Pre-selection activation price

PTC proposes an increase of the activation price of operator pre-selection from €3.18 to €6.30, which corresponds to an increase by 98.1%. According to this operator, the price proposed is orientated to a cost of [SCI]  [ECI], which is estimated to increase in 2010 to a figure close to that achieved in the 1st half of 2009 ([SCI]  [ECI]).

It should be noted that PTC’s proposal is based on the forecast continuation of decreases of the pre-selection volumes and on the increase of staff costs, on account of actuarial gains and losses and the increase of commercial support outsourcing costs, which would lead to an increase of unit costs for this service. This operator acknowledges the uncertainty associated to cost estimates for this service, and accordingly informs that it will analyse its costs in detail, especially as far as 2009 is concerned.

PTC stresses also that it is important to adjust the pre-selection activation price to costs, in order to reverse the trend recorded in the last few years of overall negative results for this service.

It is also important to observe the evolution of the costs that have been presented in the AAS and estimates produced by ICP-ANACOM:

Figures in Euro.
(1) Estimates by ICP-ANACOM based on the 2008 AAS, assuming a 5%annual reduction of direct and joint unit costs and that common costs represent 10% at the most of total direct and joint unit costs.
[ECI]

As the table above clearly shows, there is a sharp increase of costs associated to pre-selection, in particular direct costs, which represent around 80% of total unit costs, and increased by 120% between 2005 and 2008.

The significant decreases that have occurred on pre-selection activation volumes since 2006 should also be mentioned, as the following graph shows:

Graph 14 - Evolution of pre-selection activation volumes [SCI]

(Click to enlarge image)

Given the considerable reduction in the amount of pre-selection activations over the last few years, and its impact on unit costs of the pre-selection activation service, it is not considered appropriate for ICP-ANACOM to produce estimates for 2010 based on the AAS values for 2008 and using the usual methodology (5% annual reduction on direct and joint costs, concerning efficiency gains and considering a 10% mark up on the estimated value, which is considered sufficient to face a reasonable level of common costs).

It should also be mentioned that the significant decreases that have occurred on pre-selection activation volumes since 2006, together with the uncertainty that accompanies the market’s development, recommend some prudence regarding the decision to be made concerning the price to be established. Therefore the options that are less disruptive for current market practices should be favoured.

Regarding European practices, the following table presents information collected at the end of 2009 ¹ concerning the pre-selection activation price for an analogue line.

Graph 15 – Current European practices regarding the pre-selection activation price

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In light of the above, and namely considering: (i) the important variations of unit costs presented in AAS; (ii) the clear decrease trend of volumes of pre-selection activation; (iii) the above-mentioned fact that a cycle of market analyses is now reaching an end, and (iv) the need to give the market some predictability regarding the conditions in force; ICP-ANACOM considers it should limit the increase of the RIO 2010 price by 20%, thus establishing a maximum pre-selection activation price of €3.82, which corresponds to the price of the 7th EU-15 country (see graph above).