The True Cost of Telco Damages

BY SCOTT LANDES

Communications companies always recover all their costs when their cables are damaged by contractors. If you believe this, I have some bad news… there is no Santa Claus and no Easter Bunny! Communications companies seldom recover anywhere near all of their true costs.

When talking to communications stakeholders who have firsthand experience with damage investigation, claims recovery, and field operations, they all recognize that even if they recover all the actual repair costs, it is still only a fraction of the true costs. When the hard costs are combined with the soft costs, only 40-50% is usually recovered – even when the contractor or locator is 100% at fault. And keep in mind, many times it is neither the locator nor the contractor’s fault.

A seasoned telecommunications professional reviewed the checklist on page 21 for accuracy and responded to me, “It does look like a comprehensive approach but to truly do it justice, you would have to put this in book form. It is sad that things in the corporate world have gotten so busy that no one can really get their head around the scope and effect of damages. To merely provide this list without description should be enough to make anyone sit up and pay attention. Equally so, even those of us who deal with this on a daily basis, although cognizant of the facts, cannot consider all the ramifications when dealing with damages. This is where the corporate world needs to come into play. Just like the repair technician should be concentrating on restoral, and the investigator concentrating on determination of liability and building a solid case, upper management should be aware of and considering all the mitigating factors listed, and the effect not just on the customer, but also on the company as a whole.”

On top of all these costs which have and will continue to impact the facility owner’s bottom line, there are significant societal costs, including lost revenue for businesses, road closures during repairs, people sent home from work due to phone/data services cut off, the severe impact to 911 call centres, and the interruption of services from police, fire, ambulance and other emergency responders which could lead to a loss of life when communications are terminated during a time of crisis.

ln Canada, the CCGA DIRT report estimated in their last national report on damages that societal costs of damages are $1 billion. The 2016 Common Ground Alliance annual DIRT report (CommonGroundAIIiance.com) estimates the U.S. societal costs at over $1 billion.

As you read through this checklist on the costs of a cable cut provided by telecommunications professionals, ask yourself:

  1. What percent of hard costs and soft costs do I actually collect?
  2. How do damages affect my brand?

Consider this:

LOST CUSTOMERS: Weather-related loss of service is often acceptable by customers, but loss of service due to non-weather-related issues can lead to the depletion of your customer base, and this cost is not tracked as a cost of damage.

CUSTOMER REBATES/CREDITS: Usually when a customer asks for credit, they get it. This can be expensive. Many customers have Service level Agreements (SLAs) which provide rebates to the customer if service levels are not met; some rebates start the first minute of down time. This cost is not included in the cost of damage.

EMPLOYEE LABOUR COSTS: While these costs may be included as part of the labour charges, the hourly rate may not be the loaded labour rate. Post-restoration time spent on building damage claims is never included in the cost of damage or collected.

REPAIR TECHNICIAN MOBILIZATION: When technicians are pulled away from their regular load to restore damage, overtime is incurred and customer dissatisfaction is created due to deferred repair and installation loads originally scheduled for the day.

ENGINEERING OR REENGINEERING COSTS: There is a reduction in productivity when an engineer is pulled from his work to do emergency design for repairs.

UPDATING RECORDS: A hidden cost associated with damages that is usually removed from a challenged bill as an administrative cost.

LOCATOR EMERGENCY MOBILIZATION: Emergency tickets can be devastating to the locator – rerouting, additional execution time to perform the locate, and the delays to other excavators waiting for locates to perform their work.

MOBILIZATION OF DISPATCH SUPPORT, MONITORING, AND VERIFICATION OF REPAIRS: Again, considered administrative, this is another potentially astronomical cost that is often not even considered.

As a whole, the telecommunications industry is not engaged in damage prevention. Immersed in damage prevention myself since the early ’80s, it has always amazed me how many telecommunications companies do not have damage prevention programs or participate in the Common Ground Alliance. The most common rationale is that it isn’t necessary as they successfully collect the costs of damages. As you can see here, this is not accurate.

Investing in damage prevention improves your bottom line and keeps your workforce continuously focused on proactive work, improves your image and enhances your customer service. If your priorities are profits, productive employees, and happy customers, making damage prevention a high priority is an easy choice.

The TRUE Cost of Telco Damages

The cost of cut or damaged communications cable can easily be underestimated when only repair costs are tracked and documented.

Improve your understanding of the real costs of damages with this checklist based on insight from experienced professionals who have spent years working for communications companies.

What percent of hard and soft costs does your company collect?  How do damages affect your brand?

Trackable Costs ________________                                                 

May or May Not Be Collected

  • External Collection Costs/Agency Commissions
  • Barricades/Traffic Control
  • Permits (city/county/state/provincial) to install replacement cables
  • Legal fees and litigation costs
  • Exposing the damage for repair
  • Materials used in repair
  • Restoration of the area
  • Actual cost of internal labour
  • Heavy Equipment used
  • Generator/Power Equipment
  • Food, lodging, travel expense
  • Emergency mobilization (Contractor/Locator)

Soft Costs

  • Loss of brand confidence, negative public feedback, difficulty maintaining customer relationships, especially large businesses, with inconsistent services

Societal Costs

  • Loss of 911/emergency services
  • Businesses closing
  • Employee down time
  • Road closures/traffic delays

Time

  • Damage site investigator
  • Collection efforts
  • Out-of-service complaints
  • lnsurance resolution discussions
  • Overtime for unexpected increases in workloads
  • Employee time/travel for deposition and trial

Overlooked/Difficult to Track

  • Lost Customers
  • Customer loss of use (refunds/credits)
  • Resolution of customer complaints
  • Engineering/reengineering due to the cut
  • Establishing outage bridge to coordinate service interruption
  • Support staff (3-20) for outage bridge
  • Workload delays
  • Future failure points (damages may weaken the system and lead to future failure unattributed to 3rd parties)
  • Damage data capture and submission (software and /or manual)
  • Emergency One Call ticket notifications
  • Facility owner records updates

Reporting requirements (FAA, 911, PHMSA)

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