Case Studies.

Customer Need: A mid-size communications firm, operating in 11 major U.S. markets (offering voice, video and data services to residential and business customers) was establishing an enterprise-wide contribution system and needed to determine network costs as a fundamental input to the profitability system.

Services Provided: To develop capital and operational network costs, OffHook started with an understanding of the client's existing network in each of their 11 markets. Working with the client staff, we examined the existing customer bases and traffic characteristics in all markets and developed forward-looking network characteristics for each market's voice, video and data network. For each market's forward-looking network, each element (e.g., switch) was broken down to its basic engineered components (e.g., termination units) and capacity drivers (e.g., lines, trunks and MOUs) were identified. The component drivers were aligned with product demand units (e.g., lines, MOUs) and unit costs were developed. Lastly, a mapping of the network drivers/unit costs to each product and service was established allowing the client to develop the costs associated with each voice, video and data product and service.

Assessment of costs included subscriber location (modems, set top boxes, etc.), distribution network (taps, amplifiers, etc.), hub equipment (PPV, video/SONET, etc.) MegaPop equipment (headend, local switch, etc.), inter-market/regional backbones, and LD/tandem switching, IP systems, and the network control center.

Customized network costs were delivered for each product in each market.

Results: The client was able to identify which products and services were contributing to the bottom line in each of their 11 markets—and which were not. The dimensional profitability knowledge delivered by the system provided them the opportunity to make strategic decisions regarding product pricing, market specific cost management and pulling some products from certain markets all leading to better bottom line results.

Customer Need: A large U.S. bank, having recently made several acquisitions, was evaluating methods of unifying their telecom and data services network.

Service Provided: OffHook assisted in the development of build/buy scenarios to replicate the functionality provided by the existing multi-company network. Critical to the effort was understanding the client's services requirements, including security, for each branch, ATM and regional and headquarters offices throughout the nation. OffHook worked with the bank's telecom staff to prepare the network requirements to support the services.

Once the service and network requirements were understood, OffHook examined various methods to acquire. Options considered included:

1. Buy/lease – Analyzed the wholesale and unbundled network element offerings of national telecom companies to estimate the cost of leasing network capacity for the expanded network.
2. Network build – Using the service and network requirements determined, OffHook worked with the bank's telecom staff to design a high level voice and data network required to handle the capacity of each branch, ATM and regional office throughout the nation. Based on more than 15 years (at the time) of telecom cost studies, OffHook assessed the investment required to purchase and install the network assets and developed a multi-year cost analysis capturing both the capital cost of network assets and operational costs for the ongoing annual operations and maintenance.

Result: Forecasts of cost and pricing trends for dark fiber, lamdas, and high capacity services demonstrated that the client's best long term course of action was to lease capacity from a service provider. The cost studies provided allowed the client to not only make the best strategic decision (i.e., to lease capacity), but also provided knowledge that helped with the negotiations with service providers.

Customer Need: Due to regulatory requirements, a large U.S. based electric power provider was required to establish cost-based rates.

Service Provided: A forward-looking, bottoms-up, incremental cost analysis of the underlying network infrastructure and operational processes was performed. Cost analyses examined substantial network investments as well as significant operational processes, resulting in a granular level of costs and the rigor required to establish tariff quality cost support. Network components in the analysis included:

• Generation and substation equipment
• Land and buildings
• High voltage transmission lines and infrastructure (e.g., towers)
• Distribution lines and infrastructure (e.g., poles and underground)
• Service lines from distribution network to residences or businesses
• Operations and maintenance expenses
• Advanced metering and billing

Usage of residential and business customers was used to examine peak load pricing and business and residential rates were developed based on costs as well as market conditions and regulatory requirements.

Result: Client provided cost-based rates for consideration to the regulatory authority which were ultimately approved.