Operators had previously counted on achieving £270m in rent savings from changes to the Electronic Communications Code, but the Central Association of Agricultural Valuers’ Secretariat Jeremy Moody has told Mobile that the operators misinterpreted the government’s changes and that any overall rent changes would be ‘nominal’.
The confusion stems from the draft bill’s use of the term ‘no scheme’ which commonly relates to compulsory purchase orders. However, the government actually meant a ‘market value’ solution, which is whatever is fair and reasonable for both the landlord and tenant.
Jeremy Moody explained how this came about stating, ‘The government teams working on the ECC hadn’t worked with compulsory purchase orders and were unaware of the meaning of ‘no scheme’. They had no idea what baggage came with the phrase they were using.’
Apparently, the confusion was added to when two draft bills, one with a ‘no scheme’ system, the other with a ‘market value’ system were ‘rammed together' in an 'awkward manner.’
However, the DCMS contests Moody's interepretation of the bill, with a spokesperson stating, 'There has been no change in the policy Government announced in May 2016. Landowners will receive a fair market value which excludes any additional value generated by the provision of electronic communications. Government is confident this “no-scheme” approach will reduce the cost of infrastructure rollout, leading to greater investment, and improved coverage and connectivity. Economic analysis by independent market experts is that the Code reforms will lead to industry savings of £1 billion over a 20 year period.'
Impact on operators
When Mobile spoke to the operators last October, many hinted towards this no scheme system. Three told Mobile, 'The new code will ensure that rents are based on a fair economic assessment of the land.' EE stated, 'mobile operators still pay up to 30 times more than water and electric companies for site rental and access. This makes it more difficult for operators to deploy and maintain coverage in ever more rural areas.'
For operators, the difference between the two systems is thousands of pounds per site. The market value system means that even when the case goes to court (in the 160 year history of the ECC, under a dozen cases have reached court), the settlement must be a fair and reasonable settlement for both parties. In comparison, a ‘no scheme’ or CPO system would be based purely on the value of the land without taking into account the value the site represents to the operator.
An investigation by Mobile last October found that the average mast rent in the UK is £8,652. In comparison, utility rents average around £240.
How did it happen?
Describing the version of the ECC which passed before Parliament in February, Moody told Mobile, ‘This is very different from compulsory purchase, even when the land is taken from you, it’s done it with the form of an agreement. It’s a negotiation on terms and it’s a negotiation on price. There’s nothing in the logic of that that says the outcome is a utilities price.’
Oddly, when Mobile asked the DCMS to comment on the impact of its changes last October, they maintained that it would save operators money. A government spokesperson said, ‘Reforming the Electronic Communications Code will help boost mobile coverage in the UK, in part by reducing the rollout costs of new infrastructure such as masts.'
But why did the government back away from using a ‘no scheme’ tariff? The CAAV secretariat told Mobile ‘The government was going with a market value arrangement, then the operators sat on them very hard last spring and the government then said we’re going with a no scheme valuation method.’
However, the government failed to enact this and Moody explains, ‘In April 2016 the government changed from its previous policy but it was nowhere near as radical than the operators thought they’d achieved.’
Mobile’s investigation revealed that the operator backed Deloitte report (which calculated average mast rents), overestimated the cost in rural areas and underestimated it in urban areas. The Deloitte report was then used by operators to lobby for ECC changes on the basis that the cost was preventing rural coverage rollout.
- 184 councils responded
- 106 councils with mast agreements
- 52,000 number of masts in the UK
- £8,652 average rent
- £4,946 average rural rent
- £7,500 Deloitte industry funded rural rent calculation
- -34% Difference in rural rent calculation between our data and Deloitte's
- £11,346 Average urban rent
- £9,200 Deloitte industry funded urban rent calculation
- +18% Difference in urban rent calculation between our data and Deloitte
When asked about the operator's influence on government policy, Moody answered, ‘The operators have a very clear sense of their importance in all of this, and they have the capacity to say ‘well if we don’t do it, you won’t get the connectivity you need.’ That was probably part of the background to what was going on spring last year. That kind of approach may win the odd victory, but it doesn’t win you friends in government.’
Impact on landowners
Despite the nominal impact Moody believes the ECC changes will have on rents, he believes that the misinformation surrounding the topic could still be damaging for landowners. ‘If the marketplace has absorbed the idea of utility values, if the individual land owners are told very forcibly by operators or if they’ve heard elsewhere that rents are now much lower, that will be the context of the negotiation for them. That’s where I’m looking to ensure there’s a widespread understanding of what the law actually means.’
One area where the changes are expected to impact landowners that it includes access to repair and upgrade sites. Moody told Mobile, ‘Once you get into more sensitive structures, masts on police stations, masts on top of schools, masts on top of hospitals, it gets more complex. In these kind of environments, when it comes to round the clock access I’ve heard of site owners putting access charges into the contracts so someone can guide the engineer around. At that point you don’t want contractors and subcontractors loose in the building.’
Despite past animosity between landlords and operators, Jeremy Moody believes the ECC may provide all involved with the opportunity for a clean slate. He told Mobile, ‘With the new code we have a chance to build a new customer practice where we look for the positives and make having a mast an attractive idea. This will depend on how we all behave in the first months of having a new code.’
Mobile contacted the networks for comment and is awaiting their response.