Costs and Tariffs

Cost Modelling

The cost orientation of wholesale tariffs is an important keystone of a competitive telecommunications market and, in an increasing number of countries, an explicit regulatory requirement. Understanding the detailed cost structures of a telecommunications network can prove a challenge, especially in newly liberalised markets where there has been little or no prior requirement for the detailed cost analysis of individual service elements.

Specialised cost models offer a powerful tool in building the necessary understanding of cost bases and dynamics, of calculating the likely costs of service provision, and in providing the evidence of cost orientation necessary to obtain regulatory approval for wholesale tariffs. InterConnect Communications has a wealth of experience in the design, provision and implementation of cost modelling techniques for both network operator and regulators spanning:

Developing policies and guidelines for accounting separation and reviewing the separated accounts of SMP operators;
Developing appropriate cost accounting methodologies (e.g. Fully Allocated Costing, Current Cost Accounting, varieties of Long Run Incremental Costing) for calculating interconnection costs and setting interconnection charges;
Developing historic or forward-looking cost allocation models to calculate the costs of interconnection services in both fixed and mobile networks;
Determining the most appropriate method to move from existing rates to cost-based rates e.g. glide path, step reduction.

Our experts have participated in projects as varied as:

Developing cost models for a North African regulator to help provide a better understanding of the incumbent operator’s costs in both fixed and mobile networks and to provide a basis for dispute resolution;
Developing a forward looking LRIC model for the SMP mobile operator in a Southern Asian country to assist in negotiations with the regulator over the level of call termination charges;
Reviewing the costing principles and data within a Gulf States incumbent operator’s existing cost model to identify suitable ways of calculating costs for interconnection services;
Undertaking an analysis of a European incumbent’s costs of providing LLU services, supported by the development of a bottom-up cost model;
Supporting the operator community of an Arab States country in the development of costing models, and reviewing these to ensure compliance with local regulatory requirements and internationally-recognised costing and accounting separation principles;
Developing a charge model for cost-based interconnection rates in a West African country, including undertaking a review of existing policy and legislation, developing interim interconnection rates, recommending a suitable costing methodology and establishing relevant costs as borne by existing operators.

Key Service Areas:

Costs & Tariffs

25 Apr 2008InterConnect News

Interconnection Master Class

The first Interconnection Master Class of 2008 will take place on 19 - 23 May 2008.

More Information?

For more information about InterConnect's costing services, please contact Eric Tyson by phone on +44 (0) 1291 638400.