When imposing obligations relating to cost recovery and price controls, ComReg takes into account investments made by the relevant operators and allows a reasonable rate of return on adequate capital employed. The Weighted Average Cost of Capital (“WACC”) provides a measure of the appropriate rate of return on capital or investment employed in the production of regulated services. As the WACC is a key input in the setting of cost recovery/price control obligations, it has implications for the setting of efficient prices for consumers and the creation of ongoing investment incentives for the regulated firm.

Following a detailed review, ComReg determined in early 2003 that eircom’s pre-tax nominal cost of capital was 11.5% for all relevant regulatory purposes.

ComReg is currently reviewing what constitutes an adequate WACC and plans to issue a consultation document in 2007 wherein it will consult with all interested parties on various issues pertaining to the WACC review.