FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ x ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ____________________ to __________________
Commission file number: 0-19889
SOUTH HERTFORDSHIRE UNITED KINGDOM FUND, LTD.
(Exact name of registrant as specified in its charter)
Colorado South Hertfordshire United Kingdom Fund, Ltd. #84-1145140
(State of Organization) (IRS Employer Identification No.)
Bell Cablemedia House, Upton Road, Watford,
Hertfordshire WD1 7EL, England 011-44-1923-444-000
(Address of principal executive office and Zip Code) (Registrant's telephone
no. including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Limited
Partnership Interests
Indicate by check mark whether the registrant, (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days:
Yes x No
Aggregate market value of the voting stock held by non-affiliates of the
registrant: N/A
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section229 405) is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. x
DOCUMENTS INCORPORATED BY REFERENCE:
None
TABLE OF CONTENTS
PART I Page
Item 1. Business........................................................ 3
Item 2. Properties...................................................... 25
Item 3. Legal Proceedings............................................... 25
Item 4. Submission of Matters to a Vote of Security Holders............. 25
PART II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters............................... 25
Item 6. Selected Financial Data......................................... 26
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 27
Item 8. Financial Statements and Supplementary Data..................... 31
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure........................... 44
PART III
Item 10. Directors and Executive Officers of the Registrant.............. 44
Item 11. Executive Compensation.......................................... 45
Item 12. Security Ownership of Certain Beneficial Owners
and Management................................................ 45
Item 13. Certain Relationships and Related Transactions.................. 45
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K........................................... 47
Signatures..................................................... 48
Exhibit Index................................................... 49
PART I.
ITEM 1. BUSINESS
South Hertfordshire United Kingdom Fund, Ltd., formerly known as Jones
United Kingdom Fund, Ltd, (the "Partnership"), is a Colorado limited
partnership that was formed in December 1991 pursuant to the public offering
of limited partnership interests (the "Interests") in the Partnership for the
purpose of acquiring one or more cable television/telephony systems in the
United Kingdom of Great Britain and Northern Ireland (the "United Kingdom" or
the "UK"). Upon acquisition of its system, the Partnership's primary
investment objective is to obtain capital appreciation in the value of its
systems over the term they are held by the Partnership. The capital
appreciation in the Partnership's assets may be converted to cash by the sale
of a system, through one or more refinancings or by the partners' sale of
their Interests in the Partnership.
History
The Partnership was formed upon the receipt of subscriptions for Interests
totaling the minimum offering of $10,000,000. The general partner of the
Partnership was initially Jones Global Funds, Inc., a Colorado corporation
("Jones Global Funds"). As of August 15, 1992, when the initial offering by
the Partnership terminated, the Partnership had raised $16,548,000 in gross
offering proceeds from the sale of 16,548 Interests, or $14,272,650 net of
sales commissions and other organizational and offering costs. On September
14, 1992, the Partnership commenced a second offering of Interests. As of
April 1994, when the second offering terminated, the Partnership had raised a
total of $56,935,000 in gross offering proceeds from the sale of 56,935
limited partnership interests, or $48,817,997 net of sales commissions and
other organizational and offering costs, from both its initial and its second
public offerings.
On February 20, 1992, upon receipt of approval from United Kingdom
regulatory authorities, the Partnership acquired, through nominees, the
beneficial ownership of all of the shares of Bell Cablemedia (South
Hertfordshire) Limited (formerly Jones Cable Group of South Hertfordshire
Limited) ("Bell Cablemedia South Herts") from Jones Global Funds, Inc. and
certain of its affiliates (the "Former Owners"). Bell Cablemedia South Herts
is a United Kingdom corporation which holds the cable and telecommunications
licenses necessary to build and operate a cable television/telephony system in
the South Hertfordshire franchise area, located adjacent to the northwest
perimeter of Greater London (the "South Herts System.") The acquisition by the
Partnership of all of the shares of Bell Cablemedia South Herts resulted in
the Partnership acquiring an indirect beneficial ownership interest in the
South Herts System. The Partnership paid the Former Owners a total of
$4,996,700, representing, at cost, their expenses in connection with
obtaining, holding and maintaining the licenses for the South Herts System and
their capital expenditures during and before the Partnership acquired the
beneficial ownership of Bell Cablemedia South Herts, plus the amount of
operating and interest expenses in excess of operating receipts incurred
during such period. Subsequent to the Partnership investment in Bell
Cablemedia South Herts, costs reimbursements have been and will continue to be
made to the general partner (or its affilitates) for construction costs of the
South Herts System. Partnership funds are used to reimburse the general
partner (or its affiliates) at cost on a monthly basis for expenditures
incurred by the general partner (or its affiliates) for the South Herts
System's construction and operation. Through December 31, 1994, the total
amount reimbursed to fund the South Herts System's construction and
development totaled approximately $48,800,000.
The South Herts System's ownership by Bell Cablemedia South Herts, a United
Kingdom corporation, rather than directly by the Partnership, results from an
intention to insulate the limited partners of the Partnership (the "Limited
Partners") from potential United Kingdom taxation upon the eventual sale of
the South Herts System. Under current United Kingdom tax laws, the sale of
the United Kingdom cable television/telephony system by a U.S. limited
partnership may give rise to limited partner tax liability in the United
Kingdom whereas the sale of shares in a United Kingdom corporation by a U.S.
limited partnership does not give rise to limited partner tax liability in the
United Kingdom on the basis that the limited partnership is not itself trading
in the United Kingdom through a permanent establishment there. The shares of
Bell Cablemedia South Herts are held indirectly by the Partnership through
corporate nominees on the advice of the Partnership's counsel in the United
Kingdom. This indirect ownership structure is intended to afford the Limited
Partners more certain protection from United Kingdom tax liability.
In order to provide additional funding for the construction of the South
Herts System, two additional participants invested in Bell Cablemedia South
Herts in 1993 and 1994. Jones Intercable of South Hertfordshire, Inc.
invested Pound Sterling3,400,000 in Bell Cablemedia South Herts in exchange for
34,000 Class A shares in November 1993. Also in November 1993, affiliates of
Sandler Capital Management (the "Sandler Group") committed to invest Pound
Sterling6,800,000 in Bell Cablemedia South Herts, of which Pound
Sterling2,266,600 was funded in November 1993 for 22,666 Class B shares. In
June 1994, the Sandler Group invested Pound Sterling3,273,232 for 32,732 Class
B shares and Jones Intercable of South Hertfordshire, Inc. invested Pound
Sterling503,283 for 5,033 Class A shares. In July 1994, the Sandler Group
invested Pound Sterling1,800,000 for 18,000 Class B shares and Jones
Intercable of South Hertfordshire, Inc. invested Pound Sterling466,800 for
4,668 Class B shares.
On June 10, 1994, Jones Global Group, Inc., Jones Intercable, Inc. and
certain of their subsidiaries (collectively, "Jones") and the Sandler Group
entered into agreements to transfer all of their interests in their United
Kingdom cable television/telephony operations and franchises, including Jones
Intercable of South Hertfordshire, Inc.'s interest in Bell Cablemedia South
Herts, Jones Global Funds, Inc.'s general partner interest in the Partnership
and the Sandler Group's interest in Bell Cablemedia South Herts, to Bell
Cablemedia plc ("BCM") in exchange for ordinary shares (in the form of
American Depositary Shares ("ADSs")) to be issued by BCM in connection with a
planned public equity offering of ADSs by BCM. At that date, BCM was then
indirectly owned 80 percent by Bell Canada International Inc. ("BCI") and 20
percent by Cable & Wireless plc ("C&W").
On July 22, 1994, in connection with the closing of the public equity
offering by BCM, Jones and the Sandler Group completed the exchange of their
interests in United Kingdom cable television/telephony operations and
franchises for ordinary shares (in the form of ADSs) issued by BCM. At
closing, BCM acquired Jones Intercable of South Hertfordshire, Inc.'s interest
in Bell Cablemedia South Herts, the Sandler Group's interest in Bell
Cablemedia South Herts and the general partner interest in the Partnership.
These acquisitions are collectively referred to herein as the "BCM
Acquisition." In October 1994, the Partnership invested Pound
Sterling5,108,900 in Bell Cablemedia South Herts for 51,089 Class A shares and
BCM invested Pound Sterling2,554,600 in Bell Cablemedia South Herts for 25,546
Class A shares. In November 1994, the Partnership invested Pound
Sterling1,410,000 in Bell Cablemedia South Herts for 14,100 Class A shares and
BCM invested Pound Sterling705,000 in Bell Cablemedia South Herts for 7,050
Class A shares. As a result of these transactions, Bell Cablemedia South
Herts is now owned 66.7 percent by the Partnership and 33.3 percent by BCM,
and the general partner of the Partnership is now Fawnspring Limited, a wholly
owned subsidiary of BCM (the "General Partner"). The General Partner provides
consulting services to the Partnership. The General Partner may delegate some
or all of the consulting services to BCM or to other affiliates.
BCM, through its majority-owned subsidiaries and the companies in which it
holds minority interests, including Videotron Holdings Plc ("Videotron"), in
which BCM owns a minority equity interest, holds exclusive cable television
licenses and related nonexclusive telecommunications licenses covering over
one million equity homes in the Greater London and adjacent areas. In
addition to its London franchises, BCM holds cable television and
telecommunications licenses covering franchise areas in other regions of the
United Kingdom. BCM has over two million equity homes in its franchise areas
and, in terms of equity homes, BCM is one of the largest holders of cable
television and telecommunications licenses in the United Kingdom.
The South Herts System
Franchise Area
The South Hertfordshire franchise area comprises the three administrative
areas of Three Rivers, Watford and Hertsmere, with a population of
approximately 240,000. The franchise area covers commuter suburbs of London,
and many people who reside in the franchise area use the available fast rail
and motorway services to travel to work in central London. South Hertfordshire
has benefited from the completion in 1986 of the M25 London Motorway, which
makes commuting from the franchise area to other areas in or near London more
convenient. An M1 motorway link exists to give London-bound commuters direct
access from Watford to the London highway system. The M1 link is half a mile
from the South Herts System headend and administrative offices. There are
approximately 94,000 homes in the franchise area, of which approximately
85,000 are expected to be passed by the South Herts System cable
television/telephony plant when construction in the franchise area is
completed. The average housing density in the South Herts franchise area is
approximately 1,150 homes per square mile.
The South Hertfordshire franchise area contains approximately 7,000
businesses, 80 percent of which are small or medium-sized. In addition, there
are several business parks containing predominantly industrial and
manufacturing concerns.
Operations
Construction of a cable television-only network in the South Hertfordshire
franchise area commenced in early 1991 and, after the announcement of the
results of the Duopoly Review (see "Regulation") and the resulting potential
for cable-based telephony, an integrated cable television/telephony network
architecture was developed for this franchise in late 1991. As of February
28, 1995, approximately 81,500 homes, or 87 percent of total homes, in this
area had been passed. Cable television services commenced in April 1992 and
telephony services commenced in February 1993, following completion of the
installation of a telephony switch. At February 28, 1995, Bell Cablemedia
South Herts serviced approximately 14,500 basic cable television subscribers,
16,100 residential telephony subscribers and 500 business telephony
subscribers.
As a consequence of the BCM Acquisition, BCM now controls the
operations of Bell Cablemedia South Herts. Following completion of the BCM
Acquisition, BCM restructured its operations into regional operating groups
which are responsible for construction, local marketing, installation and
customer service in the regions. Functions such as finance, information
technology and national marketing have been centralized and are performed by
BCM at its corporate headquarters in Watford, which is within the South
Hertfordshire franchise area. Each region is headed by a regional managing
director who is assisted by a regional senior management team. Bell
Cablemedia South Herts comprises part of BCM's South Region which is managed
from headquarters in the London Docklands. Peter Lyne, a director of the
General Partner, is the Managing Director of the South Region. See "Item 10.
Directors and Executive Officers of the Registrant" below.
Products and Services
Three types of service are offered by Bell Cablemedia South Herts -- cable
television (mainly to the home but also to businesses), residential telephony
services and telephony and other telecommunications services for business
customers.
Cable Television Services. Bell Cablemedia South Herts offers a range of
programming, marketed in a series of packages: basic packages, which include
cable exclusive programming such as Channel One and the Performance Channel,
and various premium packages, which are based on sporting events and films.
Residential Telephony Services. Bell Cablemedia South Herts offers local
and long distance telephony services to its customers, including advanced
services such as call monitoring, call barring, three-way calling, alarm calls
and itemized billing.
Business Telecommunications Services. Bell Cablemedia South Herts offers
businesses a range of services alongside telephony, including fax, private
circuits and virtual private networks.
Future Services. Bell Cablemedia South Herts' broadband networks have been
designed to enable it to provide customers with a wide range of advanced
interactive and integrated entertainment, telecommunications and information
services, including pay-per-view programming. Services likely to be made
available to customers during 1995 include voicemail, freecall services, class
services and residential virtual private networks.
BCM is currently working with other cable operators to develop a
pay-per-view service through which cable subscribers would be able to view
certain feature films, sporting events, concerts or other special events
broadcast on a series of channels and on a per-event-basis for an additional
charge. Negotiations are proceeding with film distributors and others to
supply programming for the pay-per-view service, but the General Partner
cannot yet confirm when or if such a service will be implemented.
Additional future services could include video telephony and video
conferencing, interactive home shopping and banking services. Affiliates of
BCM are planning trials of home shopping services in other franchise areas
owned by BCM, which are expected to begin during 1995.
Sales and Marketing
Bell Cablemedia South Herts' sales and marketing strategy is aimed at both
potential customers as well as the development of the UK cable
television/telephony industry.
The principal elements of this strategy are:
Competitive packaging and pricing of cable television services. Bell
Cablemedia South Herts offers a range of basic and enhanced cable
television packages at prices which are competitive with the effective
prices (including equipment costs) offered by its principal multichannel
television competitor, British Sky Broadcasting plc ("BSkyB"). BCM is
currently working on repackaging its cable television programming into
"lifestyle packages" which are targeted to different market segments. The
repackaging effort is intended to enhance the consumer's perception of the
"value for money" of cable television and therefore to attract a wider
customer base. For business customers, Bell Cablemedia South Herts has
developed and now markets a selection of cable television packages which
includes such channels as Sky News and CNN International. Bell Cablemedia
South Herts has also developed other customized entertainment packages for
pubs, clubs, restaurants, business receptions and employee rest areas.
Quality and competitive pricing of cable telephony. Bell Cablemedia
South Herts utilizes fibre and digital technologies, enabling it to provide
high quality telephony services. In addition, these services are offered
to both business and residential customers at prices which are competitive
with those of British Telecommunications plc ("BT"), depending on the time,
destination and duration of the call. Business users may also seek
value-added services to meet specific needs and business requirements. For
example, Bell Cablemedia South Herts currently offers digital private
circuits and local and regional leased circuits.
Joint sales and marketing of cable television and telephony services.
Bell Cablemedia South Herts combines the marketing and sales of its
residential cable television and telephony services to maximize market
penetration and customer retention and minimize costs. Bell Cablemedia
South Herts discounts its monthly residential telephone line rental to
encourage subscription to the combined service. Bell Cablemedia South
Herts has an ongoing communications and sales program to cross-promote the
two services and upgrade one-service customers to the combined cable
television and telephony service.
Implementation of a comprehensive marketing communications program.
Bell Cablemedia South Herts has developed a comprehensive, customer-focused
communications program to position Bell Cablemedia South Herts and its
products in the marketplace and in the perception of its customers. The
marketing program commences before the construction phase in order to
inform the local population about the construction process and Bell
Cablemedia South Herts' services, continues through the construction period
with sales communications to potential subscribers and is followed up by
regular customer communications thereafter.
Utilization of a broad-based sales approach. Bell Cablemedia South
Herts has developed a broad based sales approach which maximizes the sales
contribution of telemarketing and customer call centers in addition to
direct sales. This approach is intended to optimize Bell Cablemedia South
Herts' sales effectiveness while minimizing cost-per-sale.
Targeting high volume customers. Bell Cablemedia South Herts targets
those businesses in its franchise area which, as a consequence of their
size and the types of services they require, represent potentially
significant revenue sources. As many of these high volume customers are
well known in the franchise areas, Bell Cablemedia South Herts believes
that attracting such businesses to a cable-based telephony service assists
its marketing efforts to both the business and residential markets.
Encouraging direct debit payments. Bell Cablemedia South Herts
encourages the use of direct debit as the preferred method of payment for
its cable television/telephony services by offering direct debit customers
monthly discounts for these services and discounts on installation rates.
This enables Bell Cablemedia South Herts to improve its cash flow and to
minimize bad debt and collection expenses. The General Partner believes
that the use of direct debit systems may also assist in reducing churn.
Developing a strong local identity and presence. Bell Cablemedia
South Herts engages in promotional activities such as sponsorship of local
sports teams, participation in community events, local advertizing
campaigns and the provision of community information channels to foster a
strong local identity and presence.
Customer Service
Bell Cablemedia South Herts believes that customer service is particularly
important to the success of its business and it places significant emphasis on
serving its customers' requirements. Bell Cablemedia South Herts operates a
customer call center which handles telephone inquiries from customers on a
"one-stop shop" basis. Installations are scheduled to suit customer
requirements and appointments are confirmed prior to the scheduled visit. The
customer call center also provides helplines during the construction phase to
provide information and to respond to inquiries from the general public.
The customer call center employs personnel specially trained in dealing
with the differing requirements of business and residential customers.
Customer care staff undertake an extensive initial five week training program
and ongoing job training is provided on a periodic basis.
The Network
Construction of Bell Cablemedia South Herts' cable television/telephony
network is substantially complete with approximately 87% of homes in the South
Hertfordshire franchise area passed at February 28, 1995.
Network Architecture. Bell Cablemedia South Herts' network includes
integrated two-way broadband cable television systems which incorporate a
digital overlay telephony network to service the homes and businesses within
the franchise area. The network utilizes fibre optic cables on major trunk
routes from a central location containing the cable television headend and
telephony switch to nodes which serve approximately 1,500 homes and 600 homes
for cable television and telephony, respectively.
Bell Cablemedia South Herts' network makes extensive use of fibre optic
cable. Fibre optic technology is based on the physical property of optical
fibre which allows rapid transmission of light pulses in a coded digital
format over long distances with little or no distortion. Fibre optic systems
are suitable for transmission of digitized voice, data and video. The main
benefits of deploying fibre in place of traditional coaxial cable or copper
cable result from its smaller size, greater capacity, increased functionality
and decreased requirements for periodic amplification of the signal. These
factors contribute to lower installation and maintenance costs and increase
the variety and quality of the services provided. The cables are pulled into
underground ducts installed in the residential and business sectors of the
franchise area. Excess duct and fibre capacity for future growth and services
is provided at the time of initial construction.
The cable television system has the capacity to carry over 50 channels of
television plus radio, teletext and other related services. This capacity
could be increased four to six times by the introduction of digital
compression techniques. The network is also capable of conveying video and
high speed data transmissions, thus providing the basis for video conference
facilities, television surveillance services and computer communications.
Television and radio programs for cable television services are sourced from
off-air antennas, by satellite earth stations and on videotape and then
distributed from a single site, the headend, to distribution nodes over fibre
optic cable and from these nodes to customers over coaxial cables. Cable
television is distributed in a manner whereby all signals are delivered to all
customers, with the set top converter in the customers' premises being used to
control the availability of scrambled channels to that address. Substantial
transmission capacity, known as bandwidth, is required to provide a cable
television program to the customer. A network's transmission capacity
requirement increases proportionally as additional cable television programs
are broadcast to customers. The inherent bandwidth limitations of twisted
pair copper wire historically used in telephone networks have to date
presented a substantial obstacle to the provision of cable television
services. Coaxial cable can provide substantially greater bandwidth than
twisted copper pair wire and fibre optic cable can provide even greater
bandwidth.
Bell Cablemedia South Herts' telephony network is currently capable of
providing a range of analog and digital voice and data services. Multipair
copper cable is used to connect fibre optic nodes serving approximately 600
homes to distribution points housed in street cabinets serving 40 homes. From
these cabinets, twisted pair copper cable is pulled to the customer's home.
Bell Cablemedia South Herts' telephony switch has multiple interconnects to
the BT and Mercury networks and plans are underway to establish connections
with other BCM switches and the switches of other London-based cable
operators.
Network Construction Costs. Construction of integrated cable
television/telephony systems is capital intensive, requiring substantial
investment for "network costs" including construction (trenching and laying
underground ducts), cable television and telephony plant and network
electronics, "customer costs" including set top converters, subscriber
electronics and installation of cable from the network to the customer's home,
and "other costs" such as headend equipment, switching offices, land and
buildings, computers, and capitalization of pre-operating costs and labor.
Total capital expenditure by Bell Cablemedia South Herts on its cable
television/telephony systems up to December 31, 1994 was approximately Pound
Sterling45.5 million ($71.2 million).
Construction costs for the South Herts System vary depending upon housing
density, the terrain and the types of underground conditions encountered.
Construction expenses in the UK have been higher than comparable costs in the
United States, primarily because a prohibition on aerial construction has
necessitated the construction of an underground duct network to house the fibre
optic and coaxial cables which form the network. Therefore, nearly all cable
installation in the UK requires hand or machine excavation, backfill to
specification and permanent reinstatement of surfaces in compliance with the
UK New Road and Street Works Act (the "Street Works Act"). The Street Works
Act has, however, standardized fees for inspection of construction works by
local government authorities and standardized specifications for reinstatement
of property following excavation. As a result, construction delays previously
experienced by cable operators because of separate and often lengthy
negotiations with local government authorities have been reduced.
Build Milestones. Because Bell Cablemedia South Herts did not meet the
construction timetable set forth in the original license issued for the South
Herts franchise area, Bell Cablemedia South Herts requested an amendment of
the construction timetable from the UK Office of Telecommunications (the
"OFTEL"), the authority that regulates the license. On February 28, 1994,
OFTEL modified the South Herts System's license. The license, as modified,
requires the South Herts System pass to be completed (by passing 85,000
premises) by December 31, 1995.
Strategic Alliances
Bell Cablemedia South Herts is currently participating in several strategic
alliances. The General Partner believes that through these alliances it is
better able to develop and market its services cost effectively.
London Interconnect. London Interconnect was established in 1992 to
promote the growth of the cable television/telephony industry in Greater
London by developing cable television services that members can deliver to
their customers in this area. Its function was subsequently expanded to
include the establishment of telephony interconnection agreements between
members. Currently, six cable television/telephony operators are members of
London Interconnect, including Bell Cablemedia (South East) Limited, a
subsidiary of BCM, and Videotron, a company in which BCM has a minority
interest. Interconnect agreements between London Interconnect members will
allow telephone calls between customers of London Interconnect members to be
routed through London Interconnect members, in part bypassing the more
expensive networks of BT and Mercury Communications Limited ("Mercury").
Pursuant to its association with Bell Cablemedia (South East) Limited as part
of BCM's South Region, Bell Cablemedia South Herts has interconnected its
network with those of London Interconnect's members.
London Interconnect members distribute three cable television-only
channels: Performance, an arts and entertainment channel launched by three
operators in London in 1992; Identity TV, a local London channel launched by
London Interconnect in July 1993; and Channel 1, an independent news,
entertainment and information channel for London launched by London
Interconnect in November 1994.
Marketing and Operations Agreements With Mercury. Bell Cablemedia South
Herts has entered into marketing and operations arrangements with Mercury, the
second largest fixed-link provider of telecommunications services in the UK.
While a formal agreement with Mercury regarding these arrangements has been
negotiated (the "M&O Agreement"), the parties are currently legally bound to
apply only those provisions of the M&O Agreement for which regulatory consent
is not considered necessary. It is expected that Bell Cablemedia South Herts
will formally execute the M&O Agreement with Mercury following the completion
of an ongoing regulatory review of the M&O Agreement. The purpose of the M&O
Agreement is: (i) to establish a working relationship between a cable
television/telephony operator, which provides local telephony service in a
franchise area, and Mercury, which with certain exceptions, provides
long-distance telephony services to customers in the franchise area; (ii) to
specify the terms and conditions for interconnection; (iii) to reduce
duplication of effort, resources and investment in the marketing of telephony
services in the relevant franchise area; and (iv) to develop joint product
initiatives. In addition, the M&O Agreement will provide that Bell Cablemedia
South Herts will, if commercially justifiable, promote Mercury to its
customers as its preferred long distance and international carrier and that
Mercury will, if commercially justifiable, treat Bell Cablemedia South Herts
as its preferred local fixed-link carrier in Bell Cablemedia South Herts's
franchise areas. Pending full implementation of the M&O Agreement,
interconnection is already taking place between Mercury and Bell Cablemedia
South Herts.
Employees
The Partnership has no employees. Bell Cablemedia South Herts is managed
as a part of BCM's South Region, thus benefiting from the economies of scale
of sharing engineering, planning, construction and support functions.
Competition
Cable Television
Overview. It is the UK Independent Television Commission's (the "ITC")
current policy, confirmed in November 1994 by the UK Government, to grant not
more than one cable television license in any franchise area. Accordingly,
Bell Cablemedia South Herts is the exclusive provider of cable television
services in its franchise areas. Bell Cablemedia South Herts' cable television
systems compete with direct reception of terrestrial broadcast television
signals and with other methods of delivering television signals to the home
for a fee, such as direct-to-home ("DTH") satellite-delivered television
services and satellite master antenna television ("SMATV") systems. The
extent of such competition depends upon, among other things, the price,
variety and quality of the programming offered and, with respect to
terrestrial broadcast television, the quality of reception. In the future,
cable television companies may face competition from video-on-demand and
television services offered by national public telephone operators ("PTO's")
such as BT and possibly additional competition using existing or new delivery
systems. Pay-per-view services and video-on-demand services which may be
provided by Bell Cablemedia South Herts and other operators in the future will
compete to varying degrees with other communications and entertainment media,
including home video, cinema and live theater. In particular, the availability
of recently released movies on videocassettes may affect the degree to which
Bell Cablemedia South Herts is able to sell pay-television and pay-per-view
services to subscribers. Both terrestrial and satellite digital television
will be available on a trial basis by the end of 1995 in the UK.
BSkyB. The most significant competitor in the multichannel television
market in the South Hertfordshire franchise area is BSkyB. BSkyB offers DTH
television services and currently is the predominant competitor in the
multichannel television market with over 2.6 million DTH subscribers in the UK
as compared with an aggregate of approximately 916,000 broadband cable
subscribers nationwide at January 1, 1995. A DTH subscriber must purchase or
rent a satellite receiver and receiving dish and then pay subscriber fees to
BSkyB for the use of a decoder, which makes the satellite signal usable.
Although BSkyB's DTH service currently presents substantial competition to
Bell Cablemedia South Herts' cable television service, the General Partner
believes that cable television has a number of competitive advantages over DTH
systems and that cable will become the preferred medium for multichannel
distribution. First, installation of satellite dishes frequently requires
compliance with zoning ordinances. Second, satellite dishes, which measure 24
inches in diameter, must be installed with a "line-of-sight" orientation
toward the transmitting satellite which restricts placement options and can
result in aesthetic objections to installation. Third, DTH subscribers who
purchase, as opposed to rent, their satellite systems must arrange and pay for
any servicing required for the systems. Fourth, without substantial
improvements in existing technology, BSkyB will not be able to offer the
integrated telephone services, locally oriented advertising and programming or
interactive video services that the cable television/telephony operators now
offer or expect to offer in the future. Fifth, cable television currently
offers customers more English-language programming than is typically available
on UK broadcast or DTH satellite service.
The General Partner, however, expects BSkyB to provide substantial
competition for the foreseeable future and no assurance can be given that it
will not become an even stronger competitor or that Bell Cablemedia South
Herts will be able to compete successfully with BSkyB. A significant factor
in favor of BSkyB is its role as sole source supplier of many of the South
Herts System's popular cable television programs. If, in the future, BSkyB
chooses to restrict the programming it makes available to Bell Cablemedia
South Herts or offers such programming to Bell Cablemedia South Herts at
prices significantly higher than those it currently charges, then Bell
Cablemedia South Herts' cable television business could be at a significant
competitive disadvantage.
PTOs. The existing licenses held by national PTOs generally do not permit
them to convey television services over their existing telephone systems. The
UK Government's policy, stated in the Duopoly Review in 1991 and confirmed in
November 1994, is that the removal of the restriction will not be reviewed
until 1998 at the earliest. In addition, as a result of the transmission
capacity limitations of twisted copper pair wires historically used in BT's
telecommunications network, particularly between its local distribution points
and its customers' homes, and the age and condition of older portions of BT's
network, unless substantial improvements are made in digital compression or
other technologies, BT may not be able to provide a broadband cable television
service comparable to that offered by the Group without substantial capital
investment.
On September 29, 1993, the ITC issued a statement in which it took the
position (shared by OFTEL and the UK Department of Trade and Industry (the
"DTI")) that BT and the other national PTOs may provide video-on-demand
services under their existing licenses. Bell Cablemedia South Herts similarly
is not prevented from providing video-on-demand services. In order to offer
video-on-demand services on a broad scale, the General Partner believes that
BT would have to upgrade its existing telecommunications switches and install
video distribution facilities and subscriber decoder devices. BT has
announced plans to install a pilot video-on-demand system in the Ipswich and
Colchester area (which is not within Bell Cablemedia South Herts' franchise
areas) and has conducted limited trails in these areas in collaboration with
BSkyB. The General Partner is unable to assess fully the technical
feasibility or timing of the plans of BT, or any other provider offering
video-on-demand services. No assurance can be given that video-on-demand will
not provide substantial competition to Bell Cablemedia South Herts in the
future.
Cable Telephony
Overview. Until 1981, the Post Office was, with certain minor exceptions,
the monopoly supplier of telecommunications services throughout the UK. BT
was formed in 1981, when it took over the telecommunications assets of the
Post Office and became the monopoly telecommunications supplier. BT was
privatized in three tranches between 1984 and July 1993.
In 1984, Mercury was formally granted a license to compete with BT. Prior
to this, in November 1983, the Government had given a commitment not to
license, for a period of seven years, companies other than BT or Mercury to
carry telecommunications services nationally over fixed links. In November
1990 the Secretary of State for Trade and Industry published a consultative
document entitled "Competition and Choice: Telecommunications Policy for the
1990's", which commenced a review of the Duopoly Policy and the UK
telecommunications market generally.
The Duopoly Review as completed in March 1991, and represented, with
consequent changes in policy and to the licenses of telecommunications
operators, a fundamental turning point in the telecommunications industry.
The major policy change was that anyone could apply to the UK Government to
run new telecommunications networks over fixed links. The general presumption,
subject to financial and technical competence, would be that such licenses
should be granted unless there were specific reasons to the contrary. Cable
television/telephony operators are now permitted to provide telephony services
in their own right, instead of as agents of BT or Mercury as previously
required, and have the right to switch their telephony customers' calls.
These changes have significantly improved the terms on which cable operators
have been able to require BT, Mercury or another PTO to interconnect with them.
Since the Duopoly Review, BT has remained the dominant provider of
fixed-link telephony services for business and residence in the UK Mercury
has continued to offer long distance and international services and it is
continuing to gain market share in the business telecommunications market.
Residential Telephony Competitors. BT, with just under 95 percent of the
residential telephony market in 1993/1994, is the Group's principal competitor
in providing residential telephony services. Its revenues for the year ended
March 31, 1994 exceeded Pound Sterling13.6 billion. In addition, Bell
Cablemedia South Herts competes in the residential telephony market with
cellular telephone operators such as Vodafone Group PLC and Telecom Securicor
Cellular Radio Limited, and with personal communications network operators,
such as Mercury one2one and Microtel Logic Limited (marketed under the name
"Orange"). Bell Cablemedia South Herts may also compete in the future with
additional entrants to the residential telephony markets. Ionica L3 Limited
("Ionica") has also announced its intention to begin the introduction of a
radio-wave telephony local loop on a national basis in 1995. The General
Partner is unable to assess the technical feasibility or timing of the
introduction of such technology or the utility of such technology in the
residential telephony market. BT has recently introduced reductions in local
and international telephony rates, and has announced that during 1995 it will
gradually move to a per second basis of charging from a per unit basis. Due
to regulatory price controls, BT is expected to continue to reduce its
telephony rates. In November 1994, BSkyB entered into a 12-month marketing
arrangement with BT pursuant to which eligible DTH subscribers can receive
discounts off BT telephone bills. Accordingly, in the long term, Bell
Cablemedia South Herts may be unable to offer residential telephony services
at rates lower than those offered by BT and may see a decline in their average
per call residential telephony margins. Many of Bell Cablemedia South Herts'
business telephony competitors have resources substantially greater than those
of Bell Cablemedia South Herts.
One advantage of the provision of the telephony services by cable operators
has been their ability to offer direct access to the Mercury trunk line
systems, whose long distance call prices have historically been less than
those charged by BT. At present, the only ways in which a residential BT
customer can choose to route calls over the Mercury trunk network is either by
purchasing a special telephone receiver with which, by pressing a special
button, it is possible to select the Mercury network in preference to the BT
network, or by dialing a special access code. The Director General of
Telecommunications (the "Director General") has announced an independent cost
benefit study of equal access. His stated policy is to introduce "equal
access" whereby all providers of local telephony systems will eventually have
to offer their customers the choice of access to the trunk systems of BT,
Mercury and any other PTO's without discrimination between those systems.
This policy would require cable operators to provide equal access once they
have a 25 percent share of the local telephony market and are requested to do
so. The feasibility of introducing true equal access to trunk systems, and
the time scale within which it will be introduced, are difficult to estimate.
Many cable operators initially opposed the equal access policy, because
placing BT under an obligation to provide equal access to the Mercury network
could potentially reduce the attraction of systems run by local operators
(which had previously marketed their ability to offer lower cost via Mercury).
The General Partner believes that it has a price advantage over BT by
virtue of its ability to offer local discounts. BT may not charge different
amounts for the same service in different geographical areas and accordingly
is generally unable to lower prices selectively in particular geographic areas
in response to competition from cable telephony operators (including Bell
Cablemedia South Herts). While cable telephony operators may be required to
provide services within a particular franchise area on a similarly
non-discriminatory basis, they have no obligation to provide such services on
the same terms in other franchise areas within the UK. Consequently, cable
telephony operators are able to set prices in accordance with particular local
market conditions.
Business Telephony Competitors. Competition in business telephony has been
more intense than experienced in residential telephony and, because of the
number of competitors in the area, is expected to intensify further. BT is
Bell Cablemedia South Herts' principal competitor in providing business
telephony services. In addition to BT, Bell Cablemedia South Herts competes
with Mercury as well as with other telecommunications companies, such as
Energis Communications Limited ("Energis"), City of London Telecommunications
Limited ("COLT") and MFS Communications Limited ("MFS"), and with long
distance service resellers, such as WorldCom International, Inc. ("WorldCom").
BT and Mercury have resources substantially greater than those of Bell
Cablemedia South Herts. Bell Cablemedia South Herts may compete in the future
with additional entrants into the business telephony market, some of which may
have substantially larger resources than those of Bell Cablemedia South Herts.
For example, a subsidiary of AT&T has recently been granted a
telecommunications license which will permit the subsidiary to provide most
telecommunications services in the UK and to convey television signals over
its telecommunications network. However, the license would not permit the
subsidiary to provide a competing cable television service in Bell Cablemedia
South Herts' franchise area. Ionica has also announced its intention to begin
the introduction of a radio-wave telephony local loop on a national basis in
autumn 1995. The General Partner is unable to assess the technical
feasibility or timing of the introduction of such technology or the utility of
such technology in the business telephony market.
Except in limited circumstances, telephone subscribers changing their phone
services to a cable television/telephony operator currently must change their
phone numbers. As a result, Bell Cablemedia South Herts' business customers
generally use Bell Cablemedia's South Herts for their outgoing telephone
calls, which generally carry higher revenues than incoming calls, and for their
specialized telecommunication needs, while retaining BT's service (and their
existing telephone numbers) for incoming telephone calls. In August 1994,
OFTEL directed BT to provide number portability in each of the franchises held
by another cable/telephony operator, Videotron (other than its Winchester
franchise), commencing on October 7, 1994. A draft amendment to BT's
telecommunications license regarding the cost of implementing number
portability has been published for comments and is currently under discussion.
Technical specifications for number portability have been adopted and OFTEL
has stated that it expects number portability to become a widespread option as
soon as practicable. Actual implementation of number portability in a
franchise area will eventually require both BT and the relevant cable operator
to have hardware and software systems in place which meet the technical
specifications. Prior to that time, number portability may be provided by
call forwarding techniques.
Regulation
The operation of cable television/telephony services in the UK is regulated
under both the Broadcasting Act which replaced the Cable and Broadcasting Act
1984 (the "Cable and Broadcasting Act"), and the Telecommunications Act. The
operation of cable television/telephony services in the UK requires two
principal licenses: (i) a license (a "cable television license") issued
either under the Cable and Broadcasting Act (prior to 1991) or under the
Broadcasting Act (since 1991), which permits the holder to provide cable
television services within a specific franchise area and (ii) a
telecommunications license issued under the Telecommunications Act, which
allows the holder to install and run the physical network necessary to provide
cable television and telecommunications services. The ITC is responsible for
granting and enforcing cable television licenses. The DTI is responsible for
granting, and OFTEL is responsible for enforcing, telecommunications licenses.
In addition, if an operator utilizes microwave distribution systems as part of
its network, such operator is required to hold a license under the Wireless
Telegraphy Acts of 1949-1967. Any SMATV system covering 1,000 homes or less
requires a telecommunications license, but not a cable television license, and
a cable television system that covers only one building or two adjacent
buildings can operate pursuant to an existing telecommunications services
class license.
By virtue of the Telecommunications Code, contained in the
Telecommunications Act and included in a modified form in the
telecommunications licenses of cable operators, cable operators also must
comply with, and are entitled to the benefits of, the Street Works Act, the
principal benefit of which is to allow cable operators the right to undertake
civil construction on public roads. In addition, because the Street Works Act
standardized fees for inspections of construction works by local government
authorities and standardized specifications for reinstatement of property
following excavation, construction delays previously experienced by cable
operators because of separate and often lengthy negotiations with local
government authorities have been reduced.
The rights of cable operators under the Telecommunications Code are subject
to planning legislation. In April 1994, a Planning Order came into force
which requires planning consent for the installation, alteration or
replacement of any telecommunication apparatus on, or within the land
surrounding, a dwelling. There is some uncertainty as to the extent to which
this new restriction will affect the development and maintenance of cable
television/telephony systems.
The cable television license held by Bell Cablemedia South Herts was issued
for a 15 year period and is scheduled to expire in 2005. The
telecommunications license held by Bell Cablemedia South Herts was issued for
a 15 year period, which has been extended to a 23 year period, and is
scheduled to expire in 2015.
Cable Television Licenses
General. The stated policy of the ITC is that only one cable television
license will be granted in each franchise area. Each such license gives the
holder the right to provide television services within the franchise area
using cable distribution systems and, in the case of some cable television
licenses issued or renewed for 15 year periods under the Broadcasting Act,
microwave distribution systems.
National PTOs cannot currently compete directly with cable operators in
providing television services because their existing telecommunications
licenses generally do not allow them to convey or provide television services
over their existing national systems. OFTEL and the UK Government have stated
that the restrictions on conveying television signals may be reviewed as early
as 1998 but that the restrictions on the provision of television programming
by the national PTOs themselves will not be reviewed until at least 2001. The
ITC, however, has said that in principle BT will not require a cable
television license for "video-on-demand" services (i.e., transmission of an
individual program to one household in response to a particular request)
although the ITC will want to review the particular system used. To date BT
does not provide video-on-demand services although it has announced plans to
begin a pilot program in the towns of Ipswich and Colchester in 1995 and has
conducted limited trials in these areas.
Cable operators are, however, subject to competition within their franchise
areas from direct reception terrestrial broadcast television, DTH
satellite-delivered television operators such as BSkyB, and SMATV systems.
With respect to the operation of a SMATV system within a cable operator's
franchise area, the DTI has stated that cable operators will have a right of
first refusal to provide a similar or superior service at a reasonable price
before a new SMATV system will be permitted to begin operations, subject,
among other things, to the cable operator being in compliance with its
telecommunications license.
Restrictions on Ownership. The ITC is under a duty to ensure that certain
entities, including local authorities, political bodies, advertising agencies
and religious bodies do not own, or otherwise participate in a manner against
the public interest in, entities holding cable television licenses issued
under the Cable and Broadcasting Act. Restrictions may also be imposed on
cross ownership of different licensed services (including local delivery
services, independent television licenses and radio services) and different
media (including local and national newspapers and licensed services, such as
local delivery services) operating in substantially the same franchise area.
Cable television licenses issued under the Cable and Broadcasting Act continue
to be substantially regulated as if the Cable and Broadcasting Act remained in
force. The ownership rules are substantially similar for cable television
licenses issued under the Broadcasting Act. The UK Secretary of State has wide
discretion to amend the rules relating to cross media ownership and
accumulations of interests in licensed services.
The ITC may revoke any cable television license in order to enforce the
restrictions on ownership contained in the Broadcasting Act. The ITC may also
revoke any cable television license issued under the Cable and Broadcasting
Act if any change in the nature or characteristics of the licensee, or any
change in the persons having control over or interests in it, are such that,
had they occurred before the granting of the license, such change would have
induced the ITC to refrain from granting the license. For cable television
licenses issued under the Broadcasting Act the test is one of fitness and
propriety of the holder of the license. The ITC also has authority to impose
fines, shorten the license period or revoke cable television licenses (subject
to consultation with the DTI and OFTEL) if a cable operator fails to comply
with the conditions of its cable television license or with any direction of
the ITC.
License Term and Renewals. Cable television licenses extend for a period
of 15 years, and all cable television licenses, including those issued under
the Cable and Broadcasting Act, are renewable under the Broadcasting Act for
additional 15 year periods. An application for renewal must be made not
earlier than five years prior to the expiration of the cable television
license and not later than the date on which the ITC publishes a notice
inviting applications for a replacement license. The ITC may refuse such
application but only on limited grounds, including that the ITC proposes to
grant a license in an area different from that described under the existing
license or that the applicant is not providing services through the whole of
its franchised area. If an operator chooses to renew for an eight year
period, it will not be required to pay the annual fees referred to below, but
at the end of the eight year period the license cannot be renewed again and
will be put out for tender and awarded to the highest bidder, as described
below with respect to the award of a new license. If an operator chooses to
renew its license for a 15 year period, it will be required to pay annually
during the renewal period a percentage to be fixed by the ITC of the
operator's cable television related revenues, plus an additional amount that
the ITC believes a successful applicant would have bid for the franchise if it
were being offered as a new franchise. At present, cable operators are only
required to pay to the ITC annual fees, which in the aggregate are intended to
cover the ITC's administrative costs. Fees are payable annually and upon the
renewal of a license. Bell Cablemedia South Herts has not yet renewed its
cable television license as more than five years remain before expiration of
its license.
New cable television licenses. To date, the UK Government has granted
cable television licenses for franchise areas covering approximately 15
million homes out of 22 million total homes nationally, including all major
metropolitan areas. Under the Broadcasting Act, a new cable television
license (called a "local delivery license") will be granted to the applicant
who submits the highest cash bid (i.e., offers to pay the highest annual cash
sum to the ITC during each year of the license) except where it appears to the
ITC that, based on the coverage area proposed or the source of the applicant's
funds, the cable television license should be awarded to another applicant.
Under any new cable television licenses, operators will be required to pay
annually to the ITC during the term of the license a percentage to be fixed by
the ITC of the operator's cable television related revenues plus an additional
amount equal to the operator's cash bid.
Revocation of Licenses. The ITC can revoke a cable television license if
an operator fails to comply with its conditions or with any direction of the
ITC and the ITC considers revocation to be in the public interest. If there
is any change in either the nature or characteristics of an operator that is a
corporate entity, or any change in the persons controlling or having an
interest in it, the ITC can decide to revoke the license if due to such
changes it would not have awarded the license under the new circumstances.
With respect to licenses issued under the Broadcasting Act, the ITC can also
impose fines and shorten the license period.
Restrictions on Transfer. The Broadcasting Act permits the transfer of a
license to a third party with the written consent of the ITC. The ITC has
absolute discretion to refuse any proposed transfer of a license.
Obligations of Licensees. Under the Broadcasting Act, cable television
operators may carry any programming licensed under the Broadcasting Act but
are responsible for ensuring that advertising included by them in their
services conforms to the restrictions set forth in the codes on advertising,
sponsorship and programming produced by the ITC. Both the cable television and
telecommunications licenses impose obligations on the licensees to provide any
information which either OFTEL or the ITC may require for purposes of
exercising their statutory functions.
Cable television pricing is subject to Bell Cablemedia South Herts'
telecommunications license, which prohibits undue discrimination or preference
and linked sales. Undue discrimination and preference involve a licensee
unfairly favoring its business so as to place others competing with it at a
significant disadvantage. The Group is also subject to general "fair trading"
provisions of the Competition Act of 1980 and the Fair Trading Act 1973 (which
generally prohibits anticompetitive trade practices) and Bell Cablemedia South
Herts' telecommunications license requires Bell Cablemedia South Herts to
furnish details of prices and changes in price to the Director General and to
make such details available for public inspection. Subject to the foregoing,
cable television pricing in the UK is not subject to pricing restrictions,
including pricing limitations, rate of return assumptions or similar
mechanisms of any kind imposed under US cable regulations.
Telecommunications Licenses
General. The telecommunications license granted to a cable operator
permits the holder to install and operate a telecommunications system over
which television and other telecommunications services are provided. The
telecommunications license also permits the holder to connect its system to
other telecommunications systems which may include systems operated by the
broadcasting authorities, satellite television delivery systems and other
telecommunications systems in the UK. Although a telecommunications license
is granted for a particular area, it is not exclusive and, as a result, a
cable operator may compete in the provision of telephony and other
telecommunications services with national PTOs, such as BT and Mercury, and
other telecommunications companies in its franchise areas.
Pursuant to its telecommunications license, a cable operator is entitled to
the benefits of the Telecommunications Code, which is contained in the
Telecommunications Act. The Telecommunications Code grants rights and imposes
obligations in respect of the installation and maintenance of apparatus such
as ducts, cables and equipment on private or public land and incorporates
procedures to be used for the installation of equipment on public highways.
Cable operators are generally required to enter into bonding obligations with
local government authorities in order to ensure reinstatement of roads and
streets in the event of the telecommunications license being terminated.
Build Schedules. Each telecommunications license specifies the build
schedule of the system which the cable operator is required to implement (by
reference to the number of premises passed by specified dates) and the
particular technical characteristics to which the system must adhere. It is
OFTEL's responsibility to enforce compliance with the build schedules.
Failure to comply with the build schedules could result in revocation of the
relevant telecommunications license.
License Term; Renewals. Telecommunications licenses that have been issued
to date have been for periods of either 15 or 23 years from the date of
issuance. Prior to 1992, telecommunications licenses with 23 year terms were
granted only to cable operators utilizing systems with a "switched star"
architecture, while all other operators received licenses with 15 year terms.
Since 1992, the DTI has amended this policy and upon request has extended the
terms of existing 15 year licenses to 23 years provided the cable operator's
system meets certain technical requirements. It is expected that renewals of
telecommunications licenses will be no less than the term of the cable
television license. The Director General may modify telecommunications
licenses either with the agreement of the licensee following a statutory
period of public consultation or following a report of the Monopolies and
Mergers Commission.
Restrictions on Transfer. Telecommunications licenses may not be
transferred. However, a change of control of an entity holding a license is
allowed subject to compliance with a notification requirement. Licenses may
be revoked if the change in control is deemed to be contrary to the UK's
national security interests or its relations with any other country.
Technical Requirements. The principal technical requirements for the cable
television/telephony systems are contained in the telecommunications licenses,
which address, among other things, technical requirements for transmissions
and performance.
Telephony Operations
Effect of the Duopoly Review. The ability of cable television operators to
provide telephony services is subject to the restrictions contained in their
telecommunications licenses. Following the Duopoly Review, the restriction on
cable operators providing voice telephony services only as an agent for either
BT or Mercury was removed, thereby enabling the cable operators to seek
amendments to their licenses so as to be able to provide all forms of wired
telecommunications services in their own right, including the ability to
switch their own traffic. In addition, cable operators were granted the right
to request that BT and Mercury provide interconnection.
Price Regulation. Under the terms of the August 1992 Price Cap Review, BT
may not increase its charges for telephony and other telecommunications
services in any year by more than the amount of the increase in the domestic
retail price index ("RPI") minus 7.5 percent through the end of July 1997.
There is, however, a separate price restriction on leased lines. Within this
limitation, BT has discretion to vary charges for separate services at rates
which may exceed the overall price cap, subject to certain secondary price
caps. Although rate changes must be notified to OFTEL, the rates charged by
cable television/telephony operators and other PTOs (other than BT) are not
required to be approved by any UK Government entity.
Since the Duopoly Review, BT has been permitted to offer discounts to high
volume users, albeit subject to several conditions. Importantly, BT is
restricted in the manner in which it can offer discounted services by virtue
of the obligation to charge the same prices nationally and the obligation not
to show undue preference and not to exercise undue discrimination by favoring
its own business to the disadvantage of competitors. For so long as this
policy remains in effect, BT's ability to respond to local competition from
cable operators will be restricted.
Interconnection and Accounting Separation. The commercial viability of
telephony and other telecommunications services provided by cable operators
depends on their ability to connect with other telecommunications systems in a
cost effective manner. Cable operators' systems must connect with systems
operated by other PTOs for calls that do not originate and terminate on their
system. Each holder of a public telecommunications license (including BT and
Mercury as well as cable operators) is required to negotiate an
interconnection agreement with any other license holder that seeks one and
either party may request intervention from OFTEL if there is a failure to agree
on terms. OFTEL also has the power to enforce certain obligations of any
party to an interconnection agreement. In addition, BT is now required by its
license to publish copies of certain details of all interconnection agreements
entered into by it.
Until the Duopoly Review, cable operators with adjoining franchises were
unable to connect their networks without the involvement of BT or Mercury
unless the combined areas were relatively small and the franchises were under
common control. The Duopoly Review has resulted in this policy being relaxed,
and the operators of adjacent cable franchises are now able to interconnect
their systems irrespective of whether they are under common ownership. In
addition, applications by cable operators to connect more distant franchises
will also be considered by the DTI.
In 1991 the interconnect conditions in BT's license were amended to require
interconnect charges determined by OFTEL, including those of cable
television/telephony operators to cover fully allocated costs of conveyance,
including a full contribution to relevant overheads, a return on capital
employed and, until BT ceases to be subject to restrictions on re-balancing
its charges, a specific contribution in certain circumstances by other
operators towards the losses incurred by BT in providing exchange lines. This
specific contribution is called the access deficit contribution.
"Re-balancing" means increasing exchange line rentals while decreasing call
prices, to reflect better the costs of providing these services.
The Director General may waive all or part of an access deficit
contribution following an application for determination. Such waivers may
until June 30, 1997 be applied to operators for their first 10 percent of
market share, until they obtain a 25 percent market share, at which point they
must pay to BT full access deficit contributions in respect of revenues from
their entire market share. When BT's market share falls to 85 percent, then
full contributions will be payable in all cases by interconnecting operators
on any incremental market share loss by BT. Full contributions will also be
required on all traffic arising from equal access. In the BT/Mercury
Determination the Director General granted Mercury a full waiver of access
deficit contribution for the first 10 percent of its share in the market in
local and national calls taken together and in the market for international
calls. Both decisions are expected to be reviewed. At the time of the
BT/Mercury Determination the Director General published a statement of policy
on the waiver of access deficit contributions. In the policy statement, he
stated that waivers should be used to encourage the development of a wide
range of services for the consumer to choose from, and the provisions of those
services at the lowest sustainable price. He also stated that he would take
three factors into account in granting waivers: (i) the desirability of
granting waivers to those companies likely to encourage BT to achieve greater
efficiency on a sustainable basis; (ii) maintaining maximum flexibility to
meet the demands of changes in the market; and (iii) the extent to which
companies will be providing competition to BT in local telephony, particularly
providing services to residential customers. Trunk operators would not have
high priority in relation to access deficit waivers as they would not have the
high construction costs of local operators such as cable television/telephony
operators, particularly those offering services primarily to residential
customers.
In July 1994, access deficit waivers were granted to eight telephone
operators, including cable operators. The three cable operators will not be
required to make access deficit contributions for calls made before April 1,
1996 in respect of the first 10 percent of their share of the market for
national and local calls. This is subject to BT's market share not falling
below 85 percent. As part of this determination, a distinct geographic market
was recognized for local and national calls in an operator's licensed area.
OFTEL currently does not have adequate information regarding this market,
although it expects to be able to obtain such information in 1995. Waivers
were also granted to Energis, ACC Long Distance UK Limited, WorldCom, COLT and
MFS. OFTEL also indicated that Mercury's current waiver was unlikely to be
renewed for the whole of its market share, even if such market share was below
10 percent to enable OFTEL to utilize waivers to benefit new entrants in the
telephony market. Further access deficit waivers were granted to various
applicants, including Bell Cablemedia South Herts, in December 1994. Such
waivers cover the first 10 percent of the operators' share of its markets for
national and local calls and expire on April 1, 1996. As discussed below, the
system of access deficit waivers is currently being reviewed by OFTEL.
Certain operators have also sought contributions from BT in respect of
their own access deficits. Having granted waivers in respect of contributions
to BT, the Director General has stated that he does not currently intend to
provide for PTOs to collect contributions to their own access deficits from
BT. The Director General also stated that should circumstances change such
that it becomes likely that access deficit contributions will be payable to BT
by those PTOs, he would reconsider this position.
On March 8, 1994 the Director General published a new framework for
interconnection charges. His statement, "Interconnection and Accounting
Separation: The Next Steps," sets out the framework for the development of
new interconnection rates and accounting separation for BT and those operators
interconnecting with it. The first step, which is effective immediately,
stabilizes interconnection arrangements with BT based on an interconnection
determination by the Director General between BT and Mercury dated December 2,
1993 (the "BT/Mercury Determination"). This stabilization covers connection
charges, calculation of conveyance rates based on component costs and routing
factors, access deficit contributions and waivers of access deficit
contributions. A "ready reckoner" attached to the statement enables other
PTOs to calculate their interconnection charges with BT. Any disputes on
conveyance rates and connection charges can be referred to OFTEL, but will be
determined in accordance with the BT/Mercury Determination. The second step
will involve amendments to BT's license and implementation of a list of 74
standard interconnection charges, a more transparent process for relating
costs to charges and accounting separation of BT's network, access and retail
businesses. Work has started on determination of these charges and the
necessary amendments to BT's license have been published in draft form for
public consultation and amended provisions are to be advertised shortly. The
third step is more long-term and involves consideration of alternative cost
based interconnection charges. These include basing charges on forward
looking economic costs, a form of long-run, incremental cost. Implementation
of such charging would involve changes to BT's price cap.
In December 1994, the Director General published a consultative document
entitled "A Framework for Effective Competition: A Consultative Document on
the Future of Interconnection and Related Issues" (the "Interconnection
Document"). The Interconnection Document is intended to be followed by formal
consultation on a series of possible amendments to BT's telecommunications
license, including establishing standard interconnection prices and preventing
unfair competition arising from changes in BT's prices. OFTEL's conclusions
on the matters set out in the Interconnection Document are expected to be
published in the summer of 1995.
OFTEL's long-term goals, as set forth in the Interconnection Document, are
to move toward less regulation and market-determined prices. OFTEL's goal
appears to be to permit BT to negotiate its own interconnection charges with
cable television/telephony providers under circumstances where such operators
have gained meaningful market share (from a competitive viewpoint) and to
regulate BT principally on the basis of conditions in its telecommunications
license. However, the Director General stated that, although significant
change is contemplated, no change will be made to BT's price cap of RPI minus
7.5 percent until the end of July 1997 (when it is due to expire) and BT's
tariffs will remain geographically averaged in order to prevent BT from
offering lower prices in those geographical areas where its faces local loop
competition (such as areas in which cable television/telephony operators
operate) than the prices it offers in areas where it faces little or no such
competition.
The Interconnection Document is divided into two parts. The first deals
with possible changes to the access deficit regime and proposes four options
for reform that OFTEL is considering. These are as follows:
1. The current regime would remain the same, with local call costs and
revenue added into the access account and access deficit
contributions being spread evenly over all call types and with the
total number of access deficit waivers that could be granted being
raised.
2. BT's charges being based on forward-looking incremental costs with
access deficit payments being abolished and common costs being
recovered by BT through a system of mark-ups.
3. The same as with option 2, but also removing the constraint on the
speed at which BT can increase exchange line rental charges, thus
ending the access deficit regime and producing more transparent
interconnection charges. This option would involve removal of the
existing RPI plus 2 percent constraint on BT increasing exchange line
rental charges.
4. BT setting interconnection charges, subject to the current no undue
discrimination and no unfair competition provisions in its license
and a possible new general anti-competitive behavior provision.
The second and third options appear most consistent with OFTEL's long-term
objectives. The fourth option would not be implemented until after the
current price cap regime runs out at the end of July 1997, while the other
options could be implemented sooner.
The second part of the Interconnection Document requests public comment on
several related issues, including additional controls on anti-competitive
behavior by dominant operators such as BT, the barriers to the development of
sustainable competition and the need for entry assistance, the benefits and
problems associated with increasing pricing flexibility for BT, residential
customers and the universal service obligation, access to networks for new
service providers and moving to a capacity charging basis for interconnection.
There can be no assurance that the implementation of new
interconnection arrangements as part of OFTEL's move to a new, less regulated,
telecommunications environment would not have an adverse effect on Bell
Cablemedia South Herts' operations.
Equal Access. One advantage cable operators have had in the marketplace
has been their ability to offer direct access to the Mercury trunk line
system, whose long distance charges have historically been less than those
charged by BT. At present, in most areas, the only way in which a residential
BT customer can choose to route calls over the Mercury trunk network is by
dialing a special access code or by purchasing a special telephone receiver
with which, by pressing a special button, it is possible to select the Mercury
network in preference to the BT network. The Director General has
commissioned a cost benefit study relating to equal access. His stated policy
is to introduce true equal access whereby all providers of local telephone
systems will be required to offer access to each fixed-line trunk system
without discrimination between those systems. BT's and Mercury's licenses
have been amended to enable OFTEL to require them to make available equal
access, either by pre-selection or on a call-by-call basis, subject to, among
other things, the cost-benefit study begin conducted and determining that the
gains will outweigh the likely costs. This will allow residential and
business customers to choose between BT, Mercury and any other provider. The
feasibility of introducing true equal access to trunk systems, and the time
scale within which it will be introduced is difficult to estate. Operators
are unlikely to request equal access while access district waivers continue to
be available because, as described above, the introduction of equal access
will terminate existing waivers. The introduction of equal access depends
also on factors such as BT having been able to rebalance its charges and the
levels of interconnection and access charges payable to BT, so that the
Director General is satisfied that fair competition has been achieved. Many
UK cable operators had opposed the equal access recommendations resulting from
the Duopoly Review because they believed that placing BT under an obligation
to provide equal access to the Mercury network would reduce the attraction of
systems run by local operators (which had previously marketed their ability to
offer lower costs via Mercury). There can be no assurance that the
implementation of true equal access by the Director General will not adversely
affect the ability of cable television/telephony operators to market their
telephony services.
Telephone Number Portability. Telephone subscribers changing their phone
services to a cable television/telephony operator currently must change their
phone numbers. As a result, many business subscribers use their
cable/telephone lines primarily for outbound telephone calls and maintain
their BT or Mercury lines for inbound calls. In order to retain a well known
telephone number, BT currently does not offer customers number portability
(i.e., the ability of telephone customers to retain their telephone numbers
when changing telephone providers) and under its license need not do so until
so directed by OFTEL. On January 13, 1994 the Director General announced
plans for the introduction of number portability. In August 1994, OFTEL
directed BT to provide number portability in the franchise areas of another
cable operator, Videotron (other than its Winchester franchise) commencing
October 7, 1994. As other operators provide OFTEL with information as to when
and where they can make number portability available to BT similar directions
with respect to such operators are expected to be made. The necessary
technical specifications for the introduction of number portability have been
settled by OFTEL's Network Interconnection Interfaces Committee. The Director
General has decided that costs are to be allocated in a transparent manner and
charged roughly in proportion to the benefits likely to accrue to all
subscribers. He has suggested that a method of doing this would be for each
operator to pay the costs of introducing number portability on its own system
and for joint costs to be allocated in proportion to the relevant market
shares. An amendment to BT's license which would simplify the formal
procedures for introducing number portability and allow the Director General
to decide on the allocation of costs, has been published for public
consultation. The Director General has indicated that number portability is
likely to be introduced in the geographic areas where it is technically
feasible as soon as practicable.
ITEM 2. PROPERTIES
See Item 1.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
While the Partnership's interests are publicly held, there is no
established public market for the limited partnership interests, and it is not
expected that such a market will develop in the future. As of March 25, 1995,
the approximate number of investors in the Partnership was 6,100.
ITEM 6. SELECTED FINANCIAL DATA
South Hertfordshire United Kingdom Fund, Ltd.
<TABLE>
<CAPTION>
For the Years Ended
December 31, From Inception
--------------------------------------------------- ---------------------
December 23, 1991 to
Income Statement Data: 1994 1993 1992 December 31, 1991
--------------- -------------- -------------- --------------------
<S> <C> <C> <C> <C>
Revenues $9,088,929 $2,631,555 $ 302,147 $ -
Operating, General and
Administrative Expenses (13,478,273) (3,679,057) (1,313,296) -
Management Fees and Allocations
from General Partner (2,004,964) (1,295,522) (658,335) -
Depreciation and Amortization (3,064,313) (1,999,086) (493,766) -
----------- ---------- ---------- ------------
Operating Loss (9,458,621) (4,342,110) (2,163,250) -
Interest Income 185,472 48,896 141,382 281,181
Interest Expense (549,834) (262,276) (70,313) -
Other Expenses (net) (2,410,724) - - -
Minority Interests 3,991,358 298,036 - -
----------- ---------- ---------- ------------
Net (Loss)/Income (8,242,349) (4,257,454) (2,092,181) 281,181
----------- ---------- ---------- ------------
Net (Loss)/Income per Limited
Partnership Unit (149.06) (145.81) (137.79) 45.60
Weighted Average Number of Limited
Partnership Units Outstanding 54,743 28,906 15,032 6,167
Balance Sheet Data:
Total Assets 73,473,610 48,640,459 19,939,456 9,547,506
Note Payable 4,446,268 4,055,520 1,208,000
Accounts Payable to Affiliates/Related Parties 6,028,108 2,368,948 2,045,589 667,427
General Partner's Capital (Deficit) (144,921) (62,497) (19,922) 1,000
Limited Partners' Capital 34,653,115 30,078,228 14,312,432 8,879,079
Minority Interests 18,553,653 8,061,163 - -
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS
Results of Operations
1994 Compared to 1993
Revenues of the Partnership increased $6,457,374 for the year ended
December 31, 1994, over the similar period in 1993 from $2,631,555 in 1993 to
$9,088,929 in 1994. This increase is primarily the result of an increase in
the South Herts System's customer subscriber base due primarily to additional
activated plant in 1994. The South Herts System served approximately 7,200
basic cable television subscribers, 5,900 residential telephony subscribers
and 100 business telephony subscribers at December 31, 1993 as compared to
14,300 basic cable television subscribers, 14,400 residential telephony
subscribers and 400 business telephony subscribers at December 31, 1994.
Operating, general and administrative expenses increased $9,799,216 for the
year ended December 31, 1994 over the similar period in 1993 from $3,679,057
in 1993 to $13,478,273 in 1994. This increase is primarily due to increases
in personnel costs, system maintenance and repair costs and marketing costs
during 1994 as compared to 1993 which resulted from the growth in the South
Herts System's size and subscriber base.
Management fees and allocated overhead from the General Partner increased
$709,442 for the year ended December 31, 1994 over the similar period in 1993
from $1,295,522 in 1993 to $2,004,964 in 1994. These increases were generally
due to the increase in revenues, upon which such fees and allocations are
based.
Depreciation and amortization expense increased $1,065,227 for the year
ended December 31, 1994 over the similar period in 1993 from $1,999,086 in
1993 to $3,064,313 in 1994. This increase was due to an increase in the
Partnership's depreciable asset base resulting from the continuing buildout of
the South Herts System.
Interest expense increased $287,558 for the year ended December 31, 1994
over the similar period in 1993 from $262,276 in 1993 to $549,834 in 1994.
This increase was generally due to the inclusion of a full year of interest
costs relating to equipment leases that the Partnership entered into in the
third quarter of 1993.
Interest income increased $136,576 for the year ended December 31, 1994
over the similar period in 1993 from $48,896 in 1993 to $185,472 in 1994.
This increase in interest income was the result of higher average cash
balances invested during 1994 as compared to average balances invested during
1993. The higher level of cash balances resulted from the second offering of
limited partnership interests, which was completed in April 1994.
Other expenses (net) in 1994 consists primarily of the writeoff of deferred
development expenditure. The writeoff resulted from a change in the
Partnership's accounting policy following the BCM Acquisition to be consistent
with BCM's accounting policy.
1993 Compared to 1992
Revenues of the Partnership increased $2,329,408 for the year ended
December 31, 1993, over the similar period in 1992 from $302,147 in 1992 to
$2,631,555 in 1993. This increase is primarily the result of an increase in
the South Herts System's customer subscriber base due primarily to additional
activated plant in 1993. The plant was activated in April 1992 and the South
Herts System received its first revenues from subscribers in May 1992. The
South Herts System served approximately 2,000 basic cable television
subscribers at December 31, 1992 as compared to approximately 7,200 basic
cable television subscribers, 5,900 residential telephony subscribers and 100
business telephony subscribers at December 31, 1993.
Operating, general and administrative expenses increased $2,365,761 for the
year ended December 31, 1993 over the similar period in 1992 from $1,313,296
in 1992 to $3,679,057 in 1993. This increase was primarily due to increases
in personnel costs, programming costs and marketing costs during 1993 as
compared to 1992 which resulted from the growth in the South Herts System's
size and subscriber base.
Management fees and allocated overhead from the general partner increased
$637,187 for the year ended December 31, 1993, over the similar period in 1992
from $658,335 in 1992 to $1,295,522 in 1993. This increase was due to the
increase in revenues, upon which such fees and allocations are based.
Depreciation and amortization expense increased $1,505,320 for the year
ended December 31, 1993 over the similar period in 1992 from $493,766 in 1992
to $1,999,086 in 1993. This increase was due to an increase in the
Partnership's depreciable asset base resulting from the continuing buildout of
the South Herts System.
Interest expense increased $191,963 for the year ended December 31, 1993
over the similar period in 1992 from $70,313 in 1992 to $262,276 in 1993.
This increase was primarily due to the inclusion of a full year of interest
costs relating to the building loan agreement that the Partnership entered
into in July 1992.
Interest income decreased $92,486 for the year ended December 31, 1993 over
the similar period in 1992 from $141,382 in 1992 to $48,896 in 1993. This
decrease in interest income was the result of lower average cash balances
invested during 1993 as compared to average balances invested during 1992.
Financial Condition
The Partnership was formed on December 23, 1991 to acquire, construct,
develop, own and operate cable television/telephony systems in the United
Kingdom. As of December 31, 1994, the Partnership had raised a total of
$56,935,000 in gross offering proceeds from the sale of 56,935 limited
partnership interests, or $48,817,997 net of sales commissions and other
organizational and offering costs, from both its initial and its secondary
public offerings.
In order to provide additional funding for the construction of the South
Herts System, two additional participants invested in Bell Cablemedia South
Herts in 1993 and 1994. Jones Intercable of South Hertfordshire, Inc.
invested Pound Sterling3,400,000 in Bell Cablemedia South Herts in exchange for
34,000 Class A shares in November 1993. Also in November 1993, affiliates of
Sandler Capital Management (the "Sandler Group") committed to invest Pound
Sterling6,800,000 in Bell Cablemedia South Herts, of which Pound
Sterling2,266,600 was funded in November 1993 for 22,666 Class B shares. In
June 1994, the Sandler Group invested Pound Sterling3,273,232 for 32,732 Class
B shares and Jones Intercable of South Hertfordshire, Inc. invested Pound
Sterling503,283 for 5,033 Class A shares. In July 1994, the Sandler Group
invested Pound Sterling1,800,000 for 18,000 Class B shares and Jones
Intercable of South Hertfordshire, Inc. invested Pound Sterling466,800 for
4,668 Class B shares.
On June 10, 1994, Jones Global Group, Inc., Jones Intercable, Inc. and
certain of their subsidiaries (collectively, "Jones") and the Sandler Group
entered into agreements to transfer all of their interests in their United
Kingdom cable/telephone operations and franchises, including Jones Intercable
of South Hertfordshire, Inc.'s interest in Bell Cablemedia South Herts, Jones
Global Funds, Inc.'s general partner interest in the Partnership and the
Sandler Group's interest in Bell Cablemedia South Herts to Bell Cablemedia plc
("BCM") in exchange for ordinary shares (in the form of American Depositary
Shares ("ADSs")) to be issued by BCM in connection with a planned public
offering of ADSs by BCM. At that date, BCM was then indirectly owned 80
percent by Bell Canada International Inc. ("BCI") and 20 percent by Cable &
Wireless plc ("C&W").
On July 22, 1994, in connection with the closing of the public offering by
BCM, Jones and the Sandler Group completed the exchange of their interests in
United Kingdom cable/telephony operations and franchises for ADSs issued by
BCM. At closing, BCM acquired Jones Intercable of South Hertfordshire, Inc.'s
interest in Bell Cablemedia South Herts, the Sandler Group's interest in Bell
Cablemedia South Herts and the general partner interest in the Partnership.
In October 1994, the Partnership invested Pound Sterling5,108,900 in Bell
Cablemedia South Herts for 51,089 Class A shares and BCM invested Pound
Sterling2,554,600 in Bell Cablemedia South Herts for 25,546 Class A shares.
In November 1994, the Partnership invested Pound Sterling1,410,000 in Bell
Cablemedia South Herts for 14,100 Class A shares and BCM invested Pound
Sterling705,000 in Bell Cablemedia South Herts for 7,050 Class A shares. As a
result of these transactions, Bell Cablemedia South Herts is now owned 66.7
percent by the Partnership and 33.3 percent by BCM, and the general partner of
the Partnership is now Fawnspring Limited, a wholly owned subsidiary of BCM
(the "General Partner").
During 1994, Bell Cablemedia South Herts had approximately $39,621,000 of
capital expenditures. All of these expenditures were for the construction of
the South Herts System and were funded from limited partner contributions and
advances from affiliates. Bell Cablemedia South Herts is nearing completion
of negotiations for the provision of Pound Sterling25,000,000 ($39,000,000, at
an exchange rate of US$1.56 per UK pound sterling) in bank financing. If
provided, the General Partner believes that such debt financing coupled with
Bell Cablemedia South Herts' existing cash resources will be sufficient to
fund the completion of construction and operation of the South Herts System.
There can be no assurance that the proposed bank financing will be completed.
If the proposed bank financing is not completed, Bell Cablemedia South Herts
will be required to seek additional debt or equity financing.
In July 1992, Bell Cablemedia South Herts entered into an agreement with a
bank to refinance its primary office headend building for Pound
Sterling800,000. This loan was repaid in March 1995. Interest on the loan
was calculated at the London InterBank Office Rate ("LIBOR") plus 2 percent.
Because the Partnership maintains its funds in US dollars but is required
to reimburse the General Partner in UK pounds sterling for expenditures
incurred by the General Partner for the construction and operation of the
South Herts System, the Partnership may encounter currency exchange rate
risks. To hedge these risks, the Partnership has entered into forward foreign
exchange contracts from time to time. Through September 1994, the Partnership
had purchased forward foreign exchange contracts with a blended average
exchange rate of U.S. $1.68 per United Kingdom pound sterling. At December
31, 1994, the Partnership had incurred a cumulative loss of $334,980 on these
forward foreign exchange contracts, which was capitalized in the investment in
cable television and telecommunications properties on the Partnership's
Consolidated Balance Sheet at December 31, 1994. At December 31, 1994 the
Partnership did not have any open forward foreign exchange contracts.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
SOUTH HERTFORDSHIRE UNITED KINGDOM FUND, LTD.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1994 AND 1993
AND FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
INDEX
-----
Page
----
Reports of Independent Public Accountants. . . . . . . . . . . . . . . 32
Consolidated Balance Sheets. . . . . . . . . . . . . . . . . . . . . . 34
Consolidated Statements of Operations. . . . . . . . . . . . . . . . . 36
Consolidated Statements of Partners' Capital (Deficit). . . . . . . . 37
Consolidated Statements of Cash Flows. . . . . . . . . . . . . . . . . 38
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . 39
INDEPENDENT AUDITORS' REPORT
South Hertfordshire United Kingdom Fund, Ltd.
We have audited the accompanying balance sheet of South Hertfordshire
United Kingdom Fund, Ltd. (a Colorado limited partnership) as of December 31,
1994, and the related statements of operations, partners' capital (deficit)
and cash flows for the year then ended. These financial statements are the
responsibility of the General Partner's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of South Hertfordshire United
Kingdom Fund, Ltd. as of December 31, 1994, and the results of its operations
and its cash flows for the year then ended in conformity with generally
accepted accounting principles.
TOUCHE ROSS & CO.
London, England
March 27, 1995
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
South Hertfordshire United Kingdom Fund, Ltd.
(formerly Jones United Kingdom Fund, Ltd.)
We have audited the accompanying balance sheet of South Hertfordshire United
Kingdom Fund, Ltd. (formerly Jones United Kingdom Fund, Ltd.) (a Colorado
limited partnership) for the year ended December 31, 1993, and the related
statements of operations, partners' capital (deficit) and cash flows for the
two years in the period ended December 31, 1993. These financial statements
are the responsibility of the General Partner's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of South Hertfordshire United
Kingdom Fund, Ltd. (formerly Jones United Kingdom Fund, Ltd.) as of December
31, 1993, and the results of its operations and its cash flows for each of the
two years in the period ended December 31, 1993 in conformity with generally
accepted accounting principles.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Denver, Colorado
March 31, 1995
SOUTH HERTFORDSHIRE UNITED KINGDOM FUND, LTD.
(A Limited Partnership)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
-----------------------------------
ASSETS 1994 1993
------ ---------- -----------
<S> <C> <C>
CASH AND CASH EQUIVALENTS $ 139,307 $ 9,940,929
RECEIVABLES:
Subscriptions receivable, net of related syndication costs
and sales commissions of $0 and $84,700 at December 31,
1994 and 1993, respectively -- 531,300
Other receivables net of allowances for doubtful accounts of
$641,694 and $51,893 at December 31, 1994 and 1993,
respectively 2,807,303 1,932,198
INVESTMENT IN CABLE TELEVISION AND
TELECOMMUNICATIONS PROPERTIES, net of
accumulated depreciation and amortization of $5,394,293
and $2,368,403 at December 31, 1994 and 1993,
respectively 70,225,246 36,117,963
PREPAID EXPENSES AND OTHER ASSETS 301,754 118,069
------------ ------------
Total assets $73,473,610 $48,640,459
============ ============
</TABLE>
The accompanying notes to financial statements
are an integral part of these balance sheets.
SOUTH HERTFORDSHIRE UNITED KINGDOM FUND, LTD.
(A Limited Partnership)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
----------------------------------
1994 1993
--------------- ---------------
<S> <C> <C>
LIABILITIES:
Accounts payable to affiliates
and related parties $6,028,108 $2,368,948
Trade accounts payable 3,160,657 3,766,176
Accrued liabilities 8,226,047 3,752,100
Accrued loss on forward contracts -- 60,725
Note payable 4,446,268 4,055,520
----------- -----------
Total liabilities 21,861,080 14,003,469
----------- -----------
COMMITMENTS AND CONTINGENCIES -- --
MINORITY INTERESTS 18,553,653 8,061,163
----------- -----------
PARTNERS' CAPITAL (DEFICIT):
General Partner-
Contributed capital 1,000 1,000
Accumulated deficit (145,921) (63,497)
----------- -----------
(144,921) (62,497)
----------- -----------
Limited Partners-
Net contributed capital (56,935 and 42,170 units
outstanding at December 31, 1994 and 1993,
respectively) 48,817,997 36,083,185
Accumulated deficit (14,164,882) (6,004,957)
----------- -----------
34,653,115 30,078,228
----------- -----------
Currency translation adjustment (1,449,317) (3,439,904)
----------- -----------
Total partners' capital 33,058,877 26,575,827
----------- -----------
Total liabilities and partners' capital $73,473,610 $48,640,459
=========== ===========
</TABLE>
The accompanying notes to financial statements
are an integral part of these balance sheets.
SOUTH HERTFORDSHIRE UNITED KINGDOM FUND, LTD.
(A Limited Partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Years Ended
December 31
--------------------------------------------------------------
1994 1993 1992
-------------- ------------- ---------------
<S> <C> <C> <C>
REVENUES $9,088,929 $2,631,555 $ 302,147
COSTS AND EXPENSES:
Operating, general and administrative (13,478,273) (3,679,057) (1,313,296)
Management fees and allocated overhead
from the General Partner (2,004,964) (1,295,522) (658,335)
Depreciation and amortization (3,064,313) (1,999,086) (493,766)
---------- ---------- ----------
OPERATING LOSS (9,458,621) (4,342,110) (2,163,250)
---------- ---------- ----------
OTHER INCOME (EXPENSE):
Interest income 185,472 48,896 141,382
Interest expense (549,834) (262,276) (70,313)
Other expenses (net) (2,410,724) -- --
---------- ---------- ----------
LOSS BEFORE MINORITY INTERESTS (12,233,707) (4,555,490) (2,092,181)
Minority interests 3,991,358 298,036 --
---------- ---------- ----------
NET LOSS: $(8,242,349) $(4,257,454) $(2,092,181)
=========== =========== ===========
ALLOCATION OF NET LOSS (Note 1):
General Partner $(82,424) $(42,575) $(20,922)
=========== =========== ===========
Limited Partners $(8,159,925) $(4,214,879) $(2,071,259)
=========== =========== ===========
NET LOSS PER LIMITED
PARTNERSHIP UNIT $(149.06) $(145.81) $(137.79)
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF LIMITED
PARTNERSHIP UNITS OUTSTANDING 54,743 28,906 15,032
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
SOUTH HERTFORDSHIRE UNITED KINGDOM FUND, LTD.
(A Limited Partnership)
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
<TABLE>
<CAPTION>
For the Years Ended
December 31
----------------------------------------------
1994 1993 1992
-------------- ------------- -------------
<S> <C> <C> <C>
GENERAL PARTNER:
Balance, beginning of period $(62,497) $(19,922) $1,000
Net loss for period (82,424) (42,575) (20,922)
----------- ----------- -----------
Balance, end of period $(144,921) $(62,497) $(19,922)
=========== =========== ===========
LIMITED PARTNERS:
Balance, beginning of period $30,078,228 $14,312,432 $8,879,079
----------- ----------- -----------
Capital contributed 14,765,000 23,166,000 8,701,000
Less-
Sales commissions (1,476,500) (2,316,600) (870,100)
Syndication costs (553,688) (868,725) (326,288)
----------- ----------- -----------
Net contributed capital 12,734,812 19,980,675 7,504,612
Net loss for period (8,159,925) (4,214,879) (2,071,259)
----------- ----------- -----------
Balance, end of period $34,653,115 $30,078,228 $14,312,432
=========== =========== ===========
Translation adjustment (1,449,317) (3,439,904) (1,684,354)
----------- ----------- -----------
Total partners' capital $33,058,877 $26,575,827 $12,608,156
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
SOUTH HERTFORDSHIRE UNITED KINGDOM FUND, LTD.
(A Limited Partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended
December 31
--------------------------------------------------
--------------------------------------------------
1994 1993 1992
-------------- -------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(8,242,349) $(4,257,454) $(2,092,181)
Adjustments to reconcile net loss to net cash used in
operating activities:
Minority interests (3,991,358) (298,036) --
Depreciation and amortization 3,064,313 1,999,086 493,766
Write off of deferred development expenditures 2,487,690 -- --
Increase in other receivables (875,105) (1,406,049) (526,149)
Decrease in interest receivable -- 664 280,517
Increase in prepaid expenses and other
assets (183,685) (51,406) (66,663)
Decrease in accounts payable to related parties (715,592) - -
Increase in trade accounts payable and
accrued liabilities 2,670,952 2,016,788 990,773
-------------- -------------- --------------
--------------
Net cash used in operating activities (5,785,134) (1,996,407) (919,937)
-------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction costs for cable television/telephony
system (39,620,863) (20,873,159) (17,822,435)
Increase in construction accounts payable 1,136,751 2,071,107 2,439,608
-------------- -------------- --------------
Net cash used in investing activities (38,484,112) (18,802,052) (15,382,827)
-------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributed capital, net of syndication costs
and sales commissions 12,734,812 19,980,675 7,504,612
Proceeds from sale of common stock by subsidiary 14,533,811 -- --
Investment by an affiliate of the General Partner -- 5,000,000 --
Investment by an unaffiliated investor group -- 3,359,199 --
Proceeds from borrowings 390,748 2,993,024 1,208,000
Decrease (increase) in net subscriptions
receivable 531,300 (434,700) 50,025
Proceeds from shareholder loans 4,374,752 -- --
-------------- -------------- --------------
Increase in accounts payable to affiliates -- 323,359 1,378,162
Net cash provided by financing activities 32,565,423 31,221,557 10,140,799
-------------- -------------- --------------
Effect of exchange rate changes on cash 1,902,201 (1,755,550) (1,684,354)
-------------- -------------- --------------
Increase (decrease) in cash and cash equivalents (9,801,622) 8,667,548 (7,846,319)
Cash and cash equivalents, beginning of period 9,940,929 1,273,381 9,119,700
-------------- -------------- --------------
Cash and cash equivalents, end of period $139,307 $9,940,929 $1,273,381
============== ============== ==============
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $549,834 $262,276 $70,313
============== ============== ==============
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
SOUTH HERTFORDSHIRE UNITED KINGDOM FUND, LTD.
(A Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION AND PARTNERS' INTERESTS
Formation and Business
South Hertfordshire United Kingdom Fund, Ltd., formerly known as Jones
United Kingdom Fund, Ltd. (the "Partnership"), a Colorado limited partnership,
was formed on December 23, 1991, pursuant to a public offering. The
Partnership was formed to acquire, construct, develop, own and operate cable
television/telephony systems in the United Kingdom. Fawnspring Limited, a UK
corporation, is the general partner of the Partnership (the "General Partner").
The period of the Partnership's first public offering expired on August 15,
1992. Because the Partnership required funds beyond those raised by its first
offering in order to construct and develop a franchise to own and operate the
South Herts System, the General Partner, on behalf of the Partnership, sold
additional interests in the Partnership during an offering period that
commenced in September 1992 and ended in April 1994. As of December 31, 1994,
the Partnership had raised a total of $56,935,000 in gross offering proceeds
from the sale of 56,935 limited partnership interests, or $48,817,997 net of
sales commissions and other organizational and offering costs, from both its
initial and its secondary public offerings.
Contributed Capital
The capitalization of the Partnership is set forth in the accompanying
Consolidated Statements of Partners Capital (Deficit). No existing limited
partner is obligated to make any additional contributions to partnership
capital.
The General Partner purchased its interest in the Partnership by
contributing $1,000 to partnership capital.
Profits, losses and distributions of the Partnership are allocated 99
percent to the limited partners and 1 percent to the General Partner until the
limited partners have received distributions equal to 100 percent of their
capital contributions plus an annual return thereon of 12 percent, cumulative
and non-compounded. Thereafter, profits and distributions will generally be
allocated 75 percent to the limited partners and 25 percent to the General
Partner. Interest income earned prior to the formation of the Partnership was
allocated 100 percent to the limited partners.
Investment in Subsidiary
Bell Cablemedia (South Hertfordshire) Limited (formerly Jones Cable Group
of South Hertfordshire Limited) ("Bell Cablemedia South Herts") is a United
Kingdom corporation originally owned by Jones Global Funds, Inc. (the previous
general partner) and Jones Cable Group, Ltd., an affiliate of the previous
general partner. Bell Cablemedia South Herts is the holder of a franchise to
own and operate a cable television/telephony system in the South Hertfordshire
franchise area, located adjacent to the northwest perimeter of Greater London,
England (the "South Herts System"). There are approximately 94,000 homes in
<PAGE>
the franchise area, of which approximately 85,000 will be passed by the South
Herts System's cable television/telephony network when construction in the
franchise area is completed.
On February 20, 1992, upon receipt of approval from United Kingdom
regulatory authorities, the Partnership acquired, through nominees, the
beneficial ownership of 100 percent of the shares of Bell Cablemedia South
Herts. The acquisition by the Partnership of all of the shares of Bell
Cablemedia South Herts resulted in the Partnership acquiring beneficial
ownership of the South Herts System. The Partnership reimbursed Jones Global
Funds, Inc. and certain of its affiliates (the "Former Owners"), at cost, for
their expenses in connection with obtaining, holding and maintaining the
franchise rights or licenses for the South Herts System, for capital
expenditures during the period before the Partnership acquired the beneficial
ownership of Bell Cablemedia South Herts, and for the amount of operating and
interest expenses in excess of operating receipts incurred during such period,
which totalled $4,996,700. Subsequent to the Partnership's acquisition of
Bell Cablemedia South Herts, additional cost reimbursements have been made to
the general partner for construction costs. Partnership funds are maintained
in U.S. bank accounts as protection from foreign passive income tax
restrictions and are used to reimburse the general partner for the South Herts
System's construction and operation. As a result of timing differences,
accounts payable to affiliates, which totalled $5,340,912 at December 31,
1994, are created. Through December 31, 1994, the total amount reimbursed to
fund the South Herts System's construction and development was approximately
$48,800,000. As a result of the acquisition of the shares of Bell Cablemedia
South Herts in 1992, it has been consolidated with the Partnership's
operations.
In order to provide additional funding for the construction of the South
Herts System, two additional participants invested in Bell Cablemedia South
Herts in 1993 and 1994. Jones Intercable of South Hertfordshire, Inc.
invested Pound Sterling3,400,000 in Bell Cablemedia South Herts in exchange
for 34,000 Class A shares in November 1993. Also in November 1993, affiliates
of Sandler Capital Management (the "Sandler Group") committed to invest Pound
Sterling6,800,000 in Bell Cablemedia South Herts, of which Pound
Sterling2,266,600 was funded in November 1993 for 22,666 Class B shares. In
June 1994, the Sandler Group invested Pound Sterling3,273,232 for 32,732 Class
B shares and Jones Intercable of South Hertfordshire, Inc. invested Pound
Sterling503,283 for 5,033 Class B shares. In July 1994, the Sandler Group
invested Pound Sterling1,800,000 for 18,000 Class B shares and Jones
Intercable of South Hertfordshire, Inc. invested Pound Sterling466,800 for
4,668 Class B shares.
On June 10, 1994, Jones Global Group, Inc., Jones Intercable, Inc. and
certain of their subsidiaries (collectively, "Jones") and the Sandler Group
entered into agreements to transfer all of their interests in their United
Kingdom cable television/telephony operations and franchises, including Jones
Intercable of South Hertfordshire, Inc.'s interest in Bell Cablemedia South
Herts, Jones Global Funds, Inc.'s general partner interest in the Partnership
and the Sandler Group's interest in Bell Cablemedia South Herts to Bell
Cablemedia plc ("BCM") in exchange for American Depositary Shares ("ADSs")
issued by BCM in connection with a planned public offering of ADSs by BCM.
On July 22, 1994, in connection with the closing of the public offering by
BCM, Jones and the Sandler Group completed the exchange of their interests in
United Kingdom cable/telephony operations and franchises for ADSs issued by
BCM. At closing, BCM acquired Jones Intercable of South Hertfordshire, Inc.'s
interest in Bell Cablemedia South Herts, the Sandler Group's interest in Bell
Cablemedia South Herts and the general partner interest in the Partnership.
<PAGE>
In October 1994, the Partnership invested Pound Sterling5,108,900 in Bell
Cablemedia South Herts for 51,089 Class A shares and BCM invested Pound
Sterling2,554,600 in Bell Cablemedia South Herts for 25,546 Class A shares.
In November 1994, the Partnership invested Pound Sterling1,410,000 in Bell
Cablemedia South Herts for 14,100 Class A shares and BCM invested Pound
Sterling705,000 in Bell Cablemedia South Herts for 7,050 Class A shares. As a
result of these transactions, Bell Cablemedia South Herts is now owned 66.7
percent by the Partnership and 33.3 percent by BCM, and the general partner of
the Partnership is now Fawnspring Limited (the "General Partner"), a wholly
owned subsidiary of BCM. The General Partner provides consulting services to
the Partnership. The General Partner may delegate some or all of the
consulting services to BCM or to other affiliates.
(2)SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Records
The accompanying financial statements have been prepared on the accrual
basis of accounting in accordance with generally accepted accounting
principles. The Partnership tax returns are also prepared on the accrual
basis.
Principles of Consolidation
As a result of the Partnership's majority ownership of Bell Cablemedia
South Herts, it has been consolidated with the Partnership's operations in the
accompanying audited financial statements as of December 31, 1994, 1993 and
1992.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, amounts held in banks and
highly liquid investments purchased with a maturity of three months or less.
Currency Exchange Rates
The costs incurred by Bell Cablemedia South Herts are converted from United
Kingdom pounds sterling to United States dollars pursuant to Statement of
Financial Accounting Standard No. 52 ("SFAS 52"). Since pounds sterling
represent Bell Cablemedia South Herts' functional currency, translation
adjustments related to recording assets and liabilities in U.S. dollars at
current exchange rates are charged or credited directly to cumulative
translation adjustment in shareholder's equity. In the discretion of the
General Partner, net proceeds received from the sale of Partnership interests
will be converted from United States dollars to United Kingdom pounds
sterling. Likewise, net proceeds from the sale or refinancing of the
Partnership's cable television/telephony properties will be converted from
United Kingdom pounds sterling to United States dollars in order to make any
distributions to the partners.
Because the Partnership maintains its funds in US dollars but is required
to reimburse the General Partner in UK pounds sterling for expenditures
incurred by the General Partner for the construction and operation of the
South Herts System, the Partnership may encounter currency exchange rate
risks. To hedge these risks, the Partnership has entered into forward foreign
exchange contracts from time to time. Through September 1994, the Partnership
had purchased forward foreign exchange contracts with a blended average
<PAGE>
exchange rate of U.S. $1.68 per United Kingdom pound sterling. At December
31, 1994, the Partnership had incurred a cumulative loss of $334,980 on these
forward foreign exchange contracts, which was capitalized in the investment in
cable television and telecommunications properties on the Consolidated Balance
Sheets at December 31, 1994. For the years ended December 31, 1994 and 1993
and 1992, the losses capitalized relating to these contracts were $59,548,
$28,013 and $247,419, respectively. At December 31, 1994 the Partnership did
not have any open forward foreign exchange contracts.
Property, Plant and Equipment
Prior to receiving the first revenues from subscribers of a cable
television/telephony system constructed by the Partnership, all construction
costs, operating expenses and interest related to the system are capitalized.
From the time of such receipt until completion of the main construction build
(defined as the "prematurity period"), which in most cases is no longer than
two years, except in major urban markets, in which case the prematurity period
may be longer than two years, portions of certain fixed operating expenses and
interest are capitalized in addition to direct construction costs. The General
Partner has estimated a prematurity period of 3 years for the South Herts
System based upon its urban location, housing density and requirement for
mostly underground cable. The portions capitalized are decreased as progress
is made toward obtaining the subscriber level expected at the end of the
prematurity period, after which no further expenses are capitalized. At
December 31, 1994 and 1993, the investment in the cable television and
telecommunications network was comprised of $66,244,817 and $31,225,200 of
cable network and other electronic equipment, $2,022,595 and $1,691,732 of
freehold buildings, $1,957,834 and $814,556 of office and other equipment and
$0 and $2,386,475 of capitalized development costs, respectively. As of
December 31, 1994, the South Herts System had received $12,022,631 of revenue
from operations and had capitalized approximately $2,784,526 of expenses.
During 1994 Bell Cablemedia South Herts changed its accounting policy in
respect of deferred development expenditure to be consistent with the policy
adopted by the General Partner, and wrote off $2,487,690 to the consolidated
statement of operations.
Depreciation is provided on property, plant and equipment at rates
which are intended to write off the cost of the assets over their estimated
useful lives. Effect is given to commercial and technical obsolescence. For
1994 there has been a change in the assets lives to a consistent basis with
those adopted by the General Partner and its affiliates. The effect of this
change increased the net loss by $358,835 for the year ended December 31,
1994. Depreciation is provided on a straight line basis over 10-40 years for
the cable network and other electronic equipment, 35 years for freehold
property and 4-8 years for office and other equipment. Depreciation of the
capitalized construction costs begins from the time of receiving first
revenues from subscribers. During the prematurity period a portion of the
depreciation is recognized, based on the projected construction costs at the
end of the prematurity period. The portions depreciated are increased as
progress is made toward the prematurity period, after which full depreciation
continues.
Revenue Recognition
Subscriber prepayments will be initially deferred and recognized as revenue
when earned.
Other Receivables
<PAGE>
Refunds applied for of value-added taxes paid by the Partnership are
recorded as other receivables on the Consolidated Balance Sheets.
(3)TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATED ENTITIES
Consulting and Management Fees
The General Partner, BCM or affiliates of BCM is paid a management fee by
the Partnership. During the construction phases of the South Herts System,
this consulting fee is 2 percent of construction costs. After completion of
construction of each portion of the system, the consulting fee for the
completed portion is 5 percent of the gross revenues, excluding revenues from
the sale of cable television/telephony systems. The 5 percent fee is
calculated and payable monthly. No additional management or consulting fees
will be paid to the General Partner, BCM or affiliates of BCM by the
Partnership. Consulting fees paid or payable to the General Partner (or its
predecessor) by the Partnership for the years ended December 31, 1994, 1993
and 1992 were $1,008,545, $585,176 and $224,403, respectively. Of these
amounts, $0, $453,502 and $209,296 were capitalized in the investment in cable
television and telecommunications properties on the Consolidated Balance
Sheets and $1,008,545, $131,674 and $15,107 were expensed on the Consolidated
Statements of Operations for the years ended December 31, 1994, 1993 and 1992,
respectively.
Distribution Ratios and Reimbursement
Any Partnership distributions made from cash flow (defined as cash receipts
derived from routine operations, less debt principal and interest payments and
cash expenses) are allocated 99 percent to the limited partners and 1 percent
to the General Partner. Any distributions other than interest income on
limited partner subscriptions earned prior to the acquisition of the
Partnership's first cable television system or from cash flow, such as from
the sale or refinancing of a system or upon dissolution of the Partnership,
will be made as follows: 99 percent to the limited partners and 1 percent to
the General Partner until any negative balances in the limited partners'
capital accounts are reduced to zero; 100 percent to the General Partner until
any negative balance in its capital account is reduced to zero; 99 percent to
the limited partners and 1 percent to the General Partner until the balance in
the limited partners' capital accounts is equal to their adjusted capital
contribution plus a 12 percent return; 100 percent to the General Partner
until the balance in its capital account is equal to its adjusted capital
contribution, and any remaining income or gain shall be allocated 75 percent
to the limited partners and 25 percent to the General Partner.
The General Partner and its affiliates are entitled to reimbursement from
the Partnership for direct and indirect expenses allocable to the operation of
the Partnership and the South Herts System, which includes, but is not limited
to, rent, supplies, telephone, travel, copying charges and salaries of any
full or part-time employees. The General Partner believes that the
methodology used in allocating these expenses is fair and reasonable. During
the years ended December 31, 1994, 1993 and 1992, reimbursement made to the
General Partner (or its predecessor) for any allocable direct and indirect
expenses totalled $996,419, $1,163,848 and $643,228, respectively.
The General Partner and its affiliates may make advances to, and defer
collection of fees and allocated expenses owed by, the Partnership, although
they are not required to do so. The Partnership will be charged interest on
such advances and deferred amounts at a rate equal to the General Partner's or
certain affiliates' weighted average cost of all debt financing from
unaffiliated entities. For the years ended December 31, 1994 and 1993 no such
<PAGE>
interest was charged to the Partnership by the General Partner or its
affiliates and for the period from inception (December 23, 1991) to December
31, 1992, $252,426 of interest had been charged to the Partnership by the
predecessor to the General Partner. These amounts are capitalized in the
investment in cable television and telecommunications properties on the
Consolidated Balance Sheets.
(4) FINANCING
In July 1992, Bell Cablemedia South Herts entered into an agreement with a
bank to refinance its primary office/headend building for Pound
Sterling800,000. This loan was to be repaid over 10 years with quarterly
principal and interest payments due July 1993 through July 2002. Interest on
the loan was calculated at the London InterBank Offered Rate ("LIBOR") plus 2
percent. For the years ended December 31, 1994, 1993 and 1992, the South
Herts System had recorded interest expense of $81,050, $98,471 and $68,726,
respectively. At December 31, 1994, the effective interest rate was 8
percent. At December 31, 1994, the amount outstanding on this loan totalled
$1,043,000 when converted to U.S. dollars at the exchange rate between U.S.
dollars and UK pounds sterling effective at such date. Payments due on the
note payable for each of the five years in the period ending December 31, 1999
and thereafter, respectively, are $139,067, $139,067, $139,067, $139,067,
$139,067 and $347,665.
Bell Cablemedia South Herts is nearing completion of negotiations for
the provision of Pound Sterling25,000,000, ($39,000,000, at an exchange rate
of U.S. $1.56 per U.K. pound sterling) in debt financing. Such bank
financing, if completed, will enable Bell Cablemedia South Herts to complete
the construction of the South Herts System within the timetable set forth in
the modified license and provide additional working capital. There can be no
assurance that the proposed financing will be completed. If the proposed bank
financing is not completed, Bell Cablemedia South Herts will be required to
seek additional debt or equity financing.
(5)COMMITMENTS
Because Bell Cablemedia South Herts did not meet the construction timetable
set forth in the original license issued by the South Hertfordshire franchise
area, Bell Cablemedia South Herts requested an amendment of the construction
timetable from OFTEL, the United Kingdom regulatory authority that issued the
license. On February 28, 1994, OFTEL modified the South Herts System's
license. The license, as modified, requires that the South Herts System pass
60,000 premises with cable by December 31, 1994 and that it be completed (by
passing 85,000 premises) by December 31, 1995.
(6)INCOME TAXES
Income taxes have not been recorded in the accompanying financial
statements because they accrue directly to the partners. The Federal and
state income tax returns of the Partnership are prepared and filed by the
General Partner. There are no significant differences between taxable income
and the net income reported in the Consolidated Statements of Operations.
The Partnership's tax returns, the qualification of the Partnership as such
for tax purposes, and the amount of distributable Partnership income or loss
are subject to examination by Federal and state taxing authorities. If such
examinations result in changes with respect to the Partnership's qualification
as such, or in changes with respect to the Partnership's recorded income or
loss, the tax liability of the general and limited partners would likely be
<PAGE>
changed accordingly.
United Kingdom profits (comprising income and gains) of a corporation owned
by the Partnership will be subject to United Kingdom corporation tax.
Corporation tax is currently charged at a rate of 33 percent, with a lower
rate of 25 percent applying to companies with profits of less than Pound
Sterling250,000. Marginal relief applies where the profits exceed Pound
Sterling250,000 but not Pound Sterling1,250,000. Such corporation will be
able to carry forward losses from operations to be offset against subsequent
profits for the same operations for an indefinite number of years. No tax
benefit has been recognized in the accompanying financial statements for tax
net operating losses generated by Bell Cablemedia South Herts.
(7)SUBSEQUENT EVENT
In March 1995, bank financing to refinance Bell Cablemedia South Herts'
primary office/headend building was repaid. See note 4.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURES
On March 20, 1995, the Partnership engaged a new auditor, Touche Ross & Co.
The new auditor is already engaged by Fawnspring Limited, the general partner
of the Partnership, and as such already audits the accounts of Bell Cablemedia
South Herts, shares of which constitute the Partnership's primary operating
assets. The efficiencies created by Touche Ross & Co.'s current relationship
were the reason for their engagement and the change from the prior auditors,
Arthur Andersen LLP.
Arthur Andersen LLP resigned as auditor of the Partnership by letter dated
March 20, 1995. Arthur Andersen LLP's reports on the financial statements of
the Partnership for the fiscal years ended December 31, 1993 and 1992 did not
contain any adverse opinion or disclaimer of opinion and were not qualified or
modified as to any uncertainty, audit scope or accounting principal.
Moreover, there were no disagreements with Arthur Andersen LLP on any matter
of accounting principles or practices, financial statement disclosure or
auditing scope or procedure, which, if not resolved to Arthur Andersen LLP's
satisfaction, would have caused it to make reference to the subject matter of
such disagreement in connection with such reports.
In accordance with Item 304(a)(3) of the Regulation S-K, the Partnership
has furnished Arthur Andersen LLP with a copy of this report on Form 10-K and
has requested Arthur Andersen LLP to furnish it with a letter addressed to the
Securities and Exchange Commission stating whether Arthur Andersen LLP agrees
with the statements made by the Partnership herein, and, if not, stating the
respects in which it does not agree. A copy of the letter from Arthur
Andersen LLP is included as exhibit 16.1 to this filing.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership itself has no officers or directors. Certain information
concerning directors and executive officers of the General Partner is set
forth below.
<PAGE>
Name Age Positions with the General Partner
----- ---- ----------------------------------
Alan Christopher Bates 52 Chairman of the Board
William David Anderson 45 Director
John William Sheridan 40 Director
Peter Lyne 40 Director
Mr. Bates has been Chairman of the Board of Directors of the General Partner
since July 1994. He has been Director of BCM since April 1994 and has been
Chief Executive Officer of BCM since July 1994. He was Chief Executive of
Bell Cablemedia (South East) Limited for the period from May 1988 through
March 1989. Earlier Mr. Bates spent five years as a consultant to various UK
and international companies. Mr. Bates is a director of T2 Solutions Ltd, a
computer software company, and Alderwick Peachell & Partners Limited, a
recruitment company. In 1994, Mr. Bates was Chairman of the Cable
Communications Association.
Mr. Anderson has been a Director of the General Partner since July 1994. He
was appointed a Director and Chief Financial Officer of BCM in May 1994.
Prior to this he had been Vice-President, Taxation of BCE since January 1993
and Assistant Vice-President, Taxation of BCE from September 1991. From 1990
to September 1991, Mr. Anderson was an independent tax consultant, and from
1972 to 1990, he was with a major Canadian and international accounting firm.
Mr. Sheridan has been a Director of the General Partner since December 1994.
He has been Chief Operating Officer of BCM since January 1, 1995. Prior to
this appointment in January 1995 he was Chief Executive of Bell Cablemedia
(South East) Limited for two and a half years. Previously he was Vice
President of Sales and Service for Bell Canada Inc. He is currently chairman
of London Interconnect and deputy chairman of the Cable Communications
Association.
Mr. Lyne has been a Director of the General Partner since February 1995. He
has been Managing Director, South Region of BCM since January 1995. He joined
BCM in July 1994 as Managing Director, East Region. Previously he was sales
director for Northern Telecom Europe and has also worked for STC and ICL.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no employees; however, various personnel are
required to operate the South Herts System. Personnel are employed by BCM and
its affiliates and, pursuant to the terms of the Partnership's limited
partnership agreement, the cost of such employment is charged by BCM and its
affiliates to the Partnership as a direct reimbursement item. See Item 13.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
No person or entity owns more than 5 percent of the limited
partnership interests in the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The General Partner and its affiliates engage in certain transactions
with the Partnership as contemplated by the limited partnership agreement of
the Partnership and as disclosed in the prospectuses for the Partnership's
public offerings. The General Partner believes that the terms of such
transactions, which are set forth in the Partnership's limited partnership
agreement, are generally as favorable as could be obtained by the Partnership
<PAGE>
from unaffiliated parties. This determination has been made by the General
Partner in good faith, but none of the terms were or will be negotiated at
arm's-length and there can be no assurance that the terms of such transactions
have been or will be as favorable as those that could have been obtained by
the Partnership from unaffiliated parties.
Jones International Securities, Ltd. ("JISL"), an affiliate of the
Jones Global Funds, the former general partner, served as the dealer-manager
of an offering of limited partnership interests in the Partnership during 1994
and received a fee equal to 10 percent of the gross proceeds and paid all
commissions of broker-dealer firms that sell interests. Up to 9 percent of
the gross proceeds paid to Jones International Securities, Ltd. was permitted
to be reallowed to unaffiliated participating broker-dealer firms. For the
year ended December 31, 1994, the Partnership paid fees of approximately
$1,476,500 to JISL in connection with the offering. In addition the
Partnership paid $553,688 in syndicate reimbursement costs.
Pursuant to the provisions of the Partnership's limited partnership
agreement, the General Partner is entitled to be paid a consulting fee by the
Partnership. During the construction phases of the cable television/telephony
system, this consulting fee will be 2 percent of construction costs. After
completion of construction of each portion of the system, the consulting fee
for the completed portion will be 5 percent of gross revenues, excluding
revenues from the sale of cable television/telephony systems. No additional
management or consulting fees will be paid to the General Partner or any of
its affiliates. Consulting fees paid or payable by the Partnership for the
year ended December 31, 1994 totalled $1,008,545.
The General Partner is entitled to reimbursement from the Partnership
for certain allocated overhead and administrative expenses in accordance with
the terms of the limited partnership agreement of the Partnership. These
expenses consist primarily of salaries and benefits paid to corporate
personnel, rent, data processing services and other facilities costs. Such
personnel provide administrative, accounting, legal and investor relations
services to the Partnership. Allocations of personnel costs are based
primarily on actual time spent by employees of the General Partner with
respect to the Partnership.
The General Partner and its affiliates may make advances to, and
defer collection of fees and allocated expenses owed by, the Partnership,
although they are not required to do so. The Partnership will be charged
interest on such advances and deferred amounts at a rate equal to the General
Partner's or certain affiliates' weighted average cost of all debt financing
from unaffiliated entities. No such interest charges were incurred by the
Partnership for year ended December 31, 1994.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a) The following documents are filed herewith as part of this report:
1. See index to financial statements at page 31 for the list of
financial statements and exhibits thereto filed as part of this
report.
2. The following exhibits are filed herewith:
3.1 Certificate of Limited Partnership dated December 31, 1991.
<PAGE>
3.2 Amendment to the Certificate of Limited Partnership dated
January 31, 1995.
4.1 Limited Partnership Agreement dated as of December 31, 1991.(1)
4.2 Amendment No. 1 to Limited Partnership Agreement dated October
20, 1992.
10.1 Letter Agreement dated February 20, 1992 by and among the
Partnership, its General Partner and Jones Cable Group, Ltd.
regarding the transfer of beneficial ownership of Jones Cable
Group of South Hertfordshire Limited to the Partnership.(1)
10.2 The South Herts System's Cable Program License dated December
3, 1990.(1)
10.3 The South Herts Systems's Telecommunications License dated
October 15, 1990.(1)
10.4 The South Herts System's Modification of Telecommunications
License dated February 28, 1994.
16.1 Letter from Arthur Andersen LLP regarding change in certifying
accountant.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K
The Partnership has not filed a report on Form 8-K during the last fiscal
quarter of the period for which this Form 10-K is filed.
_____________________
(1) Incorporated by reference from the Form S-1 Registration Statement of the
Partnership filed with the Securities and Exchange Commission (Registration
No. 33-48400).
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
SOUTH HERTFORDSHIRE UNITED
KINGDOM FUND, LTD.
a Colorado limited partnership
By: Fawnspring Limited,
its General Partner
By: /s/ Alan C. Bates
-------------------------
Alan C. Bates
Date: March 31, 1995 Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
<PAGE>
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: /s/ Alan C. Bates
-------------------------
Alan C. Bates
Director of
Fawnspring Limited
Dated: March 31, 1995 (Principal Executive Officer)
By: /s/ William D. Anderson
-------------------------
William D. Anderson
Director of
Fawnspring Limited
(Principal Financial and
Dated: March 31, 1995 Accounting Officer)
By: /s/ John W. Sheridan
-------------------------
John W. Sheridan
Director of
Dated: March 31, 1995 Fawnspring Limited
By: /s/ Peter Lyne
-------------------------
Peter Lyne
Dated: March 31, 1995 Director of Fawnspring Limited
EXHIBIT INDEX
Number Description
------ -----------
3.1 Certificate of Limited Partnership dated December 31, 1991.
3.2 Amendment to the Certificate of Limited Partnership dated
January 31, 1995.
4.2 Amendment No. 1 to Limited Partnership Agreement dated
October 20, 1992.
10.4 The South Herts System's Modification of Telecommunications
License dated February 28, 1994.
16.1 Letter from Arthur Andersen LLP regarding change in certifying
accountant.
27.1 Financial Data Schedule.
Exhibit 3.1
CERTIFICATE OF LIMITED PARTNERSHIP
OF
JONES UNITED KINGDOM FUND, LTD.
The undersigned, desiring to form a limited partnership under the
Uniform Limited Partnership Act of the State of Colorado, does hereby swear
<PAGE>
and state as follows:
1. The name of the limited partnership is Jones United Kingdom
Fund, Ltd. (the "Partnership").
2. The name and address of the agent for service of process shall
initially be Elizabeth M. Steele, 9697 East Mineral Avenue, Englewood,
Colorado 80112. The General Partner may change such name and address of the
agent for service of process in its discretion as it deems advisable.
3. The name of the General Partner is Jones Global Funds, Inc., a
Colorado corporation, which, with its affiliates, intends to acquire franchise
rights in the United Kingdom and then construct, develop and operate
communications systems that will provide both cable television programming and
fixed link telephone services to residential and commercial subscribers in the
franchise areas. The location of the principal place of business of the
General Partner shall initially be 9697 East Mineral Avenue, Englewood,
Colorado 80112. The General Partner may change such place of business in its
discretion and may maintain such other offices at any other place or places
as it deems advisable.
4. There are at least two partners in the Partnership, at least
one of which is a limited partner.
IN WITNESS WHEREOF, the undersigned has signed and sworn to this
Certificate of Limited Partnership on the 31st day of December, 1991.
JONES GLOBAL FUNDS, INC.
a Colorado corporation,
General Partner
By: /s/ Elizabeth M. Steele
-------------------------
Elizabeth M. Steele
Vice President
STATE OF COLORADO )
) ss:
COUNTY OF ARAPAHOE )
On the 31st day of December, 1991, before me personally appeared
Elizabeth M. Steele, as Vice President of Jones Global Funds, Inc., to me
known and known to me to be the individual described in and who executed the
foregoing instrument, and she thereupon duly acknowledged to me that she
executed the same, of her own free will, as her voluntary act and deed.
IN WITNESS WHEREOF, I hereby set my hand and seal on the date first
above written.
(SEAL) /s/ Deborah L. Baughman
-------------------------
Notary Public
My commission expires 9/14/95.
Exhibit 3.2
AMENDMENT TO
<PAGE>
CERTIFICATE OF LIMITED PARTNERSHIP
OF
JONES UNITED KINGDOM FUND, LTD.
We, the undersigned, desiring to amend the Certificate of Limited
Partnership of Jones United Kingdom Fund, Ltd. originally filed in the office
of the Secretary of the State of Colorado on December 31, 1991, hereby certify
as follows:
1. Paragraph 1 of the Certificate of Limited Partnership of Jones
United Kingdom Fund, Ltd. shall be amended by striking out and eliminating the
existing text thereof in its entirety and substituting the following in its
place:
"The name of the limited partnership is South Hertfordshire United
Kingdom Fund, Ltd. (the "Partnership")."
2. Jones Global Funds, Inc., a general partner, has withdrawn its
status as general partner, and Fawnspring Limited has been admitted as the new
general partner of the Partnership Fawnspring Limited is a company formed
under English law and it intends to carry on the business of the former
general partner. The location of the principal place of business of the new
general partner is Colne House, 21 Upton Road, Watford, Hertfordshire WD1 7EL,
England. The general partner may change such place of business in its
discretion and may maintain such other offices at any place or places as it
deems advisable.
IN WITNESS WHEREOF, the undersigned have signed and sworn to this
Amendment to Certificate of Limited Partnership on the 31st day of January,
1995.
JONES GLOBAL FUNDS, INC. FAWNSPRING LIMITED
By: /s/ Elizabeth Steele By: /s/ William D. Anderson
--------------------- -----------------------
Elizabeth M. Steele William D. Anderson
Vice President Director
Exhibit 4.2
Exhibit 4.2
JONES UNITED KINGDOM FUND, LTD.
AMENDMENT NO. 1 TO LIMITED PARTNERSHIP AGREEMENT
This Amendment No. 1 to the Limited Partnership Agreement (the
"Partnership Agreement") of Jones United Kingdom Fund, Ltd., a Colorado limited
partnership (the "Partnership") is made and entered into as of October 20,
1992, by and among Jones Global Funds, Inc., a Colorado corporation, as
general partner (hereinafter called the "General Partner") and the limited
partners of the Partnership and such additional limited partners as may
hereafter be admitted to the Partnership (hereinafter individually called
<PAGE>
"Limited Partnership" or collectively called "Limited Partners.")
In consideration of the mutual promises contained herein, the
parties agree as follows with such changes or variations thereof as may be
convenient or necessary to comply with law:
Section 3.2(i) of the Partnership Agreement is hereby amended
in its entirety to read as follows:
(i) Limited Partners shall at all times have access to the
records of the Partnership and may inspect and copy any of
them; provided, however, that the General Partner may restrict
access to its trade secrets made available to the Partnership.
An alphabetical list of the names, addresses and business
telephone numbers of the limited partners of the Partnership
along with the number of limited partnership interests held by
each of them (the "Partnership List") shall be maintained as
part of the books and records of the Partnership and shall be
available for inspection by any Limited Partner or its
designated agent at the home office of the Partnership upon the
request of the Limited Partner. The Partnership List shall be
updated at least quarterly to reflect changes in the
information contained therein. A copy of the Partnership List
shall be mailed to any Limited Partner requesting the
Partnership List within ten days of the request. The copy of
the Partnership List shall be printed in alphabetical order, on
white paper, and in a readily readable type size (in no event
smaller than 10-point type). A reasonable charge for copy work
may be charged by the Partnership. The purposes for which a
Limited Partner may request a copy of the Partnership List
include, without limitation, matters relating to Limited
Partners' voting rights under this Agreement and the exercise
of Limited Partners' rights under federal proxy laws. If the
General Partner of the Partnership neglects or refuses to
exhibit, produce or mail a copy of the Partnership List as
requested, the General Partner shall be liable to any Limited
Partner requesting the list for the cost, including attorneys'
fees, incurred by the Limited Partner for compelling the
production of the Partnership List, and for actual damages
suffered by any Limited Partner by reason of such refusal or
neglect. It shall be a defense of the General Partner that the
actual purpose and reason for the request for inspection or for
a copy of the Partnership List is to secure such list of
Limited Partners or other information for the purpose of
selling such list or copies thereof, or of using the same for a
commercial purpose other than in the interest of the applicant
as a Limited Partner relative to the affairs of the
Partnership. The General Partner may require the Limited
Partner requesting the Partnership List to represent that the
list is not requested for a commercial purpose unrelated to
the Limited Partner's interest in the Partnership. The
remedies provided to Limited Partners requesting copies of the
Partnership List are in addition to, and shall not in any way
limit, other remedies available to Limited Partners under
federal law, or the law of any state."
JONES GLOBAL FUNDS, INC., a
Colorado corporation, as
General Partner
<PAGE>
By /s/ Patrick J. Lombardi
-------------------------
Patrick J. Lombardi
Group Vice President
The Limited Partners
By: Jones Global Funds, Inc., as
attorney-in-fact pursuant to
Article 8 of the Limited
Partnership Agreement
By: /s/ Patrick J. Lombardi
-------------------------
Patrick J. Lombardi
Group Vice President
[OFTEL LETTERHEAD]
Office of Telecommunications
SOUTH HERTFORDSHIRE BROADBAND CABLE FRANCHISE
MODIFICATIONS OF THE CONDITIONS OF THE Licence GRANTED TO JONES CABLE GROUP OF
SOUTH HERTFORDSHIRE LIMITED ON 15 OCTOBER 1990
Whereas the Secretary of State granted to Jones Cable Group of South
Hertfordshire Limited on 15 October 1990 a Licence ("the Licence") under
section 7 of the Telecommunications Act 1984 ("the Act") for the running of the
telecommunication systems specified in Annex A to the License;
Whereas the Director General of Telecommunications ("the Director"), in
accordance with section 12 of the Act, published on 3 September 1992 and on 18
November 1993 notices ("the Notices") stating that he proposed to make the
modifications specified in the Notices and setting out their effect, stating
the reasons why he proposed to make the modifications and specifying that
representations and objections to the proposed modifications could be made no
later than 1 November 1992 and 20 December 1993 respectively;
Whereas the Director has considered pursuant to Section 12 of the Act all the
representations and objections made to him concerning the proposed
modifications;
Whereas copies of the Notices have been sent to the Licensee and the Licensee
has consented to the making of the modifications;
And whereas copies of the Notices have been sent by the Director to the
Secretary of State and the Secretary of State has not directed the Director
not to make any of the modifications;
Now therefore the Director, in exercise of the powers conferred on him by
section 12 of the Act, hereby makes the following modifications of the
Conditions in Schedule 1 to the License.
1. The modifications set out in the attached Annex shall have effect and
shall come into force on the date on which they are made.
2. The Interpretation Act 1978 shall apply to this instrument as though
it were an Act of Parliament.
/s/ Anna Walker
MRS A WALKER
a person authorised in that behalf under
paragraph 8 of Schedule 1 to the Act
Annex
TELECOMMUNICATIONS ACT 1984
Modifications of the Conditions of the Licence granted to Jones Cable Group of
South Hertfordshire Limited on 15 October 1990 to run telecommunication
systems in the area of South Hertfordshire
Condition Subject Page
Installation of the
1 Applicable Cabled Systems...... 2
3 Directory Information.......... 3
8 Interconnection................ 4
8A Equal Access................... 10
8b Essential Interfaces........... 17
10 Retailers/Service Providers.... 21
11 Price Notifications............ 24
15 Voice Telephony................ 25
International Simple Resale
15A Services....................... 27
25 Metering, Billing, etc......... 32
29A Numbering Arrangements......... 36
32A Controlled Services............ 43
Provision of Special
32B Facilities..................... 47
Private Circuits to other
40 PTOs........................... 49
41 Changes in Shareholders........ 52
44 Financial Statements........... 54
45 Agreement Documents............ 55
Exceptions and Limitations
46 on Obligations in Schedule 1... 56
Minor and Consequential
Amendments..................... 57
CONDITION 1
INSTALLATION OF APPLICABLE CABLED SYSTEMS AND PROVISION OF TELECOMMUNICATION
SERVICES
In Condition 1.2(a), as modified by determinations made by the Director on 17
May 1991 and 7 November 1991, after the words
" (i) 1 March 1992 not less than 5,000 premises;"
substitute the following:-
" ii) 31 December 1993 not less than 28,000 premises; and
(iii) 31 December 1994 not less than 60,000 premises;".
In Condition 1 in paragraph 1.2(b), for the words:-
"1 March 1994" substitute:-
"31 December 1995".
In Condition 1.3, for the words "at any time before 1 March 1993" substitute
"at any time before 31 December 1994".
CONDITION 3
DIRECTORY INFORMATION
For Condition 3.2(b) substitute:-
"(b) supply to the operator of that Other System, whether by
providing on-line access to the Licensee's electronic database
referred to in paragraph 3.2(c) or by providing directories of
the kind ref erred to in paragraph 3.1(b) or by providing the
totality of the contents of that database in machine readable
form, directory information about persons to whom the Licensee
provides switched voice telephony services and do so for the
purpose of enabling that operator to provide directory
information about such services provided by means of the
Applicable Cabled Systems and that Other System when connected
together and to route calls, and do so in a form which is
sufficient to meet any reasonable request of that operator for
those purposes having regard in particular to the cost to, and
the reasonable convenience of, the Licensee and that operator
and to the desirability of that operator being able to use
complete and up to date directory information; and
(c) where the operator of that Other System requests the Licensee
pursuant to and in accordance with paragraph 3.2(b) to provide
access including on-line access or including the provision of an
appropriate storage medium containing the data in machine
readable form, to all the names, addresses and telephone
numbers on the electronic database which is used by the
Licensee to provide by means of the Applicable Cabled Systems
directory information services to persons to whom the Licensee
provides switched voice telephony services then the Licensee
shall grant such access on reasonable terms (which may include
recovery of fully allocated costs and a reasonable return on
capital employed) provided that:
(i) the operator of that Other System undertakes to use the
directory information only for the purpose of providing
directory information services or to route calls;
(ii) the Licensee may lawfully provide such information to
the operator of the Other System; and
(iii) the Licensee shall not be required to do anything in
contravention of the Data Protection Act 1984.".
In Condition 3.5 after "3.2" insert "(a)".
CONDITION 8
INTERCONNECTION
For Condition 8.5(a) substitute:-
"(a) that the cost of anything done pursuant to or in connection
with the agreement including fully allocated costs attributable
to the services to be provided and taking into account relevant
overheads and a reasonable rate of return on attributable
assets is apportioned equitably between the Licensee and the
Operator;".
At the end of paragraph 8.5 add:-
"(g) that without prejudice to paragraph 8.5A the Licensee may be
required to carry out any work which the agreement requires it
to carry out within an appropriate period of time having regard
to all the circumstances which would be reasonable for an
efficient telecommunications operator who was not required to
give the particular work priority over work for the Licensee's
customers generally.".
After paragraph 8.5 insert:-
"8.5A where in pursuance of such an application as is referred to in
paragraph 8.5 the Director determines any charge (or the means
of calculating any charge) payable in respect of the
establishment of a connection between the Applicable Cabled
Systems and the system of the Operator he shall do so in
accordance with the following provisions:
1 Any costs incurred in the establishment of such a connection,
including (without limitation) the provision of dedicated capacity at a point
(a 'point of connection') at which the Applicable Cabled Systems and the
Operator's system are connected, but not transmission capacity, shall be
shared between the parties according to the proportions in which each of them
will bill the customers originating calls which are to be conveyed over the
point of connection. The proportions shall be derived from forecasts by each
party of the capacity required to convey those calls for which the respective
parties will bill customers originating them. These costs shall be assessed
on the basis of:
(a) the Licensee's or the Operator's respective fully allocated
costs of the establishment of the connection including a
reasonable contribution to relevant overheads; and
(b) the application to relevant capital employed of a reasonable
rate of return on attributable assets.
2 Any determination of any charge (or the means of calculating the
same) to be payable under paragraph 1 above may include a provision that no
such charge shall be payable where the party imposing the charge fails to
provide the connection within six months (or such longer period as the
Licensee and the Operator may agree) of the date of the request therefor,
provided that this provision shall not apply in any particular case unless it
is reasonable in all the circumstances for it to apply. It shall be deemed not
to be reasonable if:
(a) it was not reasonably practicable for any reason for the first
party to provide the connection in time;
(b) the other party's request for the connection was unreasonable
in quantum having regard to its current and future needs; or
(c) in order to comply with the time period the Licensee would have
had to give priority to making the connection beyond that given
to its own customers generally.
3 The period referred to in paragraph 2 shall be extended by such
period as equates to or, if there is no period that equates, as is reasonably
commensurate with, delays attributable to any default or lack of cooperation
by the Operator, or to force majeure of any kind.
4 Where one party has in pursuance of a provision in the agreement
required the other party to provide a connection and subsequently cancels the
order, it shall reimburse the other party for all costs (assessed on the basis
of that party's fully allocated costs, together with a reasonable rate of
return on attributable assets) incurred by the other party in the provision of
the connection up to the date of cancellation.".
After paragraph 8.8 insert:-
"8.8A.1 This paragraph 8.8A applies where:
(a) an Operator establishes a prima facie case that the Licensee is
unreasonably not performing an obligation which he is required
to perform under an agreement entered into under paragraph 8.1;
(b) the Director considers that:
(i) the obligation ought to be performed in order to achieve
the purposes of paragraph 8.1;
(ii) the Operator is not able satisfactorily to enforce the
agreement so that the obligation is performed within such
time as the Director considers necessary and the balance
of convenience requires the Director to take action
under this paragraph rather than leave it to the Courts;
and
(iii) the Operator has performed all its obligations which are
relevant to the Licensee's obligation that is allegedly
not being performed; and
(c) paragraph 8.8 does not apply.
8.8A.2 Where this paragraph 8.8A applies the Director may require the
Licensee to perform the obligation subject to such conditions as are
reasonable in the circumstances having regard, in particular, to the permitted
terms and conditions which apply and to anything which the Operator may
reasonably be expected to do in order to mitigate the effects of the
Licensee's failure to perform its obligation.
8.8A.3 Before making a requirement under paragraph 8.8A.2 the Director shall
notify the Licensee of the prima facie case established by the Operator, his
conclusions thereon, and on the matters referred to in paragraph 8.8A.1(b) and
the direction he proposes to make. The Licensee shall be afforded adequate
time in which to make representations.
8.8B.1 Notwithstanding, and without prejudice to, any of the foregoing
provisions of this Condition, if the Director considers that there is likely
to be a category comprising a sufficient number of Operators seeking
determinations under paragraph 8.5 for whom standard terms and conditions
would be appropriate, he may require the Licensee to publish standard
provisions (including, without limitation, charges or the method for
calculating them) which set out the terms on which the Licensee will enter
into an agreement under paragraph 8.1 with Operators of that particular
category.
8.8B.2 If on an application by an Operator in that category the Director is
satisfied that the Operator has established a prima facie case that any such
standard term or condition proposed by the Licensee is unreasonable and that
the Licensee has acted unreasonably in relation to negotiations on that term
or condition, the Director may, if he considers it necessary to do so, either
determine that the Licensee shall modify that standard provision in such a
way as to make the term reasonable in the agreement with the Operator, or
modify that standard provision in such a way in the provisions published under
paragraph 8.8B.1.
In applying this paragraph 8.8B.2:
(a) any such standard provision shall be confined to the subject
matter of the term or condition proposed by the Licensee
except that, where the Director considers that a term or
condition is essential in relation to subject matter not
covered by any term or condition proposed by the Licensee, he
may determine a term or condition to cover the subject matter;
(b) the Licensee shall not be deemed to have acted unreasonably
merely by virtue of having proposed the term or condition in
question; and
(c) no determination may be made in relation to any provision which
would be subject to the Unfair Contract Terms Act 1977.
8.8B.3 Before making a determination under paragraph 8.8B.2 the Director
shall notify to the Licensee and the Operator the grounds of the Operator's
application and his conclusions thereon and the modification he proposes to
make or require the Licensee to make, and shall afford the Licensee and the
Operator adequate time, being not less than 28 days, in which to make
representations.
8.8B.4 Where an Operator makes an application to the Director under
paragraph 8.5, the Director may treat the application as an application under
paragraph 8.8B.2 above and act accordingly.
8.8B.5 For the avoidance of doubt the provisions of paragraphs 8.5 and 8.5A
shall apply in respect of any determination made under this paragraph as they
apply in relation to a determination made under paragraph 8.5.".
CONDITION 8A
EQUAL ACCESS
After Condition 8 insert:-
"Condition 8A
EQUAL ACCESS
8A.1 This Condition applies in respect of any Long Line Public
Telecommunications Operator (the term 'Operator' referring in this Condition
8A to such an Operator) with whom the Licensee has entered into an agreement
as required by Condition 8.1 and where the Director has made a direction under
paragraph 8A.2.
8A.2 (a) At any time after the date on which the Licensee first provides
25 per cent of the available Exchange Lines either in any local
call charge area of British Telecommunications plc or in the
Licensed Area the Director may, subject to the provisions of
paragraph 8A.3, make a direction that whenever an Operator so
requests after a date specified in the direction the Licensee
shall make Equal Access available in respect of that Operator,
in an area or areas in relation to which the condition set out
above is met, on the basis set out in this Condition 8A;
(b) The direction shall contain a functional specification of
exchange software for the provision of Equal Access. The
specification shall be that submitted to the Director by the
Licensee (following receipt of a request from the Director) or,
if the Director, having carried out such consultation as
appears to him appropriate, considers that specification to be
unsatisfactory, in a form determined by the Director. Before
making such a determination the Director shall notify the
Licensee as to why the Licensee's specification is
unsatisfactory and give the Licensee the opportunity to make
representations.
8A.3 The Director shall not make a direction under paragraph 8A.2 unless:
(a) he has carried out a cost-benefit analysis comparing the likely
benefits to telecommunications customers to be gained from the
introduction of Equal Access with all costs likely to be
incurred, including opportunity costs, which analysis indicates
that the gains outweigh the likely costs; and
(b) in his opinion sufficient arrangements in relation to the
pricing of telecommunication services provided by the Licensee
have been made in relation to the following matters to achieve
fair competition:
(i) the extent to which the Licensee has been able to balance
its charges to align them more appropriately with costs;
(ii) the extent to which regulatory controls, whether imposed
by this Licence or otherwise and including voluntary
commitments, affect the balance referred to in paragraph
8A.3(b)(i);
(iii) the amount and structure of charges payable to the
Licensee by virtue of agreements with Operators entered
into by the Licensee under Condition 8; and
(iv) the extent to which charges are payable to the Licensee
by virtue of Condition 20.
8A.4 When carrying out the cost-benefit analysis referred to in paragraph
8A.3(a), the Director shall consult the Licensee and such other persons as
appear to him appropriate, affording them a reasonable period, being not less
than 28 days, in which to make representations, and he shall take their
representations into account when reaching his conclusions. On conclusion of
the analysis he shall make it available to the Licensee and such other
persons.
8A.5 (a) In this Condition 'Equal Access' means a facility provided to
an Operator whereby he can arrange with a customer of the
Licensee that, following a request by that customer to the
Licensee, the customer may choose over which public
telecommunications system, being a system run by a Long Line
Public Telecommunications Operator, to route National and
International calls made by means of an Exchange Line provided
to him by the Licensee. The choice shall be exercisable in
either of the following ways, at the option of the customer:
(i) by preselection, that is to say that the customer may, by
registering a preference with the Licensee, name a
particular such Operator for the conveyance of all such
calls. The Licensee may offer to provide a facility to
override the preference in the case of any particular
call; or
(ii) on a call-by-call basis, that is to say that the
customer must, for each call, exercise his choice by
dialling a short initial code designated for the
particular such Operator (or the Licensee) chosen by the
customer for the call in question. The respective
initial codes for the Licensee and for all Operators
shall be of equal length.
'National' and 'International' calls shall be defined by
reference to the Licensee's charges and other terms and
conditions published in accordance with Condition 11.
(b) The Licensee shall not require the customer to acquire any
special equipment or to pay any fee as a prerequisite to his
being able to obtain the Equal Access facility. For the
avoidance of doubt the Licensee may impose a charge if a
customer who has registered a preference changes that
preference in any way.
8A.6 Where a Long Line Public Telecommunications Operator (within the
meaning of that term in Condition 8) requires the Licensee to provide Equal
Access, and specifies exchanges forming part of the Applicable Cabled Systems
at which it is to be provided, and the Licensee has not, after a reasonable
period, entered into an agreement with that Operator for the provision of
Equal Access, the Director may, on the application of either the Licensee or
the Operator, determine the terms and conditions of the agreement, being
terms and conditions necessary for the provision of Equal Access, or such
terms and conditions which the Licensee and the Operator have failed to
agree.
8A.7 Before making a determination under paragraph 8A.6, the Director shall:
(a) carry out in relation to the operator concerned an
analysis taking into account the results of the analysis
referred to in paragraph 8A.3(a) comparing the benefits likely
to be gained with all the costs incurred and likely to be
incurred, including opportunity costs. The provisions of
paragraph 8A.4 shall apply to the analysis. The purpose shall
be to decide whether, in relation to that Operator's request
for Equal Access, the costs will outweigh the benefits; and
(i) if the Director concludes that the costs will outweigh
the benefits, his determination shall secure that no part
of those costs shall be borne by the Licensee;
(ii) if the Director concludes that the benefits will outweigh
the costs, his determination shall secure that the costs
are apportioned as provided in paragraph 8A.10; and
(b) notify the Licensee and that Operator in respect of which terms
and conditions he proposes to make a determination, and why,
and shall afford the Licensee and that Operator adequate time,
being not less than 28 days, in which to make representations.
8A.8 In making a determination under paragraph 8A.6, the Director shall:
(a) subject to paragraph 8A.10, secure that the principles set out
in Condition 8.5(a) to (g), so far as applicable, are achieved;
and
(b) secure that the Licensee's obligation in relation to the
provision of Equal Access is limited to:
(i) the acceptance of registrations of such preference as is
referred to in sub-paragraph 8A.5(a)(i);
(ii) the delivering of calls to the Operator's system in
accordance with the choice of the Licensee's customers as
described in paragraph 8A.5; and
(iii) the provision of facilities contained in the
specification referred to in paragraph 8A.2(b).
8A.9 (a) Where the Director makes a determination under paragraph 8A.6
he shall secure that any development of the Applicable Cabled
Systems made necessary thereby is consistent with the
Licensee's then planned programme of network modernisation
and development and in particular that the Licensee is not
required to introduce Equal Access at any exchange if to do so
would involve either:
(i) modernising the exchange in a case where, but for the
proposed introduction of Equal Access, the exchange would
not have been modernised at that time; or
(ii) a significant risk of impairment to the quality of
telecommunication services provided by means of the
Applicable Cabled Systems.
(b) Subject to paragraph 8A.9(a), where the Director makes a
determination under paragraph 8A.6 the following shall apply in
relation to the preparation of exchanges for Equal Access.
(i) The determination may require the Licensee to introduce
Equal Access within a reasonable period. At a digital
exchange to which the determination relates which does
not require conversion for the introduction of Equal
Access, a reasonable period for adapting the exchange to
provide Equal Access shall be six months. In relation
to such an exchange which does require conversion, or any
other exchange of an exchange type which is capable of
conversion to provide Equal Access, a reasonable period
for conversion and adaptation shall, subject to paragraph
8A.9(a), be eighteen months. Different periods may be
specified for different exchanges.
(ii) Where at the date of the determination an exchange to
which it relates is not digital, and is of an exchange
type which is not capable of conversion to provide Equal
Access, the Licensee shall ensure (subject to paragraph
8A.9(a)) that, when modernisation to digital is planned,
the specification therefor provides for Equal Access.
8A.10 Where, in an analysis carried out under paragraph 8A.7(a), the
Director concludes that the benefits will outweigh the costs, any
determination under paragraph 8A.6 shall secure that the Licensee's costs of
introducing Equal Access are apportioned according to the following
provisions.
(a) The following costs of introducing Equal Access, among any
others which the Director may consider relevant, shall be
included among those brought into account:
(i) costs incurred by the Licensee which are not related to
any particular locality consisting of initial development
and set-up costs including, without limitation, the costs
of hardware design and production, the costs of
software development and the costs of planning and
training;
(ii) costs incurred by the Licensee in relation to a
particular locality where an Operator has requested the
introduction of Equal Access, consisting of initial
development and set-up costs in relation to that locality
including, without limitation, the costs of
installation of hardware and software and the costs of
distribution of necessary documentation and instructions
and of training;
(iii) the incremental costs of providing at any particular
locality Equal Access to any further Operator after the
first Operator at that locality;
(iv) the costs per customer of registering preferences and
of implementing arrangements for the initial code
referred to in paragraph 8A.5(a)(ii); and
(v) the costs per customer of changing registered preferences
or removing, in relation to any particular Exchange Line,
arrangements for the initial code.
(b) Subject to paragraph 8A.10(c) and (d):
(i) the costs referred to in paragraph 8A.10(a)(i) shall be
apportioned between the Licensee and Operators who make
requirements under paragraph 8A.6. The costs shall
initially be apportioned between the Licensee and the
first such Operator. Procedures will be established for
subsequent Operators to make a proportionate contribution
to the costs in such manner as the Director shall
determine from time to time;
(ii) the costs referred to in paragraph 8A.10(a)(ii) shall be
apportioned between the Licensee and Operators who make
requirements under paragraph 8A.6 in relation to the
particular locality. The apportionment rules set out in
paragraph 8A.10(b)(i) shall apply mutatis mutandis;
(iii) where the addition of an Operator at a locality reduces
the contribution to the costs of Equal Access at that
locality of the Licensee and the other Operators, the
procedures in paragraph 8A.10(b)(i) shall apply mutatis
mutandis to the costs referred to in paragraph
8A.10(a)(iii). In any other case that Operator shall pay
such costs;
(iv) the costs referred to in paragraph 8A.10(a)(iv) and (v)
above shall be met by the Long Line Public
Telecommunications Operator, whether the Licensee or an
Operator, to whom the customer chooses to route calls by
registering a preference or, where the customer exercises
choice on a call-by-call basis, apportioned equitably
among the Long Line Public Telecommunications Operators
(including, where appropriate, the Licensee) to whom the
customer has the option of routing calls from time to
time.
(c) The apportionment of the costs referred to in paragraph
8A.10(a)(i), (ii) and (iii) shall reflect equitably the benefit
to the Operator and his customers, actual and potential, of the
implementation of Equal Access in relation to that Operator.
(d) Before determining any apportionment of any costs referred to
in paragraph 8A.10(a), the Director shall inform the Licensee
and the Operator of his proposed determination, together with
a full explanation of how it is calculated, and shall allow the
Licensee and the Operator a reasonable period, being not less
than 28 days, in which to make representations.
8A.11 In this Condition 8A, potential customers include those customers of
the Licensee who it is reasonable to expect will apply for the Equal Access
facility, and "Exchange Line" shall have the meaning given to it in Condition
6.
8A.12 The provisions of this Condition form part of Condition 8 and
accordingly shall be treated for all purposes as contained in and laid down in
Condition 8.".
CONDITION 8B
ESSENTIAL INTERFACES
After Condition 8A insert:-
"Condition 8B
ESSENTIAL INTERFACES
8B.1 This Condition is without prejudice to Condition 8.
8B.2 (a) The Director may, having first notified the Licensee of his
proposal, affording the Licensee adequate time, being not less
than 28 days, in which to make representations, specify an
Essential Interface.
(b) "Essential Interface" means in respect of a point of
connection, as defined in Condition 8.5A1, an interface at
which in the opinion of the Director it is essential that
interoperability between the Applicable Cabled Systems and the
respective Operator's systems is available.
8B.3 (a) Where in pursuance of paragraph 8B.2 the Director specifies an
interface as an Essential Interface, and the Licensee
thereafter makes that interface available to an Operator in
relation to its Applicable Cabled Systems, it shall do so in
such a manner as it considers appropriate, but shall ensure
such availability in compliance with the Relevant Standard if
the Operator so requires.
(b) "Relevant Standard" means:
(i) an appropriate European or other international standard,
or
(ii) in the absence of such a standard, any other standard
specified by the Director after notifying the Licensee of
his proposal and allowing the Licensee adequate time,
being not less than 28 days, in which to make
representations, provided that the Director shall not
specify a standard if an appropriate European or other
international standard is expected to be promulgated
within a reasonable time, including, by way of example,
if the European Telecommunications Standards Institute
have published a work programme for the development of
such a standard,
to the extent that such a standard is necessary to ensure
interoperability.
(c) Where in pursuance of paragraph 8B.3(b)(ii) the Director
specifies a standard as a Relevant Standard, he shall include
in that Standard a technical specification. The Director shall
use all reasonable endeavors to obtain the agreement of the
Licensee and other relevant licensees to a technical
specification applicable to the Standard, being a specification
defined by reference to:-
(i) an appropriate European or other international
specification, or
(ii) in the absence of such a specification, a specification
defined by reference to any other standard having
currency within the European Community at the time.
Where after a reasonable time the Director has been unable to
secure the agreement of the Licensee and other relevant
licensees to a technical specification, the Director shall adopt
for inclusion in the Relevant Standard an appropriate technical
specification selected by him which has been promulgated by a
recognised standards body, including, by way of example, the
European Telecommunications Standards Institute, or the British
Standards Institution, or other such body as is recognised by
the Director as representative of all relevant
telecommunications interests.
(d) In any event the Director shall specify a Relevant Standard in
pursuance of paragraph 8B.3(b) only if the owners of relevant
intellectual property rights have agreed to grant any necessary
Licences in respect thereof to the Licensee on reasonable
terms.
8B.4 For the avoidance of doubt this Condition shall not:
(a) without prejudice to paragraph 8B.3, prevent the Licensee
using such interfaces as it considers appropriate in relation
to the Applicable Cabled Systems; or
(b) where it makes available to an Operator an interface which
the Director has specified as an Essential Interface, require
the Licensee to comply with the Relevant Standard if the
Operator does not require it to do so.
8B.5 When implementing an Essential Interface, the Licensee shall not be
obliged to conform with the Relevant Standard:
(a) if to do so would necessitate the Licensee:
(i) acquiring apparatus, software or other goods or
supplies of any kind, or implementing any operation,
incompatible with, as the case may be, apparatus,
software or such other goods or supplies already at
the time in use, or the subject at the time of
contracts for their procurement for use, in connection
with any of the Applicable Cabled Systems, or, in the
case of an operation, incompatible with any other
operation being carried out at the time in connection
therewith, or
(ii) incurring any cost, or having to resolve technical
difficulties, disproportionate to the benefits to be
gained from the implementation of the Relevant
Standard,
provided that the Licensee shall take reasonable steps to
incorporate the Relevant Standard in its plans for network
development, with a view to implementation of that Standard in
connection with the Applicable Cabled Systems, but without the
Licensee incurring any incremental expenditure
disproportionate to the benefits to be gained from the
implementation of the Relevant Standard which, but for the
implementation of the Relevant Standard, would not have been
incurred;
(b) if the Relevant Standard is inappropriate for the particular
application for any reason, including, without limitation:
(i) that it does not afford the Licensee adequate
protection for the security of the Applicable Cabled
Systems;
(ii) that its implementation would be liable to cause
material impairment in the quality of any
telecommunications service provided by means of any of
the Applicable Cabled Systems;
(iii) that it does not cater adequately for billing,
metering or other customer administration systems; or
(iv) that it is technically inadequate in the light of
technical developments which have taken place since it
was originally created;
(c) if the Essential Interface concerned is of a genuinely
innovative nature and accordingly the use in connection with
it of the Relevant Standard would not be appropriate;
(d) if compliance with the Relevant Standard would involve the
infringement by the Licensee of any intellectual property
right vested in any person; or
(e) if the Director so agrees.
8B.6 Where paragraph 8B.5(b) or (c) applies the Licensee shall notify
the Director thereof, with an explanation why.
8B.7 It is a precondition of any obligation on the Licensee under this
Condition that equivalent obligations as are contained in this Condition are
included in the respective Licences of all Operators.
8B.8 In this Condition "Operator" has the meaning given to it in
Condition 8.1.".
SERVICE PROVIDERS
In Condition 10.2 after "to provide by means of the Applicable Cabled Systems
any service other than" delete "(i) Connection Services; or (ii)".
After Condition 10.3 add:-
"10.4 Where the Director determines that the Licensee has 25% or more of
what is in the Director's opinion the relevant market as respects the
provision of any telecommunication service of a particular description (other
than cable television services) in any part or locality of the United Kingdom
paragraphs 10.5 to 10.10 of this Condition shall come into force in respect of
such services in such part or locality of the United Kingdom specified in that
determination and on such date as the Director shall specify.
10.5 The Licensee shall, following a request by any Service Provider to
do so, provide to that Service Provider any description of telecommunication
service specified in any determination made under paragraph 10.4 and which the
Licensee at the time the request is made offers to its customers generally and
which is specified in the request, on terms which would not prohibit the
Service Provider from contracting with another person to provide that person
with that description of service.
10.6 (a) If on an application by a Service Provider the Director is
satisfied that the Service Provider has established a prima
facie case that any charge, term or condition proposed by the
Licensee is unreasonable and that the Licensee has acted
unreasonably in relation to negotiations on it, the Director
may, if he considers it necessary to do so, determine that the
Licensee shall modify that provision in such a way as to make
it reasonable, in the agreement with the Service Provider.
In applying this paragraph:
(i) no determination made shall affect any exclusion or
restriction equivalent to one which is, at the
relevant time, included in the Licensee's current
usual terms and conditions upon which the Licensee
provides the same description of service to the
generality of the Licensee's customers in a way which
would or might have the effect of rendering the
position of the Licensee in relation to the provision
of the service the subject of the determination worse
than the position of the Licensee in relation to the
provision of the same description of service to the
generality of the Licensee's customers;
(ii) any such modified provision shall be confined to the
subject matter of the term or condition proposed by
the Licensee except that, where the Director considers
that a term or condition is essential in relation to
subject matter not covered by any term or condition
proposed by the Licensee, he may determine a term or
condition to cover that subject matter;
(iii) the Licensee shall not be deemed to have acted
unreasonably merely by virtue of having proposed the
term or condition in question; and
(iv) no determination may be made in relation to any
provision which would be subject to the Unfair
Contract Terms Act 1977.
(b) Before making a determination under paragraph 10.6(a) the
Director shall notify to the Licensee and the Service
Provider the grounds of the Service Provider's application and
his conclusions thereon and the modification he proposes
to make or require the Licensee to make, and shall afford the
Licensee and the Service Provider adequate time, being not
less than 28 days, in which to make representations.
10.7 (a) Subject to the terms of this paragraph, any charge determined
under paragraph 10.6 by the Director shall be determined by
reference to the Licensee's usual charge ("the usual charge")
for the provision to its customers generally of the service
of the description in question ("the Service").
(b) Any charge determined under paragraph 10.6 by the Director
shall not be:-
(i) less than the usual charge for the Service by an
amount which exceeds any cost savings of the Licensee
which are shown to be likely; or
(ii) less than the usual charge for the Service plus any
additional costs of the Licensee which are shown to be
likely.
(c) Where the cost to the Licensee of the provision of a service
to a Service Provider exceeds the usual charge no charge
determined under paragraph 10.6 shall be less than the usual
charge.
(d) In this paragraph "costs" means fully allocated costs and a
reasonable rate of return on capital employed.
10.8 If at any time it appears to the Director that the Service Provider
no longer satisfies the criteria within paragraph 10.10(a), the Director may,
on giving not less than three months notice to both the Licensee and the
Service Provider of his intention to do so, direct the Licensee to cease
providing that description of telecommunication service to the Service
Provider.
10.9 Where a direction given by the Director under paragraph 10.8
contains a statement that it appears to him that the need to protect the
customers of the Service Provider or to protect any other person requires
that the direction should be made without delay, the Director shall not be
required to give the notice required to be given by paragraph 10.8 or any
notice.
10.10 In this Condition "Service Provider" means:
(a) any person proposing to carry on the business of re-selling
any description of telecommunication service proposed to be
provided to that person by the Licensee and in respect of
whom the Licensee has no reason to believe that such person
will be unable to carry on that business effectively,
economically and efficiently; or
(b) any person actually carrying on that business from time to
time; or
(c) where, on the application of any person proposing to carry
on that business to whom the Licensee has refused to provide
any telecommunication service, the Director is satisfied
that such service has been refused and has determined that
such service should be provided by the Licensee to such
person, that person;
but does not in any case mentioned in paragraph 10.10(a),
10.10(b) or 10.10(c) include any person who carries on or would
carry on that business by means which necessarily involve the
running of a telecommunication system by him or on his
behalf.".
CONDITION 11
PRICE NOTIFICATIONS
At the end of paragraph 11.4(a) add:-
"In respect of a service to which paragraph 11.3 applies a copy of the notice
shall be sent to the Director at the time the service is first provided.".
At the end of paragraph 11.4 insert:-
"Where the Licensee publishes a notice of an amendment to a charge in the form
of an extract from the Licensee's price list the new price shall be clearly
identifiable and the operative date specified.".
Condition 15
PROVISION OF VOICE TELEPHONY SERVICES
For Condition 15 substitute:-
"Condition 15
PROVISION OF VOICE TELEPHONY SERVICES
15.1 If:
(a) the Licensee has become, in the opinion of the Director, a well
established operator in the provision of voice telephony
services within part of the Licensed Area; and
(b) the arrangements made by the Licensee are inadequate to secure
the availability of voice telephony services to any person
within that part of the Licensed Area who may reasonably request
them, the Director may direct the Licensee to take such steps
as the Director considers appropriate for the purpose of
securing that voice telephony services are available within
that part or all of the Licensed Area to any person who may
reasonably request them and the Licensee shall comply with any
such direction.
15.2 The Licensee shall satisfy the Director within 42 days of each of the
dates in Condition 1.2(a) and (b) that the Applicable Cabled Systems are
capable of providing services for the purpose of sending and receiving voice
telephony messages between the Applicable Cabled Systems and any other
Specified Public Telecommunications System.
15.3 In order to satisfy the Director that the requirement referred to in
paragraph 15.2 has been met it shall be sufficient for the Licensee to
demonstrate that the capacity to supply voice telephony services exists
throughout the Licensed Area by the Applicable Cabled Systems being installed
so that there is sufficient space within the ducts to permit the insertion of
any additional cables necessary to meet the requirement set out in paragraph
15.2 and accordingly this paragraph shall apply without prejudice to any
obligation in Schedule 4 to this Licence relating to the provision of spare
capacity in any ducts installed by the Licensee.
15.4 Nothing in this Condition shall be taken to require the Licensee to
commence carrying on business in the supply of voice telephony services.
15.5 For the purposes of paragraph 15.1 a "well-established operator" means
that the Licensee has 25% or more of what is in the opinion of the Director the
relevant market (excluding cable television services), within the Licensed
Area.
15.6 For the purpose of paragraph 15.3 "duct" means a structure or apparatus
(with appropriate entry points) installed underground in such a way that Lines
can be installed in it without having to break up the surface of the highway;
and
"Line" has the meaning given to it by sub-paragraph (a) of the definition of
"telecommunication apparatus" in paragraph 1 of Schedule 2 to the Act.".
CONDITION 15A
ARRANGEMENTS FOR INTERNATIONAL SIMPLE RESALE SERVICES
After Condition 15 insert:-
"Condition 15A
ARRANGEMENTS FOR INTERNATIONAL SIMPLE RESALE SERVICES
15A.1 The Licensee shall not provide any International Simple Voice Resale
Service by means of the Applicable Cabled Systems unless such services involve
the conveyance of Messages conveyed by the Applicable Cabled Systems which
have been or are to be conveyed also by the equivalent of a Public Switched
Network in any country or territory:
(i) which the Secretary of State has designated for the purpose of
International Simple Voice Resale Services and is included in a
list kept for the purpose by the Director and made available by
him for inspection to the general public;
(ii) in respect of which the Secretary of State has notified the
Licensee that he has made such a designation; and
(iii) which is not a country or territory in respect of which the
Secretary of State has revoked such designation having first
given the Licensee not less than 3 months' notice of his
intention to do so.
15A.2 The Licensee shall not provide International Simple Data Resale
Services by means of the Applicable Cabled Systems unless the Secretary of
State has specified a description of such Services which may be provided by
means of the Applicable Cabled Systems and that specification appears in a
list kept for the purpose by the Director and made available by him for
inspection by the general public.
15A.3 Where it appears to the Secretary of State to be requisite or
expedient to do so in the interests of maintaining or promoting effective
competition in the conveyance of Messages to or from one or more countries or
territories designated under paragraph 15A.l(i) he may, after consulting the
Director, give the Licensee not less than 28 days' notice of his intention
that the provisions of paragraphs 15A.5 and 15A.6 should apply in respect of
such countries or territories as the Secretary of State has specified in that
notice and has not by a further notice given before the expiry of the first
notice cancelled that specification.
15A.4 Any notice given under paragraph 15A.3 shall appear in a list kept by
the Director and made available by him for inspection by the general public.
15A.5 Subject to paragraph 15A.6, in respect of each country or territory
specified in a notice as varied by a second notice (if any) given under
paragraph 15A.3 the Licensee shall secure that in any period specified in the
notice ("the first period"), the ratio ("the first ratio") between:
(a) the volume of Messages comprised in International
Simple Voice Resale Services and International Simple Data
Resale Services which are conveyed by means of the Applicable
Cabled Systems and are delivered to the United Kingdom from
that country or territory; and
(b) the volume of Messages comprised in International Simple Voice
Resale Services and International Simple Data Resale Services
which are conveyed by means of the Applicable Cabled Systems
and are sent from the United Kingdom to that country or
territory
does not differ from the ratio ("the second ratio") for the previous specified
period ("the second period") (the second ratio and the second period both
being specified in the notice) between:
(c) the total volume of all Messages delivered to the United
Kingdom from that country or territory; and
(d) the total volume of all Messages sent from the United Kingdom
to that country or territory.
15A.6 Where the Secretary of State is unable for any reason to specify the
second ratio and has informed the Licensee accordingly, the Licensee shall
secure that in the first period the volume of Messages of the sort described in
paragraph 15A.5(a) shall be equal to the volume of Messages of the sort
described in paragraph 15A.5(b).
15A.7 In this condition:
(a) "Public Switched Network" means a public telecommunication
system by means of which two-way telecommunication services are
provided whereby Messages are switched incidentally to their
conveyance, and, for the avoidance of doubt, a Public Switched
Network does not include Private Leased Circuits or
International Private Leased Circuits.
(b) "International Private Leased Circuit" means a
communication facility which is:
(i) comprised both in a public telecommunication system and
in an equivalent telecommunication system in a country or
territory other than the United Kingdom;
(ii) for the conveyance of Messages between points, all of
which are points of connection between telecommunication
systems referred to in (i) and other telecommunication
systems;
(iii) made available to a particular person or particular
persons;
(iv) such that all of the Messages transmitted at any of the
points mentioned in (ii) are received at every other such
point; and
(v) such that the points mentioned in (ii) are fixed by the
way in which the facility is installed and cannot
otherwise be selected by persons or apparatus sending
Messages by means of that facility.
(c) "International Simple Data Resale Services" means
telecommunication services consisting in the conveyance of
Messages which do not include two-way live speech, but
include only such switching, processing, data storage or
protocol conversion as is necessary for the conveyance of
those Messages in real time, which have been or are to be
conveyed by means of all of the following:
(a) a Public Switched Network;
(b) an International Private Leased Circuit; and
(c) the equivalent of a Public Switched Network in another
country or territory;
provided that there shall be disregarded:
(aa) any service provided by means of a Public Switched
Network consisting only in such conveyance and switching
which when carried out by a customer of that Public
Switched Network over a telecommunication system run
by him could be carried out under the Class Licence for
the Running of Self Provided Telecommunication Systems
granted by the Secretary of State under section 7 of the
Telecommunications Act 1984 on 30 July 1992; and
(bb) any service provided by means of the Applicable Cabled
Systems consisting only in such conveyance and switching
which when carried out by a person other than a public
telecommunications operator over a telecommunication
system run by him could be carried out under the Class
Licence to Run Branch Systems to Provide Telecommunication
Services granted by the Secretary of State under section
7 of the Telecommunications Act 1984 on 15 July 1992.
(d) "International Simple Voice Resale Services" means
telecommunication services consisting in the conveyance of
Messages which include two-way live speech which have been or
are to be conveyed by means of all of the following:
(a) a Public Switched Network;
(b) an International Private Leased Circuit; and
(c) the equivalent of a Public Switched Network in another
country or territory;
provided that there shall be disregarded:
(aa) any service provided by means of a Public Switched
Network consisting only in such conveyance and switching
which when carried out by a customer of that Public
Switched Network over a telecommunication system run by
him could be carried out under the Class Licence for the
Running of Self Provided Telecommunication Systems
granted by the Secretary of State under section 7 of the
Telecommunications Act 1984 on 30 July 1992; and
(bb) any service provided by means of the Applicable Cabled
Systems consisting only in such conveyance and switching
which when carried out by a person other than a public
telecommunications operator over a telecommunication
system run by him could be carried out under the Class
Licence to Run Branch Systems to Provide Telecommunication
Services granted by the Secretary of State under section
7 of the Telecommunications Act 1984 on 15 July 1992.
(e) "Private Leased Circuit" means a communication facility which
is:
(a) provided by means of one or more public telecommunication
systems;
(b) for the conveyance of Messages between points, all of
which are points of connection between telecommunication
systems referred to in paragraph (a) and other
telecommunication systems;
(c) made available to a particular person or particular
persons;
(d) such that all of the Messages transmitted at any of the
points mentioned in paragraph (b) are received at every
other such point; and
(e) such that the points mentioned in paragraph (b) are fixed
by the way in which the facility is installed and cannot
otherwise be selected by persons or telecommunication
apparatus sending Messages by means of that facility.".
CONDITION 25
METERING, BILLING ETC
For Condition 25 substitute:-
"Condition 25
METERING, BILLING ETC
25.1 As regards any description of meter in use on a date specified by the
Director in connection with any of the Applicable Cabled Systems and so
specified, the Licensee shall apply for approval as soon as practicable and in
any case not later than such date as the Director may determine in relation to
that description of meter.
25.2 As regards any description of meter specified by the Director and not
in use in connection with the Applicable Cabled Systems on the date specified
under paragraph 25.1, the Licensee shall, unless the Director consents
otherwise, apply for approval no later than such date as further specified by
the Director or not less than six months before the date on which the Licensee
intends to bring that meter into such use, whichever shall be the later.
25.3 The Licensee shall not after such date as the Director may determine
in relation to any description of meter specified by him, keep in or bring
into use in connection with any of the Applicable Cabled Systems, any
description of meter so specified which is not approved or for which the
Licensee has not made an application for approval.
25.4 Where approval is not granted to or is withdrawn from a particular
description of meter the Licensee shall, as soon as is reasonably practicable,
either:
(a) inform the Director of the action to be taken by the Licensee
to remedy the absence of approval in relation to that
description of meter and the anticipated date of such approval;
or
(b) inform the Director that the Licensee intends to cease use of
that description of meter in connection with any of the
Applicable Cabled Systems within a time reasonably practicable
to the Licensee. On request of the Director, the Licensee
shall provide the Director with a timetable for the withdrawal
of that description of meter.
25.5 The Licensee shall not render any bill in respect of any description
of telecommunication service provided by means of any of the Applicable Cabled
Systems unless every amount (other than an indication of unit charge) stated in
that bill is no higher than an amount which represents the true extent of any
such service actually provided by the Licensee to the customer in question.
In this paragraph 25.5 "customer" does not include an operator within the
meaning of Condition 8.
25.6 Without prejudice to the generality of paragraph 25.5, the Licensee
shall at all times maintain in operation such a billing process as facilitates
compliance by the Licensee with, and is calculated to prevent contravention by
it of, that paragraph.
25.7 The Licensee shall not be regarded as being in contravention of its
obligation under paragraph 25.5 except where the failure is in relation to the
billing process and the Licensee has failed to take all reasonable steps to
prevent a contravention of that obligation.
25.8 The Licensee shall keep such records as may be necessary or as may be
determined by the Director to be necessary for the purpose of satisfying him
that the billing process has the characteristics specified in relation to it
by paragraph 25.6, provided that nothing in this paragraph shall require the
Licensee to retain any records for more than 2 years from the date on which
they came into being.
25.9 For the purpose of giving the Director an independent quality
assurance from time to time that the billing process has the characteristics
specified in relation to it by paragraph 25.6, the Licensee shall where the
Director has prima facie grounds to believe the billing process does not have
those characteristics and has so notified the Licensee, extend its prompt
co-operation to the Director and, in particular, on request by the Director
shall:
(a) furnish the Director in accordance with his reasonable
requirements with any information, document (including any
facility enabling him to read data not held in readable form)
or other thing;
(b) carry out (or cause to be carried out by such person having
such special expertise as the Director may specify and to whom
the Director has raised no reasonable objection) in such manner
as the Director may specify an examination of the whole or any
part of the billing process and as soon as practicable after
the conclusion of such examination furnish the Director with a
written report by the Licensee or such specified person, as the
case may be, of the results of such examination;
(c) on reasonable notice by him allow at all reasonable times the
Director and, in the case of any member of his staff, on
production of his special authority in that behalf, access to
any relevant premises, plant or equipment of the Licensee;
(d) on reasonable notice by him allow at all reasonable times the
Director and, in the case of any member of his staff, on
production of his special authority in that behalf, to examine
or test the whole or any part of the billing process including
any plant or equipment whether or not forming part of any of
the Applicable Cabled Systems;
(e) for the purpose of paragraph 25.9(c) and (d), allow the
Director to be accompanied by any person as the Director may
specify and to whom the Licensee has raised no reasonable
objection whose assistance he might reasonably require for the
purpose mentioned at the beginning of this paragraph provided
that the Director shall have given the Licensee notice (save in
exceptional circumstances of at least 5 working days) of the
identity of that person; and
(f) install and keep installed any equipment (whether or not
supplied by the Director) for the purpose of verifying:
(i) the accuracy and reliability of any equipment or
apparatus (including any meter) of the Licensee; and
(ii) in the case of any meter which is or is required to be
approved and is in use in connection with any of the
Applicable Cabled Systems, compliance with any conditions
or other matters which may be required as regards such
use of that meter.
25.10 When this Condition first comes into force paragraphs 25.1, 25.2, 25.3
and 25.4 above shall only apply to any description of meter for voice
frequency switched telecommunication services.
25.11 In this Condition:
"approved" means approved under section 24 of the Act;
"billing process" means metering systems and billing systems taken
together, where "billing system" means the totality of all equipment,
data, procedures and activities which the Licensee employs to
determine the charges to be sought for service usage recorded by a
metering system based on published or previously negotiated pricing
structure and to present these charges on customers' bills; and
"metering system" means the totality of all equipment, data,
procedures and activities which the Licensee employs to determine the
extent of any telecommunication services provided by means of any of
the Applicable Cabled Systems;
"information" includes accounts, estimates and returns; maintained,
or to be installed or to be maintained, at the Licensee's premises,
constructed or adapted for use in ascertaining the extent of
telecommunication services provided by means of a telecommunication
system and cognate expressions shall be construed accordingly; and
"service" includes any service provided by any person to whom the
Licensee is bound to account for any part of the amount charged by
the Licensee.".
CONDITION 29A
NUMBERING ARRANGEMENTS
After Condition 29 insert:-
"Condition 29A
NUMBERING ARRANGEMENTS
29A.1 Subject to the provisions of this Condition, Condition 29 shall cease
to have effect on the coming into force of this Condition.
29A.2 Any Numbering Plan in force immediately before the coming into effect
of this Condition by virtue of paragraphs 29.1 to 29.4 shall remain in force
until the adoption of any Numbering Plan amending or replacing the same under
any of the following provisions of this Condition.
29A.3 Where before the coming into force of this Condition the Licensee has
furnished to the Director proposals in accordance with paragraph 29.5, the
Director shall, notwithstanding paragraph 29A.1, make a determination in
relation to those proposals in accordance with paragraph 29.6 and the Licensee
shall adopt the Numbering Plan referred to in that paragraph as provided
therein.
29A.4 Where before the coming into force of this Condition the Licensee has
adopted a Numbering Plan in accordance with paragraph 29.6, or the Director
has made a determination under that paragraph (by virtue of which the
Licensee shall adopt the Numbering Plan), the Numbering Plan so adopted shall
be the Licensee's Numbering Plan until the Licensee adopts a Numbering Plan
pursuant to the following provisions of this Condition. The Numbering Plan
referred to in the following provisions of this Condition is the Numbering
Plan adopted pursuant to those provisions.
29A.5 The Director may determine a Specified Numbering Scheme (the "Scheme")
in accordance with the National Numbering Conventions (the "Conventions")
published in accordance with paragraph 29A.9. and he will allocate Numbers
from this Scheme to the Licensee in accordance with the Conventions. The
initial allocation of Numbers to the Licensee shall be of those Numbers to
which the Numbering Plan referred to in paragraphs 29A.3 and 29A.4 relates and
of any other Numbers to which any other Numbering Plan in force immediately
before such allocation relates, provided that, at such time of initial
allocation, those Numbers are currently in use by the Licensee, and where not
so in use, the Director shall have due regard to the Licensee's plans and
future requirements for its use and allocation of additional Numbers. The
Director shall, at the request from time to time of the Licensee, allocate to
it;
(a) such quantity of additional Numbers as it may require; and
(b) in accordance with the Conventions, such specific Numbers as it
may request and which the Director is satisfied are not
required for other purposes.
29A.6 The Licensee shall adopt a Numbering Plan for such Numbers as the
Director may allocate to it from time to time in accordance with the
Conventions. It shall within three months of being notified of such
allocation furnish details of the Numbering Plan to the Director, and keep him
informed of material changes to the Numbering Plan as they occur. The
Licensee shall also furnish details of the Numbering Plan together with any
material changes to that Numbering Plan on request to any other person having
a reasonable interest. Except where the Director agrees otherwise, the
Numbering Plan shall be consistent with the Conventions published in
accordance with paragraph 29A.9. If the Numbering Plan is not consistent with
those Conventions, the Director may direct the Licensee to adopt and furnish
him with a new Numbering Plan or to take such other reasonable remedial action
which does not cause undue inconvenience to the Licensee's customers, as may
be necessary to ensure consistency.
29A.7 The Licensee shall install, maintain and adjust its switched
Applicable Cabled Systems so that those Systems route Messages and otherwise
operate in accordance with the Numbering Plan, including any requirement
relating to Portability contained in paragraph 29A.11. The Licensee shall not
use Numbers other than those allocated to it from the Scheme except:
(a) with the written consent of the Director; or
(b) where the use of those Numbers is the subject of an agreement
to which Condition 8 applies.
29A.8(a) The Licensee shall provide to the Director on request, such
information about its operations under its Numbering Plan as he
may reasonably require to administer the Scheme and in
particular on:-
(i) the percentages of Numbers in significant ranges which
have already been allocated to end-users or which for
other reasons are unavailable for further allocation;
(ii) any allocation of blocks of Numbers to any person for
purposes other than end use;
(iii) Numbers whose use has been transferred at an end-user's
request to another Operator; and
(iv) the Licensee's current forecasts of all of the above
matters.
(b) The Licensee shall not be required to provide information about
individual end-user customers.
(c) In making any such request the Director shall ensure that no
undue burden is imposed on the Licensee in procuring and
furnishing such information and, in particular, that the
Licensee is not required to procure or furnish information
which would not normally be available to it, unless the
Director is satisfied that such information is essential to the
administration of the Scheme.
29A.9(a) The Conventions referred to in this Condition will be a set of
principles and rules published from time to time by the
Director after consultation with interested parties who are
members of the Telecommunications Numbering and Addressing Body
and, if deemed appropriate, with end-users.
(b) In consulting the said interested parties, the Director shall
afford a reasonable period, not being less than 28 days, for
them to make representations, and he shall take the said
representations into account when publishing the Conventions.
The Conventions shall govern the specification and application
of the Scheme and the Numbering Plan of the Licensee and may
also include such other matters relating to the use and
management of Numbers as (but not limited to):
(i) criteria and procedures relating to the application for,
allocation of and withdrawal of numbers;
(ii) dialling plans;
(iii) access codes;
(iv) prefixes;
(v) standard ways of recording Numbers for convenience or
ease of use, such as the grouping of digits in Numbers of
particular lengths;
(vi) methods of enabling end-users to understand the meaning
implicit in Numbers or other dialled digits, and in
particular the rate at which a call to a particular
Number will be chargeable;
(vii) arrangements for the transfer of Numbers between
Operators as a result of portability.
(c) The Director may from time to time amend or withdraw a
Convention already published, after consultation with
interested parties who are members of the Telecommunications
Numbering and Addressing Body. The Licensee shall not be
required to comply with any such amendment or withdrawal unless
the Licensee has been given a reasonable period of notice, such
notice not being less than three months. Numbers allocated to
the Licensee may only be withdrawn after similar consultation
and notice, and the Director shall consult end-users affected
by such withdrawal. Subject to overriding national interests,
or where there is no alternative solution available, the power
to withdraw Numbers shall not apply to any Numbers which the
Director has approved from time to time as part of a specific
service of the Licensee, which, as a result of investment by the
Licensee, has a recognized identity and quality associated with
that particular Number and which the Licensee is using and
plans to continue to use.
29A.10 In deciding on the details of and any subsequent changes to the
Scheme and the Conventions, and when making or changing Number allocations
within the Scheme or making determinations under this Condition, the Director
shall ensure that the Scheme complies with the Conventions and shall have
regard to:
(a) the need for sufficient Numbers to be made available, having
regard to the anticipated growth in demand for
telecommunication services, together with the need for good
husbandry of that supply at any time;
(b) the need to ensure Compatibility with the Numbering Plans
adopted or to be adopted by other public telecommunications
operators;
(c) the convenience and preferences of end-users;
(d) the requirements of effective competition;
(e) the practicability of implementing the Conventions in licensed
systems by the date when the Conventions are intended to apply;
(f) any costs or inconvenience imposed on the Licensee, other
network operators, end-users and other interested parties
(including those overseas);
(g) any relevant international agreements, recommendations or
standards;
(h) the views of the Licensee and other interested parties; and
(i) any other matters he regards as relevant.
29A.11 If directed to do so by the Director, the Licensee shall provide
Portability to the extent set out in paragraph 29A.12.
29A.12 The Portability referred to in paragraph 29A.11 shall be such as will
enable within a specified geographical area:
(a) a person provided with an Exchange Line by the Licensee at an
address at a set of premises to retain the same Number at the
said address if, instead of that Exchange Line, he arranges for
a line to be provided by another public telecommunications
operator which if provided by the Licensee would have been an
Exchange Line ("an Operator Exchange Line"); and
(b) a person provided with an Operator Exchange Line at an address
at a set of premises to retain the same Number at the said
address if he arranges for an Exchange Line to be provided
instead of that Operator Exchange Line by the Licensee.
29A.13 A direction or determination under this Licence will not determine how
the costs of Portability are to be borne and a direction under paragraph
29A.11 will not be made in respect of a geographical area unless:
(a) it is technically feasible for such Portability to be provided
by the Applicable Cabled Systems throughout the said
geographical area;
(b) (i) the Director has carried out a cost-benefit analysis
comparing the likely benefits to telecommunications
customers to be gained from the introduction of
Portability in the whole of the Licensed Area with all
costs likely to be incurred, including opportunity costs,
which analysis indicates that in the geographical areas
(taken together) where Portability is expected to be
provided the gains outweigh the likely costs;
(ii) when carrying out the cost-benefit analysis referred to
in sub-paragraph 29A.13(b)(i), the Director shall consult
the Licensee and the other relevant public
telecommunications operators, affording them each a
reasonable period, being not less than 28 days, in which
to make representations. On conclusion of the analysis,
it shall be made available to the Licensee and those
public telecommunications operators; and
(c) any public telecommunications operator referred to in paragraph
29A.12 is willing to enter into an agreement with the Licensee
to introduce and provide reciprocal Portability, and provides
Portability accordingly.
29A.14 A direction under paragraph 29A.11 may specify the geographical areas
and dates on which such Portability is to be introduced and any agreement or
determination under Condition 8 may specify the methods by which calls are to
be routed between the Applicable Cabled Systems and any Relevant Connectable
System run by another public telecommunications operator for the purposes of
providing Portability.
29A.15 The Licensee shall not, unless the Director consents
otherwise, charge any person for a Number which is allocated to him (other
than a coveted Number allocated to a person who is not a public
telecommunications operator at the request of such a person), but nothing in
this Condition shall preclude the Licensee from recovering from the operator
of a Relevant System the reasonable costs associated with allocating Numbers
to and routing calls to that System; save that in the case of any dispute or
difference as to those costs the Director may determine them and the Licensee
shall not be obliged so to allocate Numbers and route calls unless such
operator agrees to bear the costs so determined.
29A.16 For the purposes of this Condition:
"Compatibility" means the absence between the parties concerned of
any reasonably foreseeable risk of -
(a) duplication of any Number; or
(b) any other related or like effect; which would be liable
to introduce ambiguity or errors or to impose undue
restrictions on any user or group of users;
"Exchange Line" has the meaning given to it in Condition 6;
"Number" means any identifier which would need to be used in
conjunction with any public switched service for the purposes of
establishing a connection with any Network Termination Point, user,
telecommunications apparatus connected to any public switched network
or service element, but not including any identifier which is not
accessible to the generality of users of a public switched service;
"Numbering Plan" means a plan describing the method adopted or to be
adopted for allocating and re-allocating a Number to any Network
Termination Point or to any user, telecommunications apparatus or
service element;
"Relevant System" means a Connectable System which is, or is to be,
connected to any of the switched Applicable Cabled Systems;
"Relevant Apparatus" means any apparatus which is, or is to be, so
connected;
"Specified Numbering Scheme" means a scheme for the allocation and
re-allocation of Numbers for the purposes of any of the switched
Applicable Cabled Systems and the systems of other licensed Operators
which is specified by the Director for the purposes of this Licence
and described in a list kept for the purpose by him and made
available by him for public inspection; and
"Telecommunications Numbering and Addressing Body" means a body
approved by the Director as representative of the Licensee, other
public telecommunications operators and other persons whom the
Director considers it appropriate to include in consultations about
the content of the Conventions and the Scheme.
29A.17 For the avoidance of doubt, it is hereby declared that this Condition
applies notwithstanding any arrangements for numbering arising by virtue of
any agreement to which Condition 8 applies. But nothing in this paragraph
shall affect the operation of any such agreements entered into before the
coming into force of this Condition.
29A.18 The Numbers to which this Condition applies are Numbers:
(a) of a class described in CCITT Recommendation E.160, E.163,
E.164, E.165, E.166 or F.69 or their functional successors; or
(b) which are of a class described in CCITT Recommendation X.121
and which include any Data Network Identification Code which
has been:
(i) allocated before 14 November 1986 in accordance with the
Numbering Plan furnished to the Director in accordance
with paragraph 29.1; or
(ii) specified by the Director for the purposes of this
Licence and described in a list kept for that purpose by
the Director and made available by him for inspection to
the general public.".
CONDITION 32A
CONTROLLED SERVICES
After Condition 32 insert:-
"Condition 32A
CONTROLLED SERVICES
32A.1 The Licensee may only provide a Controlled Service in whole or part by
means of the Applicable Cabled Systems (whether or not Messages comprised in,
or resulting from the provision of, such Services have previously been or are
subsequently conveyed by any other public telecommunication system) where the
Relevant Condition is satisfied.
32A.2 The Licensee may only provide a telecommunication service to another
person by means of the Applicable Cabled Systems by means of which that
person, to the knowledge of the Licensee, provides a Controlled Service
(whether or not Messages comprised in, or resulting from the provision of,
such Services have previously been or are subsequently conveyed by any other
public telecommunication system) where the Relevant Condition is satisfied.
32A.3 The Relevant Condition is that there is in effect at the time the
Controlled Service concerned is provided, a Code of Practice governing the
provision of such a Service, which has been recognized by the Director for the
purposes of this Condition after consultation with the Licensee and with any
body which he considers to be representative of those wishing to provide such
Services.
32A.4 A Code of Practice shall only be recognized for the purposes of
Paragraph 32A.3 if the Director is satisfied that:
(a) its provisions are capable of properly regulating the provision
of the Controlled Services to which it relates and, without
prejudice to the generality of the foregoing, make adequate
provision for compensating those who suffer as a result of the
provision of such Services; and
(b) adequate arrangements have been made for the constitution of a
body of persons to apply and administer the Code.
32A.5 A Code of Practice is recognized for the purposes of this Condition
where it is specified as such in a determination made by the Director, and the
Director may, at any time after such a Code is recognized and after giving
not, less than one month's notice in writing of his intention to the body of
persons applying and administering the Code, determine that its recognition be
revoked if he is satisfied that its provisions are not capable of properly
regulating the provision of the Controlled Services to which it relates or
that it is not being properly applied and administered.
32A.6 For the purposes of this Condition the Director may recognize a Code of
Practice in relation to any description of Controlled Service or to all
Controlled Services and the provisions of this Condition shall apply
accordingly.
32A.7 If a recommendation is made to the Director by the body of persons
applying and administering a Code of Practice recognized under paragraph 32A.3
that any person (including the Licensee) should no longer be permitted or
should not be permitted to provide a particular Controlled Service or any
Controlled Services (whether or not he is providing it or them when the
recommendation is made) and the Director considers it appropriate, he may
direct the Licensee to cease to provide, or, as the case may be, not to
provide that person or any other person with any service facilitating or
enabling the provision of the relevant Controlled Service or Services or, as
the case may be, itself cease to provide, or, as the case may be, not to
provide the relevant Controlled Service or Services.
32A.8 The Director may determine, subject to such conditions as he, thinks
fit, that:
(a) any controlled Service of any description, or any
individually specified such Service provided by a person
named in the determination, is not to be treated as a
Controlled Service for the purposes of this Condition; and
(b) any individually specified Controlled Service in respect of
which a determination under sub- paragraph (a) above has been
made or which is within a description of Controlled Services in
respect of which such a determination has been made, is to be
treated as a Controlled Service for those purposes
notwithstanding such determination;
and where a determination of the kind specified in sub-paragraph (b)
above is made the provisions of this Condition shall apply to such a
Service from the date specified in the determination.
32A.9 Subject to paragraph 32A.8, the provisions of this Condition only apply
to a Controlled Service in respect of which:
(a) the person providing the Service obtains the whole or any part
of his revenue from the Licensee (or, where that person is the
Licensee, that part of the Licensee's business which provides
the Service is credited with revenue from that part of its
business which conveys the Messages comprised in, or resulting
from the provision of, the Service), and;
(b) the person responsible for paying the charges for the telephone
calls by means of which the Service is obtained is billed by
means of his telephone bill for any amount in respect of the
provision of the Service.
32A.10 In this Condition:-
(a) "Controlled Service" means any service of the following
descriptions:-
(i) a Chatline Service; or
(ii) a Live Conversation Message Service.
(b) "Chatline Service" means, subject to paragraph 32A.11 below, a
service which consists of or includes:-
(i) the enabling of more than two persons ("the
participants") simultaneously to conduct a telephone
conversation with one another without either:
(A) each of them having agreed with each other; or
(B) one or more of them having agreed with the person
enabling such a telephone conversation to be
conducted;
in advance of making the call enabling them to engage in the
conversation the respective identities of the other intended
Participants or the telephone numbers on which they can be
called.
(c) "Live Conversation Message Service" means a Message Service
(other than a directory information service) which consists of
the provision of live telephone conversation for any purpose,
whether or not including the provision of information of any
kind,
(i) between the person providing the service (or a person
acting on his behalf) and a person who obtains the
service, or
(ii) between a person who has independently called the service
for the purpose of conducting a telephone conversation
with one other such person, and such other person and,
for the avoidance of doubt, it does not include a service
provided by a human operator of the Licensee which is
incidental to the conveyance of a voice telephony
message.
(d) "Message Service" means a service which consists of, or
includes, the sending of speech, music or other sounds or
signals to any person who obtains access to that service by
means of a Public Switched Telephone Network.
(e) "Public Switched Telephone Network" means any public
telecommunications system which is used to provide switched
voice telephony services to the general public.
32A.11 A service by which one or more additional persons who are known (by
name or telephone number) to one or more of the parties conducting an
established telephone conversation can be added to that conversation by means
of being called by one or more of such parties is not on that account a
Chatline Service if it would not otherwise be regarded as such a service.
32A.12 The provisions of the Condition shall cease to have effect on the
making of a direction by the Director under Condition 32B to the extent
specified in the direction.
32A.13 The provision of this Condition and Condition 32B shall come into
force on such day as the Director may determine and different days may be so
determined for different provisions or different purposes.".
CONDITION 32B
PROVISION OF SPECIAL FACILITIES
After Condition 32A insert:-
"Condition 32B
PROVISION OF SPECIAL FACILITIES
32B.1 The Licensee shall comply with any direction made under this paragraph
which requires the Licensee to make available such of the facilities listed in
paragraph 32B.2 as are specified in the direction. A direction under this
paragraph shall be made by the Director after consultation with the Licensee
and shall specify only facilities which the Director considers it will be
technically and economically practicable for the Licensee to provide. The
direction shall specify the date by which each facility is to be provided and
the class or description of customer (whether described by reference to area
or otherwise) to whom it is to be provided and shall be subject to such
conditions as the Director thinks fit.
32B.2 The facilities referred to in paragraph 32B.1 are:-
(a) The provision to any customer of the Licensee for voice
telephony services who requests it of a bill or invoice
showing, by reference to the number used to access the service,
and the date and time on which access was obtained, the amount
of any charge imposed by the Licensee for a telephone call to
any service to which this Condition applies;
(b) the notification to such a customer who requests it, as soon as
reasonably practicable, of:
(i) the date on which the total charges accrued within the
standard billing period of the Licensee for voice
telephony services and any other service to be included
in the bill or invoice for such services exceed an amount
specified by that customer being an amount, or one of a
number of amounts, from time to time specified by the
Licensee as being suitable for the purpose; or
(ii) the date on which the aggregate charges accrued in any
such period in respect of Chatline Services and Message
Services to which this Condition applies exceed an amount
determined from time to time by the Director; and
(c) the barring, by means of apparatus forming part of the
Applicable Cabled Systems, on request by any such customer, of
access from any Exchange Line specified by that customer and in
respect of which that customer is the customer of the
Licensee, to all Chatline Services and Message Services to
which this Condition applies;
32B.3 The services to which this Condition applies are those Chatline
Services and Message Services in respect of which:
(a) the person providing the service obtains the whole or any part
of his revenue from the Licensee (or, where that person is the
Licensee, that part of the Licensee's business which provides
the Service is credited with revenue from the part of its
business which conveys the Messages comprised in, or resulting
from the provision of, the Service) and;
(b) the person responsible for paying the charges for the telephone
calls by means of which the Service is obtained is billed by
means of his telephone bill for any amount in respect of the
provision of the Service.
32B.4 In this Condition "Chatline Service" and "Message Service" have the
respective meanings given to those terms in Condition 32A and "Exchange Line"
has the meaning given to that term in Condition 6.".
CONDITION 40
PRIVATE CIRCUITS TO OTHER PTOs
For Condition 40 substitute:-
"Condition 40
PRIVATE CIRCUITS
40.1 Where the Licensee is a well-established operator and following the
application of any public telecommunications operator for Private Circuits of
a description which that operator is authorized by a Licence to provide the
Licensee shall, in accordance with Condition 1, provide Private Circuits to
that operator, unless the Director is satisfied:
(a) that any reasonable demand is or is to be met by other means
and that accordingly it would not be reasonable in the
circumstances to require the Licensee to provide the Private
Circuit in question; or
(b) that the public telecommunications operator in question would
be unduly reliant upon services provided by the Licensee as a
means of satisfying his obligations under his license; and
Condition 8 shall not apply in respect of any such application
as is mentioned in this paragraph.
40.2 Where pursuant to Condition 11 the Licensee has published standard
charges for Private Circuits of certain descriptions and proposes to provide
Private Circuits of different or similar descriptions to an operator under this
Condition and has published charges ("the specific charges") for such Private
Circuits, the following provisions shall apply.
40.3(a) If on an application by a public telecommunications operator
the Director is satisfied that the public telecommunications
operator has established a prima facie case that any specific
charge is unreasonable the Director may, if he considers it
necessary to do so, determine that the Licensee shall modify
that charge in such a way as to make it reasonable; provided
that the Licensee shall not be deemed to have acted
unreasonably merely by virtue of having proposed the charge in
question.
(b) Before making a determination under paragraph 40.3(a) the
Director shall notify to the Licensee the grounds of the public
telecommunications operator's application and his conclusions
thereon and the modification he proposes to make or require the
Licensee to make, and shall afford the Licensee adequate time,
being not less than 28 days, in which to make representations.
40.4(a) Subject to the terms of this paragraph 40.4 any charge
determined under paragraph 40.3(a) by the Director shall be
determined by reference to the Licensee's usual charge ("the
usual charge") for the provision to its customers generally of
the usual service.
(b) Any charge determined under paragraph 40.3(a) by the Director
shall not be:-
(i) less than the usual charge for the usual service by an
amount which exceeds any cost savings of the Licensee
which are shown to be likely; or
(ii) less than the usual charge for the usual service plus any
additional costs of the Licensee which are shown to be
likely.
(c) In this paragraph 40.4 "costs" means fully allocated costs and
a reasonable rate of return on capital employed.
40.5 Any published specific charge is not to be determined under paragraph
40.3 as being unreasonable just because it:-
(a) varies, as compared with the nearest applicable usual charge,
with the cost to the Licensee of the provision of the Private
Circuits concerned;
(b) exceeds the Licensee's charges for Private Circuits of the same
or a similar description provided to the generality of its
customers; or
(c) provides the Licensee with a rate of return which is no lower
than that obtained by the Licensee in connection with the
provision of Private Circuits of the same or a similar
description to the generality of its customers.
40.6 Nothing in this Condition shall require the Licensee to:-
(a) deal with applications from public telecommunications operators
in priority to other applications or otherwise discriminate in
favor of public telecommunications operators; or
(b) act in a way which is likely seriously to reduce the quality of
service provided by the Licensee to the generality of its
customers, in respect of any telecommunications service.
40.7. In this Condition, "well-established operator" means the Licensee has
25% or more of the relevant market (excluding cable television services), as
determined by the Director from time to time, within the Licensed Area.".
Condition 41
PRENOTIFICATION OF CHANGES IN SHAREHOLDING
For Condition 41 substitute:-
"Condition 41
PRENOTIFICATION RANGES IN SHAREHOLDING
41.1 The Licensee shall notify the Secretary of State if an undertaking
becomes a Parent Undertaking in relation to the Licensee.
41.2 Subject to paragraph 41.3 below, the Licensee shall notify the
Secretary of State of:
(a) any change in the proportion of the Shares held in a Relevant
Company by any person; or
(b) the acquisition of any Shares in a Relevant Company by a person
not already holding any such Shares, and the proportion of any
such Shares held by that person immediately after that
acquisition.
41.3 The Licensee shall be obliged to notify the Secretary of State of any
acquisition of Shares or change in the Shareholding of a Relevant Company by
any person only if, by reason of that acquisition or change, the total number
of Shares held in that Relevant Company by that person together with any
Shares held by any nominee or trustee for that person immediately after that
change or acquisition:
(a) exceeds 15 per cent of the total number of Shares in that
company (where it did not exceed 15 per cent prior to that
change or acquisition);
(b) exceeds 30 per cent of the total number of Shares in that
company (where it did not exceed 30 per cent prior to that
change or acquisition); or
(c) exceeds 50 per cent of the total number of Shares in that
company (where it did not exceed 50 per cent prior to that
change or acquisition),
provided that where a Relevant Company is a public company as defined in
section 1 of the Companies Act 1985, the obligation shall be discharged by
forwarding to the Secretary of State as soon as practicable all information in
respect of that acquisition or that change as is entered on or received for
entry on the register required to be maintained by that Relevant Company under
section 211 of the Companies Act 1985.
41.4 In any case referred to in 41.1 or 41.2 above, notification shall be
given by a date which is 30 days prior to the taking effect of such change or
acquisition, as the case may be, or as soon as practicable after that date.
41.5 In this Condition:
(a) "Parent Undertaking" has the same meaning as in section 258 of
the Companies Act 1985;
(b) "Relevant Company" means:
(i) the Licensee; or
(ii) a Parent Undertaking in relation to the Licensee;
(c) "Shares" has the same meaning as in section 259(2) of the
Companies Act 1985 and the term "Shareholding" is to be
construed accordingly.".
CONDITION 44
FINANCIAL STATEMENTS
At the end of Condition 44 add:
"44.4 Without prejudice to the generality of paragraph 44.1 the Licensee
shall, if the Director so requests, furnish to him within 6 months of its
financial year end an FRBS statement. If the Director so requests, there will
be appended to the statements a report from the Licensee's auditor stating
whether in his opinion the methods of allocation of costs, assets and
liabilities are reasonable and whether the statement has been properly prepared
applying those methods and is adequate for the purposes specified in paragraph
44.5.
44.5 In this Condition "FRBS statement" means an accounting statement the
purposes of which are to set out and fairly present the costs (including
capital costs), revenue and financial position of the Licensee's services
including a reasonable assessment of the assets employed in and liabilities
attributable to those services. The level of disaggregation as between
services specified in, and in relation to the financial information contained
in, the statement shall be such level as the Director may require from time to
time after consultation with the Licensee.".
CONDITION 45
AGREEMENT DOCUMENTS
For Condition 45 substitute:-
"Condition 45
PRENOTIFICATION OF CHANGES TO THE AGREEMENT DOCUMENTS
45.1 The Licensee shall notify the Secretary of State of any change in
the terms or effect of the Agreement Documents, howsoever arising.
45.2 The Licensee shall notify the Secretary of State of any change of
the Directors of the Licensee.
45.3 In any case referred to in 45.1 or 45.2 above, notification shall be
given by a date that is not later than 30 days before that change takes
effect, or as soon as practicable after that date.
45.4 In this Condition:
(a) "Agreement Documents" means any documents the terms of which if
changed could result in an undertaking becoming a Parent
Undertaking in relation to the Licensee;
(b) "Parent Undertaking" has the same meaning as in Condition 41 of
this Licence.".
CONDITION 46
EXCEPTIONS AND LIMITATIONS ON OBLIGATIONS IN SCHEDULE I
In Condition 46 in paragraph 46.3, after the words ".. failure of any
apparatus or equipment" add the words "beyond the control of the licensee".
For that part of paragraph 46.13 which appears before sub- paragraph (i)
substitute:
"46.13 This Condition does not apply to Conditions 8, 10.7, 12, 20, 23, 24.1,
25.1, 31, 33, 34, 38.1, 39.1, and 41 and:".
MINOR AND CONSEQUENTIAL AMENDMENTS
At the end of Schedule 1, Part 1 add:-
"6 Any reference in any of these Conditions, however expressed, to the
Director notifying the Licensee of any matter, consulting the Licensee about
any matter, affording the Licensee an opportunity to make representations,
taking representations made by the Licensee into account, or explaining, or
giving reasons for, any matter to the Licensee, shall be without prejudice to
any obligation of due process or similar obligation which the Director is or
may be under by virtue of any rule or principle of law or otherwise.".
Exhibit 16.1
[Letterhead of Arthur Andersen LLP
Suite 1900
717 17th Street
Denver, CO 80202-3341
303 295 1900]
March 31, 1995
Securities and Exchange Commission
450 5th Street, N.W.
Washington, D.C. 20549
Dear Gentlemen:
We have read the statements made by South Hertfordshire United Kingdom Fund,
Ltd. (formerly Jones United Kingdom Fund, Ltd.) which we understand will be
filed with the Commission, pursuant to Item 9 of Form 10-K, as part of the
Company's Form 10-K report for the year ended December 31, 1994. We agree
with the statements concerning our Firm in such Form 10-K.
Very truly yours,
/s/ Arthur Andersen LLP
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 139,307
<SECURITIES> 0
<RECEIVABLES> 3,211,509
<ALLOWANCES> 641,694
<INVENTORY> 0
<CURRENT-ASSETS> 3,248,363
<PP&E> 75,619,539
<DEPRECIATION> 5,394,293
<TOTAL-ASSETS> 73,473,610
<CURRENT-LIABILITIES> 20,818,080
<BONDS> 1,043,000<F1>
<COMMON> 0
0
0
<OTHER-SE> 33,058,877<F2>
<TOTAL-LIABILITY-AND-EQUITY> 73,473,610
<SALES> 9,088,929
<TOTAL-REVENUES> 9,088,929
<CGS> 5,186,787
<TOTAL-COSTS> 5,186,787
<OTHER-EXPENSES> 15,271,479
<LOSS-PROVISION> 576,975
<INTEREST-EXPENSE> 364,362
<INCOME-PRETAX> (8,242,349)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,242,349)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,242,349)
<EPS-PRIMARY> (149.06)
<EPS-DILUTED> (149.06)
<FN>
<F1>
Consists solely of mortgages totalling $1,043,000 as at December 31,
1994.
<F2>
Comprised of Partners' contributed capital of $48,818,997 less
accumulated losses of $15,760,120.
</FN>
</TABLE>
