development of a bulric model for fixed and mobile networks
TRANSCRIPT
14895-1
63b
Develo
pm
en
t o
f a B
UL
RIC
mo
del
for
fixed
an
d m
ob
ile n
etw
ork
s
Ja
me
s A
llen
, Ia
n S
tre
ule
an
d D
ave
Lo
nsd
ale
20 A
pril 2010
Ind
ustr
y p
rese
nta
tio
n
2
Co
nfi
den
tial
1489
5-1
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Copyright ©
2010. C
opyright ©
2010. A
naly
sys M
ason
Lim
ited h
as p
roduced the in
form
ation c
onta
ined h
ere
in
for
OP
TA
. T
he o
wners
hip
, use a
nd d
isclo
sure
of th
is
info
rmation a
re s
ubje
ct
to t
he C
om
merc
ial T
erm
s
conta
ined in t
he c
ontr
act betw
een A
naly
sys M
ason
Lim
ited a
nd O
PT
A
3
Co
nfi
den
tial
1489
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Co
nte
nts
Intr
oduction
Pro
po
se
d c
on
ce
ptu
al a
pp
roa
ch
Mo
de
l o
ve
rvie
w
Next
ste
ps
4
Co
nfi
den
tial
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Pro
ject
ob
jecti
ves
OP
TA
ha
s c
om
mis
sio
ne
d A
na
lysys M
aso
n t
o d
eve
lop
th
e B
UL
RIC
mo
de
ls
The p
roje
ct
obje
ctives a
re t
o:
develo
p a
conceptu
al appro
ach t
o t
he m
odels
in c
onsulta
tion
with t
he D
utc
h industr
y
pre
pare
data
requests
for
the D
utc
h f
ixed a
nd m
obile
opera
tors
constr
uct
and p
opula
te d
raft m
odels
consult w
ith t
he D
utc
h industr
y o
n t
he d
raft m
odels
finalis
e m
odels
and p
rovid
e c
osting r
esults t
o O
PT
A
Intr
od
uction
• O
bje
ctive
s
5
Co
nfi
den
tial
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Th
e B
UL
RIC
mo
dels
wil
l d
imen
sio
n
a n
etw
ork
an
d c
alc
ula
te r
esu
ltin
g
serv
ice c
osts
Intr
oduction •
BU
LR
IC m
odels
Tra
ffic
vo
lum
es
Ne
two
rk
info
rma
tion
/
assum
ptions
Ne
two
rk
co
sts
Un
it c
osts
Incre
menta
l costing
and r
oute
ing facto
rs
Ne
two
rk
asse
ts
Ne
two
rk
expenditure
s
Se
rvic
e u
nit
co
sts
KE
YIn
put
Ca
lcu
lation
Result
Depre
cia
tion
Ne
two
rk
alg
orith
ms
Geogra
phic
data
6
Co
nfi
den
tial
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Ou
r p
rocess w
ill
all
ow
sig
nif
ican
t
inp
ut
fro
m i
nd
ustr
y p
art
ies
Thro
ugh o
ur
recent stu
die
s for
both
fix
ed
an
d m
ob
ile c
ostin
g in
oth
er
countr
ies,
we h
ave r
efined a
nd im
pro
ved o
ur
appro
ach in o
rder
to:
manage t
he r
ange o
f conceptu
al is
sues
inte
ract
with m
ark
et
part
ies
request
and c
olle
ct
rele
vant
dem
and,
netw
ork
and c
ost
data
constr
uct
cle
ar
and r
obust
models
enable
regula
tors
to u
nders
tand the r
esults a
nd im
plic
ations o
f a
LR
IC-b
ased c
harg
e c
ontr
ol
Intr
oduction •
Appro
ach
7
Co
nfi
den
tial
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Th
e p
rocess c
om
pri
ses 5
ph
ases .
..
Ph
as
e 1
:
Co
nce
ptu
al a
pp
roa
ch
•D
raft
consultation p
aper
on c
onceptu
al appro
ach
•F
inal conceptu
al appro
ach p
aper
Ph
as
e 2
:
Da
ta c
olle
ctio
n
•D
ata
request docum
ent
•D
ata
colle
ction (
dem
and, netw
ork
, costs
)
Ph
as
e 3
:
Dra
ft m
odel
constr
uction
•D
evelo
pm
ent of dra
ft fix
ed a
nd m
obile
cost m
odels
•In
du
str
y w
ork
sh
op
•F
inal dra
ft c
ost m
odels
for
consultation
Ph
as
e 4
:
Fin
al m
od
el
constr
uction
•R
evie
w o
f consultation r
esponses
•R
evis
ed m
odels
and d
ocum
enta
tion
Intr
oduction •
Appro
ach
Ph
as
e 5
:
Fin
al p
rese
nta
tio
n
and r
esults
•D
evelo
pm
ent of final costing r
esults a
nd
pre
senta
tion
•In
du
str
y w
ork
sh
op
8
Co
nfi
den
tial
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… i
nvo
lvin
g o
pera
tor
part
icip
ati
on
Ph
as
e 1
:
Co
nce
ptu
al a
pp
roa
ch
•In
dustr
y c
onsultation p
eriod
•M
eetings w
ith o
pera
tors
on r
esponses
Ph
as
e 2
:
Da
ta c
olle
ctio
n
•D
ata
colle
ction
•D
ata
revie
w m
eetings w
ith o
pera
tors
Ph
as
e 3
:
Dra
ft m
odel
constr
uction
•In
dustr
y w
ork
shop intr
oducin
g d
raft
cost m
odels
•In
dustr
y c
onsultation p
eriod
Ph
as
e 4
:
Fin
al m
od
el
constr
uction
•M
eetings w
ith o
pera
tors
on r
esponses
Intr
oduction •
Appro
ach
Ph
as
e 5
:
Fin
al p
rese
nta
tio
n
and r
esults
•F
inal in
dustr
y w
ork
shop
9
Co
nfi
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tial
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Th
e p
roje
ct
wil
l b
e f
inali
sed
by
Marc
h 2
010
Intr
oduction •
Tim
eta
ble
10
Co
nfi
den
tial
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Intr
oduction
Pro
po
se
d c
on
ce
ptu
al a
pp
roa
ch
Mo
de
l o
ve
rvie
w
Next
ste
ps
11
Co
nfi
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tial
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Conceptu
al
mo
de
llin
g
decis
ions
Th
e c
ost
mo
dell
ing
wil
l b
e d
esig
ned
acco
rdin
g t
o f
ou
r key d
imen
sio
ns
Desig
n a
model to
aid
unders
tandin
g
of th
e c
osts
of
pro
vid
ing fix
ed a
nd
mobile
serv
ices in
the N
eth
erlands
Reflect th
e d
em
and,
netw
ork
and c
ost
facto
rs o
f th
e D
utc
h
netw
ork
s
Engage in d
irect
dis
cussio
n w
ith the
opera
tors
in the
ma
rke
t
Op
era
tor
Imp
lem
en
tati
on
Serv
ices
LR
IC p
rincip
les •
Ove
rvie
w
Te
ch
no
log
y
12
Co
nfi
den
tial
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We h
ave c
on
sid
ere
d a
ran
ge o
f
op
era
tors
to
mo
del
We h
ave c
onsid
ere
d a
range o
f opera
tors
*
avera
ge o
pera
tor:
pla
yers
in
each m
ark
et (i.e
. fixed a
nd
mobile
) are
avera
ged to d
efine a
“t
ypic
al” o
pera
tor
hyp
oth
eti
cal exis
tin
g o
pera
tor:
based o
n a
ctu
al opera
tors
, except
for
specific
aspects
e.g
. date
of
entr
y
hyp
oth
eti
cal n
ew
en
tran
t: a
n
opera
tor
ente
ring n
ow
with
today’s
modern
netw
ork
deplo
ym
ent
LR
IC p
rincip
les •
Opera
tor
*Modelli
ng a
ctu
al opera
tors
is n
ot
consis
tent
with a
neutr
al appro
ach
Chara
cte
ristic
Dis
cussio
n p
oin
ts
Date
of entr
yD
iffe
ren
t fo
r all
opera
tors
,
there
fore
avera
ge d
ate
is n
ot
meanin
gfu
l
Technolo
gy
Difficult to d
efine a
nd m
odel an
avera
ge t
echnolo
gy a
nd m
igra
tion
for
a f
ixed n
etw
ork
Effic
iency
Avera
ge o
pera
tor
may inclu
de
ine
ffic
ient
co
sts
Tra
nspare
ncy
Makin
g a
cle
are
r te
chnolo
gy
choic
e e
nable
s t
ranspare
ncy f
or
both
fix
ed a
nd m
obile
Reconcili
ation
New
entr
ant
appro
ach c
annot
be
reconcile
d w
ith a
ny t
op-d
ow
n
accounts
as n
o D
utc
h n
ew
entr
ants
exis
t
13
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nfi
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tial
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Ou
r p
rop
osal
is t
o m
od
el
a
hyp
oth
eti
cal exis
tin
g o
pera
tor
Mo
bil
e n
etw
ork
Rolli
ng o
ut 2G
in 2
004/0
5
Launchin
g s
erv
ice in 2
006
Addin
g c
apacity w
ith 1
800M
Hz
Addin
g o
verlay w
ith 2
100M
Hz
Opera
tion o
f 2G
and 3
G n
etw
ork
s f
or
at
least
25 y
ears
No m
igra
tion o
ff 2
G a
nd 3
G
Fix
ed
netw
ork
Rolli
ng o
ut N
GN
IP
core
in 2
004/0
5
Launchin
g s
erv
ice in 2
006
Specific
choic
e o
f access technolo
gy
Op
era
tio
n o
f th
e N
GN
IP
co
re f
or
at
least
25 y
ears
No m
igra
tion o
ff N
GN
IP
LR
IC p
rincip
les •
Opera
tor
Enable
s u
s to c
alc
ula
te a
cost th
at
is b
ase
d o
n t
he
exis
tin
g s
up
plie
rs
of te
rmin
ation in the N
eth
erlands
Actu
al m
odern
netw
ork
chara
cte
ristics c
an b
e taken into
account
14
Co
nfi
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tial
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Mark
et
en
try a
nd
dep
loyed
tech
no
log
y a
re k
ey i
np
uts
…
LR
IC p
rincip
les •
Opera
tor
KP
N legacy T
DM
core
KP
N N
GN
core
Cable
IP
NG
N c
ore
KP
N 2
G (
na
tio
na
l)
Vodafo
ne 2
G (
national)
T-M
obile
2G
(national)
KP
N 3
G
Vodafo
ne 3
G
T-M
ob
ile 3
G
2004
2009
2000
1994
long a
go
2020
Although t
here
is
co
nsid
era
ble
div
ers
ity in
initia
lentr
y d
ate
and
technolo
gy m
igra
tion,
a
consis
tent
pic
ture
has
em
erg
ed d
uring the p
eriod
2004 to today
15
Co
nfi
den
tial
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… a
nd
als
o c
overa
ge a
nd
lo
ng
-ru
n
mark
et
sh
are
Covera
ge (
footp
rint)
of th
e n
etw
ork
is a
key input to
the c
ost m
odel
degre
e to w
hic
h investm
ents
pre
cede d
em
and influences the
eventu
al unit c
ost of tr
aff
ic
In o
rder
to r
eflect re
alit
y, th
e m
odelle
d
fixed a
nd m
obile
opera
tors
should
offer
national covera
ge
An o
bje
ctive a
nd
neutr
al appro
ach
requires u
sin
g a
mark
et share
of
100%
/N, w
here
N is the a
ctu
al num
ber
of la
rge (
national) n
etw
ork
opera
tors
LR
IC p
rincip
les •
Opera
tor
Hypoth
eticalm
ob
ile
opera
tor
tha
t
rolls
out a n
ational netw
ork
achie
ves a
lo
ng
-ru
n m
ark
et
sh
are
of
33.3
%
Hypoth
eticalfi
xed
opera
tor
that
rolls
out a n
ational netw
ork
achie
ves a
lo
ng
-ru
n m
ark
et
sh
are
of
50%
3 e
xis
ting n
ational
mobile
opera
tors
KP
N
Vo
da
fon
e
T-M
ob
ile
2 e
xis
ting n
ational
fixed o
pera
tors
KP
N
Cab
le n
etw
ork
s
16
Co
nfi
den
tial
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Th
e m
ob
ile r
ad
io t
ech
no
log
y is a
mix
of
GS
M900/1
800 a
nd
UM
TS
2100
Curr
ent spectr
um
allo
cation
can b
e c
onsid
ere
d fair*
opera
tors
ow
n s
imila
r am
ount
of 900M
Hz
1800M
Hz a
nd 2
100M
Hz
allo
cation is a
sym
metr
ic,
but com
pensate
d b
y s
pectr
um
paym
ents
It is there
fore
assum
ed that
forw
ard
-lookin
g s
pectr
um
and
covera
ge c
osts
are
sym
metr
ical
GS
M/U
MT
S s
eem
s the
curr
ent eff
icie
nt te
chnolo
gy m
ix
all
exis
ting o
pera
tors
use
a G
SM
/UM
TS
mix
they o
pera
te in a
com
petitive
mark
et w
hic
h s
tim
ula
tes e
ffic
ient
use o
f te
chnolo
gy
4G
is u
nlik
ely
to b
e u
sed to d
eliv
er
larg
e v
olu
mes o
f voic
e term
ination in
the s
hort
term
* “F
air”
is d
efined h
ere
as f
ully
endogenous, i.e.
resultin
g fro
m a
n a
uction in w
hic
h
diffe
rences w
ere
paid
for
at m
ark
et price
We w
ill a
ssum
e t
hat
the m
odelle
d
opera
tor
has a
1/3
sh
are
of
900M
Hz
an
d 1
800M
Hz s
pectr
um
and
210M
Hz o
f 2100M
Hz f
requencie
s
We w
ill u
se b
oth
GS
M900/1
800 a
nd
UM
TS
2100 r
adio
technolo
gy in
the long t
erm
, w
ith U
MT
S a
s a
n
overlay
LR
IC p
rincip
les •
Technolo
gy
17
Co
nfi
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Mo
bil
e s
pectr
um
fees w
ill
als
o n
eed
to b
e d
efi
ned
For
22.5
MH
z o
f 900M
Hz
EU
R226.5
millio
n b
ase
d o
n
SE
O v
alu
ation
For
48M
Hz o
f 1800M
Hz
EU
R225 m
illio
n b
ase
d o
n
1998 D
utc
h D
CS
auction
For
20M
Hz o
f 2100M
Hz
betw
een
EU
R50 m
illi
on
an
d
EU
R150 m
illio
n e
stim
ate
d
from
recent S
wedis
h a
nd U
S
auctions o
f m
obile
bro
adband
overlay s
pectr
um
Spectr
um
fees h
ave h
isto
rically
been a
ssig
ned b
y d
iffe
rent
mechanis
ms (
e.g
. auction,
allo
cation, exte
nsio
n, tr
ade, etc
.)
We p
ropose to a
pply
a “
curr
ent
valu
ation”
for
mobile
spectr
um
,
based o
n r
ecent auctions that are
likely
to indic
ate
the v
alu
e o
f
spectr
um
for
mobile
netw
ork
use in
The N
eth
erlands
The v
iew
s o
f in
dustr
y p
art
ies a
re
requeste
d o
n o
ur
pro
posal
LR
IC p
rincip
les •
Technolo
gy
18
Co
nfi
den
tial
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Fo
r th
e m
ob
ile c
ore
, th
ere
are
th
ree
sim
ilar
pla
usib
le a
rch
itectu
ral o
pti
on
s(b
) U
pg
rad
ed
sw
itch
ing
(a)
Sep
ara
te
sw
itch
ing
(c)
Co
mb
ined
IP
sw
itch
ing
2G
/
3G
MS
C
2G
/
3G
MS
C
BS
C
/ R
NC
BS
C
/ R
NC
GS
N
s
Inte
rnet
BS
Cs
RN
Cs
2G
GS
Ns
3G
GS
Ns
Po
I
MG
WM
GW
MS
SM
SS
BS
C/
RN
C
BS
C/
RN
C
Data
ro
ute
rs
an
d G
SN
s
Inte
rnet
Po
IP
oI
3G
MS
C
2G
MS
C
2G
rad
io
laye
r
3G
rad
io
laye
r2G
rad
io
laye
r
3G
rad
io
laye
r2G
rad
io
laye
r
3G
rad
io
laye
r
Inte
rnet
We s
eek industr
y v
iew
s o
n the r
ele
vant m
odern
techn
olo
gy t
o inclu
de in t
he
mobile
sw
itchin
g a
nd tra
nsm
issio
n la
yer
and h
ow
the
costs
of
any v
ariants
in
this
technolo
gy s
equence s
hould
be r
ecovere
d
lea
se
dlin
es
se
lf-
pro
vid
ed
mic
row
ave
links
lea
se
dfibre
ne
two
rk
Tra
ns
mis
sio
n
op
tio
ns
LR
IC p
rincip
les •
Technolo
gy
19
Co
nfi
den
tial
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Fo
r fi
xed
access, it
is less c
lear
wh
ich
netw
ork
sh
ou
ld b
e m
od
ell
ed
LR
IC p
rincip
les •
Technolo
gy
(c)
FT
TN
/
VD
SL
(a)
Tra
dit
ion
al
co
pp
er
(e)
FT
TH
/
PT
P
(d)
FT
TH
/
GP
ON
(b)
Cab
le
Metr
o
core
location
NT
Pfibre
copper
City
node
MD
F
Cab
inet
NT
Pcopper/
fibre
copper
copper
City
node
NT
Pfibre
City
node
Sp
litte
r
Sp
litte
r
NT
Pfibre
fibre
fibre
Metr
o
node
Loca
l
fibre
node(s
)
NT
Pcoax
coax
We s
eek v
iew
s f
rom
the I
ndustr
y G
roup m
em
bers
on t
he a
ppro
pri
ate
fix
ed
(access)
technolo
gy t
o m
odel, o
n t
he
re
leva
nt
tech
nolo
gy to inclu
de in the
fixed t
ransm
issio
n layer,
and o
n h
ow
th
e c
osts
of
an
y v
ariants
in t
his
te
chnolo
gy s
equence s
hould
be r
ecovere
d
traffic
-sensitiv
e
assets
Ke
y
pote
ntial extr
a e
xte
nt of
traffic
-sensitiv
e a
ssets
(specific
to
arc
hitectu
re)
Cab
inet
20
Co
nfi
den
tial
1489
5-1
63b
Th
e f
ixed
co
re n
etw
ork
wil
l n
eed
to
be N
GN
-based
Th
e c
ho
ice
of N
GN
co
ntr
ol la
ye
r is
heavily
influenced b
y the a
ccess
netw
ork
arc
hitectu
re
The o
ptions a
re
cable
head-e
nds
NG
N a
ccess g
ate
ways (
AG
Ws)
NG
N 3
G d
igital lo
op c
arr
iers
(D
LC
)
NG
N IP
/Eth
ern
et bro
adband
access p
latform
s (
IP B
AP
)
For
copper-
orienta
ted d
eplo
ym
ents
, an N
GN
DLC
core
would
be
appro
priate
For
fibre
-oriente
d d
eplo
ym
ents
, an IP
-B
AP
appro
ach is m
ore
reasonable
AG
Ws a
re a
ppro
priate
for
rem
ote
custo
mers
, and a
re u
nlik
ely
to b
e
rele
vant in
the N
eth
erlands
The E
C R
ecom
mendation s
tate
s that
“the c
ore
part
could
in p
rincip
le b
e
NG
N-b
ased”
LR
IC p
rincip
les •
Technolo
gy
There
fore
, if a
copper
or
fibre
access layer
is d
eplo
yed, th
en w
e
conclu
de t
hat
the I
P B
AP
arc
hitectu
re is t
he m
ost
appro
priate
option.
If a
cable
netw
ork
is t
o b
e m
odelle
d,
then a
cable
head-e
nd
would
be a
ppro
priate
21
Co
nfi
den
tial
1489
5-1
63b
Th
e m
od
el
need
s t
o c
on
sid
er
mo
re
serv
ices t
han
ju
st
vo
ice t
erm
inati
on
The a
im o
f th
e m
odel is
to
unders
tand the c
osts
of fixed a
nd
mobile
voic
e term
ination
How
ever,
fix
ed a
nd m
obile
netw
ork
s
typic
ally
convey a
wid
e r
ange o
f
serv
ices, le
adin
g to
econom
ies o
f scale
and s
cope
a low
er
unit c
ost fo
r voic
e a
nd
data
serv
ices
A full
list of serv
ices n
eeds to b
e
used w
ithin
the m
odel
this
will
allo
w a
llocation o
f
share
d a
nd n
etw
ork
com
mon
costs
Deta
ils o
f th
e p
roposed s
erv
ices a
re
in the c
onsultation p
aper
We p
rop
ose a
lso
to
exclu
de r
eta
il
co
sts
; a “
netw
ork
share
” of busin
ess
overh
eads (
e.g
. C
EO
, etc
.) w
ill b
e
specifie
d
estim
ate
d a
t 50%
of overh
ead
expenditure
s
LR
IC p
rincip
les •
Se
rvic
es
22
Co
nfi
den
tial
1489
5-1
63b
Th
e m
od
el m
ust
cap
ture
all s
erv
ices
(at
a n
etw
ork
* vo
lum
e)
LR
IC p
rincip
les •
Se
rvic
es
Fix
ed s
erv
ices
Reta
ilon-n
et (local and n
ational)
Reta
iloutg
oin
g t
o inte
rnational, m
obile
and
oth
er
fixed o
pera
tors
Wh
ole
sale
incom
ing/o
utg
oin
g/tr
ansit: lo
cal and
tandem
Reta
ilD
ial-up I
nte
rnet
Reta
iland
wh
ole
sale
xD
SL
xD
SL d
ata
backhaul
Reta
ilT
V s
erv
ices
Leased lin
es
Oth
er
transm
issio
n s
erv
ices
Mobile
serv
ices
On-n
et
voic
e
Outg
oin
g to inte
rnational, fix
ed a
nd o
ther
mobile
opera
tors
Wh
ole
sa
le in
co
min
g/t
ran
sit
SM
S o
n-n
et, o
utg
oin
g
Wh
ole
sa
le S
MS
in
co
min
g
2G
packet data
Low
-speed 3
G p
acket
data
(R
ele
ase-9
9)
Hig
h-s
peed 3
G p
acket data
(H
SP
A)
*MV
NO
s a
nd s
erv
ice p
rovid
er
volu
mes w
ill b
e inclu
ded
in
the m
odelle
d n
etw
ork
opera
tors
23
Co
nfi
den
tial
1489
5-1
63b
A s
ing
le t
raff
ic f
ore
cast
sh
ou
ld f
eed
bo
th m
od
els
, fo
r co
nsis
ten
cy
LR
IC p
rincip
les •
Se
rvic
es
010
20
30
40
50
60
70 20
04
20
05
20
06
20
07
20
08
Minutes (billions)
Mobile
-origin
ate
dF
ixed-o
rigin
ate
d
Inte
rnet dia
l-up
VoiP
-origin
ate
d
Dia
l-u
p a
lmo
st
co
mp
lete
ly g
on
e
Fix
ed V
oIP
tra
ffic
incre
asin
g
Tra
ffic
on fix
ed n
etw
ork
s
de
clin
ing
sh
arp
ly
Tra
ffic
on
mo
bile
netw
ork
s incre
asin
g
24
Co
nfi
den
tial
1489
5-1
63b
Inte
rco
nn
ecti
on
esta
bli
sh
men
t
serv
ices a
re c
oste
d a
s w
ell
Incum
bent opera
tors
typic
ally
offer
a r
ange o
f re
gula
ted c
o-location
serv
ices, som
e o
f w
hic
h m
ay b
e
used for
inte
rconnection c
o-
location
The s
cope o
f th
ese s
erv
ices m
ay
change w
ith N
GA
, dependin
g o
n
the a
rchitectu
re
Cost ele
ments
are
ph
ysic
al sp
ace
equip
ment
Inte
rconnection e
sta
blis
hm
ent
requires a
range o
f ta
sks, oft
en
bein
g v
alid
ate
d b
y b
oth
part
ies
The tasks v
ary
dependin
g o
n
wheth
er
it c
oncern
s c
ircuit-s
witched
or
VoIP
inte
rconnection
Cost ele
ments
are
managem
ent
adm
inis
trative a
nd technic
al
man-h
ours
Only
reg
ion
al
inte
rco
nn
ecti
on
an
d c
o-l
ocati
on
will
be m
odelle
d, i.e.
inte
rconnection a
t aro
und 2
0 r
egio
nal poin
ts
Co
-lo
ca
tio
nE
sta
bli
sh
ing
in
terc
on
ne
cti
on
LR
IC p
rincip
les •
Se
rvic
es
25
Co
nfi
den
tial
1489
5-1
63b
Ch
oic
es m
ust
be m
ad
e w
hen
imp
lem
en
tin
g a
LR
IC m
eth
od
olo
gy
A n
um
ber
of are
as n
eed to b
e c
onsid
ere
d
Wh
at
siz
e o
f in
cre
men
t?–
e.g
. m
arg
inal, s
erv
ice incre
menta
l or
avera
ge incre
menta
l
Wh
at
dep
recia
tio
n m
eth
od
?–
e.g
. econom
ic d
epre
cia
tion, accounting
depre
cia
tion
Reaso
nab
le r
etu
rn o
n c
ap
ital?
–W
AC
C
Wh
ich
mark
-up
meth
od
(if
an
y)?
LR
IC p
rincip
les •
Im
ple
menta
tion
26
Co
nfi
den
tial
1489
5-1
63b
Th
ere
are
tw
o a
pp
licab
le i
ncre
men
t
defi
nit
ion
s
LR
AIC
is the p
revaili
ng a
ppro
ach in E
uro
pe
all
serv
ices w
hic
h c
ontr
ibute
to
econom
ies o
f scale
are
tre
ate
d
togeth
er
and e
qually
inP
lus L
RA
IC c
om
mon c
osts
are
m
ark
ed u
p
Pu
re L
RIC
is r
ecom
mended b
y the E
C
consid
ers
incre
ment to
be a
ll tr
affic
of a
sin
gle
se
rvic
e
incre
menta
l costs
are
those a
void
ed
when n
ot off
ering the w
hole
sale
te
rmin
ation s
erv
ice
LR
IC p
rincip
les •
Im
ple
menta
tion •
Incre
ments
LR
MC
LR
AIC
LR
IC
An
avera
ge
incre
ment
for
multip
le
se
rvic
es (
e.g
. tr
aff
ic)
The incre
ment
of
an e
ntire
serv
ice
(e.g
. te
rmin
ation)
A s
mall
incre
ment
for
the
marg
inal
un
it o
f tr
aff
ic
Tota
l costs
27
Co
nfi
den
tial
1489
5-1
63b
Based
on
OP
TA
’s r
eq
uir
em
en
ts,
we
wil
l u
se t
hre
e a
ltern
ati
ve m
eth
od
s
Th
e m
od
el w
ill u
se
th
ree
appro
aches that diffe
r in
the d
efinitio
n o
f th
e
incre
ment and the tre
atm
ent of com
mon c
osts
Pu
re B
UL
RIC
Plu
s B
UL
RA
IC
Plu
s A
ccess B
UL
RA
IC
LR
IC p
rincip
les •
Im
ple
menta
tion •
Incre
ments
1 2 3
28
Co
nfi
den
tial
1489
5-1
63b
Th
ep
ure
BU
LR
IC a
pp
roach
on
ly
inclu
des in
cre
men
tal co
sts
Th
eP
ure
BU
LR
ICappro
ach is b
ased o
n
the E
C R
ecom
mendation; it s
pecifie
s
only
the c
ost ‘w
hic
h is a
void
ed w
hen
not off
ering v
oic
e term
ination’ is
allo
cate
d to this
serv
ice
whole
sale
term
ination tre
ate
d a
s the
‘last’ s
erv
ice in the n
etw
ork
non-t
raff
ic r
ela
ted c
osts
, such a
s
subscriber
costs
, are
not allo
cate
d
netw
ork
com
mon c
osts
and b
usin
ess
overh
eads a
re n
ot allo
cate
d to the e
nd
resu
lt
The c
olo
ur-
fille
d b
oxes in
the d
iagra
ms o
n s
lides 3
1-3
4 indic
ate
the c
osts
inclu
ded in the u
nit c
ost of te
rmin
ate
d tra
ffic
for
each m
eth
od
LR
IC p
rincip
les •
Im
ple
menta
tion •
Incre
ments
Mobile Fixed
Netw
ork
share
of busin
ess o
ve
rheads
Vo
ice te
rmin
ation
incre
menta
l cost
All
oth
er
tra
ffic
and
subscribe
r driven
netw
ork
costs
Netw
ork
share
of busin
ess o
ve
rheads
Voic
e te
rmin
ation
incre
menta
l cost
All
oth
er
tra
ffic
and
subscribe
r driven
netw
ork
costs
1
29
Co
nfi
den
tial
1489
5-1
63b
Th
e o
ther
ap
pro
ach
es r
eq
uir
e t
he
defi
nit
ion
of
su
bscri
ber
incre
men
t
A s
ubscriber
incre
ment captu
res
connection/c
overa
ge c
osts
whic
h
are
not tr
aff
ic-s
ensitiv
e
The d
efinitio
n h
as to b
e c
onsis
tent
acro
ss fix
ed a
nd m
obile
We p
ropose to a
pply
a la
rge
in
cre
me
nt o
f a
ll subscribers
captu
ring the c
ost to
connect to
the n
etw
ork
‘Subscription’ is
consid
ere
d to b
e
pro
vid
ing
en
d u
se
rs w
ith
access t
o
the t
raff
ic-s
en
sit
ive n
etw
ork
The s
ubscriber
incre
ment th
ere
fore
re
quires
in a
mobile
netw
ork
–a u
niq
ue S
IM c
ard
–H
LR
an
d V
LR
re
gis
trations
–covera
ge w
ithin
footp
rint
in a
fix
ed n
etw
ork
–la
st-
dro
p to N
TP
–copper
pair/f
ibre
/cable
–share
d s
treet ducts
back
to p
oin
t of tr
affic
concentr
ation (
traff
ic-
sensitiv
ity)
We w
ill exclu
de a
ll f
orm
s o
f en
d-
user
term
inal/h
an
dset
LR
IC p
rincip
les •
Im
ple
menta
tion •
Incre
ments
30
Co
nfi
den
tial
1489
5-1
63b
Plu
s B
UL
RA
IC i
s c
on
sis
ten
t w
ith
pre
vio
us r
eg
ula
tory
co
sti
ng
Th
eP
lus B
UL
RA
ICappro
ach focuses o
n
consis
tency w
ith
the p
revio
us a
ppro
ach in E
uro
pe for
fixe
d c
ostin
g
OP
TA
’s p
revio
us m
obile
costing p
roje
ct
Avera
ge incre
menta
l costs
of tr
affic
are
defined in a
ggre
gate
, th
en a
llocate
d to
various tra
ffic
serv
ices u
sin
g r
oute
ing facto
rs
Com
mon c
osts
are
inclu
ded
A larg
e tra
ffic
incre
ment im
plie
s that costs
com
mon to m
ultip
le tra
ffic
serv
ices a
re
inclu
ded in the a
vera
ge incre
menta
l cost of
traffic
LR
IC p
rincip
les •
Im
ple
menta
tion •
Incre
ments
Mobile Fixed
Netw
ork
share
of busin
ess o
ve
rheads
Tra
ffic
incre
menta
l costs
= a
dd
itio
na
l ra
dio
sites, B
TS
,
add
itio
nal T
RX
, h
ighe
r capacity
links, additio
na
l B
SC
, M
SC
,
add
itio
nal spectr
um
, e
tc
Subscribers = HLR, LU, SIM Mob
ile c
ove
rage n
etw
ork
= r
ad
io s
ites,
BT
S, firs
t T
RX
, backhaul lin
k,
min
imu
m s
witch
netw
ork
, lic
ence
, e
tc.
Netw
ork
share
of busin
ess o
ve
rheads
Tra
ffic
incre
menta
l costs
= a
ll sw
itches,
site
s a
nd inte
r-
sw
itch
transm
issio
n
infr
astr
uctu
re to
the first poin
t o
f
traffic
concentr
ation
Subscribe
r
sensitiv
e c
osts
= last-
dro
p
connections
Share
d c
osts
of
access
= tre
nch, duct and
cable
fro
m the
last-
dro
p to the
firs
t poin
t of tr
affic
concentr
ation
Access a
nd c
ore
share
d tre
nch
2
31
Co
nfi
den
tial
1489
5-1
63b
Plu
s A
ccess B
UL
RA
IC t
reats
su
bscri
ber
co
sts
as c
om
mo
n
Th
eP
lus B
ULR
AIC
appro
ach a
ssum
es a
separa
te s
ubscriber
(access)
serv
ice
Inste
ad, th
e P
lus A
ccess B
UL
RA
ICappro
ach
consid
ers
any incre
menta
l costs
associa
ted w
ith
the s
ubscriber
access s
erv
ice a
s c
om
mon c
osts
to the tra
ffic
-rela
ted s
erv
ices
This
pre
sents
a fully
inclu
siv
e n
etw
ork
cost of
term
ination
The m
obile
result c
an a
lso b
e c
onsid
ere
d
com
para
ble
to the m
ark
ed-u
p r
esult fro
m
OP
TA
’spre
vio
us c
osting p
roje
ct, in w
hic
h
location u
pdate
costs
were
added to term
inate
d
traffic
LR
IC p
rincip
les •
Im
ple
menta
tion •
Incre
ments
Mobile Fixed
Netw
ork
share
of busin
ess o
ve
rheads
Tra
ffic
incre
menta
l costs
= a
dd
itio
na
l ra
dio
sites, B
TS
,
add
itio
nal T
RX
, h
ighe
r capacity lin
ks,
add
itio
nal B
SC
, M
SC
, add
itio
na
l
spectr
um
, etc
Subscri
be
r costs
= H
LR
, LU
, S
IMM
ob
ile c
ove
rage n
etw
ork
= r
ad
io s
ites,
BT
S, firs
t T
RX
, backhaul lin
k,
min
imu
m s
witch
netw
ork
, lic
ence
, e
tc
Netw
ork
share
of busin
ess o
ve
rheads
Tra
ffic
incre
menta
l costs
= a
ll sw
itches, sites a
nd in
ter-
sw
itch
transm
issio
n infr
astr
uctu
re to
the first
po
int o
f tr
affic
concentr
ation
Subscribe
r sensitiv
e c
osts
= last-
dro
p c
onnections
Share
d c
osts
of access =
tre
nch, duct
and c
ab
le fro
m th
e last-
dro
p to
the first
po
int o
f tr
affic
concentr
ation
Access a
nd c
ore
share
d tre
nch
3
32
Co
nfi
den
tial
1489
5-1
63b
Th
ere
are
severa
l ap
pro
ach
es t
o
dep
recia
tio
n i
n a
co
st
mo
del
…
LR
IC p
rincip
les •
Im
ple
menta
tion •
Depre
cia
tion
0
50
10
0
15
0
20
0
25
0
30
0
ye
ar
0ye
ar
1ye
ar
2ye
ar
3ye
ar
4ye
ar
5
Annual cost
Opera
ting e
xp
enditure
s
Depre
cia
tio
n (
HC
A)
Cost
of
capital em
plo
ye
d
(HC
A)
0
50
10
0
15
0
20
0
25
0
30
0
ye
ar
0ye
ar
1ye
ar
2ye
ar
3ye
ar
4ye
ar
5
Annual cost
Opera
ting e
xp
enditure
s
Depre
cia
tio
n (
CC
A)
Cost
of
capital em
plo
ye
d(C
CA
)
0
50
10
0
15
0
20
0
25
0
30
0
35
0
ye
ar
0ye
ar
1ye
ar
2ye
ar
3ye
ar
4ye
ar
5
Annual cost
Opera
ting e
xp
enditure
s
Annuity c
harg
e (
tilted)
0
10
0
20
0
30
0
40
0
50
0
60
0
ye
ar
0ye
ar
1ye
ar
2ye
ar
3ye
ar
4ye
ar
5
Annual costE
conom
ic c
ost
recovery
Str
aig
ht-
lin
e h
isto
rical
co
st
acco
un
tin
g
Str
aig
ht-
lin
e c
urr
en
t co
st
acco
un
tin
g
Til
ted
-an
nu
itie
sE
co
no
mic
dep
recia
tio
n
33
Co
nfi
den
tial
1489
5-1
63b
… w
e p
rop
ose t
o u
se e
co
no
mic
dep
recia
tio
n
The p
rim
ary
facto
r in
the c
hoic
e o
f a d
epre
cia
tion m
eth
od is w
heth
er
netw
ork
outp
ut is
changin
g o
ver
tim
e
in m
obile
netw
ork
s, tr
aff
ic v
olu
mes h
ave g
row
n s
ign
ific
antly o
ver
recent
years
and m
obile
bro
adband v
olu
mes a
re g
row
ing s
trongly
in fix
ed n
etw
ork
s, tr
aff
ic w
as h
isto
rically
voic
e-d
om
inate
d a
nd fairly
sta
ble
.
How
ever,
with v
oic
e a
nd d
ial-up tra
ffic
declin
ing a
nd b
roadb
and a
nd o
ther
data
incre
asin
g, th
is is n
o longer
the c
ase
There
fore
, in
both
cases, econom
ic d
epre
cia
tion is o
ur
pro
posed m
eth
od; our
pro
posal is
rein
forc
ed b
y the n
eed for
consis
tency b
etw
een the tw
o B
ULR
IC
mo
de
ls
We p
lan to im
ple
ment th
e s
am
e m
eth
od a
s in O
PT
A’s
exis
ting m
obile
term
ination B
ULR
IC m
odel
LR
IC p
rincip
les •
Im
ple
menta
tion •
Depre
cia
tion
34
Co
nfi
den
tial
1489
5-1
63b
Th
e I
RG
, W
PC
II a
nd
ben
ch
mark
s
un
derp
in o
ur
WA
CC
calc
ula
tio
n …
We w
ill follo
w the IR
G*
Best
Pra
ctice for
the W
AC
C c
alc
ula
tion
use the C
ap
ital A
sset
Pricin
g
Mo
de
lto
dete
rmin
e c
ost of
equity
calc
ula
te the c
ost of debt as
the s
um
of risk-f
ree r
ate
and
debt pre
miu
m
apply
an a
ppro
priate
gearing
level fo
r th
e h
ypoth
etical
exis
ting fix
ed a
nd m
obile
opera
tors
Para
mete
r valu
es a
re p
roposed to
be d
ete
rmin
ed a
s follo
ws
mark
et-
specific
para
mete
rs
(ris
k-f
ree
ra
te, ta
x a
nd
eq
uity
risk p
rem
ium
) w
ill b
e ta
ke
n fro
m
WP
CII p
rocess**
secto
r-specific
para
mete
rs w
ill
be
ba
se
d o
n
–benchm
ark
s (
, gearing)
–cost of debt estim
ate
for
KP
N**
, corr
ecte
d for
gearing a
ccord
ing to IR
G
**N
ER
A,
Ap
ril 2
009
*I
ndependent
Regu
lato
rs G
roup
Pri
ncip
les
Va
lue
s
LR
IC p
rincip
les •
WA
CC
35
Co
nfi
den
tial
1489
5-1
63b
0.0
0.2
0.4
0.6
0.8
Fix
ed
op
era
tors
Fix
ed
-mo
bile
op
era
tors
Mo
bile
op
era
tors
… l
ead
ing
to
a n
om
inal*
WA
CC
of
9.6
% (
fixed
) an
d 1
1.0
% (
mo
bil
e)
Para
mete
rF
ixed
Mobile
Ris
k-f
ree r
ate
3.8
%3.8
%
Equity p
rem
ium
6.1
%6.1
%
Asset beta
0.5
10.6
7
Cost
of
equity
(post-
tax)
10.3
%10.2
%
Cost
of
debt
5.6
%5.1
%
Gearing
52%
32%
Tax
25.5
%25.5
%
Nom
inal W
AC
C (
pre
-
tax)
9.6
%11.0
%
Asset
beta
ben
ch
mark
0%
20
%
40
%
60
%
Fix
ed
op
era
tors
Fix
ed
-mo
bile
op
era
tors
Mo
bile
op
era
tors
Geari
ng
ben
ch
mark
LR
IC p
rincip
les •
WA
CC
* T
he m
odel w
ill b
e b
ased
on r
ea
l-te
rms
calc
ula
tions,
there
fore
a r
eal te
rms
WA
CC
will
ultim
ate
ly b
e a
pplie
d
36
Co
nfi
den
tial
1489
5-1
63b
InP
lus B
UL
RA
IC, w
e s
ug
ge
st
a
EP
MU
fo
r co
mm
on
co
sts
EC
Recom
mendation s
pecific
ally
exclu
des r
ecovery
of com
mon
costs
fro
m v
oic
e term
ination
Ho
we
ve
r, (
pa
rt o
f) th
e c
om
mo
n
costs
have b
een inclu
ded in the
cost boundary
in p
revio
us
regula
tory
costing m
eth
ods
The m
odel w
ill there
fore
inclu
de
op
tions
to r
ecover
com
mon c
osts
,
indic
ate
d b
y P
lus B
ULR
AIC
an
d
Plu
s A
ccess B
ULR
AIC
To
re
co
ve
r co
mm
on
co
sts
fro
m
incre
menta
l serv
ices, a m
ark
-up
mechanis
m n
eeds to b
e d
efined
We p
ropose to a
pply
an e
qui-
pro
port
ional m
ark
-up (
EP
MU
), o
n
the g
rounds that it is:
obje
ctive a
nd e
asy to
imp
lem
en
t
consis
tent w
ith r
egula
tory
pra
ctice e
lsew
here
LR
IC p
rincip
les •
Im
ple
menta
tion •
Mark
-up m
echanis
m
37
Co
nfi
den
tial
1489
5-1
63b
Intr
oduction
Pro
po
se
d c
on
ce
ptu
al a
pp
roa
ch
Mo
de
l o
ve
rvie
w
Next
ste
ps
38
Co
nfi
den
tial
1489
5-1
63b
A m
od
ula
r ap
pro
ach
wil
l b
e u
sed
in
the c
on
str
ucti
on
of
the m
od
el
Model overv
iew
Dem
an
d m
od
ule
Co
re m
od
ule
Co
st
mo
du
le
Dem
and
vo
lum
es
Ne
two
rk
co
sts
Route
sharing
an
aly
sis
Un
it c
osts
Incre
menta
l
costing a
nd
route
ing
facto
rs
netw
ork
asset
dim
en
sio
nin
g
Ne
two
rk
expenditure
s
Se
rvic
e u
nit
co
sts
KE
YIn
put
‘Active
’ ca
lcu
latio
nR
esult
Depre
cia
tion
Ne
two
rk
assum
ptions
Ne
two
rk
geodata
‘Offlin
e’ calc
ula
tion
Inte
rco
nn
ecti
on
mo
du
le
39
Co
nfi
den
tial
1489
5-1
63b
Th
e i
nte
rco
nn
ect
mo
du
le w
ill
req
uir
e d
ata
fro
m a
ll o
pera
tors
Opera
tors
typic
ally
off
er
a r
ange o
f in
terc
onnection s
erv
ices a
nd r
ela
ted
co-location c
om
ponents
Build
ing a
module
captu
ring the c
osts
of th
ese s
erv
ices w
ill r
equire d
eta
iled
data
fro
m the o
pera
tors
this
will
be a
sked for
a p
art
of th
e
data
request
The s
erv
ice c
osting in the m
odule
will
fo
cus o
n the c
ost of re
gio
nal
inte
rco
nn
ecti
on
(up t
o a
round 2
0
locations d
ependin
g o
n topolo
gy)
Cost of in
ter-
connection
Equip
ment
com
ponents
Sp
ace
com
ponents
Main
tenance
com
ponents
Pre
para
tion
com
ponents
Serv
ice
dem
and
(requests
)
Model overv
iew
Netw
ork
testing
40
Co
nfi
den
tial
1489
5-1
63b
Intr
oduction
Pro
po
se
d c
on
ce
ptu
al a
pp
roa
ch
Mo
de
l o
ve
rvie
w
Next
ste
ps
41
Co
nfi
den
tial
1489
5-1
63b
Ind
ustr
y i
s i
nvit
ed
to
resp
on
d o
n
the p
rop
osed
co
ncep
tual
ap
pro
ach
Ele
ctr
onic
vers
ions o
f conceptu
al
paper
and these s
lides w
ill b
e
dis
trib
ute
d b
y e
Opera
tors
have 4
weeks to s
ubm
it
conceptu
al consultation r
esponses
to O
PT
A
Aft
er
revie
w o
f th
e r
esponses, and
where
needed a
nd a
ppro
priate
, O
PT
A w
ill a
rra
ng
e f
or
me
etin
gs w
ith
th
e indiv
idual sta
kehold
ers
to
dis
cuss the r
esponse (
to b
e
arr
anged; appro
xim
ate
ly late
O
cto
ber)
Next ste
ps •
Conceptu
al appro
ach
42
Co
nfi
den
tial
1489
5-1
63b
We w
ou
ld l
ike o
pera
tors
to
su
bm
it
the r
eq
ueste
d d
ata
in
tw
o p
art
s
Ele
ctr
onic
vers
ions o
f th
e fix
ed a
nd
mobile
data
requests
will
be
dis
trib
ute
d b
y e
The d
ata
colle
ction p
hase is s
plit
in
to tw
o p
art
s
part
1: data
on d
em
an
d a
nd
netw
ork
to b
e s
ubm
itte
d
befo
re 1
9/1
0/0
9
part
2: data
on c
osts
and
exp
enditure
s(a
nd
inte
rconnection)
to b
e
subm
itte
d b
efo
re 1
6/1
1/0
9
We a
re a
vaila
ble
to c
larify
any
aspects
of th
e d
ata
colle
ction
Next ste
ps •
Data
request
Late
Octo
ber
meeting t
o inclu
de
dis
cu
ssio
n o
f d
ata
colle
ction (
Part
1
deliv
ere
d, P
art
2 in p
rogre
ss)
43
Co
nfi
den
tial
1489
5-1
63b
Th
e A
naly
sys M
aso
n p
roje
ct
team
Nam
e a
nd
tit
leR
ole
in
th
e p
roje
ct
Ja
me
s A
llen
Pro
ject
Directo
r
Ian S
treule
Pro
ject
Manager
and w
ork
str
eam
leader
–
mo
bile
co
stin
g
Da
ve
Lo
nsd
ale
Work
str
eam
leader
– fix
ed c
osting
Marc
Eschenburg
Ka
i L
in
Mo
de
llin
g s
up
po
rt a
nd
da
ta a
na
lysis
Da
ta a
nd
ge
o-a
na
lysis
Bart
-Jan S
weers
Develo
pm
ent
of
fixed a
nd m
obile
cost
mo
de
ls
Next
ste
ps •
Pro
ject
team
Gill
es M
onnia
ux
Rod P
ark
er
Ma
tth
ew
Sta
rlin
g
Pro
ject
Ad
vis
er
– m
ob
ile c
ostin
g
Pro
ject
Advis
er
– n
etw
ork
desig
n
Pro
ject
Ad
vis
er
– c
ost
mo
de
llin
g
44
Co
nfi
den
tial
1489
5-1
63b
Main
co
nta
cts
Fo
r O
PT
A
Hu
ib d
e K
leijn
+3
1 7
0 3
15
35
83
h.d
ekle
ijn@
opta
.nl
Fo
r A
na
lys
ys
Ma
so
n
Ian
Str
eu
le
+44 1
223 4
60600
ian.s
treule
@analy
sysm
ason.c
om
Next ste
ps •
Main
conta
cts
45
Co
nfi
den
tial
1489
5-1
63b
Rele
van
t d
ocu
men
ts
EC
Recom
mendation o
n w
hole
sale
term
ination c
osting
http://e
c.e
uro
pa.e
u/info
rmation_
socie
ty/p
olic
y/e
com
m/d
oc/im
ple
menta
tion_enfo
rcem
ent/art
icl
e_7/r
ecom
_te
rm_ra
tes_en.p
df
Next ste
ps •
Rele
vant docum
ents