Research Concludes the Economic Function of OPEX is Greater Than Most Think

New study data leads economic researches to calculate the burden of operational expense associated with broadband networks

Davis, CA - April 14, 2003 – Analyses conducted on real-world carrier data show the significance of operational expenditures (OPEX) when contrast to the investment of emerging broadband technologies in capital expenditure (CAPEX) decisions. Since February of 2000, OMNI Consulting Group has utilized operational data from carrier networks to examine the discrete economic functions of technical efficiency and the underlying behavior of cost relationships associated with deploying broadband services.

“While many network equipment vendors continue to champion lower CAPEX costs associated with their technologies, the burgeoning problem associated with the maintenance of broadband networks rests squarely on the level of OPEX burden,” said Frank J. Bernhard, managing principal of the supply chain and telecommunications portfolio at OMNI Consulting Group. Observed data show that the heightened sense of OPEX is not solely a US domestic issue, but moreover a greater coefficient for European and Pacific Rim service environments. Average costs in Europe and Japan, for instance, are 37.5% and 15.7% higher than US network counterparts, respectively.

Customer service issues in the last mile of broadband deployment present an equivocally high challenge to broadband service providers of DSL where data prove that more than 85.3% of service complaints originate beyond 14,000 feet in the digital loop. And while DSL providers are getting savvy with self-installation protocols at the customer premise, still more than 61.5% of all service complaint calls reference network provisioning errors. That translates to a steep erosion of subscriber profitability and elongated intervals for capturing the service provisioning investment.

Growth in high demand markets is being shunted by poor network capacity, and Bernhard says, "The linear relationship between demand for consumer broadband services and readily-available service capacity remain at odds still to this day." Elements of the study were able to model the relative demand for high-speed data services across various geo-spatial maps and determine that broadband demand exceeds network capacity by more than 74.2% in metropolitan markets. Given a significant increase in VoIP services and network traffic, service providers are ill equipped to handle the backlash of OPEX costs ascribed to maintaining today’s network infrastructure.

An overview of the data elements contained in the repository is available at no charge to interested parties. For more information on our research, or to speak with members of the telecommunications practice, please contact Nicole Thompson.

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Founded in 1989, OMNI Consulting Group LLP is the premiere source for empirical knowledge behind today's fast moving technology marketplace. With an impressive global network of economists and research practitioners, the firm serves many of the world's largest technology organizations and offers an unbiased approach of quantitative standards to address client-focused initiatives. OMNI Consulting Group fosters the understanding of market dynamics through an application of econometric solutions in a wide array of advisory and market research functions. Practice units within the firm concentrate on merger and acquisition support, technology audit and assurance, and intellectual asset valuation.

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