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Network access and interconnection
Within the regulatory framework, detailed commercial and technical conditions of network access, and the specific terms of interconnection, are a key concern where competition is being encouraged over a network provided by a monopoly supplier. This concern is particularly strong where the network operator is vertically integrated and also involved in supplying competitive services, as is common in network industries. Incorrect network access pricing can create perverse incentives that lead to inefficient system use. For example, electricity transmission pricing regimes that do not reflect load flows can lead to locational decisions or within-day generation patterns which create transmission costs for all users. Increasingly, network operators and regulators also need to ensure that access pricing and interconnection rules are consistent with UK and EU competition law.
Examples of projects we have undertaken in this area include the development of an access code to Royal Mail's network for the UK postal regulator, Postcomm. This required a Long Run Incremental Cost calculation, determination of access pricing and financial modelling to understand the effects of entry. For the UK water industry we provided research on the economic and regulatory implications of the introduction of common carriage into the water industry. In the telecommunications sector we have advised a number of clients on interconnection pricing, developing or reviewing detailed cost studies for leading operators and regulators in Europe, Africa and the Caribbean.
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