Mike Conradi of the law firm DLA Piper explains a few important aspects of law as it pertains to the cable industry.

Conradi opens up with how lawyers approach due diligence when a client is considering debt or equity into an ongoing cable project.  He breaks it down into a few legal issues:

Choice of Law: Generally English law is common

Jurisdiction:  They may look into arbitration

Permits: Who is responsible for the permits and are all the relevent permits been obtained

Security:  Who takes over if the debt insn't paid

“There's an issue I've spent some time thinking on and it's can you take security over an IRU?” asks Conradi.  He quickly answer the problem and it's NO.

He examines the issue of “Dark Fiber,” where a third party allows a new system to use their fibre.  The problem comes from what happens if the third party owner of the dark fiber becomes insolvent.  Since the buyer doesn't own any assets in a meaningful way, they have no control in that situation.

Conradi does pose the possibility that a system utilizing Dark Fiber could be possible if worked into the legal structure from the beginning of a project, but from the perspective of due diligence it will never be as good as properly owning it.

He then Delved into the commercial issues of due diligence.

The construction contract presents a particular difficulty.  It contains a number of details that have to be established early in the project.  These include: milestones, liquidated damages (incentives for on-time performance), billing and liability for other consortium members, design life and risk of systemic failure, and warranty terms.

Conradi then talks about landing party agreement.  He opens with how it seems the last few miles of a system can cost far more than the rest.

“The landing party is in a position to charge a monopoly rent,” Conradi said.

Legal issues that require special focus include: the backhaul and “open access” to other backhaul providers.

Pre-sale contracts also require special attention when performing due diligence.  Aspects like the customer's credit, making sure the customer is legally bound to the contract and the length of the commitment can change expectations for the client.