Zimbabwe’s state owned daily, The Herald, reports today that POTRAZ, the local telecoms regulator will be introducing a new cost-based pricing model for telecommunications operators. Quoting POTRAZ deputy director general, Alfred Marisa, the report says the Long Run Incremental Cost (LRIC) method will be adopted by the regulator.
We are in the process of coming up with a forward-looking cost model called Long Run Incremental Cost (LRIC) which will be used for tariff determination. We have already done some consultative workshops with various stakeholders that include consumer groups, industry, operators and academia to come up with common positions on how the model should be developed, taking account the various concerns of these stakeholders.
Currently, POTRAZ has indicated, the tariffs are cost based.
LRIC itself however is a variation of the cost based model with the difference that, while the regular one (the current we presume) looks at historical costs as basis for the cost accounting, the LRIC is based on forward looking costs. According to this toolkit by infoDev and the ITU, the LCIR is in use inn most developed markets.
One important note about the LRIC from the toolkit is that the method’s tariffs are not always lower compared to those calculated using historical costs.