A Model for Calculating Interconnection Costs in Telecommunications

The liberalization of the telecommunications markets in Sub-Saharan Africa led to increased competition on the provision and pricing of communication services. But, due to the lack of appropriate regulatory tools, newly established regulators are poorly equipped to arbitrate increasing interconnection disputes between competing operators. This guidebook and its associated CD-ROM, including the cost model, were prepared to provide Sub-Saharan Africa regulators and operators with a sound regulatory tool allowing the determination of accurate interconnection costs, thus facilitating the settlement of lengthy and costly interconnection disputes between fixed and mobile operators. The cost model belongs to the family of 'Bottom-Up' models, which calculate interconnection cost incurred by an efficient operator using the Long Run Incremental Cost (LRIC) methodology. The proposed cost model takes into account most features characterizing the development stage of telecommunications networks in Sub-Saharan Africa (small size of fixed network, importance of rural telephony, excessive reliance on microwave technology, explosive demand for mobile service, and weak regulatory capacity). 'A Model for Calculating Interconnection Costs in Telecommunications' offers telecom regulators and operators not only a decision support tool but also a stimulant to enhance an understanding of the logic of regulating a sector open to competition.