Recovery of Copper Access Costs
Advisory Services
The Situation
Singapore is currently implementing a Next Generation Broadband Network (NGNBN), which makes further investment in the existing copper access network unlikely. This calls into question the continued use of forward-looking long-run incremental cost (FL-LRIC) to set copper access prices because the "build" option of the "build or buy" decision is now obsolete.
NERA's Role
The Info-communications Development Authority of Singapore (the IDA) asked NERA to assess a proposal to recognize the lack of "build or buy" decision by departing from FL-LRIC by crystallizing copper access costs at their 2005 level. NERA produced an assessment, focusing on the economic justifiability and reasonableness of the IDA's proposal. This included analysis of the available data on whether or not there had been under-recovery or over-recovery of copper network asset costs in the past, and analysis of alternative methodologies including the use of historical costs and the attempted calculation of economic depreciation.
The Result
NERA concluded that the deployment of the NGNBN in Singapore rendered FL-LRIC an unsuitable method for setting copper network access prices. We found the IDA's proposal to be both economically justified and reasonable, and superior to the alternatives available.
