NGN Buiness modeling and planning.pdf

InternationalTelecommunicationUnionBusiness planning issues - OGSNew Delhi, India, October 2010

ITU-D Workshop on NGN and Regulation for India

NGN Business Modeling and Planning

New Delhi (India), October 2010

Oscar González SotoITU Consultant Expert

Spain [email protected]

InternationalTelecommunicationUnionBusiness planning issues - OGSNew Delhi, India, October 2010 2

Agenda

• Business Planning issues

• Business Planning in NGN


What cost for network evolution?

What timing per network segment?

How to reduce CAPEX and OPEX?

Which technology per segment?

What new services to introduce and in what sequence ?

How to deal with high traffic growth by data applications ?

Others …….

Issues of NGN Business Planning


Forecast solutions, costs and revenues

Evaluate future Cashflows, NPV, IRR, ROI, etc.

Perform “What-if” analysis for optional alternatives on Volume of customers, customer mixes and services domains

Perform benchmarking with “best in class”operators

Decision making on strategy and actions in Decision making on strategy and actions in competition based on quantified evaluationscompetition based on quantified evaluations

Recommend alternatives and actions to ensure success

Role of Business Planning


Definition of business plan

A Business Plan presents the calculation of the financial indicators that enable the managers to evaluate the financial performances of an enterprise in order to take decisions.

A Business Plan summarizes the results of the planning process: • the objectives to reach ( subscribers demand, sales)• the description of all activities requested by the project;• the future revenues expected from the project;• the planned expenses (investment and operations);• the accounting statements and the financial indicators

characterizing the profitability of the project.


Overall Planning: Related Processes and interrelation

BusinessPlanning

StrategicNetwork/business

Planning

Long TermStructuralPlanning

Short/MediumTerm

Planning

Network

Planning

The Network

Network

ManagementNetworkSupportProcesses

CustomerCare &

Billing ...

NetworkTraffic & QoS

Measurement ...


Types of business plans

Strategic Business Plan for evaluating a strategy:• aid for making internal decisions for the whole company (strategic guidelines at the national level, all markets)

Tactical Business Plans for specific projects :• aid for making internal decisions for a particular area, or a market segment: mobiles, IP, applications

Short term Business Plans for management control :• aid for monitoring the implementation of projects• preparation and follow-up of budgets,


Main financial indicators

The most useful economical indicators are :

- Net present value (NPV)- Internal rate of return (IRR) - Discounted Payback period (DPP)- Net cash flow (NCF)- Discounted cash flow (DCF)- Operating income- Revenue per service/service class


INFLOWS and OUTFLOWS

cash flow

Customers Shareholders Banks, lenders

Sales of services Increase of equity Increase of debt

LabourcostsTraining

Technical& admini-strativeexpenses

Network&equipment

Tax Debtrepaymentwithinterests

Dividends

ShareholdersBanks,lenders

Govern-ment

Suppliers Serviceproviders

Staff

INFLOWS

OUTFLOWS

(credit, loans)(capital increase)(operating income)


Cash-Flow and components over time

Financial evaluation and cash flow

-4000

-3000

-2000

-1000

0

1000

2000

3000

Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10

evaluation period

KEur

o

Capex investmentOpexCapex extensionCapex substitutionResidual valueRevenuesCash flow


Net Present Value (NPV) as best decision making indicator

Net Present Value (NPV)A global capital budgeting technique; found by subtracting a project’s initial investment from the present value of its cash inflows discounted at a rate equal to the firm's cost of capital.

NPV = present value of cash inflows - initial investment

NPV = Σ [CF/(1 + k)t] – Initial Investment

Two metrics:NPV zero terminal value (when short term life cycles involved)NPV at perpetuity rate (when long life cycles of equipment and projecting business at the end of evaluation period)


Net Present Value (NPV) as best decision making indicator

Differential NPV for NGN alternatives

-50,00

0,00

50,00

100,00

150,00

200,00

250,00

Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10

Year

Cur

renc

y U

nits

medium speed migration NPV (Zero Terminal Value) no OSP enhance NPV (Zero Terminal Value)

medium level enhance NPV (Zero Terminal Value) high level enhance NPV (Zero Terminal Value)

Example of differential NPV comparison at 4 deployment alternatives


Dynamic modelling of network activity flows for migration

IncrementalDemandfor service

TotalIncrementalDemand forResources

IncrementalResourceSupply

Production& Costingof Resources

ResourceDepreciation &Decommissioning

TariffandRevenue

Servicecosts &charges

Others costs(Admin/mkt)

TariffPolicy

DemandParameters

Replacementof Resources

Resources Costs(And trends)

Input data

Phase ofcalculation


Agenda

• Business Planning issues

• Business Planning in NGN


Network Planning domains

Planning domains to be addressed in NGNPlanning domains to be addressed in NGN

Business PlanningBusiness Planning

Fixed Access BB Planning

Fixed Access BB Planning Transmission

planningTransmission

planning

Fixed Switching and

routing planning

Fixed Switching and

routing planning

IT, OSS, IMS and Applications planningIT, OSS, IMS and

Applications planning

Access radio planning

Access radio planning

Core radio planning

Core radio planning Signaling and

control planning


Business Planning Areasfor NGN

• Business evaluation for core migration rates to IP/MPLS mode

• Business evaluation for Local/Edge migration to IP/MPLS mode with new functionalities

• Business evaluation for Access migration at physical and functional levels

• Business evaluation for IP protocols migration: IPv4 to IPv6

• Business evaluation for Overall migration to full end to end NGN


Business Planning Areasfor NGN

• Business impact of introducing new services and service bundles

• Wholesale versus retail business evaluations

• What technology to use per geo-scenario

• Infrastructure sharing business evaluation

• NM/ OSS/BSS migration from multiple platforms to integrated platform


Business Planning projections

Business plans by BT for overall investments and revenues with NGN 21 CN. This type of evaluation has to be performed by all service providers

Time

$

Revenue ICT

Expenses

Invest to Grow

ICTServices

21CN

Invest to Save


Business Planning savings

Infrastructure sharing dimensions in NGN that need business evaluations to reduce costs

Horizontal network segments sharing

BackhaulingAccessCustomer Local National International

Physical

Spectrum

Switching

Services

Applications

Transmission

Verti

cal n

etw

ork

reso

urce

s sha

ring

International Mobile

Roaming

International GW sharing

End-user

sharing

Passive Infrastructure SharingLLU Sharing

Mobile Virtual Network Operation Sharing

Spectrum Sharing


Illustration of functional requirements for the business planning domain

Modular Functionalities

Market Demand Forecasting

Costs, Tariffs and Revenues

Capacity grow and Substitutions

Financial evaluations

Backward Cost Assignment

Inputs From other

Planning Tools

From Network

From Technology

From Data Bases

From Planners

Outputs

To other Planning Tools

To Network and OSS

To Data Bases

To Planners

Scenario’s Sensitivity

Business/Network/Scenario Design

Network Planning Tools Requirements:


Required functionality for Business tools in NGN

- Service Demand Projection- Dynamic modeling for technology substitution and migration rates- Dimensioning multiple flows (circuit and packet modes)- Evaluation of network resources and associated investment (CAPEX)

- Evaluation of revenues for services and service bundles- Modeling multiple resource lifetimes- Modeling of demand elasticity to tariffs- Interrelation between network growth and operational cost (OPEX)- Cost assignment as a function of utilization rates- Generation of standard financial results like Cash Flow, Profit & Loss, Balance Sheet, NPV, IRR, etc.

Network Planning Tools Requirements:


What technology to use per geo-scenario? : Best Solution Mapping

Compliance• Services• Capacities• Availability• Operational

constraints

SelectedScenarios

NetworkModels

SelectedNetworkSolutions

Recommendations

MappingTechnicalSolutions

Projects/Geo-scenarios

Techno-economicalEvaluation• Architecture• Density• Capital expenditure• NPV of full costs• Entry costs

Qualifiers• Flexibility• Speed to service• Evolution• Experience

Results

Input criteria

Actions

MappingEconomical

SolutionsMappingQualified Solutions


Solution Mapping: Investment sensitivity to density in WL Access

High density areas

Metrop. total

Metrop. infrastructure

Sub. total

Sub. infrastructure

Density (subscribers per KM²)

Mon

etar

y un

its

0

50

100

150

200

250

300

529

651

774

894

1 01

6

1 13

9

1 25

9

1 38

1

1 50

4

1 62

5

1 74

7

1 87

01

990

2 11

2

2 23

52

355

2 47

7


Cost sensitivity to customer density per type of solution

0500

1 0001 5002 0002 5003 0003 5004 0004 5005 000

7 13 20 27 33 40 47 53

Density: (customers/ km^2)

CA

PEX,

pric

e pe

r lin

e,

Mon

etar

y un

its WL extension inexisting network

.WL solution Greenfield

WLL solution Greenfield

- Clear cross-point between WL and WLL solutions as a density function

- Important impact of existing network reusability


Frequent applicability mapping at access

Mobile

Satellite

FTTx

WL-DLC/xDSL

WL-PLC

IMT 2000-WLL

WiMax

Technology Solution

Disperse settlement

s

LD resorts Rural Clusters

LD Villages

Scenario Type

(if OSP available)

FTTC FTTP

Most frequent applicability is illustrated per solution category


Solution mapping by business evaluations

• Current positioning of access and FTTH solutions in service/density scenarios

POTS/Fax POTS/ISDN/Data POTS/data/Video Multimedia BBPOTS/Data nx64

Highdensity

Mediumdensity

- Highclustering

10000

1000

1000

200

200

0.5

Cust./Km2

Services&Traffic

WL: MultiserviceWL: Multiserviceand DSLAMand DSLAMxDSLxDSL

Satellite BB

NarrowbandSwitching

GPON/FTTHGPON/FTTHGreenfieldGreenfield

Wireless AccessWideband/BB/WiMAX

Rur

al a

nd L

ow D

ensi

ty

Lowdensity

- Lowclustering Satellite NB

Wireless AccessNarrowband

20 Fixed GSM/CDMA

Overlap areaOverlap area

Quantitative Dif. < 10%Quantitative Dif. < 10%

““Qualitative assignmentQualitative assignment””

GPON/FTTHGPON/FTTHExisting AccessExisting Access


Recommendations

• Identify key factors for business feasibility and strategy definition

• Develop team with capability to perform techno-economical evaluations to decide best alternative.

Collaborate with external experts when needed

• Investment in business evaluations produce the higher returns by a high multiplication factor

Documents

NGN Buiness modeling and planning.pdf