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The business of wimax - Pareek D.

Pareek D. The business of wimax - Wiley publishing , 2006. - 330 p.
ISBN-10 0-470-02691
Download (direct link): thebusinessof2006.pdf
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Cash balance curve
The cash balance curve gives a simple and easily understandable overview of a project’s profitability, and is a good tool to be used together with, for example, the NPV (Figure 8.3).
Risk and Sensitivity Analysis
As discussed earlier, the investment costs in access network upgrade projects are high. The lifetime of the investments is also expected to be
many years, requiring the operators to make predictions for the distant future (Figure 8.4). These forecasts always hold a certain degree of uncertainty, the main sources of which are the predicted service demands, the competition between operators, the costs of network components and the costs of operating the new network architectures. These uncertainties and their effects on the viability of the investment projects are assessed by means of risk and sensitivity analyses. A common approach to handling risk in investment decision processes is
Figure 8.4 A typical sensitivity graph
sensitivity and scenario analyses. This approach aims to incorporate the project risk directly within the NPV formula.
Sensitivity analysis is a simple technique used to locate and assess the potential impact of risk on a project’s value. The aim is to identify the impact of changes in key assumptions on the profitability (e.g. the NPV) of the project. The results of the sensitivity analysis can be plotted in the so-called sensitivity graph that offers an illustrative view of the sensitivity of the variables. The sensitivity of each variable is reflected by the slope of the line - the steeper the line, the greater the impact of changes on the NPV.
The techno-economic analysis carried out here is done using a tool which is very similar to the proprietary tool named TERA. The TERA tool is a spreadsheet-based application for techno-economic assessment of communication networks and services. It was developed within the European Union ACTS (Advanced Communications Technologies and Services) Programme. TERA tool enables techno-economic evaluations and strategic analyses that combine high-level parameters such as density of subscribers and service penetration, with relevant low-level parameters such as costs of key network components. As such, the TERA tool is suitable for the present purpose, straightforward to use and adapts easily to the different scenarios. The outputs of the tool are easy to interpret and traceable to the inputs due to the visibility of the formulas in use. However, we will not go into a detailed analysis and will concentrate on the result of the analysis (Figure 8.5).
Applying the Analysis - WiMAX
Let us now apply methods of the previous section to analyse the economic aspects of WiMAX deployments in different kinds of environments. Here we try to answer the following broad questions:
• Is WiMAX a threat to established operators?
• Is WiMAX a possibility for established operators?
• What are the most attractive environments for WiMAX?
• Is WiMAX capable of becoming the technology of choice for new entrants?
Figure 8.5 TERA tool
• Could WiMAX provide broadband services more cost-efficiently than DSL?
The analysis is made for a study period of 5 years, 2004-2008. The analysis is made for six different types of areas or environmental scenarios:
• two urban areas, one from a developed and the other from a developing country;
• two suburban areas, one from a developed and the other from a developing country;
• two rural areas, one from a developed and the other from a developing country.
Each of the scenarios is characterized by their geographic areas and household densities. The data used as the base in forming the scenarios
Table 8.2 Attributes of environmental scenarios
Geographic Household Numer of Number of
area density households telephone
Scenario (L x L = A km2) (1/km2) exchanges
Urban area - developed 2 x 2 = 4 5000 20000 2
Urban area - developing 3.2 x 3.2 = 10 2000 20000 2
Suburban area - developed 4 x 4 = 16 1000 14000 2
Suburban area - developing 5 x 5 = 25 500 14000 2
Rural area - developed 30 x 30 = 900 5 5000 16
Rural area - developing 50 x 50 = 2500 2 5000 36
are hypothetical. The scenarios were deliberately constructed so that in each scenario the achievable number of subscribers would be roughly the same, also taking into account the expected market share evolution in each environment. In each case, the expected number of subscribers at the end of the study period is about 1500.
The business case for WiMAX was analysed for several scenarios (Figures 8.6-8.11) - urban, suburban and rural areas - and from the
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