ante Margin Squeeze Test

Margin squeeze test:methodology
Contents
1. Executive Summary .......................................................... 4
1.1. Scope .................................................................................................... 4
1.2. Objective ............................................................................................... 4
1.3. Methodology ........................................................................................... 4
1.4. Rationale of the test ................................................................................ 4
1.5. Recommendations ................................................................................... 5
2. Introduction .................................................................... 6
2.1. Objective ............................................................................................... 6
2.2. Methodology used in the report................................................................. 7
2.3. Organisation of the document ................................................................... 7
3. Regulatory background ..................................................... 8
3.1. How NITA applies the test ........................................................................ 8
3.2. What happens if the test is not passed ....................................................... 8
4. Methodology for margin squeeze ...................................... 10
4.1. Introduction .......................................................................................... 10
4.2. Objective and principles .......................................................................... 10
4.3. Tests performed on ex-ante basis ............................................................ 11
4.3.1. Type of tests used for bundled offers ..................................................... 13
Recommended approach ............................................................................... 14
4.4. Main elements of the methodology ........................................................... 15
4.4.1. The reference operator ........................................................................ 15
Recommended approach ............................................................................... 18
4.4.2. Cost standard for assessing price-squeeze .............................................. 19
Recommended approach ............................................................................... 21
4.4.3. Time value of money ........................................................................... 22
Recommended approach ............................................................................... 24
4.4.4. Reasonable Margin .............................................................................. 25
Recommended approach ............................................................................... 27
© SVP ADVISORS P a g e | 2
June 2009