UCC BU GSM – Model Manual

UCC BU GSM – Model Manual

Version 1.0

24 November 2008

Contents 1. Introduction ........................................................................................ 3

1.1 Purpose of document ........................................................................... 3

1.2 Purpose of model ................................................................................. 3

2. Methodology ....................................................................................... 5

2.1 LRIC + Mark-up definition and principles ............................................. 5

2.2 Forward looking costs .......................................................................... 6

2.3 Scorched node approach ..................................................................... 7

2.4 Annualised capital costs ....................................................................... 8

3. Model Overview ................................................................................ 12

3.1 Model structure .................................................................................. 12

3.2 Overview of model operation ............................................................. 13

4. Model Operation ............................................................................... 14

4.1 Introduction ........................................................................................ 14

4.2 1. Masterfiles ...................................................................................... 14

4.3 2. Traffic Demand............................................................................... 14

4.4 3. Routing and Conversion ................................................................. 16

4.5 4. Network Design Parameters .......................................................... 16

4.6 5. Unit Investment & Opex ................................................................. 17

4.7 6. NE Demand ................................................................................... 18

4.8 7. Radio Dimensions .......................................................................... 20

4.10 9. Annualised Costs ........................................................................... 25

4.11 10. Service Costs ............................................................................... 26

BU MOBILE MODEL MANUAL – DRAFT 03 APRIL 2006

Page 3 of 27

1. Introduction

1.1 Purpose of document The purpose of this document is to provide:

• An overview of the BU LRIC plus Mark-up methodology • An overview of the model • A manual to describe in detail how the model operates.

1.2 Purpose of model The model calculates network charges for mobile interconnection services for 2007. The services covered are: • Call origination • Call termination • SMS origination • SMS termination

By implication it is necessary to model all conveyance services listed below: Serivce ID Name GSM101 Outgoing - Calls to on net GSM102 Outgoing - Calls to other GSM operators

GSM103 Outgoing - Calls to PSTN & FWA CDMA operators

GSM104 Outgoing - Calls to international GSM105 Outgoing - Calls to emergency services GSM106 Outgoing - Calls to voicemail GSM107 Outgoing - Inbound roaming

GSM108 Incoming - Calls from other GSM operators

GSM109 Incoming - Calls from PSTN & FWA CDMA operators

GSM110 Incoming - Calls from International GSM111 Incoming - Inbound roaming GSM112 Outgoing - SMS to on net


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GSM113 Outgoing - SMS to other GSM operators GSM114 Outgoing - SMS to international

GSM115 Incoming - SMS from other GSM operators

GSM116 Incoming - SMS from international In addition to the above services provided by the Ugandan operators, the following interconnect services have also been modelled:

Mobile origination Mobile termination


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2. Methodology This section describes the key methodologies used in the model:

• LRIC plus Mark-up definitions and principles • Forward looking costs • Scorched node approach • Annualised capital costs

2.1 LRIC + Mark-up definition and principles Economic theory suggests that optimal prices are achieved when the tariff equates to the marginal cost of providing a service. Marginal costs in this context are defined as the increase in the cost base associated with the provision of one additional unit of production. However, the telecommunications industry is characterised by high levels of fixed common and joint costs that would not be recovered if pricing were based solely on marginal costs. As a result, it is normal for interconnect charges to be based on forward looking long run incremental costs (LRIC). This assumes that all inputs are variable in the long run (number of employees, capital charges etc.), and therefore interconnect charges include a return on capital. LRIC is generally defined as the cost of adding a product or service to a portfolio of existing products or services or, conversely, the cost avoided if production of a product or service is taken away from the list of existing products or services.

With LRIC based prices, competitors are able to decide whether to use an incumbent’s network or, alternatively, build their own network, because the interconnection prices will reflect the costs of constructing a network based on modern technology, including a reasonable rate of return on the investment. The cost structure will reflect the costs that an efficient operator would incur in establishing such a network.

However a business which prices its services based on LRIC would not be viable in the long run, since it would not recover its fixed common and joint costs. Therefore the tariff of one particular service needs to include a mark-up to cover fixed common and joint costs.


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Where there are economies of scope, as indicated by the presence of fixed common and/or joint costs between increments, average LRIC will be lower than average total cost. If interconnection prices were then set equal to LRIC it would follow that the fixed common and joint costs would not be recovered. Failure to provide the Ugandan operators with the ability to recover all of their costs would not provide adequate incentives for the Ugandan operators to invest in new network services and infrastructure.

Hence a mark-up, calculated as a percentage of capital costs, has been included in the BU model to allow for the recovery of operators’ fixed and joint common costs. This mark-up has been calculated based on the indirect costs and direct opex separately provided by the Ugandan operators. Therefore costs produced by the BU model include all costs either variable or fixed incurred by an operator. An individual percentage mark-up has been applied for switching network elements while an equi-proportionate mark-up (EPMU) has been used for all other network elements.

2.2 Forward looking costs If LRIC is to provide efficient price signals to the market then the result must reflect the forward-looking costs of building and operating a modern network. Forward-looking costs reflect the costs that will be incurred in the future to meet future objectives and, as such, some judgment is necessary in estimating forward-looking costs. Forward-looking costs differ from historic costs in a number of ways. Historic costs were recorded in the past and were related to meeting historic objectives. Figure 2.2 below compares the uses and attributes of historic and forward-looking costs.

Figure 2.2: Historic versus forward-looking costs Historic costs Forward-looking costs Uses Financial reporting

Assessment of past behaviour Proxy basis for future decisions

Basis for calculating LRIC Basis for future decisions Relevant costs for a new entrant

Positives Relatively simple Easy to produce Transparent and reconcilable Datum for accounting profit

Supports economically efficient decisions Provides absolute price floors and ceilings Establishes target costs

Negative Embeds economically Outputs sensitive to specific


Page 7 of 27

s inefficient allocation of resources Misstates real profit

chosen methodology Complex and lacks transparency / reconcilability May give volatile movements in profit over time

Forward looking costs might be expected to differ from historic costs as a result of technological change, price inflation (general and specific), and the fact that historic costs were incurred to meet past objectives and may have been excessive. BU LRIC models use forward-looking capital costs.

2.3 Scorched node approach There are two main approaches to modelling the network topology in LRIC models:

Scorched earth – This is an approach where the location and number

of network nodes are determined based on an optimal network design, taking account of current and future demand profiles

Scorched node – This approach takes the current location and number of network nodes as the basis for the modelled network topology.

The scorched earth approach has a number of key limitations:

It is commercially unrealistic, particularly for incumbent operators.

Network nodes can rarely be sited in the theoretically ideal location, with the results that networks are always less than optimal

It is practically impossible to model well. Network design is a complex process, involving a very large number factors and design parameters, not all of which are measurable in advance

It can only provide optimisation at a point in time. Networks develop over time in response to changes in forecast demand and allowing for evolution and uncertainty, rather than at the theoretical limits of efficiency.

The scorched node approach is superior and has been adopted, because it:

Acknowledges that it is impossible to accurately capture the impact of

such highly complex processes as those in a purely predictive model. Recognises that it is commercially and economically impossible

continually to redesign the nodal structure of a network or to make significant changes within the short term horizon of a cost model.


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Relies instead upon statistics about the design of actual operators’ networks as predictors of the network design constraints faced by any operator.

Even though the scorched node approach has been adopted in the model, the number of nodes in the Base Station Sub-System i.e. number of BTS sites and BSCs is variable. This increase in the flexibility of the model allows determining if there is any inefficiency in the actual access radio dimensioning.

2.4 Annualised capital costs The purpose of the model is to calculate the cost of services for a particular year and it is therefore necessary to annualize capital employed. The annualised capital cost is added to annual operational expenditure to find the annual costs of each service.

An annuity approach is used in the model to estimate the annualised capital costs, including the cost of capital. The use of annuities for determining annual capital costs has the merit of smoothing depreciation costs over the life of the asset.

Depreciation, in economic terms, can be defined as the change in value of an asset over a given period. This definition is consistent with the objective of estimating the forward-looking economic costs of interconnection conveyance services.

The value of an asset may be influenced by a number of factors including: Its running costs and changes in running costs over its lifetime; The value of its outputs and changes in value of outputs over its

lifetime; Its productivity (in terms of the volume of outputs it can generate) and

changes in productivity over its lifetime; and The existence or expectation of a challenger asset (i.e. an alternative

marque or technology), which threatens to redefine the modern equivalent asset.

It is apparent from the above that it is theoretically possible to estimate depreciation by modelling the individual factors which may influence an asset’s value in the form of its net present value (note also that asset lives would be similarly determined). It is equally apparent that this may be highly complex and would require the specification of a number of complex and/or arbitrary exogenous assumptions. Additionally, there may be problems of rational expectations in that the value of outputs in a regulated industry will be influenced by the depreciation of its inputs.

In light of these problems a sensible approach is to adopt a growing or tilted annuity method.


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First, it is useful to describe a standard annuity.

Standard Annuity

A standard annuity is used to calculate the constant periodic payments to capital for a given number of periods. In the context of our question this is analogous to the sum of economic depreciation and cost of capital. The annuity is expressed in the following form:

ntr

rIC

11.0

Where: C is the constant annual capital charge;

It=0 is the replacement value of the asset at the start of the period;

r is the cost of capital; and

n is the useful life of the asset.

A standard annuity would accurately describe the total annual capital charge associated with an asset in the situation where there is no change in price of the asset over its useful economic lifetime. However, it is clear that such a restrictive assumption is wholly inappropriate for the telecoms industry that is characterised by the consumption of assets that are subject to substantial price changes.

Tilted Annuity

A tilted annuity offers a way of incorporating the effects of asset price changes and can be expressed in the following form:

10 1.

111

.

t

ntt i

ri

irIC

Where: Ct is the annual capital charge in period t

i is annual change in the price of the asset;

Since we are indifferent to which period t is measured (provided, of course, consistency with the period for which the asset value I is measured) we can simplify the expression for the first period (t=1).


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ntt

ri

irIC

111

.01

The above formulation assumes a rate of change of asset price i which is consistent with the useful economic life of the asset n. Both i and n, however, are defined as exogenous variables which implies that i is the average annual rate of price change over the assets lifetime. The above approach requires that all the above variables be collected for each asset type that is to be modelled.

Thus far, we have assumed that the asset is acquired, put into operational service and cash expended simultaneously on the first instant of the first period (t=1). This assumption is unrealistic since it ignores any time to build the network during which capital is tied up and in which no revenues are being earned. In the ordinary world of continual investment this is analogous to assuming away the existence of capital work in progress, and would understate the costs of the network. To correct for this omission the price of the asset at the start of the period needs to be adjusted to reflect its price when the outlay of expenditure was actually incurred and the cost of capital tied up during the unproductive period. This can be achieved by the following adjustment:

u

tuu

tt irIriII

111.)1.( 000

Where: I`t=0 is the adjusted value of the asset to reflect the time taken in building the asset; and

u is the average time taken to build the asset.

Thus, the appropriate formulation for the annual capital charge of an asset is in the following form:

- for simple annuity

n

u

t rr

irIC

111

1.0

- for tilted annuity

n

u

tt

ri

irirIC

111

11

01


Page 11 of 27

The model provides the facility to use either a simple or tilted annuity to calculate the annualised capital costs.

The cost of capital is required for use in the calculation of the capital annuity and is the combined cost of debt and equity that is borne by a company. These two sources of capital are weighted together to derive a weighted average cost of capital for the company in question. The standard CAPM approach is set out in the following approach:

Figure 2.3: Formula for nominal pre-tax WACC

EDEr

EDDr

TWACC pre tax Equity post taxDebt post tax

c

)1(( )

Where:

1. r Debt post tax = (Risk free rate + debt risk premium) * (1 – Tc)

2. r Equity post tax = Risk free rate + Beta * market risk premium

3. Tc = Marginal tax rate

4. D = Market value of debt

5. E = Market value of equity


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3. Model Overview

3.1 Model structure The model is structured as follows:

Figure 3.1: Model Overview

Design

8. Switch & Trans Dimens

2. Traffic Demand

10. Service Costing

7. Radio Dimensions

A. Results

4. Network design parameters

5. Unit Investment & Opex

9. Annualised Costs

6. NE Demand

3. Routing & Conversion

1. Masterfiles

Each box depicted in Figure 3.1 represents a separate worksheet in the model. The contents and calculations performed in each worksheet are as follows:

Figure 3.2: Model worksheets

Worksheet Type Purpose A. Results Output Summarises the results calculated by the

model B. Schematic Information Provides an overview of calculations and

data flows in the model C. Diagram Information Provides an overview of a mobile network

and the number of actual and dimensioned network elements

1. Masterfiles Input Input sheet for lists used throughout


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model – services and network elements 2. Traffic Demand Input Input sheet for subscriber numbers, traffic

data by service and busy hour conversion factors

3. Routing & Conversion

Input Input sheet for service route factors, SMS conversion factors, traffic distribution and coverage data

4. Network Design Parameters

Input Input sheet for spectrum, cell sectorisation, cell parameters, equipment quantities and erlang table

5. Unit Investment & Opex

Input Input sheet for unit costs of equipment, asset lives etc; opex and capex costs

6. NE Demand Calculation Calculates busy hour traffic demand for each type of equipment in the network, based on annual traffic demand, busy hour conversion factors and route factors

7. Radio Dimensions

Calculation Calculates required radio equipment quantities for busy hour traffic demand

8. Switch & Trans Dimens

Calculation Calculates required switching and transmission equipment quantities for busy hour traffic demand

9. Annualised Costs Calculation Calculates annualised costs of network equipment (based on dimensioned and actual quantities, and unit costs); allocates annualised costs to network elements; applies opex and capex mark-ups

10. Service Costing Calculation Calculates unit service costs, with reference to network element costs, service volumes, route factors and SMS conversion factors

3.2 Overview of model operation The Bottom Up Model uses the network design parameters to calculate the network equipment (such as switches, transmission systems and network platforms) that will be needed to handle the traffic demand in the busy hour.

An option is provided on sheet “A.Results” to either use the quantity of network elements dimensioned by the model using the design parameters or the actual quantity of network equipment present in the Ugandan operator network in 2005.

The Model then allocates the costs of each network element amongst the various categories of traffic (service categories) that the network supports. The Model does this using Service Routing Factors. Service Routing Factors reflect the extent to which each service uses each network element.

The unit cost for each service category is then calculated.


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4. Model Operation

4.1 Introduction This section describes the way the model operates, (at a high level), how to use the model and provides a detailed description of the calculations performed in each worksheet.

The model has a number of specific conventions to assist the user:

Input cells have blue fonts (and a green background); data from a previous sheet has a light blue background and calculated cells have a white background.

Calculations flow from the top part of each sheet to the bottom.

4.2 1. Masterfiles This sheet is an input sheet containing the following tables:

Table No

Name Details

1.1 Connections A list of the different type of connections 1.2 Conveyance

Services A list of the services modelled

1.3 Network Elements

A list of network elements required for the services modelled

4.3 2. Traffic Demand This sheet is an input sheet containing the following tables:

Table No

Name Details

2.1 Number of connections

The number of subscribers (by type)

2.2 Traffic volumes for voice services

The number of billed minutes by service per year

2.3 Traffic volumes for SMS services

The number of SMS by service per year

2.4 Call duration & SMS size

Average call duration depending on terminated network and average size of an SMS in bytes

Call set-up time Average non conversation holding time depending on which type of network the call is being terminated


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Call completion rate

Average percentage of successful calls depending on which type of network the call is being terminated

2.5 Busy hour statistics

The percentage of daily traffic in the busy hour and number of busy days per year, which are used to derive the percentage of annual traffic occurring during the busy hour

2.6 Erlang conversion Number of minutes in 1 Erlang


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4.4 3. Routing and Conversion This sheet is an input sheet containing the following table:

Table No

Name Details

3 Routing Table Summarised route factors for each service and network element

4.5 4. Network Design Parameters This sheet is an input sheet containing the following tables:

Table No

Name Details

4.1 General Criteria & Assumptions

Data such as blocking probability and non-perfect cell tessellation factors

4.2 Spectrum Spectrum data for GSM 900 and 1800 4.3 Coverage Covered area for each of the 5

Ugandan regions based on number of BTSs and average cell radius

4.4 Traffic distribution Traffic distribution between the 5 Ugandan regions

4.5 Sectorisation Cell types (e.g. omni, 3 sector) for the different area types used in the model

4.6 Sites Actual and expected number of sites 4.7 Access and

Switching Equipment

The actual quantities of switching and other GSM platforms, together with capacity data

4.8 Transmission Equipment

Transmission data (e.g. % of BTS backhaul links served by microwave and fibre) and average link lengths

4.9 Other general information on Transmission

Design parameters for microwave links and BTS backhaul

4.10 Number of Point of Interconnection (POI) with GSM operators and PTOs

Use to derive the routeing factors table

4.11 SMS Conversion Factor

Conversion of one SMS into voice equivalent minute

4.12 Erlang Table Standard Erlang table setting out the number of circuits for different Erlang demand at various grades of service


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4.6 5. Unit Investment & Opex This sheet is an input sheet containing the following tables:

Table No

Name Details

5.1 Unit investment for access and switching network elements

Unit prices, import taxes, supervision and installation cost, asset lives, asset price inflation and time to build the asset for GSM switching and access assets

5.2 Unit investment for own built transmission network elements

Unit prices, import taxes, supervision and installation cost, asset lives, asset price inflation and time to build the asset for GSM transmission assets

5.3 Indirect assets Capital value of the assets which can not be directly allocated to network

5.4 Operational expenditure for leased transmission infrastructure

Payments to other operators for renting transmission capacity

5.5 Network Costs OPEX spent on BTSs and other network elements

5.6 Retail Operating Costs

OPEX spent on retail activities

5.7 Common and other opex

OPEX which cannot be directly allocated to network or retail

5.8 Cost of capital Cost of capital as provided and used by the operator

5.9 GSM licence fees Initial amount paid by the operator to acquire GSM licence from the UCC

5.10 Exchange rate Exchange rate for the current and previous years

5.11 Total financials Financial statements figures for reconciliation purposes


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4.7 6. NE Demand This sheet calculates the busy hour occupancy for each logical network element, as follows:

Figure 4.1: NE Demand calculation

Usage (calls, SMS

etc)

Unsuccessful %, Holding

times

Route Factors

Busy Hour & SMS

Factors

Network Element Demand

The calculations are performed in the following stages:

Table No

Name Details

6.1 Network Demand by Voice Service

Data sourced from tables on annual traffic by service and call statistics to calculate the annual network occupancy minutes

6.2 Network Demand for SMS

Data sourced from table 2.3 on annual traffic for SMS and SMS conversion factor in table 4.11 to convert SMS traffic into annual network occupancy minutes

6.3 Summarised Route Factors

A replica of table 3.1 Routing Table


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6.4 Busy Hour Statistics

The % of traffic in the busy hour is sourced from table 2.7 Busy hour statistics

6.5 Demand by NE Applies data from tables 6.1, 6.2, 6.3 and 6.4 to calculate busy hour occupancy by network element

6.6 BTS BHE Applies data from tables 6.5 and table 4.1 (minutes to erlangs conversion factor) to calculate busy hour erlangs in the radio network


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4.8 7. Radio Dimensions This sheet calculates the required number of sites, cells and TRX’s, to provide necessary coverage and traffic, as follows:

Figure 4.2: Radio Dimensions calculation

Traffic Demand(Radio BHE)

Traffic Demand by area typeArea (by

type)

Traffic Distribution

(by area)

Average cell radius

(1)

No of required

cells

% of omni, 3-sector etc by area type

Maximum Carriers per

Sector

Capacity Planning

Factor

Grade of Service

Erlang Table

Tessellation Factor

Timeslots per Carrier

Maximum cell radius (by type)

Traffic per Cell

No of Timeslots

No of TRX per Cell

No of Cells (by type)

No of Sites

No of TRX

GSM1800Spectrum %

% cells equipped GSM1800

(1) Run until Av cell radius results in No of TRX per cell <= Max Carriers per Sector

Traffic Demand(Radio BHE)

Traffic Demand by area typeArea (by

type)

Traffic Distribution

(by area)

Average cell radius

(1)

No of required

cells

% of omni, 3-sector etc by area type

Maximum Carriers per

Sector

Capacity Planning

Factor

Grade of Service

Erlang Table

Tessellation Factor

Timeslots per Carrier

Maximum cell radius (by type)

Traffic per Cell

No of Timeslots

No of TRX per Cell

No of Cells (by type)

No of Sites

No of TRX

GSM1800Spectrum %

% cells equipped GSM1800

(1) Run until Av cell radius results in No of TRX per cell <= Max Carriers per Sector

7.3 Cell Radius Calculation

This table calculates the average cell radius (for each area type) to handle the levels of traffic. This is performed by calculating the required number of TRX’s per cell for various cell radii and comparing these against the total timeslots per carrier (which depend on the amount of spectrum available and the cell re-use factor). For low cell radii, fewer numbers of TRX per cell are required – as the cell radius is increased, more TRX’s per cell are required until the number exceeds the number of available timeslots per carrier. The selected cell radius will be the largest possible where the number of TRX’s per cell are still lower than the maximum number of carriers per cell based on spectrum availability.

Once the average cell radius has been calculated, this is compared against the maximum cell radius due to propagation constraints and the lower of the two is selected as the final average cell radius.

The following assumptions are made:


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Row Name Details Area covered The area of a hexagon is calculated as Area/ (3/2

* 3^0.5 * Cell Radius^2)

7.4 No of Dimensioned Sites, Cells and TRXs This table calculates the total number of sites, cells and TRX’s, based on the required number of cells, the % of different cell types (omni, 3 sector and micro) and the % of cells equipped for GSM 1800.


Row Name Details Total Sites Total number of cells/ (% Omni + 3 * % 3 Sector +

% Micro)

7.5 No of Dimensioned Sites and TRXs (post tessellation) This table calculates the total number of sites and TRX’s, after applying the tessellation factor.


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4.9 8. Switching & Transmission Dimensions

This sheet calculates the required number of switching and associated platforms, together with required transmission equipment as follows:

Figure 4.3: Switching Dimensions calculation

No of subscribers

No of SMS per BH

No of sites per BSC

No of BSC, MSC, IN etcNo of Sites

Capacity planning

factor

Annualised Costs

No of subscribers

No of SMS per BH

No of sites per BSC

No of BSC, MSC, IN etcNo of Sites

Capacity planning

factor

Annualised Costs

8.3 Switching & Other Platforms This table calculates the required number of BSC’s based on the number of TRXs per BTS and the number of BSC’s per BTS. Other equipment quantities are calculated on the basis of the number of subscribers (or other capacity measure) which each platform can cater for, together with the capacity planning factor.


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Figure 4.4: Transmission Dimensions (BTS – BSC) calculation

Av no of microwave

hops

No of sites per BSC

Av Cell Radius

No of Radio LinksNo of Sites

% of sites served by

radio/ cable

Annualised Costs

Av BTS –BSC

distance

Required BTS – BSC

E1sNo of TRXs

No of BTS –BSC E1

kmsAnnualised Costs

Av no of microwave

hops

No of sites per BSC

Av Cell Radius

No of Radio LinksNo of Sites

% of sites served by

radio/ cable

Annualised Costs

Av BTS –BSC

distance

Required BTS – BSC

E1sNo of TRXs

No of BTS –BSC E1

kmsAnnualised Costs

8.4 Radio Transmission – BTS Backhaul

This table calculates the required number of microwave links, based on the number of BTS sites, the percentage of BTS’s served by radio (rather than cable) and the average number of microwave hops between BTS and BSC.

8.5 Cable Transmission – BTS Backhaul This table calculates the required number of E1 kilometres, based on:

The E1s required (a function of the number of TRX’s)

The average distance between a BTS and BSC


Row Name Details Average distance between BTS and BSC

(Number of cell sites per BSC^0.5 -1) * (Final cell radius/2) *1.5


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Figure 4.5: Transmission Dimensions (Core) calculation

8.6 Core Transmission

This table calculates the required number of E1 kilometres for each link between BSC’s, MSC’s and other platforms, based on:

Busy hour traffic between each link (from 6. NE Demand)

Conversion to busy hour Erlangs (based on minute to erlang conversion factor)

Conversion to E1’s (based on the Erlang table)

Applying the average link length

BH Conversi

BHE by link

Network Element

Erlangs per E1

No of E1s per link

No of E1 kms per

Av link length


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4.10 9. Annualised Costs This sheet calculates the annualised costs as follows:

Figure 4.6: Annualised Costs calculation

WACC

Annualised Eqpt Costs

No of Switching Equipment

Equipment Unit Prices

No of E1 kms per link

Actual Equipment Quantities

Transm’n Costs

Network Costs by

NE

Opex and Capex

mark-ups

Total Costs by NE

Service Costing

WACC

Annualised Eqpt Costs

No of Switching Equipment

Equipment Unit Prices

No of E1 kms per link

Actual Equipment Quantities

Transm’n Costs

Network Costs by

NE

Opex and Capex

mark-ups

Total Costs by NE

Service Costing

9.4 Annualisation radio and switching costs

This table calculates the annualised capital costs using a simple or tilted annuity method, as well as dimensioned or actual equipment quantities (both options are controlled on the A. Results sheet).

9.5 Own built Transmission Costs This table calculates the annualised cost of own built transmission links using a simple or tilted annuity method, as well as dimensioned or actual equipment quantities (both options are controlled on the A. Results sheet).

9.6 Leased Transmission Costs

This table calculates the cost of “leased” transmission circuits.

9.7 Total transmission costs

This table sums up the costs for own built and leased transmission which are taken respectively from table 9.5 and table 9.6.


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9.8 Cost Allocation

This table allocates equipment costs to logical network elements. In general this is a one-to-one allocation process. Certain costs such as TRX, BTS equipment, Power Generator and BTS sites are aggregated together to constitute the total cost of one logical Network Element in this case the BTS.

9.9 Summary This table shows the total costs, including direct annualised costs, OPEX and Indirect CAPEX mark-up. As well, licence costs are allocated to each network element based on their respective costs.

4.11 10. Service Costs This sheet calculates the service costs as follows:

Figure 4.7: Service Costs calculation

Service Unit Costs

Total Costs by NE

Route Factors

SMSFactors

Service Volumes

Service Unit Costs

Total Costs by NE

Route Factors

SMSFactors

Service Volumes


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10.1 Service Costs This table calculates the total and unit costs of each service, based on:

Total annual costs (calculated in 9.9)

Route factored volumes (which are derived from route factors, service volumes and SMS to voice conversion factors)

10.2 Interconnect products Routeing factors for outgoing and incoming calls to/from GSM operators have been used respectively for mobile origination and mobile termination. Routeing factors for mobile termination are used to calculate interconnection rates that a GSM Ugandan operator could charge to other operators for terminating calls on its network.

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UCC BU GSM – Model Manual

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