Estimating the Long Run Incremental Cost of PSTN Access

Fri Jan 01 15:24:38 EST 1999
By Nigel Attenborough

The primary purpose of the report is to estimate the costs an efficient firm will incur in providing PSTN originating and terminating access services in Australia. NERA has developed a model to estimate the total service long run incremental costs of providing these services. This approach is consistent with the Commission's Access Pricing Principles Telecommunications -- a guide.

The cost model is based on NERA's understanding of the network design and architecture under Telstra's Future Mode of Operations. By necessity cost models are based on a range of assumptions concerning efficient network design, equipment costs, depreciation of capital, cost sharing (for example between leased lines and the PSTN) and on.

NERA and the ACCC are of the view that industry comment and assistance with the model is very important. To date this has occurred through an industry working group. NERA and the ACCC believe that providing the opportunity for parties to scrutinise the report by releasing it in draft form is an important part of the development of the model.

It is highly likely that assumptions and parameters in the model will be altered by NERA resulting from this process. It is therefore not possible to draw inferences from the draft results as presented.

NERA and the ACCC seek comments on all aspects of the report. Throughout the report NERA and the ACCC have raised issues and noted assumptions which can potentially have important effects on the results of the model. Given that in some cases there is debate about these assumptions, NERA and the ACCC particularly seek comments on the issues raised.

NERA and the ACCC ask parties to, where possible, provide supporting data to substantiate their comments. For example, if a party is of the view that a particular aspect of the network design is not consistent with 'best practice', it would assist NERA and the ACCC if the party could provide supporting evidence which suggests what is 'best practice'. This will enable appropriate changes to the model to be made.