James Forder is Academic and Research Director at the IEA. He has taught economics and sometimes politics at Oxford University since 1993 and is Andrew Graham Fellow and Tutor in Political Economy at Balliol College.
The rollout of 5G telecommunications is in trouble. The trouble has been caused by the government. It has alienated landowners, many of whom have started to resist the siting of essential equipment such as masts on their land. That makes the expansion of the network much harder – or impossible. This has happened because legislation in 2017 reduced, sometimes very substantially, the rents paid to landowners for the use of their land.
The Product Security and Telecommunications Infrastructure Bill currently before Parliament provides an easy opportunity to fix the problem. But the government is digging itself into a deeper hole.
To provide nationwide coverage of fast internet, telecommunications companies need to site all sorts of equipment on other people’s land. Masts are the most obtrusive and tend to require the most access for maintenance and upgrades. Naturally, landowners expect to be paid to have such equipment on their land. Before 2017 many agreements between the landowners and telecommunications companies were amicably reached, and the masts were set up. Although the agreements themselves were consensual, in the background the ‘Electronic Communications Code’ – legislation originally dating from 1984 – regulated the arrangements and contained provision for compulsory siting of equipment at judicially-assessed rents.
Although in practical terms the system was working well, the Code was legally unsatisfactory in that it contained certain anomalies and was inconsistent with other legislation in certain respects. Legislation was proposed to remove these difficulties. But, late in the day, the government changed tack and, contrary to the suggestion of the Law Commission, decided to change the basis on which rents could be compulsorily assessed.
The effect was that judicially-assessed rents would be very much lower than under the previous legislation. Naturally enough, the telecommunications companies have taken the opportunity to reduce the offers they make to landowners. The effect can be dramatic, with reductions in the region of 90% being reported. And landowners, equally naturally, have resisted having masts planted on their land for what they regard as inadequate payments.
Difficulties have been so severe that the government is now legislating again. The Product Security and Telecommunications Infrastructure Bill, now before Parliament, provides for further reform of the Code. Part 2 of the bill contains Byzantine provisions intended to speed up agreements on the siting of equipment.
The trouble with them is, that rather than seeking to move back to the pre-2017 situation where matters were largely consensual, these provisions are aimed at making it easier for telecommunications companies to force compliance from landowners. The basic problem, that landowners object to being required to hand over their land for inadequate payments, goes unaddressed. The government, it seems, simply thinks that those who do not co-operate should be compelled.
The question of the fairness of the arrangements is clearly important. One idea might be that lower rents will mean lower prices for consumers. If the telecommunications companies pay less to site their equipment, surely they will pass on the cost savings to their customers? Well, it’s possible.
It is notable though that the Law Commission said that, when they were consulting on what became the 2017 legislation, none of the telecoms companies even suggested this as an outcome of lower rents. And in any case, research commissioned by the government found that the maximum saving that might be achievable was in the order of 1% – and that assumed the telecoms companies passed on all the saving.
At the other and of the spectrum, it might be feared that landowners with particularly suitable land could – if the free market were to reign – extract very high rents, perhaps even imposing a meaningful detriment on consumers. But there is little sign of that being very likely. In the case of masts (rather than, say, cable), there is nearly always a variety of possible locations. So no one landowner can have a monopoly position. In any case, an entirely unregulated market is not the only alternative to the government’s approach. The Law Commission’s proposal at the time of the 2017 legislation specifically prevented the exploitation of such a position.
Or maybe the government thinks its approach is a kind of ‘levelling up’? But it is not. Some of the landowners may be rich, but levelling up should not harm them. And some are certainly not – some are charities, NHS trusts, and sports clubs. These are amongst those objecting to swingeing rent reductions.
The government should take the opportunity to undo the mistake of 2017 and set the rules so that telecommunications companies have to pay fair rents for fair usage of other people’s land.