National & regional experiencse

1. 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 The views expressed in this paper are those of the author and do not necessarily reflect the opinions of the ITU or its membership. Dr Kelly can be contacted at Tim.Kelly@itu.int.

2. Agenda • Background • Mechanism /road map • The purpose of the Accounting Separation Guidelines • The purpose • application * This will be the subject of separate presentations.

3. Agenda Saudi experience Oman Qatar Italy USA AT&T UK flash

4. Preamble1 Structural and functional separation of telecommunications operators is being considered in many parts of the world following the U.K. adoption of Openreach

5. Preamble2 “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

6. 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

7. 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

8. Application These Guidelines will apply to all Designated Service Providers.

9. Saudi Experience1 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”.

10. Saudi Experience2 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

11. Saudi Experience3 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

12. Saudi Experiencepurpose 4 verify a Designated Service Provider’s adherence to its obligations of non-discrimination, 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;

13. Saudi Experiencepurpose 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.

14. Time schedule1

15. Time Schedule2

16. Oman Experience1 Oman TRA issued Consultation Paper SMP Remedies All current Class I license holders are classified as Notified Operators

17. Oman Experience2 The activities and services had been classified as follow: Retail fixed voice Access Local &national voice International voice Telephone service

18. Oman Experience3 Retail data Retail leased lines Dial up internet Broad band internet Whole sale fixed voice Call origination Call termination

19. Oman Experience 4 Wholesale infrastructure Wholesale unbundled access Wholesale unbundled line rental Wholesale broad band access Wholesale terminate segment of leased lines Wholesale trunk segment of leased lines

20. Oman Experience5 Mobile market Access of call origination Voice call termination on individual mobile network wholesale International roaming

21. 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 • Top-down FDC • LRIC model

22. 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 • Top-down FDC • LRIC model

23. Oman The response to the A/S 8 Separate regulatory accounts ( Annually) Investigative costing studies (rare) FDC/LRIC modeling interconnect tariff approval (annual) Tariff rebalancing ( annual) Product price approval ( each product) Corrective (occasional)

24. Qatar1 Information and Communication Technology (ictQATAR) issued Regulatory Accounting System Instructions in August 2010 (ICTRA 08/10),

25. 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.

26. 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

27. 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

28. 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

29. 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

30. Qatar roadmap 1 In preparation for these RAS Orders, ictQATAR held two rounds of consultation 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

31. 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

32. Qatar instructions 9 These RAS Orders are formal Instructions to QTel to comply with the following 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.

33. 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;

34. Qatar instructions 11 5.Guarantee the performance of its RAS obligations . providing a Performance Bond

35. 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

36. 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.

37. 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.

38. 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

39. US the master caseBreakup 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

40. US the master caseBreakup 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

41. 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

42. 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;

43. 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

44. 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

45. 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.

46. 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 infrastructure-based 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.

47. 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

48. 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?contentId=562609. Prieger, J. E. (2002). Regulation, innovation, and the introduction of new telecommunications services. The Review of Economics and Statistics, 84(4), 704-715.

49. 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