Network dimensioning, service costing
and pricing in a packet switched environment
Gareth Davies, Michael Hardt and
Frank Kelly
Telecommunications
Policy 28 (2004) 391-412.
"Come the revolution - network dimensioning, service costing
and pricing in a packet switched environment"
Abstract
The telecommunications industry is going through a technological
revolution, involving a transition from multiple voice and data networks to
integrated service networks using packet switching technologies. The paper
describes a new framework (the IPCP Framework) for capacity planning and
costing in an IP network environment. Capacity Planning is carried out in
four stages, the first of which is based on the concept of Effective
Bandwidth, with the other three addressing the needs of different classes
of traffic (Real Time, Interactive Data and Streaming, and Delay-Tolerant
Services). The Framework enables network operators to reduce costs by
optimising their capacity requirements and, with the aid of the IP Costing
Module, to determine the costs of the various services that use integrated
IP networks, each of which may have a different set of service quality
requirements. Illustrative results show that capacity requirements and
costs per Mbit vary significantly by service type, a finding with
far-reaching implications for business planning and pricing. The approach
has been extended to support the design of the new pricing models that will
be required in an IP environment and to provide a basis for decisions on
traffic management and product portfolio optimisation. The paper also
describes the policy implications of the migration to multi-service,
packet-based networks, and emphasises the need for regulators, as well as
operators, to gain an understanding of the new economics of service
provision.
Keywords: IP networks; packet switching; capacity planning;
service costing; pricing, regulation
Available as
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Citations,
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Gareth Davies was until recently a Partner in IBM Business Consulting's
Telco Strategy Group, based in London, and is now
Director of Competition Policy at Ofcom, the
regulatory agency for the UK communications sector.
Dr Michael Hardt
was a Managing Consultant in IBM Business Consulting's Telco Strategy
Group, and is now with PricewaterhouseCoopers in London.
Frank Kelly is Professor of the
Mathematics of Systems at the University of Cambridge.