In the version published on 1 October 1996
This translation was published by the Federal Regulatory Authority for Telecommunications and Posts. Reproduced with kind permission.
Table of Contents
§1 Forms of and Procedures for Rates Approval
Chapter I Approval under §27 (1) subpara 1 of the Telecommunications Act
§2 Scope of Cost Statements
§3 Criteria Determining Rates Eligible for Approval
Chapter II Eligible for Approval
Chapter III Miscellaneous Provisions
§6 Rates Review
§7 Rates for Special Network Access
§8 Participation Rights
§9 Publication
§10 Entry into Force
The Federal Government hereby issues the following Ordinance under §27 (4) and §39 of the Telecommunications Act of 25 July 1996 (Federal Law Gazette I p 1120):
§1 Forms of and Procedures for Rates Approval
(1) The procedure for approving rates and rate-related components of general terms and conditions according to §25 (1) in conjunction with §27 (1) subpara 1 of th Telecommunications Act shall only be applicable when the service cannot be grouped in a basket with a number of other services as provided for by para (2) below.
(2) Under the procedure for approving rates and rate-related components of general terms and conditions according to §25 (1) in conjunction with §27 (1) subpara 2 of the Telecommunications Act the regulatory authority shall group in separate respective baskets the services of Licence Classes 3 and 4 according to §6 (2) subpara 1 letter c and subpara 2 of the Telecommunications Act. Services in the same Licence Class may only be grouped in one and the same basket when the level of competition for these services is not expected to differ significantly.
Chapter One Approval under §27 (1) subpara 1 of the Telecommunications Act
§2 Scope of Cost Statements
(1) Along with any rates proposal according to §27 (1) subpara 1 of the Telecommunications Act the filing company shall submit, for the given service, the following documents or statements relating to:
- detailed service specifications, including details of quality of service, and the draft general terms and conditions,
- revenues generated in the five years prior to the rates proposal filing, the revenues forecast for the year of filing and for the four years thereafter,
- quantities sold and, where possible, price elasticity of demand for the period according to subpara 2 above,
- development of the individual costs according to para (2) below (cost statements) and the development of contribution margins over the period according to subpara 2 above,
- the financial impact on customers, with particular reference to the demand structure for residential and business customers, and on competitors procuring the network offering for their resale offering, and
- with regard to rate differentials, the impact on the user groups between whom distinctions are made, and proper justification of the diffential(s) intended.
(2) Cost statements according to para (1) subpara 4 above shall comprise costs that can be directly allocated to the given service (direct costs) and costs that cannot be directly allocated to the given service (common costs). Statements relating to common costs shall set forth how the common costs are allocated to the given service. In such allocation the filing company shall take into account the criteria of the Council Directives issued under Article 6 of Council Directive 90/387/EEC of 28 June 1990 on the establishment of the internal market for telecommunications services through the implementation of open network provision (Official Journal of the European Communities No L 192/1). Also to be included in the cost statements according to sentence 1 above is an account of
- the method used to determine the costs,
- the level of payroll costs, depreciation, cost of capital, costs in relation to materials,
- target and actual capacity utilisation in the documentation period, and
- the cost, on which cost accounting is based, of the individual factors employed to provide the service, including the relevant prices, and in particular the elements of the public telecommunications network (§3 subpara 12 of the Telecommunications Act) used for provision of the service and the cost of using these elements.
(3) The regulatory authority may reject a rates proposal when the company fails to submit in full documentation as specified in paras (1) and (2) above.
§3 Criteria Determining Rates Eligible for Approval
(1) The regulatory authority shall examine the documentation submitted by the filing company with a view to establishing whether and to what extent the rates proposed are based on the cost of efficient service provision within the meaning of para (2) below.
(2) The cost of efficient service provision is derived from the long-term additional costs of providing the service plus an appropriate amount for volume-neutral common costs, both inclusive of an appropriate return on capital employed, to the extent that these costs are required to provide the offering.
(3) Under the examination according to para (1) above the regulatory authority should, for purposes of comparison, refer additionally to, in particular, the prices and costs of companies offering corresponding services in comparable competitive markets. Any special features of the reference markets shall be taken into account.
(4) Where costs stated according to §2 (2) exceed the cost of efficient service provision according to para (2) above, they shall be deemed expenditure superfluous to efficient provision. This expenditure and other neutral expenditure will only be taken into account in the rates approval procedure if and for such duration as it derives from a legal requirement or the filing company evidences other proper justification therefor.
Chapter Two Approval under §27 (1) subpara 2 of the Telecommunications Act
§4 Creation of Benchmarks
(1) The regulatory authority shall establish in the first instance the initial rate level for services grouped in one and the same basket.
(2) The benchmarks for approval under §1 (2) encompass
- the rate of price increases in the economy overall,
- the expected rate of growth in productivity of the regulated company, and
- any constraints suited and required to guarantee compliance with the requirements of §24 (2) of the Telecommunications Act.
(3) There shall be taken into account in the specification of benchmarks, in determination of the rate of growth in productivity in particular, the relationship between the initial rate level and the cost of efficient service provision (§3 (2)).
(4) There shall be taken into account in the specification of benchmarks the rates of growth in productivity of companies operating in comparable competitive markets.
(5) The regulatory authority shall stipulate, in addition to the content of baskets according to §1 (2), in particular the period for which benchmarks will remain unchanged, the historic reference periods against which compliance with benchmarks will be examined and the conditions under which further services may be included in an existing basket, services may be taken out of a basket or price differentiation made in respect of services already included in a basket.
(6) For the purpose of benchmark specification the regulatory authority may order the company concerned to provide the statements referred to in §2 paras (1) and (2).
§5 Preconditions for Approval
(1) Along with any rates proposal according to §27 (1) subpara 2 of the Telecommunications Act the filing company shall submit all documentation enabling the regulatory authority to verify compliance with benchmarks specified according to §4. These documents shall give the percentage of total revenue generated by each rate item during the reference period as determined by the regulatory authority under §4 (5).
(2) The regulatory authority may reject a rates proposal when the company concerned fails to submit in full the documentation referred to in para (1) above.
(3) Where there is compliance with benchmarks specified according to §4 the regulatory authority should approve within a period of two weeks any rates proposal filed under the procedure according to §27 (1) subpara 2 of the Telecommunications Act.
Chapter Three Approval under §27 (1) subpara 2 of the Telecommunications Act
§6 Rates Review
(1) In the cases specified in §30 of the Telecommunications Act the regulatory authority may order the company concerned to submit statements according to §2 (1) and (2) along with other pertinent statements. §3 shall apply accordingly.
(2) The regulatory authority shall determine the date on which the review shall begin and notify the company concerned as provided for by §30 (2) sentence 2 of the Telecommunications Act.
§7 Rates for Special Network Access
(1) Where rate changes are filed in respect of telecommunications services having cost components that are essential to offerings requiring special network access (§35 (1) sentence 2 of the Telecommunications Act) as well as to other telecommunications services, the competitive opportunities of other companies may not be unjustifiably impaired by such measure. Unjustified impairment shall be presumed notably when a change in the cost components according to sentence 1 above on which the measure is based is taken into account in such manner that it has a negative effect solely or predominantly on offerings requiring special network access. The filing company shall state in its proposal that no impairment is expected or that there is proper justification therefor.
(2) Offerings requiring special network access may not be included with other services in one and the same basket. Offerings requiring special network access should not, as a rule, be included in one or more baskets prior to 1 January 2000. Where offerings requiring special network access are subsequently included in one and the same basket, the regulatory authority shall, through stipulating constraints on pricing, ensure compliance with the condition specified in para (1) above.
§8 Participation Rights
(1) The regulatory authority shall publish in its official gazette intended decisions on the grouping of services according to §1 (2) and on specification of the respective benchmarks according to §4. Prior to publication according to sentence 1 above it should give the company to whom the decision relates the opportunity to state its case.
(2) In the case of rates proposals according to §27 (1) subpara 1 of the Telecommunications Act the regulatory authority shall publish in its official gazette rates measures filed.
§9 Publication
The regulatory authority shall publish in its official gazette as provided for by §28 (4) of the Telecommunications Act rates approved along with the relevant service specifications and provisions relating to rates.
§10 Entry into Force
This Ordinance shall enter into force in respect of rates regulation for voice telephony (§3 subpara 15 of the Telecommunications Act) on 1 January 1998. It shall enter into force in other respects on the day following its promulgation.
Bonn, 1 October 1996
The Federal Chancellor
The Federal Minister of Posts and Telecommunications
The above translation was published by the Federal Regulatory Authority for Telecommunications and Posts. Reproduced with kind permission. This HTML edition by Lawrence Schäfer and © 2001 Gerhard Dannemann. The contents of this page may be downloaded and printed out in single copies for individual use only. Making multiple copies without permission is prohibited.