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October, 2012

WCB Cost Model Virtual Workshop 2012 - Determining the Annualized Cost of Capital Investments

October 1, 2012

Please provide comments to the issue below as part of the 2012 WCB cost model virtual workshop for inclusion in the record. Comments are moderated for conformity to the workshop’s guidelines.

Background

Hybrid Cost Proxy Model: The HCPM adopts a straight line equal-life-group method of depreciation, using Gomerpertz-Makeham curves. These standard curves describe generalized mortality patterns and are used to determine the probable frequency of plant mortality. To estimate depreciation expenses, the HCPM uses the projected lives and future net salvage percentages for the asset accounts in Part 32 of the Commission's rules. The HCPM also selects a particular set of Annual Charge Factors (ACFs) based on a methodology that is user adjustable and reflects the sum for the three inputs: depreciation, cost of capital, and maintenance costs.

CQBAT: The CQBAT model uses the same approach as the HCPM. It adopts a straight-line equal-life-group method with expected mortality curves. The lifetimes are also set by the HCPM's values. The Bureau notes that the CQBAT model as submitted in the record does not make public the calculations used to set particular input values in the event a lifetime changes.

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WCB Cost Model Virtual Workshop 2012 - Capturing Variation by Geography

October 1, 2012

Please provide comments to the issue below as part of the 2012 WCB cost model virtual workshop for inclusion in the record. Comments are moderated for conformity to the workshop’s guidelines.

Background

Hybrid Cost Proxy Model: The HCPM varies costs by nine density zones. Many of the inputs are the same across multiple density zones, while others show more variation among lower-density zones. The model also varies installation costs by geologic conditions, like soil type.

CQBAT: The CQBAT model varies costs according to three density zones (urban, suburban, and rural). The model as submitted in the record does not specify how locations are assigned to those zones.

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WCB Cost Model Virtual Workshop 2012

October 1, 2012

The virtual workshop is now closed. Parties should submit any additional input regarding the model development, including any follow-up commentary to topics that have been previously posted in the virtual workshop, in WC Docket No. 10-90.

Welcome to the home page for the Wireline Competition Bureau's (WCB) cost model virtual workshop, through which the Bureau is soliciting input from the public on Connect America Fund (Connect America) Phase II cost model design and inputs. A notice announcing this virtual workshop was released on September 12, 2012.

The virtual workshop will take place over a period of weeks sufficient to allow public input on all material issues. Discussion on multiple related topics will be facilitated through the various subject matter-specific discussion forums listed below. The Bureau will announce which topics will be discussed in which timeframes by Public Notice and on this page.

If you would like to make longer posts, we encourage you to place them in the Commission’s public comment site (ECFS) as an ex parte and place a summary of the post with the relevant URL in the forum. Similarly, if you would like to include an attachment to a post, include the URL for the attachment in your post. To ensure security, the forums will not support live links or attachments. ECFS can be reached here.

At the close of the virtual workshop, an electronic copy of all posts will be placed in the official record of the relevant dockets, much as a transcript of a hearing would be placed in the record.

If you have any questions about the format or operation of the virtual workshop or have any difficulties accessing any of the subject matter forums, please contact Katie King at 202-418-1500, katie.king@fcc.gov.

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WCB Cost Model Virtual Workshop 2012 - Determining Customer Locations

October 1, 2012

Please provide comments to the issue below as part of the 2012 WCB cost model virtual workshop for inclusion in the record. Comments are moderated for conformity to the workshop’s guidelines.

Background

Hybrid Cost Proxy Model: When adopting the HCPM, the Commission concluded that it should use geocode data to the extent available for determining customer locations. The Commission later affirmed this conclusion, but found that "no source of actual geocode data has yet been made adequately accessible for public review." The Commission expected that a source of accurate and verifiable actual geocode data would be identified in the future for use in calculating federal support.

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WCB Cost Model Virtual Workshop 2012 - Clustering

October 1, 2012

Please provide comments to the issue below as part of the 2012 WCB cost model virtual workshop for inclusion in the record. Comments are moderated for conformity to the workshop’s guidelines.

Background

Hybrid Cost Proxy Model: In developing the HCPM, the Commission concluded that a clustering algorithm should group customer locations into serving areas in an efficient manner to minimize costs while maintaining a specified level of network performance quality. Efficient clustering of customers leads to a least-cost and most-efficient network design that is consistent with forward-looking modeling principles.

The HCPM limits clusters by engineering constraints. It attempts to group customers so that they are no further away than allowed by network design, and so that no more customers are attached to a digital loop carrier remote terminal (DLC) than is permitted by network design. Initially, the model groups all customer locations into one cluster, then divides the cluster if one or more of the engineering constraints is violated. The model then uses several optimization routines that reassign certain customers to different clusters in order to lower the cost of constructing distribution areas.

CQBAT: The CQBAT model largely uses the same clustering approach as the HCPM, but uses road-based routing to determine the maximum size of the clusters. Thus, clusters defined by CQBAT are likely smaller but more realistic estimates of cluster size; by using road segments in clustering, CQBAT avoids the problem of having the length of some loops along roads exceed maximum loop length.

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WCB Cost Model Virtual Workshop 2012 - Inter-Office Transport Cost

October 1, 2012

Please provide comments to the issue below as part of the 2012 WCB cost model virtual workshop for inclusion in the record. Comments are moderated for conformity to the workshop’s guidelines.

Background

Hybrid Cost Proxy Model: The HCPM sizes inter-office transport based on voice connections. The model assumes the use of state-of-the-art SONET rings. The Commission concluded there should be an allocation of a reasonable portion of the joint and common costs of the switching and inter-office functions to the cost of providing the supported services, i.e., voice telephony. Moreover, the model uses the Local Exchange Routing Guide (LERG) database to determine host-remote relationships.

CQBAT: The CQBAT model uses a tandem switch—central office switch relationship to determine which central offices tie to which aggregation points. This information comes from the LERG database. The model assumes Ethernet-based fiber connections among wire centers and between wire centers and tandem switches, including the use of reconfigurable optical add-drop multiplexers (ROADMs) and wave division multiplexing (WDM) gateways. Additionally, the model connects each hierarchy to the nearest (lowest cost) Internet access point regardless of ownership. The CQBAT model also uses routing along roads to determine the cost of deploying fiber to make connections, and includes Broadband Remote Access Servers (BRAS) and/or gateway costs.

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WCB Cost Model Virtual Workshop 2012 - Voice Capability

October 1, 2012

Please provide comments to the issue below as part of the 2012 WCB cost model virtual workshop for inclusion in the record. Comments are moderated for conformity to the workshop’s guidelines.

Background

USF/ICC Transformation Order: The Commission determined that "voice telephony service" is the service supported by federal high-cost universal service support. All recipients must offer voice telephony service. In addition, as a condition of receiving support, all recipients must offer broadband service.

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WCB Cost Model Virtual Workshop 2012 - Wire Center Facilities

October 1, 2012

Please provide comments to the issue below as part of the 2012 WCB cost model virtual workshop for inclusion in the record. Comments are moderated for conformity to the workshop’s guidelines.

Background

The Bureau believes most of the hardware necessary in each wire center is captured by the requirements for voice or inter-office transport.

Hybrid Cost Proxy Model: The HCPM envisions a network that requires a circuit switch for voice calls, digital loop carriers (DLCs), and serving area interfaces (SAIs). The HCPM also includes the costs associated with the main distribution frame (MDF), the purchase and installation of power equipment costs, and appropriate engineering costs.

CQBAT: The CQBAT model includes costs for an all-IP network, including routers, Ethernet switches, and rack space, in addition to costs for buildings, land, and power. For fiber-to-the-premises (FTTP) configurations, the cost of optical line terminators (OLTs) is also included.

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WCB Cost Model Virtual Workshop 2012 - Sizing of Network Facilities

October 1, 2012

Please provide comments to the issue below as part of the 2012 WCB cost model virtual workshop for inclusion in the record. Comments are moderated for conformity to the workshop’s guidelines.

Background

Hybrid Cost Proxy Model: The HCPM is built for a narrow-band network. Network sizing in the HCPM is a matter of ensuring sufficient capacity to handle voice calls and provide appropriate levels of call blocking (e.g., using an Erlang model, which is used in telephony as a measure of offered load or carried load on service-providing elements such as telephone circuits or telephone switching equipment).

CQBAT: The CQBAT model sizes the network according to the digital throughput required at the time of peak usage based on a busy-hour offered load. This method is basically the same approach that was taken in the National Broadband Plan modeling.

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WCB Cost Model Virtual Workshop 2012 - The Use of Company-Specific Values

October 1, 2012

Please provide comments to the issue below as part of the 2012 WCB cost model virtual workshop for inclusion in the record. Comments are moderated for conformity to the workshop’s guidelines.

Background

Hybrid Cost Proxy Model: The Commission determined that nationwide default values were generally more appropriate than company-specific values. Accordingly, the HCPM uses nationwide average values for estimating plant-specific operations expenses. The Commission found that averages, rather than company-specific data, are better predictors of the forward-looking costs that should be supported by the federal high-cost mechanism. The Commission also determined that the use of nationwide averages would reward efficient companies and provide the proper incentives to inefficient companies to become more efficient over time, and that this reward system would drive the national average toward the cost that the competitive firm could achieve.

CQBAT: While the CQBAT model also does not use company-specific values to predict forward-looking costs, it does use regional cost adjustment factors to capture variation in labor and materials costs by three-digit ZIP codes.

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