Replicability Assessment in the Broadcasting Sector

Project executed on behalf of a major European broadcasting company

Project Objective

One of the main infrastructure providers for wireless telecommunications in Europe sought to update the internal methodological framework used for the replicability assessment of its commercial offers in the broadcasting market. The aim was to ensure full alignment with the current legal and regulatory framework, and international best practice.

Axon was commissioned to:

  • Carry out a thorough review of the ex-ante methodology used to analyse the replicability (margin squeeze) of the client’s commercial tariffs in the broadcasting market, and
  • Develop quantitative replicability tools and models

Project Description

Axon carried out an exhaustive analysis of the methodology used to assess the replicability of the client’s tariffs in the framework of its launch of commercial offers.

Figure 1: Tariff replicability assessment

Our assessment covered the following parameters of relevance:

  • Boundaries of the services and markets that are subject to replicability analysis
  • Reference operator: Equally Efficient Operator (EEO), Reasonably Efficient Operator (REO), Adjusted Equally Efficient Operator (AEEO)
  • Cost standards: Fully Distributed Costs (FDC), Long Run Incremental Costs (LRIC)
  • Determination of relevant revenues and costs
  • Capital related costs: amortisation and cost of capital

 

Axon made several recommendations in relation to these parameters in order to adapt the new methodological framework to the current realities of the business and best international practice, such as the Recommendation of the European Commission (2013/466/EU) on consistent non-discrimination obligations and costing methodologies.

Additionally, Axon provided support with margin squeeze models and tools for the replicability of tariffs, based on the recommendations made on to the new methodological framework.

Key Takeaways

The recommendations proposed by Axon were implemented in the client’s internal methodological framework. This allowed our client to test the replicability of its commercial offers before market launch, in order to ensure full alignment with the relevant legal and regulatory regime, and avoid potential future regulatory actions and challenges by competitors.