Next generation wholesale leased circuits cost model

The Taiwanese regulator NCC has taken a decision to adopt a cost-oriented approach for the regulation of next generation wholesale leased line services. To support the NCC in deriving appropriate wholesale prices for these services, Plum was commissioned to build a bottom-up long run incremental cost (LRIC) model.

Plum, working alongside the Telecom Technology Center, carried out extensive consultation and workshops with industry stakeholders to verify the network parameters, input data and cost assumptions used for the model.  The model built by Plum was based on a hypothetical operator using a scorched node approach and assumes modern equivalent assets (MEA) for copper-based lines. A LRIC+ cost standard, which includes all fixed and common costs, is used and the asset base is valued according to Current Cost Accounting (CCA).

Using the results from the cost model, Plum then provided recommendations on the implementation of appropriate price caps for wholesale leased lines over the next price control period. An impact assessment of the proposed regulation was also conducted.