We have worked with regulators in a number of countries to develop cost-accounting requirements and to review the regulatory accounts of operators with significant market power (SMP). We have also provided advice to operators and regulators regarding the appropriate value of cost-of-capital.
Accounting separation is a key regulatory tool which assists NRAs in checking that the prices of their SMP operators are, where appropriate, non-discriminatory and cost-oriented. It is also a tool which can be useful in the detection of anti-competitive cross subsidies.
Figure 1: The accounting separation process
Figure 2: The accounting separation process (detail)
Relevant experience
Projects we have carried out on the implementation and review of accounting separation models, include:
- auditing the regulatory cost accounts of a major European incumbent fixed-network operator – our knowledge of telecoms networks was crucial for providing an opinion on the allocation of joint and common costs, as well as the valuation of telecoms assets at ‘current cost’
- helping an incumbent operator in the audiovisual infrastructure business to respond to regulatory actions regarding tariffs for end-user services
- reviewing the regulatory accounts produced by the two dominant mobile operators in Spain on behalf of the regulator – we reviewed whether the accounting principles had been correctly implemented
- for a Western European regulator, we undertook an external audit of the incumbent operator’s accounting separation process, evaluating the separate accounting system.
