Problems related to competition can be found in the electronic communications market. PTS is consequently working to lay down rules to create a predictable and level playing field for all market stakeholders. This will eventually create a better range and options for consumers. As a step in this work PTS has decided that TeliaSonera must sell and lease a number of products and services in the fixed network at a ‘cost-oriented price’. PTS uses a costing model, also referred to as a ‘hybrid model’, to work out cost-oriented prices.
PTS revises the costing model
In accordance with applicable rules, PTS must regularly revise the costing model. The reason for this is that the economic and technological conditions for setting up and operating a network change over time. This affects the costs, which must be reflected in the model. The last revision was made in 2007. The ‘obligation decisions’ now being drawn up by PTS have meant that the model needs to be modified to include more products in the fixed network that are to be provided at cost-oriented prices. This applies to, for example, access to TeliaSonera’s fibre network. While conducting a revision, PTS must review various fundamental aspects of the model, such as the technology used in the network and various economic principles and key values. PTS also compiles current financial information from TeliaSonera about the company’s costs and so on.
Contributions from operators are important
In order to have a costing model that is as fair as possible, it is important for those operators affected by the outcome of the model to contribute their views and knowledge on, for instance, the market, current technology and cost levels. PTS therefore welcomes the participation of operators during the forthcoming revision process. The revision process, which is a collaboration between PTS and operators, started in February 2010 with consultation concerning the fundamental principles forming the basis of the costing model (Model Reference Paper). The revised model will be in place by mid 2011 and will be put into effect thereafter.
Background
What is a ‘cost-oriented price’?
A ‘cost-oriented price’ must cover the cost of producing the product and also yield a reasonable return.
What is an ‘obligation decision’?
The European Commission has decided that PTS and the other European regulatory authorities must produce decisions on obligations that operators with significant market power must comply with. Obligation decisions form the rules of play in the electronic communications market to enable the achievement of long-term sustainable competition. The best way in which PTS can increase competition is for the Agency to identify which operators have significant market power and then impose obligations on these operators.
What is a ‘Model Reference Paper’?
A ‘Model Reference Paper’ is a document describing the functions and fundamental principles for the costing models used to calculate cost-oriented prices.
What is the difference between a ‘revision’ and an ‘annual update’?
PTS updates the cost model annually using current volumes and cost levels based on market trends.
A revision of the model takes place less frequently, about once every three years. This is a significantly more extensive process, as PTS examines and if necessary modifies the basis of the model. PTS then looks at everything, from the technology used in different parts of the network to the basic cost assumptions and indexes for distributing overheads, depreciation periods, required return and so on. PTS then also compiles information about TeliaSonera’s costs. TeliaSonera reports this information in the form of its own costing model.