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Retail Model Marginal Cost Calculation Worksheet The costs used here are not derived from any particular network - they are a simple example only Target Line Loading Factor 55% input Line loading before more bandwidth is International Circuit cost calculation Capacity of the circuit Kbps Cost of the circuit - total lease cost monthly Megabytes monthly Max sustainable loading factor Max sustainable traffic level Break even cost per megabyte at target load $ $ 2048 120,000 685,670 55% 377119 0.32 uses target load factor from above Marginal cost of delivered data, impor Domestic Circuit cost calculation Capacity of the circuit Kbps Average cost of the circuit - total lease cost monthly Megabytes monthly Max sustainable loading Max sustainable traffic level cost per megabyte line imbalance Topology Factor cost per megabyte Traffic Balance International Trunk Local Total Delivered cost per Mb Overheads Fixed rate overhead calculation Marginal Cost Return on cashflow Target Average Retail Price per delivered Megabyte This calculation is for the average of a $ $ $ 2048 8,000 685,670 55% 377,119 0.02 0.75 1.5 0.02 uses target load factor from above assumes unidirectional traffic Average ratio of highest direction traff Average number of domestic hops for Marginal cost of delivered data 65% $ 22% $ 13% $ $ 0.22 0.00 - How much traffic is imported How much trsffic is along domestic pat 0.23 Average transmission cost of delivered 20% $ 0.27 5% $ 0.28 Ratio of all other costs to total bandwi Business cost of delivered data Desired operating margin of cash flow Retail Model Page 1 Retail Model 64K connection Costs Maximum delivery capacity (Mb) Average line occupancy Average line delivery (Mb) marginal cost Net service cost (transmission) Max service liability (avg traffic flow) Max service liability (absolute risk) monthly monthly $ monthly monthly monthly $ $ $ 21427 30% 6,428 0.28 1,824.71 6,082.36 8,590.91 Average line loading of line to custom Fixed Flat rate tariff Monthly Dual Rate Tariff Low band average line occupancy High band average line occupancy Low monthly High monthly $ 1,824.71 40% 18% 59% 1,094.83 3,576.43 Dual rate tariff step point $ $ Tiered Access Pricing Tier Factor 1.40 1.20 1.10 1.05 1.00 can be used to encourage resellers leased PSTN modem, rated at 19.2K 64K 128K 256K 512K 19.2 64 128 256 512 margin over base rate for this access s margin over base rate for this access s margin over base rate for this access s margin over base rate for this access s margin over base rate for this access s Retail Schedule Fixed leased PSTN modem, rated at 19.2K 64K 128K 256K 512K $ $ $ $ $ 766 2,190 4,014 7,664 14,598 2 Tier Low $ $ $ $ $ 255 1,314 2,409 4,598 8,759 High $ $ $ $ $ 835 4,292 7,868 18,776 28,611 Modem Access Pricing Cost per modem hour Average modem speed kbps MBytes/hour Average line loading level At Marginal Retail Service Activity Loading Retail - minimum level hourly Initial retail marketing margin Retail hourly $ 26 10.4 10% 0.30 500% 1.77 50% 2.66 $ $ Page 2 Retail Model Line loading before more bandwidth is required uses target load factor from above Marginal cost of delivered data, imported data This calculation is for the average of all domestic leased circuits uses target load factor from above assumes unidirectional traffic Average ratio of highest direction traffic volume to total traffic along link Average number of domestic hops for all traffic flows Marginal cost of delivered data How much traffic is imported How much trsffic is along domestic paths Average transmission cost of delivered data Ratio of all other costs to total bandwidth lease cost Business cost of delivered data Desired operating margin of cash flow Page 3 Retail Model Average line loading of line to customer (customer received traffic) Dual rate tariff step point can be used to encourage resellers through economies of aggregation margin over base rate for this access speed margin over base rate for this access speed margin over base rate for this access speed margin over base rate for this access speed margin over base rate for this access speed Page 4 Example Business Plan Business Plan Year 1 Services In Operation (SIO) Type dial dial modems pstn 64K 128K 256K 512K TOTAL Revenue Connection charges Access charges dial pstn 64K 128K 256K 512K TOTAL Capacity calculation Calc Line Lease Actual Line Lease Costs Equipment Line Lease Staff Marketing Overheads TOTAL Net Result P/L (167,968) 149,394 675,097 1,653,596 140,000 82,500 250,000 0 120,000 592,500 420,000 330,000 350,000 50,000 120,000 1,270,000 640,000 660,000 450,000 100,000 140,000 1,990,000 1,800,000 1,956,797 500,000 150,000 200,000 4,606,797 300 30 10 20 4 0 0 64 $ 210,000 116,374 7,664 66,215 24,279 0 0 424,532 132 128 2000 200 20 40 6 2 0 268 $ 588,000 620,663 15,328 132,430 36,418 26,555 0 1,419,394 427 512 4000 400 40 100 15 8 5 568 $ 832,000 1,163,743 30,655 331,075 91,046 106,220 110,358 2,665,097 1,116 1,024 10000 1000 150 200 40 25 15 1430 $ 2,250,000 2,327,485 114,957 662,150 242,788 331,937 331,075 6,260,393 2,827 3,036 Year 2 Year 3 Year 4 Revenue Costs Profit/loss 424,532 592,500 (167,968) 1,419,394 1,270,000 149,394 2,665,097 1,990,000 675,097 6,260,393 4,606,797 1,653,596 Page 5 Sheet3 Line Occupancy Number of Clients 5% 10 10% 36 15% 47 20% 45 25% 35 30% 15 35% 10 40% 9 45% 5 50% 6 55% 5 60% 8 65% 6 70% 4 75% 0 80% 1 85% 1 90% 2 95% 3 100% 0 248 198 50 50 360 705 900 875 450 350 360 225 300 275 480 390 280 0 80 85 180 285 0 Client Spread 50 45 40 35 30 25 20 15 10 5 0 0% 20% 40% 60% 80% Number of Clients Line Occupancy 26.733871 18.6363636 58.8 Page 6 Sheet3 100% Page 7
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