Financial Restitution for Cable Cuts and Other Buried Facility Disruption? It May Be Closer Than You Think
It may be one of the most common and persistent kinds of disasters that affect business today. Have you heard horror stories like any of the following before? They are all true—and far more frequent than we would like to believe:
- On April 8, 2009, a sabotaged fiber-optic cable in San Jose, Calif., caused most phone services (wired and wireless) to be down all day. Gas stations, banks, and ATMs shut down. Businesses could not accept credit cards. Hospitals canceled elective surgeries to reserve capacity for emergencies. Residents could not reach 911, necessitating expensive house-to-house checks on the elderly and infirm. Companies closed early due to no phones or Internet.
- In January 2009, a contractor in Tempe, Ariz., drilled through a fiber-optic cable that served the data center for a major airline. Hundreds of flights were grounded all day, thousands of passengers were stranded, and losses ran well into the millions of dollars.
Source: Sabotage Suspected in Silicon Valley Cable Cut, excerpted from various news sources.
The risks are real. Excavation accidents involving gas, electric, telecommunications, pipelines, and other buried facilities in public right of ways (ROW) cost Americans billions of dollars annually.
How Bad Is the Problem?
The situation improved for a while with the advent of “look before digging” systems like 811, but now persists due in part to regulators being limited in how they can respond. The 811 system was put into place several years ago to encourage excavation contractors to "dial 811" before digging. Initially, it helped a lot. Immediately following deployment of 811, the number of accidents dropped from 675,000 in 2004 to "only" 112,000 in 2009. It was a great start, but since 2009, the number has remained static. Today, despite 811, there are still 300 major buried facility accidents each day in the U.S.
Beyond physical damage and safety are other concerns, particularly for corporations. These include contamination, product loss, negative press, regulatory exposure, higher insurance rates, and more. The real problem for readers of this article, however, is the impact of these accidents on telecommunications systems. Fully 27.5% of excavation events affect telecommunications facilities. At this rate, it’s only a matter of time before it happens to you since 30,000 times a year, 80 times a day, businesses and individuals lose critical service. In fact, you have probably already sustained a few. For call centers, banks, brokerages, e-sales, 911 centers, and others the impact is immediate and often unrecoverable. Today, cable cuts often mean e-commerce—and the company’s cash register—stop cold.
It’s not just telecommunications, either. According to the U.S. Department of Transportation Pipeline Hazardous Materials Safety Administration (PHMSA), excavation damage is a leading cause of natural gas and hazardous liquid pipeline accidents:
“Excavation damage poses by far the single greatest threat to distribution system safety, reliability and integrity; therefore, excavation damage prevention presents the most significant opportunity for distribution pipeline safety improvements.”
Why Are Regulators Still Having Trouble?
So why don’t regulators do something about this? Wouldn’t stiff fines or other regulatory action eventually solve the problem? Like many things, it’s not that simple.
The first problem lies with jurisdiction. Consider the PHMSA, which is a federal agency, and its complex relationship with the states. There is no single, comprehensive, national damage prevention law in this country. Instead, all 50 states have a law designed to prevent excavation damage to underground utilities.
According to the PHMSA, “These state laws vary considerably and no two state laws are identical.” And therein lies the problem. Government solutions are in gridlock due to 51 conflicting laws governing this issue, one for each state plus federal laws. Because many state laws apply to other utilities besides pipelines, the PSMSA has been hamstrung on federal action at least for now.
Quote from the U.S. Department of Transportation, PHMSA Office of Pipeline Safety, April 2, 2012.
Should the Courts Be Involved?
What about court action? Wouldn’t expensive lawsuits eventually resolve the problem? In this case, the answer may be yes and no. Consider the case of a major telecommunications firm that sued two local plumbing companies for facility damage. The contractor allegedly caused damage to the telecom firm’s property after plumbing company employees shot a trenching missile across a city roadway on May 8, 2010. That missile struck a Verizon underground facility and knocked out service in the area.
Ironically, this accident transpired on Mothers Day, traditionally the highest calling volume day of the year. Who says Murphy’s Law does not apply to telecommunications! “Verizon sues area plumbing companies for damage to underground facilities,” Pennsylvania Record Legal Journal, May 4, 2012
The Verizon lawsuit accused the plumbing company of performing excavation, repair, and construction work without first ascertaining whether Verizon’s underground cables, wires, conduit, and telecommunication facilities were present in the area. It further alleged that the contractor:
- Failed to properly examine the work site prior to commencing their work
- Failed to adequately control and supervise the work so as to ensure that utility facilities would not be damaged
- Handled tools, machinery, and implements in an unskillful and un-workmanlike manner
- Failed to notify the Pennsylvania One Call System of their intent to perform work as required by the state’s One Call Statute
- Failed to protect and preserve the markings and designations made by Verizon to ensure that their excavation would cause damage to Verizon’s underground facilities
- Negligently hired an operator to perform the excavation work
The lawsuit claimed that Verizon sustained $26,354.14 in damages due to the incident and sought to be compensated for the costs of the repairs. It also sought attorney’s fees and other equitable relief. And therein lies another problem.
Most of the lawsuits filed for facility damage seek only recovery of the actual damage to the facility. Few are filed that seek indirect or consequential damages payable to the persons and businesses affected by those events—organizations like yours. The requested amount ($25,000) pales in comparison to the millions lost by business each year to these kinds of accidents. I believe that is one reason why they continue. Sometimes, in fact, it is cheaper for a contractor to just go ahead and dig rather than wait on utilities to come out and mark facility routes. Sometimes bad actors and negligent operators are not even charged for facility damage. In cases where they are, the amounts sought by utilities are relatively trivial.
Is There Hope?
This part is changing, though. The airline I mentioned at the beginning of this article is going to court. It is actively seeking relief for the direct, indirect, and consequential damages it incurred due to the negligent acts of a contractor. So are other companies, for a number of reasons.
The first and most obvious reason is that absent regulations or civil penalties, people, and businesses naturally seek relief in the courts. There are other more subtle reasons as well.
Consider the fact that telephone company tariffs are in many cases going away. In the past, tariffs contained limitation of liability provisions. You may be aware of these already. What they say once you read all the legal mumbo-jumbo is that a telephone company’s liability, if any, for an outage is very limited. In an outage, the phone company is liable only for the pro-rata share of what you paid them for the service for the time the service was out. By way of example, this means that if you have a $1,000 a month T1 line that supports your whole office that goes down for a whole day (for any reason other than gross negligence by the phone company), your sole recourse is 1/30 of the cost of that T1, or about $33. This is true even if you lose $100,000 that day due to the accident or outage.
Because it is very difficult to prove gross negligence, such tariff provisions make phone companies largely bulletproof to claims and suits based on service outages. But, what about the fact that most enterprise users order outside the tariff? This may be a completely new ballgame.
Over the past 20 years or so, custom contracts, rather than tariffs, have become the norm for large enterprise users. Many of these do not contain the same limitation of liability provisions. That’s something to consider the next time your service goes down, isn’t it?
What Should You Do Now?
So what should you be doing now? Here are a few tips:
- First, do the obvious. Have a backup plan for telecommunications that includes redundant facilities to protect you in the case of a cable cut. Sadly, backup capability is not as prevalent even with enterprise organizations, as one might believe.
- Consult legal counsel after any major facility-related accident. The rules are changing, and a good lawyer who is current on the changes may be able to help you recover your loss or settle your claim. As in any legal case, there are many factors to consider. First, understand that many of these cases never make it to court because many organizations believe tariffs or laws preclude legal action. Second, many of these cases settle before ever going to court, and qualified legal counsel and experts can help you.
- In addition to your other options, there are technology precautions you can take in advance to mitigate exposure to telecom cable cuts. Consider the various wireless options available including infrared point-to-point links, microwave radio, satellite communications, as well as many wireless Internet options. In fact, a Google search of “wireless Internet options” produces many options, although some may not be available in your area. Any one of these options can be helpful in the event of what telephone company persons used to call “backhoe fade” affecting critical circuits and facilities. Obviously, one should also remember that any system that traverses an airwave should be encrypted, especially if it carriers proprietary or financial information.
In their 1996 book Understanding Emerging Network Services, Pricing and Regulation (by Leo A. Wrobel and Eddie M. Pope, authors), Wrobel and Pope predicted that fault-tolerant networks would become mainstream after 2000. This has not happened for a variety of reasons. In fact, things have arguably gone the other way. With the advent of competition with the 1996 Federal Telecom Act, many competitive communications companies began interconnecting with Incumbent Local Exchange Carriers (ILECs) such as AT&T and Verizon. In case after case, these connections are not made via fault-tolerant SONET networks but via 1980s technology like M13/T3.<
Everyone has his or her favorite cable cut story. Years ago when I worked at AT&T, thousands of people in Dallas lost service for most of a business day. It was because a farmer dug up the main AT&T fiber-optic route while burying a dead cow. Or consider the supervisor in New York City who told his technician, “There are two fibers down there in the manhole. Cut the BAD one.” New York was isolated for most of the day. Some things never seem to change, but one fact remains as true as ever. In today’s e-businesses, when a telephone or fiber-optic cable is damaged, the cash register stops.
Whether you are a telecom company owner or a large enterprise user, it may now be possible to recover the cost of these outages. In addition to the obvious benefits of reduced down time due to fiber, cable, and other facility cuts, there are potentially a number of other reasons to find a solution to buried facility disruptions, including:
- Recovery of extraordinary costs associated with telecom outages including payroll, overtime, increased fraud risk with loss of automated systems, travel, and/or temporary employees
- Lower exposure to contractual, legal, or regulatory penalties
- Improved reputation with customers, suppliers, partners, banks, financial markets, and credit reporting agencies
- Help in meeting audit requirements
- Lower business interruption insurance rates
Best of luck in your pursuits!