Cost modelling

Analysys Mason is respected worldwide for our independence, as well as the exceptional quality of our work on the costing, pricing and regulation of telecoms networks. Since our groundbreaking mobile costing work for the UK regulator in the late 1990s, Analysys Mason has undertaken hundreds of such projects worldwide.

We build bottom-up, top-down and hybrid models for costing the full range of telecoms networks, including fixed, mobile, broadcasting and satellite technologies. We consider the allocation of costs across the full scope of services on these networks, including voice, data, television, interconnection, co-location and leased lines. These models enable:

• regulatory authorities to provide a fair setting for new entrant operators with wholesale service prices, and encourage operational efficiency
• operators to understand the true costs of providing services, and make well-informed pricing decisions.

We have modelled all generations of mobile networks (up to and including 5G) and fixed networks  (from legacy public telephone networks through to the latest next-generation networks) resulting in a deep understanding of their cost structures. The combination of our strong area knowledge, building on years of wide-ranging experience, and proven methodologies creates accurate and flexible models for our clients.

Our model development methodology follows a four-step approach:

• specifying the model’s design capabilities and structure to achieve its intended objectives
• collecting input data from appropriate sources
• constructing the model, preparing the input data to populate it and sense-checking the outputs
• calculating relevant cost measures and using them to inform strategic decisions, or even pricing of services.

We have a clear understanding of the full range of factors that must be considered when constructing such models, ensuring that we account for any limitations or uncertainties. The factors cover:

• all technical and implementation aspects (cost trends, efficiency adjustments, migration between technology generations, depreciation methods, weighted-average cost of capital)
• treatment of common costs (identification of these costs, appropriate mark-up methodologies)
• price setting (allowable asymmetries, glide paths, windfall losses).

We work closely and flexibly with operators, regulators and policy makers in developing robust cost models to help tackle and resolve the regulatory challenges they face.