Public consultation on access deficit contribution

1. Consultation Paper (EAU/02/2010)
Draft Decision
Access Deficit Contribution
Background:
In 2008, the TRA approved Tariff Rebalancing proposal of Omantel with the following note.
“The TRA in principle does not support the Access Deficit Contribution (ADC) approach, yet it realizes that access
deficit contributions may be needed for a short period of time to supplement the rebalancing mechanism for class I fixed
licensee whose access prices were regulated below cost due to social implications. The ADC will not be admissible to the
fixed-line access provider(s) beyond 2011. In case the Access deficit stands eliminated at an earlier date, the TRA may
disallow any ADC earlier than this date”.
The Telecommunications Regulatory Authority is pleased to forward the following consultation
paper (Draft Decision of Access Deficit Contribution (ADC)) to the industry and other
stakeholders for their comments and suggestions. TRA shall give due consideration to all
comments and contributions received from the interested parties in finalizing the decision;
however, incorporation of any proposed changes will be the sole discretion of the Authority
The TRA, at its own discretion, may publish comments and views of the respondents unless
confidentiality is requested and justified by them.
The closing date for this consultation is the 30th
of August 2010.
Comments and contributions may be addressed to:
Economic Affairs Unit,
Telecommunications Regulatory Authority,
P.O Box No: 579, P.C 112, Ruwi,
Sultanate of Oman.
Or
E-mail: econ@tra.gov.om

2. In order to implement the above stated position, the TRA herby issues the following decision, which
outlines the regulatory process that would be followed by the International Gateway operators and the
operator requesting ADC.
Article 1:
Definitions
In this decision, the following terms will be defined as follows:
(i) Access Deficit: The difference between the costs of installing, maintaining and retailing the
access services of a regulated operator and the revenues the operator generates from selling
these services.
(ii) Economic Profit (loss): The difference between the revenues generated from access
services and the costs of access services including the opportunity cost which is represented by
weighted Average Cost of Capital (WACC).
(iii) Excess/Positive Economic Profit: Profit generated when the qualified licensee continues
to earn Profits exceeding a reasonable return on services that are effectively bundled with
the access line to the extent that fully covers the deficit.
(iv) Qualified Licensee: A class I fixed-line licensee providing line Rental service through fixed
access network at a regulated price, who has demonstrated to TRA that its Line Rental service
is provided below cost.
(v) International Gateway Licensee : The licensees licensed to operate International Gateway
exchange in the Sultanate
Article 2: The Qualified Licensee shall be entitled to file Applications for ADC for the period falling
between the date of commercial operation of the 2nd International Gateway Operator licensed by
TRA and December 2011.
Article 3: The Qualified Licensee shall file Applications for ADC on annual basis. The Qualified
Licensee shall submit Application for ADC for a calendar year by 30th April based on the audited
accounts and the traffic data of the preceding calendar year. The ADC charge proposed in the
application shall be considered as provisional ADC charge for that calendar year and final ADC charge
for the preceding calendar year.
Article 4: The first such application shall be filed within 30 days of notification of this decision which
shall be based on audited accounts of the previous year.
Article 5: The TRA shall examine the provisional rate of ADC for a calendar year and then notify
the rate to all concerned licensees within 30 days of receipt of application for ADC.

3. Article 6The Licensees operating international gateway shall settle ADC dues payable to the Qualified
Licensee based on the rate notified by the TRA.
Article 7: The Qualified Licensee and the Licensees operating International Gateway exchange shall
carry out adjustments on account of ADC for the difference between Provisional ADC charge and
Final ADC charge. The adjustment on account of ADC charge shall be finalized within 30 days from
the notification of Final ADC.
Article8: The Qualified Licensee and the Licensees operating International Gateway shall agree on
necessary commercial arrangements for exchange of traffic data and settlement of dues.
Article9: In case of any dispute between the parties regarding the ADC charge, the disputing party
may file its complaint to TRA under dispute resolution procedure.
Article10: The Application for ADC shall include:
a) Complete documentation including Excel-based model to work out the ADC charge for a
calendar;
b) Cost of Capital calculations duly supported by assumptions and input data;
c) Audit Certificate by an independent external auditor. The auditor shall certify:
i. reasonability of methodology and assumptions used to work out the ADC charge,
ii. accuracy of revenue and cost calculations,
iii. reasonability of cost and revenue allocation methodology,
iv. reasonability of methodology, assumptions and the input used to estimates of the
cost of capital.
d) Demonstration that the access deficit net of contributions of excess profit from line
dependant services is of a value less than zero. The calculation of this access deficit net of
contribution (ADNC) is to follow the format as outlined in Schedule 1
Article11: The ADC will be limited to the portion of the Access Deficit, which the Qualified Licensee
cannot fund through other internal sources of economic profit from line dependant services.
Article12: If upon review, the TRA observes that the ADNC is negative; the TRA may direct the
Qualified Licensee to calculate ADC based on the formula outlined in Schedule 2 and resubmit the
revised values to the relevant parties within 30 days from such direction.
Article13: For the purpose of calculating the ADC rate per minute, total
international inbound and outbound traffic on the public network shall be used.
Article14: The licensees shall keep complete traffic data (CDR etc) available to substantiate their
claims.
Article15: The ADC claims once agreed and adjusted shall be considered final and closed. No claim
on account of ADC shall be admissible with retrospective effect.

4. Schedule 1
Calculation of Access Deficit Net of Contribution (ADNC)
The calculation shall be in the form of a table providing the following inputs:
 EBIT (A)
 Capital Employed (B)
 Weighted Average Cost of Capital - WACC (C)
 Economic profit /(loss) (D)
Where D = A-(B*C) for each of the following service groups:
1. Exchange lines
2. Exchange line Broadband (e.g. ADSL)
3. National calls
4. International calls
5. Other call
And Total ADNC = sum of all economic profit (loss) for the above 5 components
Where
 EBIT is earnings before interest and tax
 ADNC, Access Deficit Net of Contribution is the sum of economic profit or loss of each of
the service groups from 1-5 above.
 The ADNC must be less than zero or else the application would be invalid.
 The following notes apply in relation to the service groups 1-5 above:
1. Free calls and value added services bundled with the access service by the Qualified
Licensee shall be included,
2. All broadband services provided over the exchange lines shall be included,
3. All originated calling terminated in country ( fixed to fixed as well as fixed to mobile)
4. Qualified Licensee international termination inbounds and originated outbound.
5. All other call types passing through qualified exchange lines, including interconnection

5. Schedule 2
Calculation of Access Deficit Net of Contribution (ADNC)/minute.
A: Qualified Licensee International Call minutes
B: Other International Gateway licensees international call minutes
C: Total International Call minutes (A+B)
(Question: what are your views on using GB or GB/Second instead of minutes as a base of
calculating the ADC).
D: Total ADNC
E: Total ADNC/ Total International Call minutes = (D/C)
Where:
 International calls include both inbound and outbound minutes
 ADNC as calculated in Schedule 1