Regulatory accounting and price control

General information regarding cost accounting, price control and accounting separation by markets

Information regarding retail price control (except roaming regulation)

Information regarding wholesale price control (except roaming regulation)

Information regarding roaming regulation

Calculator of costs for electronic communication services

Cost accounting and cost distribution systems used in Lithuania

BU-LRAIC 2012 Calculations

Other useful information

General information regarding cost accounting, price control and accounting separation by markets

Where Fully Distributed Cost method (FDC) is applied for price control, cost of services should be calculated according to rules on cost accounting set by National Regulatory Authority (NRA). Non binding translation of rules on Cost accounting according to fully distributed costs into English is available here.

An accounting separation remedy is usually imposed also there price orientation to costs calculated according to FDC method is imposed. Non binding translation of rules on Accounting separation into English is available here.

Information regarding retail price control (except roaming regulation)

The aim to regulate these services is to guaranty the availability of fixed communications services to consumers and to create conditions for competition providing fixed communication services.

Universal services. Provision of access to fixed networks, provisions of national and international calls provided at fixed location, provisions of payphone services to natural and legal persons should be guaranteed in Lithuania. Prices of those universal electronic communication services should not be higher than price cap set by the Government of Lithuania. Decree on price caps of universal electronic communication services is available here (only in Lithuanian).

Price caps set for universal electronic communication services are provided in the table below.

TEO LT, AB, provides universal electronic communications services in Lithuania.

Access provided at fixed location. Prices of access provided to legal and natural persons at fixed location should be no less than costs calculated according to rules on cost accounting. Costs are taken from financial accounts and should be valued at acquisition costs. Costs should be fully distributed. In general this method is called FDC+HCA. Only prices of services provided by TEO LT, AB, are regulated.

Provision of calls. Prices of national and international calls provided to legal and natural persons at fixed location should be no less than costs calculated according to rules on cost accounting. Costs are taken from financial accounts and should be valued at acquisition costs. Costs should be fully distributed. In general this method is called FDC+HCA. Additionally difference between prices of calls from SMP’s network to alternative fixed networks and prices of on-net calls should not be higher than difference between fixed termination rates of SMP operator and alternative operator. Only prices of services provided by TEO LT, AB, are regulated.

Provision of retail leased lines. Prices of retail leased line (leased lines up to and including 2Mb/s speed) services should not be higher than costs calculated according to rules on cost accounting. Costs are taken from financial accounts and should be valued at acquisition costs. Costs should be fully distributed. In general this method is called FDC+HCA. Additionally a price cap (available only in Lithuanian) is applied in price regulation. Only prices of services provided by TEO LT, AB, are regulated.

Price caps for provision of retail leased lines are provided in the table below.

Information regarding wholesale price control (except roaming regulation)

Fixed termination, origination and transit services

Prices of call origination and transit services provided at fixed location by TEO LT, AB, should be cost oriented to HY-LRAIC costs. Prices should not be higher than HY-LRAIC costs. A glide path is applied in transition period and prices are reduced by 40 per cent annually until HY-LRAIC costs would be reached.

From January 1, 2010 price of termination services provided by TEO LT, AB, should be equal to prices set by NRA. From January 1, 2010 prices are reduced annually till January 1, 2012 till they reach HY-LRAIC costs.

Information regarding HY-LRAIC model is available here.

NRA sets target prices of call termination rates applied by TEO LT, AB, which valids from April 1, 2013 and should not be higher than 0,0211 LTL/min (excl. VAT) any time of day, connecting networks at any interconnection point till prices set by NRA according to EC Recommendation 2009/396 will be adopted, but not later than September 30, 2013.

Termination prices set for TEO LT, AB, are provided in the table below.

Price of call termination services provided by alternative operators (UAB „Nacionalininis telekomunikacijų tinklas“, UAB „CSC Telecom“, AB Lietuvos radijo ir televizijos centras, UAB „Telekomunikaciju grupa“, UAB „Mediafon“, UAB „Eurocom SIP“, AB „Lietuvos geležinkeliai“, UAB „Cubio“, UAB „Linkotelus“) from January 1, 2010 should not be higher than prices applied by TEO LT, AB.

With price control measures effective from January 1, 2010 a price symmetry was introduced. Cost related with interconnection (except for interconnecting link used to connect networks) should be recovered by operators themselves. Cost of interconnecting link should be shared equally by interconnecting operators.

Mobile termination services

From January 1, 2010 prices of mobile termination services provided by UAB “Bitė Lietuva”, UAB “Omnitel” and UAB “Tele2” should not be higher than prices set by NRA. From January 1, 2010 till January 1, 2012 prices are reduced annually until they reach BU-LRAIC costs.

Information regarding BU-LRAIC cost model is available here.

From January 1, 2013 NRA sets target prices of mobile termination services provided by UAB “Bitė Lietuva”, UAB “Omnitel” and UAB “Tele2” that should not be higher than 0,0360 LTL/min. (Excl. VAT) any time of day, till prices set by NRA according to EC Recommendation 2009/396 will be adopted, but not later than September 30, 2013.

Prices of mobile termination services are provided in the table below.

With price control measures effective from January 1, 2010 a price symmetry was introduced. Costs related with interconnection (except for interconnecting link used to connect networks) should be recovered by operators themselves. Cost of interconnecting link should be shared equally by interconnecting operators.

Wholesale line rental. Prices of wholesale line rental (WLR) services should not be higher than costs calculated according to rules on cost accounting. Costs are taken from financial accounts and should be valued at acquisition costs. Costs should be fully distributed. In general this method is called FDC+HCA. TEO LT, AB, is obliged to provide wholesale line rental service.

Wholesale (physical) network infrastructure access (including shared or fully unbundled access) at fixed. Prices of local loop unbundling (fully and shared) to twisted copper pair should not be higher than costs calculated according to rules on cost accounting. Prices of access to unbundled optical fibre line (including related services), prices of access to shielded and unshielded twisted pair (STP and UTP) line, prices of access to ducts, prices of access to dark fibre should not be higher than costs calculated according to rules on cost accounting. Costs are taken from financial accounts and should be valued at acquisition costs. Costs should be fully distributed. In general this method is called FDC+HCA. TEO LT, AB, is obliged to provide access to service mentioned above.

Wholesale broadband access. An obligation that prices should not be higher than costs calculated according to rules on cost accounting was imposed on TEO LT, AB. But due to court ruling prices of these services are not regulated according to price control obligations set by NRA. Despite that TEO LT, AB, offers wholesale broadband access services on commercial bases.

Wholesale leased lines, terminating and trunk segments of leased lines. Prices of wholesale leased lines (for end-to-end connectivity) and prices of terminating segments of leased lines up to and including 2 Mb/s speeds are regulated. Prices of such services should not be higher than costs calculated according to rules on cost accounting. Regulation of prices of trunk segments of leased lines is not differentiated according to speeds and prices of such services should not be higher than costs calculated according to rules on cost accounting. Costs are taken from financial accounts and should be valued at acquisition costs. Costs should be fully distributed. In general this method is called FDC+HCA. Prices of wholesale leased lines, prices of terminating and trunk segments of leased lines provided only by TEO LT, AB, are regulated.

Broadcasting transmission services. This market is divided into seven submarkets:

-transmission services of analogue terrestrial radio broadcasts when radio frequencies are assigned to transmission service provider (SMP is AB Lietuvos radijo ir televizijos centras);

-transmission services of digital terrestrial radio broadcasts when radio frequencies are assigned to transmission service provider (SMP is AB Lietuvos radijo ir televizijos centras);

-transmission services of analogue terrestrial radio broadcasts when radio frequencies are assigned to broadcaster (SMP is AB Lietuvos radijo ir televizijos centras);

-transmission services of analogue terrestrial television broadcasts when radio frequencies are assigned to transmission service provider (SMP is AB Lietuvos radijo ir televizijos centras);

-transmission services of digital terrestrial television broadcasts when radio frequencies are assigned to AB Lietuvos radijo ir televizijos centras (SMP is AB Lietuvos radijo ir televizijos centras);

-transmission services of digital terrestrial television broadcasts when radio frequencies are assigned to TEO LT, AB (SMP is TEO LT, AB,);

-transmission services of analogue terrestrial television broadcasts when radio frequencies are assigned to broadcaster (SMP is AB Lietuvos radijo ir televizijos centras);

Prices of television and radio transmission services when radio frequencies are assigned to transmission service provider should not be higher than costs calculated according to rules on cost accounting. Costs are taken from financial accounts and should be valued at acquisition costs. Costs should be fully distributed. In general this method is called FDC+HCA.

When radio frequencies are assigned to boradcaster (content providers), prices of accesses to services to provide transmission services (i.e. access to masts and other auxiliary services) are regulated only. Prices of trasmission services are not regulated in this case. Prices of access should not be higher than costs calculated according to rules on cost accounting. Costs are taken from financial accounts and should be valued at acquisition costs. Costs should be fully distributed. In general this method is called FDC+HCA.

Cost accounting and cost distribution systems used in Lithuania

Fully Distributed Cost (FDC) and Long Run Average Incremental Cost (LRAIC) accounting systems are used in practice of the Communications Regulatory Authority of the Republic of Lithuania.

Fully Distributed Cost system. In FDC system all costs incurred are fully distributed to particular products or services. Costs are distributed to cost objects (cost pools) according to causality principle. It means that particular costs should be attributed to those products or services which caused to incur particular osts. A return on investment is treated as costs and attributed to products and services accornding to capital used to provide a product or a ervice. At the end directly incurred costs, indirectly incurred costs (shared costs) and part of common costs and reasonable return on investment are attributed to products and services. In FDC method costs are valued at acquisition costs. This method is called Historical Cost Accounting.

When price control obligations are based on FDC costs, such costs should be valued and distributed to products and services according to rules on Cost accounting according to fully distributed costs. Non binding translation of those rules is available here.

Long Run Average Incremental Cost system. LRAIC system allows recovering only efficiently incurred costs. Costs related with excess capacity and recourses that are not related with provision of a regulated service are not allowed to be recovered. This encourages efficiency of business. Costs in LRAIC model are valued at current costs. This allows to mimic decisions that would be made by an incumbent or a competitor at present in an competitive market where decisions are made according to present information and not according to decisions made in the past. LRAIC model also allows to model services that are not provided yet.

The Communications Regulatory Authority of the Republic of Lithuania used BU-LRAIC to calculated costs of mobile interconnection services and BU-LRAIC, TD-LRAIC, and HY-LRAIC model to calculate costs of fixed interconnection services. In later case BU-LRAIC was built by NRA, TD-LRAIC was built by incumbent and later BU and TD models were reconciled into HY-LRAIC model.

Long Run Average Incremental Cost model for fixed interconnection services

Below you will find documents related with LRAIC model used to calculate costs of interconnection services provided at fixed location.

Long Run Average Incremental Cost model for mobile interconnection services

Below you will find documents related with LRAIC model used to calculate costs of interconnection services provided by mobile operators.

BU-LRAIC 2012 Calculations

Other useful information

Recommendations of European Commission regarding regulation of electronic communication services are available here.

Documents of the Body of European Regulators for Electronic Communications (BEREC) regarding regulation of electronic communication services are available here.

Links to other NRAs and bodies involved in regulation of electronic communication services are found here.