Bottom-up framework for cost allocation to services in telecommunication networks

Communications service providers (CSP) supply information, transport and passive infrastructure services that rely on the deployment of multiservice networks. To attain service cost reductions, the planning and design of those networks is essential, so that the total cost of the network ownership (TCO) is minimized. In this paper, we propose a bottom-up calculation framework for the allocation of the TCO cost components (i.e. capital and operational expenditures) to the services supplied by a CSP. For this, the framework is formulated within the context of the network life-cycle. Our method provides the level of abstraction required for the calculation of the three basic service cost contributors, namely, direct, shared and common costs. Moreover, it outlines the role of network planning in the design of an efficient network infrastucture, and in the calculation of the TCO. Based on this, we show how the stand alone, fully allocated and long-run incremental costs of a service can be calculated. Besides the determination of service cost drivers, the framework is useful to evaluate the cost-efficiency of competing technologies. To illustrate this, we study the allocation of the infrastructure costs for a CSP offering transport services with an optical network. By designing the infrastructure with fixed-grid and flex-grid technologies, it is shown that in both cases the main service cost driver is determined by the transponders installed. The results show that fixed-grid fits well for the provisioning of high speed constant bit-rate transport services, whereas flex-grid is a good candidate for transport services with bursty traffic patterns.