Funds for Liabilities

Peter Davies

Licensing Advisor

2

Funds for Liabilities

OFTEL updating its policy

Procedure needs to be put in place

Sufficient funds available to meet liabilities

Relevant event means:• Licence revoked, or• Licensee ceases to trade

3

Why is OFTEL involved?

Telecommunications Act 1984

Code powers granted over section 10

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Telecommunications Act 1984

Licences to run a telecommunications system are granted by the Secretary of State

The Secretary of State may decide that certain licensees can have “Code Powers” (section 10)

Code Powers allow licensees to acquire rights over public and private land for the purpose of installing and maintaining telecommunications infrastructure (Schedule 2 T Act)

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PTO licence

“…the Licensee shall make such arrangements as will satisfy the Director … that sufficient funds are available … to meet the liabilities described in paragraph 16.2 below …”

(Condition 16 Schedule 4)

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The Problem

Operators need access to highways

Highway authorities want reassurance that funds will be available to meet liabilities

Need to encourage investment in infrastructure. Now around 175 operator groups with Code Powers

EC Licensing Directive - all operators with code powers have Condition 16

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Licensing Procedure

Scheme must be:

Proportionate

Transparent

Non-discriminatory

OFTEL prefers self regulation

Need to strike a balance

8

Position of the highway authorities

What is a relevant event

Damage from uncompleted streetworks

Apparatus safe and unobtrusive

Quality of the work and proper reinstatement

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Types of equipment

Underground cabling in trenches and/or ducts

Overhead cable and telegraph poles Mobile phone masts and aerials Telephone boxes Managed service phones Telephone cabinets, and Microcells and other miscellaneous

equipment

10

Calculating the liability

% of the capital cost

If so, what %?

Specific values on each category of equipment

Using ratable values

How do we deal with historical cost

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After a relevant event

If no other operator takes on the infrastructure

Should it be left in the ground

Should there be a period after which infrastructure passes to highway authorities

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Length of the liability period

If left in the ground

Appropriate period of liability

Six years (simple contract)

Twelve years (contract made by deed)

Fifteen years (latent defect liability)

13

A scheme needs to be created which will provide highway authorities with the

assurances they require. How do consultees consider such a scheme should

be structured?

Simple to operate

Proportionate transparent and non-discriminatory

Fair and equitable for all of its operators

14

Are there any other ways apart from insurance and

bonds/guarantees which consultees consider could provide

such assurances?

15

Could the present ad hoc arrangements continue and if so how could Oftel meet it’s

obligations of transparency and non-discrimination under the Licensing Directive

while maintaining confidentiality in its dealings with individual operators

Present process unsatisfactory

Some changes inevitable even if continued

16

Would individual performance bonds/guarantees work to inhibit the ability

of some operators to obtain funding for development and would any scheme based

on bonds/guarantees by individual operators be discriminatory?

Bond will be a change on assets

Might inhibit investment

17

How could a global scheme of insurance covering the whole industry work in practice and is it likely to operate in a discriminatory

manner?

Structured in cells

Related to perceived risk

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Should there be any additions or other changes to the list of types of telecommunications apparatus

listed in paragraph 10.2?

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Which of the two methods of calculating liability as set out in this consultation

document do consultees consider to be more appropriate, or are there other methods of calculating such liability which they consider would be more

appropriate?

20

What action is most appropriate in the case of part completed works?

Only after a relevant event

Does not extend to workmanship during construction

21

What is the most appropriate period for contingent liabilities?