Telus says CRTC strayed from accounting principles in spectrum revenue and contribution decision

Telus Corp. says the CRTC should review its decision to include revenues from the sale and subordination of spectrum in its contribution regime because it did not take into account generally accepted accounting principles (GAAP). Straying from GAAPs, Telus argued, will force telecom providers to develop new financial reports for contribution purposes, create irregularities in financial reportings, and lead to confusion among stakeholders. Telus' comments came last Thursday in support of a review and vary application brought forward by TerreStar Solutions Inc. TerreStar is challenging the CRTC’s decision to deny its request to deduct spectrum sale and subordination revenues from its Canadian operating revenues when determining its National Contribution Fund allocations. The current revenue-based contribution regime requires companies to contribute a percentage of their Canadian telecommunications services revenue (CTSR) to the National Contribution Fund. In its original application, TerreStar argued that spectrum subordination does not fall under the definition of a telecommunications service. Spectrum’s intangible nature, the fact that no facilities or equipment are involved in its subordination, and it is separately regulated by the department of Innovation, Science and Economic Development (ISED) make it “markedly different from other ‘services’ that the commission has had to consider under the Telecommunications Act,” the company wrote to the commission in November. The CRTC denied the application, stating that TerreStar’s interpretation failed to account for the fact that “any service that is incidental to the business of providing telecommunications services” also counts as a telecommunications service. In its review and vary application, TerreStar argued that there are no previous CRTC decisions or guidance indicating that spectrum sale and subordination revenues are considered incidental services and must be included in the revenue calculations and said the CRTC is contradicting its previous decisions regarding the principles to be applied in the calculation of contribution. In its intervention, Telus said it was in agreement with TerreStar on this point. The telecom argued to the CRTC that it only focused on the “tangential issue” of whether the sale and subordination of spectrum constitutes a service under the Telecommunications Act. According to Telus, in doing so, the CRTC failed to “consider the overlapping accounting context that the commission originally incorporated into the contribution regime.” “When this context is duly considered, the issue can be more accurately reframed into a question of whether revenues from the sublicensing or sale of spectrum are ‘total operating revenues reported in financial statements… prepared in accordance with generally accepted accounting principles (GAAP),’” Telus wrote. The CRTC has historically required telecommunications service providers (TSPs) to follow GAAP when reporting contribution-specific financial information, Telus noted, adding that is also how financial and securities regulators treat total operating revenues. Telus argued GAAPs are an internationally recognized set of accounting standards designed to enhance the quality and comparability of financial information for investors, creditors, regulators, and other stakeholders. “The implications of the commission’s decision is that the quality and usefulness of contribution-specific financial information will be diminished. It will be difficult to review multiple companies’ contribution financials side-by-side, or the same company’s contribution statements year-over-year, because there is no guarantee that accounting principles have been followed to the same set of standards,” Telus wrote. The decision to include spectrum revenues in total operating revenues also introduces inefficiencies into the contribution reporting process, according to Telus, because TSPs would need to create additional financial documents for the CRTC's contribution regime. – Reporting by Jenna Cocullo at jcocullo@thewirereport.ca and editing by Phalen Tynes-MacDonald at pcreed@thewirereport.ca.

Telus says CRTC strayed from accounting principles in spectrum revenue and contribution decision

News | October 2, 2023

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Telus says CRTC strayed from accounting principles in spectrum revenue and contribution decision

News | October 2, 2023

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