Case study

PCCW

Using system dynamics modelling to convince the regulator to phase out mandatory local loop unbundling

Type II interconnection (mandatory local loop unbundling) arrangements have been in place in the Hong Kong telecom industry for a number of years. OFTA, the regulator, indicated that Type II was a key enabler for investment in the local telecom infrastructure and was critical in ensuring sufficient consumer choice. PCCW, however, believed that OFTA misunderstood the dynamics of the fixed line market in Hong Kong.

The challenge for PCCW is to produce a compelling argument to convince OFTA that Type II interconnection arrangements should be discontinued. To support its argument, PCCW commissioned PA to build a system dynamics model which enabled estimation of the impact of different regulatory scenarios on the a variety of indicators of consumer and community welfare. In the end, PCCW successfully persuaded OFTA to retreat from its position on Type II.