1. Eligible Revenue Information Sessions 2012 USO non-participating persons

2. Overview  Purpose of session  Legislative framework  Levies and charges  Cutover to TUSMA legislation  Reporting requirements  2010-11 period update  2011-12 reporting  Monitoring framework  Tools

3.  assist industry participants who may earn less than AUD$25 million to meet their statutory reporting requirements  update carriers on any changes to the framework for reporting, evidence-based assessments and related levies and charges

4. Set out in  Telecommunications Act 1997 (Telco Act)  Telecommunications (Consumer Protection and Service Standards) Act 1999 (TCPSS Act)  Telecommunications Universal Service Obligation (Eligible Revenue) Determination 2003  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  Telecommunications Universal Service Management Agency Act 2012 (TUSMA Act)  Subsidiary instruments to TUSMA Act – under development

5. 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.

6. 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

7.  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].

8. Requirement TCPSS Act /Telco Act [Subsidiary Legislation] Participating person or USO non- participating person section 20A / section 7 [Participating Persons Determination] Due date to provide eligible statutory declaration (31 Oct) for declaring revenue under threshold [Participating Persons Determination] Calculation of revenue [subsection 4(2) of Participating Persons Determination] [Telecommunications Universal Service Obligation (Eligible Revenue) Determination 2003] Participating person must lodge return of eligible revenue in form approved in writing by the ACMA by due date (31 Oct) section 20 [Handbook on Eligible Revenue Portal on ACMA website] [Telecommunications (Period for Providing Return of Eligible Revenue) Specification 2010] Audit report on return by approved auditor & verification by statutory declaration section 20D and subsection 20(2) [Telecommunications (Approved Auditor) Determination 2010]

9. Participating person (vs exempt person) section 92 TUSMA Act [new legislative instrument] Calculation of eligible revenue Section 93 TUSMA Act [equivalent instrument to Eligible Revenue Determination] Lodge return in approved form and Due date for returns Section 91 TUSMA Act Verification of return by statutory declaration Section 91(3) TUSMA Act Audit report on returnSection 94 TUSMA Act From 2012-13

10. 2011-12 and future periods  Telecommunications Industry Levy (TIL)  Annual Carrier Licence Charge (ACLC) (variable component)

11. ❶ section 20 of TCPSS Act) ❷ section 91 of TUSMA Act ❸ section 20F of TCPSS Act, section 96 of TUSMA Act ❹ sections 20J and 16 of TCPSS Act respectively ❺ Telecommunications Industry Levy (TIL) – capped under section 99 of TUSMA Act ❻ sections 88 and 99 of TUSMA Act ❼ section 20U of TCPSS Act, section 100 of TUSMA Act ❽ section 23D of TCPSS Act and section 121 of TUSMA Act

12. 2011-12 / 2012-13 FY(11-12)- Eligible Revenue Period period of assessable activity FY2 (12-13)- Eligible Levy Period 31 Oct Eligible Statutory Declarations / Submissions due for FY1 Before EOY ACMA makes ER assessments for FY1 under TCPSS Act FY3- Invoicing Period Levy cap set by Minister under TUSMA Act TIL levy assessment by ACMA and invoicing in Sept/Oct under TUSMA Act

13. Key concepts  Carrier revenue includes revenue of Declared Related Parties (DRPs) and consolidated related parties  Grouped carrier – for revenue calculation and statutory declaration  Declaration of revenue must be verifiable to financial statements or other evidence on request or notification from the ACMA

14.  When carriers meet at least one of the thresholds an eligible statutory declaration must be submitted to qualify as a USO non-participating person  Participating persons will be subject to levies and charges where eligible revenue is assessed by the ACMA to be greater than $0 Why provide an eligible statutory declaration by the due date?

15.  Participating persons must complete a full eligible revenue return and meet the audit requirements under sections 20 and 20D of the TCPSS Act  Assessed eligible revenue based on estimate when substantially compliant return not provided  Penalties and enforcement if non-compliant Why provide an eligible statutory declaration by the due date?

16. >Total claimed eligible revenue ($28.665 billion) >Total assessed eligible revenue ($28.755 billion) >Understatement of eligible revenue for industry (by $89.3 mil in 2010-11, $48.9 mil in 2009-10 and $71.1 mill in 2008-09 >Partnerships and joint venture earnings disclosure >Mergers and acquisitions and changes in accounting period (evidence requirements) >Evidence for significant deductions

18. Lodged with the ACMA Documents that were not statutory declarations and not ESDs >e.g. same signatory as witness, no revenue threshold declared, no witness, witness did not advise their designation Statutory declarations that were not ESDs >Invalid statutory declarations – e.g. signatory did not advise whether they were a Company Secretary or Director ESDs that were not best practice >Highest revenue threshold applicable not declared by carrier(s) – for example <$25 mil eligible revenue declared when <$25 mil initial sales revenue applied >All three thresholds selected

19.  All participating persons to report  A carrier will only be a USO non-participating person if it meets one of the thresholds and submits an eligible statutory declaration by the due date  Revenue determined on a group basis (for multiple carriers)  Include related party revenues for application of thresholds

21. Step 1: Identify whether part of a group -Does the carrier have the same ultimate Australian parent entity as 1 or more other carriers? Step 2: Identify related parties -Does the carrier or group have consolidated related parties and/or declared related parties?

22. Include related party revenues Consolidated related party an entity: (a)that is not the carrier; and (b)the revenue of which is included in the annual consolidated financial statements of the carrier’s ultimate Australian parent entity

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

24. Owner company Bluetone 50% Carrier X

25. Step 3: Identify revenues and deductions of carrier(s) and any consolidated related parties -100% of these revenues must be recognised -ADD these revenues together >whole Australian dollars (AUD$) >exclusive of GST

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

27. 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.

28. 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

29. Step 4: Calculate declared related party revenues and deductions - revenues and deductions recognised proportionally by declared related party factor (party interest X carrier interest) -refer to Factsheet: Related parties for eligible revenue reporting

30. Owner company Bluetone 50% Carrier X Carrier interest (i.e. owner interest in Carrier X) > < Party interest (i.e. owner interest in Bluetone DRP) Declared Related Party Factor Carrier (participating person) interest X Party interest = 50% X 50% = 25%

31. Carrier A Holding Company Co X Co Y Co Y1 Co Z Co M Co N1 Co N2 Co N3 Co N 100% 45% Co J Co K 90% 80% 49% 50% 100% 50% 90% 50% 30% Holding Coy interest in Co N2: =(90%x100%x50%) +(90%x80%x50%) =45% + 36% =81% Holding Coy interest in Carrier A: =90%x80%x80% =58% Declared Related Party Factor for Co N2 = Co J interest in Co N2 of 90% Multiplied by Co K interest in Carrier of 80% = 72%

32. Step 5: Total Revenues and Deductions recognise 100% revenues and any claimed deductions for carrier(s) and consolidated related parties + revenues and deductions recognised proportionally by declared related party factor (party interest X carrier interest)

33. From 2011-12 period

34. Biannual assurance report >Report from ‘approved auditor’ >Audit reports (may be limited to certain subject matter) >Review Reports >Agreed upon procedures reports (report of factual findings) >Contact with the ACMA Revenue Assurance Section recommended

35. Approved auditor Telecommunications (Approved Auditor) Determination 2010 specifies the following as approved auditors: 1. Registered auditors under Part 9.2 of the Corporations Act 2001 2.Authorised audit companies registered under Part 9.2A of the Corporations Act 3.Auditors-General Find an approved auditor or check approved auditor status by using the professional registers on the ASIC website: http://www.search.asic.gov.au/pro.html

36. Contacts for the ACMA >Specific carrier representation – use ACMA contact form to nominated preferred contacts

37.  First stop: ACMA Eligible Revenue Portal  Future information sessions where there is interest – please complete your evaluation form  ACMA Revenue Assurance Section Email: uso@acma.gov.au Ph: 61 02 6219 5355uso@acma.gov.au