The Worldwide trends is introducing local loop unbundling in order to activate competition at the local telephone market. The local loop unbundling make entrance barrier into the local telephone market decrease by allowing competitive carriers lease incumbent carrier's local loop at price based on cost. Also the local loop unbundling provides competitive carriers opportunities that they can delay local loop investment which is uncertain and sunk. The ability to defer permits that the competitive carriers see the evolution of local telephone market, before take an irreversible decision to invest in local loop. If local telephone market condition is good, competitive carriers make the investment in the local loop. However, if local telephone market condition is not good, competitive carriers don't invest in the local loop.
But TELRIC(Total Element Long Run Incremental Cost) do not include this value of opportunity in the pricing of local loop unbundling. Despite the acknowledged importance of investment for long-run welfare maximization in telephone industries, the modern theory of investment under uncertainty has not yet been incorporated into the theory of network access pricing. This paper presents that there is value of real option which is called option to defer in the local loop unbundling and suggests that this value should be included in the price of local loop unbundling in order to prevent competitive carrier's decision making on the construction of local loop from distorting.
