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Chapter 4

Chapter 4. Traffic and Cost Generators – Cost Generators. Overview. In most networks – the single largest expense item is the cost of the bandwidth. Routers with purchase cost of $10,000(amortized cost $300/month) can terminate links that cost $20,000/month.

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Chapter 4

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  1. Chapter 4 Traffic and Cost Generators – Cost Generators EMIS 8392 Maya Petkova

  2. Overview • In most networks – the single largest expense item is the cost of the bandwidth. • Routers with purchase cost of $10,000(amortized cost $300/month) can terminate links that cost $20,000/month. • Besides the TRAFFIC table The TARIFF table represents the largest data structure needed to pose a network problem. EMIS 8392 Maya Petkova

  3. Types of Tariffs • Tariff is a published rate for telecommunications services and facilities (in U.S. carriers file tariffs with FCC). • 2 types of links : - usage-insensitive or leased - usage-sensitive • In telephony most individual links are usage-sensitive. EMIS 8392 Maya Petkova

  4. Types of Tariffs – Usage Sensitive Voice Tariffs • A simple usage-sensitive voice tariff: • Fixed cost for the use of line. • Can place outgoing calls for an additional fee. • Unlimited incoming calls (the calling party pays). • The tariff is specified in 1-minute increments. EMIS 8392 Maya Petkova

  5. Types of tariffs – Usage-insensitive Voice Tariffs • Usage-insensitive tariffs come in variety of types based on the locations involved. • Suppose we have a call center located 200 miles from a large cit, Anagon, where we have several hundred customers. EMIS 8392 Maya Petkova

  6. Types of tariffs – Usage insensitive Voice Tariffs – Cont’d • Leased line – need a tandem voice switch in Anagon that can connect the leased line with a trunk in the local phone system. • Out-of-district line gives a line that appears to be in Anagon. Reduces the per-minute charge for outgoing calls from $0.095 per minute to $0.03 per minute. • Banded WATS (wide area telephone service) (4 hours/day) – allows up to 4 hours of calls per day to locations that are no more than a certain specified distance, for instance 250 miles. EMIS 8392 Maya Petkova

  7. Types of tariffs – Usage-insensitive Voice Tariffs – Cont’d • Banded WATS with unlimited usage within the same 250 mile circle. • Nationwide WATS - national coverage with unlimited usage. • Banded WATS are more expensive. EMIS 8392 Maya Petkova

  8. Types of tariffs – Usage- sensitive Data Tariffs • X.25 and ISDN are deployed in parts of the world. • Users can place a data call much as they would place a voice call . • Users will be charged a fixed cost + a cost/minute. • Optionally users are charged a cost/bit or a cost/packet. • In other parts of the world data one demand is limited to modems operating over voice-grade lines. EMIS 8392 Maya Petkova

  9. Types of tariffs – Usage-insensitive Data Tariffs • Limited to speeds consistent with the multiplexing hierarchy for the country. • In U.S. rates are 56 Kbps; fractional T1, e.g. 128 Kbps, 192 Kbps, 256 Kbps, 384 Kbps, 512 Kbps, 768 Kbps; and full T1. • In Europe there is normally only multiples of 64 Kbps, including half E1 = 1024 Kbps. • Usage-insensitive data tariff for U.K. EMIS 8392 Maya Petkova

  10. Tariff Taxonomies Given the number of ways of buying bandwidth and connectivity and the number of ways of paying for it, we need a taxonomy of link costs - that is to make a decision how to categorize all the types of links into a relatively small set of examples. Note: No taxonomy is complete. EMIS 8392 Maya Petkova

  11. Tariff Taxonomies – Link Types – Fixed Virtual Circuits • Leased links that can be filled with voice calls or data at any hour of the day or night. • They are usually in place for months or years. • Have substantial installation costs, in order of 1 or 2 months rent. • Often derived from higher-speed links by TDM • Clocked to the network – different form the situation in asynchronous modems where users transmit whenever they like. EMIS 8392 Maya Petkova

  12. Tariff Taxonomies – Link Types – Dialed Virtual Circuits • Can be set up or torn down on demand. • Often not available at the same speed as fixed virtual circuits. Example: a T3 link at 45 Mbps is only available as a fixed virtual circuit, not as dialed virtual circuit. • Conventional phone uses dialed virtual circuits. EMIS 8392 Maya Petkova

  13. Tariff Taxonomies – Link Types – Fixed Pipes • Define pipe to be a communication link that accepts bits at a certain rate and makes an effort (the supplier usually calls it a best effort) to deliver the bits to the other end. Examples – X.25, frame relay, and SMDS (switched multimegabit data service). • Many pipes can share the same physical interface • Note: with virtual circuit the data rate and the circuit rate are the same, in pipes they can be quite different. Suppose we have frame relay connection with 64 Kbps peak rate and a 16 Kbps CIR ( committed information rate). We are only guaranteed to use the link to an average of 0.25 of its capacity. EMIS 8392 Maya Petkova

  14. Tariff Taxonomies – Link Types – Dialed Pipes • Pipes that can be set up or torn down upon demand. • Have the same service characteristics as the fixed pipes. • Charging structure is usage sensitive. EMIS 8392 Maya Petkova

  15. Tariff Taxonomies – Link Types – Cont’d Along with the previously described link taxonomy we have a list of possible fees: 1. Access fees ( the cost of maintaining a physical network connection). 2. Setup fees. 3. Teardown fees. 4. Usage fees, which depend on - channel capacity - CIR - distance - time of day - national and administrative borders EMIS 8392 Maya Petkova

  16. Tariff Taxonomies – Relationship to the Network Design Process Q1. How to obtain and organize all the information mentioned so far in a reasonable way so that it can be made use of in the design process? Q2. How do we automate the process so that gathering the tariff data doesn’t become the largest part of the design process? EMIS 8392 Maya Petkova

  17. Distance-Based Costing • Calculating link costs is not very simple. • Sometimes costs can be very odd. • The tariff world represents anomalies like those found in airline tariffs. • Example: NY-LA cheaper air fares than NY-Montreal because of the competition. • Link from NY- Montreal can be more expensive than a link from NY to LA. Competition serves to depress the market if there is excess capacity. Crossing national borders plays role in decreasing competition. EMIS 8392 Maya Petkova

  18. Linear Distance-Based Costing Cost models for fixed virtual circuits and fixed pipes: generating the monthly rental cost. • Cost of a circuit between 2 sites that are km apart is - fixed cost - variable cost • A D64 virtual circuit might have a fixed cost of $1200 and a variable cost $2.50/km. A circuit of 200 km will cost $1700/month. • Unfortunately most tariffs differ significantly from this simple model EMIS 8392 Maya Petkova

  19. Linear Distance-Based Costing – Cont’d • Interesting use of liner distance-based costing is to estimate tariffs when the exact tariff is known but is unreasonably complex. • Tariff may be published as a gigantic table. There may be 400 cities in a country, and the tariff for a D64 line is published as a table of length . The table is published on paper. If we do not want to scan 100 pages and convert into ASCII via OCR (optical character recognition) we can take a number of city pairs from the table and fit into a linear distance-based tariff. EMIS 8392 Maya Petkova

  20. Linear Distance-Based Costing – Cont’d • Represent the data as: where • Do a least square fit of the data to a linear function • Minimize • Min occurs when the partial derivatives are 0. EMIS 8392 Maya Petkova

  21. Linear Distance-Based Costing – Cont’d • Solve in terms of and . • It will work quite well in certain limited cases – if all the cites are within a country or within the service region of a company within a country, the tariff might be exact. • Example: In U.K. we can use the approximation of $757.09 + $2.40/km for the cost of a 128 Kbps circuit. In the U.S. the circuit between central offices would be $605.00 +$0.49/mile EMIS 8392 Maya Petkova

  22. Piecewise-Linear Distance- Based Costing • Definition 4.2. A piecewise-linear function on with breaks at is continuous on and is linear on the intervals • Many tariffs are published in piecewise-linear format. • Cost per mile or km is in bands. EMIS 8392 Maya Petkova

  23. Piecewise-Linear Distance- Based Costing – Cont’d Piecewise-linear tariff for a T1 circuit between central offices in the U.S. and Mexico. Piecewise linear tariff for 56 Kbps link between U.S. and Canada. EMIS 8392 Maya Petkova

  24. Piecewise-Constant Distance-Based Costing • Another model for costs is a step function. • Japanese tariff for a D64 line. EMIS 8392 Maya Petkova

  25. Tariff Nirvana Even if the data is available finding the charges can be tricky. Q. What would be the ideal solution to the tariff problem? • Tariff library or a tariff client/server interface that allowed us to ask for tariffs on demand so we could write the following code: PNODE newyork, paris; cost = tariff_nirvana(newyork, paris, “T1”, “ANYCARRIER”, “FIBER” ); and get magically the correct result EMIS 8392 Maya Petkova

  26. Tariff Nirvana – Cont’d We are long way from tariff nirvana: - often tariffs do not exist - while it is easy to get a tariff from Dallas to London, it can be another thing to get a tariff from Caracas, Venezuela to Beijing, China - if there are no direct circuits between 2 countries, there is probably no filed tariff - the tariffs is not just a function of the 2 endpoints; it also depends on the country where the service is booked EMIS 8392 Maya Petkova

  27. Tariff Nirvana – Cont’d • Not clear which is the correct tariff to use. • Good example: U.S. and Canada – circuits between these countries are treated differently from other international circuits and differently from national circuits.There is a question on optimizing the link cost across multiple carriers. • Another good tariff example: in U.S. with the notion of LATA (local access and transport area) – the cost of a circuit between 2 sites in different LATA uses a different tariff than would be used if both points are in the same LATA. EMIS 8392 Maya Petkova

  28. Tariff Nirvana – Cont’d • Tariffs are misleading – could appear that tariff offers low rate between 2 sites but when go to provision the circuit we may find that the there are no facilities or the lead time to provide the circuit is unacceptably long. • There are parts of the world where the cost of a simple phone is not prohibitive, but the wait for a phone is measured in decades. • If a network is large enough there are negotiated tariffs that allow carrier to have a special deal with a customer. EMIS 8392 Maya Petkova

  29. Tariff Tools • Network designers and network operators are the single largest group of customers of businesses that produce tariff tools and tariff references. • Companies in the tariff tool business: - NAC Corp. - PRICER tool produces tariffed costs in North America. Extensions of this tool cover most of the first world - LYNX - LYNXGTD tool is very comprehensive, strong on pricing international circuits, weaker on prices within countries - Tarrifica – they produce a tariff book, relatively comprehensive EMIS 8392 Maya Petkova

  30. A Sequence of Cost Generators • Commercial tariff tools are expensive. • 5 different cost generators that can generate costs for sample problems or for real work are described • Interesting problems can be developed with piecewise-linear tariffs. • Cost Generator 1 and Cost Generator2 – for academic studies, the other 3 for those who are trying to do actual design work. • Costgen.c – source code with DELITE • COSTALG will control which generator to be used EMIS 8392 Maya Petkova

  31. Cost Generator 1 • Inputs: - SITES table with locations in V&H or L&L - TARIFF-UNIVERSAL table as shown below • Output: matrix of size where is the number of sites and is the number of link types defined in the TARIFF-UNIVERSAL table. EMIS 8392 Maya Petkova

  32. Cost Generator 1 – Cont’d • The algorithm passes through all node pairs. Fixed cost is is abbreviated as and the cost/km as If distance form to is then • Requires min amount of info to produce cost table • It will do well within a LATA in U.S. or within a country with a simple charging structure like U.K. • Can not produce realistic tariffs covering sites in several countries – too simple. • Best way of generating tariffs for test problems with min amount of manual work EMIS 8392 Maya Petkova

  33. Cost Generator 2 • Inputs: - SITES table with locations in V&H or L&L - TARIFF-UNIVERSAL table as shown below with 2 additional fields • Output: matrix of size where is the number of sites and is the number of link types defined in the TARIFF-UNIVERSAL table. EMIS 8392 Maya Petkova

  34. Cost Generator 2 – Cont’d • Extends our linear model to a piecewise-linear. • Not realistic for international tariffs. EMIS 8392 Maya Petkova

  35. Cost Generator 3 • The costs of services in the U.S. and Mexico are quite different as are the costs of services in Germany and France. We can deal with it by overlaying the output of the Cost Generator 2 with the country specific information. • Inputs: - SITES table with locations in V&H or L&L - TARIFF-UNIVERSAL table as shown below EMIS 8392 Maya Petkova

  36. Cost Generator 3 – Cont’d • TARIFF-NAT table as shown below EMIS 8392 Maya Petkova

  37. Cost Generator 3 – Cont’d • Output: matrix of size where is the number of sites and is the number of link types defined in the TARIFF-UNIVERSAL table. • is first filled with values from the TARIFF-UNIVERSAL table using piecewise-linear cost generator. After that is done, a second pass through the sites is taken. If the country code for site and are both country , then we recalculate the tariff for the node pair • Strong relationship between the economy of scale offered by the tariff and the shape of the final network EMIS 8392 Maya Petkova

  38. Cost Generator 4 • Approximate international circuit pricing. • Many large companies have located facilities throughout the world. We need whole range of international tariffs. They can be supplied on a country-pair vs. node-pair basis. • International costs are usually sum of 2 pieces referred to as half-circuits. • For most country pairs (A,B) the cost of circuit from anywhere in country A to anywhere in country B is the same. EMIS 8392 Maya Petkova

  39. Cost Generator 4 – Cont’d • Inputs: - SITES table - TARIFF-UNIVERSAL table - TARIFF-NAT table - TARIFF-HCKT table as shown below with additional columns to clarify the country code EMIS 8392 Maya Petkova

  40. Cost Generator 4 – Cont’d • Output: matrix of size where is the number of sites and is the number of link types defined in the TARIFF-UNIVERSAL table. • is first filled with values from the TARIFF-UNIVERSAL table using piecewise-linear cost generator. Then we use the TARIFF-NAT table to overwrite values for sites within a country. If site is in and site is in then we recalculate the tariff for the node pair if both half-circuits are present EMIS 8392 Maya Petkova

  41. Cost Generator 5 • Allows us to specify some overrides and investigate special tariffs available between some city pairs • Inputs: - SITES table - TARIFF-UNIVERSAL table - TARIFF-NAT table - TARIFF-HCKT - TARIFF-OVERRIDE table as shown on slide 42 EMIS 8392 Maya Petkova

  42. Cost Generator 5 – Cont’d After all of the tariffs are computed using the TARIFF-UNIVERSAL table, the TARIFF-NAT table, the TARIFF-HCKT table as a final step we read through TARIFF-OVERRIDE table and replace the individual entries of with costs in the this table. EMIS 8392 Maya Petkova

  43. Summary • Traffic and cost generation allows us to take the SITES table of entries and produce the TRAFFIC and TARIFF tables which have entries. • If these tables were produced manually they would take up most of our time which could be used to create good designs. • Traffic and cost generators are packaged into a single program called network generator which allows us to pose a complete design problem. EMIS 8392 Maya Petkova

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