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.