Long run average incremental costs meaning

An economic costing approach used in telecoms regulation to set cost‑oriented interconnection and wholesale charges. long run average incremental costs (LRAIC) estimate the forward‑looking costs an efficient operator would incur to provide a defined increment of service or traffic over the long run, then divide those incremental costs by forecast demand to produce an average per‑unit charge. In practice this yields a single, symmetrical rate (for example, per minute or per megabyte) applied to all interconnecting operators, rather than bespoke charges reflecting each provider’s own cost base. The term is descriptive rather than a statutory definition. It is used in Ofcom and ComReg cost models, European Commission recommendations and related case law, alongside variants such as LRIC (including “pure LRIC”) and LRIC+, which differ in whether shared and common costs are included. LRAIC is commonly applied in setting mobile and fixed termination rates, leased line and wholesale broadband charges, and in resolving interconnection disputes under Significant Market Power (SMP) conditions and charge controls. Usage is broadly consistent across England and Wales, Scotland and Northern Ireland (regulated by Ofcom) and Ireland (regulated by ComReg), though the chosen variant (LRAIC, LRIC or LRIC+) may vary by market and regulatory period.