Does the universal service obligation represent an unfair burden for eircom?
Based on this framework, Oxera’s initial analysis concluded that, while the USO might impose additional costs on eircom, the wider benefits for the company could be considered to have offset these in 2009–10 and the USO had not undermined eircom’s profitability. As a result, Oxera concluded that ComReg would not be likely to find an unfair burden. ComReg took Oxera’s conclusions into account in its draft determination, in which it set out its preliminary view that the USO did not represent an unfair burden in 2009–10.
In response, eircom outlined a number of questions around ComReg’s framework for defining an unfair burden, as well as Oxera’s application of that framework, including the scope of the business to be considered in coming to a view on the profitability attributable to the USO, the choice of materiality threshold, and the appropriate weighted average cost of capital against which to test whether eircom suffered a material shortfall in profitability.
Oxera provided an updated report, specifically including an assessment of eircom’s points on the application of the framework. Based on a wide range of considerations and stakeholder input, including Oxera’s analysis, ComReg found that there was not an unfair burden for eircom in 2009–10.