National & regional experiencse
Dr. Musab Barakat Ahmed Ali
PhD.;FCCA;FCMI
Chartered Certified Accountant
Practicing firm Barakat&co
Senior partner & CEO
Consultant
National Telecommunication
Corporation (Sudan
1 ITU or
The views expressed in this paper are those of the author and do not necessarily reflect the opinions of the
its membership. Dr Kelly can be contacted at Tim.Kelly@itu.int.
Agenda
 Background
 Mechanism /road map
 The purpose of the Accounting Separation
Guidelines
 The purpose
 application
* This will be the subject of separate presentations.
2
Agenda
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Saudi experience
Oman
Qatar
Italy
USA AT&T
UK flash
3
Preamble
1
Structural and functional
separation of
telecommunications operators is
being considered in many parts
of the world following the U.K.
adoption of Openreach
4
Preamble
2
“The operational separation of
Telecom is a key part of the
government’s strategy to deliver a
more effective telecommunications
sector. It will underpin increased
competition and efficient investment
for the long-term benefit of all New
Zealanders,” Communications
Minister David Cunliffe
5
Mechanism/Roadmap
Structural separation should include
a time-line detailing the milestones, key dates
and stages
 Consultation paper
 Responses
 Workshop
 Position statement
 Guidelines/ determination
 Application
6
The purpose of the Accounting
Separation Guidelines
 complementary activity
 - encouraging good practice to the respect to
accounting separation
to provide specific guidance on how:
to prepare and present separated accounts
 the instruction to Designated Service Provider
on how to submit information and reports to the
regulatory body
 - to provide instruction on preparation of
regulatory accounting systems & Accounting
Separation systems
7
Application
These Guidelines will apply to
all Designated Service
Providers.
8
Saudi Experience
1
Article 12 of the Bylaw includes
“the level of segregation of
telecommunications services for
accounting and regulatory
purposes as may be determined
by the Commission”.
9
Saudi Experience
2
 the creation of a favorable atmosphere to
promote and encourage fair competition
in all fields of telecommunications
 the level of segregation of
telecommunications services for
accounting and regulatory purposes as
may be determined by the Commissio
10
Saudi Experience
3
The Accounting Separation Policy
of 2004 required STC to separate
its accounts on the basis of four
pre-defined business segments:
fixed, mobile, data and other
11
Saudi Experience
purpose
4
 verify a Designated Service Provider’s
adherence to its obligations of nondiscrimination, objectivity, cost–based
pricing and transparency set down in the
Bylaw;
 ensure the Designated Service Provider’s
compliance with specific obligations
imposed on it by the CITC;
12
Saudi Experience
purpose
5
understand a Designated Service Provider’s
costs and revenues at the required level
of detail; identify and prevent abuses of
dominance or other anticompetitive
practices by a Designated Service
Provider; and/or
ensure implementation of any associated
objectives of the Act.
13
Time schedule
1
First quarter 2004
Issue of policies
Third quarter 2004
Saudi telecom provide
plan & draft of how they will
execute the accounts
separation
Third quarter 2004
Issue of unaudited
accounting statements for
the year2003
First quarter 2005
Saudi telecom to provide
final method of A S the
results
Second quarter 2005
The regulatory body
endorse the procedures
14
Time Schedule
2
Second quarter 2005
Second quarter 2005
S T issue unaudited F S for the year
2004
Second quarter 2006
Issue of audited accounts for the year
2005
Second quarter 2006
Issue of A S statements for the year
2005
Second quarter 2007
Issue of audited accounts for the year
2006
Second quarter 2007
Issue of A S statements for the year
2006
15
Oman Experience
1
Oman TRA issued Consultation
Paper SMP
Remedies
All current Class I license holders
are classified as Notified
Operators
16
Oman Experience
2
The activities and services had been
classified as follow:
Retail fixed voice
1. Access
2. Local &national voice
3. International voice
4. Telephone service
17
Oman Experience
3
 Retail data
1. Retail leased lines
2. Dial up internet
3. Broad band internet
 Whole sale fixed voice
1. Call origination
2. Call termination
18
Oman Experience
4
 Wholesale infrastructure
1. Wholesale unbundled access
2. Wholesale unbundled line rental
3. Wholesale broad band access
4. Wholesale terminate segment of leased
lines
5. Wholesale trunk segment of leased lines
19
Oman Experience
5
 Mobile market
1. Access of call origination
2. Voice call termination on individual
mobile network
3. wholesale International roaming
20
Oman
The response to the A/S
6
 Oman took the initiative very early in the
region
 Omantel group is providing fully
segmented costing analysis for
 Fixed line
 Cellular based on
1. Top-down FDC
2. LRIC model
21
Oman
The response to the A/S 7
 Oman took the initiative very early in the
region
 Omantel group is providing fully
segmented costing analysis for
 Fixed line
 Cellular based on
1. Top-down FDC
2. LRIC model
22
Oman
The response to the A/S 8
1. Separate regulatory accounts ( Annually)
2. Investigative costing studies (rare)
3. FDC/LRIC modeling interconnect tariff
approval (annual)
4. Tariff rebalancing
( annual)
5. Product price approval ( each product)
6. Corrective (occasional)
23
Qatar
1
Information and Communication
Technology (ictQATAR) issued
Regulatory Accounting System
Instructions in August 2010
(ICTRA 08/10),
24
Qatar 2
 Since then, QTel has developed a
Regulatory Accounting System (RAS)
based on the financial year (FY) 2009.
ictQATAR has reviewed the regulated
accounting separation system and the
information supplied. ictQATAR has
developed their needs for cost and
revenue data.
25
Qatar objectives 3
 The RAS is a supporting tool to assist
ictQATAR to meet it general objectives to
develop competitive telecommunications
markets in QATAR and promote
competitive services
 The RAS provides a platform for
additional analysis to assist with
decisions on such issues as costing and
pricing
26
Qatar objectives 4
 The RAS is a supporting tool to assist
ictQATAR to meet it general objectives to
develop competitive telecommunications
markets in QATAR and promote
competitive services
 The RAS provides a platform for
additional analysis to assist with
decisions on such issues as costing and
pricing
27
Qatar objectives
5
 to provide an initial basis for price
controls – retail and wholesale.
 To provide some information for
evaluation for anti-competitive behavior
investigations and evaluations of price
squeezes
28
Qatar objectives 6
 evaluation of new wholesale products’
costs, cross subsidizations and
cost/profit trends;
 To enhance transparency to ictQATAR
and the industry of the status of services,
costs and margins being made, and so
assist with competitive market
developments
29
Qatar roadmap 1
 In preparation for these RAS Orders,
ictQATAR held two rounds of consultation
1. The first consultation (from 23 October
2012 until 29 November 2012) provided
details of the RAS system, the
methodology to be applied and the
expected RAS outputs
30
Qatar roadmap 2
 The second consultation (from 23 January
to 7 February 2013) allowed additional
constructive comments to be made by all
parties to assist ictQATAR with the
finalization of the RAS Orders
31
Qatar instructions
9
 These RAS Orders are formal Instructions
to QTel to comply with the following
1. Prepare and participate in the further
development of the RAS as approved by
ictQATAR
2.Meet the timelines for the RAS
implementation process according to the
timelines setout.
32
Qatar instructions 10
Prepare and submit written reports, plans
and responses to information requested
from ictQATAR as part of the RAS
4.Apply the RAS information in its own
business systems and practices that
relate to price setting and to demonstrate
the application and implementation of the
RAS system and information;
33
Qatar instructions 11
 5.Guarantee the performance of its RAS
obligations . providing a Performance
Bond
34
Telecom Italia’s Operational
Separation model: main
features Italy 1
 Creation of a separated business unit –
Open Access – providing SMP access
services both internally and externally.
 Physical separation of Open Access and
Telecom Italy Wholesale staff and
management
35
Telecom Italia’s Operational
Separation model: main
features Italy 2
 Separated incentive schemes and
separated code of conduct for Open
Access and Telecom Italy Wholesale
staff and management.
 Logical/physical separation of
information systems.
 Technical equivalence for both existing
and forthcoming SMP access services
based on the equivalence of output
concept.
36
Telecom Italia’s Operational
Separation model: main
features Italy 3
 Economic equivalence based on internal
contracts and internal transfer charges
consistent with regulated wholesale
prices.
 Governance of the equivalence model
ensured by the Supervisory Board.
37
US the master case 1
 The experience of separation approaches
in the United States over the last 35 years
can be good start to think about
functional &operational separation in
telecom
38
US the master case
Breakup of AT&T 2
 1984 wittnesed the broke up AT&T, which
was at that time the largest
telecommunications company in the world
 The main issue that led to the breakup
was that AT&T had used its control of
bottleneck local telephone networks to
foreclose12 competitors and to cross
subsidize its potentially competitive
markets, primarily long distance and
manufacturing
39
US the master case
Breakup of AT&T 3
 1984 wittnesed the broke up AT&T, which
was at that time the largest
telecommunications company in the world
 The main issue that led to the breakup
was that AT&T had used its control of
bottleneck local telephone networks to
foreclose12 competitors and to cross
subsidize its potentially competitive
markets, primarily long distance and
manufacturing
40
US the master case Breakup
of AT&T 4
 The underlying theory for the breakup of
AT&T was based on two basic
assumptions .
 Firstly, that the division between local
exchange and long distance was a natural
business boundary such that markets and
companies could be unambiguously
divided accordingly
41
US the master case Breakup of
AT&T 5
 Secondly, the provision of local telephone
lines was a natural monopoly
 The observations from the breakup of
AT&T included:
(1) In markets as dynamic and
unpredictable as telecommunications,
there is a strong risk that business line
divisions will be overtaken by market and
technology changes;
42
US the master case Breakup of
AT&T
2)Artificial industry boundaries can lead
rivals to invest heavily in the regulatory
and political processes in order to gain
regulatory advantage
(3) Regulatory imposed barriers to
competition delay important changes that
would benefit customers
43
US the master case Breakup of
AT&T
 (4) Regulatory battles over separation
boundaries can diminish new entrants‟
resources favor entrants that are effective
in the regulatory arena rather than those
that are effective in the marketplace
44
US the master case Breakup of
AT&T
 Behavioral rules are more effective than
separation measures. While structural or
functional separation were often justified
ex ante as necessary for bringing about
the benefits of competition, actual
experience showed otherwise.
45
U K
Flash 1
 In the UK, British Telecom created
Openreach BT in 2005 to operate all its
access networks. This spurred a new
wave of investment and infrastructurebased market entry as evidenced by the
explosion of local loop unbundled lines in
UK which jumped from less than 100,000
in June 2005 to 6.2 million by
November2009.
46
U K
Flash 2
 The UK experience shows a major benefit
of functional versus structural separation
is the ability to adjust the boundaries of
separation over time for example to allow
Openreach to offer active-based fiber
products
47
references
 Blowers, A. (2007). Functional separation
– The UK „Openreach‟ Model.
Presentation at ANACOM‟s 10th Seminar,
Lisbon, Portugal. (Available at
http://www.anacom.pt/content.jsp?content
Id=562609.
 Prieger, J. E. (2002). Regulation,
innovation, and the introduction of new
telecommunications services. The Review
of Economics and Statistics, 84(4), 704715.
48
References
Workshop on “Policy for Next Generation
Networks: European and US
Perspectives”
MIT, Cambridge, 27th March 2009
Safdar Imam ;presentation Dubai
Senior costing analyst Oman telecom
49