Microwave Backhaul Total Cost of Ownership (TCO) pt. 2

How Important is Initial CAPEX?

Are we seeing the forest or the trees?

Based on microwave Total Cost of Ownership (TCO) model posted earlier, the most significant contributor to total cost is ongoing OPEX.

We see an increasing trend of operators making decisions on backhaul solution based mostly (sometimes solely) on price (or initial CAPEX). While initial CAPEX is important, if the goal is lowest cost, this can be problematic approach as initial CAPEX it is not the most significant contributor to total cost.  Ongoing OPEX is key.

Perhaps a better approach would be to focus on features most impacting lowering total costs.  For instance, adaptive coding and modulation can lower antenna sizes – which can reasonably reduce 10 year TCO by as much as $48,000 (which is 2-3x more than initial CAPEX).  Deploying ring architectures with high layer (L2/L3 or packet-based) failure recovery techniques can enable lower per hop reliability and smaller antennas – further lowering costs.

Microwave Backhaul Total Cost of Ownership

Gary Croke

Product Marketing, Aviat Networks

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Microwave Total Cost of Ownership (TCO) Pt. 1

When choosing the right backhaul technology, total cost of a microwave system is a critical, often overlooked, consideration. TCO is not widely understood today. Lack of understanding of microwave TCO can lead to poor decisions about choice in backhaul technology and obscure the relative importance of features. Features that lower critical components of TCO are often not given enough attention.

A summary of a TCO model for a mobile operator in North America is shown below. Clearly, ongoing OPEX resulting from tower leases represent largest contributor to total cost.  These lease costs include tower space for antennas and cable runs, shelter/cabinet space and power, and ongoing move/add/change fees regularly paid to tower companies. The largest portion of this tower lease is related to the antenna size. Microwave products and features that enable smaller antennas sizes, less indoor space, and fewer cables are most important for operators.

10 Year Microwave Total Cost of Ownership

*Note: for private network applications (like state/local governments, public safety organizations, and utilities) who generally own towers, initial CAPEX is often higher, leading to an overall reduction in ongoing OPEX and TCO.

Make sure to check back next week for post #2 ” How Important is Initial CAPEX?” where I breakdown the true costs of initial and ongoing CAPEX.

Gary Croke

Product Marketing, Aviat Networks

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