The European Commission has opened an in-depth investigation into the proposal of the Slovenian telecoms regulator AKOS to make adjustments to the standard weighted average cost of capital (WACC) formula leading to higher prices of wholesale high-quality broadband access services.

The Commission considers that AKOS’ proposal to adjust the standard formula for calculating the WACC in Slovenia is not compliant with EU telecoms rules.

The WACC is a measure of a company’s rate of return on investment and is an important element used by national telecoms regulators to calculate the prices of wholesale high-quality access services. By adding a so-called “size premium” to the standard calculations used to set the WACC, AKOS increases the WACC to reflect the high risks associated with the small size of the Slovenian regulated company. However, the Commission considers that such risks should already be captured by the WACC formula commonly used by telecoms regulators in the EU.

In the Commission’s view, AKOS has not provided sufficient justification for the inclusion of the “size premium”, which does not correspond to a normal regulatory practice in setting the WACC. This mark-up is likely to have a significant impact on the final value of the WACC and thereby on wholesale prices and on retail prices. In this particular case, the addition of the “size premium” has the considerable effect to increase the final WACC rate by over 50% compared to the WACC obtained excluding that mark-up.

The Commission therefore has serious doubts that the WACC value proposed by AKOS, which includes an unjustified size premium, promotes efficient investment and innovation, whilst ensuring that competition in the market is preserved and that consumers may have the maximum benefit in terms of choice, price, and quality.

The Commission now has three months to discuss the case with AKOS, in close cooperation with BEREC, in order to remove any elements giving rise to serious doubts as to compliance with EU law. The Commission may, at the end of the investigation period, either lift its reservations or issue a Recommendation under Article 7a of the Framework Directive, which will require AKOS to amend or withdraw its draft measure. If AKOS does not amend or withdraw its draft measure accordingly, without valid reasoned justification, the Commission could reserve its right to consider other available legal measures.

The inclusion of a “size premium” in the WACC formula has already been a subject of the Commission’s serious doubts in Slovakia, which have been shared by the Body of European Regulators for Electronic Communications (BEREC) in its Opinion on that case.


The EU’s Regulatory Framework for electronic communications requires National Regulatory Authorities (NRAs) to review national telecoms markets regularly and assess the need for ex-ante regulatory remedies to foster competition. NRAs are required to determine appropriate regulatory measures to be applied to operators with significant market power (SMP) in these markets and notify such measures to the Commission under Article 7 of the Framework Directive. They should also apply price control where justified. Despite this, SMP operators are allowed a reasonable rate of return on their investments, which is typically measured via the WACC. NRAs often use different assumptions to estimate the WACC, a practice which does not always reflect market fundamentals and may distort the Digital Single Market. Following the publication by the Commission of a study on this subject in July 2016, on 14 December 2017 the Commission published a roadmap summarising the milestones of its ongoing initiative aiming at developing an EU methodology for determining the WACC in telecoms regulation.

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