The Situation

The Infocomm Development Authority (IDA) of Singapore was seeking to regulate retail prices for fixed access and call charges, in order to bring SingTel's prices better into line with costs. The Authority believed that prices were currently significantly above costs, and would therefore need to be reduced by way of a price cap over a set regulatory period.

NERA's Role

NERA undertook three main studies in order to formulate the optimum regulatory decision for the IDA. Firstly, we examined how the price cap should be formulated, looking at the appropriate regulatory period, shape of the glide path, and the services the price cap should cover. Secondly, we undertook a robust efficiency study to estimate the size of cost savings which SingTel could be expected to make during the regulatory period. Finally, we constructed a detailed price cap model, forecasting costs and revenues for a three-year period using data on demand trends and market shares collected from all interested parties in Singapore.

The Result

NERA's model and report formed the basis for IDA's consultation and eventual decision on implementing a price cap for retail fixed-line services in Singapore.