Consultation document issued by the Director General of Telecommunications

24 June 2002

Contents

Summary

Chapter 1 – Introduction and background

Chapter 2 – The statutory framework

Chapter 3 – Oftel's strategy and approach to co-regulation

Chapter 4 – The Government's vision and objectives

Chapter 5 – Summary of responses to the June 2001 consultation document

Chapter 6 – Proposed scheme

Chapter 7 – Proposed changes to licences

Chapter 8 – Questions

Chapter 9 - Consultation process and timetable

Annex A – Condition 16 funds for meeting liabilities

Annex B – Draft new condition 16

Annex C – Specimen bond

Annex D – Draft certificate

Glossary

Summary

S.1 As competition in telecommunications continues to develop and telecommunications operators offer new and innovative services, there is a continuing need for those operators to have access to public land in order to build out communications infrastructure. Equally, Highway Authorities who afford access to operators for the purposes of constructing Street Works need to be reassured that sufficient funds are available to meet any liabilities should any particular operator, with the benefit of the Telecommunications Code (‘the Code’) and creating infrastructure on public land, cease to trade or have its licence revoked.

S.2 Oftel needs to develop and implement a scheme to ensure that sufficient funds are available and that the concerns of Highway Authorities are met. At the same time reasonable access to public land for the construction of communications infrastructure needs to be made available.

S.3 In June 2001, the Director General of Telecommunications (‘the Director’) published a consultation document on funds for liabilities (‘the first consultation’)
(see www.oftel.gov.uk/publications/licensing/2001/funds0601.htm). The first consultation sought the views of the telecommunications industry, Highway Authorities and other interested parties on Oftel’s policy in relation to funds for liabilities and on how a procedure could be put in place that would enable the Director to be satisfied that sufficient funds were available.

S.4 Following a very positive and constructive set of responses to the first consultation Oftel has had informal discussions with both the telecommunications industry and Highway Authorities and has received a number of helpful suggestions and comments.

S.5 This second consultation presents the results of the first consultation and seeks comments on a clear set of issues and proposals designed to ensure that sufficient funds are available to meet any potential liabilities.

S.6 Individual telecommunications operators would, subject to obtaining their own independent advice, determine the level of potential liability under Condition 16 having regard to a list of apparatus published by Oftel.

S.7 The operator would decide which type of instrument, for instance insurance policy, bond, guarantee or otherwise, would enable it to comply with Condition 16 but which would be appropriate to its particular needs.

S.8 The operator would make an application with supporting documentation to Oftel for formal approval of its arrangements to comply with Condition 16. The supporting documentation would include:

a) certificate; and
b) a copy of the relevant instrument(s).

S.9 The Director would in appropriate cases seek independent specialist advice from appointed third parties to assist him in deciding whether the proposed arrangements were sufficient to comply with Condition 16.

S.10 The Director would also be able to request and obtain verification of the amount of the liability were he to consider that to be necessary in any particular case with a fallback power of ex post facto audit by the Director.

S.11 Arrangements would have to be in place within three calendar months of the implementation of the scheme and would be reviewed jointly by the Director and the operator at intervals to be determined by the Director.

S.12 In respect of existing arrangements, and during the lifetime of the scheme, the operator would be required to confirm to Oftel in writing, no later than one calendar month before the expiry of its arrangements, its proposals to ensure continued compliance with Condition 16. That is, operators must ensure that arrangements do not lapse without alternative arrangements being in place to ensure continuity of cover.

S.13 The operator or, for instance, the administrator (as the statutory successor to the operator under its licence) would be required to take all reasonable steps, and in any event within three working days, to contact the Department of Trade and Industry and Oftel to confirm the occurrence of a Relevant Event.

S.14 Oftel asks for comments on these proposals by 5 August 2002 and hopes to publish a statement of its conclusions in autumn 2002.

Chapter 1 – Introduction and background

1.1 The aim of the first consultation was to seek views of the telecommunications industry, Highway Authorities and other interested parties to assist Oftel in updating its policy in relation to funds for liabilities. In particular, the consultation considered how a procedure could be put in place which would enable the Director to be satisfied that telecommunications operators, who had the benefit of the Code and were creating infrastructure on public land, had sufficient funds available to meet any potential liabilities (as defined in Condition 16 of Part 2 of Schedule 4 to a telecommunications operator’s licence (‘Condition 16’)).

1.2 Chapter 2 sets out briefly the statutory framework of the Code and funds for liabilities and refers briefly to the Government’s published proposals for an Office of Communications (OFCOM).

1.3 Oftel is also obliged to comply with the principles set out in the EC Licensing Directive (see note one below) when updating its policy in relation to funds for liabilities. In developing and implementing a scheme it must be objective, non-discriminatory, proportionate and transparent.

1.4 Oftel’s strategy for regulation stresses the importance of setting a level of regulation appropriate to the level of competition in a particular market. This means retreating progressively from regulation where it is no longer necessary (where competition has developed to a level of maturity sufficient for the market to regulate itself), or where appropriate making more use of self and co-regulation, but taking decisive action where competition is not yet delivering the best deal for the consumer. Chapter 3 refers to Oftel’s management plan 2002/3 and, in particular, Oftel’s strategy and approach to co-regulation.

1.5 The Government has indicated that it would like to foster the widest possible access to a choice of diverse communications services of the highest quality and to make sure that the UK is home to the most dynamic and competitive communications market in the world. One of its published goals is to develop throughout the UK a high bandwidth infrastructure which can expand to meet the growing needs of businesses and individuals with no unnecessary barriers to the construction of the necessary infrastructure. Chapter 4 explores briefly the Government’s vision and objectives.

1.6 Oftel received a very positive and constructive set of responses to the first consultation. Chapter 5 draws together the responses to the specific questions raised by the first consultation and identifies those matters which are the subject of this more narrowly focused consultation.

1.7 While there is a continuing need for telecommunications operators to have access to public land in order to build out infrastructure, Highway Authorities wish to ensure that there are sufficient funds available to meet potential liabilities under Condition 16. Oftel needs to develop and implement a scheme to ensure effective compliance with Condition 16 and that the concerns of Highway Authorities are met. At the same time, reasonable access to public land for the construction of communications infrastructure needs to be ensured.

1.8 Following the first consultation, Oftel has had informal discussions with both the telecommunications industry and Highway Authorities. It has received a number of helpful suggestions and comments. Where appropriate these have been taken into account in the drafting of this second consultation document.

1.9 Following the very positive and constructive set of responses to the first consultation and the informal meetings referred to above, Oftel has been able to form a view regarding the way forward for funds for liabilities. The purpose of this second consultation is to seek comments on a clear set of issues and proposals designed to ensure that sufficient funds are available to meet any potential liabilities. Chapter 6 outlines Oftel’s proposals for a scheme to ensure compliance with Condition 16 and draws together the questions on which Oftel is consulting.

Note:

1. Directive 97/13/EC of the European Parliament and of the Council of 10 April 1997 on a common framework for general authorizations and individual licences in the field of telecommunications services.

Chapter 2 – The statutory framework

2.1 Section 10 of the Telecommunications Act 1984 (‘the Act’) makes provision, in the case of licences granted by the Secretary of State for Trade and Industry (‘the Secretary of State’), for the use of the Code. The Code grants a number of rights and obligations regarding access to private and public land and in certain circumstances exemptions from the Town and Country Planning Legislation.

2.2 Section 10(3) of the Act provides that rights given under the Code may be subject to certain exceptions and conditions contained in the telecommunications operator’s licence. Section 10(4)(c) stipulates that such exceptions and conditions shall include such conditions which may be necessary to ensure that adequate funds are available to cover liabilities arising from the exercise of rights given by the Code. In this context, Condition 16 is now included in Schedule 4 of any licence where the licensee has the benefit of the Code. The text of the existing condition is reproduced at annex A.

2.3 Condition 16 places an obligation on the licensee to satisfy the Director that arrangements have been put in hand to ensure that sufficient funds are available to Highway Authorities after the occurrence of a Relevant Event to meet the liabilities described in Condition 16.2. Relevant Event is defined in Schedule 4 Part 1 to the licence. In essence, a Relevant Event is defined as the revocation of the licence, the expiry of the licence where the licensee is not immediately granted another similar licence, or if the licensee ceases to trade.

2.4 The EC Licensing Directive requires Member States to ensure that regulation is kept to the minimum necessary and that conditions attached to licences must be proportionate. Oftel must have regard to the EC Licensing Directive when updating its policy in relation to funds for liabilities. In developing and implementing a scheme Oftel must ensure that the scheme is objectively justified, non-discriminatory and transparent.

2.5 In December 2000, the Government published its White Paper, A New Future for Communications. The Government proposed a new regulatory body, OFCOM, and a single regulatory framework for the communications sector to better reflect and respond to the increasing convergence of services. A copy of the White Paper can be found at www.communicationswhitepaper.gov.uk .

2.6 The Government has indicated that it proposes to retain much of the broad thrust of the Code in a new statutory scheme to be known as the Electronic Communications Code. Whilst it has yet to finalise the detail of the new statutory scheme, it is clear that some procedure will be needed to ensure that adequate arrangements exist which will provide the assurances Highway Authorities require when access is granted to communications operators to enter onto public land.

Chapter 3 – Oftel’s strategy and approach to co-regulation

3.1 Oftel’s management plan 2002/3 can be found on the Oftel website at www.oftel.gov.uk/publications/about_oftel/2002/mapl0402.htm .

3.2 Oftel’s strategy refers to a set of high level objectives and underlying regulatory principles to provide a framework to ensure ‘appropriate regulation’ is achieved. Appropriate regulation means regulation adjusted to the level of competition in a particular market and focused on the area of concern.

3.3 It is important to keep regulation to the minimum necessary and, where possible, to encourage the industry to regulate itself. It is also important to promote competition so as not to create disincentives for new market entrants or incumbents to invest in infrastructure or to innovate in the provision of new services.

3.4 Oftel’s strategy is to apply regulation only where necessary, and to the minimum extent necessary, to achieve its objectives. Ideally, competitive markets would deliver the required benefits and no regulatory intervention would be needed. If the conclusion is that the market will not adequately deliver such benefits, Oftel needs to ask why and, if appropriate, what form any regulation should take.

3.5 In the past, with only a comparatively small number of operators having the benefit of the Code, the process of satisfying the Director was carried out on an ad hoc basis, usually at the request of the licensee who needed access to public land for the purpose of constructing infrastructure. The number of operators utilising the Code and the growing concerns of Highway Authorities to ensure that there are sufficient funds available to meet liabilities has rendered such an ad hoc system inappropriate and necessitated a review of the existing policy, as detailed in the first consultation.

3.6 The form of regulation can be one or more of the following:

a) formal regulation by Oftel; and/or
b) co-regulation involving Oftel and the industry; and/or
c) self-regulation by the industry largely without Oftel involvement.

3.7 The value of self and co-regulation is that it provides alternatives to formal regulation and provides the flexibility to regulate at the minimum level necessary to achieve Oftel’s objectives. Self and co-regulatory mechanisms may represent stages in a move towards less regulation or the means to avoid the need to introduce new, more intrusive, formal regulation.

3.8 Co-regulation, in particular, covers three scenarios:

a) where Oftel backs industry-led initiatives through statutory fallback powers, with the aim of bolstering the authority of the co-regulatory initiative, so making the use of formal powers unnecessary;
b) where Oftel facilitates and/or participates with interested parties addressing commercial and/or technical issues in the implementation of formal regulatory requirements; and
c) where Oftel facilitates and/or participates in stakeholder groups established to address an issue, usually at the development stage, so avoiding the need for formal regulatory requirements.

3.9 Each of these can be termed co-regulatory as Oftel is involved in encouraging progress and providing assistance in areas where the market is not delivering desired outcomes.

3.10 For co-regulation to succeed it must provide clear benefits. In the context of funds for liabilities these benefits might include, for instance:

a) greater scope for operators to make arrangements which would enable them to comply with Condition 16 but which would be appropriate to their particular needs;
b) better information and confidence for Highway Authorities to grant access to the public highway;
c) faster responses for operators following requests for access to the public highway;
d) better relations between operators and Highway Authorities; and

e) Oftel being able to focus its resources more on resolving outstanding issues and on applying and/or adjusting formal regulation as appropriate.

3.11 Oftel’s view is that benefits will only be realised if co-regulation is applied to the appropriate circumstances, with the necessary energy and commitment from all stakeholders. However, co-regulation is not necessarily an easy option. It can take time, resources and commitment from all participants including Oftel. It requires appropriate objectives and working practices in the same way as more formal measures. Apart from practical issues, commercial considerations can make it hard to secure agreements or rapid action.

3.12 In the context of funds for liabilities, Oftel can usefully bring together the industry and Highway Authorities. It can also have a role in post-implementation and in monitoring the success of a co-regulatory initiative, to ensure that Oftel’s objectives continue to be met as market conditions change.

Chapter 4 – The Government’s vision and objectives

High bandwidth Britain

4.1 The Government has indicated a wish to develop throughout the UK a high bandwidth infrastructure which can expand to meet the growing needs of businesses and individuals. The infrastructure will depend on a combination of different technologies, for instance:

a) fibre-optic cable;
b) cable and DSL;
c) fixed wireless networks;
d) satellite services; and
e) third generation (3G) mobile.

4.2 Technological developments are opening up new opportunities for the provision of information services. The Universal Mobile Telecommunications System (UMTS) is a so-called ‘third generation’ (3G) broadband, packet-based system to be deployed in Europe for the transmission of text, digitised voice, video, and multimedia to mobile computer and phone users. If these new technologies are to be successful a method of allowing new infrastructure creation will have to be provided which at the same time safeguards the position of Highway Authorities.

4.3 The UK auction for five UMTS licences was held in April 2000. The telecommunications industry is investing heavily in 3G technologies which offer faster access to information and the delivery of high bandwidth to mobile services. The rolling out of these networks will also require considerable additional infrastructure.

4.4 The Government has acknowledged that building out the infrastructure to create high bandwidth Britain requires a partnership between public and private sectors. There is a continuing need for telecommunications operators to have access to public land in order to build out the necessary infrastructure. Indeed, the industry has seen an increase in the number of companies providing telecommunications networks and services and the level of Street Works activity in building out the necessary infrastructure.

4.5 Equally, Highway Authorities, who afford access to public land for operators to build out infrastructure, need to be reassured that sufficient funds are available to meet any liabilities should any particular operator cease to trade or have its licence revoked.

Chapter 5 – Summary of responses to the June 2001 consultation document

5.1 Overall, there was a very positive and constructive set of responses to the first consultation which required further consideration and investigation before Oftel could draw any conclusions. See Oftel’s website at www.oftel.gov.uk/publications/responses/index.htm for more detailed information.

5.2 Based on the responses to the first consultation Oftel’s main conclusions are as follows:

How should a scheme be structured to ensure compliance with Condition 16?

5.3 Whilst the industry indicated that it is content for the present ad hoc arrangements to comply with Condition 16 to continue, it also indicated that it was grateful for the opportunity to work with Oftel to find the best mechanism for securing compliance with Condition 16. Highway Authorities preferred a more formal regulatory approach including an industry-wide performance bond, guarantee or insurance to which all telecommunications operators with the benefit of the Code would be obliged to contribute.

5.4 Oftel needs to ensure that appropriate regulation is achieved. It also needs to produce a satisfactory scheme within a short timescale. It is for these reasons in particular that Oftel supports the industry’s proposal to work together to find the best mechanism for securing compliance with Condition 16.

5.5 Highway Authorities also suggested that a Telecommunications Industry Fund had merit and was worth exploring. However, the industry considered that such a fund would be complex to structure, could be discriminatory and might increase the administrative and financial burden on the industry.

The most appropriate type of guarantee

5.6 The first consultation sought views on the most appropriate method by which an operator could satisfy the Director that funds for liabilities are and will continue to be available. It identified two possible methods, namely insurance cover and bonds or guarantees, and asked whether or not such methods could be regarded as discriminatory and whether or not they would act as a barrier to market entry.

5.7 Based on the responses to the first consultation and subsequent discussions with the industry and Highway Authorities, Oftel has concluded that the most acceptable option is for operators to be able to implement individual insurance policies, bonds, guarantees or other instruments to cover these liabilities. It is accepted that the cost of such individual arrangements will be a relevant factor for new market entrants. However, if the same risk assessment criteria are applied by financial institutions to all operators, it is difficult to contend that for each operator to have to obtain such cover is discriminatory against any one or any set of operators.

The amount of the potential liability

5.8 An important issue, when considering arrangements to comply with Condition 16, is the amount of potential liability that might arise following a Relevant Event. The first consultation referred to an assumption that the systems installed by most licensees, and which would create a potential liability, would comprise combinations of certain types of equipment and it provided a list for comment. A number of amendments to the list of equipment were suggested by Highway Authorities including boxes, chambers and covers.

Calculating the liability

5.9 The first consultation also identified two possible methods for calculating the potential liability and asked for comments regarding the same and whether there were other methods of calculating the potential liability. The preferred method identified in the majority of responses of calculating the potential liability of an operator is to take a percentage of the capital cost of construction. However, the Operators Group and BT proposed a risk matrix and set up a Working Group to consider how it could be used to determine the potential liability. It has been suggested by some of the Highway Authorities that any method must be simple to calculate and simple to ratify and update.

The length of the contingent liability period

5.10 Liability to Highway Authorities will only arise following a Relevant Event. Where infrastructure is left in situ, operators will need to ensure that they have cover in place for contingent liabilities. The first consultation asked for views on what would be the appropriate period of such an ongoing liability. There were a number of proposals for the contingent liability period ranging from three years to an indefinite period. The appropriate contingent liability period will be affected, in particular, by what is believed to be the position of the insurance industry.

How infrastructure is dealt with following a Relevant Event

5.11 The first consultation also asked how any infrastructure would be dealt with following a Relevant Event. Two scenarios were envisaged, namely part completed and completed works. In both cases, it is accepted by the operators that Highway Authorities have the experience and also the responsibility in this particular area and due weight must be given to their concerns.

5.12 For part completed works, a situation is envisaged where an operator enters into insolvency proceedings, for instance administration. Highway Authorities refer to their responsibility in this area and the need to ensure that any such works are immediately made safe for the public. This emergency work, they suggest, may take the form of lighting, signing and guarding together with visits to the site(s) to maintain the same. If the works are not transferred to an alternative operator it has been suggested that any arrangements, needed for the reinstatement of the works, will need to be made as soon as possible after the Relevant Event.

5.13 For completed works, following a Relevant Event, it is accepted that if infrastructure is transferred to an alternative operator, who will be required to make any necessary arrangements in respect of any subsequent liability, there would be no action for the Highway Authority concerned except to be satisfied that arrangements have been made to deal with future liabilities. If the infrastructure is not transferred to an alternative operator it has been suggested that any arrangements needed for the long term safeguarding and stability of the infrastructure will need to be made as soon as possible after the Relevant Event.

5.14 It has been suggested by some operators that there should be an initial period, for instance six months, for the administrator to try to achieve a transfer of the infrastructure to an alternative operator after which decisions regarding what action to take with the infrastructure would need to be addressed.

Interim scheme

5.15 Finally, Highway Authorities proposed that an interim scheme, to ensure compliance with Condition 16, should be introduced. Oftel considers that any interim exercise would be time consuming, would lead to delay and would only detract from the present exercise to find a long-term solution to the problem. Oftel can continue to deal with applications for approval of arrangements, to comply with Condition 16, in accordance with its present arrangements.

Chapter 6 – Proposed scheme

6.1 Subject to further consultation, the Director has decided that the proposal for a co-regulatory initiative to find the best mechanism for securing compliance with Condition 16 is appropriate. Oftel has had informal discussions with both the industry and Highway Authorities following the first consultation. It has also received a number of helpful suggestions and comments.

6.2 Following the first consultation, and from the advice it has received, Oftel is now consulting on a clear set of issues and proposals designed to ensure that sufficient funds are available to meet any potential liabilities under Condition 16. Each of these issues and proposals are considered below.

6.3 Oftel has stated its desire to encourage the industry, where possible, to regulate itself and for Oftel’s role to be a fallback one. However, Condition 16 requires the licensee to make such arrangements as will satisfy the Director that sufficient funds are available to Highway Authorities after the occurrence of a Relevant Event to meet the liabilities described in Condition 16.

Annual review and certification

6.4 Operators would, in the respect of each year commencing after the date the proposed scheme comes into effect, submit to the Director a certificate approved by the operator’s board of directors (‘the Board’) and signed by either a Director or the company secretary of the operator which shall state:

a) that, in the Board’s reasonable opinion, the operator has systems and processes in place which are appropriate to enable the Board to form a reasonable opinion as to whether the operator is complying with its obligation under Condition 16;
b) that, in the Board’s reasonable opinion, after making appropriate enquiries and exercising due diligence, sufficient funds are available to Highway Authorities after the occurrence of a Relevant Event to meet the liabilities described in Condition 16; and
c) on its face, the amount of funds which have to be provided for.

6.5 A certificate for the purpose of paragraph 6.4 above would be submitted as soon as practicable and, in any event, within 28 days of the date on which the Board approved the certificate.

6.6 Some operators have expressed their concern that Directors might be held personally liable on the basis of an erroneous certificate. Oftel’s view is that the requirement for an operator to submit a certificate is reasonable for the reason that directors would be required to make appropriate enquiries and exercise due diligence before stating that, in the Board’s reasonable opinion, sufficient funds are available. Further, it has been suggested to Oftel by one operator that Directors might already have, or be able to obtain, insurance against such potential claims.

6.7 A draft certificate has been produced for comment at Annex D.

6.8 Do consultees agree with the proposal that operators would submit a certificate approved by the operator’s Board of Directors? If not, why not?

6.9 Should there be any amendments to the proposals for a certificate? If yes, what amendments are proposed and why?

6.10 Oftel would welcome comments on the draft certificate.

Method of calculating liability

6.11 Each individual operator would have to determine its potential liability for work in progress (based on its build plan) and for each category of apparatus – see paragraphs 6.21 and 6.22 below. The cost of reinstatement associated with the removal of the apparatus would also be included where appropriate in calculating the potential liability.

6.12 During informal discussions with the telecommunications industry it was suggested to Oftel that guidance could be issued on how to calculate the potential liability. Oftel’s view is that it is a matter for individual operators, having ensured that they have appropriate systems and processes in place, to calculate the level of their potential liability.

6.13 Oftel would welcome the views of the industry, Highway Authorities and any other interested parties on this suggestion.

Verification of the amount of liability

6.14 Operators must satisfy the Director that sufficient funds are available to Highway Authorities after the occurrence of a Relevant Event to meet the liabilities described in Condition 16. The Director needs to be certain that the level of cover provided for is sufficient to meet the potential liability under Condition 16.

6.15 Oftel has considered a requirement for an operator to submit a certificate supported by an auditor’s report. The auditor’s report would:

a) state whether, in the auditor’s opinion, the operator has systems and processes which are appropriate to enable the Board to form a reasonable opinion as to whether the operator is complying with Condition 16;
b) state whether, in the auditor’s opinion, the systems and processes referred to above have been followed; and
c) be based on an examination of all appropriate financial records and other information made available to him or required to be produced to him for the purpose of enabling him to prepare his report.

6.16 Paragraph 6.15 a) proposes the provision of assurance over the appropriateness of the operator’s internal systems and processes relevant to the determination of the potential liability.

6.17 From the advice it has received Oftel’s view is that there is little guidance in the UK for auditors to provide audit reports outside financial information. The proposals merely look at the systems and processes that an operator has in place for the Board to comply with Condition 16; they don’t themselves provide any assurance to the Board, or the Director, about the level of cover needed.

6.18 It is for these reasons that Oftel proposes not to pursue the requirement for an auditor’s report but that the Director would be able to request and obtain verification of the amount of liability if he were to consider that to be necessary in any particular case with a fallback power of ex post facto audit by the Director.

6.19 Do consultees consider that there is any merit in pursuing the requirement for operators to submit a certificate supported by an auditor’s report? Please give reasons.

6.20 In what circumstances would consultees envisage the Director exercising his fallback power of ex post facto audit? Please give reasons.

List of apparatus

6.21 In calculating the potential liability it would be assumed that the systems installed by most operators, and which would create a potential liability, would comprise combinations of the following types of apparatus:

a) aerial cable and dropwires;
b) aerials;
c) boxes;
d) cabinets;
e) cable buried directly in the ground and cable run up poles, masts and towers;
f) chambers;
g) covers and their associated frames;
h) housings for public call boxes;
i) manholes, jointing chambers and footway boxes;
j) masts and towers;
k) microcells;
l) poles; and
m) tunnels.

6.22 Oftel proposes that cable buried directly in the ground or in duct in the ground would be included except where the trench or duct is closed and the surface reinstated according to the New Roads and Street Works Act 1991 ('NRSWA') specifications. It is important therefore that operators ensure that construction of infrastructure complies with NRSWA specifications and appropriate records are kept.

6.23 Highway Authorities refer to telecommunications operators’ responsibilities under the NRSWA to lay underground cable in trenches or ducts according to the Specification for Reinstatement of Openings in Highways and to register work as completed according to the specification. They have also advised Oftel that such works are not ‘approved’ on completion and there is no programme of inspection during the works; the works are inspected only if the Highway Authority can or is likely to recover its costs from the operator, and then only in line with costs contained in the NRSWA.

6.24 It has been suggested by the industry that chambers, covers and manholes are not relevant to Condition 16 on the basis that their construction took place according to British Standards and the fact that the relevant Highway Authority would have approved work as satisfactory on completion. The industry also suggested that these items of apparatus could be removed as part of reconstruction work carried out by Highway Authorities within the lifespan of the apparatus.

6.25 Highway Authorities suggest that not all apparatus installed by some telecommunications operators, for instance JB23 boxes, complies with British Standards. They also suggest that there would be costs associated with the removal of such apparatus even as part of reconstruction work carried out by Highway Authorities. Highway Authorities advise Oftel that construction work is not ‘approved’ as satisfactory on completion.

6.26 Not all apparatus is within the scope of British Standards. Where it is however, Oftel agrees that such apparatus should be constructed according to its relevant British Standard. However, the apparatus does not have an infinite lifespan. In the event of the apparatus being abandoned by the operator, the operator would no longer maintain the apparatus (although it is accepted that not all apparatus is routinely maintained by operators) and its condition would, in Oftel's view, deteriorate quicker and shorten its lifespan. Oftel considers that these items of apparatus must be covered by Condition 16 and that the points raised by the industry would be reflected in the cost incurred by the operator for cover.

6.27 The industry also suggested that housings for public call boxes which are part of the Universal Service Obligation should be excluded from the list of apparatus on the basis that another operator would take responsibility for their provision.

6.28 The Universal Service Obligation is a provision in some Telecommunications Act licences requiring the licensee to provide certain basic services, phone, fax and low bit rate data, to all specified persons. It aims to ensure that telecommunications services used by the majority and which are essential to social and economic inclusion are available to everybody on reasonable request, in an appropriate way and at an affordable price. This is intended to ensure, in particular, that people on low incomes, those living in remote rural areas, disabled people and other vulnerable groups obtain the advantages of telephony. For instance, BT and, in the Hull area, Kingston Communications are currently required to provide basic telephone services and certain other established telecommunications services to anyone who may reasonably request them.

6.29 Oftel’s view is that in terms of providing adequately for funds for liabilities it would not be practicable to differentiate between public call boxes installed as a result of a commercial decision and those installed under any Universal Service Obligation. Public call boxes installed under the Universal Service Obligation would be covered by Condition 16 and the point raised by the industry in paragraph 6.27 above would be reflected in the cost incurred by the operator for cover.

6.30 Managed service phones have not been included in the list of apparatus (previously included in the list in the first consultation) because they are payphones installed on private land, operated under contract and are outside the scope of Condition 16.

6.31 Telecommunications is a dynamic market where operators are offering new and innovative services. With technological advances the apparatus needed to support these services is changing constantly. Oftel has considered a generic definition for ‘apparatus’ as an alternative to a closed list. Oftel’s view following discussions with the industry is that a generic definition would be difficult to use in practice. However, Oftel needs to ensure that the list of apparatus accurately reflects the type of apparatus being installed at a particular point in time. It is for this reason that Oftel proposes to review and update the list on a periodic basis following consultation.

6.32 Should there be any amendments to the list of apparatus in paragraph 6.21? If yes, what amendments are proposed and why?

Type of policy

6.33 Operators would have the freedom to be able to obtain individual insurance policies, bonds, guarantees or other instruments to cover their potential liability under Condition 16. Individual operators would have some control over the arrangements they made, they would be able to organise their finances in a way which best suited their business plans and it would ensure that these arrangements reflected accurately their particular risk.

6.34 Some operators have suggested that given the financial state of the telecommunications industry it would simply not be possible to obtain an insurance policy, bond, guarantee or other instrument. Oftel does not support this suggestion. There are operators who have complied with Condition 16 and Oftel is at the time of this consultation in discussions with other operators who are in the process of putting arrangements in place to comply with Condition 16. Compliance with Condition 16 would therefore appear to be perfectly possible.

6.35 Oftel takes the view that the cost incurred for cover is a matter for the operator and the relevant financial institution providing the cover taking into account usual risk financing principles, for instance, the individual operator’s credit rating, financial structure, claims history and business plan.

6.36 Oftel has reproduced at Annex C, and by way of example only, a specimen bond as approved by Oftel under the current ad hoc arrangements. Any instrument which an operator executes needs to make clear that it is creating either an on-demand commitment or a more traditional type of guarantee or default bond.

6.37 Further, the instrument should comply with published minimum criteria. For instance, it should include:

a) the operator’s name and address;
b) the amount of cover;
c) circumstances in which claims could be made (Relevant Event);
d) who could make a claim (Appropriate Authority); and
e) provisions to guard against the guarantor being able to avoid liability for instance an operator being given time to pay under the instrument or amendments being made to Condition 16 during the continuance of the instrument.

6.38 Do consultees agree that operators should have the freedom to be able to implement individual insurance policies, bonds, guarantees or other instruments to cover their potential liabilities under Condition 16? If not, why not?

6.39 What minimum criteria should operators’ instruments comply with? Please give reasons.

Specialist advice

6.40 The present text of Condition 16 requires a review of arrangements by the licensee and the Director at intervals of not more than two years. The resources for such a review would be considerable and the task for Oftel and the operators would be onerous.

6.41 Under the proposed scheme Oftel would check the existence of the certificate and the instrument itself. In the overwhelming majority of circumstances Oftel anticipates that the existence of the certificate and the instrument would give sufficient certainty to underpin a judgement that Condition 16 was being met and there would be no necessity for any regular ongoing case by case scrutiny. However, the Director may take independent specialist advice regarding the proposed arrangements. The Director could appoint third parties to advise him in making decisions regarding the proposed arrangements and compliance with Condition 16.

6.42 Such advice might for instance be sought if:

a) the certificate was qualified in some way; or
b) the Director was not satisfied that the arrangements complied with Condition 16.

6.43 The third parties’ principal function would be to advise the Director on the arrangements proposed by individual operators both initially and on review. Such advice could also include a review of the adequacy of the arrangements and/or the instrument itself.

6.44 The advice could include an assessment of the potential liability together with some input into the value of the infrastructure, the cost of making any redundant apparatus safe and the cost of removal of apparatus in certain circumstances including, where appropriate, reinstatement.

6.45 In what circumstances would consultees consider it reasonable for the Director to seek independent specialist advice regarding the proposed arrangements? Please give reasons.

Procedure for part completed works

6.46 The procedure would be initiated following a Relevant Event.

6.47 If an operator enters into insolvency proceedings, for instance administration, the administrator would be required to take all reasonable steps to contact Highway Authorities (each Highway Authority whose territory has been traversed) to confirm his details and to ensure that no unreasonable and/or unnecessary work is carried out by the Highway Authority prior to the final outcome of the administration.

6.48 Highway Authorities would however be entitled to take all reasonable steps to ensure that any works are immediately made safe for the public. This could for instance take the form of lighting, signing and guarding together with visits to the site(s) to maintain the same. They could also deal with any environmental issues, for instance, vandalised public call boxes. Under the terms of the instrument Highway Authorities should be able to recover immediately the cost of all works reasonably carried out.

6.49 Highway Authorities should be able to carry out such investigatory work as appears to them to be necessary to ascertain whether an operator has complied with his duties with respect to reinstatement. If a failure is disclosed, the cost of the investigatory work should be recoverable under the terms of the instrument. If a failure is not disclosed, the Highway Authority should bear the cost of the investigatory work and of any necessary reinstatement.

6.50 Highway Authorities would be expected to take all reasonable steps to contact the administrator of the company prior to any emergency work being carried out and, if that is not possible, within a reasonable period after the commencement of the work. Oftel’s view is that three working days is a reasonable period in which the administrator should be contacted.

6.51 If the works were transferred to an alternative operator with code powers, who would be required to make any necessary arrangements in respect of any subsequent liability, there would be no action for Highway Authorities except to be satisfied that arrangements have been made to deal with future liabilities.

6.52 If the works are not transferred to an alternative operator with code powers, any arrangements needed for the reinstatement of the works, will need to be made as soon as possible after the Relevant Event. Highway Authorities have told Oftel that they are uncertain about who owns abandoned apparatus. Oftel has noted Highway Authorities’ uncertainty but does not consider that this is a matter for this consultation.

6.53 Any demand(s) made by a Highway Authority would be accompanied by or incorporate a declaration setting out the basis on which a claim is being made. A form of declaration, by way of example only, can be found in the specimen bond reproduced at Annex C.

6.54 Should there be any amendments to the procedure for part completed works? If yes, what amendments are proposed and why?

Procedure for completed works

6.55 The procedure would be initiated following a Relevant Event.

6.56 If an operator enters into insolvency proceedings, for instance administration, the administrator would be required to take all reasonable steps to contact Highway Authorities (each Highway Authority whose territory has been traversed) to confirm his details and to ensure that no unreasonable and/or unnecessary work is carried out by Highway Authorities prior to the final outcome of the administration.

6.57 If infrastructure were transferred to an alternative operator with code powers, who would be required to make any necessary arrangements in respect of any subsequent liability, there would be no action for Highway Authorities except to be satisfied that arrangements have been made to deal with future liabilities.

6.58 If the infrastructure is not transferred to an alternative operator with code powers, any arrangements needed for the long term safeguarding and stability of the infrastructure would need to be made after the Relevant Event. Highway Authorities have told Oftel that they are uncertain about who owns abandoned apparatus. Oftel has noted Highway Authorities’ uncertainty but does not consider that this is a matter for this consultation.

6.59 Highway Authorities should be able to carry out such investigatory work as appears to them to be necessary to ascertain whether an operator has complied with his duties with respect to reinstatement. If a failure is disclosed, the cost of the investigatory work should be recoverable under the terms of the instrument. If a failure is not disclosed, the Highway Authority should bear the cost of the investigatory work and of any necessary reinstatement.

6.60 Any demand(s) made by a Highway Authority would be accompanied by or incorporate a declaration setting out the basis on which a claim is being made. A form of declaration, by way of example only, can be found in the specimen bond reproduced at Annex C.

6.61 Should there be any amendments to the procedure for completed works? If yes, what amendments are proposed and why?

Contingent liability period

6.62 Oftel proposes that the contingent liability period would be three years. This is considered to be a reasonable period in which any assessment of the liability could be completed by Highway Authorities – it is accepted that Highway Authorities have the experience and also the responsibility in this particular area. The period of three years also reflects what is believed to be the position of the insurance industry; namely insurers are unlikely to underwrite a long-term liability policy beyond three years.

6.63 The contingent liability period would commence immediately on the occurrence of a Relevant Event.

6.64 Highway Authorities have suggested that there would be benefits, for the telecommunications industry and Highway Authorities, by having a longer contingency liability period. They suggest for instance that all of the operator’s infrastructure would have to be inspected, made safe or removed. Certain work might be assessed during a three year period as necessary but might not be needed if left in situ for a longer period. Highway Authorities suggest also that they could ‘drip feed’ claims thereby keeping costs down and work could be completed in the most economical way. Highway Authorities refer also to increased costs to complete an assessment of an operator’s infrastructure in a three year period.

6.65 Do consultees consider that three years is a reasonable time in which it would be possible to complete an assessment of the infrastructure following a Relevant Event? If not, why not?

Oftel website

6.66 Oftel proposes to establish a web page dedicated to the issue of Condition 16. The website would include the following:

a) current version of Condition 16;
b) licensee’s name and registered address (those with the benefit of the Code);
c) licence date;
d) licence number;
e) date on which the individual licensee complied with the proposed scheme and Condition 16;
f) date of Relevant Event, if applicable; and
g) insolvency practitioner’s contact details.

6.67 The operator or, for instance, the administrator (as the statutory successor to the operator under its licence) would be required to take all reasonable steps, and in any event within three working days, to contact the Department of Trade and Industry and Oftel to confirm the occurrence of a Relevant Event.

6.68 Highway Authorities would be able to check the web site when considering a request for access to the highway. In addition, Highway Authorities would be able to receive notification of changes to information on the web site by joining Oftel’s email notification service.

6.69 What additional information, if any, should be included on Oftel’s website, and why?

Funding

6.70 The cost to Oftel of the proposed scheme would be funded by Oftel and recovered from the industry through the existing fee regime.

6.71 The fees charged would cover the costs incurred in the management, control and enforcement of the applicable scheme.

Chapter 7 – Proposed changes to licences

7.1 If any scheme is to be effective and acceptable to the industry and the Highway Authorities, changes to Condition 16 will be necessary. As Condition 16 relates to the Code, the power to modify it vests exclusively in the Secretary of State.

7.2 Section 10(8) of the Act makes provision for the Secretary of State to modify the exceptions and conditions, subject to which the Code has effect as so applied, with the consent of the licensee or, if it appears to him requisite or expedient to do so, for the purpose of ensuring that funds are available for meeting any liabilities which may arise from the exercise of rights conferred by or in accordance with the Code.

7.3 If following this second consultation the Director considers that changes to Condition 16 are appropriate, it would be his intention to ask the Secretary of State to consult on such modifications and subject to that public consultation to make the necessary changes.

7.4 Oftel has had formal discussions with the Department of Trade and Industry and has produced for comment a draft new Condition 16.

7.5 The text of this Condition has been produced at Annex B. Oftel is at this stage seeking comments on the substance and precise drafting of a new Condition 16.

7.6 Oftel would welcome comments on the draft new Condition 16.

Chapter 8 – Questions

8.1 In carrying out this public consultation Oftel would welcome answers to the following specific questions:

a) Do consultees agree with the proposal that operators would submit a certificate approved by the operator’s board of directors? If not, why not?

b) Should there be any amendments to the proposals for a certificate? If yes, what amendments are proposed and why?

c) Oftel would welcome comments on the draft certificate.

d) Oftel would welcome the views of the industry, Highway Authorities and any other interested parties on the suggestion that guidance could be issued on how to calculate the potential liability.

e) Do consultees consider that there is any merit in pursuing the requirement for operators to submit a certificate supported by an auditor’s report? Please give reasons.

f) In what circumstances would consultees envisage the Director exercising his fallback power of ex post facto audit? Please give reasons.

g) Should there be any amendments to the list of apparatus in paragraph 6.21? If yes, what amendments are proposed and why?

h) Do consultees agree that operators should have the freedom to be able to implement individual insurance policies, bonds, guarantees or other instruments to cover their potential liabilities under Condition 16? If not, why not?

i) What minimum criteria should operators’ instruments comply with? Please give reasons.

j) In what circumstances would consultees consider it reasonable for the Director to seek independent specialist advice regarding the proposed arrangements? Please give reasons.

k) Should there be any amendments to the procedure for part completed works? If yes, what amendments are proposed and why?

l) Should there be any amendments to the procedure for completed works? If yes, what amendments are proposed and why?

m) Do consultees consider that three years is a reasonable time in which it would be possible to complete an assessment of the infrastructure following a Relevant Event? If not, why not?

n) What additional information, if any, should be included on Oftel’s website, and why?

o) Oftel would welcome comments on the draft new Condition 16.

Chapter 9 – Consultation process and timetable

How to make comments on the questions raised in this consultation document

9.1 Oftel is publishing this consultation document so that interested parties may comment on the issues which it addresses. In view of the June 2001 consultation document, that this is a second more narrowly focussed consultation document, that Oftel has had informal discussions with the industry and Highway Authorities and given the urgency of resolving the issue of compliance with Condition 16, Oftel is not programming a 12 weeks formal consultation period. The closing date for submitting comments is 5 August 2002.

9.2 Oftel is for the same reasons outlined in paragraph 9.1 above not inviting interested parties to comment on the responses made by others.

9.3 Where possible, comments should be made in writing and sent by e-mail to neil.paterson@oftel.gov.uk. However, copies may also be posted or faxed to the address below. If any interested parties are unable to respond in one of these ways, they should discuss alternatives with:

Neil Paterson
Oftel
50 Ludgate Hill
London
EC4M 7JJ

tel: 020 7634 8732
fax: 020 7634 8847
e-mail: neil.paterson@oftel.gov.uk

Further copies of this document

9.4 This document can be viewed in the Publications section of Oftel’s website (www.oftel.gov.uk), under classification Licensing & Enforcement Actions. Paper copies and more accessible formats such as large print, Braille, disc and audio cassette can be made available on request. Please contact Oftel’s Research and Information Unit by phoning 020 7634 8761 or by sending an e-mail to infocent@oftel.gov.uk.

Publication of comments

9.5 In the interests of transparency, comments will be published, except where respondents indicate that a response, or part of it, is confidential. Respondents are therefore asked to separate out any confidential material into a confidential annex which is clearly identified as containing confidential material. Oftel will take steps to protect the confidentiality of all such material from the moment that it is received at Oftel’s offices. However, in the interests of transparency, respondents should avoid applying confidential markings wherever possible.

9.6 Non-confidential responses can be viewed on Oftel’s website in the Publications section under Responses to Oftel consultations. Comments can also be viewed at Oftel’s Research and Information Unit. Appointments must be made in advance by phoning 020 7634 8761 or sending an e-mail to infocent@oftel.gov.uk.

e-mail notifications

9.7 Oftel has a free e-mail based mailing list to help people stay informed about the work that Oftel is doing. Each time an Oftel document is published and placed on Oftel’s website at www.oftel.gov.uk, subscribers to the list receive an e-mail alert. To register, please go to the What’s New section of the web site and access the electronic form.

The consultation criteria

9.8 Oftel considers that this document meets the Cabinet Office code of practice on written consultation documents. The code is reproduced below for convenience. If you have any comments or complaints about this consultation process please contact:

Oftel co-ordinator for the code of practice:

Rob Jex
Oftel
50 Ludgate Hill
London
EC4M 7JJ

tel: 020 7634 5350
fax: 020 7634 8943

9.10 Timing of consultation should be built into the planning process for a policy (including legislation) or service from the start, so that it has the best prospect of improving the proposals concerned, and so that sufficient time is left for it at each stage.

9.11 It should be clear who is being consulted, about what questions, in what timescale and for what purpose.

9.12 A consultation document should be as simple and concise as possible. It should include a summary, in two main pages at most, of the main questions it seeks views on. It should make it as easy as possible for readers to respond, make contact or complain.

9.13 Documents should be made widely available, with the fullest use of electronic means (though not to the exclusion of others), and effectively drawn to the attention of all interested groups and individuals.

9.14 Sufficient time should be allowed for considered responses from all groups with an interest. Twelve weeks should be the standard minimum period for consultation.

9.15 Responses should be carefully and open-mindedly analysed, and the results made widely available, with an account of the views expressed, and reasons for decisions finally taken.

9.16 Departments should monitor and evaluate consultations, designating a consultation co-ordinator who will ensure that all the lessons are disseminated.

9.17 It is difficult to predict the timetable for dealing with this consultation. However, in view of the subject matter of this consultation and the urgent need to bring this consultation to a satisfactory conclusion Oftel anticipates that a Statement will be published in autumn 2002.

Annex A – Condition 16

Funds for meeting liabilities

16.1 In respect of the period commencing on the date of this Licence until 31 March 1999 and thereafter in respect of every period of one year beginning on 1 April the Licensee shall make such arrangements as will satisfy the Director (which arrangements shall be reviewed jointly by the Director and the Licensee at least every two years) that sufficient funds are available to the Appropriate Authorities after the occurrence of a Relevant Event to meet the liabilities described in paragraph 16.2 below which have arisen on or before the date on which that Event occurred or may arise thereafter from the exercise of rights conferred upon the Licensee by paragraph 9 of the Telecommunications Code.

16.2 The liabilities referred to in paragraph 16.1 above are:

(a) liabilities, including for the payment of indemnities in respect of costs or expenses incurred, arising under the New Roads and Street Works Act 1991 or, in Northern Ireland, the Electricity Supply (Northern Ireland) Order 1972, as amended by the Telecommunications (Street Works) (Northern Ireland) Order 1984, towards:

(i) any Appropriate Authority, Traffic Authority or other responsible authority under that Act;

(ii) any other person having the authority to execute works in, or having apparatus in, a Street;

(iii) any concessionaire within the meaning of section 1 of that Act, or in the case of Northern Ireland within the meaning of Article 23(1) of the Roads (Northern Ireland) Order 1993;

(b) any other costs or expenses reasonably incurred by any Appropriate Authority or other responsible authority in making good any damage caused by the Installation or removal of Telecommunication Apparatus, whether such damage occurs before or after the Relevant Event;

(c) any other costs or expenses reasonably incurred by any Appropriate Authority or other responsible authority after the Relevant Event occurs in removing any Telecommunication Apparatus:

(i) which is Installed under, over, along or across a Street;

(ii) which is not, or is no longer, used for the purposes of any telecommunication system and in relation to which there is no reasonable likelihood that it will be so used; and

(iii) the removal of which is desirable having regard to any harm it may cause to other persons or property, or to the visual amenity of properties in proximity to which the Apparatus is Installed.

16.3 Where the Director is not satisfied that the arrangements made by the Licensee are adequate to secure that sufficient funds are available after the Relevant Event occurs for meeting the liabilities described in paragraph 16.2 above he may direct the Licensee to take such steps as he considers appropriate for the purpose of securing that such sufficient funds are available and the Licensee shall comply with any such direction.

Annex B – Draft new condition 16

Funds for meeting liabilities

16.1 In respect of the period commencing on [insert date] or on the date hereof whichever is the later until 31 March 2003 and thereafter in respect of every period of one year beginning on 1 April, the Licensee shall submit to the Director a certificate approved by a resolution of the Board and signed by either a director or the company secretary of the Licensee. This certificate shall state:

(a) whether, in the Board’s reasonable opinion, the Licensee has systems and processes which are appropriate to enable the Board to form a reasonable opinion as to whether the Licensee is complying with its obligation under paragraph 16.1;

(b) whether, in the Board’s reasonable opinion, after making appropriate enquiries and exercising due diligence, the Licensee has made proper and adequate arrangements to ensure that sufficient funds are available to the Appropriate Authorities after the occurrence of a Relevant Event to meet the liabilities described in paragraph 16.4 below which have arisen on or before the date on which that Event occurred or may arise at any time during the Liability Period from the exercise of rights conferred upon the Licensee by paragraph 9 of the Telecommunications Code; and

(c) the amount of the funds which have been provided for.

16.2 The certificate referred to in paragraph 16.1 above shall be accompanied by a copy of the Relevant Instrument.

16.3 A certificate for the purpose of paragraph 16.1 above and a copy of the Relevant Instrument shall be submitted as soon as practicable and in any event within twenty eight days of the date on which the certificate was approved by the Board.

16.4 The liabilities referred to in paragraph 16.1 above are:

(a) liabilities, including for the payment of indemnities in respect of costs or expenses incurred, arising under the New Roads and Street Works Act 1991 or, in Northern Ireland, the Electricity Supply (Northern Ireland) Order 1972, as amended by the Telecommunications (Street Works) (Northern Ireland) Order 1984, towards:

(i) any Appropriate Authority, Traffic Authority or other responsible authority under that Act;

(ii) any other person having the authority to execute works in, or having apparatus in, a Street;

(iii) any concessionaire within the meaning of section 1 of that Act, or in the case of Northern Ireland within the meaning of Article 23(1) of the Roads (Northern Ireland) Order 1993;

(b) any other costs or expenses reasonably incurred by any Appropriate Authority or other responsible authority in making good any damage caused by the Installation or removal of Telecommunication Apparatus, whether such damage occurs before or after the Relevant Event;

(c) any other costs or expenses reasonably incurred by any Appropriate Authority or other responsible authority after the Relevant Event occurs in removing any Telecommunication Apparatus:

(i) which is Installed under, over, along or across a Street;

(ii) which is not, or is no longer, used for the purposes of any telecommunication system and in relation to which there is no reasonable likelihood that it will be so used; and

(iii) the removal of which is desirable having regard to any harm it may cause to other persons or property, or to the visual amenity of properties in proximity to which the Apparatus is Installed.

16.5 Where the Director is not satisfied that the arrangements made by the Licensee are adequate to secure that sufficient funds are available after the Relevant Event occurs for meeting the liabilities described in paragraph 16.4 above he may direct the Licensee to take such steps as he considers appropriate for the purpose of securing that such sufficient funds are available and the Licensee shall comply with any such direction.

16.6 The Licensee shall inform the Director in writing immediately if the Board becomes aware of any circumstance which causes them no longer to have the reasonable opinion expressed in the then most recent certificate given under paragraph 16.1.

16.7 The Director may publish details of any such arrangements including without prejudice to the generality of the foregoing the fact that the Licensee has failed to satisfy him that appropriate arrangements as described in paragraph 16.1 are in place.

16.8 For the purposes of this Condition:

‘'Board' means the board of directors of the Licensee;

"Interested Parties" has the same meaning as in Part 1 of Schedule 1 of this Licence;

"Liability Period" means the period commencing on the occurrence of a Relevant Event and ending on the third anniversary thereafter;

"Relevant Instrument" means insurance policies, bonds, guarantees or other instruments to enable the Licensee to satisfy its obligations under paragraph 16.1; and

"Telecommunications Apparatus" means all of those things set out in a list published by the Director from time to time and on which prior to any such publication he has consulted the Interested Parties.

Annex C – Specimen bond

To: The Appropriate Authorities

Performance Guarantee

We (insert name of financial institution) of (insert address) are informed by (insert name of licensee) whose registered office is at (insert address of registered office) that under Condition 16.1 of Part 2 of Schedule 4 to the Licence ("the Licence") which took effect from the (insert date of licence) (as amended 27^th September 1999 (include this reference if the licence pre dates the licence amendment to Condition 16 introduced by the Licensing Directive)) and which was awarded by the Secretary of State for Trade and Industry to (insert name of licensee) under Section 7 of the Telecommunications Act 1984 to run the telecommunication systems specified in the Licence, (insert name of licensee) is required to make such arrangements as will satisfy the Director General of Telecommunications (the Director) that sufficient funds are available to the Appropriate Authorities after the occurrence of a Relevant Event to meet the liabilities described in Paragraph 16.2 in Part 2 of Schedule 4 to the Licence which have arisen on or before the date on which that Event occurred or may arise thereafter from the exercise of rights conferred upon (insert name of licensee) by Paragraph 9 of the Telecommunications Code and we have been requested to issue a Performance Guarantee as contained in this document.

We, (insert name of counter-party) irrevocably undertake that if (insert name of licensee) fails to meet some, any, or all of its liabilities under Condition 16.2 of the Licence we will pay to the Appropriate Authorities all payments that the Appropriate Authorities shall be entitled to recover by reason of (insert name of licensee) default to the extent to which they are unable to recover them from (insert name of licensee).

ALWAYS PROVIDED THAT:

1. Our liability under this Guarantee is limited to an amount or amounts, including all previous claims made under this Guarantee, not exceeding in aggregate (insert figure).

2. This Guarantee will come into force on (insert date).

3. This Guarantee will expire on one year after it was entered into and will extend to the acts and defaults of (insert name of licensee) as specified herein during that period and any demand hereunder must be received by us at this office on or before 30 days after the expiry date, after which this Guarantee will become of no effect whatsoever.

4. Without prejudice to any right or remedy to which any Appropriate Authority may be entitled under this Guarantee and which may arise at any time during which the Guarantee is valid and subsisting, this Guarantee is personal to you and is not transferable or assignable.

5. Any demand made by any Appropriate Authority under this Guarantee must be accompanied by or incorporate the following declaration:

"We certify that we are an Appropriate Authority as described hereunder and that the amount claimed is due by reason of (insert name of licensee) having failed to fulfil its obligations under Condition 16.2 of Part 2 of Schedule 4 of the licence awarded by the Secretary of State to (insert name of licensee) under Section 7 of the Telecommunications Act 1984 to run the ‘Applicable Systems’ specified in Annex A to that licence."

and must be submitted in the following manner:

(i) by letter, with a signature(s) on the demand authenticated by the bankers of the Appropriate Authority; or

(ii) by the Appropriate Authority’s bankers’ TESTED TELEX/SWIFT, or other recognised authenticated means of transmission.

A demand submitted by facsimile transmission will not be accepted.

For the purpose of this Guarantee the terms "Appropriate Authorities" and "Relevant Event" shall bear the following meanings:

"Appropriate Authorities" mean the public authorities of a type described in subsection 49(6) or, in Scotland, subsection 108(6) of the New Roads and Street Works Act 1991 or, in Northern Ireland, Article 7(5) of the Street Works (Northern Ireland) Order 1995.

"Relevant Event" means:

(a) The revocation of the Licence;
(b) Where (insert name of licensee) is not immediately granted another similar licence to run the ‘Applicable Systems’ specified in Annex A to the licence, the expiry of the Licence; or
(c) Any of the events specified in paragraph 1(e) to (i) of Schedule 2 to the Licence, provided that paragraph 2 of that Schedule shall have effect for the purposes of this definition as it has for the purposes of paragraph 1 of that Schedule.

This Guarantee shall be governed by and construed in accordance with the Laws of England and Wales and shall be subject to the exclusive jurisdiction of the English Courts.

Annex D – Draft certificate

Compliance with Condition 16 in Part 1 of Schedule 4 to the licence granted to [insert name of licensee] under section 7 of the Telecommunications Act 1984

This certificate, approved by resolution of the Board of Directors of [insert name of licensee] ("the Board") at its meeting on [insert date] certifies that during the financial year [insert date] to [insert date]:

(a) in the Board’s reasonable opinion, [insert name of licensee] has systems and processes in place which are appropriate to enable the Board to form a reasonable opinion as to whether [insert name of licensee] is complying with its obligation under Condition 16;

(b) in the Board’s reasonable opinion, after making appropriate enquiries and exercising due diligence, sufficient funds are available to Appropriate Authorities after the occurrence of a Relevant Event to meet the liabilities described in Condition 16; and

(c) the amount of the funds which have been provided for is [insert figure].

[signature]
[printed name]
[position]
[date]

Glossary

Appropriate Authority means a public authority of a type described in subsection 49(6) or, in Scotland, subsection 108(6) of the New Roads and Street Works Act 1991 or, in Northern Ireland, Article 7(5) of the Street Works (Northern Ireland) Order 1995. It includes the Highway Authority, the street managers, the sewer authority, a transport authority and a bridge authority.

Relevant Event means:

a) the revocation of the licence;
b) the expiry of the licence where the licensee is not immediately granted another similar licence; or
c) any of the events specified in paragraph 1(e) to (i) of Schedule 2 to the licence.

It includes the licensee ceasing to trade.

Street Works Defined in section 48(3) of the New Roads and Street Works Act 1991 as:

works of any of the following kinds (other than works for road purposes) executed in a street in pursuance of a statutory right or a street works licence:

a) placing apparatus, or
b) inspecting, maintaining, adjusting, repairing, altering or renewing apparatus, changing the position of apparatus or removing it

or works required for or incidental to any such works (including, in particular, breaking up or opening the street, or any sewer, drain or tunnel under it, or tunnelling or boring under the street).