Comprehensive assessment of potential costing and pricing methodologies as options for future regulation in domestic wholesale markets

The problem

• Our client, a fixed operator in a developed country, was responding to a wide-ranging and far-reaching consultation by the domestic telecoms regulator on the approach to future rate setting for wholesale telecoms services, where regulatory intervention was required
• Analysys Mason was commissioned to provide a comprehensive overview and assessment of possible regulatory costing and pricing methodologies

The solution

• We first identified a broad list of possible methodologies that the regulator could consider (as listed in the first column in Figure 1 below)
  • each approach was assessed against a wide-ranging set of criteria (covering the aspects listed in the second column in Figure 1 below)
• We then wrote a paper providing a comprehensive overview and assessment of these potential methodologies
• Leveraging our extensive experience of regulation in numerous regions, especially the European Union, we also set out examples of:
  • countries and markets where each method has been applied
  • how the European regulatory framework operates in practice
  • indicative timetables for implementing such methodologies through best-practice regulatory processes

Figure 1: Methodologies assessed and the assessment criteria used

The result

• With our paper, the client was left much better informed as to the possible impacts of the different costing methodologies on its business and the consequences to the industry should the regulator implement each alternative
• This allowed them to make a more considered consultation response to the regulator