Swisscom applies for basic service provision licence
04 March 2002
Swisscom has applied for the basic service provision licence from 1 January 2003. Basic service provision covers a wide range of telecom services which are offered at standard prices nationwide. The upper price limit for telephone lines laid down last year by the Federal Council and the prescribed calculation model for investment contributions mean that the high deficit incurred by basic service provision looks set to remain. The price regulation, which sets the price well below economic cost, reduces the incentive for investment.
Under the terms of the Telecommunications Act (FMG), Swisscom is responsible for ensuring basic service provision without compensation for uncovered costs from 1998 until the end of 2002. The leading Swiss telecoms provider is now applying for the basic service provision licence from 2003 until 2007. A full-service provider with nationwide coverage and proprietary infrastructure, Swisscom is committed to providing a modern public service. The core element of basic telecom service provision in Switzerland is the fixed-line access, which allows nationwide access under equal terms and conditions to public telephone services and the Internet.
High cost deficit - price regulation will hamper future investments
The upper price limit laid down for political reasons by the Federal Council of CHF 25.25 (incl. VAT) for a standard analog telephone line is not sufficient to cover costs. According to what Swisscom considers to be the correct calculation model, which is based on LRIC (Long Run Incremental Cost), high uncovered costs are incurred by the basic service provider. The law makes provision for the uncovered costs of basic service provision by providing compensation through contributions from the telecom sector to an investment fund. However, since in its ruling the Federal Council has stipulated book values and hence historical costs as the basis for calculation, the result of this is lower calculated costs and therefore smaller contributions to the investment fund.
Since in view of its market leader position Swisscom would make the largest contribution to the fund and setting up and managing such a fund entails considerable administrative costs, Swisscom will not be claiming investment contributions for basic service provision for the period 2003 to 2007. If LRIC had been used as the basis for calculation, Swisscom would have applied to set up a fund. Through its choice of calculation model, the Federal Council has clearly reduced the basic service provider´s incentive to invest.