The document analyzes the responses from Omantel and Friendi Oman on TRA's draft decision on Access Deficit Contribution. Key points of discussion included the methodology for calculating access deficit, appropriate time period for access deficit contribution, scope of services considered in the calculation, and impact on competition in the international call market. TRA provided responses addressing the concerns raised and explaining its approach in adopting the new methodology based on recommendations from an independent consultant.

1. Position Statement for Public
Consultation on Draft Decision
Access Deficit Contribution
Date: 7 March 2011

2. 1
1. Background
The TRA undertook the public consultation process for the Draft Decision of Access
Deficit Contribution (ADC) and published the consultation draft on its website on 7
July 2010 to seek the views and comments of the stakeholders and interested
parties. The draft ADC decision outlines the regulatory process that would be
followed by the International Gateway operators and the operators requesting ADC.
All Telecom licensees and other interested parties including the consumers and
general public were invited through the TRA website and local press to look into the
draft decision and provide their comments and views.
By 30 August 2010, the TRA received responses from the following entities:
 Oman Telecommunications Company ("Omantel"),
 Connect Arabia L.L.C ("Friendi Oman").
The following section will present an analysis of the issues raised by stakeholders on
the draft decision and the TRA's response on each issue raised.
Notice:
As a final step of the consultation process; the TRA hereby publishes its final position
on views expressed by the respondents on its consultation regarding the draft decision
on Access Deficit Contribution.
The TRA thanks all those who responded to the above referred consultation paper and
provided their valuable contributions. Wherever required the TRA will make necessary
changes to the policy and any other relevant document. The final decision shall be
published upon approval by the authority.

3. 2
2. Analysis Table
Sr Topic Licensees Response TRA Response
1 General
Friendi strongly refutes that at present any complete
or transparent case for an ADC in Oman is needed
specifically in relation to MVNO's. Friendi strongly
objects to the proposed Draft Decision and
implementation of any ADC mechanism. Friendi
believes that if the TRA is provided with adequate
data it would conclude that other sources of profits
for Omantel (or Nawras) fully allows it to recover of
any access deficit.
As stated in the beginning of the consultation paper, the
TRA, in principle, does not support ADC approach.
However, in order to mitigate the impact of AD, which is
being carried by the Access Providers due to legitimate
reasons, a fair and transparent mechanism will be
attempted for the shortest possible time period. The
mechanism built in the proposed ADC approach very
clearly reflects these parameters. It permits ADC after
taking into account all revenues being earned by the
access related services and it will be permissible only
up to December 2011. Further, the ADC seeker has to
establish and demonstrate with the help of facts and
figures that it carries AD and it is not possible to recover
it after accounting for all access related revenue
receipts. It may be pertinent to mention here that
announcing the ADC mechanism might not necessarily
mean that there is an AD, it only means that we have
accepted the approach that in case any Licensee that
can prove that they are operating their access
operations with a deficit and they can only seek
contribution if they can prove it.
2 General
Friendi does not believe that TRA transparently
established any evidence of an access deficit or its
true level and is curious how the TRA is requiring
that ADC's should be paid to Omantel even by
MVNO's who already pay inbuilt compensation
The TRA agrees with Friendi that so far, there is no
clear or actual supported evidence to support a case of
AD for any Licensee and there might not even be an
AD case. The TRA never indicated or requested any
mobile reseller to pay Omantel compensation. ADC

4. 3
through non- competitive wholesale prices. regulations are not applicable to mobile resellers with
Class II Licenses.
3 General
Friendi also requests that the compensation
mechanism must be fully and transparently justified
in relation to geographic market. Friendi believe that
the current consultation lacks transparency and
fairness since the TRA is already consulting on a
draft decision and they have not been consulted on
the matter earlier.
The TRA has been extensively discussing the ADC with
the relevant parties since 2008 and has gone through
different stages from the consultancy, to the
rebalancing of tariffs up to the stage of the draft
decision. The draft decision which is being consulted
upon does not necessarily mean that it is the TRA's
final decision. The TRA ensures that it is transparent
and fair to all stakeholders. All the responses and
comments received from the public consultation are
looked into and taken into consideration.
4 General
Friendi stated that as per the usual definition of AD,
those who contribute to an AD are those who do not
provide their own access and only those who have a
regulated access right at cost-oriented (i.e.
regulated) prices.
The ADC will apply to all those Licensees who are
owning or operating the International Gateway
(including those who operate the International gateway
by way of leased capacity) for providing international
telecommunication services. TRA would like to further
clarify that those who are operating international
gateway will provide ADC and those who have a
regulated access service being provide below cost
would be eligible to receive ADC.
5 General
Friendi Oman does not believe that the ADC
advocates international best practice and other
alternative sources of funds should be taken into
consideration. Friendi state that if the access deficit
is calculated for funding purposes, the relevant
standard for access deficit should be an efficient
operator not the incumbent operator itself.
Again we would like to emphasise that TRA will ensure
that Licensees will not be receiving any additional
unjustifiable revenue from ADC. The whole purpose of
the ADC is to compensate for services being sold below
cost from the high margins of international calls.

5. 4
6
General Omantel conducted extensive research on ADC's
implemented in different markets such as those in
Hong Kong, Autralia, UK, India and Pakistan. The
most common elements from these markets were
the following:
 ADC is seen as necessary element of transition to
fully liberalised markets with tariff rebalancing;
 Period of ADC was between four to nine years;
 The phase out of the ADC was associated with
rebalancing of tariffs and establishment of
alternative funding approaches such as Universal
Service Funds (USFs);
 In all cases, ADCs were calculated as access cost
less revenue, however there is a wide variety of
means of allocating the ADC to carriers such as
international calls, national calls, profitability of
calls, call minutes and flagfall; and
ADCs have been implemented part of successful
liberalisation programme with highly competitive
market outcomes. There is no evidence that ADC's
inhibit the development of competition.
The TRA is well aware of the implementation of ADC in
other countries and the TRA has conducted this
research with a Consultant and after studying the
current situation in the Omani market, the TRA saw that
the current decision is what suits the Omani telecom
market the most. It is based on efficiency and economic
principles.
7
General Friendi Oman states that access deficit is not
supported by international best practice and its use
has been controversial and ill advised. Friendi Oman
believes that the solution is tariff rebalancing and
special packages for marginal subscribers. Friendi
Oman believes and submits that the consultation
document in its present form is almost certainly
premature and may be a less than fully informed and
The statement published in the consultation very clearly
explains the TRA's position towards ADC. In order to be
fair, the TRA had constituted a consultancy and hired
an internationally known consultant to study the issue.
The proposed framework is based on the
recommendations of the said consultant, who has
studied the issue in the light of international best
practices and peculiar situation of Omani market. The

6. 5
may be misguided and damaging if the draft decision
is implemented.
TRA does not agree with the apprehensions highlighted
by Friendi Oman
8 General
Friendi do not believe that it is justifiable to allow
Omantel to receive more revenue in the form of
access deficit contributions since they only boost the
already significant profits of Omantel (or Nawras)
instead. The economy policy objectives are not
evident in the consultation document. Friendi believe
that the Universal Service Provider regime should be
sufficient compensation or adjustment for the cost of
serving uneconomic customers.
It is important to recognise that the AD is related to, but
different from the universal service costs. The Universal
Service Regime is a completely different initiative and
any subsidy is specific to a geographical area and is not
the same as the access deficit. In addition to that, the
subsidy provided to the Universal Service Provider will
only cover the costs of providing the service in that
specific geographical area. Therefore, the TRA does
not consider USO subsidies as a relevant contribution
for the access deficit.
9 General
Omantel believes the current ADC decision is a
major departure from the previous decision on ADC
as part of the approval of tariff rebalancing in 2008.
They believe the approach is inconsistent with the
purpose of ADC which is to provide a means of
sharing the access deficit across international call
operators.
The TRA adopted this approach after studying the issue
in the light of prevailing conditions in Oman and seeking
advice from an independent consultant. The new
approach should be viewed on merits and not that it is
different than that of 2008. The TRA believes that all
services which make use of access network should
contribute for the Access Cost and ADC should be
admissible only after taking into account all related
revenues. The TRA feels that it is fair to all parties.
10 Article 2: The Qualified Licensee
shall be entitled to file
Applications for ADC for the
period falling between the date of
commercial operation of the 2nd
International Gateway Operating
licensed by TRA and December
2011.
Friendi believe that the period of the ADC is not
sufficient.
Omantel believe that the access deficit period is too
short if it is going to end in December 2011. Omantel
believe that the 2008 decision was based on further
rebalancing taking place.
In 2008 while approving the idea of ADC, in principle,
the TRA decided that ADC shall not be allowed beyond
three years period. We believe that the stipulated
period is reasonable and we do not think it's appropriate
to change the period at this stage. Regarding the
rebalancing, Omantel could go for further rebalancing,
which they did not opt at their own.

7. 6
11
Article 2: The Qualified Licensee
shall be entitled to file
Applications for ADC for the
period falling between the date of
commercial operation of the 2nd
International Gateway Operating
licensed by TRA and December
2011.
Omantel believe that there is a very strong case for
extending the ADC beyond 2011. They believe that
the removal of ADC should be consistent with
economic principles and international best practice.
The removal of the ADC should be aligned with the
rebalancing of retail tariffs. It should also be aligned
to the removal of the access deficit or the
development of a suitable alternative funding
mechanism since the deficit is expected to last
beyond 2011. The second reason why the ADC
should continue beyond 2011 in Omantel's opinion is
because they expect the ADC to take effect in May
2010 and therefore TRA should allow a three year
period for this time (the date of establishment and
operation of an international gateway by the second
fixed line licensee). Omantel believe that they can
recover the AD within 3 years.
Omantel was expected to take other measures
including tariff rebalancing and expansion of broadband
to make the access service sustainable. The TRA
believes that the incumbent has had sufficient time from
the date it was granted its License to date to rebalance
its tariffs. Therefore, the TRA does not consider
appropriate to extend the ADC period beyond the
stipulated end date. Having a short period will force the
Licensee to increase their efficiency.
Omantel has not been able to give any reasoned
response on why, Access Deficit should continue
beyond 2011 except that they were not able to fully
rebalance their tariffs.
12
General/ Schedule 1 Omantel considers that the ADC previously
approved by the TRA in June 2008 (13.5 bz/min) is
consistent with international best practice and the
approach used to calculate the figure is broadly
consistent with economic theory and international
practice. They also believe that this approach is
consistent with the licensing of the Class I fixed
license operator in November 2008 enabling the
licensee to establish and operate an international
gateway. The formula for the access deficit defined
in the draft decision (Schedule 1) has no merit
according to economic theory.
As already explained above, the TRA adopted this
approach after studying the issue in the light of
prevailing conditions in Oman and seeking advice from
an independent consultant. The new approach should
be viewed on merits and not that it is different than that
of 2008. The TRA believes that all services which make
use of access network should contribute for the Access
Cost and ADC should be admissible only after taking
into account all related revenues. The TRA feels that it
is fair to all parties and is based on economic rationale
that all services which benefit from access network
should be considered while calculating ADC.
13
Article 6: The Licensees
Friendi requests the TRA ADC payment scheme is As we have clarified earlier, The ADC will apply to all

8. 7
operating international gateway
shall settle ADC dues payable to
the Qualified Licensee based on
the rate notified by the TRA.
Article 12
immediately halted by the TRA. If the TRA decides
to proceed with the ADC scheme, Friendi Oman
believes that ADC payments must be waived or
suspended in relation to Omantel's own, but
separately licensed MVNO's.
those Licensees who are owning or operating the
International Gateway (including those who operate the
International gateway by way of leased capacity) for
providing international telecommunication services.
TRA would like to further clarify that those who are
operating international gateway will provide ADC and
those who have a regulated access service being
provide below cost would be eligible to receive ADC.
14
Article 6
Article 12: If upon review, The
TRA observes that the ADNC is
negative; the TRA may direct the
Qualified Licensee to calculate
ADC based on the formula
outlined in Schedule 2 and
resubmit the revised values to
the relevant parties within 30
days from such Decision.
Omantel requests the TRA to set out a process
(either in a final ADC decision or as an addition to
the original ADC Decision letter and the original ADC
document) that clearly defines the process that the
TRA expects to be followed to ensure payment of
the ADC and the consequences of non-payment of
ADC's by Licensees. The draft Decision also does
not impose obligations on the TRA to issue Decision
in any timescale.
The TRA expects all Licensees shall comply with the
final decision and subsequent ADC orders as it is a part
of their obligation as a Licensee. However the TRA
notes the point highlighted by Omantel and will study to
make the mechanism clearer.
15 (Question: what are your views
on using GB or GB/Second
instead of minutes as a base of
calculating the ADC)
Omantel have a concern on Schedule 2 which
seeks views of parties for using GB or GB/second
instead of international minutes as a base for
calculating the ADC. Omantel does not believe that
the ADC Decision is the appropriate place to
consider the changes to the measurement of traffic
at international gateways. Omantel considers that
call minutes are the appropriate basis for
determining the ADC consistent with interconnection
charging arrangements.
ADC calculation based on Bandwidth is just an option
that was raised as a suitable scenario when data will be
predominant rider rather than the voice minutes. There
the TRA notes Omantel preference for using voice
minutes for calculation of ADC for reasons of simplicity,
16 Schedule 1
Omantel strongly objects to the TRA's proposed
methodology for calculation of the access deficit,
As mentioned earlier, the TRA has adopted this
approach after seeking advice from an independent

9. 8
they believe that the TRA has made a major change
to its methodology without providing any explanation
for the change.
consultant. The new approach should be viewed on
merits and not that it is different than that of 2008. The
TRA believes that all services which make use of
access network should contribute for the Access Cost
and ADC should be admissible only after taking into
account all related revenues.
17 Schedule 1
Omantel also believes that this approach is
inconsistent with the principles of an ADC and that
the ADC should be determined on the basis of
access revenues and cost. The TRA should not
attempt to offset the access deficit with revenues
from other fixed services. This broadens the
definition of services so that the ADC is no longer an
access deficit contribution. Omantel does not believe
that the TRA's approach of the ADNC will lead to
sustainable competition in the international call
market. Omantel do not think it's appropriate that
Class I Licensed operators will only contribute if
Omantel does not make a profit from its fixed line
access. Competitors will enter the market without
bearing any of the cost of the access deficit as it will
be borne by Omantel.
The revenues earned from all service, which use
access network should be taken into consideration. The
TRA believes that it is fair and it conforms to the cost
causality principle.
18 Calculation Methodology
Schedule 1
Omantel also see the ADNC calculation contrary to
the proposed approach to market definitions in its
accounting separation framework preventing cross
subsidies between separate markets. They also
believe that the ADNC is likely to produce unstable
ADC's is likely to make it difficult on ADC payers and
recipients to forecast costs and maintain appropriate
prices. Omantel believe that the TRA should
The Accounting Separation, simply highlight the costs
and revenues of a market/service and shows if there is
any profit or loss in that market. It will not prevent any
cross subsidy rather it will highlight the subsidy, which
will be funded through the ADC framework. We feel that
the arguments in support of 2008 decision are out of
place as those have already been discussed in detail
above.

10. 9
continue to define access deficit and ADC as implied
in its 2008 decision and should be based on access
revenue less cost (including the cost of capital) and
the ADC should be set to recover this cost from
international calls.
19 Schedule 1
Friendi believe that it is important that an alternative
funding mechanism is to be set up based on an
efficient operator and not on the incumbent since it
will be a catalyst for the incumbent to improve its
efficiency and competitiveness. Friendi also believes
that new entrants should not be made to contribute
to any inefficiencies of the incumbent. Friendi also
believe that Omantel's access deficit should be
transparent and audited.
Any applicants AD will be thoroughly audited and has to
be justified. The December 2011 deadline is set to
ensure that the Licensee takes all necessary actions to
adjust their tariffs and operations to be as efficient as
possible and as quickly as possible. The ADC will apply
to all those Licensees who are owning or operating the
International Gateway (including those who operate the
International gateway by way of leased capacity) for
providing international telecommunication services.
20 Article 1: Excess/Positive
Economic Profit: Profit
generated when the qualified
licensee continues to earn Profits
exceeding a reasonable return
on services that are effectively
bundled with the access line to
the extent that fully covers the
deficit.
Omantel suggested deleting part (iii) The TRA believes that this part provides additional
clarity and explanation. We do not believe that deleting
it makes any difference to the content or meaning.
Therefore, part (iii) will be kept.
21 Article 10: Demonstration that
the access deficit net of
contributions of excess profit
from line dependant services is
of a value less than zero. The
calculation of this access deficit
net of contribution (ADNC) is to
follow the format as outlined in
Omantel suggested Replacing part (d) with the
following "Demonstration that the access deficit is of
a value less than zero. The calculation of this access
deficit (AD) is to follow as outlined in Schedule 1"
This suggestion is not in line with the spirit of ADC
framework adopted. TRA does not believe that there is
any basis or reason for replacing part (d).

11. 10
Schedule 1
22 Article 11: The ADC will be
limited to the portion of the
Access Deficit, which the
Qualified Licensee cannot fund
through other internal sources of
economic profit from line
dependant services.
Omantel suggested deleting article 11.
The TRA does not agree to deleting this Article since
we believe that the decision should clearly stipulate
what the Licensee is allowed to recover and to what
services as well. This will also avoid any future
misunderstandings and disputes regarding what should
be counted and what shouldn’t.
22 Article 12: If upon review, the
TRA observes that the ADNC is
negative; the TRA may direct the
Qualified Licensee to calculate
ADC based on the formula
outlined in Schedule 2 and
resubmit the revised values to
the relevant parties within 30
days from such direction.
Omantel suggested replacing article 12 with the
following "If upon review, the TRA observes that the
AD is negative; the TRA may direct the Qualified
Licensee to calculate ADC based on the formula
outlined in Schedule 2 and resubmit the revised
values to the relevant parties within 30 days from
such direction"
This suggestion is also not in line with the principle
adopted by TRA for ADC.
23 Schedule 1: Calculation of
Access Deficit Net of
Contribution (ADNC)
Omantel suggest replace Schedule 1 with the
following text "Schedule 1: Calculation of Access
Deficit Contribution (ADC)
The calculation shall be in the form of a table
providing the following inputs:
 EBIT (A)
 Capital Employed (B)
 Weighted Average Cost of Capital - WACC (C)
 Economic profit /(loss) (D)
Where D = A-(B*C) for exchange lines
And Total ADC = sum of all economic profit (loss) for
the above calculation
Where
EBIT is earnings before interest and tax
This suggestion is also not in line with the principle
adopted by TRA for ADC.

12. 11
AD, Access Deficit is the sum of economic profit or
loss for access services
The AD must be less than zero or else the
application would be invalid
The following note applies in relation to the
calculation above:
Free calls and value added services bundled with
the access service by the Qualified Licensee shall be
included.