The Price of Copper and the Transition to Fibre

The question of how to price access to the copper network during the period of transition to fibre has attracted much attention, both from regulators and in reports prepared by consultants (notably Plum Consulting and WIK Consult) acting for different groups of operators. Our paper considers three regulatory objectives - the two familiar ones of efficient cost recovery and efficient entry, and an additional one of efficient migration to fibre. It examines a range of possible pricing principles including the LRIC, HCA and CCA approaches, and mixed HCA/CCA approaches observed in France and the UK. These are simulated using a data set for the copper local loop in France, prepared by the regulator, ARCEP. Recognising that the number of instruments available to the regulator is less than the number of objectives, the paper proposes an approach which ensures nearly exact cost recovery, and which takes separate account of the obsolescent copper and of the continuing value of the trenches and ducts which contain it. Where full cost recovery allows it, the price of access to the physical works should be lowered to encourage the transition to fibre. The simulations show that the access prices associated with the proposed approach are lower than those derived from CCA and LRIC methods for pricing copper.