PTC’s proposalhttps://www.anacom.pt/render.jsp?contentId=55129
Maximum prices set by ICP-ANACOMhttps://www.anacom.pt/render.jsp?contentId=55130
PTC’s proposal
Call origination and termination prices proposed by PTC to apply in RIO 2010 (as from 01.01.2010) are shown on the table below.
|
Level |
Call activation |
Price per minute |
|
|
Peak hours |
Off-peak hours |
||
|
Local |
0,50 |
0,42 |
0,23 |
|
Simple Tandem |
0,50 |
0,55 |
0,31 |
|
Double Tandem |
0,50 |
0,68 |
0,39 |
Figures in Euro cents (VAT excluded). Charge by the second from the first second.
Peak hours: 9a.m.-7 p.m.; Off-peak hours: 7 p.m.-9 a.m.
According to PTC, the fundamental features of this proposal are:
(i) Maintaining the same prices for call origination and termination services;
(ii) Establishing a single call activation price, regardless of the interconnection level, which is slightly higher than the price currently applied for local level;
(iii) Cost-orientation for all interconnection levels.
The following table shows specific variations, for each tariff element, of the proposal presented by PTC in regards to the tariff scheme currently in force, being apparent that PTC’s proposal increases the local level call activation price and price per minute, as well as the simple tandem off-peak price per minute, reducing all other elements.
|
Level |
Call activation |
Price per minute |
|
|
Peak hours |
Off-peak hours |
||
|
Local |
2,0% |
10,5% |
21,1% |
|
Simple Tandem |
-3,8% |
-5,2% |
6,9% |
|
Double Tandem |
-19,4% |
-31,3% |
-26,4% |
Source: PTC.
In average, and considering the traffic structure foreseen for 2010, ICP - ANACOM’s estimates lead to the conclusion that the tariff scheme proposed by PTC entails a revenue reduction of [SCI] [ECI] in the call origination service and a revenue increase in the call termination service of [SCI] [ECI], which results in an overall average increase of around 2%. This increase arises specifically from the local level ([SCI] [ECI]), whereas revenues of simple tandem and double tandem levels would decrease [SCI] [ECI] and [SCI] [ECI] respectively 1.
|
Level |
Termination |
Origination |
Weighted Interconnection Total |
||||
|
Peak |
Off-peak |
Average |
Peak |
Off-peak |
Average |
||
|
Local |
|||||||
|
Simple Tandem |
|||||||
|
Double Tandem |
|||||||
|
Average |
|||||||
[ECI] Source: ICP-ANACOM estimates
Given revenues indicated on the preceding table and direct and joint unit costs estimated by ICP - ANACOM, it was calculated that PTC’s overall margin in regards to direct and joint costs for 2010, resulting from PTC’s tariff scheme proposed for 2010, would be around 22% (see table below).
|
|
Margins considering direct + joint costs |
||||
|
Traffic (million minutes) |
Estimated cost (thousands of Euros) |
Estimated revenue (thousands of Euros) |
Estimated margin (thousands of Euros) |
Margin (% Estimated cost) |
|
|
Termination |
|
|
|
|
17% |
|
Origination |
|
|
|
|
32% |
|
Total |
|
|
|
|
22% |
[FIC] Source: ICP-ANACOM estimates
In case total cost estimates were considered (direct, joint and common costs – assuming they represent a maximum of 10% of remaining costs), a global margin of approximately 11% would result from applying PTC’s tariff scheme proposed for 2010, as shown on the following table.
|
|
Margins considering total costs (with common unit costs = 10% of total direct and joint costs) |
||||
|
Traffic (million minutes) |
Estimated cost (thousands of Euros) |
Estimated revenue (thousands of Euros) |
Estimated margin (thousands of Euros) |
Margin (% Estimated cost) |
|
|
Termination |
|
|
|
|
7% |
|
Origination |
|
|
|
|
20% |
|
Total |
|
|
|
|
11% |
[FIC] Source: ICP-ANACOM estimates
In summary, it must be taken into account that:
(i) Prices put forward in PTC’s proposal represent an increase of the local level margin, which is not consistent with the necessary incentive to the development of interconnection network infrastructures;
(ii) In case total costs estimated by ICP-ANACOM were considered (direct, joint and common costs – assuming they represent a maximum of 10% of remaining costs), a global margin of approximately 11% would result from applying PTC’s tariff scheme proposed for 2010, which fails to comply with the obligation of cost orientation of prices that falls on PTC.
It follows from all the foregoing that ICP-ANACOM deems PTC’s proposal to be unacceptable.
Maximum prices set by ICP-ANACOM
Maximum prices presented below took several elements into consideration, namely keeping the balance between the need to promote incentives for the development of an independent infrastructure, the promotion of effective competition, the need for interconnection prices to reflect the way interconnection costs occur, regardless of PTC’s management policies, and the need to improve the position of prices in PTC’s reference proposal within the European context.
As regarding common costs, it is considered, as referred earlier, that the overall margin encapsulated in maximum prices must be sufficient to recover common costs of an efficient operator resulting from a situation of competition, in line with EC’s understanding on an appropriate approach for the establishment of interconnection prices, which supports the use of long-term forward-looking incremental costs, not excluding, however, the use of justified margins as means to recover costs.
It is also considered that maximum prices should allow the downward trend of the interconnection price margin in regards to direct and joint costs to continue, as has been the case in previous years (except for results for 2008, which reported a more significant cost decrease that estimated - see graph below), with no increases of margins associated to any traffic levels (local, simple tandem, double tandem).
Graph 4 - Evolution of the deviation of PTC’s total direct and joint costs from revenues
Accordingly, it is deemed that maximum interconnection prices to prevail in RIO 2010 as from 15.04.2010, are as follows:
|
Level |
Call activation |
Price per minute |
|
|
Peak hours |
Off-peak hours |
||
|
Local |
0,48 |
0,38 |
0,19 |
|
Simple Tandem |
0,48 |
0,51 |
0,26 |
|
Double Tandem |
0,48 |
0,62 |
0,33 |
Figures in Euro cents (VAT excluded). Charge by the second from the first second.
Peak hours: 9a.m.-7 p.m.; Off-peak hours: 7 p.m.-9 a.m.
These maximum prices entail, in regards to RIO 2009 prices currently in force, approximate average nominal reductions (based on a three-minute call and considering PTC’s forecast traffic profile for 2010) by 5.3% for call termination and by 10.0% for call origination, which corresponds to actual average reductions by 4.5% and 9.2% respectively, taking into account the expected inflation in the State’s Budget for 2010 2. As there seems to be no reason to impose a different activation price according to the interconnection level, PTC’s proposal for harmonization is accepted, and thus maximum prices defined by ICP - ANACOM, as presented, reflect such option.
The following table represents the estimated variation of maximum prices defined to apply in RIO 2010 in regards to RIO 2009 prices currently in force, for a three-minute call.
|
|
Termination |
Origination |
Weighted Interconnection Total |
||||
|
Peak |
Off-peak |
Average |
Peak |
Off-peak |
Average |
||
|
Local |
-0,6% |
-0,9% |
-0,7% |
-0,6% |
-0,9% |
-0,7% |
-0,7% |
|
Simple Tandem |
-11,1% |
-9,4% |
-10,6% |
-11,1% |
-9,4% |
-10,8% |
-10,7% |
|
Double Tandem |
-34,8% |
-33,5% |
-34,5% |
-34,8% |
-33,5% |
-34,6% |
-34,6% |
|
Average |
-5,5% |
-4,8% |
-5,3% |
-10,1% |
-4,8% |
-10,0% |
-6,7% |
Source: ICP-ANACOM calculations.
In case traffic profiles estimated by PTC for 2010 were considered, namely as regards call average duration, the average variation of revenues resulting from maximum prices in regards to RIO 2009 prices, which is very close to the variation calculated for a three-minute call, would be as follows:
|
|
Termination |
Origination |
Weighted Interconnection Total |
||||
|
Peak |
Off-peak |
Average |
Peak |
Off-peak |
Average |
||
|
Local |
-0,7% |
-0,7% |
-0,7% |
-0,7% |
-0,9% |
-0,7% |
-0,7% |
|
Simple Tandem |
-10,8% |
-9,4% |
-10,5% |
-10,8% |
-9,0% |
-10,5% |
-10,5% |
|
Double Tandem |
-33,9% |
-34,4% |
-34,0% |
-34,5% |
-31,8% |
-34,0% |
-34,0% |
|
Average |
-6,0% |
-4,1% |
-5,5% |
-9,9% |
-9,4% |
-9,8% |
-6,9% |
Source: ICP-ANACOM calculations
Based on estimates of direct and joint unit costs shown earlier, it is estimated that the deviation of total direct and joint costs from revenues resulting for the RIO 2010 tariff scheme will bring about an overall margin of 11% for all interconnection services, as shown in the table below.
|
|
Margins considering direct + joint costs |
||||
|
Traffic (million minutes) |
Estimated cost (thousands of Euros) |
Estimated revenue (thousands of Euros) |
Estimated margin (thousands of Euros) |
Margin (% Estimated cost) |
|
|
Termination |
|
|
|
|
7% |
|
Origination |
|
|
|
|
22% |
|
Total |
|
|
|
|
11% |
[ECI] ICP-ANACOM calculations
In case total costs estimates were considered (direct, joint and common costs – assuming they represent a maximum of 10% of remaining costs), a global margin of approximately 1%, would result from applying maximum prices defined by ICP - ANACOM, as shown on the following table.
|
|
Margins considering total costs (with common unit costs = 10% of total direct and joint costs) |
||||
|
Traffic (million minutes) |
Estimated cost (thousands of Euros) |
Estimated revenue (thousands of Euros) |
Estimated margin (thousands of Euros) |
Margin (% Estimated cost) |
|
|
Termination |
|
|
|
|
-3% |
|
Origination |
|
|
|
|
11% |
|
Total |
|
|
|
|
1% |
[ECI] ICP-ANACOM estimates
Maximum prices thus defined allow the margin downward trend to continue, as has been the case in the past, specifically for each interconnection level (as shown in the table below), margins for direct and joint costs converging to figures close to 10% for all interconnection levels.
|
|
Estimates for 2010 based on RIO 2009 (in force in December 2009) |
Estimates for 2010 based on the 2010 tariff scheme defined by ICP - ANACOM |
||||
|
Termination |
Origination |
Interconnection Total |
Termination |
Origination |
Interconnection Total |
|
|
Local |
7% |
30% |
11,1% |
6% |
29% |
10,4% |
|
Simple Tandem |
20% |
32% |
25,1% |
7% |
18% |
12,0% |
|
Double Tandem |
77% |
68% |
72,2% |
17% |
11% |
13,7% |
Source: ICP-ANACOM calculations
Without prejudice, in average annual terms, figures of average price and margin variations in regards to direct and joint unit costs differ from those shown above, given that the date of entry into force of the tariff scheme defined by ICP - ANACOM is 15.04.2010, thus average prices in force for 2010 result from striking a balance, in terms of days in which each tariff scheme is in force, between the RIO 2009 tariff scheme and the one defined herein by ICP - ANACOM.
Accordingly, if traffic profiles estimated by PTC for 2010 were considered, namely as regards the average call duration, the average variation of revenues resulting from maximum prices in regards to RIO 2009 prices, and the date of entry into force being 15.04.2010, would be as follows. Note that if a three-minute call was considered, the average variation would be -4.9%.
|
|
Termination |
Origination |
Weighted Interconnection Total |
||||
|
Peak |
Off-peak |
Average |
Peak |
Off-peak |
Average |
||
|
Local |
-0,7% |
-0,7% |
-0,7% |
-0,7% |
-0,9% |
-0,7% |
-0,7% |
|
Simple Tandem |
-7,8% |
-6,5% |
-7,5% |
-7,8% |
-6,3% |
-7,6% |
-7,5% |
|
Double Tandem |
-23,9% |
-24,1% |
-23,9% |
-24,3% |
-22,4% |
-23,9% |
-23,9% |
|
Average |
-4,4% |
-3,0% |
-4,0% |
-7,1% |
-6,7% |
-7,1% |
-5,0% |
Source: ICP-ANACOM calculations
Consistently with estimates of direct and joint unit costs shown earlier, it is estimated that the deviation of total direct and joint costs from revenues estimated for 2010, resulting from the two different tariffs in force this year, brings about an overall margin of 13% for all interconnection services, as shown in the table and graph below, which also allows the margin downward trend to continue, as in the past, and to converge to figures close to 10%.
|
|
Margins considering direct + joint costs |
||||
|
Traffic (millions of minutes) |
Estimated cost (thousands of Euros) |
Estimated revenue (thousands of Euros) |
Estimated margin (thousands of Euros) |
Margin (% estimated cost) |
|
|
Termination |
|
|
|
|
9% |
|
Origination |
|
|
|
|
25% |
|
Total |
|
|
|
|
13% |
[ECI] Source: ICP-ANACOM calculations
Graph 5 - Evolution of the deviation of PTC’s total direct and joint costs from revenues
In case total cost estimates were considered (direct, joint and common costs – assuming they represent a maximum of 10% of direct and joint costs), a global margin of approximately 3% would result from applying both tariff schemes during 2010, as shown on the following table.
|
|
Margins considering total costs (with common unit costs = 10% of total direct and joint costs) |
||||
|
Traffic (millions of minutes) |
Estimated cost (thousands of Euros) |
Estimated revenue (thousands of Euros) |
Estimated margin (thousands of Euros) |
Margin (% estimated cost) |
|
|
Termination |
|
|
|
|
-1% |
|
Origination |
|
|
|
|
14% |
|
Total |
|
|
|
|
3% |
[ECI] ICP-ANACOM estimates
Average 2010 prices thus estimated also allow the margin downward trend, in regards to direct and joint costs, to continue, as has been the case in the past, specifically for each interconnection level, as shown in the table below.
|
|
Estimates for 2010 based on RIO 2009 (in force in December 2009) |
Estimates for 2010 based on the 2010 tariff scheme defined by ICP - ANACOM |
||||
|
Termination |
Origination |
Interconnection Total |
Termination |
Origination |
Interconnection Total |
|
|
Local |
7% |
30% |
11,1% |
6% |
29% |
10,4% |
|
Simple Tandem |
20% |
32% |
25,1% |
11% |
22% |
15,7% |
|
Double Tandem |
77% |
68% |
72,2% |
35% |
28% |
31,0% |
Source: ICP-ANACOM calculations
It is thus understood that these maximum prices make it possible to keep the balance between the need to promote incentives to the development of an independent infrastructure and the promotion of an effective competition, maintaining a favourable position regarding current European practices on this matter (as shown on this document’s following section), whilst maintaining common costs at the level referred above to be reasonable.
1 PTC refers that the presented proposal shows a variation of [SCI] [ECI] of average revenues. Without prejudice, estimates performed by ICP - ANACOM, based on traffic profiles also indicated by PTC, do not replicate this figure, and on the contrary, it is estimated that PTC’s proposal represents an increase by [SCI] [ECI] of the average revenue.
2 The State Budget for 2010 provides for an inflation value of 0.8%.
3 Estimated deviations, from direct and joint costs estimated by ICP-ANACOM, of revenues that result from applying the RIO 2009 tariff scheme (in force in December 2009) in 2010, and those resulting from applying average prices for 2010 (which result from applying the RIO 2010 tariff scheme defined by ICP - ANACOM to prevail as from 15.04.2010).
