NGN business modeling and planning - ITU-APT Foundation of India
NGN business modeling and planning - ITU-APT Foundation of India
NGN business modeling and planning - ITU-APT Foundation of India
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<strong>ITU</strong>-D Workshop on <strong>NGN</strong> <strong>and</strong> Regulation<br />
for <strong>India</strong><br />
<strong>NGN</strong> Business Modeling <strong>and</strong><br />
Planning<br />
New Delhi (<strong>India</strong>), October 2010<br />
Oscar González Soto<br />
<strong>ITU</strong> Consultant Expert<br />
Spain<br />
oscar.gonzalez-soto@ties.itu.int<br />
New Delhi, <strong>India</strong>, October 2010<br />
Business <strong>planning</strong> issues - OGS<br />
International<br />
Telecommunication<br />
Union
Agenda<br />
• Business Planning issues<br />
• Business Planning in <strong>NGN</strong><br />
International<br />
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Issues <strong>of</strong> <strong>NGN</strong> Business<br />
Planning<br />
What cost for network evolution?<br />
What timing per network segment?<br />
How to reduce CAPEX <strong>and</strong> OPEX?<br />
Which technology per segment?<br />
What new services to introduce <strong>and</strong> in what<br />
sequence ?<br />
How to deal with high traffic growth by data<br />
applications ?<br />
Others …….<br />
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Role <strong>of</strong> Business Planning<br />
Forecast solutions, costs <strong>and</strong> revenues<br />
Evaluate future Cashflows, NPV, IRR, ROI, etc.<br />
Perform “What-if” analysis for optional alternatives<br />
on Volume <strong>of</strong> customers, customer mixes <strong>and</strong><br />
services domains<br />
Perform benchmarking with “best in class”<br />
operators<br />
Decision making on strategy <strong>and</strong> actions in<br />
competition based on quantified evaluations<br />
Recommend alternatives <strong>and</strong> actions to ensure<br />
success<br />
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Definition <strong>of</strong> <strong>business</strong> plan<br />
A Business Plan presents the calculation <strong>of</strong> the financial<br />
indicators that enable the managers to evaluate the financial<br />
performances <strong>of</strong> an enterprise in order to take decisions.<br />
A Business Plan summarizes the results <strong>of</strong> the <strong>planning</strong> process:<br />
•the objectives to reach ( subscribers dem<strong>and</strong>, sales)<br />
• the description <strong>of</strong> all activities requested by the project;<br />
•the future revenues expected from the project;<br />
•the planned expenses (investment <strong>and</strong> operations);<br />
• the accounting statements <strong>and</strong> the financial indicators<br />
characterizing the pr<strong>of</strong>itability <strong>of</strong> the project.<br />
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Overall Planning: Related<br />
Processes <strong>and</strong> interrelation<br />
Business<br />
Planning<br />
Network<br />
Planning<br />
Strategic<br />
Network/<strong>business</strong><br />
Planning<br />
Long Term<br />
Structural<br />
Planning<br />
Short/Medium<br />
Term<br />
Planning<br />
Network<br />
Network<br />
Support<br />
Processes<br />
Customer<br />
Care &<br />
Billing ...<br />
Network<br />
Traffic & QoS<br />
Measurement ...<br />
Management<br />
The Network<br />
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Types <strong>of</strong> <strong>business</strong> plans<br />
Strategic Business Plan for evaluating a strategy:<br />
• aid for making internal decisions for the whole<br />
company (strategic guidelines at the national level, all<br />
markets)<br />
Tactical Business Plans for specific projects :<br />
• aid for making internal decisions for a particular area,<br />
or a market segment: mobiles, IP, applications<br />
Short term Business Plans for management control :<br />
• aid for monitoring the implementation <strong>of</strong> projects<br />
• preparation <strong>and</strong> follow-up <strong>of</strong> budgets,<br />
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Main financial indicators<br />
The most useful economical indicators are :<br />
- Net present value (NPV)<br />
- Internal rate <strong>of</strong> return (IRR)<br />
- Discounted Payback period (DPP)<br />
- Net cash flow (NCF)<br />
- Discounted cash flow (DCF)<br />
- Operating income<br />
- Revenue per service/service class<br />
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INFLOWS <strong>and</strong> OUTFLOWS<br />
Customers Shareholders Banks, lenders<br />
Sales <strong>of</strong> services Increase <strong>of</strong> equity Increase <strong>of</strong> debt<br />
(operating income) (capital increase) (credit, loans)<br />
INFLOWS<br />
cash flow<br />
OUTFLOWS<br />
Labour<br />
costs<br />
Training<br />
Network<br />
&<br />
equipment<br />
Technical<br />
& administrative<br />
expenses<br />
Tax<br />
Debt<br />
repayment<br />
with<br />
interests<br />
Dividends<br />
Staff<br />
Suppliers<br />
Service<br />
providers<br />
Government<br />
Banks,<br />
lenders<br />
Shareholders<br />
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Cash-Flow <strong>and</strong> components<br />
over time<br />
Financial evaluation <strong>and</strong> cash flow<br />
3000<br />
2000<br />
KEuro<br />
1000<br />
0<br />
-1000<br />
-2000<br />
Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10<br />
Capex investment<br />
Opex<br />
Capex extension<br />
Capex substitution<br />
Residual value<br />
Revenues<br />
Cash flow<br />
-3000<br />
-4000<br />
evaluation period<br />
International<br />
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Net Present Value (NPV) as<br />
best decision making indicator<br />
Net Present Value (NPV)<br />
A global capital budgeting technique; found by subtracting<br />
a project’s initial investment from the present value <strong>of</strong> its<br />
cash inflows discounted at a rate equal to the firm's cost <strong>of</strong><br />
capital.<br />
NPV = present value <strong>of</strong> cash inflows - initial investment<br />
NPV = Σ [CF/(1 + k)t] – Initial Investment<br />
Two metrics:<br />
NPV zero terminal value (when short term life cycles involved)<br />
NPV at perpetuity rate (when long life cycles <strong>of</strong> equipment <strong>and</strong><br />
projecting <strong>business</strong> at the end <strong>of</strong> evaluation period)<br />
International<br />
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Union 11
Net Present Value (NPV) as<br />
best decision making indicator<br />
250,00<br />
Differential NPV for <strong>NGN</strong> alternatives<br />
200,00<br />
Currency Units<br />
150,00<br />
100,00<br />
50,00<br />
0,00<br />
-50,00<br />
Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10<br />
medium speed migration NPV (Zero Terminal Value)<br />
medium level enhance NPV (Zero Terminal Value)<br />
no OSP enhance NPV (Zero Terminal Value)<br />
high level enhance NPV (Zero Terminal Value)<br />
Year<br />
Example <strong>of</strong> differential NPV comparison at 4 deployment<br />
alternatives<br />
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Union 12
Dynamic modelling <strong>of</strong> network<br />
activity flows for migration<br />
Replacement<br />
<strong>of</strong> Resources<br />
Dem<strong>and</strong><br />
Parameters<br />
Resource<br />
Depreciation &<br />
Decommissioning<br />
Resources Costs<br />
(And trends)<br />
Incremental<br />
Dem<strong>and</strong><br />
for service<br />
Total<br />
Incremental<br />
Dem<strong>and</strong> for<br />
Resources<br />
Incremental<br />
Resource<br />
Supply<br />
Production<br />
& Costing<br />
<strong>of</strong> Resources<br />
Tariff<br />
<strong>and</strong><br />
Revenue<br />
Service<br />
costs &<br />
charges<br />
Input data<br />
Tariff<br />
Policy<br />
Others costs<br />
(Admin/mkt)<br />
Phase <strong>of</strong><br />
calculation<br />
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Agenda<br />
• Business Planning issues<br />
• Business Planning in <strong>NGN</strong><br />
International<br />
Telecommunication<br />
New Delhi, <strong>India</strong>, October 2010 Business <strong>planning</strong> issues - OGS<br />
Union 14
Network Planning domains<br />
Planning domains to be addressed in <strong>NGN</strong><br />
Fixed Fixed Access Access<br />
BB BB Planning<br />
Fixed Fixed Switching<br />
<strong>and</strong> <strong>and</strong><br />
routing routing <strong>planning</strong><br />
Transmission<br />
<strong>planning</strong><br />
Access Access radio radio<br />
<strong>planning</strong><br />
Business Planning<br />
IT, IT, OSS, OSS, IMS IMS <strong>and</strong> <strong>and</strong><br />
Applications <strong>planning</strong><br />
Core Core radio radio<br />
<strong>planning</strong><br />
Signaling <strong>and</strong><br />
control <strong>planning</strong><br />
International<br />
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New Delhi, <strong>India</strong>, October 2010 Business <strong>planning</strong> issues - OGS<br />
Union 15
Business Planning Areas<br />
for <strong>NGN</strong><br />
• Business evaluation for core migration rates to<br />
IP/MPLS mode<br />
• Business evaluation for Local/Edge migration to<br />
IP/MPLS mode with new functionalities<br />
• Business evaluation for Access migration at physical<br />
<strong>and</strong> functional levels<br />
• Business evaluation for IP protocols migration: IPv4<br />
to IPv6<br />
• Business evaluation for Overall migration to full end<br />
to end <strong>NGN</strong><br />
International<br />
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New Delhi, <strong>India</strong>, October 2010 Business <strong>planning</strong> issues - OGS<br />
Union 16
Business Planning Areas<br />
for <strong>NGN</strong><br />
• Business impact <strong>of</strong> introducing new services <strong>and</strong><br />
service bundles<br />
• Wholesale versus retail <strong>business</strong> evaluations<br />
• What technology to use per geo-scenario<br />
• Infrastructure sharing <strong>business</strong> evaluation<br />
• NM/ OSS/BSS migration from multiple platforms to<br />
integrated platform<br />
International<br />
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Union 17
Business Planning projections<br />
Business plans by BT for overall investments <strong>and</strong> revenues<br />
with <strong>NGN</strong> 21 CN. This type <strong>of</strong> evaluation has to be performed<br />
by all service providers<br />
$<br />
Revenue<br />
21CN<br />
ICT ICT<br />
Services<br />
Invest to Grow<br />
Expenses<br />
Invest to Save<br />
Time<br />
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Business Planning savings<br />
Infrastructure sharing dimensions in <strong>NGN</strong> that need<br />
<strong>business</strong> evaluations to reduce costs<br />
Vertical network resources sharing<br />
Applications<br />
Services<br />
Switching<br />
Transmission<br />
Physical<br />
Spectrum<br />
Enduser<br />
sharing<br />
LLU<br />
Sharing<br />
Spectrum Sharing<br />
Mobile Virtual Network Operation Sharing<br />
Passive Infrastructure Sharing<br />
International<br />
Mobile<br />
Roaming<br />
Internatio<br />
nal GW<br />
sharing<br />
Customer Access Backhauling Local National International<br />
Horizontal network segments sharing<br />
International<br />
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Network Planning Tools<br />
Requirements:<br />
Illustration <strong>of</strong> functional requirements for the <strong>business</strong><br />
<strong>planning</strong> domain<br />
Inputs<br />
From other<br />
Planning Tools<br />
From Network<br />
From Technology<br />
From Data Bases<br />
From Planners<br />
Modular Functionalities<br />
Business/Network/Scenario Design<br />
Market Dem<strong>and</strong> Forecasting<br />
Costs, Tariffs <strong>and</strong> Revenues<br />
Capacity grow <strong>and</strong> Substitutions<br />
Financial evaluations<br />
Backward Cost Assignment<br />
Scenario’s Sensitivity<br />
Outputs<br />
To other<br />
Planning Tools<br />
To Network<br />
<strong>and</strong> OSS<br />
To Data Bases<br />
To Planners<br />
International<br />
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Union 20
Network Planning Tools<br />
Requirements:<br />
Required functionality for Business tools in<br />
<strong>NGN</strong><br />
- Service Dem<strong>and</strong> Projection<br />
- Dynamic <strong>modeling</strong> for technology substitution <strong>and</strong> migration rates<br />
- Dimensioning multiple flows (circuit <strong>and</strong> packet modes)<br />
- Evaluation <strong>of</strong> network resources <strong>and</strong> associated investment<br />
(CAPEX)<br />
- Evaluation <strong>of</strong> revenues for services <strong>and</strong> service bundles<br />
- Modeling multiple resource lifetimes<br />
- Modeling <strong>of</strong> dem<strong>and</strong> elasticity to tariffs<br />
- Interrelation between network growth <strong>and</strong> operational cost (OPEX)<br />
- Cost assignment as a function <strong>of</strong> utilization rates<br />
- Generation <strong>of</strong> st<strong>and</strong>ard financial results like Cash Flow, Pr<strong>of</strong>it &<br />
Loss, Balance Sheet, NPV, IRR, etc.<br />
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What technology to use per geoscenario?<br />
: Best Solution Mapping<br />
Projects/<br />
Geo-scenarios<br />
Compliance<br />
• Services<br />
• Capacities<br />
• Availability<br />
• Operational<br />
constraints<br />
Mapping<br />
Technical<br />
Solutions<br />
Selected<br />
Scenarios<br />
Mapping<br />
Economical<br />
Solutions<br />
Techno-economical<br />
Evaluation<br />
• Architecture<br />
• Density<br />
• Capital expenditure<br />
• NPV <strong>of</strong> full costs<br />
• Entry costs<br />
Network<br />
Models<br />
Mapping<br />
Qualified<br />
Solutions<br />
Qualifiers<br />
• Flexibility<br />
• Speed to service<br />
•Evolution<br />
• Experience<br />
Selected<br />
Network<br />
Solutions<br />
Input criteria<br />
Results<br />
Actions<br />
Recommendations<br />
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New Delhi, <strong>India</strong>, October 2010 Business <strong>planning</strong> issues - OGS<br />
Union 22
Solution Mapping: Investment<br />
sensitivity to density in WL<br />
Access<br />
High density areas<br />
300<br />
Monetary units<br />
250<br />
200<br />
150<br />
100<br />
Metrop. total<br />
Metrop. infrastructure<br />
Sub. total<br />
Sub. infrastructure<br />
50<br />
0<br />
529<br />
651<br />
774<br />
894<br />
1 016<br />
1 139<br />
1 259<br />
1 381<br />
1 504<br />
1 625<br />
1 747<br />
1 870<br />
1 990<br />
2 112<br />
2 235<br />
2 355<br />
2 477<br />
Density (subscribers per KM²)<br />
International<br />
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Cost sensitivity to customer<br />
density per type <strong>of</strong> solution<br />
CAPEX, price per line,<br />
Monetary units<br />
5 000<br />
4 500<br />
4 000<br />
3 500<br />
3 000<br />
2 500<br />
2 000<br />
1 500<br />
1 000<br />
500<br />
0<br />
7<br />
13<br />
20<br />
27<br />
33<br />
40<br />
47<br />
Density: (customers/ km^2)<br />
53<br />
WL extension in<br />
existing network<br />
ẆL solution Greenfield<br />
WLL solution Greenfield<br />
- Clear cross-point between WL <strong>and</strong> WLL solutions as a density function<br />
- Important impact <strong>of</strong> existing network reusability<br />
International<br />
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Union 24
Frequent applicability<br />
mapping at access<br />
Scenario Type<br />
Technology<br />
Solution<br />
WL-DLC/xDSL<br />
WL-PLC<br />
LD<br />
Villages<br />
<br />
LD resorts<br />
<br />
Rural<br />
Clusters<br />
<br />
(if OSP available)<br />
<br />
Disperse<br />
settlement<br />
s<br />
<br />
FTTx<br />
WiMax<br />
<br />
FTTC<br />
<br />
<br />
FTTP<br />
<br />
<br />
<br />
IMT 2000-<br />
WLL<br />
Satellite<br />
<br />
<br />
<br />
<br />
Mobile<br />
<br />
<br />
<br />
<br />
Most frequent applicability is illustrated per solution category<br />
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Solution mapping by <strong>business</strong><br />
evaluations<br />
• Current positioning <strong>of</strong> access <strong>and</strong> FTTH solutions in service/density<br />
scenarios<br />
High<br />
density<br />
10000<br />
WL: Multiservice<br />
<strong>and</strong> DSLAM<br />
xDSL<br />
GPON/FTTH<br />
Greenfield<br />
GPON/FTTH<br />
Existing Access<br />
Rural <strong>and</strong> Low Density<br />
Medium<br />
density<br />
1000<br />
1000<br />
200<br />
-High 200<br />
clustering<br />
Low<br />
density<br />
20<br />
-Low<br />
clustering<br />
0.5<br />
Narrowb<strong>and</strong><br />
Switching<br />
Wireless Access<br />
Narrowb<strong>and</strong><br />
Fixed GSM/CDMA<br />
Satellite NB<br />
Overlap area<br />
Quantitative Dif. < 10%<br />
“Qualitative assignment”<br />
Wireless Access<br />
Wideb<strong>and</strong>/BB/WiMAX<br />
Satellite BB<br />
Cust./Km2<br />
Services<br />
&Traffic POTS/Fax POTS/ISDN/Data POTS/Data nx64 POTS/data/Video Multimedia BB<br />
International<br />
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Union 26
Recommendations<br />
• Identify key factors for <strong>business</strong> feasibility <strong>and</strong><br />
strategy definition<br />
• Develop team with capability to perform technoeconomical<br />
evaluations to decide best alternative.<br />
Collaborate with external experts when needed<br />
• Investment in <strong>business</strong> evaluations produce the<br />
higher returns by a high multiplication factor<br />
International<br />
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