does what I have just described in England and Wales, through changes to the 1954 Act that replicate the code valuation regime. This means that, when agreements are renewed under the 1954 Act, the new rent will be calculated in the same way as agreements renewed under the code. However, the 1954 Act deals solely with the rent that a landowner should receive from an operator. Under the code, this is not the only sum landowners can receive. The code also allows landowners to receive compensation from an operator. This compensation stands separately to the “rent” or consideration payable, and should cover any loss or damage resulting from the code operator exercising the rights that have been agreed or imposed.

There is no equivalent right to recover compensation within the 1954 Act. Clause 63 therefore inserts provisions into the 1954 Act that reflect the code provisions on compensation. This clause ensures that the amounts that landowners receive in compensation will be calculated in the same way, regardless of which statutory renewal mechanism is used and where in the UK that agreement was entered. Although the compensation provisions we are introducing will directly apply only if a renewal agreement is imposed by the court, it is inevitable that consensual negotiations can—and should—be influenced by the terms that might be imposed in those circumstances. This will influence consensual negotiations for agreements regulated under the 1954 Act, through which the parties can make adequate provision for compensation.

It was always the policy intention that the compensation provisions in the code should inform consensual negotiations for compensation in this way, and the same principle should apply to compensation provisions for the 1954 Act. We therefore want Clause 63 to stand part of the Bill.

Before I get on to the various amendments, I should say that the noble Earl, Lord Devon, referred to case law, on which I will expand a little. The courts have dealt with various points in connection with the Electronic Communications Code and the Landlord and Tenant Act 1954 and the matters we are discussing, and I do not think it would be necessarily helpful to discuss them in detail. We are happy to write to noble Lords or arrange a meeting if there are particular matters relating to case law that they would find useful to discuss, including in respect of the key judgment that was recently handed down by the Supreme Court, which is being considered carefully by department officials and legal advisers at the moment.

[The Earl of Lytton (CB)]

I ask the Minister to consider what happens if a contract under the 1954 Act contains a provision in relation to not increasing the height of a mast, or to an area where a mast operator is allowed to control the growth of vegetation—trees in particular—but then the operator demands rights to raise the mast, thus presenting a degree of visual intrusion to the farmhouse or whatever it happens to be. In a case I encountered, after 20 years of trying to establish a shelter belt at 1,400 feet up on Exmoor, the contractors for EE demanded to cut a swathe through the middle of this to get line of sight with another mast which was not in contemplation at the time the agreement was entered into. How would such an inconvenience be quantified in market terms? I suggest that there is no way of dealing with those sorts of situations under the code. The operator would simply turn round and say, “You’ve suffered no mercantile loss, and if your trees blow down we’ll give you a contribution towards re-planting them—and you’ve no right to a view anyway, so tough.” Could the Minister explain how he thinks those non-market aspects are going to be dealt with?

[Lord Sharpe of Epsom (Con)]

The noble Earl, Lord Lytton, raises some very specific and technical points, if I may say so. I am afraid I am going to have to write to him.

I turn to Amendments 28 to 33, tabled by the noble Lords, Lord Clement-Jones, Lord Fox and Lord Blunkett, and the noble Earl, Lord Lytton. These seek to amend Clause 67, which relates to interim orders where an agreement is being renewed under part 5 of the code. Paragraph 35 of the code covers situations where an agreement to which part 5 of the code applies has expired or is about to expire, and the parties are unable to agree whether that agreement should be terminated or what the terms of any new agreement should be. In those circumstances, proceedings may be issued so that a court can decide what terms should be imposed.

Such disputes can take time to be determined. The provisions in Clause 67 which amend paragraph 35 of the code enable either party to ask for an interim order in relation to any term of the current agreement. The benefit of this is that specific issues can be dealt with at a much earlier stage of the proceedings. The clause gives the court more flexibility than currently contained in paragraph 35 of the code, enabling it to look at situations where a party needs an urgent change to any term of their agreement. An example of this is where an operator needs amended terms to allow it to upgrade an existing site, to improve capacity and coverage for consumers. It also allows an operator to ask for the financial terms of the agreement to be reviewed at this interim stage. This ensures that the code valuation framework can be applied at an early stage in the proceedings, which may speed up negotiations on other areas in dispute.

It is the financial terms that the court could impose that have prompted the proposed amendments to Clause 67. These amendments seek to restrict an operator’s ability to apply for interim financial terms to be imposed, and fetter the discretion of the court when deciding them. The Government think it right that an operator can make an application for interim financial terms to be imposed, irrespective of whether other interim terms are sought. Allowing this to happen means that an operator can benefit from the code valuation framework at an earlier stage. This should give operators more capital to invest in the expansion and upgrade of their digital networks, which is of huge benefit—

--- Later in debate ---

I hope the department and my noble friend will look very favourably on the suggestion in relation to Clause 69, as well as the others I have referred to with the amendments I have spoken to. It will only strengthen the Bill if these small changes are adopted.

[The Earl of Lytton (CB)]

My Lords, I have an amendment in this group but I will also briefly voice my support for the other amendments to which my name has been added. The noble Lord, Lord Clement-Jones, referred to ADR. As I see it, ADR is highly desirable but easily avoidable in the commercial world of disputes. I believe that the application of ADR under the code as it stands is asymmetric in its treatment of site providers as against operators, which is entirely regrettable. Therefore, there ought to be mandatory ADR, and the avoidance of ADR in litigation generally is sufficiently common to make it clear that that needs to be dealt with.

I very much support the comments made by the noble Baroness, Lady McIntosh. She referred to lack of confidence, which goes back to a key theme here. I agree, although I would use the term “overt mistrust” as being much nearer the mark to describe what is happening here.

I have put my name to Amendments 39, 40 and 41. The concern here is that Ofcom is a weak regulator in this field and the entire environment of regulation is not consonant with the changed balance between site providers and operators. That needs to be tightened up.

My Amendment 42A is a “see no evil” removal clause. The idea behind it is to mandate: the operator collating and reporting complaints and actions taken in consequence to Ofcom; that Ofcom has to consider this and have regard to it when dealing with its other functions as regards the operator; and that Ofcom must then publicise annually the outcome of that process. The purpose of this is to demystify this whole question of whether there are complaints and, if so, how many, where they come from and who is to blame for what. Let us get the facts. Let Ofcom, which is supposed to be regulating the sector, deal with the matter. It is one thing that would aid transparency. It was put to me that it might stir Ofcom out of its lethargy; I would not quite use those words myself but the sentiment would probably be well understood across the House. We need tough regulators to deal with quite a difficult emerging situation.

[Lord Northbrook (Con)]

My Lords, briefly, I support the amendments in the name of the noble Lord, Lord Clement-Jones, the noble Baroness, Lady McIntosh, and the noble Earl, Lord Devon, which would make ADR mandatory, noting the lack of confidence in the current situation and the overt distrust, as mentioned by the noble Earl, Lord Lytton. I hope this process might also speed up the whole 5G rollout.

--- Later in debate ---

Tabled by

[The Earl of Lytton]

42A: After Clause 69, insert the following new Clause—
“Reporting process for complaints
(1) The Communications Act 2003 is amended as follows.(2) In section 106 (application of the electronic communications code), after subsection (6) insert—“(6A) A direction has effect for five years, after which any renewal must take into account—(a) the extent to which the operator has complied with the terms of the direction,(b) the number and nature of complaints made against the operator for breaches of the OFCOM code of practice reported under paragraph 103 of the electronic communications code,(c) such other matters as OFCOM deems appropriate in determining whether that operator should benefit from a renewal of that direction, including the general conduct and ethical performance of the operator.”(3) In the electronic communications code, after paragraph 103 insert— “103A_(1) Each operator must report to OFCOM all complaints made to it in respect of alleged breaches of the code of practice under paragraph 103 in sufficient detail to make clear the nature of the complaint.(2) The report must contain an account of the actions taken by the operator in response to those complaints.(3) Reports must be made in each calendar year before 31 January following the end of the reference year or such other annually recurring date as may be determined by OFCOM in any given instance and to like effect.(4) OFCOM must publish an annual summary no later than six months following the end of the reference year setting out the performance in terms of—(a) complaints received,(b) actions taken, and(c) directions considered but not made,in pursuance of the reports from operators.””Member’s explanatory statement
The purpose of this amendment is to ensure that instances of poor behaviour insofar as they exist have a properly formulated reporting process and would thus serve to provide a factual basis; to make Ofcom the relevant repository of the complaints regime; and to ensure that Ofcom draws on this as part of its regulatory functions as well as publishing the relevant information.

[The Earl of Lytton (CB)]

My Lords, I shall be very brief. I was rather disappointed with the Minister’s response on Ofcom. This looks like minimal regulation—guidance only, no teeth. It is asymmetric with the rights and duties that will now be exercised against site providers. It is effective open season for coercive tactics. There is no government willingness to consider principles of balance or equity. The message that goes out on that will come home to roost later if the Government do not reconsider.

Amendment 42A not moved.

Product Security and Telecommunications Infrastructure Bill

Earl of Lytton Excerpts

3rd reading
Wednesday 19th October 2022 Lords Chamber

[Lord Clement-Jones (LD)]

My Lords, I add my thanks to the Minister, the noble Lord, Lord Kamall, the noble Lord, Lord Sharpe, and their team, and of course to the Minister’s predecessor, the noble Lord, Lord Parkinson. I would describe him as “urbane”— I can flatter him now that he is no longer a Minister.

I also thank the noble Baroness, Lady Merron, and the noble Lord, Lord Bassam, on the Labour Front Bench for making common cause on so many issues, and quite a number of Cross-Benchers and Conservative Back-Benchers who have played such a prominent role in trying to improve the Bill with their expertise alongside external organisations—such as Which?, Protect and Connect, ISPA and CityFibre—which have been so helpful in their briefings. However, my particular thanks are due to my fellow in arms, my noble friend Lord Fox—who has borne at least half the burden of this Bill with me and was described rightly in Committee as a “supersub” by the noble Lord, Lord Bassam—and, very importantly, to the very expert Sarah Pughe in our whips’ office. I thank in particular the noble Lord, Lord Kamall, for his efforts; this was his first DCMS Bill, but I am sure it will get worse.

I am pleased that the Government have made some concessions and given assurances during the course of the Bill, particularly about the regulations to follow. However, on the central aspects of not specifying enough in primary legislation in terms of security requirements for IoT devices and the retention of unfair valuation and ADR provisions, the Bill is ultimately disappointing. I hope that the Minister will ensure that the review mechanism is retained and does not return to this House.

In general, the objectives on all sides of the House are not very different, but I must say that the Government’s one gigabit strategy really has seemed to mutate throughout the course of this Bill, so I do not believe that there is a great deal of clarity yet on when the Government’s strategy is actually going to be accomplished. In general, as regards retaining the review mechanism, a little willingness to accept this might earn this Government just a few, badly needed friends out there—they might find that quite useful at the current time.

[The Earl of Lytton (CB)]

My Lords, first, I apologise for my unavoidable absence at Report last week, but I add my belated welcome to the Minister on his appointment and thank him for writing today, as well as my appreciation to his predecessor, the noble Lord, Lord Parkinson. On product security, I certainly wish this Bill well. I am somewhat less enthusiastic about its telecommunications infrastructure measures, particularly on the matter of valuation.

I express my thanks to the clerks and the wonderful co-ordination run from the Liberal Democrat offices. I thank colleagues who spoke in favour of the valuation amendments that I tabled at earlier stages, particularly the noble Earl, Lord Devon, who cannot be here today, and the noble Lord, Lord Cromwell, who I am glad to see is in his place. I also thank noble Lords across the House—I am extremely grateful, particularly for the Labour amendment of last Wednesday, so ably pressed by the noble Baroness, Lady Merron, which really remains the only man standing on the measures that might ultimately address market concerns on telecoms sites. I thank the noble Baroness warmly for that and pledge my support going forward. I pay tribute to the CLA, of which I am a member, the NFU, and other bodies such as Protect and Connect, which we have heard about, for their support and persistence.

Whatever the economic and political rationale, impressions matter and govern transaction analysis—and market confidence also, as we have seen recently in grand style. So I regret that, despite the Minister’s letter of today, a reasoned justification and clear evidence for further interventions into landlord and tenant practice are not apparent to me, especially looking at contractual terms beyond rent. Although as a property practitioner and fellow of the RICS, I believe that these measures are in that sense regrettable, divisive, avoidable and likely to cause the supply of mast sites to shrivel, I appreciate that the Minister demurs and disputes the evidence that has been put forward of lessor reticence, increased legal disputes and slower market process. So we will just have to see. Site providers in the market, their advisers and so on will have to take note, and they may become increasingly wary, not only for what this means in terms of mast rentals but for the wider implications for property rights going forward.

[Baroness McIntosh of Pickering (Con)]

I rise briefly to support the noble Earl, Lord Lytton, and to thank him and his Cross-Bench colleagues, the noble Earl, Lord Devon, and the noble Lord, Lord Cromwell, for the Cross-Bench support that we have enjoyed, together with that from the opposition Benches. My noble friend Lord Northbrook has also fought a valiant fight.

I thought it important from these Benches to place my regret that the 2017 electronic communications code has been harsher in its effects than had previously been anticipated. This was an opportunity to review that. So, while I did not support the Labour Front-Bench amendment, this is a good opportunity next door to consider whether there is cause, as I believe there is, to review the legislation at this stage.

I regret the imbalance in relationship that the Bill will expedite between the operators and landowners, many of whom are not private landlords but are sports clubs and others that will find the loss of income quite substantial and very difficult to replace at this time, in particular with the cost of living crisis and the inflation that we have seen. I regret that the alternative dispute resolution mechanism will not be mandatory; perhaps that is something the Government might like to consider when they look at this next door.

I will end on a local note. This is something that potentially could impact very positively in north Yorkshire. However, there are two issues that the Minister may not be aware of, as he is relatively new to this brief. One is that there are a number of existing masts owned by a specific telecoms operator that have not been operational. You have to ask the question, since the permissions have been given and the masts are in place, why on earth are they not being operated, in a place with one of the poorest levels of connectivity in the country. The other is looking at alternatives such as piggybacking on the back of the telecommunications masts that were put in place at public expense for the North Yorkshire Police service. I can see absolutely no reason why we cannot piggyback on the back of those.

With those few words, I wish the Bill well, particularly its Part 1—we will gloss over some of the later parts—as it proceeds in its passage through Parliament.

Product Security and Telecommunications Infrastructure Bill

Earl of Lytton Excerpts

Consideration of Commons amendments
Tuesday 22nd November 2022 Lords Chamber

I urge the Minister to listen to the concerns from all sides, notably from his own Benches in this House and the other place, as well as professional bodies in support of a review or at least to bring forward a meaningful government amendment to review the valuation method towards some valuation middle ground. He has not done so and no single amendment has so far been accepted by the Government. The telecoms operators which have lobbied so successfully for this opportunity to enrich themselves must be delighted with this early Christmas present. The families and the organisations being plundered may have a rather different view.

[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.