Goto Section: 51.503 | 51.507 | Table of Contents
Revised as of September 1, 2021
Goto Year:2020 |
§ 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
(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
(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
(d) Factors that may not be considered. The following factors shall not
be considered in a calculation of the forward-looking economic cost of
(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
(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 § 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 § 51.511.
(1) A state commission may set a rate outside the proxy ranges or above
the proxy ceilings described in § 51.513 only if that commission has
given full and fair effect to the economic cost based pricing
methodology described in this section and § 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
Goto Section: 51.503 | 51.507
Goto Year: 2020 |
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