Abstract
Overview
Engineering Economics for Telecom & Media Technologists is a practical guide
towards planning and operating a media driven network using basic fiscal
management processes. This is a back-to-basics book. This book is partly an
engineering economy textbook and real-world network financial management
handbook. This book is blunt and to the point. This book is to be used by all
technologists operating in this new realm of broadband multimedia. This
publication will direct the technologist to think about driving revenue
generation. While this publication will not mention company names, the
examples given may be familiar to many readers.
This publication will raise network planning issues and network operations
issues. Network planning and operations has always been based on costs
optimization and meeting customer needs. This publication will discuss revenue
models that can be utilized in the new telecom media business environment.
Meeting customer needs assumes revenue generation. Carrier and vendor
technologists will benefit from this handbook by understanding the financial
drivers behind operating a network. The basics of money articulated in this
book will be of value to those who create and sell hardware and software.
Unlike the Telecom and IT Financial Handbook, this book will address revenue
models and content.
Target Audience
- Engineers and technologists
- Planners and project managers
- Technical managers and upper level management
- Anyone responsible or involved with telecom and/or IT financial issues
Table of Contents
- Dedications
- Acknowledgments
- Preface
- Introduction
Chapter 1: The Engineer's Financial Role
- The Impact of Multimedia Content
- What Are The Cost Elements of the Network?
- Cost versus Revenue versus Income
- Fiscal Understanding: The Engineering Economic Study Is A Decision Tool
- Examples: The Need For Economic Study
- Example 1.1:
- Figure 1.3: Trans Atlantic Company XYZ Balance Sheet
- Example 1.2:
- Example 1.3:
- Example 1.4:
- The Objectives of the Economic Analysis/Engineering Economic Study
- The Engineering Economic Study Processes
- What Engineering Economic Studies Do NOT and Are NOT
- Basic Points
- Summary
- Questions
- Answers
Chapter 2: Basic Telecom Accounting
- Accounting Concepts
- Telecom Accounting Classifications
- Assets
- Intellectual Property: Technology, Software and Content - As Assets
- Liabilities and Owner's Equity
- Balance Sheet
- Shareowner's Equity
- Table 2.1 Telecommunications Carrier Balance Sheet
- Operating Revenues
- Operating Expenses
- Income
- Income Statement
- Relationship of the Balance Sheet and the Income Statement
- After Income: Earnings and Profit
- Summary
- Questions
- Answers
Chapter 3: Capital Expenditures and the Nature of Costs
- Capital Expenditure Policies
- Example 3.1: Capital Expenditure Policies in a Healthy Company
- Example 3.2: Capital Expenditure Policies in an Unhealthy Company
- Capital Expenditure Policy Structure
- Capital Expenditure Policy: Rules and Objectives
- Revenue
- Gross Profit
- Break- Even
- Fixed Capital Investment
- Working Capital
- Income Tax Rate
- Depreciation
- Interest
- Net Profit/Operating Profit
- Rate of Return on Investment
- Payout/Payback Period
- Discounted Rate of Return
- Minimum Return Rate
- Example 3.3:
- Example 3.4:
- Capital Expenditure Policy: Summary
- Cost Expenditures: When Can You or Should You Spend Capital?
- Nature of Costs
- Plant Operation Costs
- Capital Costs
- The Nature of First Costs
- Material
- Installation
- Miscellaneous Loading
- Engineering
- Charges Occurring During Construction Which are Added to the
Plant/Equipment Investment Accounts
- The Nature of Continuing Costs
- Maintenance Expenses
- Depreciation Expenses
- Advertising
- Travel
- Commercial
- Employee Payroll, Pensions, and Benefits
- Rents
- Accounts Payable and Accounts Receivable
- General Administration
- Outsourcing
- Engineers' Outsourcing Concerns
- Cost Expenditure Policies and Capital Expenditure Policies -Harmonization
- Summary
- Questions
- Answers
Chapter 4 - Depreciation
- Attributes of Depreciation
- Intangible versus Tangible
- Example:
- Salvage, Scrap, and Junk Value
- Estimating the Useful Life of the Asset
- Methods of Depreciation
- Straight-Line Method
- Example 4.1: Straight-Line Method
- Example 4.2: Double-Declining-Balance Method
- Sum-Of-The-Years-Digits Method
- Example 4.3: Sum-Of-The-Years-Digits Method
- Example 4.4: The Sinking-Fund Method
- Which Depreciation Method Do You Use?
- Content and Depreciation
- Summary
- Questions:
- Answers:
Chapter 5: Business Planning and Organizational Theory
- Business Plan
- Components of the Business Plan
- Strategy
- Strategic Planning
- Strategic Planning - Market Segment & Size
- Strategic Planning - Value: The Story
- Strategic Planning - Distribution
- Scope and Scale of Execution
- Tactics
- Tactical Planning - Value: The Product's/Service's Intrinsic Value
- Tactical Planning - Value: The Value Proposition
- Tactical Planning - Distribution: Sales
- Equipment and Technology Sales Distribution
- Content Distribution
- Tactical Planning - Distribution: Marketing The Product
- Technology Trials - A Marketing Tool
- Marketing Mobile Content
- Tactical Planning - Distribution: Warehousing and Delivering the Product
- Tactical Planning - Other Aspects
- Vision - Binding Strategy and Tactics
- Where Do Vision, Strategy, and Tactics Lead The Company?
- Organizational Theory
- Basic Organizational Functions
- Basic Telecom Carrier and Vendor Organizational Functions
- Manufacturing and Carrier Organizational Structures
- Content Company Organizational Structures
- Multiple Organization Tracks - Measuring Performance
- Vertical and Flat Organizational Structures
- Organized Product Creation
- Departmentation
- Product Departmentation
- Functional Departmentation
- Product Departmentation versus Functional Departmentation
- Financial Relationships
- Summary
- Questions
- Answers
Chapter 6: Mathematics of Money
- Time is Money and Money is Time
- Interest: Income and Penalty
- Equivalence
- Present Worth and Future Worth
- Annuity
- Example 6.1:
- Example 6.2:
- Time-Value of Money
- Future Worth of a Present Amount
- Present Worth of a Future Amount
- Equipment and Service Value Over Time - Present and Future
- Annuities
- Annuities: Present and Future
- Future Worth of an Annuity
- Annuity for a Future Amount
- Present Worth of an Annuity
- Annuity From A Present Amount
- Rates of Return - Effective and Nominal
- Dispersed Retirements
- Summary
- Questions
- Answers
Chapter 7: Cost Analyses
- Cost Estimation Methodologies
- Order-of-Magnitude Estimation
- Historical Data
- Cost Indexes
- Example: Cost Indexes
- Cost Ratios: Cost-Capacity Relationship
- Semi-Detailed Estimates
- Buffer/Contingency Allowance
- Detailed Estimates
- Cost Estimation - Capital Investment Component
- Depreciable Fixed Investment
- Non-depreciable Fixed Investment
- Expensed or Amortized Investment
- Research and Development
- Engineering/Supervision
- Start-up Costs
- Cost Estimation - Operating Cost Component
- Direct (Variable) Operating Costs
- Indirect (Fixed) Operating Costs
- Summary
- Questions
- Answers
Chapter 8: Break-Even Analysis
- Break-Even Analysis
- Elements of the Break-Even Analysis
- Total Revenue From Sales
- Direct Costs
- Indirect Costs
- Total Costs
- Gross Profit
- Loss
- Break-Even Point
- Example:
- Break-Even Analysis
- Mathematical Representation
- Example:
- Graphical Representation
- Effect of Changes
- The Linear Cost-Volume Relationship
- The Non-Linear Cost-Volume Relationship
- Running a Sensitivity Analysis - Managing Uncertainties
- Certainty, Uncertainty, Risk, and Reward
- Summary
- Questions
- Answers
Chapter 9: Evaluating Investments and Market Driven Strategies - How?
- The Investment Decision Framework and Drivers
- Qualitative Decision Framework
- Quantitative Decision Framework
- Investment Decisions Out of Necessity
- Replacement of Worn-Out and Obsolete Equipment
- Repairs To Buildings and Facilities
- Repairs and Replacements of Equipment, Buildings, and Facilities Due to
Natural Disasters
- Meeting Government Regulations for Health and Safety
- Research and Development
- Security
- Payback Period (PP)
- Payback Period Based on Average Yearly Gross Profit
- Payback Period Based on Average Yearly Net Profit
- Payback Period Based on Average Yearly Cash Flow
- Example 9.1: Payback Period
- Return On Investment
- Example: Return on Investment
- Cost-Benefit Analysis
- Example: Cost - Benefit Analysis
- What Happens If the Quantitative Framework Fails?
- Example 9.2: Break-Even Analysis of an Investment Decision Made Out of
Necessity
- Keeping It Simple
- Integrating The Investment Evaluation with the Market Strategy
- Business Plans
- Components of the Business Plan - Review
- Strategy
- Tactics
- The Investment Evaluation and the Market Strategy - Integration Process
- Taking a Step Back
- Example 9.3
- Integration
- Summary
- Questions
- Answers
Chapter 10: Corporate Planning _ The Art Behind Integrating The Engineering Economic Study and the Business Plan
- rganization - Personnel
- Organizing the Management Thought Processes - Adaptive Planning
- Adaptive Planning Plus Organizational Structure Equals Integration
- Integrating Engineering Economy Study Results and Corporate Planning
- Assessment
- Assessment: Environment
- Assessment: Strengths and Weaknesses
- Assessment: Opportunities and Threats
- Strategic Analysis
- Decision Making
- Decision Making by the Engineer
- Setting Objectives
- Resource Analysis
- The Final Phase - Planning Implementation
- Implementation - The Customer View
- Fundamentals versus Experience
- Summary
- Questions
- Answers
Chapter 11: Project Planning & Cost Control
Chapter 12: Business & Revenue Models
- The Impact of Content on Wireless and Wireline Telecom
- The Conversion of Mobility and The Internet
- The Challenges
- Glossary
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