Project Description

Technical Approach

TONIC will use a business case study approach to assess new broadband and IP service scenarios, yielding quantitative economic results, and identifying and quantifying the associated risk factors. In IST, the project team intends to build upon previous experience in developing and exploiting techno-economic models for broadband access network evolution by integrating the services and applications level in its analyses. The results are key economic indicators such as Net Present Value (NPV), Internal Rate of Return (IRR), and Payback Period. Based on these results and on the risk analysis, TONIC will formulate recommendations for optimal service rollout strategies.

The business cases model representative investment projects where the services offered, demand, tariffs, and network costs are taken into account. The main components of a business case are illustrated in Figure 1.

Figure 1. The main elements included in a TONIC business case.

The various steps are identified below:

• The economic framework is defined for the business case. This includes the study period, i.e., the time frame over which the cash flows are evaluated, the discount rate, which may encompasses a perceived risk related to the technology or market, and other pertinent elements such as the type of areas in which the services are offered.
• Advanced services and service sets will be defined for different target groups, and analysed in terms of required quality, bit rate, and usage factors, with the objective of determining the corresponding load on the network.
• Demand scenarios derived from specifically developed models will be implemented for the different service sets, based on criteria such as user and area type as well as tariff structure.
• Network solutions for the provision of the services to the users will be explored in terms of both dimensioning rules and costs. They include fixed network solutions, mobile solutions based on UMTS and satellites, and hybrid solutions combining fixed and mobile media. The solutions will be modelled using the techno-economic tool developed in AC 364 TERA, in order to study a wide range of input parameters, such as variations in demand.
• Tariff structures will be established and refined, based on current practices and observed trends in broadband and mobile services.
• The key economic indicators - net present value, internal rate of return, and payback period - will be computed from the above-mentioned elements. These indicators enable the comparison of different solutions.
• Sensitivity and risk analysis methodologies will be applied, to provide insight into the major risk factors in the provision of advanced services.
• Recommendations for service rollout will be set forth, depending on the stated objective, which may be universal service on one hand or profit maximisation, on the other hand.