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Published: September 2006
Pages: 434
Author: P.J. Louis
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Company-wide license
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Millions are spent on equipment, products, and services, but so little
time and effort is spent on educating the technical team about good financial
management practices and the implications of projects and operations
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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
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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
Declining-Balance Method
Example 4.2: Double-Declining-Balance Method
Sum-Of-The-Years-Digits Method
Example 4.3: Sum-Of-The-Years-Digits Method
The Sinking-Fund 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
Organization - 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
Detailed Estimates
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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Ordering
Single-use license of this report is priced at $ 295 US
Company-wide license of this report is priced at $ 1,995 US
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About the Author
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P.J. Louis has over a quarter of a century’s worth of experience in the telecom business. Mr. Louis is currently developing businesses in the United States. Mr. Louis is a partner of Avondale Ventures; a private equity firm based out of new York and Washington, DC. Prior positions include Managing Director for Telecom Business Recovery in FTI Financial Consulting and PricewaterhouseCoopers, Vice President of Carrier Marketing & Product Management at TruePosition, Inc., a leading provider of wireless location services. Mr. Louis had also served as chief of staff for engineering in NYNEX (today known as Verizon). He has held a number of leadership positions within Bell Communications Research and NextWave Wireless. Mr. Louis is a former officer of the Insititute of Electrical and Electronics Engineers (IEEE) Communications Society – New York Section. Mr. Louis has been a senior member of IEEE for 27 years. Mr. Louis is on the boards of advisors of LF Productions and Titan Motion Pictures Group – Hollywood based motion picture production companies. Mr. Louis served on the editorial advisory board of Cellular Integration magazine (later it became Cellular Marketing). Mr. Louis has been a featured speaker in telecommunications conferences and is the author of four (4) McGraw-Hill books; Telecom Management Crash Course, M-Commerce Crash Course, Broadband Crash Course, and Telecommunications Internetworking. Mr. Louis is the author of three (3) Mind Commerce books. The Financial Handbook for Telecom and IT Technologists, The Definitive Guide for Wireless E-911 –2005, and The Telecom Network Management Reference Guide.
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PJLouis@MindCommerce.com
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