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					                                 36dc0672-152a-4b28-8598-d07a9fb6c08e.xls




LLCC PPC Points of Handover pricing review
Second consultation bottom-up model

Contents
Sheet                  Description
Contents               This contents sheet
Inputs                 All variable parameters are entered here
Outputs                Key outputs from the model
Summary                Creates a cost summary that is used to derive the key output numbers
Duct and fibre costs   Annual costs for the bearer duct and fibre
Operational costs      Costs for POH space, power, air conditioning, security and network management
Maintenance costs      Covers POH equipment maintenance, spares holding and duct maintenance
Support costs          Covers POH marketing




Contents :page1                                    Ofcom                                               8/5/2012
                                                                                                                                                                                                      36dc0672-152a-4b28-8598-d07a9fb6c08e.xls




 Inputs
 All of the variables for the bottom-up model are entered on this worksheet


                     Date charges to apply         1-Oct-11       Adjust the input parameters to show their expected values half way through the financial year
                      Start of financial year      1-Apr-11
                                          RPI        5.2%                 2.57% Proportion of RPI to include


 Duct & fibre costs                                                                                 With inflation LRIC adj BT adj price
                                                    Duct charge per meter               £80.00          £82.06          70%        £57.44 Based on Openreach footway excess construction charges: http://www.openreach.co.uk/orpg/home/products/pricing/loadProductPriceDetails.do?data=ZdqG%2Fxv%2FjSuBEEITnogh5uNOEwQ2%2FKws5WBAVcIlcholMnGHsqdC0vzO163bJmh34D91D7M0q8u%2F%0AIlSgtIFAKw%3D%3D
                             Cost of 4 fibres in a 48 fibre cable per meter              £0.60          £0.62          100%         £0.62 Based on BT fibre and cable costs
                             Cost of 4 fibres in a 24 fibre cable per meter              £0.60          £0.62          100%         £0.62 Based on BT fibre and cable costs
                                                            Fibres per duct              164        BT estimate for POH bearers
                                          Proportion of fibre kept for repair            10%        Ofcom estimate
                                     Spine fibre for ISH ext and CSH (m)                 1503       BT estimate average - OCP POH node separation spine fibre
                                                Distance to BT footbox (m)                50        Estimated typical BT equipment room to outside footway box
                                                      Fibres per SDH POH                   4
                                                      Fibres per PDH POH                   2
                                                            Tie cable rental            £24.00          £24.62      Openreach Cablelink annual rental
                          Real weighted average cost of capaital (WACC)                 5.80%                       Ofcom estimate WBA charge control consultation 20-1-2011 paragraph A7.56



 Duct and fibre depreciation
                                                   Duct depreciation (years)              40        Based on BT’s accounting policies
                                                   Fibre depreciation (years)             15        Based on BT’s accounting policies


 Operational costs
                            BT LLU costs from http://www.openreach.co.uk/orpg/home/products/pricing/loadProductPrices.do?data=%2Bs5
                                              5xT91%2FPruY0Pxlyi4HVnqs1m6OcKz301sgolk8P2FdiaKKPEfrCsJCb3sZkzJ
                                                                                                    With inflation LRIC adj BT adj price
                                            BT licence fee per square metre             £68.40         £70.16       100%        £70      LLU costs
                                                             Footprint factor            3.85                                                  LLU costs

                                                            Cooling per kW             £1,591.96      £1,632.91         70%       £1,143.04 LLU costs
                                           Cooling equipment depreciation                 10                                                   Ofcom estimate
                                         Cooling coefficient of performance                4                                                   Based on published guidelines http://www.emsd.gov.hk/emsd/e_download/pee/Guidelines_on_Energy_Efficiency_of_AC_Installations_2007.pdf


                                                   DC power          Max (W)         BT price       With inflation LRIC adj BT adj price
                                                                      1000         £   515.40         £528.66        70%      £370.06 LLU costs
                                                                      1500         £   635.28         £651.62        70%      £456.14 LLU costs
                                                                      3000         £   716.88         £735.32        70%      £514.72 LLU costs
                                                                      4000         £ 1,737.72        £1,782.42       70%     £1,247.69 LLU costs
                                                                      4500         £   721.80         £740.37        70%      £518.26 LLU costs
                                                                      6000         £   757.56         £777.05        70%      £543.93 LLU costs
                                                                      8000         £ 1,993.56        £2,044.84       70%     £1,431.39 LLU costs
                                                                      9000         £   845.40         £867.15        70%      £607.00 LLU costs

                           AC final distribution charge per 10KW per year          £      358.44       £367.66          70%        £257.36 LLU costs

                                                                                                                     LRIC adj BT adj price
                                           BT power rental per kW per year         £      166.80       £171.09         70%     £119.76 LLU costs (calculated per year at 365.25 x 24)

                                                     BT power usage per kW         £      0.0852        £0.087         100%          £0.09     LLU costs


                                                          Security and service £           23.40        £24.00          70%         £16.80     LLU costs
                                                                               £           55.56        £56.99          70%         £39.89     LLU costs


 Network Management
                     Ratio of network management to total network costs                  17%        Ofcom estimate based on latest BT data


                                                                                                                       MTBF       Cost of a MTBF - Mean Time Between Failures, the predicted
                                                                                                     Size (rack)
 Capital costs                                        Cost           Quantity       Power (W)                         (years)      failure average time betwen failure of a system

 SMA-1        Core                                  £10,000              1                75             26%            10          £2,000     Based on figures confirmed by OCPs, MTBF from Ofcom estimate
              STM-1 L1.1 trib                        £500                1                10                            100          £500      Based on figures confirmed by OCPs, MTBF from Ofcom estimate
              STM-1 L1.1 line                        £500                2                10                            100          £500      Based on figures confirmed by OCPs, MTBF from Ofcom estimate


 SMA-4        Core                                  £10,000              1                75             26%            10          £2,000     Based on figures confirmed by OCPs, MTBF from Ofcom estimate
              STM-1 L1.1 trib                        £500                4                10                            100          £500      Based on figures confirmed by OCPs, MTBF from Ofcom estimate
              STM-4 L4.1 line                       £2,000               2                20                            50          £2,000     Based on figures confirmed by OCPs, MTBF from Ofcom estimate


 SMA-16 Core                                        £25,000              1               250             52%            10          £5,000     Based on figures confirmed by OCPs, MTBF from Ofcom estimate
              STM-1 L1.1 trib                        £500               16               10                             100          £500      Based on figures confirmed by OCPs, MTBF from Ofcom estimate
              STM-16 L16.1 line                     £5,000               2               45                             25          £5,000     Based on figures confirmed by OCPs, MTBF from Ofcom estimate


 4x2          System cost                            £2,000              1                10              4%            12.8        £2,000     Estimated cost BT confirmed MTBF, size and power consumption


 16x2         System cost                            £3,000              1                23             20%            12.8        £3,000     Estimated cost BT confirmed MTBF, size and power consumption


 Spare holdings
                                                                                   With inflation
                              Mean time to repair (hours)                4                          Ofcom estimate based on industry experience
                   Cost of repair engineers time per hour             £55.00            £56.41      Ofcom estimate based on SLU regulatory work
                      Number of UK locations for spares                 42                          Input from BT
                 Stores spares replacement time (weeks)                  4                          Ofcom estimate based on industry experience


    Proportion of SDH POH to total network equipment                  4.07%                         Input from BT
    Proportion of PDH POH to total network equipment                  3.58%                         Input from BT


 Duct maintenance
                                                                                   With inflation
                                 Blown fibre for CSH (m)               622                          BT estimate average - OCP POH node separation blown fibre
           Proportion of blown fibres used for CSH POH                100%                          BT estimate
              Number of duct faults per 100km per year                  8                           Ofcom estimate based on industry experience
                       Number of engineers to fix a duct                4                           Ofcom estimate based on industry experience
                          Time taken to fix a duct (hours)              7                           Ofcom estimate based on industry experience
                             Duct engineer cost per hour              £55.00            £56.41      Ofcom estimate based on industry experience


 Support costs
                    Sales and marketing                                            With inflation
Full time people required for additional POH sales work                1                            Ofcom estimate based on industry experience
                                Annual cost per person              £100,000        £102,572.39 Ofcom estimate based on industry experience

 BT volume and recovery estimates

                    PPC circuit type               Volume         POH charge
                          sub 2M                          4092         £103
                                                                                  BT volumes
                            2M                            8404         £176       and published
                            34M                              2         £888       charges
                           155M                              1        £1,653

                         BT Type I POH charges                      Volumes
                          SMA-1             £3,435.27                 107         BT volumes
                          SMA-4             £5,108.81                 562         and published
                         SMA-16             £8,151.42                 191         charges
                          Bearer             £338.07

                                            Extra annual rental                                     BT published charges
                                                  SMA-1         SMA-4                  SMA-16       http://www.btwholesale.com/pages/cmsjsps/service_and_support/service_support_hub/on
                                                                                                    line_pricing_hub/cpl_hub/cpl_pricing_hub/cpl_browsable_sections/cpl_browsable_section
                                        CSH         £439.39         £1,079.16          £1,988.12
                                                                                                    b_8.jsp
                                      ISH ext       £186.86          £485.02           £1,032.38
                                         ISH        £186.86          £486.84           £1,036.26    Numbers only used to provide per 2M circuit illustrative calculations on the Ouput worksheet



 Number and type of POH
                                                                    Total BT                                           POH
                                                                      POH              non PPC                        minus
                               POH type                             volumes            volumes                       non PPC
                           SMA-1                CSH                    96                1.1%       Input from BT        94.9
                                                ISH Extn                0                1.1%       Input from BT         0.0
                                                ISH                    12                2.5%       Input from BT        11.7
                                                Retail                 26               74.7%       Input from BT         6.6
                                                Retail other           505              74.7%       Input from BT       127.8
                           SMA-4                CSH                    197               1.1%       Input from BT       194.8
                                                ISH Extn               61                1.1%       Input from BT        60.3
                                                ISH                    315               2.5%       Input from BT       307.1
                                                Retail                 226              74.7%       Input from BT        57.2
                          SMA-16                CSH                    53                1.1%       Input from BT        52.4
                                                ISH Extn               29                1.1%       Input from BT        28.7
                                                ISH                    113               2.5%       Input from BT       110.2
                                                Retail                 49               74.7%       Input from BT        12.4
                             4x2                                       835              14.3%       Input from BT       715.6
                            16x2                                      1471              18.8%       Input from BT      1194.5




Inputs :page 2                                                                                                                                                                                                             Ofcom                                                                                                                                                                  8/5/2012
                                                                                                         36dc0672-152a-4b28-8598-d07a9fb6c08e.xls




Outputs
The key outputs from the model and the source of many of the numbers used in the consultation document                      Shows the per 2M circuit costs of efficient POH and estimates of how many 2M circuits justify a move from retail to
                                                                                                                            wholesale (annual rental only)
                                            Current BT charges                                                                                                              ISH                                   ISH ext                                   CSH
                                                                                             Bearer
                                         SMA-1             SMA-4            SMA-16
      Type I POH (£ per POH)                                                                 charge                                                           SMA-1         SMA-4 SMA-16 SMA-1                     SMA-4 SMA-16 SMA-1                     SMA-4 SMA-16
                                        £3,435.27        £5,108.81         £8,151.42         £338.07               BT annual cost per 2M circuit              £57.49        £22.20       £9.11        £62.86       £23.54        £9.45       £66.87       £25.90        £10.39
     Type II POH (£ per circuit)
                                         Sub 2M             2M             34M/45M            155M                  BT 2M circuits to break even                21            32          52            23           34           54           24           37            60
                                         £103.31          £175.63           £888.47         £1,652.96
                  Total                £6,700,000

                                      First Consultation proposals                                                                                                          ISH                                   ISH ext                                  CSH
      Type I POH (£ per POH)
                                         SMA-1             SMA-4            SMA-16            Bearer                                                          SMA-1         SMA-4 SMA-16 SMA-1                    SMA-4 SMA-16 SMA-1                      SMA-4 SMA-16
                                          £648              £753            £2,135            charge
                                                                                               £401                BT annual cost per 2M circuit              £13.25         £4.92       £3.15        £19.61        £6.50        £3.54       £23.62        £8.86        £4.49

     Type II POH (£ per circuit)
                                        Sub 2M               2M            34M/45M             155M                 BT 2M circuits to break even                 3              5          13            5            7            14            6            9           18
                                          £146              £249            £1,259            £2,343
                  Total                £3,769,264

     Second consultation proposals (Option C: Use Ofcom bottom-up model to set Type I                                                                                       ISH                                   ISH ext                                  CSH
                                   and Type II charges)                                                                                                       SMA-1         SMA-4 SMA-16 SMA-1                    SMA-4 SMA-16 SMA-1                      SMA-4 SMA-16
                                         SMA-1             SMA-4            SMA-16           Bearer                BT annual cost per 2M circuit               £9.34         £3.82       £2.36        £13.03        £4.74        £2.59       £17.04        £7.10        £3.54
      Type I POH (£ per POH)                                                                 charge
                                        £401.87           £476.72          £1,347.33         £232.13                BT 2M circuits to break even                 3              5          12            4            6            13            5            9           18
                                        Sub 2M              2M             34M/45M            155M
     Type II POH (£ per circuit)
                                        £119.62           £203.35          £1,028.70        £1,913.85
                  Total                £2,874,423                                                            Note SMA-1 can carry 63 x 2M circuits, SMA-4 can carry 252 x 2M circuits, SMA-16 can carry
                                                                                                             1008 x 2M circuits, 4x2 can carry 4 x 2M circuits and 16 x 2 can carry 16 x 2M circuits


             POH charges total          £2,874,423                                                                 Annual Type I rental (Maintenance)                     Note: to calculate the annual costs per 2m circuit requires the additional input of the pre-existing
             POH charges type I           £568,619                                                                         SMA-1       SMA-4     SMA-16                   POH annual charge Cells J28:M32 from BTs PPC price list - see input worksheet for web link
             POH charges type II        £2,202,395                                                                  CSH         £439          £1,079          £1,988
            Type I bearer charge          £103,409                                                                ISH ext       £187           £485           £1,032
                                                                                                                     ISH        £187           £487           £1,036




Outputs :page 3                                                                                                             Ofcom                                                                                                                                         8/5/2012
Summary
Gathers the conclusions from each of the worksheets and derives the figures for the outputs

                                                                                                          Network
                                                          Operationa Maintenance          Support
                                          Duct & fibre                                                   managemen
                                                           l costs      costs              costs
                                                                                                              t
                              SMA-1            £232.13        £194.53        £582.53            £34.49       £182.94
                CSH           SMA-4            £232.13        £271.51        £775.10            £34.49       £253.91
                              SMA-16           £232.13        £821.05       £2,207.31           £34.49       £772.37
                              SMA-1            £232.13        £194.53        £254.54            £34.49        £91.98
  Type I      ISH ext         SMA-4            £232.13        £271.51        £350.82            £34.49       £127.47
                              SMA-16           £232.13        £821.05       £1,066.93           £34.49       £386.69
                              SMA-1              £7.72        £194.53        £249.56            £34.49        £90.96
                   ISH        SMA-4              £7.72        £271.51        £345.85            £34.49       £126.45
                              SMA-16             £7.72        £821.05       £1,061.95           £34.49       £385.67

                              SMA-1           £232.13       £194.53    £582.53        £34.49                 £182.94
                              SMA-4           £232.13       £271.51    £775.10        £34.49                 £253.91
         Type II              SMA-16          £232.13       £821.05   £2,207.31       £34.49                 £772.37
                               4x2            £116.07        £41.53    £439.05        £34.49                 £196.86
                               16x2           £116.07        £73.00    £595.30        £34.49                 £273.76
                                        Proportion of network management to operational costs               20.5%

      BT PDH and retail POH cost recovery                                   Bottom-up model 2nd consultation proposals
   Type       Volume POH charge   Total                                      Type I charges         Type II charges
 sub 2M        4092    103.31    £422,745                                       SMA-1          £401.87         sub 2M           £119.62
    2M         8404    175.63   £1,475,995                                      SMA-4          £476.72                2M        £203.35
    34M          2     888.47     £1,777                                      SMA-16      £1,347.33               34M         £1,028.70
   155M          1    1652.96     £1,653                                                                         155M         £1,913.85
                         BT retail revenue £1,902,169

Second consultation option A and B calculations

Equivalent Option A charges                                                                              Equivalent Option B charges
Distribute Ofcom identified savings only across Type I POH using BT ratios                               Distribute Ofcom identified savings evenly across all P

           Ofcom model PDH + retail         £2,202,395                                                                      BT charges
            BT PDH + retail recovery        £1,902,169                                                      Type I           £4,798,115
                          Ofcom SDH          £568,619                                                       Type II          £1,902,169
     Additional costs to be recovered        £868,845                                                                        Saving to evenly distribute


                              BT Type I POH ratios                                                                         Volumes
                              SMA-1       SMA-4             SMA-16                                             SMA-1                107
            Ratios             1.00        1.49               2.37                                             SMA-4                562
            Volumes             107         562               191                                             SMA-16                191
                                107         836               454                                             sub 2M               4092
            Charge            £622.06     £925.11          £1,476.06                                              2M               8404
                                                                                                              34/45M                  2
                                                                                                                155M                  1


Second consultation summary
                                                                   Type I                                                           Type II
                                             SMA-1          SMA-4        SMA-16               Bearer        sub 2M             2M
                   Original BT charges      £3,435.27      £5,108.81   £8,151.42              £338.07       £103.31          £175.63

      First Consultation Option A           £1,213.78      £1,805.08      £2,880.12           £400.61       £103.31          £175.63
    Second Consultation Option A             £622.06        £925.11       £1,476.06           £232.13       £103.31          £175.63

         First Consultation Option B        £1,844.68      £2,743.34      £4,377.16           £400.61       £55.48            £94.31
Second Consultation Option B    £1,420.71   £2,112.83   £3,371.16     £232.13     £42.73    £72.63

  First Consultation Option C   £648.00     £753.19     £2,134.90     £400.61     £146.44   £248.94
Second Consultation Option C    £401.87     £476.72     £1,347.33     £232.13     £119.62   £203.35

                                  BT      Option A       Option B     Option C
              Type I charges £4,798,115 £868,845        £1,984,341    £568,619
              Type II charges £1,902,169 £1,902,169      £786,674    £2,202,395
                      New Charges Quantities                Totals

                              £411.96        95                £39,113
                              £559.91       195               £109,089
                             £1,627.90       52                £85,330
                              £321.00         0                     £0
                              £433.46        60                £26,150
                             £1,242.23       29                £35,628
                              £319.98        12                 £3,744
                              £432.44       307               £132,815
                             £1,241.21      110               £136,750

                             £1,226.62       134            £164,788
                             £1,567.14        57              £89,606
                             £4,067.34        12              £50,423
                              £827.99        716            £592,505
                             £1,092.61      1194           £1,305,074
                                                Total      £2,202,395



                                                SDH           £568,619
                                         PDH + retail      £2,202,395
                                         SDH bearer           £103,409
                                                Total        2,874,423




lent Option B charges
te Ofcom identified savings evenly across all POH using BT ratios

                      Ofcom costs Difference
                           £568,619 £4,229,496
                        £2,202,395     -£300,227
          Saving to evenly distribute £3,929,270


                      BT charge    total        Proportion               Reduction       Charge
                            £3,435    £366,351      5.5%                  £214,840         £1,421
                            £5,109 £2,872,617      42.9%                 £1,684,599        £2,113
                            £8,151 £1,559,147      23.3%                  £914,335         £3,371
                              £103    £422,745      6.3%                  £247,911            £43
                              £176 £1,475,995      22.0%                  £865,572            £73
                              £888       £1,777     0.0%                     £1,042         £367
                            £1,653       £1,653     0.0%                      £969          £684
                                     £6,700,284


                  Type II
                            34/45M         155M
                            £888.47      £1,652.96

                            £888.47      £1,652.96 Option A: Distribute Ofcom identified savings only across
                            £888.47      £1,652.96 Type I POH using BT ratios

                            £477.09       £887.61       Option B: Distribute Ofcom identified savings evenly
                                                        across all POH using BT ratios
                        Option B: Distribute Ofcom identified savings evenly
£367.44     £683.61     across all POH using BT ratios

£1,259.35   £2,342.97 Option C: Use Ofcom numbers and assign costs to
£1,028.70   £1,913.85 services according to the model ratios
                                                                                    36dc0672-152a-4b28-8598-d07a9fb6c08e.xls
 Duct and fibre costs
 Calculates the duct and fibre costs for the POH
 Note: only spine fibre costs are calculated, blown fibre costs are covered by the customer equipment installation charge
       Duct and fibre annual cost (per POH)                  SDH                PDH                ISH
                      BT adj duct cost per meter            £57.44             £57.44            £57.44
                 BT adj cost of 4 fibres per meter           £0.62              £0.62             £0.62
                 Number of fibres used by a POH                4                  2                  4        An SDH POH uses 4 fibres whilst a PDH POH uses 2 fibres
                       Number of fibres per duct              148                148               148
                    Distance to OCP footbox (m)              1503               1503                50

                                Duct cost                 £2,339.65          £1,169.83           £77.83       Duct cost for the fraction of fibres used by one POH assuming a fully utilised duct
                                Fibre cost                 £925.00            £462.50            £30.77       Cost of four fibres
Real weighted average cost of capaital (WACC)               5.80%              5.80%             5.80%
                    Duct recovery time (years)                40                 40                40
                   Fibre recovery time (years)                15                 15                15
                                  Duct annuity             £143.28             £71.64             £4.77
                                  Fibre annuity             £88.85             £44.42             £2.96
                                          Total            £232.13            £116.07             £7.72



                                                       Duct and fibre annual costs
                                          SMA-1           SMA-4         SMA-16                     4x2             16x2
                              CSH        £232.13            £232.13           £232.13           £116.07           £116.07
                           ISH ext       £232.13            £232.13           £232.13
                               ISH         £7.72             £7.72             £7.72




  Duct and fibre costs :page8                                                                             Ofcom                                                                                     8/5/2012
                                                                              36dc0672-152a-4b28-8598-d07a9fb6c08e.xls
 Operational costs
 Uses the mux size and power consumption to calculate the cost of housing, powering, cooling and securing the POH equipment. Also derives the network management charge per mux
                                                                          SMA-1            SMA-4            SMA-16              4x2              16x2
                                          Power            W               105              155              500                10                 23          Most of the operational costs relate to the space or
                                     Rack space            %               26%              26%              52%                4%               20%           power consumption of the equipment
                                Number per rack                              3                3                1                25                  5
                                   Rack footprint          m2              0.18             0.18             0.18              0.18               0.18         Racks are 600mm wide by 300mm deep
                      Equivalent system footprint          m2              0.06             0.06             0.18             0.0072             0.036

                BT LLU costs from http://www.openreach.co.uk/orpg/pricing/loadProductPrices.do?data=%2Bs55xT91%2FPruY0Pxlyi4HVnqs1m6OcKz301sgolk8P2FdiaKKPEfrCsJCb3sZkzJ

                         Cooling
                           Cooling equipment             £1,143.04
                             Depreciation (yrs)            10
Real weighted average cost of capaital (WACC)            5.80%
                               Cooling annuity          £145.40

       BT adj accommodation price per m2                 £70.16      Area calculated from greater of 3.85 x footprint OR 500W per m2


                      DC power        Max (W)         BT adj price                    Model power charge per W
                                       1000             £370.06           £0.37          £0.09      Use second from minimum charge
                                       1500             £456.14           £0.30
                                       3000             £514.72           £0.17
                                       4000            £1,247.69          £0.31
                                       4500             £518.26           £0.12
                                       6000             £543.93           £0.09
                                       8000            £1,431.39          £0.18
                                       9000             £607.00           £0.07

              AC final distribution charge per 10KW per year             £257.36

                 BT adj power rental price per kW per year               £119.76
                        BT adj power usage price per kWhr               £0.08739


                                Tie cable rental         £24.62

          Security and service                        BT adj price
                  Security rental per year per m2       £16.80
                  Service charge per year per m2        £39.89

                                   Summary of annual operational costs for POH equipement
                                      SMA-1        SMA-4          SMA-16          4x2                        16x2
                     Actual (m2)      0.231         0.231          0.693        0.02772                     0.1386       From BT rule that footprint is the larger of 3.85 times
                  by power (m2)        0.21          0.31            1            0.02                       0.046       the actual footprint or 1 m2 per 500W

                 Accomodation          £16.21            £21.75           £70.16            £1.94            £9.72
                     DC power           £9.52            £14.05           £45.33            £0.91            £2.09
                      AC power          £2.70             £3.99           £12.87            £0.26            £0.59
                        Cooling        £15.27            £22.54           £72.70            £1.45            £3.34
                 Cooling power         £20.11            £29.69           £95.76            £1.92            £4.40
                   Power rental        £12.58            £18.56           £59.88            £1.20            £2.75
                  Power usage          £80.44           £118.74          £383.04            £7.66           £17.62
                       Tie cable       £24.62            £24.62           £24.62           £24.62           £24.62
                Security/service       £13.10            £17.58           £56.69            £1.57            £7.86
                      Total             £195              £272             £821              £42              £73




  Operational costs :page9                                                                          Ofcom                                                                                                  8/5/2012
                                                                                              36dc0672-152a-4b28-8598-d07a9fb6c08e.xls




Maintenance costs
Uses the cost and failure rates for the muxes to derive the maintenance charge including spares holding. Also calculates the duct and fibre maintenance costs

                                                           Average            Cost of
                                               MTBF        cost of a Failures failures
SMA-1                Price        Quantity     (yrs)        failure per year per year
Core                  £10,000        1           10         £2,000      0.1     £200
STM-1 L1.1 trib        £500          1          100          £500      0.01     £5.00
STM-1 L1.1 line        £500          2          100          £500      0.02    £10.00
                                                             Total     0.13     £215
SMA-4
Core                  £10,000         1           10        £2,000      0.1       £200
STM-1 L1.1 trib        £500           4          100         £500      0.04        £20
STM-4 L4.1 line       £2,000          2           50        £2,000     0.04        £80
                                                             Total     0.18       £300
SMA-16
Core              £25,000              1          10        £5,000      0.1       £500
STM-1 L1.1 trib    £500               16         100         £500      0.16        £80
STM-16 L16.1 line £5,000               2          25        £5,000     0.08       £400
                                                             Total     0.34       £980
4x2
System                 £2,000         1         12.8        £2,000    0.07813     £156


16x2
System                 £3,000         1         12.8        £3,000    0.07813     £234

                                     Mean time to repair (hours)        4
                          Cost of repair engineers time per hour      £56.41

Spares holding
The incremental spares required for POH are calculated
Calculation of number of spares per store for all network
                                          Total                        Total Excludin    Total Excluding
                                         network                      failures g POH used per      POH                     Total       Excluding
                                   POH volume MTBF                      per    failures week per used per                 stores      POH stores
    Equipment Price              volumes    s    (yrs)                  year per year    store week per                  holding        holding
   SMA-1 cores £10,000   470   11554.6                        10       1155       1108         0.529        0.507           4.12           4.03       Spares holdings have been left as fractions, rather
   SMA-4 cores £10,000   871   21412.2                        10       2141       2054         0.980        0.940           5.92           5.76       than rounding to whole numbers, to avoid
                                                                                                                                                      unrealistic fluctuations in spares costs, when total
  SMA-16 cores £25,000   268   6596.66                        10        660        633         0.302        0.290           3.21           3.16
                                                                                                                                                      stores rounds up and stores excluding POH rounds
           L1.1  £500 9192.47 225859                         100       2259       2167         1.034        0.992           6.14           5.97       down. If this happened, for example with SMA-16
           L4.1 £2,000 1742.95 42824.4                        50        856        822         0.392        0.376           3.57           3.51       cores, then the variation can be over £1M. By
                                                                                                                                                      retaining fractional spares the answer for POH
         L16.1 £5,000 536.968 13193.3                         25        528        506         0.242        0.232           2.97           2.93       spares is always equal to the average, irrespective
            4x2 £2,000 1431.19 39977.4                       12.8      3123       3011         1.430        1.379           7.72           7.51       of the number of spares stores, or the percentage
                                                                                                                                                      of POH equipment to total network equipment.
          16x2 £3,000 2942     82178.8                       12.8      6420       6190         2.940        2.834         13.76           13.34
                Number of UK locations for spares             42                              Spares cost per store £262,340             £256,565
           Stores spares replacement time (weeks)              4                                      Spares cost £11,018,269          £10,775,731

The number of spares per store location is derived                              Additional spares cost due to POH       £242,538      The difference between the spares required with and without POH equipment.
from: the total number of items in the network and their                                               Real WACC          5.80%
predicted failure rate, divided by the number of stores.                                  Cost of capital employed       £14,067
This gives how many spares are expected to be used                                          Number of POH ADMs             2974
per store per week. Combined with how many weeks it
takes to order new spares, plus two extra to cover for                          Annual spares charge per PoH              £4.73
excess demand, gives the number of spares that need
to be held.

                                    Total                    Excluding POH shelves
 Storage charge       Number                  Security     Number            Security
                                  Accomm                            Accomm
    for stores          of                      and          of                and
                                  o-dation                          o-dation
                      Shelves                 service      Shelves           service
SMA-1                  172.8        £2,801     £2,264       169.2    £2,743 £2,216 Spares need to be stored. This calculation assumes that
                                                                                            the spare shelves take space, whilst the spare line and
SMA-4                   248.7       £5,409     £4,371       242.0     £5,263      £4,253    tributary cards can be housed in the spare shelves. The
SMA-16                  134.8       £9,455     £7,641       132.7     £9,310      £7,523    spares are stored unpowered so no charge for power or
4x2                     324.2        £631       £510        315.6      £614        £496     air-conditioning needs to be added.

16x2                    577.8       £5,619     £4,541       560.2     £5,447      £4,402
                                              £43,240                            £42,266

         Additional spares storage cost due to POH             £974
         Additional spares storage cost per POH               £0.33

                            Duct maintenance
                                                            CSH &                             Access
                                                                        ISH       PDH
                                                           ISH ext                             fibre
          Number of duct faults per 100km per year            8           8         8             8
                                 Length of duct (m)         1503         50       1503          622
                           POH duct MTBF (years)              8         250         8            20

                   Number of engineers to fix a duct          4         4          4            4
                    Time taken to fix a duct (hours)          7         7          7            7
                       Duct engineer cost per hour          £56.41    £56.41     £56.41       £56.41

                     Cost per year to fix a POH duct       £189.93     £6.32    £189.93       £78.60

                     Number of fibres in a POH duct          148        148        148
                        Number of fibres per POH              4          4          2

       Cost per year per POH to fix a POH duct              £5.15      £0.17      £2.57       £78.60


                                 POH Maintenance costs by POH type
                                   SMA-1       SMA-4 SMA-16            4x2        16x2
                     CSH            £583        £775        £2,207     £439       £595      CSH requires maintenance of two sets of equipment and a bearer
                     ISH ext        £255        £351        £1,067                          ISH ext requires maintenance of one set of equipment and a bearer
                     ISH            £250        £346        £1,062                          ISH requires maintenance of one set of equipment and no bearer




Maintenance costs: page 10                                                                                          Ofcom                                                                                          8/5/2012
                                             36dc0672-152a-4b28-8598-d07a9fb6c08e.xls




Support costs
Calculates the costs including overheads for POH marketing and sales
Sales and marketing
         Full time people required  1
          Annual cost per person £102,572
           Number of PoH ADMs 2974.17
          Annual cost per POH      £34




Support costs: page 11                                            Ofcom                 8/5/2012

				
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