accounting separation regulations.pdf
TRANSCRIPT
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Telecommunications Authority of Trinidad and Tobago
Draft Telecommunications (Accounting
Separation) Regulations
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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
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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
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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
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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
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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).
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section 78 of the Act, following which the Regulations will be implemented by the
Authority.
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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
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(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
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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;
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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
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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
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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
____ ____
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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
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TTeemmppllaattee44::SSttaatteemmeennttooffCCoommpprreehheennssiivveeIInnccoommeeRReettaaiillFFiixxeeddBBuussiinneessss
STATEMENT OF COMPREHENSIVE INCOME
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
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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
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TTeemmppllaattee55::SSttaatteemmeennttooffCCoommpprreehheennssiivveeIInnccoommeeDDaattaaSSeerrvviicceess
STATEMENT OF COMPREHENSIVE INCOME
Current PriorPeriod Period
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
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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
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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____ ____
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TTeemmppllaattee77::SSttaatteemmeennttooffFFiinnaanncciiaallPPoossiittiioonnRReettaaiillMMoobbiilleeBBuussiinneessss
STATEMENT OF FINANCIAL POSITION as at
Current PriorPeriod Period
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
____ ____
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TTeemmppllaattee88::OOtthheerrBBuussiinneessssAAccttiivviittiieess
STATEMENT OF COMPREHENSIVE INCOME
Current PriorPeriod Period
Turnover X X
Total operating costs X X
__ __Return X X
__ __
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TTeemmppllaattee99::IInntteerrBBuussiinneessssTTrraannssffeerrCChhaarrggeessSSuummmmaarryy
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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
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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
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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)
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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)
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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[ ].
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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.
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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
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1 June 2009
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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.
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1 June 2009
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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.
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1 June 2009
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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.
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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.
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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
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1 June 2009
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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
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1 June 2009
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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.
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1 June 2009
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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
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7/24/2019 Accounting Separation Regulations.pdf
36/36
1 June 2009
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99
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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.