Modeling Network Costs. Mark T. Bryant, Ph.D. Public Utility Commission of Texas NARUC/ACERCA Meeting Antigua, Guatemala August,

Transcription

1 Modeling Network Costs Mark T. Bryant, Ph.D. Public Utility Commission of Texas NARUC/ACERCA Meeting Antigua, Guatemala August,

2 Overview Presentation Overview Background - The Need to Estimate Network Costs Data development Network Design and Investment Modules Expense Modules Model demonstration 2

3 Background Telecommunications Act of 1996: Established a Universal Service fund to support service in rural areas Required incumbent telephone companies to provide access to unbundled network elements at cost-based rates (but not based on traditional rate-of-return ratemaking These requirements created a need to develop a methodology for estimating the costs of the various elements of the telecommunications network 3

4 FCC cost principles Cost principles were adopted by the FCC in its Universal Service and Local Competition proceedings FCC focus was on determining cost of basic network functions Also adopted principles of estimating total demand served by each function as well as determining costs based on a total replacement of the network using least-cost, forward looking technology 4

5 FCC cost principles 1) Network design using least-cost, most efficient technology 2) All network functions must have an associated cost 3) Only long-run forward looking costs may be considered Current cost of purchasing network equipment and facilities Long run costs - all inputs are avoidable 5

6 FCC cost principles 4) Cost based on federal or state authorized rate of return 5) Economic depreciation lives with the FCCauthorized range 6) Cost study must include demand for all services, to capture economies of scale 7) Reasonable allocation of joint and common costs 6

7 FCC cost principles 8) Cost study should be open and verifiable 9) Cost study should permit examination and modification of all assumptions and inputs 10) Examination of costs at a granular level (e.g., wire center, census block) 7

8 UNE costs produced by the HAI Model Network Interface Device ( NID ) Loop Distribution Loop Concentrator/Multiplexer Loop Feeder End Office Switching, including the cost of features supported by end office switch software Common Transport Dedicated Transport Direct Transport Signaling Links Signal Transfer Point ( STP ) Service Control Point ( SCP ) Operator Systems Public Telephones ADSL Loops DS-1 Loops DS-3 Loops USF Cost (Basic Local Service) Per-line USF Support Tandem Switching 8

9 HAI Model Process Flow Cluster Database Demographics, line counts and basic loop distance data ARMIS and Distance Files Distribution Module Calculates distribution distances and investment Feeder Module Calculates feeder distances and investment Default Inputs User Input Adjustments Switching & Interoffice Module Calculates switching, signaling, and interoffice investment User Interface Expense Modules (Density Zone, Wire Center, and CBG) Calculates cost of capital, expenses, UNE unit costs USF requirements, access costs Workfiles Output Reports 9

10 Need for Accurate Customer Location Data Design of loop plant is critically affected by Distance of customers from wire centers Dispersion of customers from each other Each of these factors affect cable and structure cost Distance determines Length of feeder routes Use of fiber or copper in feeder routes Dispersion determines Number of feeder routes Number and length of distribution routes Distribution cable size 10

11 Use of geocoded customer location data Provides most precise method of determining customer locations Ensures that sufficient plant is installed to reach all customer locations Provides an accurate basis for grouping customers into serving areas Permits association of customer locations with geographic units (i.e., census blocks, wire centers) 11

12 If Available, ILEC records can provide actual customer locations and line counts Provides much higher geocoding success rate than use of mailing list data Also provides actual service counts for each location (e.g., number of lines, DSL services) May need to be supplemented with plant records to ensure all service locations are included in the analysis 12

13 Clustering Once customer locations within a wire center are established, a clustering algorithm is used to group locations into clusters that can be efficiently served within a single serving area Clustering criteria No point in a cluster may be more than 17,000 feet distant (based on right angle routing) from the cluster s centroid. No cluster may initially exceed an equivalent POTS channel unit capacity of 6,451 lines in size. No point in a cluster may be farther than two miles from its nearest neighbor in the cluster. 13

14 Clustering - Two Types of Clusters Main clusters Must contain at least 20 lines, or At least one all-fiber loop Outlier clusters Are each associated with a main cluster Are chained together considering minimum distance from one cluster to the next A main cluster and all of its outlier clusters constitutes a serving area 14

15 Clustering - Serving area boundaries The algorithm calculates the size of the minimum rectangle that covers the area formed by the convex hull containing all cluster members The area, aspect ratio, and orientation of the rectangle also is calculated. 15

16 Wire Center Boundary 16

17 Geocoded customer locations 17

18 Customer Location Clusters 18

19 Clusters with Boundaries 19

20 Cluster Detail 20

21 Old HAI-TNS method 21

22 New CostQuest Method 22

23 New CostQuest Method 23

24 PointCode Process Converts the latitude and longitude coordinates for cluster centroids to the V&H coordinates used in the LERG to locate wire centers; Ensures that modeled distribution rectangles have an aspect ratio and area that reflects a minimum dimension equal to twice the default drop length for that cluster s density range; Calculates radial distances between main clusters and their serving wire center; Calculates radial distances between outlier clusters and main clusters, and main clusters to wire center; Computes angles between main feeders and the clusters they serve and computes angles between clusters and their subfeeders; Calculates rectilinear (right angle) distances between main clusters and their serving wire center, and between outlier clusters and main clusters. Assigns terrain, housing unit profile, and line density zone characteristics to the cluster based on the characteristics of the dominant CBG. 24

25 Network Overview Serving Area Serving Area Trunks to Other Wire Centers SAI SAI RT Wire Center Fiber Strands & Cables for high-cap loops RT SAI Feeder Cable (Copper or Fiber) Exchange Area Boundary Drop Serving Area Distribution Cable (Copper for POTS; fiber for high-cap loops) Terminal/Splice Serving Area (boundary) NID LEGEND NID = Network Interface Device RT = Remote Terminal SAI = Serving Area Interface Adapted from Engineering and Operations in the Bell System, 2 nd Edition,

26 Distribution Module Calculates feeder and distribution cable lengths required to serve all customer locations Selects feeder technology Copper feeder Fiber feeder with Digital Loop Carrier if certain criteria are met Calculates investment in loop components NID Drop Distribution cable and supporting structure Serving Area Interface DLC equipment, if applicable 26

27 Feeder Module Assumes four main feeder routes Sub-feeder branches from main routes to reach serving areas Module calculates cable sizes required on main and sub-feeder routes to serve all serving areas Feeder cable tapers as sub-feeder routes branch to serving areas Calculates cable investment associated with each serving area 27

28 Loop Outside Plant Components Outside Plant Central Office Building CLEC Collocation NID NID Drop Wire Block Terminal Distribution Cable Copper Distribution Serving Area Interface S A I Copper Feeder Cable M D F Main Distribution Frame 2-wire A N A L O G P O R T L O C A L D I G I T A L NID NID Drop Wire Block Terminal Distribution Cable Copper Distribution Serving Area Interface S A I CHANNEL UNITS TSI and control FIBER MULTIPLEXER NGDLC RT Next Generation DLC Remote Terminal Fiber Feeder Cable F D F Fiber Distribution Frame FIBER MULTIPLEXER D S X Cross Connect S W I T C H 28

29 Switching and Interoffice Module Determines number of switches required in each end office Sizes interoffice trunks and signaling network Calculates investment in: Switches Multiplexing and transmission equipment Interoffice cable and supporting structure SS7 links, STPs, and SCPs Operator systems 29

30 Interoffice Network Wire Center Tandem Switch Common Interoffice Trunks Common Dedicated Interoffice Transport Fiber Ring Interexchange Carrier Point of Presence (PoP) End Office Switch Direct End Office Switch Wire Center Wire Center 30

31 Interconnected Rings Logical Ring Hub H H H Main Ring H H Main Ring H H Logical Rings H Ring-Ring Connector H H Tnd H H R Host-Remote Ring R R System-System Connector Different Tandem Ring System TND 31

32 Signaling Network STP = Signal Transfer Point SCP = Service Control Point DB = Data Base/Service Management System SCP DB SSP = Service Switching Point EO = End Office Switch CP = Customer Premises STP STP Physical links on interoffice transport rings CP SSP EO SSP EO CP 32

33 Enhanced Calculations in HM5.3 4-wire, DSL, DS-1, and DS-3 loop UNEs Distribution fiber for high-capacity loops Multiple DLC line card types Sharing of cable and structure costs between loop UNEs Use of fiber rather than T1 on copper to serve remote clusters 33

34 Expense Module overview Capital Cost General Support Investments Direct Cost Total Cost Expense Factors Overhead, Tax Unit Cost Demand Units 34

35 Direct Costs Capital Cost Includes equity return, interest on debt, income taxes on return, and depreciation Accounts for tax effect of IRS depreciation schedules Can accommodate straight-line/square life schedules or the Equal Life Group method used by the FCC Operating Expenses Generally are based on expense to investment ratios calculated from most recent ARMIS data for the company and state under study Applied to investment by plant account as calculated by the model 35

36 General Support Includes items such as non-switch land & buildings, motor vehicles, general purpose computers Calculated by taking ratio of these accounts to plant accounts in ARMIS, then applying inverse of this ratio to investment calculated by the model May be assigned by line or according to direct expenses at user s option 36

37 Total Annual Cost Total Annual Cost is the sum of: Direct Cost Assignment of General Support Costs Company overhead expenses Taxes other than federal income tax Allowance for uncollectibles 37

38 Unit Cost Total Cost is divided by appropriate units (lines, minutes, etc.) to estimate unit cost Display of cost is by Unbundled Network Element By Wire Center By Groupings of Wire Centers By Line Density Zones Information is contained in the model s workfiles that permits more granular analysis By census block, census block group By individual serving area (cluster) 38

39 Questions? Mark T. Bryant, Ph.D. Public Utility Commission of Texas 1701 N. Congress Ave. Austin, Texas