Thought for the day:The price of telecoms continuity

Telecoms law expert Clive Douglas wonders how safe our networks are in the event of a supplier going under.Businesses concerned...

Telecoms law expert Clive Douglas wonders how safe our networks are in the event of a supplier going under.Businesses concerned about continuity of telecoms supplies following the well-publicised financial disasters at WorldCom and KPNQwest will find cold comfort in the law.

In recent weeks business customers have taken practical measures to ensure continuity by switching to what they hope are financially secure suppliers. Invariably this means higher prices.

Large businesses typically go through a lengthy procurement process to find a financially sound supplier with optimum quality and price, but the focus has moved away from price to the supplier's financial stability. As users are discovering, the law provides little protection.

Under existing regulations, anyone who runs a telecoms network needs a licence, a process that involves investigations into the applicant's financial resources. Operators granted code powers could also be subject to conditions to ensure funds are available to cover any liabilities arising from their use.

Once a licence has been granted, nobody - not the DTI, the director general of Fair Trading, nor Oftel - has any statutory duty to monitor the operator's financial position. If concern is expressed, these bodies will, no doubt, interest themselves and use their "good offices" to help resolve specific situations. But none has the power to intervene directly unless breaches of licence conditions occur, or the possibility arises that a licence might be revoked.

The draft Communications Bill, which will abolish the existing licensing regime, does not touch on the financial status of a supplier or refer to any duty to enquire into the financial position of a communications provider. The bill is the vehicle through which the UK intends to implement, in large part, the new EU regulatory framework for electronic communications networks and services.

The EU framework and, hence, the Communications Bill, assumes the European telecoms market is now truly competitive and at a stage when regulation can be rolled back progressively.

However, the Enterprise Bill is set to make some significant reforms to corporate insolvency law, but it does not mention continuity of supply.

Fewer suppliers and higher prices may be the price to pay for having a competitive market. However, many users believe some degree of regulation or other action is needed to ensure continuity of telecoms supplies. If changes are necessary, primary legislation will be required.

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Clive Douglas
is a telecoms partner at Wragge & Co., an international corporate law firm.

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