BEREC Report Regulatory Accounting in Practice 2014

Document number: BoR (14) 114

Document date: 25-09-2014

Date of registration: 29-09-2014

Document type:
Author: BEREC

The present report provides an up-to date factual overview of the regulatory accounting frameworks used in Europe and an assessment of the level of consistency achieved by NRAs. The report is prepared annually and updates the previous versions published since 2005. The data collected for this year’s report are updated to April 2014. They have been compared, where possible, with data collected each year from 2006.

This year’s report layout follows the restructuring done in 2010 in order to perform a deeper analysis that concentrates on the following four key wholesale markets: Wholesale Line Rental, Unbundled Access, Broadband Access and Leased Lines Terminating Segments. Moreover an analysis is given of the cost base and allocation methodologies used for fixed and mobile termination markets. For those markets it contains a comparison of the most “popular” combinations of cost base and cost allocation methodologies.

The data collection started in the last few years was continued with regard to:

i) the depreciation method declared by respondent NRAs;

ii) accounting information for some products in market 4, such as copper access (including LLU, SA, SLU), fibre access (LLU, VULA), dark fibre access, duct access;

iii) motivations that induced NRAs to choose a particular costing methodology for the markets listed in 2007 EC Recommendation.

The overall picture is relatively stable in comparison to last year with generally a small number of changes by NRAs since last year. There are clear preferences for price control methods (cost orientation alone or in combination with price cap), cost base (current cost accounting – CCA) and allocation methodologies (mainly long run incremental costs (LR(A)IC) with fully distributed costs (FDC) preferred only in a few - mainly retail - markets). In the termination markets, the LRIC approach often takes the form of pure LRIC to comply with the Recommendation 2009/396/EC on termination rates.

The degree of consistent application of methodologies continues to be high and accommodates the use of elements or parameters that reflect national circumstances. Overall the 2014 data confirmed the trend towards an increasingly consistent approach to regulatory accounting obligation among NRAs. We see signs of stabilisation in the application of particular methods for cost valuation or cost allocation by NRAs. The latter indicates that NRAs are providing predictable and stable regulatory environments in their countries.

Good progress has been made in developing effective regulatory accounting frameworks to meet the needs of NRAs. However, this is a complex and highly technical topic which requires regular maintenance and enhancement of the regulatory accounting framework as competition develops, technology improves and new regulatory challenges emerge.