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Commission publishes study on a common approach for the calculation of the Weighted Average Cost of Capital in telecoms regulation

Today the Commission publishes a study on a common methodology for national regulatory authorities (NRAs) to determine the Weighted Average Cost of Capital (WACC) in the EU's telecom sector. The WACC assesses the return on investments required by investors. It is typically used by NRAs in the telecoms sector to set wholesale prices that operators charge each other for the use of their networks.

In line with the EU Regulatory Framework for telecommunications, NRAs considering price regulation to address market power in the telecoms sector should allow Significant Market Power (SMP) operators to earn a reasonable rate of return (or WACC) on their investments. However, regulators often use different methodologies to determine such a reasonable return, which results in WACCs differing considerably across the Union.

The study, prepared for the European Commission by the Brattle Group, looks into different methodologies and makes recommendations for the most appropriate approach to deriving the WACC. The report will contribute to the debate on the reasonable rate of return for investments in the telecoms network in regulatory proceedings and inform the European Commission's future policy in this area.

Refer to the study 
Executive summary in English
Executive summary in French