Hello, everyone!
Today, I would like to continue and share with you about the Techno-Economic - Cost Model Structure.
The structure of a network depends on the nature of the services offered and their requirements including bandwidth, symmetry of communication and expected levels of demand.
Figure 1. Techno-economic parameters
As shown in Figure 1, the techno-economic framework basically consists of the following building blocks: Area definition (geography and existing network infrastructure situation); Service definitions for each user segment with adoption rates and tariffs, such as network dimensioning rules and cost trends of relevant network equipment; cost models for investments (CAPEX) and operation costs (OPEX); Discounted cash flow model; Output metrics to be calculated.
The model analyses several technical parameters (distances, bandwidth, equipment performance, etc.) as well as economic parameters (equipment costs, installation costs, service pricing, demographic distribution, etc.). The model simulates the evolution of the business from 5 to 25 years. This means that each parameter can have a different value each year, which can be useful for reflecting factors that evolve over time.
1. General Model Assumptions
Techno-Economic model framework defines the network starting from a single central office (or head- end) node and ending at a subscriber CPE. At the CO, we consider only the devices that support the connection to the access network (OLT).
Users are usually classified in four main categories:
Home (residential customers)
SOHO (Small Offices and Home Offices)
SME (Small- to Medium-sise Enterprises)
LE (Large Enterprises).
The tool implements a methodology for the techno-economic analysis of access networks for residential customers and SME.
Table 1. General Model Assumptions
Access networks (for Wired technologies) have two separate but related components: physical plant and network equipment (see Table 1). The physical plant includes the locations where equipment is placed and the connections between them. The physical plant costs depend primarily on the labor and real estate costs associated with the network service area, rather than on the specific technology to expand.
Access network costs can be grouped into two categories: the costs of building the network before services can be offered (homes passed), and the costs of building connections to new subscribers (homes connected). More specifically, the homes passed portion of costs consists of exchange/CO fit out, feeder cables and civil works, cabinet and splitters, and distribution cables and civil works. The deployment cost calculations assumptions suppose that all construction work required to provide service to all homes passed takes place during the first year (deployment phase). However, only the necessary electronic equipments are deployed in the CO as well as the aggregation nodes to accommodate the initial assumption for the take rate.
2. Input Parameters
As mentioned beforehand, the definition of the input attributes is fundamental to obtain the right outputs. The model divides the inputs into two main categories: general and specific input parameters. General parameters are those that describe the area and service characteristics and are common to all the technologies. The specific parameters are those that characterise each solution, in technological terms.
These parameters are divided into three main groups:
Equipment Components
Cable Infrastructure
Housing
The housing cost is the price to build any structures required in the outside plant (Cabinets, closures, etc.) This plant corresponds to the part between CO and the subscriber house. With regard to the cable infrastructure, the percentage of new cable corresponds to the need of the new cable required, and the percentage of new conduit parameter takes into account both underground and aerial lines. The civil work cost is based on the above mentioned parameters (for example: % of new conduit (Underground/Aerial), etc.) and on the Database cost. The cost of the labor also takes into account the cabling either in underground ducts (buried trenching) or on overhead poles (aerial trenching).
To build a new network or upgrade an existing one, an operator has to choose from a set of technologies. The cost structure may vary significantly from one technology to the other in terms of up-front costs, variable cost and maintenance costs. Each technology type has elements which are dedicated, like modems and shared elements (shared by many users) such as cabinets, optical network units, base stations and cables.
While some costs like equipment pricing, are easy to compute given the data in the Cost Database, because they do not depend on network topography, the per subscriber cabling costs (i.e. trenching and fiber) and equipment housing costs (which depend on distance and density) do, so they require optimisation.
A number of choices, assumptions, and predictions have to be made before proceeding to the techno-economic analysis of a broadband access network. These include the selection of the geographical areas and customer segments to be served, the services to be provided, and the technology to be used to provide the services. As we have seen above, the definition of the input attributes is fundamental to obtain the right outputs. Then, we define three main activities:
Area Definition (Area parameters)
Requested Services (Service parameters)
Commercial Parameters and Type of Access
3. Output Results
The financial analysis requires several outputs from the tool. The financial analysis is basically focused on the following steps:
to compute the amount of equipment that needs to be installed each year for providing the service;
to compute the amount of money spent on operational costs (Operations and Maintenance, Customer Support, Service Provisioning, Marketing);
to compute the yearly income, taking into account that existing customers pay for 12 months;
to compute the net profit obtained each year; and the NPV (Net Present Value) of the yearly profits.
The calculated outputs are presented in Table 2:
Table 2. Output Results
You are welcome to leave a message and exchange in the comment area. Thank you!
