Retail price control- Margin
squeeze methodology
Izmir, 21.02.2013
Market 1 – Access to the public communication network on fixed
location for residential and business customers & Market 2Publicly available telephony services on fixed location
Undertaken regulatory measures based on market analysis:
wholesale level:
• carrier selection and carrier pre-selection
• wholesale line rental, based on retail minus
retail level:
• ex ante price control
• transparency obligation (publication of charges, terms and conditions)
• accounting separation
• prohibition of anti-competitive behaviour
• prohibition of unreasonable bundling of services (allow customers to buy unbundled
elements of any service elements)
• submission of price list to AEC’s prior approval
Retail price regulation
Margin > 0
Retail
costs (d)
Own
network
costs (w)
Price of
wholesale
input (r)
Price of
retail
product
(P)
Margin squeeze for bundles
MS for bundles= includes all prices and costs relating the various services
within the bundle, or
Pxy = rxy + wxy + dxy
Where:
Pxy: retail price of the bundle (x,y)
rxy: wholesale input for the bundle (x,y)
wxy: own network cost for the bundle (x,y)
dxy: retail costs for the bundle (x,y)
Wxy may be smaller than Wx + Wy due to economies of scale and scope
Timetable of the project
Bylaw for regulation of
retail prices
Basic MS principles
accepted by AEC
•Makedonski Telekom is obliged to
submit its valid price list to approval
to AEC after 30 days of Bylaw
publication in Official Gazette
•MS model supports both EEO and REO
tests
•Prior approval of any retail offer in
30 days before start up
•LRIC prices as relevant cost measure
•Prior approval of any promotion/
bundle offer in 30 days before start
up
•Submission of historic data for retail
offers twice a year.
•EEO test used in practice
•Both DCF and PbP used (test should be
positive by both methods)
•Product by product aggregation level of
the considered retail products
•Upstream inputs should b e considered in
a separate way.
Implementation of MS in practice
•10 August 2012 Maktel submits to AEC its price list (67 standalone and bundle retail
offers with undefined period, 12 and 24 months)
•57 standalone and bundle retail offers approved
•10 standalone and bundle retail offers denied
•From September till December 2012 seven additional retail offers approved
•As a result of market analysis decision and implementation of MS methodology AEC
approved equal monthly fee for PSTN/ISDN access for residential and business
customers.
•AEC is expecting historic data for already approved retail offers in the end of February
2013.
Example of MS test result- negative result
Thank you for your attention!
Vaska Petrovic
Head of Market Analysis Department
Agency for Electronic Communications
tel: + 389 2 3289 245
fax: + 389 2 3224 611
mob: + 389 70 38 33 23
13, "Dimitrie Cupovski" Str.
1000 Skopje, Republic of Macedonia
e-mail: [email protected]
http://www.aec.mk