Full report prepared for Dutch broadband operators Tele2 and T-Mobile on a specifically ex ante margin squeeze test.
Margin squeeze has long been recognised a means by which vertically integrated firms can harm competition in retail markets. Ex post margin squeeze tests are based on an assumption that the competitors should "Equally Efficient" as the the vertically integrated firm. However, in regulated sectors, where part of the objective of regulation is to encourage efficient market entry such an assumption may be unworkable. This report, originally prepared in 2011, takes the suggestion of the European Commission for a "Reasonably Efficient Operator" test and explores how such a test can be instituted in practice. The report is particularly pertinent today as the European Commission considers the phasing out of ex ante regulation.