Lecture#08 Analysis in the field of telecommunications The Bonch-Bruevich Saint-Petersburg State University of Telecommunications Series of lectures Telecommunication networks Instructor: Prof. Nikolay Sokolov,

Network development (ITU) OSS – operational support system, SLA – service level agreement.

Main directions of analysis 1. Forecasting 2. Network structure 3. Quality of Service (QoS) 4. Traffic engineering 5. Economic analysis

Forecasting: foreword Forecasting is the process of making statements about events whose actual outcomes (typically) have not yet been observed. A commonplace example might be estimation of the expected value for some variable of interest at some specified future date. Prediction is a similar, but more general term. An important, albeit often ignored aspect of forecasting, is the relationship it holds with planning. Forecasting can be described as predicting what the future will look like, whereas planning predicts what the future should look like. There is no single right forecasting method to use. Selection of a method should be based on your objectives and your conditions (data, etc.). Source:

Inaccurate Predictions This telephone has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us Western Union internal memo, 1876 I think there is a world market for maybe 5 computers Thomas Watson, Chairman of IBM, 1943 There is no reason anyone would want a computer in their home Ken Olson, President, Chairman & Founder Digital Equipment Corporation, K ought to be enough memory for anybody Bill Gates, Microsoft, 1981 Conclusion: Prediction is very difficult, especially if it's about the future. (Niels Bohr, Nobel Prize in Physics in 1922.).

Main considerations One of the reasons of qualitative network development is the interest of the group of subscribers which brings in a good return to Operator in new kinds of services. A number of requirements of this subscriber's group stimulate radical changes in different components of telecommunications network. At present time, the most essential changes take place in access networks. It is desirable that qualitative changes were recognized during the development of forecasts. These results are necessary for the choice of rational principles of further telecommunication system development. Different methods are being applied during the process of telecommunications networks planning. Method selection is carried out taking into consideration problem definition, character of the considered process, and available statistic information.

Unexpected surprise

Formalized forecasting methods

Two examples of trend extrapolations

Forecasting of the future and the past

Forecasting related to access networks

Generalization (1) Forecasting can be broadly considered as a method or a technique for estimating many future aspects of a business or other operation. There are numerous techniques that can be used to accomplish the goal of forecasting. For example, a retailing firm that has been in business for 25 years can forecast its volume of sales in the coming year based on its experience over the 25-year periodsuch a forecasting technique bases the future forecast on the past data. While the term "forecasting" may appear to be rather technical, planning for the future is a critical aspect of managing any organizationbusiness, nonprofit, or other. In fact, the long-term success of any organization is closely tied to how well the management of the organization is able to foresee its future and to develop appropriate strategies to deal with likely future scenarios. Intuition, good judgment, and an awareness of how well the economy is doing may give the manager of a business firm a rough idea (or "feeling") of what is likely to happen in the future. Nevertheless, it is not easy to convert a feeling about the future into a precise and useful number, such as next year's sales volume or the raw material cost per unit of output. Forecasting methods can help estimate many such future aspects of a business operation. Source: Reference for Business. Encyclopedia of Small Business, 2nd edition.

Generalization (2) Source: Reference for Business. Encyclopedia of Small Business, 2nd edition. Suppose that a forecast expert has been asked to provide estimates of the sales volume for a particular product for the next four quarters. One can easily see that a number of other decisions will be affected by the forecasts or estimates of sales volumes provided by the forecaster. Clearly, production schedules, raw material purchasing plans, policies regarding inventories, and sales quotas will be affected by such forecasts. As a result, poor forecasts or estimates may lead to poor planning and thus result in increased costs to the business. How should one go about preparing the quarterly sales volume forecasts? One will certainly want to review the actual sales data for the product in question for past periods. Suppose that the forecaster has access to actual sales data for each quarter over the 25year period the firm has been in business. Using these historical data, the forecaster can identify the general level of sales. He or she can also determine whether there is a pattern or trend, such as an increase or decrease in sales volume over time. A further review of the data may reveal some type of seasonal pattern, such as peak sales occurring before a holiday.

Main directions of analysis 1. Forecasting 2. Network structure 3. Quality of Service (QoS) 4. Traffic engineering 5. Economic analysis

Network structure. Some definitions Network structure Term is used to describe the method of how data on a network is organized and viewed. Network architecture Also referred to as the network model, the network architecture is the overall structure of how a network is laid out. The network architecture is commonly drawn out as a diagram for a visual representation of the overall network. A well designed network architecture helps prevent network bottlenecks and various other issues. Some authors use term topology instead of the word architecture because term architecture is widely applied in the publications concerning telecommunication protocols.

Examples for the graph with six nodes

Oriented, unoriented and mixed graphs Example of finding the Steiner point

Change of the access network structure

Two variants of the ring network construction

Access network modernization

Example of the several rings creation

Transformation of the optimization problem (1) Subscript s – start, subscript f – future

Transformation of the optimization problem (2) Example of the stable solution

Transformation of the optimization problem (3)

Average length of line

Main directions of analysis 1. Forecasting 2. Network structure 3. Quality of Service (QoS) 4. Traffic engineering 5. Economic analysis

Definitions In the Recommendation E.800 and in a number of other ITU-T documents several similar definitions of the term "Quality of service" are formulated: 1. Totality of characteristics of a telecommunications service that bear on its ability to satisfy stated and implied of the user of the service (E.800). 2. The collective effect of service performance which determine the degree of satisfaction of a user of a service. It is characterised by the combined aspects of performance factors applicable to all services, such as; - Service operability performance; - Service accessibility performance; - Service retain ability performance; - Service integrity performance; and - Other factors specific to each service (Q.1741). 3. The collective effect of service performances which determine the degree of satisfaction of a user of the service (Y.101). 4. The collective effect of service performance which determine the degree of satisfaction of a user of a service. It is characterized by the combined aspects of performance factors applicable to all services, such as bandwidth, latency, jitter, traffic loss, etc (Q.1703).

Dynamics of speech quality

Recommendation ITU-T E.800 (1)

Recommendation ITU-T E.800 (2)

Recommendation ITU-T E.800 (3)

Recommendation ITU-T E.800 (4)

Recommendation ITU-T E.800 (5)

Recommendation ITU-T E.800 (6)

Main terms (1) 1. Quality. The totality of characteristics of an entity that bear on its ability to satisfy stated and implied needs. Note – The characteristics should be observable an/or measurable. When the characteristics are defined, they become parameters and are expressed by metrics. 2. Service. A set of functions offered to a user by an organization constitutes a service. 3. Item (entity; element). Any part, device, subsystem, functional unit, equipment or system that can be individually considered. 4. User. A person or entity external to the network, which utilizes connections through the network for communication. 5. Customer. A user who is responsible for payment for the service.

Main terms (2) 6. Service accessibility performance. The ability of a service to be obtained, within specified tolerances and other given conditions, when requested by the user. 7. Service integrity performance. The degree to which a service is provided without excessive impairments, once obtained. 8. Network performance. The ability of a network or network portion to provide the functions related to communications between users. 9. Trafficability performance. The ability of an item to meet a traffic demand of a given size and other characteristics, under given internal conditions. 10. Dependability. Performance criterion that describes the degree of certainty (or surety) with which the functions is performed regardless of speed or accuracy, but within a given observation interval.

Main terms (3) 11. Service integrity performance. The degree to which a service is provided without excessive impairments, once obtained. 12. Network performance. The ability of a network or network portion to provide the functions related to communications between users. 13. Trafficability performance. The ability of an item to meet a traffic demand of a given size and other characteristics, under given internal conditions. 14. Availability. The ability of an item to be in a state to perform a required function at a given instant of time or at any instant of time within a given time interval, assuming that the external resources, if required, are provided. 15. Reliability performance. The ability of an item to perform a required function under given conditions for a given time interval.

Main terms (4) 16. Transmission performance. An indication of a communication signal at the egress of network compared to its performance at the ingress to the network. The indication of performance is expressed by a choice of pertinent parameters for the application or service in question. 17. Propagation performance. The ability of a propagation medium, in which a wave propagates without artificial guide, to transmit a signal within the given tolerances. 18. End-to-end quality. Quality related to the performance of a communication system, including all terminal equipment. 19. End-to-end IP network. The set of exchange link and network section that provide the transport of IP packets transmitted from source host to destination host. 20. End-to-end IP network performance. Measurable relative to any given unidirectional end-to-end IP service.

QoS and NGN (1)

QoS and NGN (2)

QoS and NGN (3)

QoS and NGN (4)

Main directions of analysis 1. Forecasting 2. Network structure 3. Quality of Service (QoS) 4. Traffic engineering 5. Economic analysis

The mean number of phone calls

The mean number of calls to modem pool

The mean holding time of phone call

The mean holding time of Internet session

Busy hour

ITU-T Recommendation Y.1542 (1)

ITU-T Recommendation Y.1542 (2)

ITU-T Recommendation Y.1542 (3)

Main directions of analysis 1. Forecasting 2. Network structure 3. Quality of Service (QoS) 4. Traffic engineering 5. Economic analysis

Background Cost-effectiveness of a telecommunications network can be estimated from two points of view. Firstly, information exchange is of appreciable benefit when producing any goods or services. From this point of view, it is very hard to estimate efficiency of the telecommunications network by units adopted in economics. It is considered that in countries of EU, one dollar of investments increases growth of social product by 2.0 – 2.5 dollars. In the USA this index is even higher: from 4.0 to 8.0 dollars. One of the possible approaches for obtaining of such estimates is based on information volume mentioned in the second lecture. Secondly, the cost-effectiveness of telecommunication network is estimated from the optimality of its construction, maintenance, and development points of view. In this lecture exactly that approach to the analysis of cost-effectiveness related to telecommunication networks is discussed.

Jipp curve (1) Jipp curve is a term for a graph plotting the number (density) of telephones against wealth as measured by the Gross Domestic Product (GDP) per capita. The Jipp curve shows across countries that teledensity increases with an increase in wealth or economic development (positive correlation), especially beyond a certain income. In other words, a country's telephone penetration is proportional to its population's buying power. The relationship is sometimes also termed Jipp Law or Jipp's Law. The Jipp curve has been called "probably the most familiar diagram in the economics of telecommunications". The curve is named after A. Jipp, who was one of the first researchers to publish about the relationship in The number of telephones was traditionally measured by the number of landlines, but more recently, mobile phones have been used for the graphs as well. It has even been argued that the Jipp curve (or rather its measures) should be adjusted for countries where mobile phones are more common that landlines, namely for developing countries in Africa.

Jipp curve (2)

Jipp curve (3)

Metcalfes Law

Main trends The following processes play an important role in the development of modern telecommunications system: Conversion to so-called "customer economics"; Convergence of telecommunications networks; Integration in telecommunications; Consolidation in telecommunications; Changing of transmission and switching technologies; Market of the new services; Increasing role of the content-oriented services.

Classifications of clients (1)

NGN as economical solution Increase of communication Operators revenues is possible by solving of two important problems. Firstly, independently or with assistance of services Providers, it is expedient to take over another niche, implicitly related to telecommunications business. The cases in point are information services which, in the long run will provide increase of Operators revenues. Secondly, revenues increase can be achieved when minimizing expenses. In this instance the matter concerns optimal ways of infocommunication system development and perfecting of maintenance processes. Efficiency of these processes determines, to a great extent, the level of Operational expenses on the system management. NGN concept – from the economic point of view can be considered as fulfilment of new requirements of potential clients at the expense of comparatively slight increase of CAPEX with essential decrease of OPEX.

Main indexes (1) GNI per capita – Gross national income (GNI) is the sum of value added by all resident producers plus any product taxes (less subsidies) not included in the valuation of output plus net receipts of primary income (compensation of employees and property income) from abroad. GNI per capita is gross national income divided by mid-year population. GDP per capita – Gross domestic product (GDP) is the sum of value added by all resident producers plus any product taxes (less subsidies) not included in the valuation of output. GDP per capita is gross domestic product divided by mid-year population. Growth is calculated from constant price GDP data in local currency. Capital expenditures (CAPEX) are expenditures creating future benefits. A capital expenditure is incurred when a business spends money either to buy fixed assets or to add to the value of an existing fixed asset with a useful life that extends beyond the taxable year. CAPEX are used by a company to acquire or upgrade physical assets such as equipment, property, or industrial buildings. Operating expenses (OPEX) are non-capital expenses incurred by a company in normal operations: salaries and wages, insurance costs, floor space rental, electricity, computer maintenance contracts, software maintenance contracts, and so on. In brief, almost all routine expenditures a company makes are operating expenses, except for a few special non-operating expenses (such as costs of financing a loan, or one-time costs for closing a plant), and except for capital costs.

Main indexes (2) Cash flow is the movement of cash into or out of a business, project, or financial product. It is usually measured during a specified, finite period of time. Measurement of cash flow can be used to determine a project's rate of return or value. The time of cash flows into and out of projects are used as inputs in financial models such as internal rate of return, and net present value. to determine problems with a business's liquidity. Being profitable does not necessarily mean being liquid. A company can fail because of a shortage of cash, even while profitable. as an alternate measure of a business's profits when it is believed that accrual accounting concepts do not represent economic realities. For example, a company may be notionally profitable but generating little operational cash (as may be the case for a company that barters its products rather than selling for cash). In such a case, the company may be deriving additional operating cash by issuing shares, or raising additional debt finance. cash flow can be used to evaluate the 'quality' of Income generated by accrual accounting. When Net Income is composed of large non-cash items it is considered low quality. to evaluate the risks within a financial product. E.g. matching cash requirements, evaluating default risk, re-investment requirements, etc.

Main indexes (3) Net present value (NPV) of a time series of cash flows, both incoming and outgoing, is defined as the sum of the present values (PVs) of the individual cash flows. In the case when all future cash flows are incoming (such as coupons and principal of a bond) and the only outflow of cash is the purchase price, the NPV is simply the PV of future cash flows minus the purchase price (which is its own PV). NPV is a central tool in discounted cash flow (DCF) analysis, and is a standard method for using the time value of money to appraise long-term projects. Used for capital budgeting, and widely throughout economics, finance, and accounting, it measures the excess or shortfall of cash flows, in present value terms, once financing charges are met. The NPV of a sequence of cash flows takes as input the cash flows and a discount rate or discount curve and outputting a price; the converse process in DCF analysis, taking as input a sequence of cash flows and a price and inferring as output a discount rate (the discount rate which would yield the given price as NPV) is called the yield, and is more widely used in bond trading. Each cash inflow/outflow is discounted back to its present value (PV). Then they are summed. Therefore NPV is the sum of all terms,

Main indexes (4) where t – the time of the cash flow i – the discount rate (the rate of return that could be earned on an investment in the financial markets with similar risk.) R t – the net cash flow (the amount of cash, inflow minus outflow) at time t. For educational purposes, R 0 is commonly placed to the left of the sum to emphasize its role as (minus) the investment. The result of this formula if multiplied with the Annual Net cash in-flows and reduced by Initial Cash outlay will be the present value but in case where the cash flows are not equal in amount then the previous formula will be used to determine the present value of each cash flow separately. Any cash flow within 12 months will not be discounted for NPV purpose.

Net present value (NPV)

Example of NPV (1)

Example of NPV (2) Source: ITU

Average revenue per user Average revenue per user (sometimes average revenue per unit) usually abbreviated to ARPU is a measure used primarily by consumer communications and networking companies, defined as the total revenue divided by the number of subscribers. This term is used by companies that offer subscription services to clients for example, telephone carriers, Internet service providers, and hosts. It is a measure of the revenue generated by one customer phone, PC, etc., per unit time, typically per year or month. In mobile telephony, ARPU includes not only the revenues billed to the customer each month for usage, but also the revenue generated from incoming calls, payable within the regulatory interconnection regime. This provides the company a granular view at a per user or unit basis and allows it to track revenue sources and growth.

Instructor: Prof. Nikolay Sokolov, Questions? Analysis in the field of telecommunications