ࡱ> loijk bjbj 4xxt>K*(*(m5.5$5554555h[6W75a7;(;;;?^" q1>95]"?]]55;;6lYYY]^5;5;|dY]YY\;0J5^(h10ah@P\\\5]]Y]]]]]Y]]]a]]]]]]]]]]]]]*( 34:  Proposed Changes to the Division 12 Record-keeping and Reporting Rules Position Paper May 2013 Contents  TOC \o "1-3" \h \z \u HYPERLINK \l "_Toc354753992"Executive Summary  PAGEREF _Toc354753992 \h 2 HYPERLINK \l "_Toc354753993"1 Introduction  PAGEREF _Toc354753993 \h 4 HYPERLINK \l "_Toc354753994"1.1 Background  PAGEREF _Toc354753994 \h 4 HYPERLINK \l "_Toc354753995"1.2 Purpose  PAGEREF _Toc354753995 \h 4 HYPERLINK \l "_Toc354753996"1.3 Consultation  PAGEREF _Toc354753996 \h 4 HYPERLINK \l "_Toc354753997"2 The Division 12 report price indices  PAGEREF _Toc354753997 \h 6 HYPERLINK \l "_Toc354753998"3 ԭs review of Division 12 methodology  PAGEREF _Toc354753998 \h 7 HYPERLINK \l "_Toc354753999"3.1 Methods for calculating price indices  PAGEREF _Toc354753999 \h 7 HYPERLINK \l "_Toc354754000"3.2 Reporting of bundles of services  PAGEREF _Toc354754000 \h 7 HYPERLINK \l "_Toc354754001"4 Collection of necessary information from industry  PAGEREF _Toc354754001 \h 9 HYPERLINK \l "_Toc354754002"4.1 The Division 12 RKR  PAGEREF _Toc354754002 \h 9 HYPERLINK \l "_Toc354754003"4.2 Characteristics of the existing Division 12 RKR  PAGEREF _Toc354754003 \h 9 HYPERLINK \l "_Toc354754004"4.2.1 Reporting entities  PAGEREF _Toc354754004 \h 9 HYPERLINK \l "_Toc354754005"4.2.2 Information to be provided  PAGEREF _Toc354754005 \h 9 HYPERLINK \l "_Toc354754006"4.2.3 Reporting obligations  PAGEREF _Toc354754006 \h 10 HYPERLINK \l "_Toc354754007"5 Proposed changes to the Division 12 RKR  PAGEREF _Toc354754007 \h 11 HYPERLINK \l "_Toc354754008"5.1 Required changes due to market developments in the industry  PAGEREF _Toc354754008 \h 11 HYPERLINK \l "_Toc354754009"5.2 Reporting of mobile services on an aggregated level  PAGEREF _Toc354754009 \h 12 HYPERLINK \l "_Toc354754010"5.3 Reporting of VoIP services  PAGEREF _Toc354754010 \h 12 HYPERLINK \l "_Toc354754011"5.4 Broadband services provided on the NBN network  PAGEREF _Toc354754011 \h 13 HYPERLINK \l "_Toc354754012"5.5 Exclusion of dial-up services  PAGEREF _Toc354754012 \h 14 HYPERLINK \l "_Toc354754013"5.6 Ceasing to report data not required for the purpose of the Division 12 report  PAGEREF _Toc354754013 \h 14 HYPERLINK \l "_Toc354754014"5.7 Clarification on reporting of data relating to subsidiaries  PAGEREF _Toc354754014 \h 15 HYPERLINK \l "_Toc354754015"6 Timeline for implementing the revised Division 12 RKR  PAGEREF _Toc354754015 \h 16 HYPERLINK \l "_Toc354754016"Appendix: the proposed revised Division 12 RKR  PAGEREF _Toc354754016 \h 17  Executive Summary The ԭ reports annually to the Minister for Broadband, Communications and the Digital Economy on changes in the prices paid by consumers for telecommunications services in Australia (Division 12 report). This is a legislative obligation under s151CM(1)(a) in Division 12 of Part XIB of the Competition and Consumer Act 2010 (CCA) To enable collection of data for this reporting, the ԭ issued the Division 12 record keeping rule (RKR) in 2004. The telecommunications industry has changed since the last revision of the Division 12 RKR in 2009, which has led to the ԭ reviewing internally its methodology for preparing the Division 12 report and the Division 12 RKR. The review identified a number of changes required for the Division 12 RKR. Some of these changes are a reflection of the amendment to the reporting methodology. Others are for the purpose of updating the RKR to reflect current market conditions and remove dated reporting obligations. These proposed changes to the Division 12 RKR include: extending to iiNet and TPG an obligation to report on fixed voice services (including PSTN and VoIP services). removing the obligations on AAPT, Primus and Unwired to report. removing the requirement of reporting mobile services on a disaggregated basis by network technology (i.e. GSM and 3G), instead requiring carriers to report all mobile services (including GSM, 3G, and 4G) on an aggregated basis. removing the requirement of reporting dial-up internet services. in relation to PSTN voice services, removing the requirement of reporting community calls and pastoral calls. in relation to sample bills for mobile and internet services, removing the requirement of reporting disaggregated cost and usage data. Instead, only total bill spend data is required. including a requirement of reporting VoIP services with comparable functionality and quality to PSTN voice services as part of reporting on fixed voice services. This should include voice services provided on the NBN. including a requirement of reporting fibre and fixed wireless internet services provided on the NBN. The ԭ seeks feedback from stakeholders on these proposed changes. Submissions should be provided to the ԭ by Friday 31 May 2013. If a stakeholder wishes to submit commercial-in-confidence material as part of its submission, the stakeholder should submit both a public version and a commercial-in-confidence version of the submission. All public submissions will be posted on the ԭs website. The ԭ proposes to implement the changes by end of June 2013. As a result, it is proposed that reporting companies will be required to prepare their Division 12 returns 2012-13 in accordance with the revised RKR. The ԭ seeks stakeholders view on whether this time frame would allow sufficient time for reporting companies to prepare and submit the Division 12 return 2012-13 by its due date (i.e. 30 September 2013). Introduction Background The ԭ reports annually to the Minister for Broadband, Communications and the Digital Economy on changes in the prices paid by consumers for telecommunications services in Australia (Division 12 report). This is a requirement in s 151CM(1)(a) in Division 12 of Part XIB of the Competition and Consumer Act 2010 (CCA). Section 151BU of the CCA provides that the ԭ may make record keeping rules that require specific carriers or carriage service providers to keep and retain records, prepare reports consisting information contained in those records, and provide those reports to the ԭ. In December 2004, the ԭ issued the Division 12 RKR requiring specific service providers to give the information required for preparing the Division 12 reports. In 2008, the ԭ undertook a review of the methodology for calculating price changes for its Division12 reporting. As a result, the ԭ adopted some changes to the methodology, for the reporting for the FY 2007-08 and onwards. The Division 12 RKR was updated accordingly in 2009. In 2010, the ԭ made minor amendments to the RKR to reflect the merger of Vodafone and Hutchison in 2009. Since the 2008 review, the telecommunications industry has changed both in terms of services and market structure. Some services such as 2G mobile services and dial-up internet, which are currently reported, have declined. New services such as 4G mobile have emerged. The market structure has also changed with a number of acquisitions and some carriers have seen their relevance rise or fall with their market share. Given this, the ԭ considered it timely to review the current methodology for Division 12 reporting and the Division 12 RKR. As part of the review, the ԭ has considered the challenges associated with the current methodology and a number of alternative approaches. It became obvious that each of the approaches considered has its own weaknesses. As a result, the ԭ considered it appropriate to adapt the current methodology rather than adopt a significantly different approach for the reporting. Purpose The review of the Division 12 methodology identified a number of changes required for the Division 12 RKR. Some of these changes are a reflection of the revisions to the reporting methodology. Others are for the purpose of updating the RKR to reflect current market conditions and remove dated reporting obligations. This paper discusses these proposed changes to the Division 12 RKR. Consultation The ԭ seeks feedback from stakeholders on the proposed changes to the Division 12 RKR outlined in this paper and any other relevant aspects of the Division 12 RKR. Submissions should be received by Friday 31 May 2013. Submissions can be sent to Zhen Wang at Zhen.Wang@accc.gov.au. All submissions will be posted on the ԭs website. If interested parties wish to submit commercial-in-confidence material as part of their submissions, parties should submit both a public and commercial-in-confidence version of their submission. The public version of the submission should clearly identify the commercial-in-confidence material by replacing it with an appropriate symbol or c-i-c. The Division 12 report price indices The ԭ currently reports price indices for a range of services as illustrated in the chart below. Figure 1: Division 12 report price indices  A yield approach is used to derive the price indices for PSTN voice services and dialup internet services. Yields are calculated by dividing revenue by quantity (e.g. call minutes, services in operation (SIO)) for a particular carriers service, which is used as a proxy for the average price. A plan approach is used to calculate price indices for mobile services, and DSL, cable and wireless internet services. The plan approach essentially involves the creation of profiles of consumer groups, and then analysing the changes in prices of the most appropriate plans for each user group. All indices measure real annual price changes for their respective services. Each price index represents the revenue-weighted average of its sub-indices. For example, the overall telecommunications services index is produced by calculating revenue weighted price changes for each of PSTN, mobile and internet services. It should be noted that the price indices reported are industry-wide calculations and do not disclose any individual companys data. ԭs review of Division 12 methodology The ԭ has recently undertaken a review of its methodologies for the Division 12 report. The review covered a range of issues from methods for calculating price indices, coverage and scope of reporting, through to amendments required for the current Division 12 RKR. This chapter briefly discusses two particular issues of significance, which relate to calculating price indices and reporting of bundles of services. Chapters 3 and 4 discuss matters to do with the Division 12 RKR. Methods for calculating price indices As noted above, the ԭ currently adopts a yield approach for calculating price indices for PSTN services. In contrast, a plan approach is used for calculating price indices for mobile services and broadband internet services. Each approach has its weaknesses when being applied to the relevant type(s) of services. The main challenge associated with adopting the yield approach for PSTN services is that it is becoming increasingly difficult to accurately determine the yield (i.e. revenue per unit) due to the increased prevalence of subscription/bucket plans and service bundling. Consequently calculation of yields involves allocating revenue among a number of services, which can be quite subjective. With respect to the plan approach, a key challenge is that the inclusions associated with plans may change over time in terms of amount, quality and type of services being offered, making it difficult to isolate the price impact of those changes. In addition, given the large amount of data required, the plan approach is also relatively complex and resource intensive to apply. As a result, the ԭ has considered whether there were better alternatives. In doing so, the ԭ considered practices of overseas agencies such as UK regulator Ofcom and OECD, and also discussed possible approaches with the Australian Bureau of Statistics. Among the alternative approaches considered include shifting to a plan approach for PSTN services and adopting a yield approach for mobile services and broadband internet. After careful consideration of the alternative approaches, the ԭs view is that each alternative has weaknesses of its own. Therefore, the ԭ considers it appropriate to adapt the current approach rather than adopting a significantly different method. The changes to the current approach are reflected in some of proposed changes to the Division 12 RKR. Reporting of bundles of services As part of the review, the ԭ has also looked into what types of services it should produce price indices for in the Division 12 report. In particular, the ԭ considered whether it should introduce specific indices for bundles of services, which are currently not reported. The ԭ intends not to begin reporting specifically on price movements for bundles of services at this time. The reasoning for this is primarily two-fold. First, the approach would be very resource intensive for both the ԭ and reporting entities. The plan approach would be most appropriate for calculating price indices for bundles given the many components that make up a single bundle. Under such an approach, the ԭ would need to create one or more (and potentially many) representative bundles of services and monitor how the prices of plans that cover those services change over time. This would require the ԭ to collect and analyse a large volume of data to establish what those representative profiles should be. Those profiles would also need to be updated regularly to ensure they remain relevant over time. As demonstrated by Ofcoms experience, the complexity of such an approach can mean a very problematic exercise. This would also result in additional burden on the ԭ as well as potentially more regulatory burden on the industry in terms of providing additional information. Secondly, the weaknesses of the plan approach identified above would still apply to the reported price movements for bundles, potentially limiting the benefit of introducing such reporting, The ԭ will however continue to monitor trends in bundling and may revisit this matter when required in the future. Collection of necessary information from industry The Division 12 RKR The ԭ has the power under section 151BU of the CCA to issue recording keeping rules to require specific carriers to keep records. In December 2004, the ԭ issued the Division 12 RKR to enable it to collect, from service providers, the information required for undertaking annual Division 12 reporting to the Minister. The Division 12 RKR was revised in 2009 and 2010. The current version of the Division 12 RKR is available at: HYPERLINK "http://www.accc.gov.au/content/index.phtml/itemId/668921"http://www.accc.gov.au/content/index.phtml/itemId/668921. Characteristics of the existing Division 12 RKR Reporting entities The table below sets out the companies that are currently required to report under the Division 12 RKR and the service categories they are required to report on. Table  SEQ Table \* ARABIC 1: List of companies required to report under the Division 12 RKR Category nameReporting carriers and carriage service providersPSTN services Telstra, Singtel Optus, AAPT, PrimusGSM mobile services Telstra, Singtel Optus, Virgin Mobile3G/WCDMA services Telstra, Singtel Optus, VHAInternet services Telstra, Singtel Optus, Primus, iiNet, VHA, SP Telemedia, Unwired Information to be provided The Division 12 RKR sets out, in schedules B to E, detailed reporting requirements for each service category. In particular, reporting companies are required to provide information on revenue and usage for a range of services components. For example, in relation to PSTN services, reporting companies are required to provide data on revenue and cost for components of PSTN services including basic access, local calls, national long distance calls, internal long distance calls, and fixed to mobile calls. In relation to mobile and internet services, the Division 12 RKR also requires reporting companies to provide a random sample of bills issued to their customers every third year. The bills must include disaggregated data on spend and usage to enable construction of customer group usage profiles. Schedule G in the Division 12 RKR provides a template for carriers data submission to the ԭ. Reporting obligations Under the Division 12 RKR, the reporting companies are required to submit their data on an annual basis, in respect of each financial year. Submission is due by 30 September in the following financial year. Reporting companies are also required to provide an explanation if they vary the methods they used compared to the previous when collecting the data. Each company is also required to submit a Record-Keeping Declaration statement (in accordance with Schedule F in the Division 12 RKR) signed by its Chief Executive Officer or Chief Financial Officer, stating that: the reports are prepared in accordance with the requirements of the RKRs, the reports are accurate in all material respects, and the reports are consistent with the internal reporting procedures of the company. Proposed changes to the Division 12 RKR This chapter outlines the proposed changes to the Division 12 RKR and the ԭs rationale for making those changes. The matters considered are: required changes due to market developments in the industry reporting of mobile services on an aggregated basis reporting of voice over internet protocol (VoIP) services reporting of services provided on the National Broadband Network (NBN) exclusion of dial-up services ceasing to report data not required for preparing the Division 12 report, and reporting of data relating to subsidiaries A revised Division 12 RKR containing the proposed changes is included as an appendix to this paper. Required changes due to market developments in the industry Since the last revision of Division 12 RKR in 2009, market conditions have changed as a result of a number of acquisitions and further consolidation of the industry. Some of the major transactions are listed below: iiNets acquisition of AAPTs consumer division and Netspace in 2010 iiNets acquisition of TransAct in 2011 and Internode in 2012 M2 Telecommunications acquisition of Primus in 2012 Optus acquisition of the Vivid Group (Unwired and Vividwireless) in 2012 As a result, some companies have seen their relevance rise or fall in accordance with their market shares. In particular, AAPT, Primus, and Unwired, which are currently required to report under the Division 12 RKR, are less significant players in their own right. Therefore the ԭ considers it appropriate to remove their reporting obligations under the Division 12 RKR. iiNet and TPG, on the other hand, have achieved growth in revenue and market share through expanding their own customer base as well as acquisitions. Both have undergone continued transition from internet service providers to full service operators with a significant presence in the sector. iiNet and TPG are currently required to report internet services under the Division12 RKR. It is expected that their presence in the fixed voice sector will increase in the future given the increasing take up of VoIP services, particularly as the rollout of the NBN continues. Therefore, the ԭ considers it appropriate to extend their reporting obligation to include fixed-line voice services including both PSTN and VoIP services (section 3.3 discusses reporting of VoIP services). The ԭ also considered whether it should require M2 to begin to report under the Division 12 RKR given M2s continued growth over recent years. While all M2-owned brands and subsidiaries collectively account for a relatively significant share of total industry revenue, the revenue of each brand/subsidiary is not significant enough on an individual basis to warrant reporting. This is particularly relevant for the way that the ԭ produces the price indices for mobile and broadband services. Therefore the ԭ considers it appropriate to not require M2 to report under the Division 12 RKR at the present time. Finally, the ԭ proposes to make two other minor changes to the current RKR. Firstly, when referring to TPG the current RKR uses TPGs previous name - SP Telemedia Ltd. TPG changed its name from SP Telemedia Ltd to TPG Telecom Ltd in 2009. Therefore the ԭ proposes to update the RKR to reflect this change. Secondly, the current RKR includes Virgin Mobile Australia as a reporting company separately to Optus. Given Virgin Mobile Australia is a subsidiary of Optus and Virgin Mobile Australias data is currently reported by Optus, the ԭ proposes to remove Virgin Mobile Australia as a reporting company. The ԭ proposes that the Division 12 RKR be amended so that: iiNet and TPG are included for reporting of fixed-line voice services, AAPT, Primus and Unwired are no longer required to report on any services The references to SP Telemedia Ltd is replaced by TPG Telecom Ltd, and Virgin Mobile Australia is removed as a reporting compony. Reporting of mobile services on an aggregated level The ԭ previously reported separate price indices for GSM and 3G mobile services, which required segmented data from mobile network operators. A number of operators submitted to the ԭ that it was difficult to break down mobile service data by technology and requested permission to report on an aggregated basis. In July 2012, the ԭ decided to grant reporting companies (i.e. Telstra, Optus, and VHA) a temporary exemption, which allowed them to report all mobile services (including GSM, 3G and 4G services) on an aggregated basis under the Division 12 RKR for 2011-12. A natural consequence of aggregated reporting is that 4G services will be included in carriers reporting. This also has the added benefit of ensuring broader coverage of the mobile sector given both Telstra and Optus have already launched their 4G networks. Given this, the ԭ considers it appropriate to implement the exemption on a permanent basis. Consequently, the Division 12 RKR will be revised to remove the requirement of reporting on GSM and 3G services separately. Instead, reporting companies will be required to report on all of their mobile services on an aggregated basis. This change is likely to reduce the burden on the industry. The ԭ proposes that the Division 12 RKR be amended so that reporting companies are required to report on mobile services on an aggregated level, which include 2G, 3G and 4G services. Reporting of VoIP services The current Division 12 RKR covers PSTN voice services. Given the emergence of VoIP services, it is necessary to consider whether the data on VoIP should be required for the Division 12 reporting. There are various types of VoIP services currently being offered. ACMA has classified the following: peer to peer  internet only, calls do not use the PSTN VoIP out  a service where calls can be made from the VoIP network to the PSTN VoIP in  a service which allows a call to be made from the PSTN to the VoIP service using a telephone number and Two way  a service which allows calls to be made both ways between the VoIP service and the PSTN using telephone numbers. The ACCC is most interested in the last category because it is most similar to traditional PSTN voice services. The take up of VoIP services is significant and growing, with total number of adult users reaching 4.3 million at June 2012, up by 21 per cent from the previous year.  The total number of users of mobile VoIP at June 2012 increased by 133 per cent to 616,000, while over-the-top VoIP services via a home computer, laptop or tablet device increased by 28 per cent to 4.0 million users. Going forward, VoIP is likely to grow significantly as take up of VoIP services supplied on the NBN increases. Therefore, the ԭ considers that those VoIP services with comparable functionality and quality to the traditional PSTN fixed voice services should be captured as part of fixed-line voice services in the Division 12 RKR. This should include voice services provided on the NBN. In addition, the ԭ proposes that PSTN voice and VoIP data be provided on an aggregated basis. Such an approach would require reporting companies to break down VoIP data by the following types of services basic access, local calls, national long distance calls, international long distance calls, and fixed-to-mobile calls. The ԭ seeks stakeholders view on whether this proposed approach is workable. The ԭ proposes that reporting companies for PSTN voice services be required to include data relating to VoIP services (including voice services provided on the NBN) with comparable functionality and quality to PSTN voice services. Broadband services provided on the NBN network The Division 12 RKR currently does not capture broadband internet services provided on the NBN. While the take up of NBN services is still fairly low (34,500 users as at end of December 2012), it is likely to grow notably over the next few years. Therefore, the ԭ considers it appropriate to require reporting companies for internet services to also report fibre and wireless broadband services provided on the NBN. These NBN services should be reported separately to the services provided on other platforms. The ԭ proposes that reporting companies for internet services be required to also separately report data relating to NBN fibre and fixed wireless services.Exclusion of dial-up services The Division 12 RKR also currently requires reporting companies to provide data in relation to their dial-up internet services. However, dial-up internet has been declining rapidly and only accounts for 4 per cent of total internet SIOs as of June 2012. Given this, the ԭ considers that dial-up internet is approaching its obsolescence and ceasing to report on dial-up services will not result in the Division 12 report being less relevant. It will also lessen the burden on the industry by removing this reporting obligation. Consequently, the ԭ considers it appropriate to remove the requirement of reporting dial-up services under the Division 12 RKR. The ԭ proposes that the requirement of reporting dial-up internet services be removed. Ceasing to report data not required for the purpose of the Division 12 report The ԭ has identified the following data under collection which are not required for the preparation of the Division 12 report: data relating to community calls and pastoral calls in relation of PSTN voice services (i.e. sections 4.1 and 4.2 in Schedule B) disaggregated usage and cost information in sample bills in relation to mobile voice services and internet services The information on community calls and pastoral calls does not feed into the calculation of price indices in the Division 12 report. Therefore, the ԭ considers it appropriate to remove the reporting obligation related to those. In relation to the sample bill information noted above, this information has been used to construct the user group profile when calculating relevant price indices. However, the ԭ intends to adopt a simplified approach in the future, where construction of the user group profiles will be based on total bill spend rather than complete usage profile. Given this, the ԭ considers it appropriate to remove the requirement of reporting disaggregated usage and cost data. Instead reporting companies will be required to provide data on total bill spend. Both changes will lead to reduced burden of reporting on reporting companies. The ԭ proposes that the Division 12 RKR be amended so that: the requirement of reporting community calls and pastoral calls in relation to PSTN voice services will be removed, and instead of providing disaggregated cost and usage data in sample bills, reporting companies will be required to provide total bill spend data only. Clarification on reporting of data relating to subsidiaries Section 4(1) in the Division 12 RKR provides that the RKR applies to reporting companies and their Australian subsidiaries. However the RKR does not specify how data relating to subsidiaries should be reported. In practice, some reporting companies report data relating to their subsidiaries separately. This allows the ԭ to disaggregate data by companies as well as by services. Therefore, the ԭ proposes to include a clarification in the RKR that data relating to a reporting companys subsidiaries should be provided separately and on a company by company basis. The ԭ proposes that a clarification be included in the Division 12 RKR that data relating to a reporting companys subsidiaries should be reported separately and on a company by company basis. Timeline for implementing the revised Division 12 RKR Subject to feedback received from the industry, the ԭ proposes that the changes to the Division 12 RKR be implemented by June 2013 and the new requirements be applied to the Division 12 Return 2012-13 (due on 30 September 2013). While this means that reporting companies were not aware of these new reporting requirements for the majority of the relevant period, the ԭ considers that reporting companies would likely have been collecting this information regardless for their own purposes. Therefore meeting the proposed timeline is likely to be a matter of collating the data for submitting to the ԭ rather than significantly amending current business systems or setting up new business systems. The ԭ seeks stakeholders view on whether the proposed approach is workable. Appendix: the proposed revised Division 12 RKR  Subscription/bucket plans refer to arrangements where the consumer pays a set monthly amount and receives certain amounts of various types of calls.  Ofcom, International Communications Market Report 2012, page 323  ACMA website (HYPERLINK "http://www.acma.gov.au/WEB/STANDARD/pc=PC_310067"http://www.acma.gov.au/WEB/STANDARD/pc=PC_310067)  ACMA,   %017SUcdhjklmnoxyƿԻƵyn_njh0MUmHnHuh mHnHuhh 0Jh0Mjh0MUjh0Mh0MUh'RhLnh&5h\hxhmh4 hueaJ$hue hbhR hbhx hbh`d hbhaGhnhbh%h"Zuh1 jh'5hwmUmHnHu!     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