Fibre pricing and margin squeeze testing in Malta

Over the past few years Plum has undertaken a series of projects for GO, Malta’s leading provider of communications services, to help it develop its investment strategy for the deployment of high-speed broadband infrastructure. The work was carried out in the following stages.

Business case for fibre investment

Plum carried out an assessment of the business case for fibre investment, and provided support in responding to a government request for information and for proposals to build an open access national fibre network. The analysis included qualitative and quantitative modelling of the commercial viability of FTTH deployment, presentations to GO’s executive board, and discussions with the Chairman of the regulatory authority, the MCA.

This is a consultancy firm that provides value for money.

-GO, 2015

Options for regulating next generation networks

Following a broadband market review by the MCA, Plum provided GO with analysis of options for regulating an FTTH network in Malta given competitive conditions there. Plum considered two options – costs plus and retail minus regulation – and evaluated them from a public interest perspective and for compliance with emerging European Commission guidance. Plum presented its analysis to the MCA and persuaded it that the retail minus option, which allows GO wholesale pricing flexibility, was in the public interest. Plum successfully argued that requirements for open access plus a margin squeeze test provided sufficient regulatory constraints – given the level of platform competition in Malta.
Margin squeeze test

Having persuaded the MCA to allow GO wholesale pricing flexibility for its fibre-to-the-home (FTTH) rollout plan, Plum specified the principles of the margin squeeze test to which GO should be subjected. Following extensive discussions, the MCA accepted Plum’s proposals and GO gave authorisation for investment in FTTH to proceed.

Evaluating the margin squeeze test

Plum then provided support to GO in dealing with the Maltese regulator’s proposed margin squeeze test. Here Plum:

  • Developed a prototype margin squeeze test to help inform GO’s thinking
  • Carried out a comprehensive evaluation of the model proposed by the MCA for use in the margin squeeze.

 

What we think distinguishes Plum Consulting is that it has the scale and knowledge to engage in complex regulatory work without being, or behaving like, a regulatory supermarket consultancy. From our experience we note that certain supermarket consultancies tend to try to apply solutions pro forma solutions found in their previous work elsewhere to our specific situation, sometimes leading to less-than-ideal outcomes. Plum Consulting endeavours to understand in-depth the specific situation they are involved in and provide specifically-targeted advice.

-GO, 2015