Cost Models for Bitstream Access Service

The European Regulatory Framework requires National Regulatory Authorities (NRAs) to conduct market analysis for a predefined set of markets that used to be subject to ex ante regulation (due to Significant Market Power (SMP) of the incumbent network operator), or that are expected to be associated with SMP. The service under consideration in this article—Bitstream Access— is considered in Market 12 (see ERG, 2003). Depending on the results of the market analysis, NRAs can impose remedies on the SMP operator, like cost accounting, long run incremental cost (LRIC), based ex ante regulation, or other requirements. Many European NRAs foresee price control of bitstream access service (BAS). This contribution provides a cost model for BAS, which takes into account the required bandwidth of a service and QoS parameters, mainly the average delay over the corresponding bitstream access configuration. The contribution shows in the second section the basic ideas of the FL-LRIC model and especially the so-called Total Element Long Run Increment Cost model (TELRIC) and the basic aspects of BAS network architecture. The third section deduces the proper TELRIC model for BAS under QoS differentiation, mainly considering delay limits. The section introduces two applications, one based on assuring QoS under the overengineering concept, and the other on traffic separation over different queues.