OFTEL Consultation- Funding Liabilities For Street Works

The United Kingdom is viewed as one of the most liberal telecommunications regimes in the world. It certainly has a liberal approach to street works. Public telecommunications operators with Code Powers (and there are 111 of them in the UK) have rights of access to public and private land to install telecommunication lines and equipment, including the right to dig up streets and roads. This right is shortly to result in their facing higher costs as can be seen from a new Consultation opened by the Telecommunications Regulatory body Oftel.

The New Roads and Street Works Act 1991 confers powers upon local highway authorities ("Appropriate Authorities") to make good any incomplete or defectively executed works and to charge operators for the associated costs but what happens if an operator becomes insolvent? Section 10(4)(c) of the Telecommunications Act 1984 permits conditions to be imposed upon licences with Code Powers which are expedient or requisite to ensure that funds are made available to meet any liabilities which may arise from the exercise of the rights conferred by the Code. Thus the Secretary of State can impose conditions on the grant of Code Powers to ensure that funds are available to meet the liabilities incurred by Appropriate Authorities.

In 1984, when provisions were enacted, it was not felt appropriate to put in place any formal arrangements when the only operators with Code Powers were BT and Kingston Communications but with the increasing number of operators with Code Powers and the uncertain state of the market a formal consultation has been opened to examine what measures should be put in place to ensure that sufficient funds are available to meet the liabilities should any particular operator cease to trade or have its licence revoked.

One solution examined by Oftel is the requirement that operators provide a guarantee or performance bond. This could be done individually or by means of an industry wide scheme. An industry wide scheme might be cheaper than individual bonds or guarantees but raises questions of how can the Regulator ensure that the contributions are fair and non-discriminatory as required under the Licensing Directive. Another issue raised by Oftel is the question of the calculation of the liabilities which might involve both Oftel and individual operators in lengthy and costly investigations.

Comments on the Consultation Paper are due on 20 August and the Consultation will end on 3 September. New Competitive Carriers should ensure that their concerns are addressed if they wish to ensure that the scheme adopted does not impose unnecessary costs and tie up valuable time and resources, particularly at a time when most telecommunication operators are under pressure to reduce costs.