Total element long-run incremental cost (TELRIC) is a calculation method that the

United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...

Federal Communications Commission The Federal Communications Commission (FCC) is an independent agency of the United States federal government that regulates communications by radio, television, wire, satellite, and cable across the United States. The FCC maintains jurisdiction ...

(FCC) requires incumbent local exchange carriers (ILECs) to use to charge

competitive local exchange carrier A competitive local exchange carrier (CLEC), in the United States and Canada, is a telecommunications provider company (sometimes called a " carrier") competing with other, already established carriers, generally the incumbent local exchange carrie ...

s (CLECs) for

interconnection In telecommunications, interconnection is the physical linking of a carrier's network with equipment or facilities not belonging to that network. The term may refer to a connection between a carrier's facilities and the equipment belonging to ...

and colocation, effectively imposing a

price ceiling A price ceiling is a government- or group-imposed price control, or limit, on how high a price is charged for a product, commodity, or service. Governments use price ceilings ostensibly to protect consumers from conditions that could make com ...

. A variant of long-run incremental cost (LRIC), it "measures the forward-looking incremental cost of adding or subtracting a

network element In computer networks, a network element is a manageable logical entity uniting one or more physical devices. This allows distributed devices to be managed in a unified way using one management system. According to the Telecommunications Act of 1 ...

" from a hypothetical system (that is efficient and uses current technologies). This allows the incumbent to recover a share of the

fair value In accounting and in most schools of economic thought, fair value is a rational and unbiased estimate of the potential market price of a good, service, or asset. The derivation takes into account such objective factors as the costs associated wi ...

of their inputs in the long run. The FCC used the

telecommunications Telecommunication is the transmission of information by various types of technologies over wire, radio, optical, or other electromagnetic systems. It has its origin in the desire of humans for communication over a distance greater than that fe ...

term for the first time when it interpreted TELRIC's role under the 1996 Telecommunications Act, which had been based on a higher level of ILEC unbundling. In short, the act assumed that "ILECs would have to

lease A lease is a contractual arrangement calling for the user (referred to as the ''lessee'') to pay the owner (referred to as the ''lessor'') for the use of an asset. Property, buildings and vehicles are common assets that are leased. Industrial ...

components of the local telephone network to prospective competitors", who would then "expect to blend these components together, possibly using their own elements to offer appropriate services to end users". TELRIC pricing is not without controversy, as some economists have argued that TELRIC prices reduce the incentives of ILECs and CLECs to make investments in existing facilities and new technologies.Thomas M. Jorde, J. Gregory Sidak, & David J. Teece, ''Innovation, Investment, and Unbundling'', 17 YALE J. REG. 1, 5 (2000), http://scholarship.law.berkeley.edu/cgi/viewcontent.cgi?article=1283&context=facpubs.

References

Telephony United States communications regulation {{telephony-stub