Goto Section: 51.503 | 51.507 | Table of Contents
FCC 51.505
Revised as of October 1, 2008
Goto Year:2007 |
2009
Sec. 51.505 Forward-looking economic cost.
(a) In general. The forward-looking economic cost of an element equals the
sum of:
(1) The total element long-run incremental cost of the element, as described
in paragraph (b); and
(2) A reasonable allocation of forward-looking common costs, as described in
paragraph (c).
(b) Total element long-run incremental cost. The total element long-run
incremental cost of an element is the forward-looking cost over the long run
of the total quantity of the facilities and functions that are directly
attributable to, or reasonably identifiable as incremental to, such element,
calculated taking as a given the incumbent LEC's provision of other
elements.
(1) Efficient network configuration. The total element long-run incremental
cost of an element should be measured based on the use of the most efficient
telecommunications technology currently available and the lowest cost
network configuration, given the existing location of the incumbent LEC's
wire centers.
(2) Forward-looking cost of capital. The forward-looking cost of capital
shall be used in calculating the total element long-run incremental cost of
an element.
(3) Depreciation rates. The depreciation rates used in calculating
forward-looking economic costs of elements shall be economic depreciation
rates.
(c) Reasonable allocation of forward-looking common costs —(1)
Forward-looking common costs. Forward-looking common costs are economic
costs efficiently incurred in providing a group of elements or services
(which may include all elements or services provided by the incumbent LEC)
that cannot be attributed directly to individual elements or services.
(2) Reasonable allocation. (i) The sum of a reasonable allocation of
forward-looking common costs and the total element long-run incremental cost
of an element shall not exceed the stand-alone costs associated with the
element. In this context, stand-alone costs are the total forward-looking
costs, including corporate costs, that would be incurred to produce a given
element if that element were provided by an efficient firm that produced
nothing but the given element.
(ii) The sum of the allocation of forward-looking common costs for all
elements and services shall equal the total forward-looking common costs,
exclusive of retail costs, attributable to operating the incumbent LEC's
total network, so as to provide all the elements and services offered.
(d) Factors that may not be considered. The following factors shall not be
considered in a calculation of the forward-looking economic cost of an
element:
(1) Embedded costs. Embedded costs are the costs that the incumbent LEC
incurred in the past and that are recorded in the incumbent LEC's books of
accounts;
(2) Retail costs. Retail costs include the costs of marketing, billing,
collection, and other costs associated with offering retail
telecommunications services to subscribers who are not telecommunications
carriers, described in Sec. 51.609;
(3) Opportunity costs. Opportunity costs include the revenues that the
incumbent LEC would have received for the sale of telecommunications
services, in the absence of competition from telecommunications carriers
that purchase elements; and
(4) Revenues to subsidize other services. Revenues to subsidize other
services include revenues associated with elements or telecommunications
service offerings other than the element for which a rate is being
established.
(e) Cost study requirements. An incumbent LEC must prove to the state
commission that the rates for each element it offers do not exceed the
forward-looking economic cost per unit of providing the element, using a
cost study that complies with the methodology set forth in this section and
Sec. 51.511.
(1) A state commission may set a rate outside the proxy ranges or above the
proxy ceilings described in Sec. 51.513 only if that commission has given full
and fair effect to the economic cost based pricing methodology described in
this section and Sec. 51.511 in a state proceeding that meets the requirements
of paragraph (e)(2) of this section.
(2) Any state proceeding conducted pursuant to this section shall provide
notice and an opportunity for comment to affected parties and shall result
in the creation of a written factual record that is sufficient for purposes
of review. The record of any state proceeding in which a state commission
considers a cost study for purposes of establishing rates under this section
shall include any such cost study.
Goto Section: 51.503 | 51.507
Goto Year: 2007 |
2009
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