accounting separation regulations.pdf

7/24/2019 Accounting Separation Regulations.pdf

1/36

Telecommunications Authority of Trinidad and Tobago

Draft Telecommunications (Accounting

Separation) Regulations


2/36

MMaaiinntteennaanncceeHHiissttoorryyDate Change Details Version

December 6, 2006 First Draft (Incorporated within theTelecommunications (Pricing)Regulations

0.1

June 27, 2008 Second Draft 0.2

September 1, 2010 Final Document 1.0

February 29, 2012 Edited 1.1


3/36

Introduction

Objectives of Accounting Separation

Accounting separation requires concessionaires to provide separate financial statements

for each business segment as if it were a stand-alone business. Separating the segments

will enable the Authority to ascertain whether there are anti-competitive cross-subsidies

among services provided by a concessionaire, or whether a concessionaire is engaging in

any form of anti-competitive pricing. Accounting separation will also be used to assist in

ensuring that charges for telecommunications services are cost-based, transparent and

non-discriminatory.

Accounting separation requires the preparation of separate accounts for each of the


4/36

The Authority is equally aware that some regulators are looking at alternative models of

operational separation, in which the access network is separated from the core network so

that equivalent access services can be offered to all competing network and service

providers. This model may become important in the future as well, particularly with the

moves towards next generation IP networks and the convergence of services (e.g.

between fixed and mobile, and between telecoms and broadcasting). For these reasons

the Authority may consider operational separation in the future, but it is not a

requirement at this time.

Requirement for Accounting Separation

S ti 24(1) f th T l i ti A t 2001 th A t t t th t


5/36

These draft regulations would, if promulgated, require concessionaires, where necessary,

to provide separate books of accounts for all services offered. These regulations should

be read in conjunction with the Guidelines for Accounting Separation published by the

Authority. Also, the Authority has proposed definitions for the relevant markets to which

these services will be classified in the Proposed Price Regulation Framework for

Telecommunications Services in Trinidad and Tobago, and will use these markets to

guide the process of the separation of accounts.

Review Cycle

A th t l i ti t d d l i t ffi i t d


6/36

The Authority determined based on comments received from stakeholders in that first

round of consultation, that the issue of Accounting Separation would best be addressed in

a separate document, rather than within the Pricing Framework and Regulations. The

Authority therefore prepared the Draft Telecommunications (Accounting Separation)

Regulations, taking into consideration the comments and recommendations received in

the first consultation round and published the document for further consultation on June

28th, 2008 for consultation together with a Decisions on Recommendations (DOR)

Matrix detailing all the comments and recommendations received in the first round of

consultation and summarising the Authoritys decisions in respect of those (see Annex

II).


7/36

section 78 of the Act, following which the Regulations will be implemented by the

Authority.


8/36

Draft Telecommunications (Accounting Separation)Regulations

REPUBLIC OF TRINIDAD AND TOBAGO

THE TELECOMMUNICATIONS ACT (ACT NO: 4 OF 2001)

REGULATIONS

Made by the Minister under section 78 (1) of the Telecommunications Act

DRAFT TELECOMMUNICATIONS (ACCOUNTING SEPARATION)REGULATIONS, [ ]

PART IPRELIMINARY

Citation 1. These Regulations may be cited as the Telecommunications


9/36

(3) A reference to a Regulation or subsection is a reference tothe relevant Regulation or subsection of these Regulations.

(4) A reference to a Schedule is a reference to the Schedule tothese Regulations.

PART IIACCOUNTING SEPARATION

Requirement forAccounting Separation

Amendment of Schedule

1.

Any concessionaire that provides two or more services shallprepare, maintain and submit to the Authority its accounts inaccordance with the applicable Separated AccountsTemplates set out in Schedule A.

2. The Minister, acting on the advice and recommendation ofthe Authority, may by order amend Schedule A or any partthereof.

(2) Where the Authority recommends the amendment of theSchedule it shall have regard to the following principles:

a) separated accounts must be prepared annually and


10/36

Preparation of

separated accounts

Submission ofseparated accounts

3. Separated accounts shall be:

a) prepared in the format set out in the applicable SeparatedAccount Templates;

b) consistent with the Accounting Separation Guidelines aspublished by the Authority on its website from time totime;

c) consistent with Generally Accepted Accounting Practice,and;

d) audited.

4. A concessionaire required by Regulation 1 to separate itsaccounts shall:

a) Within twenty-eight (28) days of the coming into force ofthese Regulations, advise the Authority in writing of theconcessionaires financial year end date, and of allservices c rrently provided by the concessionaire;


11/36

PART IIICOMPLIANCE

Penalty for breach ofRegulations

Inspection

7. A concessionaire that breaches or fails to comply with any

provision of these Regulations, without prejudice to anyother applicable remedies under the Act or otherwise, or anycompensation payable in any dispute resolution proceedings,commits an offence and shall be subject to a fine of up tofifty thousand dollars ($50,000).

8. The Authority may take such steps as it considers appropriateto verify any information provided pursuant to these

Regulations, including exercising its inspection powers underthe Act.

PART IVGENERAL REGULATIONS


12/36

SScchheedduulleeAA

AAccccoouunnttSSeeppaarraattiioonnTTeemmppllaatteess((RReegguullaattiioonn11))

TTeemmppllaatteeAA::SSttaatteemmeennttooffCCoommpprreehheennssiivveeIInnccoommeeCCoorreeNNeettwwoorrkkBBuussiinneessss

STATEMENT OF COMPREHENSIVE INCOME

Current PriorPeriod Period

Turnover:From Retail X XOther operators X X

Total Turnover X X

Operating Costs X XOf which

Depreciation X XPersonnel Costs X X


13/36

TTeemmppllaattee22::SSttaatteemmeennttooffFFiinnaanncciiaallPPoossiittiioonnCCoorreeNNeettwwoorrkkBBuussiinneessss33

STATEMENT OF FINANCIAL POSITION as at

Current PriorAs at As at

Fixed AssetsTangible Fixed Assets X X

Intangible Fixed Assets X XInvestments X X

____ ____Total Fixed Assets X X

____ ____

Working CapitalInventory X X

Trade Receivables X XOther Assets X XCash on hand & Bank Deposits X X

____ ____


14/36

TTeemmppllaattee33::SSttaatteemmeennttooffCCoommpprreehheennssiivveeIInnccoommeeLLooccaallAAcccceessssNNeettwwoorrkkBBuussiinneessss

STATEMENT OF COMPREHENSIVE INCOMECurrent PriorPeriod Period

Turnover:Transfer charges to Retail X XFrom other operators (if any) X X

Total Turnover X X

Operating Costs X XOf which

Depreciation X XPersonnel Costs X XWages & SalariesSubsistence & Traveling X XOvertime

CCA Adjustments X X

Total Operating Costs X X


15/36

TTeemmppllaattee44::SSttaatteemmeennttooffCCoommpprreehheennssiivveeIInnccoommeeRReettaaiillFFiixxeeddBBuussiinneessss


Prior CurrentPeriod Period

TurnoverConnection Charges X X

Installation Charges X XOther Connection Charges X X

Subscription ChargesResidential X XSingle Line Business X XOther Business (non-single Line) X XCall Master Services Charges X X

Other Subscription Charges X X

On-Net Toll ChargesIntra Exchange Toll Charges X X


16/36

Operating Costs:

Operating Costs specific to Fixed Retail X XTransfer Charges from Fixed Core Network X XTransfer Charges from Fixed Access Network X XADCs paid to Access Network (if any) X XDepreciation X XPersonnel Costs

Wages & Salaries X XSubsistence & Traveling X X

Overtime X XOther Costs X XCCA Adjustments X X

____ ____Total Operating Costs X X

____ ____

Return (excluding Universal Service Contribution, if any) X X

Universal Service Obligation Contributions from OLO X X____ ____

Return (including USO Contribution, if any) X X


17/36

TTeemmppllaattee55::SSttaatteemmeennttooffCCoommpprreehheennssiivveeIInnccoommeeDDaattaaSSeerrvviicceess



Turnover X XDial-up Internet X X

xDSL Subscription X XxDSL Connection X XLease lines X XOther data Services X X

Total Turnover X X

Operating CostsOperating costs specific to Data Service X X

Transfer charges from Core Network X XTransfer charge from Local Access Network X XDepreciation X XPersonnel Costs X X

W & S l i X X


18/36

TTeemmppllaattee66::SSttaatteemmeennttooffCCoommpprreehheennssiivveeIInnccoommeeRReettaaiillMMoobbiilleeBBuussiinneessss

STATEMENT OF COMPREHENSIVE INCOME Current PriorPeriod Period

TurnoverHandsets Charges X XActivation Charge X X

On-Net Charges X XOff-Net Charges

Outgoing (Fixed) X XIncoming (Fixed) X X(Outpayments) X X

Outgoing (Mobile) X XIncoming (Mobile) X X

(Outpayments) X X

InternationalIncoming X X


19/36

Operating Costs:

Operating Costs specific to Retail X XOperating Costs specific to Network X XDepreciation X XPersonnel Costs

Wages & Salaries X XSubsistence & Traveling X XOvertime X X

Other Costs X X

CCA Adjustments X X____ ____Total Operating Costs X X

____ ____

Return (excluding Universal Service Contribution, if any) X X

Universal Service Obligation Contributions from OLO X X

____ ____Return (including USO Contribution, if any) X X____ ____


20/36

TTeemmppllaattee77::SSttaatteemmeennttooffFFiinnaanncciiaallPPoossiittiioonnRReettaaiillMMoobbiilleeBBuussiinneessss

STATEMENT OF FINANCIAL POSITION as at


Fixed AssetsTangible Fixed Assets X X

Intangible Fixed Assets X XInvestments X X____ ____

Total Fixed Assets X X____ ____

Working CapitalInventory X X

Trade Receivables X XOther Assets X XCash on hand & Bank Deposits X X

____ ____


21/36

TTeemmppllaattee88::OOtthheerrBBuussiinneessssAAccttiivviittiieess



Turnover X X

Total operating costs X X

__ __Return X X

__ __


22/36

TTeemmppllaattee99::IInntteerrBBuussiinneessssTTrraannssffeerrCChhaarrggeessSSuummmmaarryy


23/36

TTeemmppllaattee1100::SSttaatteemmeennttooffTTrraannssffeerrCChhaarrggeess

Costs/Services

FixedRetail

Services

Intra-Exchange

Inter-Exchange

CallstoMobile

PublicPayphone

DirectoryEnquiry

International

OutgoingCall

International

IncomingCall

DataCircuits

InternetService

RemainingServices

MobileBusiness

Fixed Access X X X X X X X X X X X X

Fixed Network X X X X X X X X X X X X

Fixed Retail Services X X X X X X X X X X X X

Mobile Business X X X X X X X X X X X X

TOTAL X X X X X X X X X X X X


24/36

TTeemmppllaattee1111::NNeettwwoorrkkSSttaatteemmeennttooffCCoossttssOperating Capital Rate of Capital Total Operating Total Ave

Costs Employed Return Costs and Capital Costs Volume TTTT$ TT$ % TT$ TT$ Minutes

Traffic SensitiveSubscriber Unit X X X X X XPrimary Switch X X X X X XSecondary Switch X X X X X X

Transmission - Non-Length DependentRSU to Primary/Secondary Link X X X X X XPrimary to Primary Link X X X X X XPrimary to Secondary Link X X X X X XSecondary to Secondary Link X X X X X XSecondary to Tertiary Link X X X X X X

Tertiary to Tertiary Link X X X X X X

Transmission - Length Dependent(Split as above)

International Transmission X X X X X X

Directory Enquiry X X X X X XInternational Directory enquiry X X X X X X

Private Circuits\Leased Lines X X X X X

Interconnect connections and rentals X X X X X

Other categories will be included asappropriate

X X X X X X

Total Conveyance X X X X X X


25/36

TTeemmppllaattee1122aa::CCoossttssooffNNeettwwoorrkkSSeerrvviicceess

TrafficSensitive

SubscriberU

nit

PrimarySwitch

SecondarySw

itch

Non-Length

Dependen

t

RSUto

Primar/Secon

dar

PrimarytoPrimary

Link

Primaryto

SecondarLink

Secondaryto

SecondarLink

Length

Deenden

t

(Splitasabove)

International

Transmissio

n

DirectoryEnq

uiry

International

Directoryenq

uiry

Private

Circuits\Leased

Lines

Interconnect

c o n n e c t i o n s a n d

Average Cost TT$/Minute5 X X X X X X X X X X X X

Total Costs6 X X X X X

Usage Factors (Routing or Percentage)

Retail ServicesIntra Exchange Calls X X X X X X X X X X X X X X X X Inter Exchange Calls X X X X X X X X X X X X X X X X International Calls X X X X X X X X X X X X X X X X (Other retail services as appropriate)

Other Activities ServicesApparatus Supply X X X X X X X X X X X X X X X X (Other services as appropriate)

RIO Services

Call TerminationPrimary X X X X X X X X X X X X X X X X Tandem X X X X X X X X X X X X X X X X (Other RIO services as appropriate)


26/36

TTeemmppllaattee1122bb::SSttaatteemmeennttooffCCoossttssooffNNeettwwoorrkkSSeerrvviicceess((CCoonntt))

TrafficSensitive

SubscriberU

nit

PrimarySwitch

SecondarySw

itch

Non-Length

Dependen

t

RSUto

Primary/Seconda

ryLink

PrimarytoPrima

ryLink

PrimarytoSeco

ndary

Link

SecondarytoSec

ondary

Link

LengthDepen

dent

(Splitasabove)

Internation

al

Transmissio

n

DirectoryEnq

uiry

InternationalDirectory

enquiry

Othercostcatego

rieswill

beincludedasapp

ropriate

Average Cost Per Minute

Retail Services7

Intra Exchange Calls X X X X X X X X X X X X

Inter Exchange Calls X X X X X X X X X X X X (Other retail services as appropriate)

Other Activities Services

Apparatus Supply X X X X X X X X X X X X (Other services as appropriate)

RIO ServicesCall TerminationPrimary X X X X X X X X X X X X

Tandem X X X X X X X X X X X X (Other RIO services as appropriate)


27/36

Made this day of 20[ ].

Minister of Public Administration

Laid in the Senate this day of 20[ ].

Clerk of the Senate

Laid in the House of Representatives this day of20[ ].


28/36

1 June 2009

AANNNNEEXXII::DDeecciissiioonnssoonnRReeccoommmmeennddaattiioonnssThe following summarizes the comments and recommendations received from stakeholders on the second draft of this document, dated June 27 th, 2008 and the decisTATT as incorporated in this final document, dated 1 stSeptember 2010.

DDDooocccuuummmeeennntttSSSuuubbb---SSSeeeccctttiiiooonnn

SSSuuubbbmmmiiissssssiiiooonnnMMMaaadddeeeBBByyy:::

SSStttaaakkkeeehhhooollldddeeerrrCCCaaattteeegggooorrryyy8

88

CCCooommmmmmeeennntttsssRRReeeccceeeiiivvveeeddd RRReeecccooommmmmmeeennndddaaatttiiiooonnnsssMMMaaadddeee TTTAAATTTTTTss

ACCOUNTING SEPARATION

Part II: Accounting SeparationAmendment of Schedule

DIGICEL In sub-section 2f, the Authority states that the separatedaccounts must be subject to audit

The Authority should clarifywho will be responsible forselecting the auditor. Also wewould like the Authority toexplain what type of audit is to

be conducted, the length of theaudit, the cost of the audit, the

implications if the audit fails,to whom is the auditorreporting and whether the auditis to be conducted

before/after/during thefinancial year.

The Audit of should be carrtime as theregular audit, recommended within six (6) m

to which the ac

The Auditor isconcessionaireshould be pguidelines for s

Part II: Accounting Separation Submission of Separated

DIGICEL In sub-section 4b, the Authority says a Concessionaire isrequired to submit its separated accounts within 3 months of

Audited separated accountscan only be prepared no less

The Authorityconcessionaire

8Regional regulatory or Governmental agencies, Existing service and/ or network provider and affiliates, Potential service and/ or network providers and affiliates, Service/ Network Provider AssociatGroups, General Public


29/36

1 June 2009




88


Accounts the coming into force of these Regulations thereafter submit within 6 months of the end of its financial year

After the close of its financial year, Digicel usually requires atleast 6 months for its own financial statements to becompleted. Only upon completion of same would we be ableto commence the work necessary for submitting separatedaccounts. Therefore, the period suggested by TATT isimpractical.

than nine (9) months after thefinancial year end. Regulations

4c should be amendedaccordingly and Regulation 4bshould be revised to the earlierof that date or the three (3)month period.

preparation of part of their p

end accounts, acompletion of

before comNotwithstandinagrees to amendment.

General Comment CCTL finds that consulting on policy and regulationsconcurrently inefficient. Since policy informs regulations, amore efficient and effective approach in our view, is tocomplete (or substantially complete) policy, before doing theregulations.

We recommend that for futureconsultations, policy is done

before regulations.

The Authority change for fuwhere approprwill commenround of

consultation ocommence witof the policy dthat Regulatioadditional safe

being laid in Pto Parliamenrequested in arules goveresolution.


30/36

1 June 2009




88


1.1 Objective of AccountingSeparation

The Authority indicates that:The objectiveofaccounting separation is to provide separate

financial statements for each business entity as if it were astand alone business.

It is our view that more appropriate language could be used toarticulate the objective for accounting separation. An objectiveis an end result that one is trying to achieve. In other words,accounting separation is not an end in itself, but rather themeans to the end.

The end here is that the regulator would have a tool to addressanti-competitive concerns such as price discrimination, unfaircross subsidies and predatory pricing.

We recommend that theobjective is restated.

The objective h

Part I1

1. Accounting Separation The requirement for accounting separation is given as anyconcessionaire that provides two or more services. This is nota proper basis on which to require accounting separation.CCTL refers TATT to our detailed comments on this issue inour response to the consultation Proposed AccountingSeparation Guidelines for the Telecommunications Sector.

Further, as stated above in the section on the objective ofaccounting separation, the propose (sic) is to provide theregulator with a tool to address anti-competitive concerns.

We refer the Authority torecommendations in ourresponse to ProposedAccounting Separation

Guidelines for the

Telecommunications Sector.

The Authoritywith CCTLs

purpose of Acbut disagrees change.


31/36

1 June 2009




88


Preparation of SeparatedAccounts (3a)

(d)

CCTL is not in a position to comment on the templates as thepolicies are still under consultation.

The audit is a very key part of the accounting separationprocess. Once information such as audit standards have beenagreed in the policy, they should be reflected here.

The Authoritstandards have

these RegulRegulations haremain consistdocument.


32/36

1 June 2009

AANNNNEEXXIIII::DDeecciissiioonnssoonnRReeccoommmmeennddaattiioonnssThe following summarizes the comments and recommendations received from stakeholders on the first draft of this document, dated December 6 th2006, and the decisTATT as incorporated in the second draft document dated June 27th, 2008.

DDDooocccuuummmeeennnttt

SSSuuubbb---SSSeeeccctttiiiooonnn

SSSuuubbbmmmiiissssssiiiooonnn

MMMaaadddeeeBBByyy:::SSStttaaakkkeeehhhooollldddeeerrrCCCaaattteeegggooorrryyy9

99


ACCOUNTING SEPARATION

Requirements of AccountingSeparation

Section 31

Telecommunications Servicesof Trinidad andTobago (TSTT)

TSTT has provided a detailed response to the AuthoritysAccounting Separation Consultation which should be readtogether with this response. TSTT believes that regulations foraccounting separation should be drafted once the policy has

been set. There are a number of significant differencesbetween the policy and the regulations. Whilst the policy is notclear on what basis a concessionaire is determined to besubject to the requirement to produce separate accounts, the

regulations set out a number of criteria. However, even withthe very basic criteria that are set out, the regulations do notsufficiently explain the principles of clear market failures oroverriding public policy concerns which rightly ought to beexamined before requiring accounting separation.

Regulators generally follow a two-stage process to determineif ex-ante measures, such as accounting separation, arenecessary. The first stage is to define relevant markets that

The Regulatiprocess for theAccounting Sep

The Authoritywith TSTTsdominance in

9Regional regulatory or Governmental agencies, Existing service and/ or network provider and affiliates, Potential service and/ or network providers and affiliates, Service/ Network Provider AssociatGroups, General Public


33/36

1 June 2009




99


may be subject to ex-ante regulation and to assess the degreeof competitiveness, barriers to entry and availability of

substitute products and assessing the degree of competition onthat relevant market. The assessment must be consistent withSignificant Market Power Guidelines. If dominance exists, asecond stage would involve determining what market failure or

public policy concern would result from that dominance andconsidering what, if any regulatory remedy is necessary to dealwith that concern. TSTT believes the regulations as drafted donot provide adequate guidance on the due regulatory processthat must be followed before accounting separation could berequired of a concessionaire.

is a pre-conditifor accoun

Accounting seaddress possibanti-competitivwhether coconcessionaireotherwise, fosubsidy. The notes that manmentioned byfacilitated byseparated concessionairemultiple servic

The AuthorAccounting regulatory meaand facilitates measures thundertaken.

Sections 33-36. Ministry ofPublic

It may be advantageous to distil the accounting separationregulations from this document into separate document. Please

This has been d


34/36

1 June 2009




99


Administrationand

Information,(MPAI)

see MPAIs comments regarding the Accounting SeparationGuidelines.

Section 33 Telecommunications Servicesof Trinidad andTobago (TSTT)

The requirement to deliver separated accounts within 3 monthsof being given notice to do so is too onerous for a number ofreasons. First, as is clear from the proposed accountingseparation policy, the Authority is going to have to determineor at least validate a methodology before it is implementedwith any concessionaires accounts. This may involve newaccounting software, restructuring of cost centres and creationof numerous processes to deliver information for costallocation. Second, of necessity, separated accounts have to bedone after financial accounts have been completed. Logicallythe financial year for

separated accounts will have to be the same as the statutoryyear. The Authority cannot arbitrarily set a three monthtimeframe as a reasonable timeframe for the provision ofseparated accounts. It is our considered view and afterreviewing the situation in severalmarkets where separated accounts is a requirement, that aminimum of six months after a statutory year end would berequired before separated accounts for that period could be

prepared. In fact for the provision of the first set of accounts alonger period of nine months is a more suitable period.

The methodolthe relevant regulations havreflect aconcessionaireThe Authority there is no

preparation of should commecompletion of f

The proposed extended.


35/36

1 June 2009




99


TSTT would point to markets such as UK, Jamaica andIreland. In Jamaica six months is allowed for the publication of

regulatory accounts. In the UK where BT has had years ofexperience in publishing regulated accounts, in August of2006, the period for publication was extended by two months.The requirement is now no later than six months after the

period to which they relate. In the case of eircom in Ireland,the current publicationtimeframe is five to six months after the financial year end.TSTT would strongly urge the Authority to followinternational best practice in setting regulations for separatedaccounts.

Section 36 Telecommunications Services

of Trinidad andTobago (TSTT)

Any timeframe set by the Authority should be reasonable.

PART V : COMPLIANCE

37. Penalty for breach ofRegulation

WindwardTelecom

The maximum fine for a breach of the Regulations has beenlimited TT$50,000. We believe that this maximum does not

provide enough of an economic deterrent to concessionaires,particularly large dominant carriers. For example, we wouldnote that simple under-pricing of inbound termination by

The proposed fpossible Telecommunic


36/36

1 June 2009




99


US$0.01 per minute to thwart competition involves a revenueopportunity of TT $93,000 per day. TSTTs proposed DS -3

interconnection charge of US$82,600 per month exceeds thecausal cost of such facilities by at least US$79,000(TT$490,000) per month. The proposed fines will not inducedominant carriers to comply with the regulations.

Inspection

Section 38

Telecommunications Servicesof Trinidad andTobago (TSTT)

TSTT repeats its concern that the information requested by theAuthority must be demanded in such a way that aconcessionaire understands why the information is beingrequested, exactly what information is required and observance

by the Authority of theestablished confidentiality procedures/guidelines as provided

by the Authority in furtherance of the relevant provisions of

the Telecommunications Act, 2001.

The regulation to those reinformation suraised by Tirrelevant.

accounting separation regulations.pdf

Documents