All in due time
Scientists often dream up useful models for our future, but they also dream up castles in the air. Fortunately, there are some scientists who can tell us if these castles can ever be built on solid ground.
Advanced communication and network services is a field where technology is way ahead of what most users can afford. At what point should such services be introduced? We journeyed out to Telenor Research and Development at Kjeller outside Oslo to speak with the people who provide a healthy dose of scepticism to their most techno-optimistic colleagues.
Techno-economics is the key issue!
"To derive suitable strategies for network and service introduction, you need techno-economic evaluation in telecommunications", says Leif Aarthun Ims, senior research scientist in the Broadband Access group of Telenor R&D. Since 1994, Ims has been working on access network development in several projects.
We all want faster connections, better service and more information, not to mention better sound quality, high resolution video images and real-time access to movies, games and chat rooms. We have all read about the wonderful new world out there. Why can't we have it all right now?
"What is happening on drawing boards and in laboratories is a far cry from what is actually available at home. As a customer, you are at the end of a very long line – and your end is the smallest, most fragile part of the line". Traditionally, telephone services were provided to homes through a twisted pair of copper wires. Today, cable networks and satellite discs are available. Soon, home users will be within reach of a cellular radio network for mobile telephony – or so we are told.
The broader, the better
The "information superhighway" and "broadband" were terms we learned in the nineties. The broader the band, the more information a user can receive. With the widespread use of Internet, bandwidth became a household term. What was the capacity of your modem? Did you have ISDN, or were you among the lucky few who had risen to the high speed DSL?
We all know the technology exists. Why can't we get it now?
A dedicated group of scientists with backgrounds in engineering and economics working at Kjeller, answer this common question with one word "techno-economics".
When asked to elaborate, Ims explained, "We can predict that some components will be cheaper, and that digging trenches for cables will be more expensive and we know a little about how much people are willing to pay for different services. Using this information, we build models, allowing us to predict how and when to implement the technological solutions which are already there, but not necessarily available to everyone".
Into your home
Availability is another key word. The access network, the final link to the end-user, has to be upgraded. Changing existing cables is expensive, so what are the alternatives? "Digitising the network offered improved service, and recently available technologies such as cable modems and DSL modems ensured faster connections. But the dream of optic fibre lines in every home is still just a dream. Even the Japanese dropped their ambitious plans to link every Japanese home by year 2010, a project estimated at USD 240 billions", Ims explained.
One key issue with a strong impact on the overall economics is the investment cost level. What kind of investment levels might be expected for various technologies deployed for broadband access in different markets and areas? How will the rates affect costs and revenues? What is the effect of costs associated with civil work required for a broadband access upgrade? How will the required investment level change over time?
Another factor in this investment includes migration towards fibres in the access network. How deep into the access network should the fibre be deployed? Finally, revenue, payback and cashflow. What project values in terms of cash flows and payback periods can the access network operator expect as the revenue streams from the new broadband service delivery arrive?
One project after the other
Such parameters have been in the focal point for European projects like TITAN (Tool for Introduction scenario and Techno-economic evaluation of Access Network), OPTIMUM (OPTImised architectures for MUltiMedia networks and services), and TERA (Techo-Economic Results from Acts). Borgar T. Olsen at Telenor R&D has been the project leader for OPTIMUM and TERA, and Kjell Stordahl at Telenor Networks has been responsible for the market analysis in the projects.
TERA began in June 1998 and will end in June of 2000. It is responsible for the techno-economic evaluations in the 4th Framework programme of the European Commission DG XIII. Comprehensive studies of various multimedia services and network alternatives are carried out in several field situations. "We are partners in a group of leading operators, equipment providers and research institutes", said Ims, "and co-operate with a number of other projects, some on techno-economical matters, others on purely technical matters".
Ims went on to explain that "Our mission is the consolidation of guidelines for implementation of new networks and services in ACTS (Advanced Communication Technologies and Services) concentration mechanisms. We shall also come up with a uniform and harmonised evaluation of the various ACTS trials with different focuses, enabling the construction of guidelines based on comparable results, and provide techno-economic support for ACTS.
According to Markku Lähteenoja, researcher at Telenor R&D, development of the programme has been on-going. "Our methodology has been developed in previous projects. TITAN and OPTIMUM combined market parameters like demand and revenue forecasting, broadband take-rates and tariff elasticity with network parameters such as subscriber density, geographical mapping and technology alternatives. The central part of TERA tool is a comprehensive database encompassing the cost characteristics of current and emerging network components. This also includes long-term predictions of component costs and related uncertainties".
Garbage in equals garbage out
Putting data into a computer is easy, but interpreting information that comes out is another matter. The TERA group at Kjeller have no problems letting other colleagues use their methodology, but insist that it is what goes into the studies, combined with their experience interpreting the results, which give them an advantage and has put the group in the forefront in techo-economical research.
Thanks to the work of the TERA group at Kjeller, disappointed technophiles wondering why they don't have access to next generation technology today finally have an answer: Techno-economics.
Text by: Øystein Frøiland
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