An Improved Cost Proxy Model and Its Application-Cost Analysis of China IP Network

An improved cost proxy model is established in the following, where the extreme imbalance between urban and rural area as well as complicated geographic environment of China was taken into consideration. On the one hand, new parameters were introduced into scene variant vector so as to prescribe urban and rural differences and also topographical differences. On the other hand, in order to analyze network cost rather than business cost, original agent factors such as labor and capital price multiplexers are weakened, while scene vector which embodies region area, average density, average commitment bandwidth per user etc., were highlighted. Based on the improved cost proxy model, we built the China IP network cost optimization model employing engineering approach, and cost functions were then obtained through econometric analysis on a large number of simulation data. The results verify scope economies of telecommunications network cost, and prove the fact from the empirical point of view that IP voice service, whose bandwidth demand is much less than broadband access service, has to cross-subsidize the latter one. The conclusions provide both operators and regulation agencies with theoretical basis for development of IP voice services charges and implement of price control.