Financial strategies for backup power in telecom networks

When all access switching terminals were powered by a single battery technology (valve regulated lead acid-VRLA), the economics of a telecom power storage system in a given operating environment was predictable using only three parameters: (a) the initial purchase price of the battery; (b) the annual cost of maintenance of the battery; (c) and the average life of the battery. With such a homogeneous technology, the strategies were limited to three options : (a) frequent battery replacements associated with low maintenance costs; (b) high maintenance costs associated with a longer average battery life; (c) a combination of the two strategies above. Field data collected from various telecom operators worldwide demonstrates that in similar operating environments the three strategies generate comparable life-cycle costs (i.e. 5 to 6 times the initial purchasing price of a VRLA over a period of 10 years for outdoor sites operated at an average temperature of 30/spl deg/C). Due to increasing competition in their industry, telecom operators are placing more importance on financial criteria when investing in network equipment. Recently, several telecom operators have started, or are considering deploying heterogeneous power solutions, such as Ni-Cd batteries, flywheels, diesel engines, etc. in their access networks. Due to the inherent performance of these technologies over a longer time-frame, new financial strategies are made possible and need to be investigated with more refined models, to include the analysis of: (a) downtime costs, hidden costs, insurance costs and risk management; (b) the contribution to capital expenditures; (c) the contribution to operating expenditures; (d) the effect of material and labor cost increases (inflation); (e) the impact of currency actualization; and (f) the impact of a capital leasing or of an operating leasing scheme. This paper proposes a simple methodology, based on basic tools (spreadsheets and graphs), focusing on cash-flow analysis, to compare heterogeneous technologies and to select the appropriate strategy for a given operating environment. The methodology is illustrated by concrete examples, and the impact on cash flow of different strategies is demonstrated in given operating contexts. The impact in a given strategy of different operating parameters ( such as average temperature, labor cost, etc...) is also analyzed. Practical business cases show that the payback of a higher initial investment depends heavily on the intrinsic performance of the technology. However, the operating context has also a significant importance.