5.2.2 Negotiation-based price setting is most adequate, if there is an efficient market of players with similar market power. However, in case of one (or few) dominant players, negotiation-based prices will lead to suboptimal results, as dominant players can exert their market power to determine actual price levels. In addition, negotiation-based price setting is often highly intransparent and the public interest is usually not taken into consideration. 5.2.3 Price-setting by benchmarking is an often used efficient method e.g. to quickly reduce prices to (international) best-practice prices. One major problem with benchmarking is the choice of reference countries, which can lead to widely varying results and gives an additional difficulty of how to adjust prices to local market circumstances. 5.2.4 Cost-based price-setting is a most widely used approach by regulators to set prices at levels of an efficient operator. The two main approaches (each of which comes with different variants) are Long-RunIncremental Cost (LRIC) and Fully-Allocated Cost (FAC). According to economic theory, both approaches will converge to the same results, if they are based on current costs of an efficient operator and use a full-service (or long-run average) increment. However, in most cases, LRIC-based cost models lead to lower prices, by using a more narrow definition of the actual service increment or by applying forward-looking efficiency improvements. 5.3 Fully allocated cost approach 5.3.1 In the case of price-setting for tower and electricity access sharing, RURA applies – in an initial approach – a fully-allocated cost methodology, using actual cost figures provided by all main operators in Rwanda. This approach uses weighted-average capital-expenditures (CAPEX) figures with different categories for asset life time and weighted-average operating costs (OPEX) as submitted by the operators to determine monthly costbased infrastructure sharing prices (see Annex F for detailed CAPEX and OPEX figures derived from operator data submissions). 5.3.2 A cost-based service price is defined as: SERVICE COST = OPEX + DEPRECIATION + RETURN ON CAPITAL While operating costs can be determined relatively straight-forward, return on capital and depreciation charges can be based on different approaches, depending on the form of depreciation. Most commonly used approaches are straight-line depreciation (used in most accounting systems) and annuities. 14