SHARED COSTS IN THE CO-LOCATION MODEL

The costs shared between the co-locating operators are co-location specific site costs. These costs are the additional costs needed to prepare a space at the SMP operator site for co-location. The model does not distinguish between costs that are dependant on site size and those that are independent of site size13_.

In order to share these costs between the co-locating operators the model uses demand data including the total demand in m2 _{for co-location and number of co-locating operators}

per site.

The co-location demand data specifies three inputs:

• Total demand for co-location space and services by site type

• The average number of operators in each site by site type

• Number of sites where co-location is required by site type area required.

The demand sheet specifies the demand for different years. Any year (and demand level) can be selected. However, the default year is 2003 assuming a one year planning horizon as required by the MRP.

To calculate the room fit-out costs of rack space the model first determines the average size of a co-location space by using demand data. This will depend on the costing year. The piece-wise linear cost-volume relationship for room build costs is then used to calculate the square metre cost for co-location at different site types (RSS, LE and TS). Multiplying this square metre cost by the average rack size results in the cost of rack space per rack. This cost per site is then weighted by a demand profile for co-location space per site. This demand profile is based on the average co-location demand per operator per site.

As stated in the previous section cable costs are also allocated some shared costs. These are the room fit-out costs that are independent of size. These are cable wiring looms, cable chutes, cable lead in etc. To estimate the costs per operator owned cable the fixed cost per site is divided by the weighted number of operators per site.

5.6 COMMON COSTS IN THE CO-LOCATION MODEL

The area of space in sites that is used by co-location services defines how much of the buildings’ common costs should be apportioned to the co-location services. This

calculation is carried out in the core model. To do this the core model must have the total co-location space required at different sites types. The outputs of these values from the co-location model are manually entered into the core model, where a m2 cost is

calculated specifically for co-location including co-locations proportion of these common costs.

Costs that are common to co-location services and services in the core and access networks are:

• Power supply units (including back-up systems)

13 _{The available data did not allow for a distinction: that the cost of some elements will depend on}

• Air conditioning units (including power consumption)

• Security systems

• Site preparation and maintenance.

It should be noted that the co-location model also deals specifically with power costs, in particular the costs of installing power cables. It is assumed that the co-locating operator may use the main power supply unit already installed a site. Power costs in the co- location model do therefore not include the costs related to the power supply units.

5.7 OTHER SERVICE COSTS INCLUDED IN THE CO-LOCATION MODEL

The cost inputs for a number of services covered by the LRIC regulation that are specific to core and access services have been modelled in the co-location model. Because these services do not use core and access directly and many cases consist of costs that are specific to work process, the BUMT has decided to model these in the co-location model. The services for which the co-location model contains cost input are:

• Installation of raw copper

• Installation of shared raw copper

• Installation of bit stream access

• Installation and operation of 2 regional Point of Interconnect (POI)

• Installation and operation of a local POI

• Installation and operation of (2 Mbit/s) interconnection capacity.

The starting point for the calculations is the activities or working tasks involved in providing these services.

5.7.1 Raw copper

When installing raw copper the two cost driving activities considered are:

• Order processing - all ordering costs before and after physical coupling in exchange, i.e. reception, confirmation and key in of orders

• Coupling in exchange - dismounting of old wire, coupling to trunk, transportation etc.

Note that costs regarding examination and reservation of possible cable routes are including in the annual charges for raw copper.

5.7.2 Shared raw copper and bit stream access

When installing shared raw copper and bit stream access the two cost driving activities considered are:

• Order processing - all ordering costs before and after physical coupling in exchange, i.e. reception, confirmation and key in of orders

• Coupling in exchange – installation of splitters, transportation etc.

Note that the cost of installation only includes work at the exchange site. Work at the customer premises is not included.

5.7.3 Regional and local POI

In the core model the assumption is used that any switch that is to become a point of interconnect (POI) will require upgrades to the signalling and call routing tables. As the cost of this upgrade depends on the switch type, the upgrade costs will depend on whether it is an LE or a TS.

The POI upgrade costs are treated as if it were a switch asset. Hence the costs are annualised. The costs have been allocated to the POI_Traffic element for uses only by interconnect calls.

In addition to these costs are the specific costs related to the services regional and local POI. These are the costs incurred when setting-up a POI for other operators and the costs of operating and maintaining these.

For both regional and local POI of the model calculates an installation cost based estimates of tasks involved and time spent on these tasks. The relevant tasks are:

• Order processing - administrative staff tasks such as, reception, confirmation and key in of orders but also academic staff tasks such as contract negotiations and communication of information.

• Network changes - elaboration of signalling parameters, supervision functionality, traffic data etc.

The annual operating costs of a POI is assumed to include the following:

• Administration tasks - billing, secretarial duties, case handling, etc.

• Network management - day-to day operation and maintenance activities, e.g. individual repairs.

In order to take account of the software costs related to he operating of POI an additional mark-up has been added to the technicians salary.

5.7.4 Interconnection capacity

Interconnection capacity refers to a 2 Mbit/s port on the interconnection exchange. The installation costs of interconnection capacity are driven by:

• Order processing - administrative staff tasks such as, reception, confirmation, key in of orders and ordering of hardware.

• Mounting of hardware – including coupling The annual costs for interconnection capacity consist of:

• An annualised cost of a port unit.