Residential tariff of the fixed telephone service (2010)

Decision on the residential tariff proposal for the telephone service at a fixed location, for 2010, within the scope of the universal service, as presented by PTC on 30.10.2009

1. PT Comunicações, SA (PTC) submitted a proposal to ICP-ANACOM on 30.10.2009 to amend the tariff of the Universal Service (US) for both the main tariff and the alternative tariff, to take effect from 01.01.2010.

2. With respect to the main tariff, the proposal made by PTC consists of: (i) the extension of free traffic to the daytime period of weekends; and (ii) the merger of the Local and National pricing categories. The following table summarizes the fixed telephone service tariffs proposed by PTC.

3. With respect to the alternative tariff, the proposal made by PTC consists of: (i) increasing the discount on the monthly line rental charge, compared to the monthly charge under the main tariff, of 70 cents (including VAT, 58 cents excluding VAT) to 80 cents (including VAT, 66.67 cents excluding VAT), (ii) increasing the initial time credit for national calls, from 30 to 60 seconds, and (iii) making a 10% reduction in the price per minute (after the initial time credit) charged for national calls. The following table summarizes the fixed telephone service tariffs proposed by PTC.

4. By determination of 14.12.2004¹, approval was given to the obligations in the retail narrow band markets applicable to the companies of Grupo PT notified as having significant market power (SMP) in each of these markets, in particular: (i) to ensure transparency through the publication of tariffs, levels of quality of service and other conditions of the offer; (ii) to refrain from showing undue preference to specific end-users; (iii) cost orientation of prices, (iv) to maintain an analytical accounting system; (v) to maintain separate accounts; and (vi) to maintain affordability.

5. To ensure affordability and cost orientation, a specific price-cap has been adopted for the residential market as a way of progressively achieving cost orientation of prices and of transferring efficiency gains to the customer.

6. Pursuant to the determination, it was noted that, until ICP-ANACOM establishes modifications to the specific functioning of the obligation of price control, the price-cap provided for in the Universal Service Price Convention² regarding the subscriber mode, of CPI -2.75% would continue to apply to services previously provided for in the same document, that is, the installation of an analogue network line, analogue network line rental and telephone communications in the country.

7. With respect to the value of CPI used to calculate the price-cap, given that the State Budget for 2010 has not yet been published, PTC intends to use the latest forecast of the Bank of Portugal, issued on 15.07.2009, (1.3%) plus 0.2 percentage points to reflect the possibility of economic recovery in 2010. Given the information available (data published by the Bank of Portugal, the European Commission and the International Monetary Fund), it is reasonable at this time to accept the value for CPI presented by PTC for the purposes of setting the price-cap (1.5%). Therefore, the value of the price-cap applicable for 2010, resulting from the formula CPI-2.75%, is set at -1.25%.

8. Having examined the proposal submitted by PTC, it was concluded that:

a. PTC shall submit its proposed amendments to the tariffs of the Universal Service so as to allow timely fulfilment of the procedures set out in the legal framework, to ensure entry into force by the planned dates, which is not the case in the present situation, given the need to notify consumers in advance where there is an increase in prices, as well as the need to obtain the opinion of the Advisory Council of ICP-ANACOM;

b. The weighted variation of the prices resulting from the proposed main tariff of the fixed telephone service (applicable by default), presented by PTC to take effect from 01.01.2010, is compatible with the applicable price-cap, resulting in an average annual change in the basket of -1.26%;

c. For the alternative tariff (applicable on an optional basis upon the request of customers), presented by PTC to take effect from 01/01/10, the variation of the prices results in -1.25%, which is also compatible with the applicable price-cap;

d. The reduction in the number of pricing categories associated with the base tariff represents a major simplification of the tariff structure and comes in a context of technological evolution where the distance of calls will tend to have less influence on costs, whereby PTC can be deemed as being in line with current market practice;

e. Although, with respect to the main tariff, the merger of the Local and National price categories represents a single one-off overall increase in the price of local calls made on working days, given the extension of free traffic to the daytime period of weekends, PTC's proposal actually constitutes a reduction of 0.28% in the average price of local calls. Nevertheless, the existence of the alternative tariff scheme, which maintains the current tariff structure and does not entail any increase in the price of calls, may provide a suitable alternative which ensures continuity with respect to the main tariff which has been in force;

f. Given the average retail prices resulting from each of the tariff options proposed by PTC, it is concluded that the revenue received by PTC on the basis of the proposed tariffs (and taking into consideration the traffic patterns reported by PTC) are sufficient to cover the costs estimated for 2010 (considering overall traffic).

9. Accordingly, under the powers provided for in points b), d), f) and h) of paragraph 1 of article 6 of the Statutes in annex to Decree-Law No 309/2001 of 7 December and in accordance with paragraph 3 of article 86 of paragraph 1 of article 93 of Law No 5/2004 of 10 February and pursuant to the regulatory objectives set out in points a) and c) of paragraph 1, points a) and b) of paragraph 2 and point a) of paragraph 4, all of Article 5 of the same Law, the Management Board of ANACOM determines:

a. To submit the proposal presented by PTC to the opinion of the Advisory Council of ICP-ANACOM, pursuant to point c) of article 37 of the Statutes of this Authority;

b. Not to oppose the entry into force on 01/01/10 of the residential tariff proposed for the telephone service at a fixed location for 2010 within the scope of the Universal Service, as presented by PTC on 30.10.2009, whereas PTC is also required to comply with the obligations of transparency to which it is subject;

c. In the event that, when new data becomes available (related in particular to the value of CPI published in the State Budget and the establishment of the basket in 2009), it is deemed that the price-cap will not be fulfilled on the basis of the present proposal, PTC shall implement, in good time, a further reduction to the base tariff;

d. That, given the alteration to the pricing structure associated with the main tariff, and given that the current structure of the alternative tariff scheme is maintained, PTC shall publicise in an appropriate manner (on its website and in correspondence that is sent to customers to inform them of changes to the base tariff) the existence of and the specific conditions associated with both tariff options (main and alternate tariff), which publicity must be carried out under the same terms and with the same relevance given to both tariffs.

10. Furthermore, ICP-ANACOM recommends that PTC send its proposals to amend the universal service tariffs sufficiently in advance so that the procedural requirements set out in the legal framework can be carried with a schedule consistent with the intentions of the company with respect to the targeted date of the entry into force of the presented tariffs.