Development of a techno-economic Bottom-Up LRIC model for Danish FTTH, coaxial and copper networks

Project executed on behalf of Danish Business Authority (DBA)

Project Objective

Since 2003, the Danish Business Authority (formerly, National IT and Telecom Agency) has determined maximum wholesale prices annually for several fixed-network services, by means of a bottom-up LRIC (Long Run Incremental Cost) model. In 2019, this model required an update to cover developments in the Danish market, including the rise of several regional FTTH providers, and the necessity to balance fair competition and investment.

To this end, Axon supported the DBA in the development of a LRIC model for fixed networks, including copper, fibre and coaxial networks, which can be used to assess cost levels for wholesale access services.

Project Description

The project involved the following, among other, activities:

  • Definition of DBA’s costing methodology, presented in a Model Reference Paper (MRP). This MRP was prepared through a public consultation process with the industry.
  • Data request process with stakeholders, involving all fixed network operators in the country.
  • Geographical modelling of fixed access networks in Denmark at building level using a big data approach based in R.
  • Development of a fixed Bottom-Up LRIC model for copper, fibre and coaxial networks, mirroring the operations of different service providers in Denmark, producing results for all wholesale regulated services (including recurring and non-recurring components). The model underwent three public consultation rounds with the industry.

A sample of the different materials prepared in the context of this project can be found in the following link.

Figure 1: Illustration of networks included in the model

Key Takeaways

DBA was provided with clear cost references for the regulated wholesale services in Denmark, together with a flexible tool that allowed it to evaluate the impact of different scenarios and/or hypothesis on cost levels. These references are expected to assist DBA in ensuring cost-orientation of the wholesale charges and safeguarding competition without stifling investment incentives for operators.