During part of 2014, and as in previous years, MEO - Serviços de Comunicações e Multimédia, S.A. (MEO) provided the universal service (US) of: i) connection to a public communications network at a fixed location and provision of a publicly available telephone service through the said connection (FTS), ii) a comprehensive directory and of a comprehensive telephone directory enquiry service, and iii) public payphones (PPP) throughout the national territory, under the concession contract in force at the time.
It should be noted that contracts on US offers were signed in 2014 further to designation procedures, whereby the dates on which each of these offers started determined the dates of termination of US offers by MEO under the concession contract concluded between the State and the then PT Comunicações (currently MEO - Serviços de Comunicações e Multimédia, S.A.), on 20.03.1995, modified by an amending agreement concluded between the parties on 03.04.2003.
As such, on 19.02.2014, the Portuguese State and Optimus – Comunicações S.A. (OPTIMUS) signed a contract for the provision of the US of connection to a public communications network at a fixed location and of publicly available services in the North and Centre areas. On the same date, a contract was signed between the Portuguese State and ZON TV Cabo Portugal, S.A. (ZON) for the provision of the same service in the South area and Islands. These two companies, further to a merger through the incorporation of ZON into OPTIMUS, currently integrate a sole company under the name NOS Comunicações, S.A., which started the provision of the FTS US on 01.06.2014.
On 20.02.2014, PT Comunicações (currently MEO) and the Portuguese State signed contracts for the provision throughout the national territory of the US of a comprehensive directory and of a comprehensive telephone directory enquiry service, as well as of the public payphones US, having the company started the provision of these services on 20.02.2014 and 09.04.2014, respectively.
Pursuant to article 95 of the Electronic Communications Law (ECL)1, where the National Regulatory Authority (NRA) considers that the US provision may represent an unfair burden on the respective providers, it must calculate the net costs of the universal service (CLSU - custos líquidos do serviço universal) in accordance with one of the following procedures:
a) Calculating CLSU, taking into account any market benefits which accrue to providers;
b) Making use of the CLSU identified by a designation mechanism in accordance with the provisions of ECL.
As such, in compliance with that article and in line with article 96 of the same law, Autoridade Nacional de Comunicações (ANACOM) approved in 2011 a decision on the concept of unfair burden, as well as a decision on the methodology to be used to calculate CLSU2.
Above-mentioned decisions establish also the methodology to calculate CLSU, as from the moment it is deemed that its provision may represent an unfair burden (that is, as from 2007, inclusively) and for as long as the US is provided by MEO under the concession contract, which was the case for a part of 2014, as referred earlier.
Taking into account that the methodology for calculating CLSU was developed on an annual basis and bearing in mind that the dates on which services started to be provided, referred above, led MEO, in 2014, only to provide the US for a part of the year under the regulatory framework for the period preceding the tender designation of a universal service provider (USP), ANACOM approved on 22.07.2015 a decision that adapts the CLSU calculation methodology to this circumstance3.
The ECL provides that the USP has a duty to make available all accounts and other relevant information for the purpose of CLSU calculation, observing determinations issued by ANACOM. MEO accordingly submitted to this Authority, on 30.10.2015, CLSU estimates for 20144.
Being incumbent on ANACOM to submit estimates presented to audit, under paragraph 4 of article 96 of ECL, as well as to approve CLSU values, this Authority awarded, on 16.09.2015, to AXON Partners Group Consulting S.L. (hereinafter AXON) the audit to CLSU estimates presented by MEO for the 2014 financial year. The audit work started at the end of 2015.
The audit consisted of a thorough, systematic and comprehensive analysis of CLSU estimates presented by MEO for 2014, to check whether they met principles, criteria and conditions laid down in ANACOM’s determinations, as well as to review calculations and sources of information, as well as the identification and analysis of any limitations, discrepancies, alternative approaches and all relevant matters related to the methodology used.
In the course of the audit, having been completed an initial checking of information submitted by the company, auditors conveyed to MEO recommendations intended to correct some situations which had been identified, having MEO submitted new CLSU estimates to auditors on 27.01.2016, in order to meet the referred situations. Subsequently, MEO, which in the meantime had recast values of the Cost Accounting System (CAS) available for 2014, submitted to auditors, on 06.05.2016, reviewed results of 2014 CLSU in the light of those values5, informing ANACOM of this fact. These results were audited by AXON in the scope of the same audit procedure, and auditors submitted a final report of the overall audit to 2014 CLSU on 19.07.2016, which covered conclusions on the first estimates presented by MEO in October 2015 and corrected by the company in January 2016 and final conclusions on estimates resubmitted by MEO in May 2016.
By determination of 10.08.2016, ANACOM approved a DD on the results of audits to MEO CLSU for 2014, which was submitted to the general consultation and prior hearing procedures for a period of 20 working days.
In the scope of the referred procedure, three contributions were received within the time limit set for the purpose, which were summarized and analysed in the public consultation and prior hearing report, which is an integral part of this decision. Positions presented did not determine any amendment of the draft decision submitted to public consultation and prior hearing of stakeholders.
1 Law No. 5/2004, of 10 February, as it currently stands.
2 The following determinations are also relevant in this context: (i) determination of 25.11.2011 which approved the price-elasticity of demand effect in the element associated to retired persons and pensioners; (ii) determination of 12.10.2012 which implemented the concept of ''abnormally high access costs'', to determine unprofitable customers in profitable areas; (iii) determination of 20.06.2013 which determined adjustments on the CLSU calculation methodology with impact on estimates for years after 2009; and (iv) determination of 20.11.2014 which determined the review of the adjustment made to avoid double-counting of traffic between unprofitable customers in profitable areas.
3 Decision on the methodology for calculating universal service net costs for 2014.
4 Reference to 2014 CLSU must be regarded, in the context of this document, as CLSU incurred by MEO in the period between 1 January 2014 and 31 May 2014 for the provision of FTS and between 1 January 2014 and 8 April 2014 for the provision of PPP service.
5 It should be noted that recast CAS values for 2014 used by MEO when 2014 CLSU were resubmitted correspond to values approved by decision of ANACOM on 25 May 2016, further to an audit to MEO’s 2014 CAS results.
