Incremental Costs for Incremental Decisions in Telecommunications

Diversijication by incumbent telecommunications companies raises many issues for regulators. Given the concerns expressed by potential competitors antl.some ·consumergroups, it is important for regulatory commissions to adopt costing principles that cannot be manipulated bypmticipants in the hearing process. Incremental cost is offered as the benchmark conceptforidentifyingpredation and cross-subsidization in that it dutifully embodies theprinciple of cost-eausality. Moreover, while it is important to measure costs with precision, it is better to have a rough approximation of the right number than a precise calculation of the wrong number.