STEM newsletter

Modelling of a complex NGN migration project

30 July 2004

Siemens’ Customer Value argumentation team of ICN Carrier Networks (based in Munich, Germany) has built a model to investigate and evaluate the economic merits of migrating an existing TDM-based incumbent operator network, CANTV in Venezuela, to an NGN (IP-based) network. At the same time new services are introduced into the network, enabling new revenues as well as allowing existing services to be offered to all subscribers that previously could not use them due to limitations in some of the old switching equipment.

Structure of the model

The network rollout was planned over a number of phases as well as geographic areas. The STEM Scenario and Replication features were used in the model. The Scenario feature was used to allow the effect of the introduction of various new services over the underlying migration to be evaluated in combination with each other and individually.

The Replication feature was used to model the different geographic areas, which differed in their existing installed switch types and vendors, switch sizes and operating costs, service demand and revenues. The actual solution, calculated for each type of switch, was matched to the existing switches, re-using components where possible.

A second Scenario allowed the selection of individual areas or combinations of areas. The contribution of each area as well as the effect of varying the rollout speed and sequence was then evaluated. Also modelled was the effect of delaying rollout, which of course has the consequence of reducing market share as the competition has more chance to become established.

One Variant of the first Scenario was a “Status Quo” case, i.e. if the network and services are operated as usual and no investment is made in network upgrade and NGN, with the associated customer base erosion to competitive operators offering new services. Using this Variant as the base case, the effects of NGN investment are easy to show without needing to model the entire operator’s business since the parts common to all Variants can be excluded.

Concluding issues

Although simply replacing the network would not normally necessarily generate additional revenue, in this case there were still some old analogue and digital switches in the network that prevented the availability of all services to all subscribers, for example pre-paid service which is very popular especially for the lower ARPU segment. Therefore network replacement also increased subscriber numbers and ARPU. Another important revenue “protection” effect of an NG network is that the operator is in a position to offer new services such as IP-Centrex to existing customers, so retaining them instead of losing them to competitors who are able to offer these services via an IP connection and are not hampered by not having local exchange access to the subscribers.

The opex savings potential of the migration was also investigated. Sources of savings include space, power, site costs (due to site consolidation), staff. Opex savings, although significant, proved not to be very dominant compared to other costs and revenues.

The model, built with input from the operator, and its results were very well received by CANTV and assisted them in making far-reaching decisions on the future evolution of their network.

Siemens Information and Communication Networks (ICN) provided solutions for IP-based voice/data convergence, broadband access and optical transport networks to enterprises, carriers and service providers in 160 countries.

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