Telecoms case update
On 14 October 2020, the Upper Tribunal handed down judgment dealing with a determination of terms to be documented in a Code agreement relating to equipment rights, upgrading, sharing and valuation. The decision has been heralded as a landmark ruling which has implications for operators and site providers alike in relation to the entering into of future telecoms agreements of rooftop sites, particularly as to the Tribunal's approach to consideration.
The reference was brought by the operator, Cornerstone Telecommunications Infrastructure Ltd (CTIL), who sought the order of an agreement under the Code conferring a right to install electronic communications apparatus on the rooftop of a building known as Maple House in Peckham, South London. The building itself is an eight-storey building used for multi-purposes including residential, which is owned by London and Quadrant Housing Trust (L&Q) and access to the rooftop is gained through the common parts of the building.
The issues and the Tribunal's conclusions
The parties were agreed as to the principle of an agreement conferring Code rights being imposed, with the majority of the terms having been settled consensually between the parties largely following CTIL's standard form of Code agreement.
The key issues to be resolved between the parties related to equipment rights, upgrading and sharing. In particular:
1. Equipment cap
The Tribunal held an equipment cap was not appropriate and that both practically and legally the potential for significant additional apparatus being installed on the rooftop was limited.
The Tribunal was not persuaded by L&Q's concern that CTIL may install unlimited equipment on the rooftop, in particular as the proposed Code agreement included terms prohibiting it from overloading the building and requiring it to take all reasonable steps to ensure it does not make the building or any plant and machinery on it unsafe. The Tribunal commented that in practice the amount of apparatus which may be installed on a proposed site will be limited by the strength of the supporting structure and size of the site (CTIL v University of the Arts).
L&Q had proposed a more restrictive agreement than CTIL, limiting:
- CTIL's right to install apparatus by reference to a list to be annexed to the Code agreement, referred to as the equipment cap;
- CTIL's right to upgrade the installed apparatus by reference to the power conferred by paragraph 17 of the Code (in general terms being that CTIL would have no right to effect any upgrade which had more than a minimal adverse impact on the appearance of the apparatus, or which imposed any additional burden on L&Q), whereas CTIL sought an unrestricted right to upgrade; and
- the sharing of the apparatus to the minimum permitted by paragraph
2. Upgrading and sharing
The Tribunal held that it would be inappropriate to impose terms significantly impeding CTIL's right to upgrade, particularly given that one of the intentions of the Code is to facilitate the rollout of new technology, but that upgrading and sharing should cause the least possible loss and damage by curtailing the number of persons entitled to make use of CTIL's infrastructure. The Tribunal determined that CTIL was entitled to terms permitting upgrading without limit, but noted the least possible loss and damage principle was met by limiting the sharing to two operators with further operators as permitted by paragraph 17.
CTIL sought an agreement conferring a right (amongst other things) to upgrade apparatus, which is accounted for in paragraphs 3(c), 3(f) and 3(e) of the Code. The Tribunal proceeded on the basis that L&Q was seeking to qualify CTIL's right to upgrade apparatus by reference to such upgrade to be in accordance with the provisions of paragraph 17 of the Code.
Paragraph 17 is not entirely straightforward. It treats upgrading and sharing in the same way, but the right to upgrade, unlike the right to share, is itself a Code right. It is also devoid of any explanation of what upgrade means, leaving doubt as to whether it means only doing something to apparatus already installed, or whether it also includes installing new apparatus. L&Q's primary concern was the unwanted implications of unrestricted upgrading and sharing rights on its responsibilities under the new building safety regime. On the other hand, CTIL sought unrestricted upgrading and sharing rights given the difficulty of predicting the changing needs for a site, taking account of technological advances in particular.
3. Consideration and compensation
The Tribunal's involvement in this reference finally turned to determining the consideration and compensation payable to L&Q arising from the exercise of rights to be conferred by the Code agreement for the benefit of CTIL, which it was commented are, in the market, often wrapped up in an inclusive annual site payment.
The Tribunal concluded that willing parties in these circumstances would pay annual consideration £5,000 per annum for this rooftop site, reflecting the following:
- payment of a rounded figure of £1,500 reflecting a nominal site value of £62.50 per annum and taking into account the benefit to CTIL of L&Q's responsibilities for building maintenance and insurance of £1,456.17;
- an allowance of £1,000 in relation to the additional burdens of L&Q managing access across the common parts and onto the rooftop of the building; and
- an allowance to reflect anticipated costs to L&Q of CTIL's rights to share the benefits of the agreement with up to two others and to upgrade the apparatus at the site without restriction.
The Tribunal also awarded L&Q's reasonable legal expenses in advising on and completing the agreement (not including the costs incurred in the proceedings themselves) of £3,068 by way of compensation.
The Tribunal commented that consideration negotiated prior to the Code's commencement would not be a reliable guide as to values on the no-network assumption. The Tribunal further stated that evidence of existing sites would not be a reliable guide. Instead, the Tribunal held that evidence of new rooftop lettings negotiated after the commencement of the Code provided the most helpful guide to what the parties to a consensual agreement for a letting would agree. The Tribunal had regard to figures achieved on three previous lettings in London and elsewhere in particular.
The Tribunal's ruling will be a welcome sign for site providers of rooftop sites and operators alike in adding clarity to the Tribunal's approach under the Code in relation particularly to the level of consideration which might be payable in a particular case. In addition to consideration, the decision will have implications for those entering into telecoms agreements of rooftop sites going forwards, where comparable circumstances may be drawn.
The Tribunal's closing words in this decision act as a stark reminder for those negotiating terms of future telecoms agreements of rooftop sites under the Code, and in particular the method of assessing new rooftop lettings negotiated after the Code came into force. As the Tribunal puts it: "We would add, for the assistance of parties in other cases… the evidence we have considered in this case gives us no reason to expect that the market value of a site provider's agreement to confer code rights over a rooftop site on any different residential building will be much more or less than the sum of £5,000 we have determined. As the comparison between Brookstone Court [being one of the three post-Code lettings the Tribunal considered in its assessment] and Maple House indicates, there may be features of a particular building which justify a modest range, but we would not expect variations to be significant one way or the other. The evidence does not suggest that there is much difference between the value of a site on a residential building in Inner London or in Sheffield and we would be surprised if values in other parts of the country were not in the same narrow bracket".