Public & Social Infrastructure · National Fibre / Public Infrastructure
Stress-testing a National Fibre Wholesale Tariff for a Regulator
An illustrative engagement: stress-testing a national open-access fibre tariff against inflation, currency devaluation and regulatory delay, and rebuilding it into a structure that clears under downside stress rather than only at the base case.
Challenge
A government-backed national fibre programme in East Africa has a wholesale tariff on the table that clears cost-of-service at the base case but has never been tested against the three risks that have derailed comparable programmes: local-currency devaluation against dollar-denominated debt, construction-cost inflation running above CPI, and a multi-quarter regulatory-approval overhang on tariff resets.
Solution
We run a joint Monte Carlo across FX paths calibrated to a long window of central-bank data, CPI-plus construction inflation, and a delay distribution built from comparable African tariff-reset decisions. We price the debt-service coverage ratio across scenarios, then re-engineer the tariff around an indexation formula, a delay-adjusted reset clause, and a first-loss concessional tranche sized to the downside shortfall.
Results
The revised tariff clears the required DSCR under downside stress rather than only at the base case. The regulator adopts it with the indexation formula intact, open-access partners sign, and the concessional tranche is closed with a DFI on the sizing the simulation produced.
Future Applications
The same tariff-stress-test methodology is referenced by neighbouring regulators for their own broadband programmes, and the indexation clause is picked up as a template for future infrastructure concessions.
