MTAS Conference Slides
FTM CBA Sensitivity
James Mellsop
Director
Wellington
2 and 3 September 2009
Comparative statics: assumptions
 Corrections to the Comission’s FTM CBA model
– Correct calculation of waterbed effect to account for mobile subscription
elasticity
– Mobile voice revenue, call minutes and subscribers updated to reflect
Telecom’s 2008 results, rather than 2004
– Include a positive (versus zero) cost benchmark for 2010
 Commission parameter assumptions used as base case
– Factual FTM pass-through (75% increasing to 100%)
– Counterfactual FTM pass-through
– Factual MTRs
– Counterfactual MTRs
 For comparative statics around the factual pass-through, we have
assumed a constant level of pass-through for the whole period and varied
that
1
Net benefits are sensitive to the
waterbed effect assumption
CC Base Case
$300,000,000
Net benefits
$200,000,000
$100,000,000
$0
0%
-$100,000,000
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
-$200,000,000
-$300,000,000
Waterbed
CS LINEAR
CS CED
TS LINEAR
TS CED
2
Lower pass-through gives net costs for a
wider range of the waterbed effect
Pass-through = 75%
$300,000,000
Net Benefits
$200,000,000
$100,000,000
$0
0%
-$100,000,000
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
-$200,000,000
-$300,000,000
Waterbed
CS LINEAR
CS CED
TS LINEAR
TS CED
3
Lower pass through gives net costs for a
wider range of the waterbed (con’t)
Pass-through = 50%
$200,000,000
$100,000,000
Net Benefits
$0
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
-$100,000,000
-$200,000,000
-$300,000,000
-$400,000,000
-$500,000,000
Waterbed
CS LINEAR
CS CED
TS LINEAR
TS CED
4
Net benefits are also sensitive to
the pass-through assumption
Waterbed = 50%
$200,000,000
Net benefits
$100,000,000
$0
0%
-$100,000,000
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
-$200,000,000
-$300,000,000
-$400,000,000
-$500,000,000
Pass-through
CS LINEAR
CS CED
TS LINEAR
TS CED
5
Higher waterbed effect gives net costs
for a wider range of pass-through
Waterbed = 75%
$100,000,000
Net benefits
$0
0%
-$100,000,000
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
-$200,000,000
-$300,000,000
-$400,000,000
-$500,000,000
-$600,000,000
Pass-through
CS LINEAR
CS CED
TS LINEAR
TS CED
6
Contact Us
James Mellsop
Director
Auckland
+64 9 373 7231
[email protected]
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NERA Economic Consulting Limited
All rights reserved.