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Long Run Incremental Cost

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Long Run Incremental Cost
A foreseen, future change in the incremental cost to a company, which is the cost of a company producing one more unit of a product. Long run incremental costs are likely changes to the inputs of making a product, such as the cost of raw materials. For example, if making a product requires a significant amount of oil, and oil prices are thought to be likely to decline, the long run incremental cost is also likely to decline. While there is no guarantee that the long run incremental cost will change in the exact amount expected, attempting to calculate it helps a company make future investment decisions.


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The Japanese government tried to implement the Long Run Incremental Cost (LRIC) method for determining interconnection rates at the Japan-US summit meeting prior to the Birmingham summit in 1998.
Key Highlights: * The regulator is flexing its muscle, issuing a decision in May 2009 to base the cost of terminating calls on the incumbent's fixed network on a bottom-up long run incremental cost pricing model.
In June 2001, the MPHPT revised the Telecommunications Business Law, requiring NTT East and West to set interconnection charges (a per-call fee paid by competitor carriers to route calls over NTT's local telephone network) that were "fair and justifiable in terms of cost," calculated according to a method chosen by the MPHPT, with the long run incremental cost (LRIC) system currently being used to determine these charges.
 
 
 
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