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Recovering Local Distribution Costs

Fortnightly Magazine - November 15 1995

use the local distribution network or system. Instead, a true common cost is one that is incurred regarless of the volume of each service or even the number of services provided; it is a cost common to the production of multiple services.Access Drive CostsEconomics literature provides clear guidance on the proper treatment of the costs incurred to provide access to a network or system for telecommunications subscribers. Two important points can be derived:

. These costs are generally not sensitive to the volume of use of the network or system to which they provide access. They are sensitive to the number of customers served and the nature of the franchise obligation to provide service.

. Second, these costs are not common to the production to the production of multiple services provided by the local carrier. Rather, they are directly attributable to the services that cause them; the "access" characteristic of private line, special access, Centrex, and basic local exchange service.

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