APPENDIX 4
Default pricing principles for use in dispute resolution
1.  OVERVIEW
Paragraph 10.5 of this Code provides that, in certain situations in which persons are unable to negotiate a commercial agreement, one person may request MDA to initiate a Dispute Resolution. This Appendix sets out the procedures and the pricing principles that MDA will apply when conducting a Dispute Resolution to determine the price or costs to be paid to:
(a)   a Lead Broadcaster that is supplying access to a “feed” of an Event of National Significance as provided for in paragraph 2.4.3.1.3 of this Code;
(b)   a Designated Video Archive Operator for a licence to broadcast archived material as provided for in paragraph 2.5.5.2 of this Code;
(c)   an Entity Controlling Resources for access to a Resource as provided for in paragraph 9.3.2.2 of this Code; and
(d)   a Receiving Qualified Licensee, by a Supplying Qualified Licensee, for the purpose of carrying Qualified Content of the Supplying Qualified Licensee on the Receiving Qualified Licensee’s Relevant Platform, as provided for in paragraph 2.7 of this Code.
[S 380/2011 wef 02/07/2011]
2.  PRICING OF ACCESS TO “FEEDS” COVERING EVENTS OF NATIONAL SIGNIFICANCE
2.1  Introduction
(a)   In accordance with paragraph 2.4.2 of this Code, MDA may select a Lead Broadcaster who will be given the right to locate cameras and other equipment at the site of a specific Event of National Significance. Pursuant to paragraph 2.4.3.1 of this Code, the Lead Broadcaster must provide access to the “feed” of the Event of National Significance to all Free-to-Air Television Licensees and Free-to-Air Radio Licensees who are obligated to broadcast the Event of National Significance, and any other person as MDA may direct as being entitled to obtain the “feed” to the Event of National Significance, subject to the discretion of MDA.
(b)   Paragraph 2.4.3.1 of this Code further provides that any Free-to-Air Television Licensee, Free-to-Air Radio Licensee, or any other person as MDA may direct, who receives the “feed” from the Lead Broadcaster has an obligation to compensate the Lead Broadcaster for the reasonable costs that the Lead Broadcaster incurred in providing the “feed”.
(c)   Paragraphs 2.4.3.1.1 and 2.4.3.1.3 of this Code further provide that in any case that, despite good-faith negotiations, the Lead Broadcaster and Free-to-Air Television Licensee, Free-to-Air Radio Licensee or any other person as MDA may direct are unable to reach an agreement regarding the price at which the Lead Broadcaster will provide access to the “feed” of the Event of National Significance, MDA will apply the following procedures.
2.2  Procedure
(a)   At the time the Lead Broadcaster submits a Response pursuant to paragraph 10.5.1.3 of this Code, the Lead Broadcaster must specify a proposed price payable for access to the “feed” of the Event of National Significance. In developing its proposed price, the Lead Broadcaster must apply the pricing principles specified in paragraph 2.3 of this Appendix. The Lead Broadcaster must also provide relevant cost support data. In accordance with paragraph 10.5.1.6 of this Code, MDA may subsequently request the Lead Broadcaster to provide additional information to substantiate its proposed price (including, but not limited to, the Lead Broadcaster’s internal management accounts). MDA will then review the respective persons’ submissions.
(b)   If MDA concludes that the Lead Broadcaster has appropriately applied the pricing principles specified in paragraph 2.3 of this Appendix in developing its proposed price, MDA will accept its proposed price as the determined price payable for access to the “feed” of the Event of National Significance. If MDA concludes that the Lead Broadcaster has not appropriately applied the pricing principles specified in paragraph 2.3 of this Appendix in developing its proposed price, MDA will reject its proposed price and instead specify the determined price payable for access to the “feed” of the Event of National Significance.
(c)   For the avoidance of doubt, the determined price payable will only be binding on the persons to the Dispute Resolution for the specific Event of National Significance that is the subject of the dispute.
2.3  Pricing Principles
2.3.1   Cost Components
The Lead Broadcaster is entitled to recover:
(a)   an appropriate allocated portion of the operating costs attributable to the coverage and production of the Event of National Significance which has not been otherwise compensated by MDA or by other sources of public funding; and
(b)   the incremental costs associated with providing access to the “feed” of the Event of National Significance to additional persons.
2.3.2   Operating Costs
The appropriate allocated portion of the operating costs attributable to the coverage and production of the Event of National Significance may include the costs of coverage crew (such as cameramen, sound engineers, technicians, support crew, video tape recorder operators, managers and coverage directors), as well as the costs of leasing of fibre optics for “live” events.
2.3.2.1  Treatment of Operating Costs
Operating costs will be calculated on a per day basis, unless another charging basis (such as on an hourly basis) would more accurately reflect the way in which the costs are incurred. Market rental values for specific resources and facilities may be used as an appropriate proxy for the Lead Broadcaster’s operating costs.
2.3.3   Incremental Costs
The Lead Broadcaster is also entitled to recover any incremental cost that it incurs which can be directly attributed to the delivery of the “feed” of an Event of National Significance to a Free-to-Air Television Licensee, Free-to-Air Radio Licensee or any other person as MDA may direct. These incremental costs may include, but are not limited to:
(a)   costs associated with the transmission of the “feed” to an acceptable interconnection point, including but not limited to, any costs of leasing microwave, fibre optics or satellite capacity;
(b)   costs incurred to physically connect at the point of interconnection; and
(c)   any incremental personnel required to deliver the “feed” of an Event of National Significance to the Free-to-Air Television Licensee, Free-to-Air Radio Licensee or any other person as MDA may direct.
3.  PRICING OF ARCHIVED VIDEO MATERIALS
3.1  Introduction
(a)   In accordance with paragraph 2.5.3 of this Code, the Designated Video Archive Operator must license or otherwise make available the material set out in paragraph 2.5.3 for broadcast on reasonable prices, terms and conditions.
(b)   Paragraph 2.5.5 of this Code further provides that the Designated Video Archive Operator is entitled to reasonable compensation for licensing the broadcast of its archived material.
(c)   MDA will apply the following procedures and pricing principles in any situation in which a person seeking the licence, despite good-faith negotiations, is unable to reach an agreement with the Designated Video Archive Operator regarding the price at which the Designated Video Archive Operator will license the archived material for broadcast.
3.2   Events of National Significance
The following procedures and pricing principles apply to licensing of archived Events of National Significance.
3.2.1  Procedures
(a)   At the time the Designated Video Archive Operator submits a Response pursuant to paragraph 10.5.1.3 of this Code, the Designated Video Archive Operator must specify a proposed licence fee payable for the right to broadcast the archived material. In developing its proposed price, the Designated Video Archive Operator must apply the pricing principles specified in paragraph 3.2.2 of this Appendix. The Designated Video Archive Operator must also provide relevant cost support data. In accordance with paragraph 10.5.1.6 of this Code, MDA may subsequently request the Designated Video Archive Operator to provide additional information to substantiate its proposed licence fee (including, but not limited to, the Designated Video Archive Operator’s internal management accounts). MDA will then review the persons’ submissions.
(b)   If MDA concludes that the Designated Video Archive Operator has appropriately applied the pricing principles specified in paragraph 3.2.2 of this Appendix in developing its proposed licence fee, MDA will accept its proposed licence fee as the determined licence fee payable for the licence of the archived material for broadcast.
(c)   If MDA concludes that the Designated Video Archive Operator has not appropriately applied the pricing principles specified in paragraph 3.2.2 of this Appendix in developing its proposed licence fee, MDA will reject its proposed licence fee and instead specify the determined licence fee payable for the licence of the archived material for broadcast.
(d)   For the avoidance of doubt, the determined licence fee payable will only be binding on the persons to the Dispute Resolution for the specific licence of archived material for broadcast that is the subject of the dispute.
3.2.2   Pricing Principles
The Designated Video Archive Operator is entitled to be compensated only for an appropriate allocation of the costs of storing archived Events of National Significance for future use. Archive storage costs may include electricity, personnel, preservation and maintenance costs, and similar expenses, directly related to the maintenance of the archive. Such archive storage costs should be based on the Designated Video Archive Operator’s costs for the most recent calendar or financial year.
3.3   News, Current Affairs or Information Programmes
The following procedure and principles apply to licensing of archived News, Current Affairs or Information Programmes.
3.3.1  Procedure
(a)   At the time when a person seeking to obtain a licence to broadcast archived material submits a Petition pursuant to paragraph 10.5.1.2 of this Code, the person must also submit to MDA its proposed licence fee payable to the Designated Video Archive Operator. MDA will not disclose to the Designated Video Archive Operator the person’s proposed licence fee until after the Designated Video Archive Operator has submitted its Response pursuant to paragraph 10.5.1.3 of this Code.
(b)   At the time when the Designated Video Archive Operator submits a Response pursuant to paragraph 10.5.1.3 of this Code, the Designated Video Archive Operator must specify a proposed licence fee payable for the right to broadcast the archived material.
(c)   When a person or a Designated Video Archive Operator submits its proposed licence fee to MDA, that person or Designated Video Archive Operator must also provide MDA with supporting evidence and documentation to explain the basis of its proposed licence fee.
3.3.2   Appropriate Criteria
The person and the Designated Video Archive Operator must support their proposed licence fees with reference to the following criteria:
(a)   recent examples of comparable sales of archived material in Singapore or elsewhere;
(b)   estimated commercial value based on potential domestic demand;
(c)   whether a reduced licence fee is justified based on social and political considerations, and public service obligations;
(d)   potential likely sales of the programme in which the licensed archived material is incorporated;
(e)   potential advertising revenue derived from the programme in which the licensed archived material is incorporated;
(f)   evidence regarding the costs of producing the archived material; and
(g)   any other relevant factor.
3.3.3   Pricing of Licence Fee
MDA will generally determine the licence fee payable by adopting one or other of the proposed licence fees after reviewing the respective submissions of:
(a)   the person seeking to obtain a licence; and
(b)   the Designated Video Archive Operator.
4.  PRICING OF ACCESS TO ESSENTIAL RESOURCES
4.1  General Principle
(a)   In accordance with the MDA Act as well as paragraphs 9.3.1.4 and 9.3.1.7 of this Code, MDA may require an Entity Controlling Resources to provide any Requesting Person with access to an Essential Resource on reasonable and non-discriminatory prices, terms and conditions.
(b)   MDA will apply the following procedures in any situation in which, despite good-faith negotiations, a Requesting Person seeking access to an Essential Resource is unable to reach agreement with the Entity Controlling Resources regarding the price at which the Entity Controlling Resources will provide the Requesting Person with access to the Essential Resource.
4.2  Procedures
(a)   At the time the Entity Controlling Resources submits a Response pursuant to paragraph 10.5.1.3 of this Code, the Entity Controlling Resources must specify a proposed access fee. The Entity Controlling Resources must indicate the pricing methodology used to develop the proposed price and must also provide relevant cost support data.
(b)   In accordance with paragraph 10.5.1.6 of this Code, MDA may subsequently request the Entity Controlling Resources to provide additional information (including, but not limited to, the Entity Controlling Resources’ internal management accounts). MDA will determine the access price that the Entity Controlling Resources can charge using the methodology that is most appropriate given the circumstances.
4.3   Charging Methodology
MDA will generally seek to apply a cost-based methodology to determine the access price. MDA will generally use a fully allocated cost or incremental cost methodology.
4.3.1  Fully Allocated Cost Methodology
(a)   In any case in which MDA applies a fully allocated cost methodology, MDA will first determine the costs that the Entity Controlling Resources has incurred to construct or acquire the Essential Resource. MDA will then allocate the costs amongst the individual services and products using an appropriate set of criteria such as relative capacity utilisation, minutes of use or proportionate revenues generated.
(b)   MDA will typically apply a fully allocated cost methodology to determine the appropriate access price where:
(i)there is no proportional relationship between the supply of the Essential Resource and the level of demand (i.e. where an increase in the demand for the Essential Resource does not require an incremental supply of the same service or product);
(ii)despite reasonable efforts, the detailed cost information necessary for an incremental cost analysis cannot feasibly be obtained given available time and resources; or
(iii)MDA considers it to be in the public interest to allow the Entity Controlling Resources to recoup a portion of its historical costs from users of the Essential Resource.
4.3.2  Incremental Cost Methodology
(a)   In any case in which MDA applies an incremental cost methodology, MDA will determine the additional direct costs that the Entity Controlling Resources has incurred in providing the Requesting Person with access to the Essential Resource.
(b)   MDA will typically use an incremental cost methodology to determine the appropriate access price where:
(i)there is a proportional relationship between the supply of the Essential Resource and the level of demand;
(ii)the joint and common costs can be readily allocated between the different services and products provided by the Entity Controlling Resources; or
(iii)MDA considers it to be in the public interest to require the Entity Controlling Resources to price the Essential Resource at the level that would exist in a fully competitive market.
(c)   MDA will select the appropriate incremental cost methodology which it considers most appropriate based on its understanding of the circumstances and characteristics of the specific Essential Resource.
4.4   Applicable Cost Components
After MDA has selected the appropriate cost methodology, it will determine the access price through an analysis of the cost structure of the Entity Controlling Resources.
4.5   Return on Capital
(a)   MDA will determine a reasonable return on capital that will be applied to determine the access price. This will reflect the Entity Controlling Resources’ cost of capital.
(b)   MDA will generally calculate the cost of capital of the Entity Controlling Resources based on a weighted average of the cost of debt and equity finance typically consisting of a risk free rate and a specific company risk premium.
(c)   In accordance with paragraph 10.5.1.6 of this Code, MDA may subsequently request the Entity Controlling Resources to provide information on its cost of capital. However, in the absence of any information on capital transactions that the Entity Controlling Resources has undertaken, MDA may consider the cost of capital incurred by owners of comparable Resources in other countries, adjusted to reflect the market situation in Singapore and the specific characteristics of the Entity Controlling Resources.
5.  PRICING OF COSTS OF CROSS-CARRIAGE
5.1   General Principle
(a)   In accordance with paragraph 2.7.3 of this Code, MDA may adopt the following pricing principles for determining the incremental costs to be borne by the Supplying Qualified Licensee as referred to in paragraph 2.7.1(i)(ii) of this Code.
(b)   In determining the incremental costs to be borne by the Supplying Qualified Licensee, MDA will adopt the following broad principles:
(i)the incremental costs must be costs incurred by the Receiving Qualified Licensee as a direct result of its compliance with its cross-carriage obligation in relation to Qualified Content of the Supplying Qualified Licensee; and
(ii)the pricing principles are to be applied in a transparent, fair and non-discriminatory manner.
(c)  Following MDA’s determination of the incremental costs to be borne by the Supplying Qualified Licensee, MDA reserves the right to publish its determination on its website for the industry’s reference.
5.2   Charging Methodology
5.2.1   Subject to paragraph 5.2.3 of this Appendix, to ensure efficient transmission of Qualified Content, MDA will determine the incremental costs to be borne by the Supplying Qualified Licensee based on the rate of the most cost efficient Relevant Platform in the Singapore market.
5.2.2.To determine the rate of the most cost efficient Relevant Platform in the Singapore market, MDA will compare the efficiencies of all Relevant Platforms of all Receiving Qualified Licensees, using for each either the Directly Attributable Incremental Cost Methodology or the Long Run Incremental Cost Methodology; and will, in using either methodology, take into account any leasing costs payable by the Receiving Qualified Licensee based on such rates as at 21st June 2012 in respect of that Relevant Platform for leasing:
(a)optical dark fibre strands in Singapore Telecommunications Limited’s network of optical fibre cables; and
(b)duct space in Singapore Telecommunications Limited’s underground ducting network,
 which are attributable to enabling the Receiving Qualified Licensee to cross-carry the Qualified Content of the Supplying Qualified Licensee for the purpose of fulfilling its duties under paragraph 2.7 of this Code, under any arrangement with Singapore Telecommunications Limited entered into before 2nd July 2011 and any subsequent amendment or variation to the arrangement, provided that such leasing costs are incurred before the first of the following dates which applies:
(i)1st April 2020;
(ii)1st April 2017, if any change is made (directly or indirectly) before that date to the provision as at 2nd July 2011 in respect of the automatic renewal of the arrangement for the period from 1st April 2017 to 31st March 2020; or
(iii)the date of termination of the arrangement.
 For the avoidance of doubt, any leasing costs payable by the Receiving Qualified Licensee to Singapore Telecommunications Limited to enable the Receiving Qualified Licensee to cross-carry the Qualified Content of the Supplying Qualified Licensee shall be passed through to the Supplying Qualified Licensee by the Receiving Qualified Licensee without any mark-up, variation or additional charge.
5.2.3.Where:
(a)a Relevant Platform of a Receiving Qualified Licensee is not the most cost efficient Relevant Platform; and
(b)the Receiving Qualified Licensee incurs leasing costs in respect of its Relevant Platform referred to in paragraph 5.2.2 of this Appendix,
 the Authority will take into account, as the incremental costs to be borne by the Supplying Qualified Licensee in respect of that Relevant Platform, the lower of the following:
(i)the rate of the most cost efficient Relevant Platform, and the leasing costs referred to in paragraph 5.2.2 of this Appendix; or
(ii)the rate for its Relevant Platform determined in accordance with paragraph 5.2.2 of this Appendix.
5.3Directly Attributable Incremental Cost (DAIC) Methodology
(a)Where the Supplying Qualified Licensee is also designated as a Receiving Qualified Licensee, MDA will determine the incremental costs to be borne by the Supplying Qualified Licensee based on the DAIC methodology.
(b)In calculating the incremental costs, MDA will include the incremental capital expenses and operating expenses of the Receiving Qualified Licensee directly attributable to the cross-carriage of the Qualified Content of the Supplying Qualified Licensee including the leasing costs incurred by the Receiving Qualified Licensee that is referred to in paragraph 5.2.2 of this Appendix.
(c)Under the DAIC methodology, MDA will determine the incremental costs in a manner which captures only the costs directly attributable to the Qualified Content of the Supplying Qualified Licensee. Therefore, the relevant increments in the DAIC methodology will exclude other TV-related services (for example, the transmission by the Receiving Qualified Licensee of content other than Qualified Content of the Supplying Qualified Licensee) and any other non TV-related services.
5.4Long Run Incremental Cost (LRIC) Methodology
(a)Where the Supplying Qualified Licensee is not designated as a Receiving Qualified Licensee, MDA will determine the incremental costs to be borne by the Supplying Qualified Licensee based on the LRIC methodology.
(b)In calculating the incremental costs, MDA will include the incremental capital expenses and the operating expenses of the Receiving Qualified Licensee directly attributable to the cross-carriage of the Qualified Content, as well as such portion of the costs as relates to the use of the transmission network of the Receiving Qualified Licensee for the transmission of the Qualified Content of the Supplying Qualified Licensee including the leasing costs incurred by the Receiving Qualified Licensee that is referred to in paragraph 5.2.2 of this Appendix.
(c)For the LRIC methodology, MDA will determine the relevant increments in a manner which includes the carriage of the TV services provided by the Receiving Qualified Licensees. Increments in the LRIC methodology will exclude any other non-TV related services.
[S 320/2012 wef 10/07/2012]
5.5   Cost Standards
MDA will endeavour to undertake the following approach to determine the actual value of the incremental capital expenses:
(a)   In determining the actual value of the incremental capital expenses of the Receiving Qualified Licensee, MDA will use replacement costs of the transmission network of the Receiving Qualified Licensee to reflect the forward looking nature of the obligation to cross-carry Qualified Content. This will ensure that replacement costs would be achievable by a new entrant seeking to compete with established Receiving Qualified Licensees.
(b)   To annualise the replacement costs, MDA will adopt such tilted annuities approach as MDA believes best suits the circumstances of the Receiving Qualified Licensee and the Supplying Qualified Licensee. MDA believes that a tilted annuities approach will allow market conditions such as the expectations of new technologies and changes in asset prices, to better reflect the depreciation and replacement costs of the relevant assets. MDA will adopt as the annualised costs of the transmission network of the Receiving Qualified Licensee, such annualised costs as is represented by the most cost efficient Relevant Platform in the Singapore market.
(c)   For the purpose of the tilted annuities approach, MDA will use the Weighted Average Cost of Capital (‘‘WACC’’) specific to the Receiving Qualified Licensee’s subscription nationwide television business.
[S 380/2011 wef 02/07/2011]