26 Del. Admin. Code § 4005-7.0

Current through Register Vol. 28, No. 7, January 1, 2025

Section 4005-7.0 - Incremental Cost Price Floor and Cross Subsidization Prohibitions

7.1 Definition of Incremental Costs to be used to Determine a Service Price Floor. Calculations of incremental costs using the methodology described in this rule shall be used by the telecommunications service provider.

7.1.1 The incremental costs used to determine a price floor for a service and to insure the absence of service cross subsidization as required by Section 710 of the Act will be Total Service Long Run Incremental Costs ("TSLRIC"), defined as the difference in the forward looking total costs of the service provider less the forward looking total costs of the service provider without the service or services at issue.

7.1.2 TSLRIC for determination of product or service price floors shall be performed on the basis of the individual service and shall include the forward looking volume sensitive costs plus the product or service specific fixed costs. These forward looking volume sensitive costs and the product or service specific fixed costs shall be known as direct costs.

7.2 Additional Use of Incremental Costs in the Calculation of a Price Floor for Discretionary and Competitive Services. Incremental costs using the methodology described herein shall be used by the telecommunications service provider to meet the requirements of Sections 708(a)(2) and 709(2) of the TTIA. To meet these requirements a telecommunications service provider shall demonstrate:

7.2.1 That the revenue resulting from the proposed rate for a Discretionary Service equals or exceeds the revenue resulting from the sum of the rate(s) for the Basic Services which another telecommunications service provider typically uses in its provision, plus any additional incremental costs incurred by the electing telecommunications service provider and not associated with the rate(s) for the Basic Services that are used to provide the Discretionary Service. In determining when another telecommunications service provider "typically uses" a Basic Service in its provision of a competing Discretionary Service, the Commission shall consider the current practices of other providers, whether technically feasible, economically reasonable alternatives exist for the underlying Basic Services, and such other factors as the Commission deems appropriate.

7.2.2 That the revenue resulting from the proposed rate for a Competitive Service equals or exceeds the revenue resulting from the rate(s) for Basic and Discretionary Services which another telecommunications service provider typically uses in its provision, plus any additional incremental costs incurred by the electing telecommunications service provider and not associated with the rate(s) for such Basic and Discretionary Services that are used to provide the Competitive Service. In determining when another telecommunications service provider "typically uses" a Basic or Discretionary Service in its provision of a competing Competitive Service, the Commission shall consider the current practices of other providers, whether technically feasible, economically reasonable alternatives exist for the underlying Basic and Discretionary Services and such other factors as the Commission deems appropriate.

7.2.3 Individual customer contracts that include Discretionary or Competitive Services with underlying Basic or Discretionary Services that competitors typically use to compete with BA-Del must satisfy the requirements of Rules 7.2.1 and 7.2.2, as applied to the complete contract price.

7.3 Total Service Long Run Incremental Cost Study Methodology.

7.3.1 General Methodology.

The telecommunications service provider will perform TSLRIC studies in compliance with the Act using the following:

7.3.1.1 Long Run.

Long run shall be defined to mean a period of time over which all optimal capacity expansions or contractions can be accomplished.

7.3.1.2 Forward-Looking.

Forward looking shall be defined to mean that the telecommunications service provider will include in its incremental cost studies the technology, or mix of technologies, that would be chosen in the long run as the most economically efficient choice for replacement of existing plant, equipment, or other investments.

7.3.1.3 Network Topology.

Existing network topology will be assumed to exist over the long run, unless the telecommunications service provider has documented plans to change such topology. If a planned, rather than actual, network topology is used, it shall be used for all cost studies performed in compliance with this section. The technologies that provide the most efficient means of supplying the necessary capacity, given this topology, should be assumed.

7.3.1.4 Currently Available Technologies.

The telecommunications service provider's economical choice of forward looking technologies may be restricted to those technologies available in the marketplace and for which vendor prices can be obtained at the time the study is performed.

7.3.1.5 Increment to be Studied.

For purposes of all studies performed in compliance with this Rule, the relevant increment of output shall be the level of output necessary to satisfy the total current or forecasted demand of the service being studied.

7.3.1.6 Planning Period.

The planning horizon for service offerings shall be no less than 5 years and no greater than 8 years, unless otherwise authorized by the Commission.

7.3.1.7 Assumptions.

The telecommunications service provider shall fully document all assumptions used to compute the proposed TSLRIC prices.

7.3.2 Administrative Requirements.

The telecommunications service provider shall produce available documentation for all incremental cost studies performed in compliance with this Rule. Such documentation shall be substantively equivalent to that provided by Bell Atlantic-Delaware, Inc. in connection with incremental cost studies at the time of the adoption of these rules. The telecommunications service provider shall provide a copy of all documentation produced to the Division of the Public Advocate.

7.4 The Application of the TSLRIC Price Floor and Imputation Standard.

7.4.1 The revenue associated with a particular Basic service offering must be sufficient to meet its TSLRIC price floor, unless otherwise authorized by the Commission.

7.4.2 The revenue associated with a particular Discretionary service offering must be sufficient to meet its TSLRIC price floor and imputation standard.

7.4.3 The revenue associated with a particular Competitive service offering must be sufficient to meet its TSLRIC price floor and imputation standard.

7.4.4 The revenue associated with an individual customer contract must be sufficient to meet the contract's TSLRIC price floor and applicable imputation standard.

26 Del. Admin. Code § 4005-7.0

2 DE Reg. 280 (08/01/98)
23 DE Reg. 1048 (6/1/2020) (Final)