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CAM Version 4.0 Methodology Document

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Released: December 18, 2013













Model Methodology

CACM)




CACM version 4.0
Document version 4.0
Revised 12/11/2013

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Copyright 2013 CostQuest Associates, Inc. All rights reserved.
Confidential Information – subject to the Third Supplemental Protective Order in Federal
Communications Commission WC Docket No. 10-90, including the Connect America Cost Model
(CACM) License Agreement. Disclosure, copying, reproduction, merger, translation, modification,
enhancement or use for any purpose other than direct participation in WC Docket No. 10-90 is
prohibited.



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Table of Contents
1
Introduction .......................................................................................................................... 5
1.1.
Overview ...................................................................................................................... 5
1.2.
Architecture, Function and Logic .................................................................................. 6
1.3.
CACM Processing ...................................................................................................... 11
2
Architectural Component 1 – Understanding Demand .......................................................... 11
2.1.
Introduction ............................................................................................................... 11
2.2.
Information Source and Process .................................................................................. 12
3
Architectural Component 2 – Design Network Topology ...................................................... 14
3.1.
Introduction ............................................................................................................... 14
3.2.
Overview of Approach ................................................................................................ 14
4
Architectural Component 3 – Compute Costs and Develop Solution Sets .............................. 15
4.1.
Introduction ............................................................................................................... 15
4.2.
Capital Expenditure (Capex) Sub-Module .................................................................... 16
4.2.1 Build Assumptions and Attributes ........................................................................... 16
4.2.2 Network Architecture.............................................................................................. 17
4.2.3 Network Capital Requirement Development ............................................................ 18
4.3.
Operational Expense (Opex) Sub-Module .................................................................... 25
4.3.1 Opex Assumptions .................................................................................................. 26
4.3.2 Sources of Information ............................................................................................ 27
4.3.3 Development of Opex Factors ................................................................................. 27
4.3.4 Operational Cost Sub-Module Conclusion ............................................................... 31
4.4.
Cost To Serve Processing Steps ................................................................................... 31
5
Architectural Component 4 – Define Existing Coverage ....................................................... 32
5.1.
Introduction ............................................................................................................... 32
5.2.
Information Source and Process .................................................................................. 32
6
Architectural Component 5 – Calculate Support and Report ................................................. 34
6.1.
Factors that Determine Support ................................................................................... 35
6.2.
CACM User Controlled Reporting Parameters and Output Descriptions ....................... 35
6.3.
Support Model Report Output Field Definitions ........................................................... 37
7
Appendix 1 – CACM Network Topology Methods ............................................................... 40
7.1.
Introduction to CQLL................................................................................................. 40
7.2.
Accurate Bottoms-Up Design ...................................................................................... 40
7.3.
Developing Costs for Voice and Broadband Services .................................................... 41
7.4.
Network Assets........................................................................................................... 41
7.4.1 End User Demand Point Data ................................................................................. 43
7.4.2 Service Areas .......................................................................................................... 43

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7.5.
Methods - Efficient Road Pathing and Networks .......................................................... 44
7.6.
Demand Data Preparation .......................................................................................... 44
7.7.
Efficient Routing ........................................................................................................ 45
7.8.
CQLL Network Engineering, Topologies and Node Terminology ................................. 48
7.9.
Key Network Topology Data Sources .......................................................................... 51
7.9.1 Service Area Engineering Input data ........................................................................ 51
7.9.2 Demand data .......................................................................................................... 51
7.9.3 Supporting Demographic Data ................................................................................ 51

8
Appendix 2 – CACM Middle Mile Network Topology Methods ........................................... 52
8.1.
Introduction to CQMM .............................................................................................. 52
8.2.
Middle Mile Undersea Topologies for Price Cap Carriers in Non-Contiguous Areas ...... 54
8.3.
Development of Undersea Percentage Use Factors ....................................................... 55
8.4.
Submarine Topologies for Price Cap Carriers in Non-Contiguous Areas ....................... 56
9
Appendix 3 – Data Source and Model Application Summary ................................................ 57
10
Appendix 4 – CACM Data Relationships ........................................................................ 60
11
Appendix 5 – CACM Processing Schematic ..................................................................... 61
12
Appendix 6 – CACM Input Tables .................................................................................. 63
13
Appendix 7 – CACM Plant Sharing Input Walkthrough ................................................... 66
13.1. Sharing Between Distribution and Feeder .................................................................... 66
13.2. Sharing Between Providers .......................................................................................... 68
13.3. Sharing Of the Middle Mile Network ........................................................................... 69
13.4. Sharing of Middle Mile Routes Associated with Voice and Broadband .......................... 69

14
Appendix 8 -- Broadband Network Equipment Capacities ................................................ 71
14.1. Impact of Bandwidth growth on Broadband Network Equipment Capacities ................. 74
15
Appendix 9 -- Plant Mix Development ............................................................................ 76
15.1. Carrier-Provided Plant Mix Data Request .................................................................... 76
15.2. Methods ..................................................................................................................... 76

16
Document Revisions ....................................................................................................... 77




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1

Introduction


In its entirety, the Connect America Cost Model (CACM or CAM) provides for the identification of
universal service support amounts through a series of processing steps, consistent with the direction
provided by the USF/ICC Transformation Order and FNPRM (FCC 11-261) regarding Connect
America Phase II, and all subsequent direction.

CACM calculates the cost of building an efficient network capable of providing voice (via carrier
grade Voice over Internet Protocol (cVoIP)) and broadband-capable service.1 The model develops
the investment and cost for voice and broadband-capable network connections to locations utilizing
the existing wireline serving wire center locations. The process of developing a universal support
amount takes the cost output from the Cost to Serve Module along with user-defined parameters to
calculate a result representing universal service support specific to the user request.

The Support Module calculates an amount of universal service support by taking cost calculated by
the Cost to Serve Module for a given set of inputs (i.e., a Solution Set) along with user-defined upper
and lower thresholds. These calculations are based on granular cost information about which areas
require support given those user-specified upper and lower thresholds.
1.1. Overview

CACM estimates the cost to provide voice and broadband-capable network connections to all
locations in the country. In its entirety, CACM provides specific details at the Census Block level,
for both (1) the forward-looking cost to deploy and operate carrier grade Voice Over Internet
Protocol (cVoIP) service and a broadband-capable network and (2) universal service support levels
for that voice and broadband-capable network. The voice and broadband-capable cost development
process in CACM is based on the follow key criteria:

1. Forward--Looking Cost Methodology.2

2. Network Topology and technology consistent with efficient technologies being deployed
by service providers today.3


1 Modeled network efficiency is a product of CACM’s using real-world optimized algorithms to
minimize road distances, current technology selections, current demand targets and related
engineering rules.

2Connect America Fund et al., WC Docket No. 10-90 et al., Report and Order and Further Notice of
Proposed Rulemaking, 26 FCC Rcd 17663, 17727, para. 166, (2011) (USF/ICC Transformation Order
and FNPRM
or Order or FNPRM), pets. for review pending sub nom. In re: FCC 11-161, No. 11-9900
(10th Cir. filed Dec. 8, 2011) (“Specifically, we adopt the following methodology for providing CAF
support in price cap areas. First, the Commission will model forward-looking costs to estimate the
cost of deploying broadband-capable networks in high-cost areas and identify at a granular level the
areas where support will be available”).

3USF/ICC Transformation Order and FNPRM, 26 FCC Rcd at 17736, para. 189 (“We conclude that
the CAF phase II model should estimate the cost of a wireline network”).

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3. Granular details / calculations to the Census Block level for all locations.4

4. All locations including the Continental United States, Alaska, Hawaii, Puerto Rico, U.S.
Virgin Islands and Northern Marianas Islands.5

5. Carrier grade voice over internet protocol (cVoIP) and broadband capable network.

6. Utilize data from various sources, including the National Broadband Map (NBM), for
identification of served and unserved locations, including the ability to exclude Census
Blocks served by an unsubsidized competitor from funding.6

7. Reflect cost differences consistent with the actual geographic conditions associated with
the study area as well as construction and operational cost differences related to carrier
size.

8. Consistent in all aspects with the Commission Order FCC 11-161 and all subsequent
direction.
1.2. Architecture, Function and Logic

The following three schematics provide important introductory views of CACM. An understanding
of the CACM overall environment, its basic architecture (components) and its processing flow will
assist with understanding the CACM methodology.

 Figure 1 – a relatively high level view of the overall modeling environment

 Figure 2 – a mid-level view of CACM’s basic architecture

 Appendix 5 – a more detailed view of CACM’s processing flow

This initial view of CACM’s modeling environment shows how the inputs and tools used to develop
the network topology (CQLL and CQMM) relate to the fundamental model.


4USF/ICC Transformation Order and FNPRM, 26 FCC Rcd at 17735-36, para. 188 (“We conclude that
the CAF Phase II model should estimate costs at a granular level –the census block or smaller – in
all areas of the country”).

5USF/ICC Transformation Order and FNPRM, 26 FCC Rcd at 17737, para. 193 (“We direct the
Wireline Competition Bureau to consider the unique circumstances of these areas (Alaska, Hawaii,
Puerto Rico, the U.S. Virgin Islands and Northern Marianas Islands) when adopting a cost model,
and we further direct the Wireline Competition Bureau to consider whether the model ultimately
adopted adequately accounts for the costs faced by carriers serving these areas”).

6USF/ICC Transformation Order and FNPRM, 26 FCC Rcd at 17729, para. 170 (“In determining the
areas eligible for support, we will also exclude areas where an unsubsidized competitor offers
broadband service that meets the broadband performance requirements described above, with those
areas determined by the Wireline Competition Bureau as of a specified future date as close as
possible to the completion of the model”).

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Figure 1--CACM High Level View


The second view (Figure 2) is more of an architectural view. From an architectural perspective
CACM can be considered in terms of five distinct yet interrelated components each designed to
address a specific modeling function. From a system-logic perspective, across these five components
CACM gathers and considers relevant information required to:

 Understand demand,

 Design viable network options,

 Estimate network costs,

 Understand existing broadband coverage and ultimately,

 Explore and assess potential support assumptions.

Also, across the architecture are a set of input options and toggles that provide users with the
opportunity to explore a number of different inputs and support scenarios. CACM also includes a
reporting function that provides users with a variety of outcome reports and a variety of audit
reports.

A schematic of CACM’s five architectural components and related functions follows. Abbreviations
and terms used in the schematic are explained throughout the Methodology. For example, CQLL
refers to the CostQuest LandLine process whereby demand points are connected (modeled) back to
a known Central Office and CQMM refers to the CostQuest MiddleMile process whereby Central
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Office locations are connected (modeled) to a location where Internet peering can occur . POI refers
to a Point of Interconnection, otherwise known as a Central Office.

A third view (Figure 15) is presented in Appendix 5 and provides a more detailed view of how
CACM sequentially processes inputs and develops reports.
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Figure 2--CACM Architecture


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The CACM Architectural Components and their function are summarized below and
detailed further throughout this Methodology.

1.

Component 1 - Understand Demand:

The function whereby consumer and
businesses are located. Results in a representation of potential demand consistent
with address level consumer and business information from GeoResults and US 2010
Census data, updated with 2011 Census county estimates.

2.

Component 2 – Design Network Topology:

The function whereby network design
is determined to accommodate required service capabilities, demand and
geographies. Results in a set of Network Topologies which are consistent with
forward-looking network deployments.

3.

Component 3 – Compute Cost and Develop Solution Sets:

The function whereby
network construction and operating costs are determined and custom Solution Sets
are defined. (Note: outputs from the Cost to Serve Module (i.e., Component 3)
represent a unitized measure of costs for comparison among Census blocks and are
stored in and referred to as a “Solution Set”. Solution Sets are subsequently used by
the Support Module along with specific user parameters to calculate a result.) Results
in an estimate of the cost to deploy and operate the Network Designs selected by the
user. This component also includes a set of user inputs and toggles which provide
users the ability to explore certain cost related input options.

4.

Component 4–Define Existing Coverage:

The function whereby existing voice and
broadband coverage is inventoried and associated with deployment technologies,
speed and specific geographies. Results in a representation of voice and broadband
coverage, drawing on various sources including the State Broadband Initiative (SBI)
data development program.

5.

Component 5 – Evaluate Support and Report:

The function whereby support
options are evaluated, final model outcomes are assessed and model detail is
reviewed. Results in the computation of a universal service support amount based
upon parameters (toggles) entered by the user. This component also includes
parameters which provide users with the opportunity to explore a variety of support
scenarios. Also included in this component are a variety of system outcome and
audit reports.

Three of the components (i.e., (1) Understand Demand, (2) Design Network Topologies,
and (4) Inventory Coverage) are stand-alone related efforts that are consistent with CACM’s
purpose. The other two components (i.e., (3) Compute Costs and (5) Evaluate Support)
represent the core of CACM’s internal processing. See discussion and schematic in
Appendix 5 regarding CACM processing.

With respect to the two core CACM components, the Compute Costs and Develop Solution
Set component (sometimes called the Cost to Serve Module) is a systematized procedure that
takes as inputs geographic and non-geographic data and produces an estimate of the cost of
providing voice and broadband-capable networks. As such, it provides unitized measures of
costs for comparison among Census blocks. The outcome from this component is a Solution
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Set. That is, when users create CACM Solution Sets they are interacting with the Cost to
Serve Module. Information on running CACM Solution Sets is described in the User Guide.


The Evaluate Support and Report Component (sometimes called the Support Module) takes
cost data from the Cost to Serve Module as an input and produces a universal service
support amount based upon parameters entered by the user. When users are running
CACM Reports, they are interacting with the Support Module. Specific information on
running CACM reports is described in the User Guide.

The Cost to Serve Module develops a cost estimate, and the Support Module then takes that
cost estimate as an input and allows a user to test different potential universal service support
options. The role of the Support Module is to allow a user to see the impact of different
universal service funding scenarios. As an example, a user could use a Benchmark and fund
all blocks above that Benchmark. Or they could use a Benchmark and a Cap to fund only
those blocks between the Benchmark and the Cap. Or, they could use a Cap only.

The CACM architecture (consisting of distinct components each focused on a specific
function) enhances the ability of users to understand and view the interactions among inputs,
intermediate outputs and support calculations. As an example a user is able to view the
network design (the amount of investment, cable distances, plant mix) and middle mile
design without corresponding support amounts or support filtered amounts. Not only does
this facilitate auditing, but the modularized design also allows a user to segregate analysis
away from support decisions versus cost estimation decisions. Modularized design also helps
a user study the sensitivity of various cost scenarios (Solutions Sets) relative to an available
support amount or support allocation method.
1.3. CACM Processing

Before we turn to a detailed methodology discussion on CACM’s five architectural
components, it is helpful to also understand the system from a technical processing
perspective. The schematic presented in Appendix 6 provides this perspective as it highlights
(1) user choices / outcomes, (2) default choices / outcomes and (3) preprocessed databases
populated for CACM.

With that as a brief overview of CACM’s processing flow, we turn our attention to the
methodology employed across the five CACM components.
2

Architectural Component 1 – Understanding Demand


2.1. Introduction

Understanding demand is vital to modeling a realistic telecommunications network. Key
elements include the number of consumers and businesses as well as where these potential
demand points are located. The following provides an overview of how demand data is
developed within the CACM architecture.


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2.2. Information Source and Process

For the fifty states and Washington, DC, residential and business data is initially sourced
from GeoResults (Q3/2012). Common building locations for residences and businesses are
recognized and carried through based on a GeoResults national building file. Using the
common building identifier allows the process to keep together residential and business
records which share a common building.

As a first step, the address level data were geocoded and associated with the nearest road
point to allow a network to be created through spatial programming.7 While the GeoResults
data were provided with a geocode, all GeoResults’ data were re-geocoded using Alteryx
version 8.1 to provide a consistent and known source of demand reference locations. For the
GeoResults’ data, approximately 96% of residences and 94% of business are considered to be
well geocoded8. Using the resulting geocode, the TIGER 2010 Census Block of every point
was identified.

For business data, the GeoResults data were used as the primary source. As such, no data
were added or subtracted. For addresses that did not geocode well, the process fell back to
GeoResults-provided geocode.

For residential data, while GeoResults data provided the basis for the majority of the
locations in the country, the primary source of counts of housing units by Census Block was
the Census Bureau’s 2010, SF1 Census Block data, which was updated to 2011 counts using
the Census Bureau’s 2011 county estimates.9

As part of the process of creating a complete residential demand data set that is consistent
with Census Bureau’s counts of housing units, poorly geocoded10 GeoResults’ residential
data were first discarded. The well geocoded counts of GeoResults’ residential data were
compared to Census Housing Unit counts on a Census Block by Census Block basis. For
deficiencies, single unit Housing Units were added and assigned a random road location

7 Geocoding is a process by which the location on the earth’s surface is determined for the
address provided. The location is indicated by a latitude and longitude.

8 Well geocoded implies that the location is placed upon the appropriate street segment.

9 The process to update 2010 census block housing unit counts to 2011 levels either randomly
added or randomly subtracted housing units within the census blocks associated with the
county. The only eligible blocks for placement were those which had evidence of residential
habitation from Census 2010 or GeoResults. Random in this circumstance means the
addition or deletion of housing units was unordered. Each existing point had an equal
chance of deletion, for example.

10 Geocodes are provided at levels of spatial accuracy. Some are specific to a ‘rooftop’, a
specific address or a street segment. These geocodes are useful in the CACM modeling
process. Other geocodes are provided at a higher (less specific) level, e.g., to a ZIP level, a
city center, etc. These are deemed “poorly geocoded” for CACM purposes and the location
of the point is assigned randomly.

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point within the roads of the Census Block. For overages, random GeoResults’ residential
data were removed. In the end, the Housing Unit counts by Census Block matched the
2011 Census estimated counts.

In earlier versions of CACM, the residential and business location data were summarized by
provided Census Block and then randomly dispersed on livable roads in that block. In
Version 3 and later, the re-geocoded GeoResults data were linear referenced to the nearest
TIGER road segment,11 and added Housing Units from the Census true-up process were
randomly assigned to a road location and resulting linear reference. In CACM 4.0, Census
Blocks are identified where there is no evidence of residential housing units . Evidence
includes the 2010 Census Block information along with utilized 2011 GeoResults geocoded
residential data. For those housing units placed via 2011 country growth into Census
Blocks for which there is no evidence of residential locations, the houing unit was removed.
The removed housing units are aggregated to the county level and then randomly placed
into Census Blocks that have evidence of residential habitation. The random placement
follows the same methods used in version 3.0 with the exception that roads from Census
Blocks without evidence of habitation are removed as possible targets for random placement.
Because geocoding sometimes bunches points on the segment, the processing also included a
rectification step which spreads points out along a segment if they were recognizably
bunched/clustered on the segment.

For Puerto Rico, Commonwealth of Northern Mariana Islands (MP) and the Virgin Islands,
the location data were sourced in a different manner given the lack of third party data and
the ongoing delivery of US Census Block data currently available. For Puerto Rico
residential demand, US Census 2010, SF1 data were used exclusively as the GeoResults data
did not cover Puerto Rico.

Due to the release date of Census Block level data in MP and Virgin Islands, Census 2000
Block data were used and then adjusted consistent with current territory counts. All
residential data were then randomly assigned to road locations within the Census Blocks.

For business demand in Puerto Rico, Mariana and Virgin Islands, 2007 Economic Census
data were utilized. These data are provided at the county level and were randomly assigned
to road locations within the Census Blocks associated with the county.

The table below summarizes the different sources and vintages of demand used in the
CACM model.



11Linear referencing is a process in which the nearest road point of the location of interest
(e.g., House) is identified so that the distance along a road segment (e.g., 50 feet along a road
segment) is determined rather than using the spatial location of the location of interest (e.g.,
a residential geocoded address) to measure distances. Network programming is simplified
and run times reduced by using linear referencing.

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Table 1--Summary of Demand Sources and Vintages

Area

Fifty States and District of

Puerto Rico

Columbia

Primary

GeoResults 3Q 2012

US Census 2010

Residential
Location Source
Residential True

US Census 2010, True Up to 2011

US Census 2010

Up Source

County

Primary Business GeoResults 3Q 2012

Economic Census 2007

Source

Business True Up not applicable

not applicable

Source



Area

Mariana Islands

Virgin Islands

Primary

US Census 2000, Adjusted to 2010

US Census 2000, Adjusted to 2010

Residential

based on county subdivision
based on county subdivision

Location Source

estimates
estimates

Residential True

not applicable
not applicable

Up Source
Primary Business Economic Census 2007

Economic Census 2007

Source
Business True Up not applicable

not applicable

Source


3

Architectural Component 2 – Design Network Topology


3.1. Introduction

Network cost (and hence, any required Support) is a function of network design. CACM’s
network design process is initially informed by an understanding of the demand as
determined in CACM’s Component 1. In designing a network topology CACM makes use
of CostQuest LandLine (CQLL). Additional detailed information on CQLL and its
supporting CostQuest Middle Mile (CQMM) model is available in Appendix 1 and
Appendix 2, respectively.

3.2. Overview of Approach

CQLL takes Component 1 demand data consisting of approximately 130 million point
located records and using real-world network engineering rules, equipment capacities and
spatial realities (road systems and relevant terrain attributes) assembles / designs an efficient
forward-looking wireline network. CQLL is a spatial model in that it connects demand data
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back to known Central Office locations. It measures media (copper cable or fiber optic
cable) along actual road paths and accounts for differences in terrain and demand density.
The endpoint of CQLL is a database of network equipment locations and routing required to
support voice and broadband-capable networks at a Census Block12 or smaller geographic
level.

Where CQLL develops a wireline network from the demand point back to the Central
Office, CQMM develops the network middle mile topologies between each Central Office in
a state to a location where Internet peering can occur. As noted above, additional
information on CQMM is available in Appendix 2.

When users create a Solution Set using CACM’s Fiber to the Premise (FTTp) network
topology, they are loading both CQLL and CQMM derived databases into CACM.13

4

Architectural Component 3 – Compute Costs and Develop

Solution Sets


4.1. Introduction

The function of CACM’s third architectural component is to determine network deployment
(e.g., construction) and operational costs and to establish custom Solution Sets as warranted
by user inputs and system default values.

As noted above, at the heart of this component is the Cost to Serve Module – a systematized
procedure that takes as inputs geographic and non-geographic data and produces an estimate
of the cost of providing voice and broadband capable networks. That is, the Cost to Serve
Module estimates the cost to deploy and operate the Network Topology defined by the
second CACM component. As such, the Cost to Serve Module provides unitized measures
of costs for comparison among Census Blocks.

Output from the Cost to Serve module (and related coverage data) is referred to as a Solution
Set. As discussed later in this Methodology, Solution Sets are used in the Support Module to
evaluate support and generate reports.

Based on relevant demographic, geographic, and infrastructure characteristics associated
within each identified service area – as well as the service quality levels required by voice and
broadband-capable networks – an estimate of (a) build-out investments (Capex sub-module)
and (b) associated operating costs (Opex sub-module) are developed for each Census Block.

A key input to the second architectural component generally and the Cost to Serve Module
specifically is the Network Design. The Network Design provided by CACM’s second
architectural component can be thought of as the network schematic. As such it represents a

12 In Census 2010, there are approximately 11 million Census Blocks.

13 Earlier versions of CACM provided a Fiber to the DSLAM (FTTd) in addition to a Fiber
to the Premise (FTTp) topology.
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modeled network which is “built” according to real-world engineering rules and constraints.
As equipment and cable types and sizes are determined from the network schematic and as
unit costs (and related costs) are applied, network costs are computed. These network costs
include all the costs associated with the construction of the plant, including engineering,
material, construction labor, and plant loadings. The resulting costs are driven to the Census
Block level based upon cost-causative drivers.

In the current CACM version a voice and broadband-capable Network Design is available.14

Fiber to the Premise – a design where the entire network from the Central Office to the
demand location is entirely fiber optic facilities. In this design, the demand point is
within 5,000 feet of the fiber splitter.

In a corresponding component of work within the Cost To Serve module, operating costs
(Opex) for service areas are estimated based on certain user-defined criteria (e.g., company
size) and certain Census Block-specific profile data (e.g., density). In addition to network
driven Opex, operating costs can also be driven by the number of demand locations

In summary, the Cost to Serve Module develops both capital expenditures (Capex Sub-
Module) and operating expenditures (Opex Sub-Module) appropriate for the network
topology selected.
4.2. Capital Expenditure (Capex) Sub-Module
4.2.1 Build Assumptions and Attributes

A key to any cost model approach is defining the architectural assumptions and design
criteria used to construct the network. The following table summarizes key assumptions and
design attributes:

Table 2

Category
Assumptions
Overall
Scorched node
Design

Forward-looking

New network built to all locations

All service locations have access to voice and broadband-capable networks

Contemporary / real-world wireline systems engineering standards are used for the
modeling of the network. More specifically, industry standard engineering practices
are used for wireline deployments.

Long-standing capacity costing techniques are used to apportion investments
reflecting real-world engineering capacity exhaust dynamics down to the Census
Block level.

Network design is based on deployment from known/existing LEC Central Offices
(based upon GeoResults Central Office locations).

14 Previous versions also provided users with the option of selecting a fiber to the DSLAM
design. Specifically, CACM’s FTTd option represented a blended copper and fiber design
consisting of a subscriber loop of up to 12,000 feet of copper to the DSLAM and fiber from
the DSLAM back to the Central Office.
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Category
Assumptions

The current service providers continue to supply the service area.

Smaller companies have the opportunity to join purchasing agreements with other
small companies, improving scale economies.
Coverage
Cable broadband coverage currently based on NTIA’s National Broadband Map
(June 2012), supplemented with FCC Form 477 data and information on subsidized
providers by Study Area Code.

Wireless broadband (fixed) coverage currently based on NTIA’s National Broadband
Map (June 2012), supplemented with FCC Form 477 data and information on
subsidized providers by Study Area Code.
Network
Provides broadband-capable networks capable of providing voice and data services

Voice services provided via cVoIP platform. No Time Division Multiplexing (TDM)
investments are present

No Video equipment (including Set Top Boxes) are installed

Network is built to a steady state, and results represent a steady state valuation.

Plant mix will be specific to each state and can be adjusted as part of an Input
Collection.

Apportionment of structure, copper, fiber, and electronics will be based on active
terminations. For example, working pairs, fibers per DSLAM, etc.

The network build (demand used to build the network design) includes special service
terminations required by businesses and apportions cost to those services in a
consistent manner as used for broadband

The modeled network ends at the fiber termination on the Cloud; this fiber
termination is modeled to an assumed Internet Peering location.

4.2.2 Network Architecture

To understand the model approach and outputs it is also helpful to understand the
underlying technologies and the contemporary Gigabit Passive Optical Network (GPON)
FTTp deployment.

The schematic that follows reflects the fundamental technology architecture (topology)
assumed within CACM. Nodes (e.g., Node 0 thru Node 4) are used to help bridge the
understanding of functionality through the selected topology. The “nodes” are significant in
that they represent the way in which costs are aggregated and eventually assigned to Census
Blocks, if appropriate.

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Figure 3-- Fiber to the Premise Architecture

4.2.3 Network Capital Requirement Development

The Capex Sub-Module takes into account demand locations; efficient road pathing; services
demanded at or traversing a network node; sizing and sharing of network components
resulting from all traffic; and capacity and component exhaustion from the Network Design
selected when a Solution Set is created.

The Cost to Serve module develops unit costs, based upon capacity costing techniques. Unit
costs address plant, structure, and electronics to support the voice (cVoIP) and broadband-
capable network data requirements of the designed network.

The voice and broadband-capable network is broken into two key components: loop and
middle mile. Additional information on how each component was modeled is provided in
Appendices 1 and 2.

The loop portion captures the routing of network facilities from the demand location up to a
serving Central Office. This routing captures both the “last mile” (facilities from the demand
location to the serving Node2) and the “second mile” (facilities from the Node2 to the
Central Office).

The middle mile portion captures what one might typically refer to as the interoffice network
or transport. It captures the routing from a Central Office to the point at which traffic is
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passed to “the cloud.” Within CACM, the connection to the Cloud occurs at a regional
tandem (RT) location within a state.

The following discussion provides an overview of how the two components of the voice and
broadband-capable network are developed.
4.2.3.1
The Loop
CACM employs CostQuest Associates’ industry recognized CQLL Economic Network
model platform to design the network. That is, CACM accepts as inputs network topologies
produced by components of CQLL. These files include the distribution (last mile) and feeder
topologies (second mile) of the wireline network. The CQLL methodology is discussed in
further detail in Appendix 1 to this document.

At a high level, CQLL is a modern “spatial” model that identifies where demand locations
exist and “lays” cable along the appropriate (most efficient path) roads of a service area. As
a result, a cable path that follows the actual roads in the area can literally be traced from
each demand location to the serving Central Office.

From the output of CQLL, a network topology is built that captures the equipment locations
and routing required for delivery of voice and broadband services to an entire service area.
Within the CACM Capex logic, the network topology is sized to determine appropriate
cable and equipment and then combined with equipment prices, labor rates, contractor costs,
and key engineering parameters (e.g., equipment capacities appropriate for demand) to
arrive at the investments required.

The Capex Sub-Module uses the Network Topology as the basis for a logical economic
scorched node build given the technical parameters required for a voice and broadband-
capable network.
4.2.3.2
CQLL Service Assignment
Incumbent wireline carriers often have an obligation to provision new service within a short
period of time. As such, significant components of wireline networks are engineered to meet
residential and business service demand within a serving area in recognition of this
obligation. That is, certain components of wireline networks are typically built and sized to
serve all locations. Service location data are, therefore, key drivers of the network build and
instrumental to reliability of the results. The Cost to Serve Module generally and the Capex
Sub-Module specifically recognize this operational reality.

As noted above, CQLL is populated with data that incorporate various types of business
locations in addition to Census-trued residential locations. Based on this road-located
customer location data set, CQLL then created the network topology required by customers
and their associated service requirements.

The following table outlines the provisioning option for each customer type:


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Table 3

Market
Segment
Employee
Provisioning Option
Count
Residentia
not applicable
not
Broadband
l
applicable
Business
Technology Oriented Business (NAICS
<10
Broadband
code>50000)


>=10
Special Access fiber15

All Other Business



(NAICS < 50000)
<10
Broadband


>=10 < 50
Broadband



Special Access fiber


>=50
Special Access fiber
Other
Wireless Towers and Community Anchor
not
Special Access fiber
Institutions
applicable

Once the network topology is designed, the network facilities associated with the build out
are associated with each provisioning option (broadband, Special Access fiber) based upon
cost-causative drivers or through an appropriate attribution and assigned to the subscribers in
the Census Block.

Only the facilities (or portions thereof) associated with voice and broadband services are
extracted from the CQLL results and pulled into CACM. As such, the network topology
captures the full build of a typical voice and broadband provider, and only the portion of the
network build associated with broadband provisioning is captured in the CACM results.
This separation is described in the following section
4.2.3.3
Allowance for Special Access Demand
To account for the impact of Special Access demand on the network and on the cost
allocation to the broadband-capable network, demand from wireless towers and community
anchor institutions (CAI) is captured and modeled as Special Access service demand. In
addition, based upon the size of a business and its NAICs category, the model deploys
Special Access fiber to a business location. Collectively, these services represent the Special
Access demand included in the modeling effort.

The additional fiber which comes from the CAI / Towers or business locations are used in
concert with the previously noted demand data to size the total network. The cost of the
total network is then attributed to the services based on capacity drivers (e.g., fiber strands,
etc.). The cost driven by the fiber strands for these Special Access services are excluded in
the cost to serve calculations in CACM. In other words, costs are shared where structure
and fiber is shared between the broadband and the Special Access networks. If structure and
media are dedicated solely to the Special Access demand, that cost is excluded from the cost
to serve calculations. In addition to the exclusion of the cost associated with the Special
Access locations, when unitizing total cost in a block within CACM, these Special Access
location counts are not used.

15 For the purposes of this discussion, Special Access includes private line and direct Internet
Access as well
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For the middle mile portion of the network, a user adjustable percentage of the cost for fiber
and structure is assumed for the transport of Special Access demand. In other words, only a
portion of the middle mile fiber cable and structure investment is assumed to be driven by
the cVoIP and broadband network.
4.2.3.4
Voice Costs
CACM v2 introduced voice capabilities along with the broadband network. Voice services
are provided using carrier grade Voice over Internet Protocol (cVoIP).

Investments to support voice capabilities are presented to the model on a per unit of demand
basis. The typical cVoIP network consists of the following components. For modeling
purposes the functionality presented in the following figure is categorized into hardware,
software and service categories.

Figure 4--Carrier Grade VoIP Platform

The basic function of IMS/Softswitching sites depicted above is to provide routing
information for the voice packets and to provide the calling features for the customer. The
IP Multimedia Sub-System (IMS)/Softswitching platform is typically deployed as a national
architecture that supports multiple states with one or more paired core sites that contain
modules sized to meet demand required and multiple access sites that interconnect with
other carriers that feed into the core sites.

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Consistent with CACM’s use of CQLL to model first and second mile network topologies,
CACM employs CQMM (Middle Mile) to design the connection between Central Offices
and “the Cloud” at what is typically called an Internet Gateway. The CACM middle mile
topology connects a Central Office to a point of interconnection at a Regional Tandem
within the state. Efficient high-capacity Ethernet routes are created to move traffic from
Central Offices to the location of existing access tandems.

4.2.3.5
Outside Plant Engineeing Rules
Within the Capex workbook, CACM provides several rules through which Outside Plant
modeling can be modified.

Typical manhole sizing can be modified in Urban, Suburban and Rural areas with 3 distinct
rules:
1. TypicalManholeSizeInUndergroundSystemRural
2. TypicalManholeSizeInUndergroundSystemSuburban
3. TypicalManholeSizeInUndergroundSystemUrban.

CACM supports placing buried plant in conduit. The percentage of buried placements is an
input controlled within the PlantMixBuriedConduit workbook. As an example, a value of
100% in the PlantMixBuriedConduit workbook implies that 100% of buried placements will
be buried within conduit. Buried excavation costs are used. Two additional toggles are
available to provide additional control.
1. TypicalManholeSizeInBuriedSystem: This toggle allows the user to specify a size1
manhole or to exclude manholes. The exclusion of manholes is the current default.
2. IsInnerDuctUsedForBuriedSystem: This toggle selects the type of conduit used for
the buried trench. Currently a duct without innerduct is the default.

Buried trenching costs can be used for underground systems; this logic is turned off by
default (UsedBuriedTrenchingCostsForUndergroundSystems = “No”).

Pole logic and investment calculation can be controlled with a variety of rules.

1. PoleSizeWithSharing specifies the height of a pole to use.
2. TypicalGuySpan specifies the distance between guy placements.
3. GuyLengthToPoleHeightRatio provides a ratio to determine guy length given the
pole sizing. The specified value is multiplied by the PoleSizeWithSharing to develop
an average guy length.
4. TypicalAerialSpan is meant to capture the average length of a planned aerial span.
This is used to calculate the total count of poles needed on a run, assuming 1 is
needed at the beginning and end. So if a span is 1200, the typical spacing is 150ft
(Pole Spacing table), CACM will place 9 poles (not 8).
5. TypicalCableSegmentLength is meant to capture the average length of a planned
build, irrespective of the plant type. This is used to capture Telco
Administration/Inspection costs on a per foot basis.


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4.2.3.6
Middle Mile
The CACM middle mile network connects a Central Office to other Central Offices. It also
connects Central Offices to an Internet Gateway.

The approach used to determine the middle mile equipment required – and then to compute
the related investment costs – is centered in the spatial relationship between the Central
Office and the nearest access to a Tier 3 Internet Gateway tandem. A surrogate for such
access is assumed to be on a Regional access Tandem (RT) ring within the state.

This approach starts with obtaining the location of each Central Office – also referred to as
Point of Interconnection (“POIs”) and/or Node0 – from the GeoResults Central Office
database. The result of this approach aligns the Central Office/Node0 locations used in the
underlying CQLL model’s network for the local loop.

Regional tandem locations (and the relevant feature groups deployed) are obtained from the
LERG ®database. Each tandem identified as providing Feature Group D access in LERG ®
7 is designated an RT. As with Central Offices, a latitude and longitude is identified for each
RT.

The underlying logic (and the process) of developing middle mile investment requirements
are grounded in the assumption that the Internet Gateway peering point is located on the RT
ring – meaning that if the modeled design ensures each Central Office is connected to an RT
ring, the corresponding Node0 customers all have access to the Internet.

For areas outside of the contiguous United States, undersea cable and landing stations
support links between the RT and the contiguous United States. Within non-contiguous
areas, submarine cable and beach manholes are used to support middle mile routes that
intersect water bodies (e.g. routes going from one island to another island). Additional
information on undersea and submarine modeling can be found in sections 8.2 and 8.4 of
this document.

Additional material on the logic used to model middle mile networks within and areas
outside of the contiguous United States is available in Appendix 2.

4.2.3.7
Capex Cost Considerations
It is important to understand three real-world factors that improve the computation of Capex
in CACM at the Census Block level. The cost factors considered are presented in the table
that follows:

Table 4

Modeling Issue
Design Logic Employed
Terrain
The Capex Sub-Module is sensitive to terrain characteristics faced in wireline
construction via the use of a driver to account for varied construction costs. The
model gathers terrain characteristics including depth to bedrock, depth to water,
rock hardness and soil type.
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Modeling Issue
Design Logic Employed
Density
The Capex Sub-Module is sensitive to aggregate density of a Census Block
through multiple factors, including user quantity driven wireline costs and
scaled backhaul (second and middle mile) costs based on aggregated demand in
a given serving area. Density in the model is based upon the area and number
of locations in each Census Block Group.
Region
The Capex Sub-Module adjusts for regional cost differences in material and
labor costs. This is controlled by the RegionalCostAdjustment user controlled
input.

Terrain/soil conditions and density affect Underground Excavation costs and Buried
Excavation costs. Each of these cost elements have cost inputs specific to the type of soil
condition (Normal, Soft Rock, Hard Rock or Water (i.e., high water table) and the density of
the area. Based upon soil/terrain and density information associated with each plant
element, the model uses the relevant associated Capex cost input to estimate the cost of
structure placement in the specific soil type and density in which the structure is being
placed. In other words, as an output of the Network Design each plant element has an
associated terrain and density attribute. Based upon the terrain attribute, the appropriate
investment lookup is made.
4.2.3.8
Terrain Factor Development
To support cost sensitivity driven by terrain factors, a terrain by Census Block Group (CBG)
table was developed.

For the contiguous states, Puerto Rico and Alaska, the terrain by CBG table was sourced
from Natural Resources Conservation Service (NRCS) STATSGO data.16

For VI and MP, SSURSGO data was used.

In both cases, the following attributes were used:

 Bedrock Depth
 Rock Hardness
 Water Depth
 Surface Texture

The Bedrock and Water Depth for each Census Block Group represented the area weighted
average of each STATSGO/SSURSGO Component Map Unit relative to the Census Block
Group. The Rock Hardness used was the most frequently occurring value. When
developing the Terrain by CBG table, the STATSGO Component polygons had to cover at
least 20% of the Census Block Group to be represented in the calculations. For the
contiguous United States, where no STATSGO or SSURSGO data elements covered at
least 20% of the CBG, values were filled as NULLS.

In Alaska, Puerto Rico and Hawaii, terrain assignments to Census Block Groups (CBGs)
were made such that any CBG with more than 50% of the area covered by a STATSGO

16 Data extracted fromhttp://soildatamart.nrcs.usda.gov/">, http://soildatamart.nrcs.usda.gov/. Website deactivated
4/24/2013.

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component polygon with a RockHardness value of Hard was assigned a RockHardness
value of Hard.

Based upon the depth to bedrock, water and the rock hardness assignments to Hard, Soft,
Normal and Water terrain types were made. With these assignments made on each plant
element, appropriate terrain driven inputs are applied by CACM.


4.2.3.9
Density Development
Since CACM version 2, density is measured at the Census Block Group level and based
upon the sum of locations in the Census Block Group divided by the area of the Census
Block Group. The resulting numerical value is then translated into Urban (equal to and
above 5000/sq mi.), Suburban (equal to and above 200/sq mi.) and Rural.
4.3. Operational Expense (Opex) Sub-Module

The CACM Opex Sub-Module estimates wireline telecommunication operating expenses
incurred in provisioning voice and broadband in service areas by company size and by
density. The CACM Opex Sub-Module is applied to Census Block profiles with
consideration of coverage requirements defined by a set of user assumptions and
investments.

The CACM Opex cost profiles are presented within a hierarchy of costs referred to as the
CostFACE. From the highest level in the hierarchy down, the CostFACE is comprised of
the following:

F – Cost

F

AMILY (e.g., Network vs. Customer Operations vs. General and Administrative)
A – Cost

A

REA (e.g., Plant Specific vs. Plant Non-Specific)
C – Cost

C

ENTER (e.g., Cable & Wire vs. Circuit Equipment vs. Switching)
E – Cost

E

LEMENT (e.g., Copper Aerial v. Fiber Aerial v. Copper Buried v. Fiber Buried)

The purpose of the CostFACE is to organize and align operating costs with relevant cost
drivers (e.g., associated Capex investment and demand17).

The model input is organized in a set of static tables made available to CACM for purposes
of aligning the selected operating costs to the selected provider type, size, and density based
on cost drivers, such as investment or service locations.

To provide estimated operating expense for the difference in operating characteristics noted
above, relevant provider data available within the public domain were gathered and
analyzed to develop a set of baseline cost profiles and a corresponding set of factors or cost
functions designed to adjust the baseline views by provider size and density. These publicly
available values were then validated against proprietary data provided by ABC Coalition
members.

17 The term demand is used to reference both working and non-working locations on the network.
In the past subscribers was used synonymously (to represent all network demand locations) but
some readers were confused by that reference. Therefore, demand is used in this document to
represent both working and non-working locations.
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The steps in the operational cost development process vary by provider size, but are
summarized generally below:

 Research and gather operating expense data;
 Segmentation of data into uniform expense lines;
 Analysis of data;
 Identification of appropriate CACM Opex Sub-Module cost drivers based on best
available data;
 Development of baseline Opex detail;
 Development of factors for size and density adjustments;
 Development of property tax location adjustments; and
 Validation and revalidation of results.
4.3.1 Opex Assumptions

Developing a forward-looking cost model which includes operational expense functions is
complex. What you are trying to do is develop a forward-looking Opex value for a network
which may not yet be in place over the assumed geographic scope of the network.

To accomplish this, existing data sources must be examined, potentially comingled and
compared across a number of dimensions to yield a relevant estimate of Opex.

There is no existing readily available source for detailed cost by technology by operating cost
category, by geographic area, by density which is aligned with accessible cost drivers. This is
the type of information that is needed in a forward-looking modeling effort. Rather, there
are a limited number of relevant data points found across an array of information sources.
This implies that developing data sources which are inputs into CACM processing will be
complex. The quality standard by which the CACM inputs were evaluated was their
consistency among company sizes, consistency with prior forward-looking results, and
comparability to proprietary data sources, if those sources are available.

The process to develop the CACM inputs to the Opex sub-module relies on certain
assumptions and limitations that constrain the absolute predictability of the Opex Sub-
Module, as listed below:

a) Industry-reported financial data are reasonably accurate and sufficiently segregated
to develop Opex drivers to model operating expenses at geographic granular levels
(i.e., Census Blocks);

b) Varying formats and expense-detail levels of publicly available financial data can
be reconciled to provide compatible detail;

c) Compilation of publicly available information can be analyzed using regression
equations, averages, and other acceptable analysis derived from industry
information to derive baseline Opex detail;

d) Resulting unitized baseline expense detail can be modeled against CACM forward-
looking cost drivers to approximate reasonable estimates of Opex for selected
provider, size, and density characteristics;
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e) Historic financial data comprised of mixed technological generations can be
adjusted to predict the operating expense of deployed new technology; and

f) Varying types of expense detail can be validated against industry or company-
specific data.
4.3.2 Sources of Information

The following information sources were the primary sources from which the Opex data were
derived, analyzed, and tested/validated:

 FCC ARMIS Data
o Pulled from: FCC Report 43-01 for 2007 and 2010
 NECA Data
o Pulled fromhttp://transition.fcc.gov/wcb/iatd/neca.html">: http://transition.fcc.gov/wcb/iatd/neca.html for 2006-2010
 Section: “

Universal Service Fund Data: NECA Study Results”


 Thomson Reuters’ Checkpoint/RIA
 Wolters Kluwer’s CCH (Commerce Clearing House)
 Comments filed in National Broadband Plan docket
 Telecommunication Carriers Public Financial Statements 2009-2010
 Standard & Poor’s Industry Surveys: Telecommunications: Wireline, April 2011
 Business Monitor International, United States Telecommunications Report, Q1
2011
 Morgan Stanley, The Mobile Internet Report, December 15, 2009
 R.S. Means, Building Construction Cost Data 69th Annual Edition
(Massachusetts: R.S. Means Company, Inc. 2010)
 Marshall & Swift, Marshall Valuation Services (U.S.A.: Marshall & Swift/Boeckh,
LLC, 2010)
 Certain proprietary and third party information, including data provided by the
ABC Coalition

Additional information regarding Opex development is available as a presentation posted to
the Resources section of the CACM website-- Opex Overview.zip.
4.3.3 Development of Opex Factors

The sections that follow provide an overview of the methodology used to develop the
CACM Opex Sub-Module factors and related adjustment factors for the various FACE
elements.

The table immediately below shows the detail operating cost functions that are represented
in each level of the CACM FACE.
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Table 5

FACE Primary Level
Second Level
Third Level
Network Operations Expense Plant Specific
Outside Plant Cable by Cable Type


Poles


Conduit


Circuit / Transport
Plant Non-Specific Network Operating Expense


General Support and Network Support
General and Administrative
n.a.
n.a.
Selling and Marketing
n.a.
n.a.
Bad Debt
n.a.
n.a.
4.3.3.1
Network Operations Expense Factors
To estimate the CACM Network Operations Expenses, the relationship between capital
investment and ongoing cost to operate and maintain the plant was determined.

This determination relied primarily on three years of NECA data (2008-2010), supplemented
with additional data sourced from ARMIS and third party sources18. These NECA data
report operating expenses, Investment by Plant Type in Service (IPTS), and Total Plant in
Service (TPIS) amounts for companies across common USOA Part 32 accounting categories
CO Transmission and Circuit Equipment, and Cable & Wire accounts.

These data were further categorized with a size variable using the NECA reported line
counts.

A NECA rural classification was overlaid on the company size data. In addition, the cable
and wire accounts were broken out into Aerial Cable, Buried Cable, Conduit, Poles, and
Underground Cable using industry data percentages of distribution plant (e.g., Opex & Plant
Investment) pulled from ARMIS.

Finally, the data were unitized on a per-loop basis to facilitate the validation/testing of the
results by company size and density.

Development of the network operations expense investment-based factors relied on NECA
data (2008-2010), segregated by company size and density. Two analytic paths were
investigated. The first was a regression analysis to develop Opex regression coefficients.
The second was a mean analysis to develop the median and average Opex / IPTS factors per
loop. The mean analysis was used.

The median and average operating expense to plant investment per loop were determined
and were then averaged to derive the NECA-based Opex to Plant Investment factor.

18 These third party sources include material provided by the ABC Coalition companies.
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These results were then adjusted from a historical cost basis to a contemporary topology-
specific network build on a forward-looking cost (“FLC”) basis, resulting in the baseline
CACM Opex Sub-Module factors. Once model output was available, the scaling was
revisited to ensure that forward-looking opex values did not exceed NECA-based Booked
Opex that were derived by applying the initial NECA-based Opex to Plant Investment
Factor to the weighted average NECA-based plant investment per loop which resulted in the
annual operating expense per loop by company size and density.

From these data, cable CACM Opex Sub-Module factors were further segregated between
metallic and non-metallic to account for the significant operating differences between the
two types of cable using proprietary data sources. Finally, a large company baseline view
was extracted based on the cost categories discussed in the Cost Face format illustrated
above. Factors were then derived to adjust for size, density, and location.19
4.3.3.2
General and Administrative Operating Expense
To calculate the CACM General and Administrative (“G&A”) Opex sub-module factors, a
regression analysis was employed using five years (2006 - 2010) of NECA G&A Opex
(dependent variable) and Total Plant in Service (“TPIS”) (independent variable) data
segregated by company size to determine the relationship between total plant investment and
G&A operating expenses. Using the same type of NECA investment data unitized on a per
loop basis as used in the network operations analysis, FLC G&A Opex Component factors
per loop were developed by company size and by density using a regression equation.
Comparing the contemporary G&A Opex Component factors to the regression parameters
resulted in a set of FLC to historical G&A adjustment factors by company size and by
density. Applying these adjustment factors to the regression parameters resulted in the
CACM G&A Opex Component factors by company size by density. The Large Company
baseline results were then validated by comparing them to G&A operating expense data
provided by the ABC Coalition companies.
4.3.3.3
Customer Operations Marketing & Service Operating Expenses
To determine the CACM customer selling and marketing (“S&M”) Opex Sub-Module
factor, the effort employed publicly available ARMIS data and ABC Coalition company
data. Based on the ABC Coalition company data, overall S&M costs were estimated as a
percent of total operating revenue. In addition, a review of the latest ARMIS data available
for large incumbent local exchange carriers (“ILECs”) (2007) and mid-sized ILECs (2010)
indicates S&M operating expenses are 12.97 percent of all ARMIS reported revenue. Both
percentages were averaged and applied to the assumed ARPU of the CACM service(s) to
derive the CACM S&M monthly operating expense per customer.

An analysis of ARMIS data also indicates that 41 percent of the S&M per customer is
attributable to marketing with the remaining 59 percent associated with “Customer
Operation Services”.

19 The density measure used in CACM ( associated with the Census Block Group which the
Census block falls within) is used to determine both the appropriate Capex and Opex values for
the Census block.
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4.3.3.4
G&A Opex Property Tax Location Adjustment
Property taxes are typically a subset of the G&A operating expense. Property taxes, which
are based on the value of the property owned by the taxpayer in the taxing jurisdiction as of
a particular lien date, vary by state and, to some degree, by taxing authority within each
state. As such, location-specific property tax indices to be applied to the G&A Opex
Component factors were developed.

To develop the location-specific indices, total corporate operations expenses (G&A plus
Executive & Planning) and the net plant in service, based on the NECA data, were
summarized by state. The effort then developed the average property tax levy rates by state.
Applying these levy rates to the net plant in service (e.g., proxy for the taxable property tax
value) resulted in the implied property tax expense by state. Comparing these figures to the
overall national weighted average property tax levy rate, property tax indices by state were
developed. Applying these indices to the G&A operating expense adjusts for location-
specific differences in property taxes.
4.3.3.5
Bad Debt Expense
The CACM Bad Debt Module expense is applied on a per unit of demand basis and was
estimated based on using a revenue derived bad debt factor and an assumed ARPU. The
bad debt factor as a percentage of all reported revenue was based on a review of industry-
specific 10K’s and industry knowledge.
4.3.3.6
Validation
The accuracy of the CACM Network Opex Sub-Module factors was tested by applying them
to the estimated CACM Capital Investment Module factors per loop and comparing the
results to the NECA network operating expenses per loop by company size and by density.

The CACM operating expenses per customer output by cost element also were reviewed for
differences in density, technology, and other factors. General and Administrative and
Selling & Marketing expenses also were validated against data reflecting the provisioning of
cVoIP and broadband services.20

As presented below, CACM’s non-network related operating costs follow a consistent
pattern across company size and under different take rates. The values shown in the
illustration are consistent with CACM baseline inputs (except for take rate variance). The
values are intended for illustration only.


20 Output was also compared to confidential, actual data where those data were available.

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4.3.4 Operational Cost Sub-Module Conclusion

As the Cost to Serve module completes its processing, the model captures the average
monthly cost of service per customer for each of the over 11million Census Blocks in the
country. This monthly cost includes the monthly operational costs and the capital related
monthly cost of depreciation, cost of money and income taxes. These capital costs are
developed through the application of levelized annual charge factors applied to the Capex
that is developed by the model. As described above, the output of the Cost to Serve module
is stored in and referred to as a “Solution Set.” Solution Sets are used by the Support
Module along with specific user parameters to calculate a result.
4.4. Cost To Serve Processing Steps

From an implementation perspective, the computation of Architecture Component 3’s
Capex and operating costs (Opex) is accomplished in CACM through the steps in Table 6.
The steps are described below but processing source code is available to interested users.

The System Evaluator version of CACM (CACM-SE) allows users to view resolved
processing code and step through each of these steps viewing calculations, updates to tables
and report definition files.

Table 6




Step
Description
Comments

0
Prepare Coverage
Prepares coverage table using base coverage, augmented with
available coverage and challenge coverage if available for each
technology.
1
Initialize Solution Set
Creates the Solution Set entity that will frame the computations to
follow and hold results when completed.
2
Update CT Density
Calculates Census Tract Density to be used in a later calculation.
3
Define distribution network
Establishes the consumer and business customer counts and related
distribution network topology.
4
Estimate demand
Develops consumer and business demand based on take rates.
5
Determine bandwidth
Develops bandwidth throughput required based on consumer and
throughput requirements
business demand determined in previous steps
6
Not Used (see Note)

7
Determine Demand at
Develops data important to the sizing of Node2 investments (i.e., at
DSLAM or Fiber Splitter
the DSLAM or Fiber Splitter)
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Step
Description
Comments

8
Create intermediate Capex
Develops and incorporates defining network cost drivers such as
table
terrain, density, company size and location, tax rates, etc.
9
Develop Capex for
Updates the Solution Set with investment required for the
distribution and feeder
Distribution network (i.e., from Node0 through Node4)
10
Develop Capex for Middle
Updates the Solution Set with capital investment required for the
Mile
Middle Mile (i.e., from Node0 to Node00)
11
Develop Investment Related
Updates the Solution Set with investment related Opex and pre-
Opex
stages the computation of full operating costs
12
Develop Non-Investment
Updates the Solution Set with non-investment related Opex
Related Opex
including adjustments for regional cost and property tax
differences)
13
Populate Solution Set
Completes the Solution Set and makes it ready for use in the
Support Module
Note
Other Comments
This table presents the processing code steps as used in the current
CACM release. The full system code includes certain steps that are
inactive for CACM processing (e.g., certain previously employed
user selection alternatives for estimating demand, certain steps
relating to the development of ARPU, etc.).
5

Architectural Component 4 – Define Existing Coverage


5.1. Introduction

The function of CACM’s fourth component is to inventory existing voice and broadband
coverage and associate that coverage with providers and specific geographies. The outcome
from this component is a preprocessed coverage database that is derived from the National
Broadband Map, lists of subsidized providers by Study Area Code (SAC) and FCC Form
477 data. The coverage database informs CACM as to what broadband technology is
currently serving a Census block as well as what Maximum Advertised Downstream and
Maximum Advertised Upstream speeds are available in that block. The combination of a
broadband technology and the speed in which it is available determine if a Census block is
served by a particular technology.
5.2. Information Source and Process

Broadband coverage information, specifically the speed and technology available in each
Census block, is sourced from National Broadband Map round 7 data (based on December
2012 data). National Broadband Map data are updated every six months as part of the
NTIA State Broadband Initiative (SBI).

The derivation of the coverage data used in CACM started at the Census block level by
examining each distinct technology group, maximum advertised downstream and maximum
advertised upstream speed record by provider. As described below several technology and
provider level filters are applied. These filters included whether the provider reports voice
services on FCC Form 477 and if the provider receives a subsidy.

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Within this process, the SBI Technology of Transmission codes were used to develop
technology groups as follows.

 Telco broadband includes SBI Codes 10, 20 and 30

 Fixed Wireless includes SBI Codes 70 and 71

 Cable includes SBI Codes 40 and 41

Excluded codes are 60 (satellite), 80 (mobile wireless), 90 (BPL) and other (0).

In summary, broadband coverage for CACM was developed in a similar manner to prior
releases. The significant difference is Cable and Fixed Wireless coverage was removed if a
provider did not report voice services on FCC Form 477 (December 2012) or did receive
subsidy within a particular Study Area Code.

Broadband coverage development was based upon information from the National
Broadband Map (NBM), round 7 (December 2012). The CACM coverage development
process started with a list of subsidized providers containing the holding company number
(hoconum) and SAC.21 Based upon the Census Blocks which compose each Serving Area as
well as the correspondence of Service Areas to Study Areas, the Census Blocks
corresponding to each SAC are identified.22

This list of potential National Broadband Map Census Blocks was joined back to the
subsidized hoconum by SAC list. Where there is a match between a subsidized hoconum in
the corresponding, SAC, the matching Cable or Fixed Wireless served Census Blocks for
that provider (hoconum) fall out. The Census Blocks falling out are the Census Blocks
which are Cable or Fixed Wireless Served in NBM provided by the subsidized company
(hoconum).

With this first step complete, Census Blocks in NBM not subsidized Cable and not
subsidized Fixed Wireless are available. The coverage development process joins that list
back to the ‘FCC Form 477, State Filers’ table23. This Form 477 table isolates those
hoconum reporting voice service.

From the non-subsidized coverage, those records which don’t join on hoconum and state fall
out. This means that if the hoconum is not a voice 477 filer they fall out of the second step
and will not show as covered in CACM.

Because the subsidized competitor process is SAC based and the Voice service process is not,
a given provider could be impacted (in a given SAC) by subsidy but not impacted (in the
same state) for voice or vice versa. There are also cases in the subsidized provider step where

21 An Excel workbook showing this beginning table as well as those subsidy and voice impacted
SACs is available on the Resources page of the CACM website.
22 In CACM, Census Blocks are identified to Service Areas (also referred to as wirecenter
boundaries). Service Areas are associated to Study Areas via the SAC code. This relationship
provides the method to identify Census Blocks to SAC Codes.
23 Available at http://transition.fcc.gov/wcb/iatd/comp.html
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coverage outside of a specified SAC will be untouched but inside the supported SAC the
coverage is impacted.

Once the coverage eligible technology groups and related downstream and upstream speeds
were available in each block, a ranking process was developed to determine the available
(i.e., maximum advertised) speeds. The speed ranking prioritized broadband coverage in a
block if that technology group record covered at least 20% of the Census Block. For records
with less than 20% coverage, the coverage was only used if there are no other providers in
the block.

The next step categorized the broadband advertised speed category of each coverage record
into bands.24 Band labels (e.g., Good, Better, Best) are a function of both download and
upload speeds expressed in Mbps. The NTIA speed codes are categorical. A sample of an
NTIA category runs from768 Kbps to less than 1.5 Mbps. To translate the categories into a
speed value we use the bottom of the NTIA category. As an example, the 768 Kbps to 1.5
Mbps category is assigned a value of 0.768 Mbps. Given this, the process starts at the Best
category and decrements, examining each Census block, provider / speed / technology
combination, assigning the value to the first rank category judged true.

o Best: Download at or above 10 and upload above 1.5

o Better: Download at or above 6 and upload at or above 1.5

o Good: Download at or above 3 and upload at or above 0.768

o Poor or Null: Download under 3 and/or upload under 0.768

With the bands of each Census Block identified, the process then picked the top band
available within the Census Block. Within the top band, if there is a tie, the process picks the
best available speed, using the record with the superior upload speed.

The resulting ranked speed assignment by technology group by Census Block is then
imported into the CACM Solution Set.

As part of CACM release, the resulting broadband speeds by Census Block and technology
group are used to determine the appropriate threshold to determine if a Census Block is
served or unserved.

In addition, CACM allows for the augmentation of the coverage data through either a
challenge process or augmentation data set.
6

Architectural Component 5 – Calculate Support and Report


The function of CACM’s fifth and final component is to allow users to compare support
options, view final model results and review / audit model detail. Sometimes referred to as
the “Support Module” this component includes a mathematical procedure that takes cost

24 A coverage record in the NTIA National Broadband Map data represents a single carrier’s
technology of transmission and speed within a Census Block.
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output (Solution Set) data from the Cost to Serve module as an input and produces a
universal service support amount based upon parameters set / entered by the user.

Once the Cost to Serve Module has run, a large amount of information is available for
analysis and decision making. As described earlier, the Support Module takes the output
(Solution Set) from the Cost to Serve Module along with user-defined parameters to
calculate a result representing universal service support specific to the user request. The
Support Module examines the granular cost information and calculates those areas requiring
support given a specific set of parameters.
6.1. Factors that Determine Support

A few of the critical considerations in determining high-cost universal service support
amounts and included in the Support Module are:

 geographic unit for estimating costs averaging criteria (targeting);
 eligible blocks for funding based upon the presence of an alternative (unsubsidized)
voice and broadband provider,
 benchmark above which Census Blocks are eligible for support;
 threshold above which Census Blocks are not eligible for support, which may be
better served by an alternative technology; and
 overall cap on total funding

Once the user selects the appropriate support attributes and associated values, CACM
reporting will provide a summary of the funding requirements based on the user’s selections.
Irrespective of the user’s choices, keep in mind that the coverage filters, cost and support
calculations are always performed at the Census Block level and rolled up to the user’s
specific request.
6.2. CACM User Controlled Reporting Parameters and Output Descriptions

The following terms are used on the Support Module interface. Cost and Total Funding
amounts specified are in dollars per month, unless noted otherwise. Definitions are provided
below.

Target Benchmark

- The cost benchmark to which a candidate area’s per unit cost is
compared to determine where funding is required. Locations with cost per demand unit
below the target benchmark are excluded from the support calculation, and the value of the
target benchmark is deducted from the support amount for locations with cost per demand
unit above the target benchmark.

Alternative Technology Cutoff

– The input value representing the support limit or
alternatively the cost increase over the Target Benchmark. If the candidate area’s cost per
unit is greater than the Target Benchmark plus the Alternative Technology Cutoff, the
number of service locations in the candidate area is excluded from support and presumed to
be served by and voice and broadband technology, such as satellite. A similar term,
Alternative Technology (Cost) Threshold represents the entire cost threshold. In other
words, Alternative Technology (Cost) Threshold equals the Alternative Technology Cutoff
plus the Target Benchmark. The Alternative Technology Cutoff can be modified in CACM.
Alternative Technology (Cost) Threshold is a descriptive term used in other documentation.
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Cable Unserved

– Used to include or exclude cable served areas in the analysis. Setting this
value to false will allow Cable Served blocks to be eligible for support.

Fixed Wireless Unserved

– Used to include or exclude fixed wireless served areas in the
analysis. Setting this value to false will allow Fixed Wireless Served blocks to be eligible for
support.

Rate of Return/Price Cap

– A parameter used to show either Rate or Return (ROR), Price
Cap (PC) or both provider types simultaneously in a given report. Average Schedule and
Rate of Return affiliates of Price Cap companies are treated as Price Cap in this filter.

Unitize Cost By –
A toggle used to determine how cost is unitized. Total Cost can be
unitized by either a take rate impacted demand (sometimes described as subscribers) or non-
take rate impacted demand (sometimes described as locations). Prior versions of CACM
used the take rate impacted unitization.

Reports also may be produced for different levels of geography. This field only specifies the
manner in which the data in the report is presented, and does not change the granularity of
calculations. That is, CACM computations are done at the Census Block level while CACM
reports are available at a higher/summarized level. These areas are explained below.

Census Designated Place

– A geographic entity that serves as the statistical
counterpart of an incorporated place for the purpose of presenting census data.

Census Block Group
– A Census Block group (CBG) is a cluster of Census Blocks
having the same first digit of their four-digit identifying numbers within a census
tract.

Census Tract
– A census tract represents a relatively permanent statistical
subdivision of a County.

Company
– An abbreviation of the name corresponding to the 14 largest (by line
count) telephone providers. If not named, designated as small (SML)

County
– The primary legal divisions of most states are termed counties. If a state or
territory doesn’t have counties, the statistical equivalent area (e.g. Borough, Parrish)
is used.

OCN
– Operating Company Number based upon GeoResults 2012, 4Q as revised
with assistance from FCC, USAC and responses to public notice.

SAC
– Study Area Code identifying a collection of Study Areas as described by the
Universal Service Administrative Company (USAC).

Serving Area
– An area, based on GeoResults, corresponding to the serving wire
center boundary of an incumbent LEC.

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State –

State provides a geographic rollup where State is defined as the 5th and 6th
character of the service area.
6.3. Support Model Report Output Field Definitions

The following table describes the calculation for each of the output columns related to the
Support Model reports. On export to CSV (comma separated variables), many columns
rename to their system definition. Where a calculation is shown in the second column, the
definition reflects a pseudo-code explanation. The actual processing code is available within
the stored procedures called by the reporting definitions file (RDL).

Table 7

Report Field Name
Definition/Calculation
Benchmark
The lower cost threshold at which funding begins.
BMrk_less_Cost_per_Demand_Unit Target Benchmark minus Monthly Cost Per Demand Unit
Cable Unserved
Used to include or exclude cable served areas in the analysis. True
excludes served areas.
Company Name
An abbreviation for the incumbent provider
County
The primary legal divisions of most states are termed counties. If a state
or territory doesn’t have counties, the census equivalent
Cumulative Percentage of
Running total of demand divided by sum of all demand * 100.
Subscribers at Rollup
Cumulative Total Max Funding
The accumulation of Total Max Funding up to the Total Max Funding
(input parameter). In the detail report, once the Total Max Funding hits
this value, this Total Max Funding is reported for each detail record
thereafter.
DemandUnits Over Alt Tech Cutoff The sum of Total DemandUnits whose average cost are over the
Alterative Technology Cutoff. The model determines which demand is
over the Alternative Technology Cutoff by determining if the Benchmark
minus Cost Per Unit of Demand is greater than the Alternative
Technology Cutoff; then the Active Subscriber is Over the Alt Tech
Cutoff, otherwise the demand is under the cutoff.
DemandUnits SprtElgbl
Each Census Block record when rolled up to a specified geographic level
is determined to be eligible for support based on this calculation.
Calculation: If the Total Max Funding > 0 then DemandUnits Under
Alternative Technology Cutoff and over Benchmark, otherwise it is 0.
This is then summed to get the demand subsidized.
DemandUnits Under Alt Tech
The DemandUnits under the Alternative Technology Cutoff. Sum of
Cutoff
DemandUnits where Alternative Technology Cutoff is not exceeded.
Monthly Cost Per DemUnit
Total Cost / Demand Unit in specified geographic area
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Report Field Name
Definition/Calculation
OCN
Operating Company Number based upon the GeoResults wire center
boundary wire center to OCN association as well as corrections from
support tickets and public notice response.
Per Unit Funding
Total Max Funding / Demand Units Under Alt Tech Cap
SAC
Study Area Code identifying a collection of Study Areas as described by
the Universal Service Administrative Company (USAC)
Service Area
An area corresponding to the serving boundary of an incumbent
telephone provider. The Service area is based upon GeoResults,
wirecenter boundaries.
Short Name
An abbreviation for selected incumbent providers
State
State provides a geographic rollup where State is defined as the 5th and
6th character of the Service area
Support Capped Funding
Amount of funding the provider/candidate requires up to the Monthly
Support Funding Cap (input parameter25). If the Alternative Technology
Cutoff is not exceeded then, Support Capped Funding is 0 when
Benchmark-(TotalCost/Unitization Value)* FCC Portion26 *Unitization
Value) is larger than or equal to 0. Otherwise it is
FCCPortion*(TotalCost/Unitization Value)-Benchmark when
(TotalCost/Unitization Value)-Benchmark is less than
SupportFundingCap, and FCCPortion*SupportFundingCap when
(TotalCost/Unitization Value-Benchmark) is greater than the
SupportFundingCap
Telco Served DemandUnits
The number of funded DemandUnits that are broadband served by a
Telco. Served refers to having a downstream/upstream speed sufficient
to be judged as served. This test is made for an entire Census block.
“DemandUnits SprtElgbl” refers to the Demand Units under the
Alternative Technology Cutoff'.
Telco Unserved DemandUnits
The number of funded DemandUnits that are not broadband served by
Telco. Unserved refers to having a downstream/upstream speed
insufficient to be judged as served
Total Cost
Sum of Total Cost (Total Opex Cost + Capital Cost) where Alternative
Technology Cutoff is not exceeded. Cost is a monthly value

25 The complete CACM processing code has a provision whereby a user input monthly cap on per
unit funding can be set. As this is not how CACM is currently used, this input parameter has
been removed. The pseudo-code description used above retains the reference for completeness
and consistency with the underlying system code.

26 The complete CACM processing code has a provision whereby a pre-determined Federal
portion of an allowable support amount would be determined by the FCC. This functionality is
not active in version 3.1 forward. As a result, the “FCCPortion” value in the currently employed
code is set to 100%. The pseudo-code description used above retains the “FCCPortion” reference
for completeness and consistency with the underlying system code
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Report Field Name
Definition/Calculation
Total DemandUnits
This is the sum of demand units over any user entered Benchmark.
Total Investment
This is the Total Investment from the Solution Set that is under the
Alternative Technology Cutoff (as calculated at the CB level). If there is
no Alternative Technology Cutoff, then this is the sum of Total
Investment from the Solution Set.
Total Max Funding
The amount of total funding based on the support module before the
application of any support funding caps. A demand unit could have cost
in excess of the benchmark, but not get funded, since the available
funding was exhausted prior to funding the provider/candidate or a
support cap was in place. At the point where the Cumulative Total Max
Funding reaches the Total Max Funding (input parameter) the last record
is the dollar amount where the funding is exhausted. All detail records
after this point will have a value of 0. Total Max Funding is 0 when
BMrk_less_Cost_per_Demand_Unit is less than 0 and Cumulative Total
Max Funding is less than the Total Max Funding Parameter amount. For
all other cases if (Total Max Funding Parameter amount -
TotalCappedFunding)/(-
1*BMrk_less_Cost_per_Demand_Unit*TotalDemandUnits*FCCPortion)
is greater than 1 then Total Max Funding is (Total Max Funding
Parameter amount -TotalCappedFunding), and if (Total Max Funding
Parameter amount -TotalCappedFunding)/(-
1*BMrk_less_Cost_per_Demand_Unit*TotalDemandUnits*FCCPortion)
is less than or equal to 1 than Total Max Funding is (Total Max Funding
Parameter amount -TotalCappedFunding)/(-
1*BMrk_less_Cost_per_Demand_Unit*TotalSubscribers*FCCPortion
Tribal Lands
A flag to indicate if the Census block composes an American Indian
Areas/Alaska Native Areas/Hawaiian Home Lands
Fixed Wireless Unserved
Used to include or exclude fixed wireless served areas in the analysis.
True excludes served areas.
UnitizeCostBy
A toggle which impacts how unitized costs are calculated. Total Cost in a
Census Block is not impacted but the unit cost can either be a take rate
impacted or non-take rate impacted value.



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7

Appendix 1 – CACM Network Topology Methods

7.1. Introduction to CQLL

CACM makes use of two long standing models to develop the CACM network topologies:
CostQuest LandLine (CQLL) and CostQuest Middle Mile (CQMM).

This appendix provides an overview of how the wireline topology was developed for
CACM. As such, this section includes an overview of the underlying network loop topology
platform (i.e., CQLL) as well as a discussion of modeling methods, a summary of key data
sources and an overview of results.

Appendix 9 provides a corresponding overview of how wireline middle mile facilities are
modeled using the CQMM platform. CQMM output is used by CACM to build the final
comprehensive network topology which is in turn utilized in the development of a Solution
Set.

CQLL produces a network topology (including cable lengths, equipment sizes and locations,
etc.) for use in the CACM application. The modeled network includes all work efforts and
components to prepare and place the asset / system for productive use within a network
designed to provide the desired level of voice and broadband service.

Inputs, as outlined in this Appendix, are based on publicly available data and service area
boundaries. Assumptions and engineering rules reflect real-world / current engineering
practices, including how these practices are applied within specific terrain.

Finally, the central economic model is a widely accepted, modern approach to network
modeling practices used throughout the industry.

CQLL is a next-generation network modeling platform. It models a forward-looking,
optimized network based on a current demand analysis of network utilization. The CQLL
platform uses a granular approach, adheres to spatial relationships and is based upon
realistic implementations of common engineering guidelines.

At its core, the CQLL modeling platform is a “spatial” model. It determines where demand
is located and “lays” cable along the actual roads of the service area to reach that demand
point. In fact, a cable path can literally be traced from each demand location to the serving
Central Office; a path that follows the actual roads in the service area.

CQLL determines the topology for wireline network components, across all categories of
plant required to connect a specific service demand group (e.g. customers, former customers
or potential customers) to their serving Central Office – and to provide voice and broadband-
capable networks. The model assumes the installation of forward-looking, commercially
available telecommunications technologies and uses generally accepted engineering practices
and procedures.


7.2. Accurate Bottoms-Up Design

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Topologies created by CQLL are grounded in network connections among service demand
Just like an engineer, the model tallies the necessary length and type of network facilities,
including relevant network components and electronics, based on demand, Central Office
locations and service architectures.
7.3. Developing Costs for Voice and Broadband Services

For the CACM application, CQLL was used to develop a GPON Fiber to the Premise
(FTTp) network. More specifically, CACM’s FTTp topology is a design where the entire
network from the Central Office to the demand location is entirely fiber optic facilities. In
this design, the demand point is within 5,000 feet of the fiber splitter.

As noted below, prior versions of CACM provided for a Fiber to the DSLAM topology
which included a blended copper and fiber design consisting of a subscriber loop of up to
12,000 feet of copper to the DSLAM and fiber from the DSLAM back to the Central Office.

7.4. Network Assets

The logic behind economic network modelling is derived from a realistic, engineering-based
understanding of what drives; i.e., causes, investments in the environment (both physical and
customer demand) in which the network will serve.

As a broad guide, the following discussion provides the increments and drivers of the basic
assets in the network modelled within the CQLL framework.

Loop:

Wireline loop plant connects demand locations to Central Offices. The basic drivers
of loop plant investment, including electronics, include all manner of demand and location.
The loop is typically broken into a distribution portion and feeder portion. Distribution runs
to demand locations from the Feeder Distribution Interface (FDI) described below while
feeder runs to the Central Office from the FDI.

The distribution components, drivers, and nomenclature of the typical loop as modeled in
CQLL are described below:

Network Interface Device (NID)

– The NID serves as a demarcation point between
customer wiring and the carrier’s distribution plant. In a Fiber to the Premise (FTTp)
installation, an Optical Network Terminal and battery are used in place of a conventional
NID. In regard to the NID, for telecom deployment it is sized based upon copper pair
demand, which is a function of service demand.

Optical Networking Terminal (ONT

) – An ONT is used to provide services to customers in
an FTTP topology. An ONT is hosted by an Optical Line Terminal. The ONT is placed at
each demand location.

Customer Premise Equipment (CPE)

– CPE can be capitalized equipment that is placed on
a customer premise. Its use is driven by a particular service (e.g., a modem for DSL). CPE
investment is driven by the count of services, customers served, and ultimate ownership of
the equipment.

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Drop Wire (Drop)

– For telecom deployment, the Drop is a cable sheath consisting of two
or more pairs of copper wires which permanently connects the NID to a Distribution
Terminal (DT). Essentially, the drop wire provides the connection between the premises and
the distribution cable at the street. A drop wire can be buried or aerial and is driven by
customer demand. For Fiber to the Premise (FTTp) deployments, this drop is fiber, rather
than copper, and connects up to the Fiber Service Terminal.

Distribution Terminal / Building Terminal (DTBT)

– For telecom deployment, the
Distribution Terminal (DT) is the point where the drop wires from several customers are
connected to pairs in a larger cable. This cross-connect (sometimes called a “tap point”) can
be located at a pole, handhole, buried splice, or pedestal. In some circumstances, the cross-
connect or tap point can be a Building Terminal (BT). The BT acts as the demarcation point
at a location where it is more effective to simply terminate a distribution cable at the
customer’s premise rather than using drop cables and NIDs. For FTTp, the DTs and BTs
are replaced by Fiber Service Terminals and are fed by fiber cable.

For reporting purposes, the cross-connect point, whether it is a DT or BT or FST is described
and tracked as a DTBT within CQLL. It is generically referred to as Node3 in topology
structure diagrams.

Distribution Cable (DT-FDI)

– The DT-FDI is the loop component that connects the
DTBT with the feeder cable at the Feeder Distribution Interface (FDI). For FTTp designs,
the distribution cable is fiber.

As the topology is exported to CACM, the CACM user inputs specify the percentage of
distribution cable that is buried, underground or aerial through the entries in the plant mix
table. The plant mix table is a portion of an Input Collection.

The major components of the feeder portion of the loop are described below:

Feeder Distribution Interface (FDI)

– In copper loop architectures, the FDI is where
distribution cables are connected to a feeder cable. The FDI allows any feeder pair to be
connected to any distribution pair. (For reporting purposes, a portion of the FDI is assigned
to distribution.) For FTTp designs, the FDI is replaced by the Fiber Distribution Hub (FDH)
or Primary Flexibility Point (PFP).

Fiber Distribution Hub / FiberSplitter (FDH/PFP) –

In an FTTp design, the fiber cable
from the OLT in the Central Office or in the field is split at the FDH/PFP into 16 to 32
distribution fibers. These 16 to 32 distribution fibers then connect to ONTs at the premises.

DSL Access Multiplexer (DSLAM)

–In an FTTd network, a DSLAM provides voice and
broadband service capability and receives data from multiple DSL connections and most
often aggregates the data onto a high speed Gigabit Ethernet (GigE) backbone.

The FDI, FDH/PFP and DSLAM are generically referred to as Node2 in topology structure
diagrams.

Optical Line Terminal (OLT) –

In an FTTp design, the fiber cable from the PFP terminates
on an OLT. This OLT can either be housed in the Central Office or in the field.

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Gigabit Ethernet (GbE or GigE)

– A term implying the use of Ethernet to carry data at
Gigabit speeds over Fiber Optic cable. For example, GigE is generally used to transport data
from DSLAMs to the Central Office.

Feeder Cable (FDI-DLC and DLC-CO)

– The feeder cable transports traffic, either voice or
data, between the FDI/PFP and the Central Office in the telecom environment.

Ethernet Switch (eSwitch)

– Internet Protocol traffic from each Service Area is routed to an
Ethernet switch located in each Central Office.

The OLT and Ethernet Switch are generically referred to as Node0 in topology structure
diagrams.


7.4.1 End User Demand Point Data

Within CQLL, the modeling exercise can begin with address-geocoded customer point data.
Address geocoding is a method used to match a customer address to a location on a physical
(real world) road network. Address geocoding is a well-established technique to derive a
locational attribute, such as longitude and latitude or linear reference,27 from an address.

CQLL then augments actual geocoded point data with surrogate locations for demand that
cannot be located accurately. These surrogate locations are based upon generally accepted
data sources (e.g., Census data), client-specific engineering and optimization rules, and
standard industry practices.

In the current CACM implementation, CQLL uses geocoded information from GeoResults
and Census information to derive estimated demand locations. As noted above, the
surrogation of points is based upon generally accepted practices and occurs at the finest level
of Census geography. That is, the surrogation of data takes place at the Census Block level
using the roads and customer counts within each Census Block. A technique called
“stacking” provides for a relevant representation of demand located in apartment buildings.
Care is taken so as not to place customers on specific types of roads such as interstate
highways.
7.4.2 Service Areas

Using industry standard engineering rules, road distance and service demand information
(e.g., DS0s, pairs, Living Units, etc.), service clusters are formed. A service cluster is a group
of demand points which share a common loop network technology. For example, for a
broadband network a service area could be described for all demand locations sharing the
same DSLAM. Within each cluster, appropriate forward-looking digital equipment and
copper and/or fiber cable is placed. Service clusters are used to surrogate: Distribution Areas
(DAs), Fiber Serving Areas, Carrier Serving Areas, and Allocation Areas (FSA/CSA/AA).


27 A linear reference is a method by which location is described in terms of a distance along a
feature. A highway mile-marker is a type of linear reference. This is in contrast to a latitude,
longitude which is a locational reference in terms of a grid placed upon the Earth’s surface.
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7.5. Methods - Efficient Road Pathing and Networks

CQLL designs a network to serve demand locations within a service area (e.g., wire center,
etc.) based on where they actually reside. The model “lays” cable along the actual roads in
the service area to connect locations with their serving Central Office. As this section
demonstrates, the network can be seen on a map of the actual roads in a service area. In
fact, it will aid the reader in understanding the model if he/she begins to immediately
consider visually the spatial layout of a road network. The figure below shows the road
network for a typical service area.
LEGEND:
Central Of f ice
0
2
4
Roads
miles
Wire Center Boundary

Figure 5 -- Road Network

7.6. Demand Data Preparation

The demand location data (both business and residential) was pulled from public sources.
For residential data, GeoResults address data was trued up with Census household counts.
For business data, GeoResults address data was used. In each case, counts of locations by
address and/or Census Block are provided. Before the customer data can be used, it must be
located on the earth’s surface, along a road path so that the network routing algorithms
know where to route. For demand location that is non-address or cannot be geocoded, a
random placement algorithm is used to place the demand locations along the roads of the
Census Block. Care is taken so as not to use roads that are restricted (e.g., interstate
highways). In addition, multifamily and buildings containing residential and business
demand are tracked. This allows CQLL to identify the appropriate multi-dwelling
equipment rather than replicate single demand unit equipment.

Figure 6, presents a section of the view shown in Figure 7 with demand locations shown as
circles. In this example, these circles represent all of the service demand points (e.g., both
business and residences). The demand and service data are now ready for processing by
CQLL.

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LEGEND:
Roads
Customer Location
0
200
400
feet

Figure 6 -- Demand Locations

7.7. Efficient Routing

Using the demand locations and the road network, specifically designed and reviewed
algorithms determine network routing and placement based upon standard industry
engineering rules. As a first step, CQLL uses an Efficient Road Pathing (“ERP”) algorithm
to develop the optimized routing from the Central Office to all demand locations. Once a
full service area ERP is determined, CQLL develops natural clusters by linking demand
points that are close together (e.g., neighbors). These neighbor groups are further combined
with other nearby customer clusters to form larger clusters (“neighborhoods”). This process
continues until the clusters reach the limits of length and/or capacity as specified by the
engineering design (e.g., 5kft max length from the fiber splitter). Once all demand locations
to be served by a host node are determined, appropriate components such as Feeder
Distribution Hubs (FDHs), Fiber Nodes and Feeder Distribution Interfaces (FDIs) are
located within each serving area. Once the serving nodes are placed within these “remote”
served serving areas, an optimal path is formed to the hosting Node. The path within each
serving area then becomes the distribution cable path. This process continues until all
portions of the service area have been “clustered”.

For those demand locations served by a terminal in the Central Office, a distinct ERP is
determined. Once the main Central Office served areas are determined, an ERP is created.
These tree paths are then ‘walked’ to determine points at which Feeder Distribution
Interfaces (for copper areas) or Fiber Distribution Hubs (for fiber served areas) terminals are
to be placed. These placements are driven by user inputs guiding demand location counts
and distance limits.

As a final step in the pathing algorithms, an ERP for feeder plant is determined. That ERP
links the nodes outside of the Central Office (e.g. DSLAM or FSH, Node2) to the Central
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Office (CO). In CACM 4,0, changes were made to the feeder pathing algorithms. This
improves feeder path determination in areas with multiple roads.
Figure 7 depicts a distribution network created by the process based on the optimized ERP
approach. Figure 8 depicts the same type of information for the feeder network.


LEGEND



FDI Location

DLC Location
DT/BT Location
Roads
Feeder Route
Distribution Route

Wire Center
Boundary

Figure 7—Distribution Plant

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LEGEND


Central Office
DLC Location

Roads
Feeder Route


Wire Center


Boundary


0
1.5
3

miles













Figure 8 -- Path for Feeder Plant


After the serving areas and optimal routings are determined, engineering rules guide the
installation and placement of electronics, such as Fiber Nodes, DSLAMs, and Central Office
Terminals.

Once the spatial layout of the network is determined, CQLL’s Configuration Process
connects the network components. This entails the determination of cable sizes,
identification of service points requiring special engineering, and selection and sizing of
Node2 type. Once the network is configured, CQLL summarizes the network topology
information to create the source file for the CACM application. In this summarization, the
information about the network build is related to / associated with the relevant Census Block
records. As such, each Census Block record captures the size of the main serving terminal
(e.g., DSLAM, FDH, etc.), the demand at the Central Office, the length of the feeder and
distribution cable and the portion attributable to the Census Block, and other pertinent
information relevant to the network build. In CACM 4.0, modifications were made to the
routines that develop accumulation calculations of Feeder Fibers for GPON Splitters and
Special Access services. Modifications were also made to calculation formulas consistent
with changes described in prior versions of CACM release notes.

CACM allows an end user to review these two summary files by wire center. These reports
are available as Audit reports, Audit Network Design Dist or Audit Network Design Feeder.
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7.8. CQLL Network Engineering, Topologies and Node Terminology

CQLL develops investment estimates for wireline loop plant. The loop is the portion of the
telecommunications network that extends from the Central Office (CO) to the demand location.

A loop extends from a demand location (a business or housing unit). It can be terminated on specific
customer premise equipment, CLEC equipment or any multitude of routers, gateways or specialized
equipment necessary to support IP driven services like VoIP.

CQLL designs a network using forward-looking technologies and design principles. To meet the
heterogeneous engineering characteristics of today’s service providers, CQLL is capable of modeling
different wireline topologies. This section describes potential network topologies and lists the Node
reference for each. It is helpful to understand the unique Node naming conventions as these descriptions
carry forward to audit reports and cost / investment information.

In the CACM network designs, the references to network topology have been standardized by using the
values of Node0 through Node4. Node identifiers are used to help bridge the understanding of functionality
across the differing technologies (wireless and various forms of fiber and hybrid fiber solutions) that are used
in CACM. The “nodes” are significant in that they represent the way in which costs are assigned /
aggregated to enable comparisons across technologies. Node diagrams for both FTTp and FTTd designs are
provided for reference.

The FTTd design, available in earlier versions of CACM is shown in Figure 9.


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Figure 9--FTTn and FTTd Topologies


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The second IP based topology is Passive Optical Network (GPON) FTTp (Fiber to the Premise), as depicted
below.



Figure 10--FTTP topology

In this topology an ONT (Optical Network Terminal) is placed at the demand location, along with a battery
for backup power. Fiber cable then connects to the Central Office. Along the path, the fiber is concentrated
at the PFP (Primary Flexibility Point) or FDH (Fiber Distribution Hub) in a typical 32 to 1 ratio. At the
Central Office, the fiber from the PFP or FDH terminates on an OLT (Optical Line Terminal). The traffic is
then sent to an Ethernet switch. IP packets are routed to the IP network via a connection to a router. This
gateway router can be in the Central Office or can be located at an intermediate office to support multiple
Central Offices.


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7.9. Key Network Topology Data Sources

Network Topology development requires data inputs and modeling assumptions unique to CACM’s
requirements and assumptions. Input data and relevant sources are outlined below.
7.9.1 Service Area Engineering Input data

Public domain and commercially licensed data products provide the foundation for the CQLL model. This
included service area boundaries, Central Office locations and demand sources.

 Service Area boundaries
o GeoResults, 4th Qtr 2012.

 Central Office locations
o GeoResults, 4th Qtr 2012.
7.9.2 Demand data

The goal of CACM was to produce investment for all potential voice and broadband demand locations;
CQLL develops a network serving all potential residential and business locations.

Residential demand was based upon GeoResults (3rd Qtr. 2012) data that provided residential and business
address data. Residential counts in each Census block were trued up to Housing Unit counts from 2011
Census data. Business demand data was also derived from GeoResults (3rd Qtr 2012).
7.9.3 Supporting Demographic Data

CQLL requires several additional data sources to support road pathing and demographic analysis.

These data sources are described below:

 Roads
o Source: US Census TIGER
o Vintage: 2010

 Census Blocks
o Source: US Census TIGER
o Vintage: 2010

 Demographic Estimates
o US Census Housing Unit and Population Estimates
o Vintage 2011


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8

Appendix 2 – CACM Middle Mile Network Topology Methods

8.1. Introduction to CQMM
In concert with the development of loop topologies using CQLL, the middle mile methodology and
approach of CACM uses components of the CostQuest network modeling platform (CQMM).

The middle mile is that portion of the network that provides a high capacity transport connection from
Central Office to Central Office (Node0 to Node0) and/or Central Office to Regional Tandem (Node0 to
Node00).

In CACM the middle mile is assumed to extend between the service provider’s point of interconnection with
the internet and the service provider’s point of interconnection (“POI” or CO) with the second and last mile
network built to support end user broadband demand locations in unserved areas. This relationship is
illustrated in the Figure 11.28


Figure 11--Middle Mile Architecture


28 In Middle Mile diagrams, the DSLAM is preserved to indicate how Middle Mile architecture was used in prior
versions of CACM. Given the FTTp CACM topology, a DSLAM node would not be present.
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The material that follows provides additional information on how middle mile investments are developed
within CACM.

The approach used to determine middle mile equipment required – and then to compute the related
investment costs – is centered in the spatial relationship between the service provider’s point of
interconnection (POI or CO) with the second and last mile network (designated as a Central Office) and the
service provider’s access to a Tier 3 internet gateway (a surrogate for such access is assumed to be at a
regional access tandem (“RT”) or RT ring).

Central Office Location: the location of each Central Office (also referred to as POIs, and/or Node0s) is
obtained from the GeoResults database. The results of this approach align with the Central Office/Node0
locations used in the underlying CQLL Network Topology model used to create the local loop network,
including last and second mile related equipment and investments.

Regional Tandem Location: Regional tandem (RT) locations (and the relevant feature groups deployed)
were obtained from the LERG® database. Each tandem identified as providing Feature Group D access in
LERG 7 is designated an RT. As with COs, a latitude and longitude is identified for each RT.

The underlying logic (and the process) of developing middle mile investment requirements is grounded in
the assumption that the Tier 3 internet peering point is located at an RT or on the RT ring – meaning that if
the modeled design ensures each Node0 is connected to an RT, the corresponding Node0 customers all have
access to the internet.

Given this baseline data on CO and RT locations and working under the assumption outlined above, the
middle mile processing logic proceeds as follows:

 The Middle Mile process is run state by state. All Node0’s in a state are homed to an RT in
that same state

 Within a state, each Node0 is assigned to its nearest RT (Node00) to create the initial spatial
relation of (“parentage”) Node0s to RTs. Node0s must be in the same state as their related
Node 00.

 Node0 records are then routed to other Node0 records with the same Node00 parent using a
spanning tree approach based on the shortest (most efficient) distance routing back to their
proper Node00 record.

 The Node00 records within the same LATA are routed together in a ring. To ensure an
efficient (and hence ‘most likely’) design the shortest ring distance is used. The shortest ring
is chosen by starting at each Node00 point and storing the ring distances. After stepping
through each potential ring route, the shortest ring distance is then used for further
computations.

With that information in hand, CACM develops middle mile costs thru the following steps:

a. The distance of the RT rings is attributed to each Node0 on the ring in proportion to the
number of potential customers at each Node0 as compared to the total potential customers
for all the Node0s attached to the RT Ring. For each spanning tree connection, distance is
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calculated as follows. Where a road distance is available, 29 the road distance is used unless
the ratio of the road distance to airline distance is > 3.04. In that case the airline distance x
3.04 is used. If the route is classified as partially submarine (see section 9.4), 1.2 x the airline
distance is used to develop the overall distance between the points. Within CACM, the final
middle mile distances are multiplied by the TreeToRingRedundancyFactor in the Capex
input (the factor is currently set to 1.2).

b. The distance on the Node0 tree back to the RT is attributed much in the same way as the
loop feeder routing. That is, CACM attributes each route based on the cumulative potential
customers that can use the route.

c. For electronics, CACM captures the broadband routers (it is assumed that each CO/POI
will connect to two routers to provide redundancy) which connect up to the fiber at RT/Tier
3 location. Additional electronics of the RT/Tier 3 or the RT ring are not included as part of
the local access costs.

d. For the fiber placement, CACM assumes a portion of the conduit, buried trenching and
poles already exist for the local access network (this sharing is controlled in the Capex input
workbook). As such, only a portion of additional costs for conduit, buried trenching and
poles is captured for middle mile. CACM does retain the full cost for fiber which supports
the end user broadband-capable network.

e. From the total middle mile costs that are calculated, CACM captures a portion of the costs
(some costs are assumed to be absorbed by uses other than CACM voice and broadband
services, e.g., special access services). This sharing assumption is controlled in the Capex
input workbook.

f. Finally, CACM relates the middle mile cost to each Census Block (the basic unit of
geography in CACM) based on the proportion of potential demand locations in the Census
Block (as compared to the total potential customers in the POI/CO/Node0 serving area).
8.2. Middle Mile Undersea Topologies for Price Cap Carriers in Non-Contiguous Areas

For price-cap carriers who need undersea links to the contiguous United States, CACM calculates costs
associated with the undersea link back to the contiguous United States.

The Undersea tab of the CAPEX workbook provides the following inputs:
 Undersea cable investments including repeater electronics
 Landing station investments including electronics
 Route distances
 Route broadband traffic percentage use factors

Investments calculated within the undersea portion of the CAPEX workbook represent additive investments
to the middle mile (Node0 to Node00) portion of the network for non-contiguous areas. These investments
capture the costs of undersea cable and landing station investments needed to transport traffic from landing
stations in non-contiguous areas to landing stations in the contiguous U.S.


29 Road distance is calculated using ESRI Network Analyst, version 10.1
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The total route investment is calculated as (Route Distance x Cost Per Foot) +2 x (Landing Station
Investment) for each route. It is assumed that each non-contiguous area is connected by two routes to
provide redundancy.

Undersea fiber optic cable inputs were developed on a per foot basis for material and labor based on publicly
available data for an undersea cable system connecting Alaska with the U.S. mainland.30

In addition to the fiber optic cable investments, Landing Station investments are based on publicly available
data.31 CACM assumes 2 landing stations per route. The total estimated investment (equipment, land and
buildings) is for stations at both ends of each undersea route. This investment is broken down between
equipment, land and buildings.

After the total route investment is developed, the total route investment is multiplied by the averages listed
in the table shown below, which represent the percentage use, utilized for voice and broadband.32
8.3. Development of Undersea Percentage Use Factors
Percentage use factors reflect the portion of the total route utilized by the CACM network.

To develop these factors, total CACM busy hour bandwidth demand was compared to the actual deployed
capacities of current undersea routes, both total route capacity and highest lit capacity.33 Table 8, below,
shows both comparisons; the average of both is the value used as the percentage use in CACM.


Table 8--Percentage Use

AREA
DEMAND
HIGHEST
% DEMAND
HIGHEST LIT % DEMAND
AVERAGE
(Gbps)
TOTAL
to TOTAL
CAPACITY
to LIT
CAPACITY
CAPACITY
(Gbps)
CAPACITY
(Tbps)
Hawaii
213.6
6
3.956%
2,000
11.867%
7.91%
North
7.7
7.68
0.111%
5,120
0.166%
0.14%
Marianas
Islands
(Guam to
Oregon)

30 Presentation available athttp://akorn.alaskacommunications.com/"> http://akorn.alaskacommunications.com/#, estimates total construction cost. The
submarine values for Alaska were not adjusted with Regional Cost Adjustment factors.
31 See slide 29 of
http://hmorell.com/sub_cable/documents/Basics%20of%20Submarine%20System%20Installation%20and%20Op
eration.pdf
32 The percentage use factor inputs are located in the Capex workbook, undersea worksheet.
33 CACM calculates the demand for the modeled network assuming that all end users are simultaneously consuming the total
busy-hour offered load. Accordingly, estimated demand is based on CACM locations * Take Rate * Bandwidth (CACM
BHOL input).
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AREA
DEMAND
HIGHEST
% DEMAND
HIGHEST LIT % DEMAND
AVERAGE
(Gbps)
TOTAL
to TOTAL
CAPACITY
to LIT
CAPACITY
CAPACITY
(Gbps)
CAPACITY
(Tbps)
Puerto Rico
587.9
80
0.816%
310
100%34
50.00%
U.S. Virgin
20.0
80
0.028%
310
7.168%
3.60%
Islands
(Puerto Rico
to Florida)

For routes that are utilized for international traffic, CACM estimates the investment that carriers will face in
securing transport to and from the contiguous United States by applying the percentage use value to the
CACM-calculated total route investment. Because the Alaska route and the Northern Marianas to Guam
portion of the Northern Marianas route are not shared with any international traffic, CACM includes 50
percent of the costs of connecting Alaska to Oregon and Washington, the Northern Marianas to Guam, and
the U.S. Virgin Islands to Puerto Rico, which is the default middle mile allocation in CACM.35

Investments are converted into costs based upon the Underground Fiber Optic Annual Charge Factor.


8.4. Submarine Topologies for Price Cap Carriers in Non-Contiguous Areas


In addition to the airline distances and road distances in non-contiguous areas, two additional data fields are
available to middle mile processing code.
 Submarine distance; and,
 An indicator of whether the route is visually on the same or different land masses.
Within CQMM a route is classified as partially submarine where there is no connection between the land
masses. In a separate analysis, there was one additional route that was classified as partially submarine,
given that the road distance was over 20 times longer than the airline distance.

For each route classified as partially submarine, two beach manholes are placed. Submarine cabling
investment is used for the submarine segment while land based cabling is used for the remainder.
Submarine cable investment is not shared with other utilities nor impacted by regional cost adjustment.

Submarine investment is converted into costs based upon the Underground Fiber Optic Annual Charge
Factor.



34 CACM caps lit capacity at 100 percent. Because there is unlit capacity available or coming on line, it is assumed that it
would not be economically reasonable to build two or more new cables.
35 CACM assumes that the other 50% of costs are allocated to special access and private line services, and supported by
revenues from those services.
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9

Appendix 3 – Data Source and Model Application Summary


The table below provides a summary (inputs grouped by category) of the major data inputs to the CACM
along with the underlying source for that data and a reference to its use within the model.

Table 9







Data Category
Model Variables
Data Source
Wireline
Capex Opex
Coverage
Census
Full Census Block; full Census
TIGER\Line
X
X
x
boundaries
Block Group; full Census Tract; 2010
full Census County; Census
State
Service Area
Service Area boundaries, codes
GeoResults
X
X

boundaries and and Central Office points, as
4Q 2012
Central Office
adjusted by public comment and
locations
USAC review
Geographic
Land area; total road length;
TIGER\Line
X
X

characteristics
2010
Terrain
Terrain characteristics
USDA,
X
X

NRCS-
STATSTGO
Housing Units
Occupied housing units; total
Census 2010,
X
X
X
housing units; total households
SF1 housing
by block. Adjusted by Census
units. Census
Population and Housing Unit
Population
Estimates
and Housing
Unit
Estimates,
2010
Provider size
Corporate ownership; size of
ABC
X
X
X
and
parent company; number of
Coalition
organizational
wire centers operated by carrier
Members,
structure
Support
Feedback,
FCC, USAC
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Data Category
Model Variables
Data Source
Wireline
Capex Opex
Coverage
Company Opex A wide array of company-
Data sources


X
financial data
specific financial information
available in
(and underlying business
methodology
volumes) from public and

subscription service sources.

Data centers on operating
expense by category (e.g.,
maintenance, sales,
interconnection, sales and
marketing, G&A, bad debt,
taxes, etc.).
High capacity
High capacity locations
GeoResults
X
X

locations
represent high demand business 3Q2012

points and will be used to
National
improve business location points Building
for sizing the network.
Database and
Community Anchor Institutions Detail
(CAI) taken from National
Business File.
Broadband Map.
CAI from SBI
Round 6
Wireless tower
Wireless tower locations
CostQuest
X
X

location
represent locations requiring
proprietary

fiber service and are used to
tower database
supplement business and
residential customer points for
sizing the network.
Fixed Wireless
Fixed wireless provider
National
X


broadband
broadband speed coverage
Broadband
service
within a Census Block
Map (Round
(Transtech 70,71), as adjusted
6). FCC Form
based upon FCC Form 477
477 (June
reporting data and information
2012),
on subsidized providers by
Subsidized
Study Area Code..
Provider by

SAC list.

Telco
Telecommunications provider
National
X


broadband
broadband speed for wireline
Broadband
service
area coverage within a Census
Map (Round
Block (Transtech 10,20,30,50)
6)
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Data Category
Model Variables
Data Source
Wireline
Capex Opex
Coverage
Cable
Cable provider broadband speed National
X


broadband
for cable area coverage within a Broadband
service
Census Block (Transtech 40,41)
Map (Round
as adjusted based upon FCC
6). FCC Form
Form 477 reporting data and
477 (June
information on subsidized
2012),
providers by Study Area Code.
Subsidized

Provider by
SAC list.

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10 Appendix 4 – CACM Data Relationships

The schematic provides an overview of how data are organized and related within CACM. The diagram is designed to illustrate at a high
level the relationships between inputs and the resulting Solution Set.


Figure 12--CACM System Schematic

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11 Appendix 5 – CACM Processing Schematic

Figure 13--CACM Processing



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The diagram in Figure 13 is color coded to illustrate how information can flow through CACM.
Specifically, the grey colored objects reflect a system input (e.g., an input table) that is driven by a
user. Once that input table is loaded into the system, it becomes part of an input collection then a
user generated Solution Set. In contrast, many users run CACM without modifying any inputs and
are reliant on default (blue) system objects.

From left to right Figure 13 shows that a group of input tables (i.e., Input Collection) is used by the
Cost to Serve Module. Users can either use the default input collection or load their own tables to
suit particular analytic needs. The files which constitute an Input Collection are shown in Figure 13
and further described in Appendix 6. The Input Collection is where users provide information about
the cost of plant such as structure (e.g., Poles, Conduit) or costs of equipment (e.g., DSLAMs, Fiber
Splitters).

Along with an Input Collection, the Cost to Serve module also requires information on the
geographic scope of analysis, the type of network to build and two other toggles to create a Solution
Set36. Once the Solution Set has run, several types of reports are available from CACM. Additional
information about CACM reports is also available in the User Guide.

Also note on Figure 13 several orange symbols. These orange components represent additional
databases which are preprocessed and available as inputs into CACM.



36CACM allows you to export a Solution Set as part of the Audit Solution Set report. The audit
report contains the portion of a Solution Set specific to the user entered Service Area name.

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12 Appendix 6 – CACM Input Tables

The inputs which form the basis of an input collection are available as a download from the CACM
website.

 Annual Charge Factor (ACF)
o This table captures the Annual Charge Factors that convert Investment into monthly
costs. The values loaded into CACM are produced by CostQuest’s CapCost model
which is available for download. The basis of the model is the economic
determination of the depreciation, cost of money, and income taxes associated with
various plant categories. The calculation incorporates industry standard procedures,
such as Equal Life Group methods, inclusion of future net salvage, impact of
deferred taxes, and mid-year conventions.
 Key inputs into the derivation are lives of plant, assumed tax lives, survival
curve shapes, cost of money, cost of debt, debt/equity split, and future net
salvage
o Uses depreciation lives consistent with those prescribed by the FCC’s Wireline
Competition Bureau’s latest general depreciation in CC Docket No. 92-296
o How Used: Converts Investment into monthly values of Depreciation (DEPR), Cost
of Money (COM), and Income Taxes (TAX)

 Bandwidth
o Provides the busy hour bandwidth
o Used to size appropriate network components
o How Used: Based upon current inputs, Bandwidth is currently not a driver of any
capex investment or opex cost.

 Business Take
o How Used: Derives the voice and data demand for the business market

 Capex
o Provides the material and installation costs for the plant build
o Data are applied against the network topology data to derive total build-out
investment levels
o Inputs capture technology, network node, network function, and plant sharing.37
Within the CAPEX workbook, all Material inputs are material only. As an example,
the OLT inputs found on the FTTp Material worksheet are material prices only.
EF&I is included in the “Total Material Loadings” and “Engineering Rate” on the
Labor Rates and Loadings” worksheet. The model always adds in labor costs –
either through direct inputs such as the Material Labor worksheet for telco placing
and splicing costs and the Structure Labor worksheet for OSP contractor structure
placing costs, or through the use of the EF&I factors on the Labor Rates and
Loadings worksheet.
o How Used: Values which derive the total capex.


37 See Appendix 7, Methodology for additional information on Plant Sharing.
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 COSize Adjustment
o Provides the user the capability to adjust the assumed purchasing power of small,
medium, and large providers
o The current inputs assume that all providers can achieve the same purchasing power
(either as a result of their size or their ability to buy as a consortium)
o Adjusts up or down the Capex costs in the model, current inputs are set to 1
o How Used: In the current release of the model, COSize Adjustment table is used but
the value is set to 1.

 OCNCoSize
o Provides correspondence for OCN, company size category and SAC.
o How Used: Categorizes the size of each company.

 Opex
o Provides the estimated operation costs to run and maintain voice and broadband-
capable networks.
o How Used: Values help to develop the operational cost development.

 PlantMix
o Provides the estimated mix of facilities by type: aerial, buried, and underground
o How Used: Determines the mix of facilities required to serve an area.

 PlantMix Buried Conduit
o Provides values to be used which represent the percentage of buried placements to
become buried placement in conduit.
o How Used: The values in this table indicate the percentage of buried placements
to become buried placement in conduit. As an example, if the table value is 1
(100%) for Distribution (Dist) then 100% of the corresponding distribution buried
plant placements will be buried in conduit. To preserve backward compatibility
with earlier input collections, a non-calculation impacting version of this table is
available, PlantMixBuriedConduit NonState. This ‘NonState’ version has been
associated with input collections created before CACM 4.0. If desired, a user can
select PlantMixBuriedConduit NonState when creating a CACM 4.0 solution set.
A copy of PlantMixBuriedConduit NonState is available for review within
the Input Collection published on the CACM website.

 Ptax
o Sourced from property tax rates in each state compared to a national average
o Provides the impact of property tax on the G&A operation costs given the difference
of the state rates versus the national average
o Captured in the multiplier used for the operational element
o How Used: Provides an index value to capture the impact of property tax in the
operation costs.

 RegionalCostAdjustment
o Sourced from third party source – RSMeans (2011)
o Provides the estimated difference in the cost to build and operate in each part of the
county
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o Used to drive differences in Capex and Opex costs due to labor and material cost
differences across the country
 Applied to All Capex and indirectly to specific Opex components that are
derived from Capex
o How Used: Captures material and labor costs difference at ZIP3 level.

 StateSpecific Capex
o Provides an input source for situations in which a state specific CAPEX input is
required.
o How Used: When State Specific Capex toggle is set to “Yes”, CACM reads the
values in this table and uses them when processing the States provided in the
StateSpecific input workbook. To preserve backward compatibility with earlier
input collections, a non-calculation impacting version of this table is available,
StateSpecificCapex NonState. This ‘NonState’ version has been associated with
input collections created before CACM 4.0. If desired, a user can select
StateSpecificCapex NonState when creating a CACM 4.0 solution set. A copy of
StateSpecificCapex NonState is available for review within the Input Collection
published on the CACM website.

 StateSalesTax
o Sourced from appropriate sales tax rates for telecommunications plant in each state
o How Used: Impacts Capex derivation, applies State Sales Tax.

 Residential TakeRate
o How Used: Derives the data and voice demand for the residential market



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13 Appendix 7 – CACM Plant Sharing Input Walkthrough

This material provides an overview of the source and use of the input tables in the Plant Sharing tab
of the Connect America Fund Cost Model (CACM) Capex input workbook. The order in which we
describe the components below is designed to explain the interaction between these functions and is
not necessarily the sequence or flow in terms of how the tables are used within CACM.




Modern telecom networks increasingly enjoy the benefits of sharing facilities and capacities across
different services to different customer groups in different geographies/locations. The ability to
leverage network investments in this way is vital to the network’s economic performance through
time. Within the context of CACM, it is important that mechanisms exist to share facility and
structure costs across the relevant network functions and geographies (e.g., ultimately, across Census
Blocks).

As outlined below, there are four components of the CACM plant sharing function (i.e., four types
of facilities sharing):

 Sharing Between Distribution and Feeder
 Sharing Between Providers
 Sharing Of The Middle Mile Network
 Sharing Of Middle Mile Routes Associated with Voice and Broadband

Each of these components is explored further in the material that follows. In each section we
describe the type of structure sharing and the CACM Logic which then employs and processes those
inputs.
13.1. Sharing Between Distribution and Feeder

This input table provides the percent of common route (both feeder and distribution on the same
route) that shares structure in three density categories (i.e., Rural, Suburban and Urban) across three
types of plant (i.e., Aerial, Buried and Underground).

% of common route that shares structure

Density

Aerial
Buried
Underground
Rural
0.78
0.41
0.67
Suburban
0.78
0.41
0.67
Urban
0.78
0.41
0.67

CACM Logic:

The schematic that follows represents a typical network topology developed by
CACM. For additional information on how network topologies are developed within CACM please
refer to the CACM Methodology.

In this schematic distribution pathing is represented by golden lines, feeder pathing is represented by
blue lines, and pedestals are represented by gray boxes.


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The expanded diagram to the right shows a typical Node2 cluster (e.g., the pedestals served by a
specific splitter in an FTTp network). Within the topology creation process, each segment (network
node to network node) is tracked with information on:


 Density of the area in which the segment resides
 Terrain of the area in which the segment resides

 Length of the segment
 Amount of segment that is shared between distribution and feeder routes

Using the schematic above as an illustration, the discussion that follows explains how CACM
develops structure sharing "Between Distribution and Feeder".

Consider two segments (a) and (b) labeled in the expanded diagram at right in the schematic above.
Each segment is 1000 feet long. Segment A is ONLY a distribution route and Segment B is BOTH a
distribution route and feeder route (100% of the route is shared). To simplify our example, assume
the plant mix for both segments is 50% aerial and 50% buried and further assume that the area is
Suburban.

When developing the topology, fiber routes are planned for each segment. For Segment A, 1000 feet
of fiber is installed for the distribution plant. For Segment B, 1000 feet of fiber is installed for the
distribution plant AND 1000 feet of fiber is installed for the feeder plant.

With these requirements in mind, structure is now designed for each segment. For Segment A, based
on the 50/50 split of Aerial and Buried, 500 feet of trench will be dug and poles for a 500ft route will
be placed. For Segment B, both feeder and distribution cables are being placed. However, the
inputs provide for the fact that there will often be timing differences in design and placement and
there is a probability that different forms of structure will be used between feeder and distribution.
As such, we will likely need more than 1000 ft of overall structure (though less than the 2000 feet of
structure that would be required if the feeder and distribution plant are built entirely independently
of one another).

To arrive at the structure needs for Segment B, we refer to the "Between Distribution and Feeder"
table to guide the calculation.
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Specifically, referring to the input values in the table above, for the 500 feet of required Aerial
distribution structure and the 500 feet of required Aerial Feeder structure:


 (100% - 78%) , or 22% is dedicated or non-shared…or 110 feet and
 78% is shared…or 390 feet.

Since both feeder and distribution are sharing the same pole 78% of the time (or 390 feet for this 500’
span of cable), we assign 1/2 of the 390 feet (i.e., 195 feet) to Distribution and ½ of the 390 feet to
Feeder. The total Aerial structure feet for distribution is then 110 feet of dedicated and 195 feet of
shared for a total of 305 feet of distribution structure; and, for feeder the total Aerial structure feet is
110 feet of dedicated and 195 feet of shared for a total of 305 feet of feeder structure.

Again, referring to the input values above, for the 500 feet of required Buried distribution structure
and the 500 feet of required Buried Feeder structure:

 (100% - 41%), 59% is dedicated or non-shared…or 295 feet and
 41% is shared…or 205 feet.

Since both feeder and distribution are sharing the same trench, we assign 1/2 of the 205 feet (i.e.,
102.5 feet) each to Distribution and Feeder. The total Buried structure feet for distribution is then
295 feet of dedicated and 102.5 feet of shared for a total of 397.50 feet of distribution structure. For
feeder, the total Buried structure is also 295 feet of dedicated and 102.5 feet of shared for a total of
397.50 feet of feeder structure
13.2. Sharing Between Providers

This input table provides the percent of cost attributed to a studied carrier across three density
categories (i.e., Rural, Suburban and Urban) across three types of plant (i.e., Aerial, Buried and
Underground). These inputs reflect the fact that portions of structure costs may be shared with
other parties (attachment to third party poles rather than owning poles, sharing of joint trenching
costs, etc.)

% of Cost Attributed to Carrier Network

Density

Aerial
Buried
Underground
Rural
0.48
0.96
0.96
Suburban
0.48
0.80
0.80
Urban
0.48
0.76
0.76

CACM Logic:

Using the schematic and overall assumptions described above and from the logic used
for the sharing "Between Distribution and Feeder" we know the structure distances. With this
information in hand the cost of the structure attributable to the network of the provider under study
is developed using the inputs of the "Structure Sharing" table and is rather straight forward as
follows:

 For the aerial routes, 48% of the aerial structure (poles) costs are assigned to the provider
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For the buried and underground routes (using suburban values as an example), 80% of the
buried trench and/or underground structure is assigned to the provider38



13.3. Sharing Of the Middle Mile Network

This input table provides the percent of a interoffice, or middle mile, route that requires dedicated
structure (as opposed to sharing structure with feeder and/or distribution cables) across three density
categories (i.e., Rural, Suburban and Urban) across three types of plant (i.e., Aerial, Buried and
Underground).

% of route that is dedicated structure

Density

Aerial
Buried
Underground
Rural
0.37
0.71
0.26
Suburban
0.22
0.64
0.19
Urban
0.14
0.56
0.11

CACM Logic:

Using the schematic and overall assumptions provided above the CACM logic for the
attribution of costs regarding interoffice (IOF)/Middle Mile facilities is described below.

For interoffice routes, the routing runs from Central Office to Central Office. The logic for feeder
and distribution structure captures the full cost of structure within the wire center. It is likely that the
interoffice routes will often run along the same routes as used by the feeder and distribution and use
the same structure. This table reflects the percentage of the time that interoffice cables do not share
structure with feeder and/or distribution cables. In other words, this factor captures a similar kind
of sharing as was captured in the section on sharing between distribution and feeder (though these
figures represent the amount of dedicated middle mile structure; while the feeder-distribution sharing
figures represent the amount of structure that is shared.

The inputs in this table reflect when dedicated structure will be incurred solely for the interoffice
routes.

For aerial and underground structure, this sharing will likely be much higher than for buried
structure, as shown in the low amount of dedicated structure assumed in the input.



For example, in an urban area the model assumes that structure needed for interoffice routes will be
shared with distribution and/or feeder cables (100%-14%), or 86%, of the time and those structure
costs are already included in the feeder and/or distribution cost calculations. For 14% of the urban
interoffice route distances, the model assumes that separate structure is required for the interoffice
cables.

13.4. Sharing of Middle Mile Routes Associated with Voice and Broadband


38 This means, for example, that there is only a 20% chance that an electric, cable or other companies
will want to lay fiber along a given route at the same time when the provider has a buried trench
open or underground conduit duct available. The sharing of poles is assumed to be much more
prevalent (less cost assigned to providers) because other companies do not need to be deploying
facilities at the same time in the same place to share the cost of aerial facilities.
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Input values (see table below) are based on the assumption that there are two major groups of
services traversing the interoffice network: voice/broadband and Special Access services. CACM
only includes the interoffice costs associated with the voice/broadband services. This input table
provides the percent of an interoffice route that is attributed to voice/broadband across three density
categories (i.e., Rural, Suburban and Urban) across three types of plant (i.e., Aerial, Buried and
Underground).

% of route that is attributed to Broadband

Density

Aerial
Buried
Underground
Rural
50.0%
50.0%
50.0%
Suburban
50.0%
50.0%
50.0%
Urban
50.0%
50.0%
50.0%

CACM Logic:

The CACM logic for the attribution of costs regarding the assignment of Middle Mile
Routes with Voice/Broadband is described below.

For the feeder and distribution routes, the network is built to handle all services but costs associated
with Special Access data services (e.g., high caps) are excluded from the CACM network topology.












The interoffice network is a shared network carrying both voice/broadband and Special Access data
(i.e. special access) traffic. CACM calculates the full cost of the interoffice network and this input
table then attributes only 50% of the cost of the interoffice network to the voice and broadband-
capable network, excluding the other 50% that is assigned to the Special Access data services.

The 50% attribution impacts the media (Fiber Strands) on the route as well as the structure (Poles,
Conduit, etc.) which supports the route. The 50% attribution does not impact electronics costs
which are necessary to support middle mile functions.



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14 Appendix 8 -- Broadband Network Equipment Capacities

The Connect America Cost Model’s Fiber to the Premises (FTTp) network architecture is based on a
Gigabit Passive Optical Network (GPON) design (ITU-T G.984). The GPON design allows
different bit rates CACM assumes 2.5 Gbps downstream and 1.2 Gbps upstream bandwidth per
fiber. The CACM network limits the length of the fiber after the splitter to 5,000 feet.

The network that the CACM models is shown in the figure below:


Figure 14--FTTp IP Architecture



Moving back from the customer premise (on the right-hand side of the network diagram), the
components include:

Optical Network Termination (ONT)

- at the customer premises (inclusive of battery
backup and alarm)

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Fiber Service Terminal

– Serving terminal or pedestal connecting the ONTs with the fiber
distribution cables

Splitter

– Also referred to as the Primary Flexibility Point (PFP) or a Fiber Distribution Hub
(FDH) or simply as a splitter – passive equipment which splits the signal transmitted over
each feeder fiber into multiple signals; CACM utilizes a 32:1 splitter ratio. That is, up to 32
customers can be served per feeder fiber.

Optical Line Terminal

– Aggregates traffic from multiple splitter fibers. OLTs are typically
located in Central Offices (though they can be located remotely), and can aggregate demand
from splitters across a large portion of the serving wire centers service area.

OLT

d
r
d
r
d
r
d
r
d
r
d
r
d
r
d
r
Ca

Ca

Ca

Ca

Ca

Ca

Ca

Ca

d
r
N
N
N
N
N
N
N
N
O
O
O
O
O
O
O
O
Ca

P
P
P
P
P
P
P
P
T
G
G
G
G
G
G
G
G
N
d
r
d
r
d
r
d
r
d
r
d
r
d
r
Ca

Ca

Ca

Ca

Ca

Ca

Ca

N
N
N
N
N
N
N
O
O
O
O
O
O
O
P
P
P
P
P
P
P
G
G
G
G
G
G
G
Notes:
Each Gpon Card supports to 4 F1/PON fibers

Each NT Card supports 4 1GigE or 1 10GigE backplane fibers

Figure 15--OLT Schematic


Ethernet Switch and Router
– Switches and directs IP traffic

Figure 16--Ethernet Switch Schematic


Ethernet Switch

1
MDA
MDA-XP
6
2
MDA
MDA-XP
7
3
MDA
4
5
A
SF/CPM
B
SF/CPM
Notes:
Cards:
MDA - supports 20 GigE connections
MDA-XP - 2 port 10 GigE
SF - Switch Fabric
CPM - Control Program Module


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Router

1
2
3
4
5 A
B
6
7
8
9 10
r
d
r
d
r
d
r
d
r
d
r
d
r
d
r
d
M
M
r
d
r
d
k

Ca
k

Ca
k

Ca
k

Ca
e

Ca
e

Ca
tw
e

Ca
e

Ca
tw
e

Ca
e

Ca
tw
tw
L
i
n
L
i
n
N
L
i
n
L
i
n
S
F
/
CP
S
F
/
CP
N
L
i
n
L
i
n
N
N
Notes:
IMM slot: 50Gbps
IMM cards:

10GigE 8 port >> toward 7450
10GigE 4 Port >> IOF
up to 4 to 1 concentration

SF/CPM: 500Gbps
SF - Switch Fabric


CPM - Control Program Module

Figure 17--Router Schematic

In the GPON network, there are a limited number of aggregation points that constrain broadband
speeds. The first aggregation point is the fiber splitter (PFP or FDH). Up to 32 end-user locations
can be served off each splitter feeder fiber, with the 32 locations sharing 2.5 Gbps of capacity.39 That
means that each location could have a minimum of 75 Mbps of capacity (i.e., 32 subscribers could
all receive 75 Mbps on a single 2.5 Gbps fiber).40 As a result, the maximum per customer busy hour
bandwidth input into CACM should not exceed 75Mbps.

The next aggregation point is the optical line terminal (OLT), where fiber-optic signals from multiple
splitter feeder fibers are aggregated and shifted onto a 10 Gbps connection to Ethernet switches and
routers (10 Gbps total bandwidth for each OLT). CACM assumes that each OLT can handle as
many as 58 splitter feeder fibers, or 1,856 customers (i.e., 58 fibers x 32 customers each assuming all
locations passed subscribe).41 In other words, the OLT is likely to be the choke-point in the GPON
network, where capacity is most limited.42 The CACM inputs are expressed on a “per port or per
splitter fiber termination” basis assuming the OLT is fully built out with all ports utilized, adjusted
for engineering utilization43. When both splitters and the OLT are fully utilized, each end user is
assumed to receive at a minimum 5.4 Mbps of capacity as shown in the following calculation:

10 Gbps total backhaul from each OLT / 1856 customers = 5.4 Mbps per customer

As shown in the calculation above, the number of customers determines the amount of capacity
available to each customer. In denser areas, the splitter is typically fully consumed (i.e., there are 32

39 In fact, 32 end-user locations may have only a fraction of those locations as subscribers, meaning even
more capacity per subscriber than described in this example.
40 Upstream capacity for GPON tends to be one half of downstream.
41 Equipment can potentially provide 15 cards with 4 ports each for a total of 60 splitter fibers, but CACM
assumes 2 ports are reserved for maintenance and administration purposes.
42 As many as 58 2.5 Gbps fibers are backhauled by one 10 Gbps fiber.
43 Each of the OLT’s ports is assumed to support up to a maximum of 32 customers per fiber. As such,
CACM calculates the number of consumed OLT ports by each splitter by dividing the splitter’s active
customers by 32 and rounding up.
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end-user locations within 5,000-feet of the splitter). In contrast, in more rural areas it is likely that
there will be fewer than 32 end-user locations aggregated onto a single splitter fiber. Thus, in rural
areas, where there are more likely to be fewer customers per splitter fiber, the architecture used in the
model would result in more capacity per customer.

In addition, in smaller service areas, the OLT utilization would not be as high as that found in larger
service areas. In other words, service areas with fewer end-user locations, as is often the case in
more rural areas, would be more likely to have unused splitter-fiber capacity aggregating at the OLT,
leaving more backhaul capacity from the OLT available to each end user.44 The OLT is still likely to
be the choke-point in the network, but end-users each would have more capacity.

Regardless, in the most capacity-constrained areas (areas where OLTs are fully utilized: higher
density and likely lower cost), each end user is assumed to receive at least 5.4 Mbps of capacity.45 In
rural areas, where it is likely to have fewer than 32 customers per splitter fiber and some OLTs
underutilized (i.e., less than 58 splitters connected to every OLT), each customer can have many
times this 5.4 Mbps capacity by default, with the exact amount determined by local conditions.

Further toward the core network, the next set of aggregation points are the Ethernet switches and
routers, whose capacities (backplane gigabit capability) increases with the number of users assumed
to be on the network. In other words, the CACM captures the need for increased capacity in the
Ethernet (backhaul) network in less-costly increments, tied to the number of subscribers. The
CACM inputs for Ethernet switches and routers are developed on a “per OLT port” basis assuming
that these network nodes will be fully utilized adjusted for engineering fill. As noted, each of the
OLT’s ports is assumed to support up to a maximum of 32 customers per fiber. As such, CACM
calculates the Ethernet switch and router investment triggered by each splitter by dividing the
splitter’s active customers by 32 and rounding up.

In summary, given the network sizing at each of these aggregation points, and the likely range of
reasonable take rates, the modeled network provides much more than 5.4 Mbps of capacity per
subscriber in rural areas.
14.1. Impact of Bandwidth growth on Broadband Network Equipment Capacities
As stated above, CACM has more capacity than the currently supported 4/1 service mandated for
all locations in the USF Transformation Order. That said, CACM should capture the increase in
deployment costs that may occur when the per-user capacities start to grow beyond the supported
4/1 service.

In prior versions of the CACM, given that the network was configured for capacities greater than the
supported service definition, there was no logic to capture the impact of increased busy hour loads.
This has been addressed in the latest input files released.

44 As noted above, OLTs often aggregate demand from an entire service area; and each OLT can provide
service for up to 1,856 end-user locations. Thus even in rural areas, each serving wire center is likely to
have more than one OLT’s demand. However, it is likely that each splitter fiber in a rural area has, on
average, fewer than 32 customers. As such, the maximum capacity per customer would be higher.
45 This corresponds to a busy-hour offered load of 5,400 kbps. One hundred percent usage all the time of
a 4 Mbps connection would result in a busy hour offered load of 4,000 kbps. Therefore the 5,400 kbps
busy-hour offered load corresponds to more capacity than the amount required if all subscribers were
using every bit of available bandwidth on a 4 Mbps network at one time. And, as noted above, more rural
areas, with fewer splitters per OLT, are assumed to have more capacity than that.
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Within the CAPEX input workbook, the investment in the OLTs, Ethernet Switches, and
Broadband Routers are all triggered by the number of OLT ports consumed by the terminating
Splitter fibers. That is, the OLT, Ethernet Switch, and Broadband Router are unitized on a per
OLT port basis, where each port can support up to 32 customers from each splitter fiber. As such,
for every 32 customers of splitter demand (referred to in the CACM methodology as the Node2
demand), CACM adds an increment of investment for these three components.

As described above the OLT acts as the throttle point by providing a maximum of 5400 kbps busy-
hour load per customer or 172Mbps per splitter fiber. The new input files increment the investment
of the OLT, Ethernet Switch, and Broadband Router based on the modeled demand that is
calculated at each fiber splitter (i.e., Node2). The total bandwidth at fiber splitter is calculated by
multiplying the bandwidth per customer by the customer take rate at each fiber splitter/Node 2. The
CACM compares that aggregate demand to the maximum supported demand of 172Mbps per
splitter fiber. Where busy hour load increases and causes the aggregated demand to exceed the
capacity of the OLT, the CACM now adds additional cost to account for additional OLT and
backhaul capacity.

As an example, if a Fiber Splitter / Node2 location has exactly 32 end users (i.e., the take rate times
the number of locations leads to a fully utilized splitter with 32 end users), there is no incremental
cost for any busy-hour load up to 5400 kbps. However, if one were to assume the per-user, busy
hour demand had grown to 10,800 kbps, each OLT could handle only half as many fibers (with
twice the busy-hour demand each). Therefore, the model calculates additional OLT cost (twice the
number of required OLTs), along with added cost for Ethernet Switches, and Broadband Routers In
effect, the model has to double the count of OLTs and double the ports consumed on Ethernet
Switch, and Broadband Router.
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15 Appendix 9 -- Plant Mix Development
The following process was used to derive the Plant Mix (i.e., the percentage of Aerial, Buried, and
Underground plant) used in the Connect America Cost Model.
15.1. Carrier-Provided Plant Mix Data Request
As part of the Plant Mix development process, three price cap providers with multi-state operations
provided plant mix information in the states in which they operated.46 In short, Plant Mix
information was provided by
-
State
-
Type of plant – Distribution, Feeder, Inter-Office (IOF)
-
Density of Area – Rural, Suburban, Urban
Subsequently, a fourth price cap carrier operating in one state provided proposed plant mix values in
the same format, which have been incorporated as default values in the plant mix input tables in
CACM.

The layout of the data provided is shown below. The following values shown in the table are for
illustrative purposes only.

CostFam>>

DIST

Feeder

IOF

State

Density

Aerial Buried Underground Aerial Buried Underground Aerial Buried Underground

*
Rural
50.0% 50.0%
0.0% 45.0% 53.0%
2.0% 45.0% 53.0%
2.0%
*
Suburban
40.0% 58.0%
2.0% 35.0% 40.0%
25.0% 35.0% 40.0%
25.0%
*
Urban
30.0% 65.0%
5.0% 20.0% 20.0%
60.0% 20.0% 20.0%
60.0%

Figure 18--Data Layout

15.2. Methods

1. Data Validation
a. Example -- did the percentages sum to 1 for each Type of Plant?
2. Calculation of Averages for each state where data was submitted
a. Averaged submitted values by Density and Type of Plant for those states where more
than one provider submitted data. NB, values showing no decimal places were likely
result of operator(s) in a state submitting data without decimal precision.
b. For those states where no state-level data were submitted, averaged values across all
states by Density and Type of Plant to develop national averages
3. Compiled into the CACM input table



46 The original plant mix values were publically filed in August 2011 and have been subsequently updated
since that time.
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16 Document Revisions

5/22/2013
Updated for version 3.1.2
6/5/2013
Updated for version 3.1.3, coverage derivation changes and modification to table 3.
6/20/2013
Clarified application of middle mile sharing.
Clarified category breakpoints for urban and suburban
Updated support model parameter definitions, removed Monthly Support Cap. Added fn, per User
Guide.
Updated Broadband Network Equipment Capacities section

Updated Capex table definition per User Guide
8/27/2013
Updated for version 3.2
Updated bandwidth values, removed reference to clear-channel to reduce confusion with TDM
Updated figure 11, figure 3, 10, 14
Fixed caption figure 13
Removed abbreviation FST to minimize confusion between Fiber Service Terminal and Fiber
Splitter Terminal.
Added section to address Middle Mile undersea.
Added section for Plant Mix development.
Updated Figure numbering. Clarified presence of DSLAM.
Added footnote, page 29 to clarify the role of density in CAPEX and OPEX.
Expanded section 9.3 to include derivation of percentage use factors, removed Mark With Provider
from field description.
9/15/2013
Updated description of broadband coverage development.
Updated description of bandwidth table.
12/1/2013
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Updated section 3.2 to describe new placement methods
Updated section 5.2.3.7 to cover terrain modifications
Updated section 9 to cover new Middle Mile methods
Added section 5.2.3.5 to cover engineering rules
Updated table definitions for new workbooks-PlantMixBuried and StateSpecificCapex; mirror User
Guide






























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