Digital Economy Bill

Lord Grantchester Excerpts

1st reading (Hansard): House of Lords & Committee: 1st sitting (Hansard): House of Lords
Tuesday 31st January 2017 Lords Chamber

Moved by

[Lord Grantchester]

23: Clause 4, page 3, line 20, at end insert—
“( ) Any rent savings made by mobile network operators as a result of provisions in this section must be invested in efforts to increase geographical coverage.”

[Lord Grantchester (Lab)]

My Lords, this amendment brings the Committee to Part 2 of the Bill: digital infrastructure. This introduces, under Schedule 1, the new revised Electronic Communications Code to replace the code assembled in 1984 and revised in 2003. The Government claim that the new code gets the balance right between operators and site providers. Many of our amendments today are intended to challenge and assess that claim and to make the code work better for everyone.

The code introduces a new no-scheme regime for valuing land sites and access. Under a backstop power there is an element of compulsion—including compulsory purchase, compulsory lease and compulsory contract powers—if agreement cannot be reached. However, the code is distinct from most compulsory purchase powers in that it creates continuing relationships and seeks to impose what would reasonably be agreed. Yet this principle of agreement requires a market value, even a deemed value, rather than compensation for a loss.

In trying to get this code right, the Government sensibly undertook consultations and asked the Law Commission to come up with a solution. However, they suddenly changed tack and came up with this new interpretation which has caused consternation to many who sense that the Government have listened to only one side, the operators—characterised as huge multinationals made up of only a handful of companies —as opposed to site providers, which are, by contrast, small entities with diverse interests. The National Trust, for example, which is charged with obligations under the European Landscape Convention, has concerns where there is a need to protect landscapes and scenic beauty. Fisher German, meanwhile, which represents around 7,500 clients, not only in rural locations but also land owners and authorities in urban areas, argues that there has been close consultation with the operators only to the detriment of land owners.

The Government’s new code aims to incentivise investment in infrastructure which will in turn improve coverage and connectivity for everyone. The charge is that infrastructure costs are too high for the operators. The Government wish to change the balance in favour of those larger institutions; that is, the operators. There are certainly problems with the old code but the sector has made it work. The sector has developed more through the market than by statutory imposition. Changing that to imposition sends warning signals that could lead to much greater resistance by those affected.

BT has claimed that 20% of its costs are tied up with infrastructure. We all want improved coverage and connectivity, yet is it correct that operators blame obstructive landowners blocking development and charging ransom rents? The Government have been convinced by networks regarding these new powers.

I am grateful to Mobile, which has undertaken an investigation into the true cost of mobile network operators’ rental agreements. Its research covered 184 councils, as well as others, with 52,000 masts in the UK. The data compiled by Mobile relating to both rural and urban sites showed that estimates of the average rent costs were 34% less for rural sites and 18% more for urban sites than the information provided by Deloitte. The average urban rent was £11,346 as opposed to an average rural rent of £4,946. Yet it is the rural and more remote areas of the UK where coverage is poor. These statistics point out that the biggest costs are in the urban areas.

The Deloitte report, commissioned by the Mobile Operators Association in 2015, concluded that £270 million could be unlocked for investment in improving networks if the new Electronic Communications Code was in place. The Government assume that reducing costs will result in increased investment. Will cutting the costs of city-centre rents result in better rural coverage? Has the Minister seen the site traffic data and income figures for some of these sites? It is claimed that some sites in London could earn £1 million a month, whereas the code seeks to reduce the rent from £30,000 a year to £200. Have the Government considered the other side of the coin, by which I mean the lost income to site providers—the local authorities, hospitals, water-tower owners, sports club charities, and even clubs like Lincoln City in football whose floodlights on football stands host the infrastructure? These amendments put the challenge to mobile network operators and give real incentive to the Government’s backing. If the costs are so significant and constraining to investment, let us see the savings spent on extending and improving that coverage.

I also speak to Amendment 24 in this group. There is great concern at the concentration of ownership of wireless infrastructure in the hands of huge vertically integrated mobile operators. To encourage an independent network of sites under integrated management, this amendment proposes a threshold of 10 as a minimum size to encourage investment in independent infrastructure. Many of these investments are in alternative structures such as water towers and pylons and often improve connectivity across mainly rural areas. The challenge is whether the rents and returns can support this investment. By clarifying the situation regarding using site provider investments to become ECC beneficiaries, this probing amendment challenges the Minister to say whether he sees this as a further incentive to the sector, and to aggregated site rights in particular, to bring forward efficiencies such as multiple properties on standard terms. I beg to move.

--- Later in debate ---

[Lord Ashton of Hyde]

My Lords, this is an important part of the Bill. The Electronic Communications Code is the regulatory framework underpinning agreements between site providers and electronic communications operators that wish to install and maintain digital communications infrastructure. The existing code was introduced in 1984 and has been subject to persistent criticism. It is widely perceived as unclear and outdated. The reforms before noble Lords today are the result of extensive research, consultation and collaboration with a diverse range of stakeholders and other government departments. This has included review by the Law Commission in 2012, followed by full government consultation in 2015, as well as the commissioning of independent economic research. We believe the reforms will ensure that communications operators are able to deliver the coverage and connectivity that UK consumers need.

Without making a Second Reading speech, I think we should bear in mind when considering the amendments and the Electronic Communications Code the views expressed in previous debates. Noble Lords have roundly condemned the speed and availability of mobile communications. We do want to reduce costs but we do not want to tear up existing arrangements. That is why they are prospective. It is important to say, as the noble Lord, Lord Aberdare, mentioned, that we expect most of the contracts to be consensual.

Amendment 23 seeks to introduce a statutory obligation on mobile network operators to invest any savings in improving geographical coverage. The reformed code introduces an essential package of reforms that will give rise to significant savings for industry. Our impact assessment estimates that the industry stands to save around £1 billion over a 20-year period. The Government agree that if reforms are to have real impact, savings must be invested in expanding network infrastructure. Mobile network operators have already made commitments to improve coverage and connectivity. These include the 2014 joint agreement to provide voice and text coverage across 90% of the UK’s geographical area by 2017. There is also a wide-scale industry rollout of 4G technology, led by Telefonica’s licence obligation to deliver to 98% of indoor premises 4G coverage by the end of 2017. This will amount to investment of close to £5 billion in UK infrastructure. However, that is just the beginning. We are confident that the revised code creates the right market incentives to secure real investment in digital communications infrastructure. As such, regulatory intervention to direct industry savings is not necessary.

Amendment 24 seeks to expand the category of persons who can be designated by Ofcom as a code operator under Section 106 of the Communications Act 2003. The amendment would allow a new category of specified persons to use the code to compulsorily acquire land and then offer it back to the market for digital communications use. The code’s purpose is to confer code rights on operators to install apparatus on land. A person whose purpose is only to acquire land to provide to other operators is, in effect, a statutory middleman and an unnecessary addition to the code. We believe that the amendment could reduce the availability of land in the market.

Amendment 25, in the name of my noble friend Lady Byford, seeks to remove the code right to obstruct or interfere with access to land. Naturally, when rolling out or maintaining physical infrastructure, it is sometimes necessary to temporarily interfere with access to land. However, the code makes it clear that an operator cannot obstruct access to land unless the occupier of that land agrees to it or the court so orders. This is a fundamental right to protect landowners’ rights of access, long established in the current code. Its retention was recommended by the Law Commission. To confirm, the previous code provided for a right to obstruct access to the site provider’s land, but not to obstruct other land without the written agreement of the occupier of the other land. The revised code continues this provision, but as with the rest of the revised code, more clearly sets out the code rights applicable to code operators.

My noble friend spoke to Amendments 39 and 40. I do not regard them as frivolous. Clearly a £250,000 combine, which is the sort of thing that will be driving around now, is not frivolous. Her amendments deal with the right to install overhead lines. The right to install overhead lines is subject to paragraph 74(3) of the code, which stipulates that the right to fly overhead lines will not apply if it,

“interferes with the carrying on of any business carried on on that land”.

As such, the Government consider that the code provides sufficient protection for landowners who may be affected by overhead lines, and therefore these amendments are not necessary. In answer to my noble friend’s question, the Law Commission’s consultation considered whether any changes were necessary, and it concluded that they were not. The Government have not received any evidence to suggest that they are.

I hope that in light of these explanations and reassurances, the noble Lord will withdraw his amendment.

[Lord Grantchester]

I thank the Minister for his reply. I am well aware of the areas he spoke to in terms of the objectives in the code. However, I am somewhat sceptical that the MNOs have a real case that costs are prohibitive. That has been the draconian whip behind a lot of the code’s provisions. I am even more sceptical that these cost savings will be spent on improvements to the geographical coverage of the rural and more remote areas of the UK. However, we understand what the Minister said.

On Amendment 24, it is somewhat puzzling that the Minister mentioned middlemen in the system. I understand that they are already present in the system in that they have often bought sites from rural landowners, to give them an up-front payment, in order to receive rents when they lease them out to the telecommunications industry. The middlemen in the system have real concerns. They provide a service to the mobile networks in some of their activities congregating sites so that they can introduce an agreed package rather than dealing with each site individually. We will look at the overall thrust of the Minister’s reply on that and, more pertinently, on the big group which is to come because it will all knit together in a more comprehensive package by the time we have finished our deliberations.

[Lord Ashton of Hyde]

It may be helpful if I say that these are fairly technical amendments, particularly those in the next very big group. It may help the noble Lord if we agree to allow him to think about some of my answers. He can read what I have said, and we can possibly meet before Report to discuss some of the technical aspects of things so that he does not feel it necessary to go through every single scintilla of difference in the Chamber.

[Lord Grantchester]

I beg leave to withdraw the amendment.

Amendment 23 withdrawn.

Digital Economy Bill

Lord Grantchester Excerpts

Committee: 1st sitting (Hansard - continued): House of Lords
Tuesday 31st January 2017 Lords Chamber

Moved by

[Lord Grantchester]

26: Schedule 1, page 94, line 3, at end insert—
“(4) For the avoidance of doubt—(a) neither the inclusion of such a building within the meaning of a structure, nor anything else in this code, shall prevent any code right for further electronic communications apparatus being conferred on any operator in respect of the roof or external walls of such building; and (b) any structure, whether or not a building, which would not otherwise be considered electronic communications apparatus, shall not be considered as falling within sub-paragraph (1)(d) simply by reason of the installation upon that structure of any operator’s electronic communications apparatus under this Code or other lawful agreement.”

[Lord Grantchester (Lab)]

I am grateful to the Minister for his helpful remarks before the Committee adjourned. I agree that we should not become overly concerned with technical drafting, but in Committee, it is important that we bring out the important issues. Many interested sector representations have been made to us, and the noble Lord, Lord Aberdare, has already raised some of them. I am greatly indebted to Mr Jeremy Moody of the Central Association of Agricultural Valuers, who has immense experience in this field. I shall endeavour to be brief and, as the Minister said, I am sure that a period of reflection and dialogue will become necessary before Report.

In moving Amendment 26 I shall speak also to Amendments 29 to 36 and 41 to 43. It is a huge group, and I will endeavour to be as brief as I can, yet do justice to all the important matters that they raise.

I spoke earlier about the new code, which readjusts the balance of interests in infrastructure between operators and site owners. The code will extend largely untrammelled powers to operate, if the Committee is not careful. The new code makes substantial changes. Operators will have new automatic rights to upgrade and share, and cannot be charged extra for changes where, to their interpretation—the wording is as yet untested—there is minimal adverse visual impact or burden on site providers.

The new code will enshrine reassignment of code rights by the operators to communication providers, with no option for site owners to negotiate new terms for existing contracts. There may be no future bids for further rents to benefit site providers, as well as operators, for new technologies as they come on stream, bringing further income and wealth to operators only.

Code rights will continue to apply on any land transfer without any requirement to register these rights. These are some of the severe implications of all these changes and demand a balance of behaviour reflecting competing responsibilities and objectives in the various rights between the parties which will continue to wish to develop their businesses. The amendments in this group also have the intention of making the code work better in the business environment.

On Amendment 26, the Government’s stated policy intent with regard to the scope of the new EEC is not to disrupt market incentives for investment in passive infrastructure by establishing a legal framework to allow compulsory access to site towns in which infrastructure providers have made a significant investment. The Government seem to look to achieve this through the Bill by developing the definition of land over which operators will have code rights that exclude “communications apparatus” in line 13, page 152. There are questions around whether this does or does not confer mobile operators with code rights over purpose-built masts provided by infrastructure providers as the drafting in line 28 of page 93 goes significantly further than this, creating the risk that non-telecom infrastructures used for fixed-line telephony will fall outside the scope of the code.

On the one hand, I am probing whether it is the Government’s intention to remove a significant proportion of sites from the scope of the code, diluting the impact of the code reforms. On the other hand, it should be made clear that non-telecom structures, such as electricity pylons, water towers, floodlights, church steeples, and so on, do not become electronic communications apparatus when an operator installs a dish or antenna on the structure and is therefore within the scope of the new code, subject to the full force of code powers.

Given the Government’s intention that code operators should be free to assign code agreements between themselves, Amendment 29, replacing paragraph 15(4), would give a better process for the fair treatment of site providers. It does not qualify the intended freedom to assign but it would establish a better process than that proposed by the Government so that, for example, the assignee would have the benefit of the rights only once a site provider is notified by the assignment. Secondly, the notice would state that there is an assignment and to whom and give an address in the United Kingdom for the service of notices on the assignee. The requirement that the address be in the United Kingdom would be consistent with other legislation, such as the Landlord and Tenant Act 1987, which makes rent enforceable against many tenants only when a new landlord has provided such an address. An address outside the United Kingdom would be problematic for many site owners and it would add to a sense that this was opaque.

Amendment 30 is proposed as an alternative to provide a better climate between operators and site providers. Paragraph 16 gives operators substantial but qualified rights to upgrade apparatus where it will have,

“no more than a minimal adverse impact”,

and to share apparatus where this does not impose an adverse burden on the site provider. That, however, could see operators simply proceeding with such plans, careless of the site provider who would only become aware of effects as they arose afterwards, so having to object only when the investment or action has already taken place. Many examples could be provided and I know that the National Trust is very concerned as to what may be interpreted as “a minimal adverse impact” if, in other people’s eyes, the apparatus could be described as a blot on the landscape.

This amendment would resolve this in a practical way, by requiring the operator to notify the site provider beforehand, so that these issues can be considered before the event. It gives a timetabled structure for the site provider to object and refer the matter to arbitration— a more appropriate forum for such an issue than a court or tribunal. Failure to meet that timetable would enable the operator to proceed with the benefit of code rights.

Amendment 31 seeks to underline the Government’s intention that the new code will initially apply only to new sites and new agreements. The Government have yet to clarify the transitional arrangements whereby agreements can be renewed over the longer term, perhaps taking 15 to 20 years to complete. There is a fear that many existing agreements will potentially be exposed to challenge, on what may be considered rather spurious grounds, in order to be superseded by new agreements under the new code. This amendment will ensure that the focus remains on rollout to new sites and increased coverage, rather than operators tearing up current contracts. This will initially avoid network disruption, protect good working relationships and provide clarity and certainty to businesses and communities.

Amendment 32 makes reference to the code of practice which Ofcom is initially consulting on, to clarify behaviour between the parties, and which we will be discussing when we consider paragraph 103. Experience in other sectors, be it the water industry or even retail supermarkets, shows that however good a code of practice may be it has no merit if it is not remembered and respected. This amendment is one of several which seek to achieve that status. It would give the code of practice default status as part of all agreements, save where, and to what extent, the parties or the court decide otherwise. It does not impose the code of conduct where the parties see parts of it as inappropriate to their specific circumstances.

Amendments 33 to 36 are intended to determine that, under the new code, consideration or price is properly based on the market and agreement, taking into account all the relevant features in the wording of the amendment, and from the fact of the date of the occupation being either before or after the introduction of the new Electronic Communications Code. The amendments refer to paragraph 23 of the schedule and are extremely complex on the issues they raise. They are intended to specify that the value of code rights and agreements still have a reference to the established market-value methodology, reversing out the no-scheme approach of the new code until any reference is needed in any court or tribunal. Under Amendments 33 and 34, any move to a new system of compulsory agreement must offer businesses certainty, while at the same time seeking to avoid dispute. These factors are listed, especially regarding future additional burdens as technology advances and greater access is required.

The proposed new code importantly affirms that the payments for rights, taken under the code, are still to be assessed as a price and not as compensation—as market value, not recognition of loss. That maintains the consistent principle that the code operates on the basis of agreement, albeit that this may on occasion be imposed. In this, we stress that all definitions of market value in professional valuation standards turn on the price expected to be agreed between willing and well-informed parties after suitable marketing and with no compulsion. It is stressed that the concept of market value excludes ransom value—a special category which also includes a marriage value for properties. Market value is the value of a property in a market, not its particular value or worth to any individual. In this case, the market value need not be the value it may have to either the operator or the site provider. This is where the schedule’s current paragraph 23(3) is confusingly worded as it imports a concept that is not market value. Paragraph 23(3) should be deleted as confusing and inappropriate. The Government’s policy, if approved, would be more clearly stated by a straightforward disregard of the use of the apparatus for electronic communications purposes.

There is no requirement for a market value to be a high price or one that always goes up. Properly functioning markets will see prices reflect their realities and so the value of some sites will be less than others and may, according to circumstances, go down. Thus, sites that can serve only distinctively small or remote areas or those with low populations may naturally have a lower value than ordinary masts, but that is to be found in the market. Ideally, the policy should, as now, be as simple as that. The consideration should be market value. The present arrangement has worked well and with little litigation for perhaps two centuries, and the core concept is an agreement—with recourse to an agreement being imposed by a court—for which the price is market price and market value. That would remain the most satisfactory answer.

However, the Bill’s proposal in paragraph 23 compromises the market-value approach to an unknown extent by a change in policy announced in May—that the assessment of market value is to be on a no-scheme basis, making it subject to an awkward series of disregards and special assumptions. The drafting needs significant improvement to assist both the parties and their valuers in applying the intended basis. Many in the sector believe that it would be more rational and practical to stay with the present basis and do not see that that impedes the development of the sector, as rents paid for masts and cables are a very small share of the operational costs of operators and assist affected owners to view the infrastructure positively.

I have already spoken about costs and their relative size in considering an earlier amendment. The valuation change would have a substantial impact on many site providers who may no longer to wish to have their land used in this way, and create issues that operators may not yet have foreseen. It may be much harder for, for example, school governors, a village hall committee or a church council to explain why they should enter into an agreement affecting their property if they are not to be properly paid for it, especially if they are aware that it may complicate future plans they may have for the structure. That issue is equally critical for those with valuable buildings offering good sites for infrastructure but for whom it can simply be an ancillary inconvenience, impeding redevelopment or even necessary repairs and maintenance. They are deterred from having code apparatus by such events as expensive and frustrating delays to critical repairs that could be needed to a building, caused by an unresponsive operator.

There is concern in professional practice about the artificiality of the assumption to be imposed by paragraph 23(4)(b) that requires the parties or their valuers to disregard the statutory limitations which the code will apply to agreements in permitting assignment or the sharing or upgrading of equipment. The effect of this is that valuers will be asked to assess the consideration payable for a site on terms that cannot exist in practice because they are not permitted under the code. This is akin to asking for a semi-detached house to be valued as if it was a detached house, but in a world where no detached house exists; or indeed, as I am advised, to value a horse, whether a racehorse or a nag, by reference to an achieved sale value for a unicorn. I have not seen a unicorn, not even in my dreams.

If agreements are effectively to be all-inclusive on these points, they should be valued as such. Developments in the marketplace may often mean that the current financial conditions or bars on site sharing in agreements are already ineffective, meaning that rental differences between the regimes may, in reality, be less marked than might have been supposed. To expressly recognise the proposed inability to bar assignment, site sharing and upgrading would remove an assumption that is not only artificial but contrary to practical and commercial reality. That would enhance transparency with the use of direct comparables and aid the functioning of the market that delivers this infrastructure.

--- Later in debate ---

Again, I apologise for the length of my response, but in the light of these explanations, I hope that the noble Lord will feel able to withdraw his amendment.

[Lord Grantchester]

I am very grateful to the Minister for his reply. This group hangs together as quite a difficult jigsaw of amendments. To go through them again in replying to his reply would be excessively tedious, I am sure, because they interrelate in many different ways. We are happy to look at the Minister’s reply and, no doubt, will meet later to try to understand our way through it all.

I say to the noble Lord, Lord Foster, that my brief did not come only from the Country Land and Business Association. I am glad that he received its communication, just as I did, but he may not have received the much wider range of submissions I did from many others who have to adjudicate between interests en masse, in urban and rural areas, including local authorities, health authorities and many more. If one of their buildings hosts such an apparatus, they may face many complexities in wanting to develop their operations and around the rights that operators will have in determining how that apparatus is maintained. The CLA did not endorse any of my comments in the amendments on the market value. Like Members from all around the House, it wishes the rollout of communications to proceed as fast as possible.

I merely wished to draw out some of the difficulties in the Government’s drafting. That has been achieved tonight, but I would be very grateful to the Minister if we could look at it all again to make sure there are no unintended consequences in any of the provisions. I am very glad of his clarifications and notifications—for example, on Amendment 31—which were very helpful. With those comments, I am very happy to withdraw the amendment tonight.

Amendment 26 withdrawn.

--- Later in debate ---

Moved by

[Lord Grantchester]

44: Schedule 1, page 149, line 4, at end insert—
“Code of Practice Adjudicator
The Secretary of State must appoint a person who shall act as an adjudicator with the powers—(a) to determine the validity of complaints as to breaches of the code of practice; and(b) on finding a breach of the code of practice, to determine whether it warrants an award of compensation, costs between the parties or a penalty as the adjudicator shall deem appropriate and proportionate.Status of the Code of Practice
Compliance with the Code shall be a material consideration—(a) by the court in considering disputes referred to it under this Schedule as may be relevant to both the determination of the dispute and any ancillary matters including the award of costs between the parties; and (b) by the adjudicator in considering any question arising over the grant or retention of a licence to Operator enabling it to have the benefit of Code Rights under this Schedule.”

[Lord Grantchester]

My Lords, I will move Amendment 44 and my noble friend Lord Stevenson will speak to Amendments 47 and 48. Paragraph 103 requires Ofcom to ensure the preparation of a code of practice as to behaviour regarding information in negotiations and operations under this schedule. Ofcom, new to this level of detail in this sector, has commenced that process and a working party is well advanced in drafting. It is clear that the Government set considerable store by the potential of these codes of practice to lubricate the operation of the statutory Electronic Communications Code in practice. By setting out expectations on behaviour and conduct, the codes of practice are intended to address concerns that many stakeholders expressed about the imbalance of power between operators, which are usually very large corporations, and those with an interest in the site on which the apparatus is sited, who may be individuals, small businesses or local authorities.

I am reminded of the Groceries Code Adjudicator, where the Government were resistant to introducing the power to fine transgressions, believing that reputational damage was enough. I am pleased to reflect that the Government reconsidered and, in that piece of legislation, allowed supermarkets to be fined for unfair practices.

There is also a parallel in the water industry. Written in the early 1900s, its guidance is still relevant and practical today. It is very largely ignored in practice, meaning that much work results in damage to property and business. The problems arise in part because of the strength of the water companies’ statutory powers and in part because the work is increasingly carried out by contractors and sub-contractors who are either not aware of the code of practice or whose contracts do not make reference to it. Breaches of the code of practice can only be taken to Ofwat, which will occasionally uphold a complaint and issue a minor financial penalty. In practice, few complaints are made to Ofwat, and as a result, it is not seen to be worth the effort involved.

I am concerned here that we draw lessons from both these codes as we try to decide how the Electronic Communications Code can operate effectively. In the communications industry, consumers already have the benefit of a referral to one or two ombudsman schemes if telecommunication companies do not deal with their complaints, but there is no parallel scheme in place for those whose land or buildings might be used or abused by telecommunications operators and their contractors.

With the model of the Groceries Code Adjudicator in mind from a sector with similar imbalances of power, our first proposed paragraph would provide for an adjudicator to hear complaints about breaches of the code of practice, with powers to make awards for restitution or penalties. Such a forum—especially if it is, as suggested, independent and accountable to the Secretary of State—would give all the more confidence that the code might be remembered so that it can, as intended, support better behaviour.

The second proposed paragraph would make compliance with the code a material consideration when awarding licences to a code operator or determining the grant or renewal of a code agreement. I suggest that the harder it is for these issues to be referred to independent resolution, the worse the operators will tend to behave. This perspective should also apply in this sector. I beg to move.

[Lord Ashton of Hyde]

My Lords, we are now in our final group on the Electronic Communications Code, so I will spare noble Lords further explanation of what the code seeks to achieve. Amendment 44 is similar to Amendment 41, which we recently discussed. It seeks to create a code adjudicator to examine breaches of the code of practice and impose sanctions. I repeat that I will examine what the noble Lord, Lord Grantchester, said. However, we do not consider that a costly and resource-intensive statutory code of practice and adjudicator are necessary, for the reasons that I outlined on the last but one group.

Amendments 47 and 48 relate to points made by—

--- Later in debate ---

[Lord Grantchester]

I thank the Minister for his reply and in doing so, recognise his answer to Amendment 41. On Amendment 44, I will further draw out that there are many issues involved with this code which give operators quite extensive powers to assign without recognising or even informing site owners. They could lead to many problems further down the field. At some point, a code of practice might need a body other than Ofcom, which has no experience of any adjudication in this field.

Nevertheless, the Minister has replied extensively. We will look at all our amendments and, as I said in withdrawing my earlier amendments, take due cognisance of his remarks in considering how we might propose amendments on Report. If we can secure some agreement with him to some of our more challenged considerations, it would be much the better way to proceed. We shall see how we proceed. We will have the opportunity to look at these issues again on Report. With that, I beg leave to withdraw the amendment.

Amendment 44 withdrawn.

Digital Economy Bill

Lord Grantchester Excerpts

Committee: 4th sitting (Hansard): House of Lords
Wednesday 8th February 2017 Lords Chamber

[Lord Gordon of Strathblane]

My Lords, there is a general air of unanimity and approval for this amendment: I think the noble Lord has backed a winner. Any changes that I have in mind I can discuss with him at some point between now and Report, and I am confident that he would probably agree. Reference has already been made to the difference between the linear services—which are already up to speed and are becoming more and more effective, and cost-effective—and some of the online platforms, which are quite complicated. We might need to insert the word “proportionate” into the amendment, but apart from that, I think that everybody in the Committee endorses what the noble Lord is trying to do.

[Lord Grantchester (Lab)]

I support Amendment 225, tabled by the noble Lord, Lord Borwick, and thank him for introducing it. We on this side of the House would claim that it has our fingerprints all over it, as it was introduced and spoken to in the other place by our honourable friend Louise Haigh MP. We agree that people with hearing or sight disabilities should be able to watch catch-up or on-demand services in the same way as they can watch standard linear TV, whether on a traditional television or on a computer, tablet or mobile phone.

We agree that broadcasters have not made sufficient progress—with the exception of the BBC, which has 98% accessibility on iPlayer. I understand that 76% of the UK’s 90 on-demand providers still offer no subtitles at all, that 85% of Sky’s on-demand content via its set-top box is inaccessible, and that only 5% of Virgin Tivo on-demand services have subtitles. I understand that on linear TV 16% of content is watched with the subtitle option switched on. The noble Lord, Lord Borwick, may well be correct to say that other broadcasters are moving in the same direction as the BBC.

This service provision is critical for people with sight or hearing disabilities, who can feel isolated and socially excluded from family, friends and society in so many ways, especially with this new way of watching TV. In the other place the equivalent amendment was withdrawn following the Minister’s commitment to take action.

We are content that this amendment would enable the Government to introduce a statutory instrument to give Ofcom the powers to fix the exact level of the quota necessary, balancing the need to make content accessible with the cost to the industry. Following consultation, Ofcom can replicate the mechanisms used for linear TV, which works on a sliding scale that requires large broadcasters to provide access services on a higher percentage of their content than the smaller ones. Furthermore, Ofcom may cap the total cost of meeting those requirements at 1% of a broadcaster’s relevant turnover.

Two issues remain, both of which the noble Lord, Lord Clement-Jones, mentioned. Both were also raised by the Delegated Powers and Regulatory Reform Committee. First, the “appropriate regulatory authority” should be named on the face of the Bill. My understanding is that the 2003 Act has Ofcom as the default regulator unless an alternative is specified, and that Ofcom has the power to designate an alternative regulator. If the Minister can confirm that this is the position, and that the custom and practice of most modern enabling legislation is similar, we would understand that the recommendation of the Delegated Powers Committee might fall away.

Secondly, we would support that committee’s recommendation that the statutory instrument should be enacted through affirmative resolution, and not by the negative procedure. There are significant reasons why that should be so, which are not limited to mere detail and technical content.

The appropriate regulatory authority, Ofcom, will have significant powers to impose substantial financial penalties for any contravention. The regulations will impose important new statutory duties on broadcasters, which may be required to increase their provision over time. Of course, all this will attract significant public interest, and the interest of both Houses of Parliament. I am sure the Minister will also confirm that Ofcom will consult widely, most notably with organisations representing people with sight or hearing difficulties.

We understand that the Minister will be minded to accept the amendment, for which we are grateful to him. Has he had discussions with Ofcom, and can he give an indication of when Ofcom might undertake, and conclude, its consultation process? I would be grateful if he could tell us when he might expect that this provision could be enacted.

[Lord Ashton of Hyde]

My Lords, I too thank my noble friend Lord Borwick for tabling such a worthy amendment, which the Government are pleased to support. I also pass on the Government’s thanks to the Ewing Foundation and Action on Hearing Loss for bringing this important issue to our attention.

In recent years technology has changed the way we do things. Long gone are the days of a fixed phone line being the only way to make or receive a call, or having to sit in front of the square box in the corner to watch your favourite television show. In 2016 Ofcom reported that 93% of UK adults use a mobile phone; similarly, it is quite normal to watch TV at a time and on a device that suits. However, given the limited provision of subtitles, signing and audio description for on-demand services, a significant proportion of society is unfairly excluded from doing so.

The current statutory targets for subtitling, signing and audio description, collectively known as access services, on domestic linear broadcast TV channels cover 83 channels. That is over 90% of the audience share for broadcast TV. However, these targets are not duplicated for on-demand services. Over the years there has been an increase in the provision of access services—most notably, the number of service providers reporting subtitles increased from seven channels in 2013 to 22 channels in 2015—but there is room for improvement. Similarly, provision levels for audio description and sign language have remained disappointingly low, with little increase over the years.

The amendment will address this shortcoming, and the 116 on-demand service providers in the UK will be required to provide access services on their on-demand content. Through consultation with Ofcom, the industry and other stakeholders, the Government will determine the requirements that providers of on-demand programme services will be required to meet. We need to make sure that the requirement maximises the benefits to consumers while not presenting undue burdens to providers of on-demand services. Consultation will enable us to strike the correct balance. I can tell the noble Lord, Lord Grantchester, that officials are engaged in discussions with Ofcom. The aim is for statutory instruments to be put in place later this year.

In reply to the noble Lord, Lord Clement-Jones, I say that the Government have noted the three recommendations of the DPRRC on my noble friend Lord Borwick’s amendment. If the House agrees the amendment, the Government will consider any further changes that are necessary and will respond to the committee in time for Report. We will get back to the DPRRC on the second one on the appropriate regulatory authority to explain that Part 4A of the Communications Act 2003, into which the proposed new sections will be inserted, is already clear that Ofcom is the regulator unless it has appointed a separate body for that purpose. Accordingly, as it has not appointed any other body, it is the regulator, but the original drafting was simply intended to fit in with the existing structure of the Communications Act, which uses the phrase “appropriate regulatory authority” and defines that separately. This maintains consistency across legislation. We are following the advice of parliamentary counsel on that.

I accept that there are two other points. I expect to be able to respond to the committee in time for Report. We commend the amendment to the Committee.

Digital Economy Bill

Lord Grantchester Excerpts

Report: 1st sitting: House of Lords
Wednesday 22nd February 2017 Lords Chamber

[Lord Ashton of Hyde]

My Lords, the Committee debates afforded the opportunity to cover many areas of the Electronic Communications Code in detail and I and my officials have reflected further on the points raised. The government amendments tabled following this are intended to provide greater clarity and make it easier for the code to be applied in practice.

Amendment 6 concerns land registration. During the debate, the noble Lord, Lord Foster, drew our attention to the relationship between the code rights and land registration rules and questioned whether the revised code provided adequate clarity on this. Having revisited this area of the revised code as a result of this, and taking into account his helpful comments, we have now tabled Amendment 6. This amendment makes it clear that the code rights will bind site providers whether they are registered as part of an agreement—for example, a lease—with the Land Registry or not. This will ensure certainty for operators and landowners and support continuity of service for consumers.

Amendments 8 to 12 are about valuation. The noble Lord, Lord Grantchester, spoke in Committee of his concerns, and the concerns of stakeholders, that paragraph 23 of the revised code was not clear enough. Paragraph 23 sets out the basis on which the consideration for an agreement to confer code rights is to be assessed. I take this opportunity to thank the noble Lord, Lord Grantchester, for taking the time to meet me and discuss these comments further, and for the effort he has made to get to grips with this complex area. I also acknowledge the contributions made by the Royal Institution of Chartered Surveyors and the Central Association of Agricultural Valuers, which have provided invaluable assistance to officials in developing amendments that will address these concerns.

The Government are clear that landowners should be paid appropriately for allowing code operators to use their land. That is why the revised code requires a price to be paid for that use, rather than creating a system where the landowner solely receives compensation. However, the Government are equally clear that the public need for digital communications services is such that landowners, whoever they are, should not be able to extract additional value from the fact that their land is being used specifically for the provision or use of electronic communications networks. Paragraph 23 therefore introduces a “no scheme” basis of valuation which ensures that any such additional value is not taken into account when the value of a code agreement is assessed. The no scheme basis of valuation is central to the aims of these reforms, which are to deliver improved coverage and connectivity for UK consumers by making it easier and cheaper for digital communications providers to roll out their infrastructure. The amendments tabled here do not change the Government’s policy position.

Amendments 8 to 10, to new paragraph 23 in Schedule 1, provide that the market value of an agreement to confer code rights must be assessed on the basis of four clearly expressed assumptions. Their combined effect will ensure that operators do not pay elevated prices for using land to provide infrastructure and deliver electronic communications networks.

Amendments 11 and 12 make corresponding amendments to new paragraph 63 in Schedule 1, which deals with the valuation of Crown tidal land. This group also contains a number of minor technical amendments. Amendment 8 simply updates and corrects a cross-reference. Amendment 13 recognises that there is no property chamber of the First-tier Tribunal in Wales, so that code disputes in Wales can be dealt with only by the Upper Tribunal.

Finally, Amendments 15 and 16 are consequential on the devolution of the management functions of the Crown Estate commissioners to the Scottish Ministers under the Scotland Act 1998, as amended by the Scotland Act 2016. I will reply to the amendment in the name of the noble Lord, Lord Grantchester, after he has spoken to it, and beg to move Amendment 6.

[Lord Grantchester (Lab)]

My Lords, I thank the Minister and his team, especially Kellie Hurst, for meeting and looking at the difficulties around the communication code. The meetings were indeed very constructive, focusing on the issue of value. I am grateful to the Minister for his introductions to the amendments today and for his kind words.

In Committee, we wondered how far this code got the balance correct between property rights and the public benefit. We all recognised the public interest in accessing modern communication channels at as low a price as possible. The Government finalised their position, after representations from operators, to a further qualified use of market value, which resulted in a clouded understanding that might not have been helpful but for this clearer use of language now proposed. In references to the new code as being on a no-scheme basis, there had been interpretations that this imported a compulsory purchase compensation basis that gave rise to general misapprehensions about the code by parties with a compulsory purchase experience. The code is now clearer that value is based on agreement as reflected by market value, qualified by the public interest in references to a no scheme basis in that the disregard is of the use of the rights for the electronic communications network.

Amendments 6 and 7 are clarifications to new paragraph 13 in Schedule 1, as prompted by the noble Lord, Lord Foster, and technical corrections are to new paragraph 15.

Amendments 8, 9 and 10 to new paragraph 23 are the pertinent amendments, with further clarifications in Amendments 11 and 12 to new paragraph 63, which now makes clear that the core principle remains that the consideration is to be assessed as the market value of agreement conferring the code rights. It is not compensation for loss. That is then further defined in new paragraph 23(2) in Schedule 1 and interpreted and qualified in proposed new sub-paragraph (3A).

As the Minister said, proposed new sub-paragraph (3A), regarding market value, makes four assumptions that clear up the misapprehensions and misunderstandings brought to us and considered in Committee. Assumption 1 recognises that the code right is within the agreement and that everything under it is relevant, save the intended function for a network. Assumption 2 reflects the Government’s policy that the operator’s freedom to assign the agreement and its qualified freedoms to upgrade or share apparatus are to be disregarded. Following these two disregards, assumption 3 affirms that the code right in question is otherwise to be assessed as it is in the real world and not some hypothetical one. Assumption 4 follows the Law Commission’s report and recent government policy in assuming there is more than one suitable site available as a means to exclude perceptions of ransom value brought forward by operators, even though the definition and interpretation of market value excludes ransom value.

Amendments 11 and 12 translate what I said above to new paragraph 63 in Schedule 1 concerning Crown land, and Amendment 13 is a technical correction of new paragraph 94. We will all be grateful that there has been a lot of proofreading and for Amendments 15 and 16 regarding the transfer of duties to the Scottish Government. We are also very grateful that the Minister listened to the concerns we raised in Committee and, in re-examining the situation, recognised that improvements could be made. We are in agreement with the amendments and, like the Minister, I am grateful to the Royal Institution of Chartered Surveyors and the Central Association of Agricultural Valuers for their technical expertise, which helped to recognise misapprehensions and clarify our drafting. These amendments make a massive improvement.

It could be said that with these improvements there should be fewer disputes and therefore fewer problems concerning the code of practice to be drawn up between operators and site owners. Granted that this may well be the case, and that the Minister said in Committee that the large superstructure of an adjudicator’s office and staffing may be costly, cumbersome and unnecessary, anxieties nevertheless remain. Wide experience in other areas operating under a code of practice is that, where there is a wide disparity between the relative economic strengths of parties involved in an activity, market power tends to lead to abuses against the smaller party with the use of unfair practices and a transfer of business risk. As Ofcom is a regulator with little or no experience or much expertise in this area, Amendment 14 proposes that it appoint an expert independent adjudicator to rule on disputes brought under the code of practice.

It would be an error to assume that the new regime will immediately work without there being a hitch or problem in the operation of the new code. Parties acting under it must recognise that any code of practice has to be abided by and has teeth with which to enforce compliance, and must have confidence that they have recourse should they consider the code to have been breached. I welcome the Minister’s assurance in this respect.

[Lord Ashton of Hyde]

My Lords, I thank the noble Lord, Lord Grantchester, for explaining his amendment, which seeks to introduce a statutory regulation by Ofcom of the code of practice for the Electronic Communications Code and to create a code adjudicator to examine breaches of the code of practice and impose sanctions. The Government understand the need to ensure that the Ofcom code of practice has real impact on industry behaviour. The Electronic Communications Code will modernise the way digital communications are deployed, and it is essential in this new market that the legitimate interests of all parties are respected.

Under paragraph 102 of the revised Electronic Communications Code, Ofcom has a duty to develop and publish a code of practice. The development of this code must be in consultation with key stakeholders, including both industry representatives and landowner interest groups. This ensures that relevant parties have the opportunity to directly influence industry standards of best practice.