Quality of Service in Cost Models

Abstract

Several network operators have been deploying Quality of Service (QoS) techniques that help improve customer satisfaction and can have an impact on the cost of telecommunications services. As Long-Run Incremental Cost (LRIC) models are used in various jurisdictions to derive the cost of regulated services, a question that needs to be addressed is how QoS concepts can be included in an LRIC model. This article pursues two goals. First, it describes the main QoS techniques and strategies that could be taken into account in a cost model. Second, it discusses the impact of QoS concepts on an LRIC model. The article shows that the introduction of QoS concepts into a cost model involves a critical review of the following parameters: cost drivers, cost of network elements, traffic supported by network elements, and usage factors.

Keywords: QoS, cost model, LRIC, NGN

JEL Classification: L86, L96, M48