Cost Method Effectiveness Analyses Case Study – Fixed Telecommunication in Albania

Abstract

The fundamental problem in the Telecommunications market, which contributes to slowing down the competition, reclines in the local and central necessary network access, capable to offer regulated services. In order, to overcome to stimulate competition in the telecommunications market effectively, the European Commission intervened with a series of directives forcing the only notable operators who own the network, to provide regulated access. This regulation was then extended to all of the operators with the significant market power. The national regulatory authority is the authority that determines the right access price to encourage downstream competition and at the same time encourage the prospects of new operators to build their own infrastructure. Different methodologies are used to allocate costs for calculating access prices by national regulatory authority in European countries. They use accounting methods, preferring them over what economic theory advises, however these methods are affected by a variety of limitation. The telecommunications sectors in Albania comprise a similar situation that deserves the attention of operators, regulators and academics. This sector is subject to ex ante regulation and access regulation is of public interest. It is therefore of strategic importance to find the right balance between promoting competitions in the short term -allowing new operators to enter in the market -and promoting long-term competitionthrough appropriate incentives to invest in alternative infrastructure. The research is based in qualitative method. There is no information on the costs of operators and their calculations but a qualitative analysis of the collected facts as well as a qualitative analysis of the author based on her background. Primary sources are obtained from documents published by the regulator and operators, legal and sub-legal acts; secondary data are collected from various scientific and professional articles and publications of academics and researchers, also books and regulatory documents of other countries. Electronic and Postal Communications is the Albanian regulator Authority that verifies the compliance of the regulated rates with the method and conditions set for the regulation of the rates. Even though since 2010 the Albanian regulatory has formally accepted the application of the Bottom-up Long-Run Incremental Cost method, it continues to apply a Benchmark model with reference to the rates calculated by the regulators of the Body of European Regulators for Electronic Communications countries. So there has been no evidence of data being used to do a complete research in order to decide whether the results obtained by using the Benchmark model would have been more / less consistent and more / less efficient than those obtained from using the Bottom-up Long-Run Incremental Cost model (cost-oriented model). The author concludes that the regulatory complies with the requirements of the law, but with limited application, it implements the minimum / maximum average rate model of ...