ComCom reduces unbundling price to CHF 18.18
Bern, 24.09.2008 - The Federal Communications Commission (ComCom) has set the price for unbundling the local loop for the first time. For the current year it will be reduced to CHF 18.18. Swisscom had initially demanded a price of CHF 31.00 from its competitors; it is currently charging CHF 23.50. ComCom is also reducing interconnection prices again by 25 to 30 percent for 2007 and 2008.
Large reduction in unbundling prices
For 2007 and 2008, Swisscom initially charged a monthly rental of CHF 31.00 for access to the local loop. In March 2008 Swisscom voluntarily reduced unbundling prices – with retroactive effect from 1 January 2008 – to CHF 23.50. Within the framework of several procedures based on applications from Swisscom's competitors, ComCom has examined this price by applying the legal guidelines and has come to the conclusion that it is excessive. ComCom is therefore reducing the monthly price for unbundling of a house connection to CHF 18.18 for the year 2008 and CHF 16.92 for 2007. This decision is based on extensive cost analyses and pricing calculations performed by the Federal Office of Communications (OFCOM).
Prices for co-location also lowered
To enable Swisscom's competitors to unbundle subscriber lines, i.e. to operate them themselves, they must be able to obtain access to Swisscom's local exchanges and install their equipment in them (this is known as "co-location"). Here too, ComCom has reduced prices considerably. In particular, the one-off prices for Swisscom's clarifications and implementation services are being reduced by 55 to 85%.
Interconnection prices lower than the EU average
Last year, ComCom had already significantly reduced these prices for the years 2004-2006. It then had to examine interconnection prices for 2007 and 2008 as well. In doing so, it became apparent in particular that the prices for the services most in demand, which are billed on the basis of usage ("usage charges"), are also excessive. ComCom is reducing most interconnection prices by 25 to 30 percent compared with the prices published by Swisscom. This means that interconnection prices in Switzerland will henceforth be among the lowest in Europe.
Reasons for the price reductions
The cost analysis in the unbundling procedures has shown that Swisscom had assumed too high capital charges, some too foreshortened amortisation periods and inflated construction and operating costs. In relation to interconnection prices, ComCom had already implemented a large part of the adjustments which have now been reaffirmed in its decision on the similar procedures by Colt and Verizon on 14.12.2007. Thus in the interconnection procedures, Swisscom again assumed in some cases to short service lifetimes and excessive operating costs. Furthermore, the overhead costs and the weighted average costs of capital were much too high. ComCom has made the corrections in accordance with the legal guidelines and this has resulted in the price reductions which have been decreed.
Improved legal and investment security
The effects of unbundling, which has been possible since 1 April 2007, are becoming apparent: there are already many new offerings based on unbundling on the market, for both business and residential customers. ComCom's fixing of the unbundling price improves legal security in the market. Businesses can now better plan their investments in full knowledge of the price level and general conditions for unbundling. The lower unbundling prices also lower the barriers to entry into the market and this will provide an additional stimulus to competition. Unbundling enables providers to define their offerings freely and to achieve an exclusive relationship with customers. Customers in turn benefit from a wider range of products at low prices.
Third-party effect thanks to ban on discrimination
The decreed prices apply to all providers, i.e. even to those who did not complain (the so-called third-party effect). This entitlement exists in law on the basis of the ban on discrimination and does not need to be agreed contractually. The prices will enter into force on expiry of the appeal period of 30 days (from receipt of the decision in writing), in so far as none of the parties to the procedure lodges an appeal with the Federal Administrative Court.
The price calculation methodology ("LRIC")
Article 11 of the Telecommunications Act (TCA) states that a market-dominant provider must among other things provide fully unbundled access to the local loop (including co-location) and interconnection at cost-based prices. These prices are based on the costs which an efficient provider would incur if it had to provide access to the infrastructure itself under competitive conditions. The legal provisions do not therefore allow historic costs to be used when valuing the network. For the price calculations, the tried-and-tested "LRIC" method (LRIC – Long Run Incremental Cost) is used, as stipulated in the Telecommunication Services Ordinance (art. 54) (cf. the attached media background material for further information).
The parties will receive the decisions, with grounds, in the coming weeks; the decisions will also be published on the ComCom website.
Address for enquiries
Marc Furrer, ComCom President, +41 (0)31 323 52 90
Publisher
Federal Communications Commission ComCom
http://www.comcom.admin.ch/
