10 October 2013

Penalising Public Service Providers

Infocomm Development Authority of Singapore recently imposed a penalty of $1.5 million on M1 Limited for breaching the Code of Practice for Telecommunication Service Resiliency in that it failed to provide resilient mobile telephone services, which resulted in the disruption of M1's 2G and 3G mobile telephone services in January.

Some 250,000 M1 users were affected by the service disruption, which lasted several days.

M1 failed to ensure good electrical installation practices when carrying out power termination during upgrading works at one of its network operation centres, a key telecom infrastructure node housing essential network equipment, according to IDA. Sparks and smoke activated the gas suppression system, which set off a water sprinkler, resulting in the failure a mobile network switch.

IDA assessed that M1 had not carried out adequate risk assessment on the upgrading works. It did not exercise due care and diligence in ensuring sufficient safeguards to minimise the risks posed to its equipment and operations. It did not have sufficiently rigorous control and supervision of the upgrading process, despite the works being carried out at a key infrastructure node housing sensitive telecoms equipment.

Other Examples
The regulatory authorities have imposed financial penalties on other public service providers for breaching quality of service standards.

Singapore Telecom, Starhub and M1 were fined $10,000 each for non-compliance with the Quality of Service standard of at least 99 per cent service coverage (95 per cent previously) for the nation-wide outdoor service coverage indicator for September 2012.

SingNet was fined $180,000 for a mio TV service outage during the final Barclays Premier League matches in May 2012.

SMRT was fined $300,000 for its handling of a fire to cables near Newton station in February, which LTA considered to be in breach of the licence conditions and Code of Practice 52 under the Rapid Transit Systems Act.
 
SBS Transit was fined $250,000 for not complying with NEL’s operating performance standards and its handling of a stalled train near Buangkok station in June.

DBS was penalised with a $230 million additional capital charge for the failure of its banking network in 2010. It did not exercise sufficient oversight of the maintenance, functional and operational practices and controls employed by IBM, according to MAS. The incident revealed weaknesses in its technology and operational risk management controls.

Comment
Certainly most people are annoyed or upset when a service they use or rely on is disrupted, and they cry for the offending service provider to be duly punished.

But is it realistic to expect that a service to be never disrupted?

No company is happy when the service it provides fails because it affects its profit and its reputation. But services can and do sometimes fail despite its best efforts. And the regulator may assess that the company's best efforts were not good enough.

Companies try to prevent service failures by incorporating redundancies, or duplication, in their critical infrastructure and/or by regular maintenance including replacing hardware when it is worn out or damaged.

But they face at least three challenges.

First, cost. With redundanices, the company is essentially using only part of the infrastructure that it has built. As for replacing hardware, there is a balance between continuing to use the hardware a little longer and replacing it prematurely. Unlike the government with deep pockets and the ability to levy taxes and surcharges, most companies do not have a free hand to raise prices without losing customers.

Second, determining what is critical. This is easy with 20/20 hindsight, but quite a difficult proposition before the fact. Parts of a system that are least expected to fail may fail at the wrong time, sometimes because the failure was precipitated by a seemingly unimportant defect elsewhere. For example, the malfunction of humble O-rings led to the space shuttle Challenger disaster in 1986.

Third, some service standards are not exactly within the company's control. For example, the public bus operators are required to ensure that the bus breakdown rate does not exceed 1.5 per cent per month and the accident rate does not exceed 0.75 per 100,000 bus-km per month. Failure to comply brings a financial penalty of $100,000 per month.

It is very easy for a regulator to set service standards and impose financial penalties if the public service providers do not meet the standards. This is because standards are results and the service providers can only do what they think is required to most likely bring about the desired results but cannot ensure that the desired results will happen.

The Authorities As Service Providers
What happens when the regulator is the service provider itself, or if there is no regulator?

What happens when:

▪ A terrorist escapes from a detention centre?

▪ Major roads are flooded?

▪ The Public Transport Council cannot decide on a formula for public transport fares after deliberating for more than a year?

▪ The infrastructure cannot cope with waves of imported foreign workers?

▪ The price of new HDB flats is so high that buyers have to work for decades to pay off mortgages, but can't be lowered without hurting existing owners?

▪ The cost of hosting a youth sports event exceeds the budget by hundreds of millions of taxpayers' dollars?

Who regulates the authorities? Who punishes the authorities when they do not meet standards?

1 comment:

  1. Well, they take the monies, and we suffer "for the breakdown."... Any upgrading or improvement will be back-charged to the commuters.

    Thanks PAP=WP MPs...

    ReplyDelete