On September 30, 2008, the Commission launched a public consultation process to establish a price caps pricing regime for certain of the regulated services offered by Cable and Wireless TCI Ltd.

The purpose of the price cap regime is to put an upper limit (or “cap”) on the overall average level of prices for regulated services provided by the company over a specified number of years. It does this by applying a price cap index formula to the prices for a group or groups of regulated services.

Under price caps regulation, the service provider has an incentive to operate as efficiently as possible because the scheme allows the service provider to keep any increase in profits that result from its actual productivity performance being better than its predicted productivity. In this manner, price cap regulation is one type of incentive regulation. This is in contrast to traditional rate-of-return (“ROR”) regulation wherein the service provider is not allowed to keep any profits in excess of the regulatory-determined rate of return (on debt and equity), independent of its productivity performance. Further, in contrast to ROR regulation, under incentive regulation generally and price caps regulation specifically, the service provider is provided with relatively more flexibility to set its prices provided that it complies with the price caps formulae and other restrictions. Price cap regulation has emerged as the most popular form of incentive regulation around the world.

The Commission’s proposed approach to the implementation of the price caps regime is outlined in the consultation paper found on this web site (see “public consultations”), with comments invited from any interested parties on or before November 7, 2008.

see - price cap document