From Green Whiskers

Valuation and costing issues in the ACCC's guidelines for telecommunications access pricing

Posted in: Reports / Papers

By Henry Ergas
January 13, 2000

Normatively, regulation can be viewed as an implicit or explicit contract between the regulatory authority, consumers and the regulated supplier(s) The essence of this contract is that the authority, acting as a consumer agent, commits to setting prices on a basis which recoups the long-run costs of efficient supply, where efficient supply is defined with reference to that which would prevail were the market at issue contestable. This, in turn, implies that the supplier derives a stream of residual income dependent on the costs it incurs relative to the prices which would be established under contestability... more. (pdf, size 74kb)