Ex-Ante Margin Squeeze Tests in the Telecommunications Industry: What Is a Reasonably Efficient Operator?

Posted by D. Daniel Sokol

Germain Gaudin, TELECOM ParisTech - Department of Economics and Social Sciences and Claudia Saavedra, Regulatory Affairs - Orange ask Ex-Ante Margin Squeeze Tests in the Telecommunications Industry: What Is a Reasonably Efficient Operator?

ABSTRACT: We study the implementation of ‘reasonably efficient operator’ margin squeeze tests by National Regulatory Authorities in European telecommunications markets. We provide a theoretical framework in which we show how regulatory authorities deal with the asymmetries between the entrants and the incumbent by adjusting the ‘equally efficient operator’ margin squeeze test used in competition policy. Using this framework, we build a benchmark of implementation choices by inspecting authorities’ guidelines, market analyses and decisions. We find that some implementation choices are very similar across the authorities’ decisions, whereas some others are dealt with quite heterogeneously.