USO Fund Administration in Australia

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USO Fund Administration in Australia

• Asia Pacific Telecommunity
• Symposium on Universal Access and Service
• Hanoi, February 2004
• Australian Communications Authority
• Mark McGregor
• Email mark.mcgregor_at_aca.gov.au
• Telephone [phone]

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USO Funding and Subsidy Arrangements

• Those in industry that benefit from the USO are
  required to contribute to its cost in an
  equitable manner. USO subsidies are greater than
  200 million.
• Arrangements have been developed to be consistent
  with the legislation of the day

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For discussion

• Funds (subsidies) available for universal service
  providers
• Timeline of the fund administration process
• Details of the method used to allocate funds to
  the universal service provider
• Eligible revenue
• USO levies

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Determined USO subsidies
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USO Fund Administration - Timeline
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USO Fund Administration

• The legislation introduces the concept of
  eligible revenue to apportion the USO subsidies
  and digital data costs claims amongst carriers.
• The legislation defines eligible revenue in terms
  of an ACA determination
• To define eligible revenue, the ACA has made the
  Telecommunications Universal Service Obligation
  (Eligible Revenue) Determination 2003
• Principle of the fund administration is for the
  universal service providers to receive funds in
  an efficient manner.

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Eligible Revenue

• broadly spreads the burden of USO contributions
  across the telecommunications industry,
• is transparent,
• makes use of readily accessible data,
• is administratively simple and
• is competitively neutral.

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Eligible Revenue Components

• Eligible revenue is based on the sales revenues
  of the carrier and its related parties less a
  series of revenue and expense types
• Deductible revenue
• Acts not associated with telecommunications
  industry
• Acts outside Australia
• Acts in Australia for services outside Australia
• Selling, installation and maintenance of customer
  equipment
• Levy credit balance
• Content services
• Exempt base station
• Construction of infrastructure
• Expenses relating to inter carrier input payments

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Who pays for the USO?

• Each company with a carriers licence is required
  to contribute to the cost of the USO
• The amount each company contributes is calculated
  on its eligible revenue from the previous year
• In general terms, if a carrier earns 1 of total
  industry eligible revenue, then it must
  contribute 1 of the cost of the USO
• Over time the proportion of the USO cost
  contributed by Telstra has decreased

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Proportion of Total Eligible Revenue Contributed
Telstras share of eligible revenue is falling
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USO levies (1)

• Each year the USP and DDSP make a claim to the
  ACA in respect of the services provided
• Total levy credits total of all subsidies for
  both USO and DDSO
• ACA then calculates each carriers USO levy (also
  known as levy debit) based on a carriers eligible
  revenue as a proportion of the total industry
  eligible revenue (the levy contribution factor)

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USO levies (2)

• Levy debit levy contribution factor/adjustment
  factor X (Total levy credits previous levy
  deficit)
• Two mechanisms to ensure USP not disadvantaged
  should a carrier fail to pay its levy (Levy Debit
  Formula Modification Determination (No. 1) 2002)
• The proportional share of carriers is adjusted
  for those entities in receivership, liquidation
  or having ceased to exist)
• Unpaid levies from previous years for carriers in
  receivership, liquidation or having ceased to
  exist
• This mechanism distributes both unpaid levies and
  levies which are unlikely to be paid among all
  carriers

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Example levies No.1

• Eligible revenue
• Carrier A 70
• Carrier B 20
• Carrier C 10
• Total levy creditsUSO subsidy digital data
  costs 100,000
• Contribution Factor eligible revenue/total
  eligible revenue (eg Carrier A70/10070)
• USO Levies Contribution factor X Total levy
  credits

• USO levies
• Carrier A 70,000
• Carrier B 20,000
• Carrier C 10,000
• N.B. All carriers in a position to pay

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Example levies No.2 - adjustment factor

• Eligible revenue
• Carrier A 70
• Carrier B 20
• Carrier C 10 (in liquidation)
• Total levy creditsUSO subsidy digital data
  costs 100,000
• Levy debit levy contribution factor/adjustment
  factor X (Total levy credits previous levy
  deficit)

• USO levies
• Adjustment factor 0.7 0.2 0.9
• Carrier A (70//90) X 100,000 77,778
• Carrier B 22,222
• Carrier C 10,000 (in liquidation)
• N.B. As carrier C not in a position to pay, no
  adjustment factor in calculation of its levies

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Example levies No.3 previous levy deficit

• Eligible revenue
• Carrier A 70
• Carrier B 20
• Carrier C 10
• Total levy creditsUSO subsidy digital data
  costs 100,000
• Levy debit levy contribution factor/adjustment
  factor X (Total levy credits previous levy
  deficit)
• In previous year, carrier D did not pay its USO
  levies of 30,000 and is now in liquidation

• USO levies
• Previous levy deficit Carrier D levies from
  previous year 30,000
• Carrier A (70) X (100,000 30,000) 91,000
• Carrier B 26,000
• Carrier C 13,000

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• Thank you