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by: Wireline Competition Bureau

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 discussed the possibility of adjusting costs due to regional variation in the context of plant-specific operating expenses. The Commission ultimately did not make those adjustments, however, because it could not determine how much of the variation among providers and areas was due to inefficiency by those providers as opposed to differences in labor rates. In addition, the Commission noted that "it would be preferable to use an index [of regional wage variation in determining operating costs] specific to the telecommunications industry."

CQBAT: The CQBAT model includes a cost adjustment based on the three-digit ZIP code of every area of the country. These cost adjustments are based on construction cost variations and are applied to capital costs—i.e., labor and materials.

Questions for Comment

  1. Is there any reason to deviate from the CQBAT model's approach of adjusting labor costs based on differences in construction costs, while maintaining operating expenses at a national level?

Sources

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