Economic Model

Economic model in deliverable D14

The aim of the model is to calculate the cost implications of various options for a high speed connection between two destinations. The model and the possible options are described in detail in SERENATE report D14, which also includes cost examples compiled by use of the model.

The model uses a simplified network structure with three major building blocks:

1. The transmission link
2. The transmission equipment and
3. The routing and switching equipment.

The transmission link (Link options):

Five different link options are included in the model:

• Full ownership (own fibre) implies investments in fibres (construction costs) and expenses for operation and maintenance. In addition full ownership of fibres will also involve full ownership of transmission equipment (see below).
• Dark fibre (three options) implies expenses for leasing or buying a dark fibre. Operation and maintenance will to a certain degree be included in these costs. A dark fibre may include amplification and regeneration underway. If not expenses for transmission equipment are added in the model. By all means transmission equipment in both ends must be added (se below).
• Direct access (lambda) implies expenses for leasing or buying a wavelength connection. Transmission equipment in both ends must be added (see below).

The transmission equipment (Transmission options):

Here you can chose between; carries class, Metro or CWDM equipment as transmission medium and furthermore the capacity of the transmission equipment. Depending on the type of transmission equipment lambdas of 40, 10 or 1 Gbps, or a 10 Gbps Ethernet can be selected.

The routing and switching equipment (Routing/switching):

Depending on the choice of transmission equipment, a number of solutions for routers or switches and interface cards can be chosen here - including the cards on "both" sides of the router or switch.

Interest rate:

The interest rate is used to calculate the cost of capital used for the initial investment.

Capacity demand:

The capacity demand represents the overall capacity needed for a given transmission link.

Distance:

The distance represents the overall length of the transmission link.

Lifetime of fibre:

The economic lifetime of the fibre. The physical lifetime maybe 20 years or more, but operators may choose to operate with a much shorter time horizon e.g. 5 years.

Lifetime of electronics:

The economic lifetime of electronics

O&M fibre:

The costs of operation and maintenance of the transmission link. The costs are given as a percentage of the investment costs for a fibre. In a dark fibre O&M is smaller the costs will shared by a number of users. O&M does not include leasing costs.

O&M electronics

The costs of operation and maintenance of amplifiers and routers/switches as a percentage of investment costs.

O&M regenerators:

The costs of operation and maintenance of regenerators as a percentage of investment costs.