Efficient component pricing rule meaning

A pricing approach used in telecoms access and interconnection, under which the wholesale charge equals: (a) the incremental cost of providing the interconnection service; plus (b) the retail margin (including contribution to common costs) the network operator would forgo by selling interconnection to another provider rather than supplying the final customer itself. This opportunity cost construction seeks to leave the incumbent economically indifferent between retailing and wholesaling. ECPR (also known as the Baumol-Willig rule) is an economic concept rather than a term defined in UK or Irish legislation, and it is not a binding legal test in case law. It appears in regulatory submissions, expert evidence and competition law matters concerning access pricing and margin squeeze. In practice, UK (Ofcom) and Irish (ComReg) regulation generally require cost-oriented charges based on long-run incremental cost (LRIC or LRIC+) for many wholesale services (for example, call termination), and do not mandate ECPR. Authorities often view ECPR as potentially preserving incumbent market power where retail margins are high. Usage and understanding are broadly consistent across England and Wales, Scotland, Northern Ireland and Ireland.