Eligible Revenue Information Sessions

Session overview  Purpose  Legislative obligations of carriers  Reporting requirements  Type of carrier – Participating or USO non-participating person?  Fees and Charges based on eligible revenue  Eligible statutory declaration  Eligible Revenue Submission  Tools

PURPOSE  Sessions are to assist industry participants to meet their statutory reporting requirements

Why report?  Eligible revenue based on an eligible revenue submission (including substantially compliant eligible revenue return and supporting documents) or otherwise estimated by the ACMA  Used to calculate fees and charges  Penalties and enforcement if non-compliant

What is a carrier? Under section 7 of the Telecommunications Act 1997, a carrier is the holder of a carrier licence. Not all carriers have to submit an eligible revenue return from

What are the legislative obligations of carriers?

Set out in  Telecommunications Act 1997 (Telco Act)  Telecommunications (Consumer Protection and Service Standards) Act 1999  Telecommunications Universal Service Obligation (Eligible Revenue) Determination 2003  NEW! Telecommunications (Participating Persons) Determination 2011 (No.1) (Participating Persons Determination)  Telecommunications (Period for Providing Return of Eligible Revenue) Specification 2010  Telecommunications (Approved Auditor) Determination 2010

Topic TCPSS Act / Telco Act 1997 Subsidiary Legislation Participating person must lodge return of eligible revenue in form approved in writing by the ACMA Section 20 Participating person (vs exempt person) Section 20A / Section 7 Telecommunications (Participating Person) Determination 2011 (No.1) (Participating Persons Determination) Period specified in writing by the ACMA for providing returns Paragraph 20(2)(a) Telecommunications (Period for Providing Return of Eligible Revenue) Specification 2010 Verification [of return] by statutory declaration Subsection 20(2) Calculation of eligible revenueSection 20B Telecommunications Universal Service Obligation (Eligible Revenue) Determination 2003 Audit report on return by approved auditor Section 20D Telecommunications (Approved Auditor) Determination 2010

What are carrier’s reporting requirements?

For each eligible revenue period, a carrier is either:  a participating person - and must submit an Eligible Revenue Submission to the ACMA by 31 October OR  a USO non-participating person – and must submit an eligible statutory declaration to the ACMA by 31 October

How do I determine what type of carrier I am?

 A participating person for an eligible revenue period is an entity that was a carrier at any time during that eligible revenue period [section 20A of the TCPSS Act].  However, the minister has determined that a person is not a participating person when the person (or “grouped carrier”) has: initial sales revenue; gross telecommunications sales revenue; OR eligible revenue of less than AUD$25 million for the eligible revenue period and the person submits an eligible statutory declaration to the ACMA by 31 October [part 4 of the Participating Persons Determination].

Fees and charges based on eligible revenue

 Universal Service Obligation Levy (annual)  National Relay Service Levy (quarterly)  Annual Carrier Licence Charge (variable component) FY1- Eligible Revenue Period (period of assessable activity) FY2- Claim Period 31 Oct Eligible Revenue Submissions due for FY1 Before EOY ACMA makes ER assessments for FY1 FY3- Invoicing Period Claim from universal service provider received in August levies assessment and invoicing in Sept/Oct

Eligible Statutory Declaration for a USO Non-participating person

 By 31 Oct, the person must provide to the ACMA an eligible statutory declaration stating that the person’s applicable revenue for the eligible revenue period was less than AUD$25 million  A statutory declaration given by a person is an eligible statutory declaration if it is made by a director or company secretary of the carrier and in accordance with the Statutory Declarations Act 1959  Template available on the ACMA Eligible Revenue Portal on the ACMA website Eligible statutory declaration

Key concepts  Declaration for each eligible revenue period (not multiple periods)  Include revenue of Declared Related Parties (DRPs) and consolidated related parties  Grouped carrier – for revenue calculation  Declaration of revenue must be verifiable to financial statements or other evidence on request or notification from the ACMA

IMPORTANT  Regardless of a carrier earning under AUD$25mil revenue they will be a participating person if they fail to provide an eligible statutory declaration to the ACMA by 31 October  Each participating person must provide a Return and supporting documentation to the ACMA by 31 October or may face penalties/other enforcement action – the Return must be compliant with the Act, i.e. substantially compliant with the form approved by the ACMA

Eligible Revenue Submission for a participating person

Key reporting concepts  All participating persons to report  Eligible Revenue Submission on a group basis vs individual basis  Disclose revenue of Declared Related Parties (DRPs) and consolidated related parties

Key reporting concepts cont.  Evidence for revenues and deductions  Financial statements of carrier and related parties  Audit report OR Audit Waiver granted by the ACMA

Revenue Allocation Schedule – when submitting ERR Form for more than one carrier Table 1: Gross Telecommunications Revenue allocation A B C Note Ref Name of Carrier ABN/ACN (without spaces) Gross Telecommunicatio ns Revenue allocation in $AUD R1 BIGTelco 22,000,000 R2 MedTelco 10,000,000 R3 Total $32,000,000 Total Gross Revenue $32,000,000 Unallocated $0

Revenue Allocation Schedule – when submitting ERR Form for more than one carrier Table 2: Eligible Revenue allocation Note Ref Name of Carrier ABN/ACN (without spaces) Eligible Revenue allocation in $AUD R11 BIGTelco $19,000,000 R12 MedTelco $6,000,000 R13 Total $25,000,000 Total Eligible Revenue $25,000,000 Unallocated $0

Related Parties Consolidated related party an entity: (a)that is not the participating person; and (b)the revenue of which is included in the annual consolidated financial statements of the participating person’s ultimate Australian parent entity ( whose revenues are fully accounted for in the ERR Form)

Related Parties Declared related party Any entity that earns telecommunications sales revenue from the Australian telecommunications industry and that is not a participating person or a consolidated related party and is owned at any time during the eligible revenue period (>49%) by the owner of the carrier

Multiple Parties Schedule in ERR Form Table 1: Ownership Group Name: Note Ref Carrier Name Carrier Licence Number ABN/ACN (without spaces) M1 BIGTelco M2 MedTelco M3

Ultimate holding company Bluetone 50% Carrier X

Multiple Parties Schedule in ERR Form Table 2: Declared Related Parties Please refer to Sections 6 and 7 of the Telecommunications Universal Service Obligation (Eligible Revenue) Determination 2003 to determine if you have any Declared Related Parties Declared Related Party (DRP) Name (A) Proportion of Carrier owned by Ultimate holding company (participating person interest) (B) Proportion of DRP owned by Ultimate holding company (party interest) DRP Factor (A x B) M % M % M % M % Bluetone 50% 25%

Carry through to revenue and deductions sheets – example: Table 1: Sales Revenue (per financial statements) AB DE Note Ref Name of Group/Carrier or name of DRP DRP factor % if applicable (automatically applied from "Multiple Parties" sheet) Total Revenue in $AUD Carrier/Group Portion of Revenue R1 Bluetone R2 25% $100,000$25,000

Carrier A Ultimate Australian Parent Co X Co Y Co Y1 Co Z Co M Co N1 Co N2 Co N3 Co N 100% 50% Co J Co K 90% 80% 50% 100% 50% 90% 50% Parent interest in Co N2: =(90%x100%x50%) +(90%x80%x50%) =45% + 36% =81% Parent interest in Carrier A: =90%x80%x80% =58%

Multiple Parties Schedule in ERR Form Table 2: Declared Related Parties Please refer to Sections 6 and 7 of the Telecommunications Universal Service Obligation (Eligible Revenue) Determination 2003 to determine if you have any Declared Related Parties Declared Related Party (DRP) Name (A) Proportion of Carrier owned by Ultimate holding company (participating person interest) (B) Proportion of DRP owned by Ultimate holding company (party interest) DRP Factor (A x B) M % M % M % M % Co N2 58% 81% 47%

A complete Eligible Revenue Submission (ERS) is made up of two parts: 1.A Return  Eligible Revenue Return Form (ERR Form)  Final Financial Statements for carrier and related parties  Outline of Business Structure 2.Supporting Documents  Independent Audit Report  Statutory Declaration – Management Certification

ERR Form >Eight sheets (was 17 in ) and built in related party percentages >Prepare ERR Form in accordance with relevant Australian Accounting Standards >whole Australian dollars (AUD$) and English >exclusive of GST

Calculating Eligible Revenue  Initial sales revenue  Less Non-telco sales revenue and revenue earned whilst not a licence holder =  Gross telecommunications sales revenue  Less Deductions: -Overseas Activities and Acts in Australia for services outside Australia -Customer equipment -Content services -Exempt base station -Infrastructure revenue -Inter-Person Input Payments

What is telecommunications revenue? >Revenue earned from the telecommunications industry from carrying on business as a carrier or carriage service provider, or...

What is telecommunications revenue? … supply goods or services for use in connection with the supply of a listed carriage service; supply a content service using a listed carriage service; manufacture or import customer equipment or customer cabling; or install, maintain, operate or provide access to: (i)a telecommunications network; or (ii)a facility; used to supply a listed carriage service.

Audit report on return An eligible revenue return given to the ACMA under section 20 must be accompanied by a report of an approved auditor that: (a)is in a form approved in writing by the ACMA; … This is the ACMA independent audit report form published for the relevant year on the: ACMA Eligible Revenue Portal /STANDARD/pc=PC_410118

Approved auditor >Subsection 8F(1) of TCPSS Act – meaning of approved auditor: A reference in this Part to an approved auditor is a reference to a person included in a class of persons specified in a written determination made by the ACMA for the purposes of this section

Approved auditor Telecommunications (Approved Auditor) Determination 2010 specifies the following as approved auditors: 1. Registered auditors under Part 9.2 of the Corporations Act Authorised audit companies registered under Part 9.2A of the Corporations Act 3.Auditors-General Find an approved auditor who is either a registered auditor or authorised audit company by using the professional registers on the ASIC website:

Audit Report on Return - s20D TCPSS Act The approved auditor must provide an audit opinion on the complete Return, not only the ERR Form Only exception is where an audit waiver or a conditional audit waiver has been granted by the ACMA.

Requesting an Audit Waiver (may be a conditional audit waiver) >Applies to only one eligible revenue period >Request prior to lodging all other documents in an Eligible Revenue Submission >Audit waiver is more likely to be approved where: -other sufficient and appropriate evidence is provided -when carrier did not hold the licence for the full eligible revenue period -no significant errors in prior period returns -administrative expense is prohibitive for carrier compared to expected revenue from telecommunications activity in Australia

Tools for carriers

 First stop: ACMA Eligible Revenue Portal /STANDARD/pc=PC_  Potential for future information sessions where there is interest  ACMA Revenue Assurance Section Ph: