Image

The Belgian Institute for Postal services and Telecommunications (BIPT) has published a draft decision containing the calculation of the net cost of Universal Service for the year 2003, yielding an amount just under €46m.


This is a sharp reduction from the previously calculated amount of €101.6m.


The new amount results from a re-evaluation (the elements of the re-evaluation, and the key conclusions, are summarised by T-REGS hereafter).


Comments from interested parties are invited by 31 Oct 2004.



Specifically, the following elements were examined:


- Calculation of transfers between the components of Universal Service (geographic availability, social tariffs, payphones, directory enquiries and directories) based on the actual costs rather than on the basis of retail tariffs.


- Verification of the costs of the local access network, on the same basis as the basis used for the calculation of interconnection charges.


- Taking into account the costs of social tariffs based on the costs rather than based on the loss of revenue for Belgacom (this is an innovation compared to the methods applied in France and in Spain).


- Coherence between the cost model for universal service, and the actual architecture and topology of the Belgacom network.


- Inclusion of the value of incoming calls


- Assessment of immaterial advantages for Belgacom from being the desigated Universal Service provider.


The calculation is based on cost accounting data for the year 2001, using a 'top-down distributed cost' methodology, adjusted to exclude restructuring costs and pension back service costs, and then modified to reflect current cost accounting (CCA), a tilted annuity method (TAM) to deal with amortisation, and an adjustment to reflect the cost of 'an efficient operator' (which is low -and not made public- for the PSTN, but set at 10% for payphones). The weighted average cost of capital (WACC) is set at (pre-tax) 12.88%.


Since the year 2000, Belgacom has repeatedly stated that it incurs an access deficit (connection and subscription charges do not cover costs), and the BIPT has accepted that such as access deficit effectively exists. The BIPT and Belgacom disagree on the impact of the access deficit on Belgacom's ability to respect the applicable retail price-cap. Given the stipulations in EU directives, and the rulings of the European Court of Justice, the BIPT is, however, excluding any element of access deficit in the calculation of the net cost of Universal Service.


A key development in this new calculation is the treatment of 'immaterial advantages' from being the Universal Service provider, specifically relating to: brand name recognition, ubiquity, lifecycle of customers and marketing. The BIPT is putting forward the basic question: "What are the immaterial advantages to the provider, given its statute and its obligations, and that the provider would lose if it were to disconnect the non-profitable customers from its network?".


The BIPT's conclusions in this respect are as follows:

































Provisional net cost


Before immaterial advantages


After immaterial advantages


Basic telephone service


11.137.674


0


Payphones


21.274.883


18.967.991


Social tariffs/minimum


27.427.862


27.007.909


Directory enquiries


0


0


Universal directory


0


0


TOTAL


€59.840.420


€45.975.900


The full text (in French) of the BIPT consultation can be accessed by clicking here.


For a discussion, please contact Yves Blondeel.