Continuity of supply

BT's response to DTI Consultation "Proposals to ensure continuity of supply in the event of insolvency" Sep 02 

Management summary

• It is a reasonable public policy objective to seek to minimise the consequences of failure of a telecommunications operator. The problem is that effective safeguard measures to ensure continuity of supply would affect the apportionment of risk in the market creating "moral hazard".
• It is essential that consumers, lenders and investors are not unduly insulated from the consequences of their decisions in order to enforce market discipline and to avoid moral hazard.
• The best way of ensuring continuity of supply is to do as much as reasonably possible to ensure that those who are allowed to offer service to the general public and to other operators are generally fit to do so and remain that way. BT has proposed to industry a set of contractual provisions aimed at reducing the potential for bad debt to build up.  We believe this to be the best way of sustaining competition and ensuring continuity of supply.
• The structure of the telecommunications industry is complex and as such does not lend itself easily to one size fits all type solutions in this instance. Service is delivered to end users often via a complicated mix of contractual relationships between suppliers.
• The Atlantic case demonstrated that it is the practical issues, such as availability of staff and plant, impacts on  "business as usual", numbers of customers affected, geographic spread etc which define the optimum solution which will be different in each case.
• Of the options presented, therefore, we believe option 1 is the only one which warrants further investigation.
• The appropriate industry response should be to compete for the customers affected and commit to an orderly migration of them as soon as possible, taking into account the specific circumstances of the company in trouble. All parties would need to work closely together with the administrator to achieve this aim. All operators should have a commitment to use best endeavours to bring about an orderly migration of customers from the troubled operator to an operator of the customers' choice.

BT would welcome further discussion on the contents of this paper with interested parties. In the first instance comments, questions, requests for further details or points of clarification should be addressed to:

JJE O'Connor

T: 020 7728 4104
F: 020 7236 3457