Tutorial 1, October 16, 9.00-12.30, Pentagono room
Valuing flexibility in telecom infrastructure projects using real options thinking
Instructors
Name: Sofie Verbrugge, Mathieu Tahon
Affiliation: UGent/IBBT – Department of Information Technology (INTEC)
Address: Gaston Crommenlaan 8 bus 201, 9050 Gent, Belgium
Email: sofie.verbrugge@intec.ugent.be
Phone: +32 9 33 14 880
Fax: +32 9 33 14 899
Web: http://ibcn.intec.ugent.be/te
Abstract with Objective and Motivation
The rapid technological change and uncertain future evolutions have a large impact on the investment projects in the telecommunication sector. When new infrastructure networks are rolled out, the initial assumptions can prove to be untrue, severely impacting the economic viability. It is therefore extremely important that projects offer flexibility to allow the management to react to unforeseen changes. Management must, for example, be able to decide to speed up the project, slow it down, or even completely abandon it. However, the standard method used to evaluate investment projects, the Net Present Value (NPV) analysis, is unable to capture the value of these different flexibility options. The Real Option (RO) concept, derived from financial literature, was proposed as a solution and allows implementing this flexibility in the standard calculations. However, Real
Option Thinking (ROT) is only slowly getting accepted within the telecommunication sector.
In this tutorial, we will indicate why the characteristics of this sector make it very well suited to apply real options to investment projects. In addition, we introduce the basics of real options theory and provide a practical methodology to apply real options to realistic telecom business cases. The rollout of fixed next-generation access networks offers a broad range of growth options to the operator, e.g. additional network upgrades or the introduction of new services. Using real options allows comparing the flexibility value of all these options.
We provide a practical approach that can be seen as an extension to the standard techno-economic planning process of network deployment or migration. We indicate the essential requirements for the application of real options (uncertainty, flexibility and phased decision) and describe the four methodological steps: executing a standard NPV analysis, identifying the uncertainties, identifying the flexibility and calculating the option value (see figure below). To indicate the strength as well as ease of application of real option valuation, we will walk through a realistic techno-economic case, the migration from copper-based access based networks to more fiber rich and (eventually) fiber to the home networks.

Outline
1. The standard techno-economic planning process and its shortcomings:
The tutorial starts with a description of the standard techno-economic planning process, highlighting the different steps from input gathering over equipment dimensioning to economic evaluation [1]. In this overview, participants will learn how choices made in the initial steps impact the outcome of the techno-economic evaluation. For example, initial adoption estimates have a significant impact on the economic viability, but come with a high degree of uncertainty. To capture this impact, scenario analysis and sensitivity analysis exist, but these assume no reaction of the management to changed market circumstances.
2. Managerial flexibility
During the course of any project, the management has the opportunity to change the initial technoeconomic plan. A lower than expected market share, new technology, new market opportunities, etc. are just a few unforeseen circumstances that can call for a change in the initial plan. Projects can be abandoned or the market can be broadened to other countries or segments depending on the new market environment. Based on the 7S framework [2], the different sorts of managerial flexibility will be introduced, together with real examples from the telecom world.
3. Real options: valuing managerial flexibility
Translating the managerial flexibility into the evaluation step of the techno-economic planning process requires the introduction of real options. Real options are based on the concepts of financial options. A financial option is the possibility (and not the obligation) to buy or sell an asset during or at the end of a certain period. Whereas financial options are used in financial markets for stocks, obligations or even commodities (oil, gold, etc.), real options apply the same rationale for investment projects. A real option is the possibility to invest or disinvest during the course of an investment project.
However, before real option techniques can be used in techno-economic cases, three conditions must be met. The participants will be made familiar with these conditions and why they are so important. When these conditions are met, the value of the option (and thus the managerial flexibility) can be calculated.
Several methodologies exist to value these real options. But for realistic cases, the methodology proposed in [3] is the most designated. It consists of a four-step process that will be introduced using a stylistic example.

Application of real options in a realistic techno-economic study
The real strength of the above methodology lies in its applicability to realistic cases. As an example case, the investment decision many network operators currently face, the migration towards fiber to the home will be used. First, the standard techno-economic planning process will be applied to our example case. With this reference case, we show how future uncertainty can impact its outcome.
Introducing managerial flexibility allows a reaction to the changed future. The three conditions will be checked in the case and the methodology will be followed step by step, showing how real option valuation improves the decision process.
Summary and references
We will end by summarizing the entire process and highlighting some references from literature.
6. Questions and answers (15 min)
Although questions and suggestions are welcomed throughout the entire tutorial, some time will be allocated at the end for discussion, questions and answers.
Intended Audience
The following groups of people could benefit from attending our tutorial:
- People starting in the field of network planning, wanting to dive into the topic.
- Practitioners in network planning that want to understand better how to deal with uncertain changes to the planning inputs in a systematic way.
- Researchers interested in taken a start with real options thinking.
There is no prerequisite knowledge
Biographical Sketch
Sofie Verbrugge received an MSc degree in computer science engineering from Ghent University
(Ghent, Belgium) in 2001. She obtained the PhD degree from the same university in 2007 for her thesis entitled “Strategic planning of optical telecommunication networks in a dynamic and uncertain environment”. She is currently working as a researcher affiliated to the Interdisciplinary
Institute for Broadband Technology (IBBT), where she is a coordinator for the techno-economic research within the Internet Based Communication Networks and Services group (IBCN). Her main research interests include infrastructure as well as operational cost modeling, telecom service and network deployment planning, advanced evaluation techniques including real options and game theory. She has been involved previously in several European as well as national research projects in these domains, including the COST-action Econ@tel. Currently she is leading the work package on “Business modeling” with the European FP7 project ICT-OASE.
Mathieu Tahon graduated as Master in Applied Economics, option Finance in July 2009 at Ghent
University. He joined the IBCN Internet Based Communication Networks and Services) research group of the Department of Information Technology as PhD student in August 2009, at the same university. He is affiliated with the techno-economic research cell, where he performs research on the application of advanced evaluation techniques in broadband network rollout (both fixed and wireless) and new service introduction (smart meters, electric vehicles). He specifically focuses on the use of real option and competition modeling in the economic evaluation. He is involved in different national and European research projects, including the European FP7 ICT-STRONGEST project and the national IBBT-ICON TERRAIN, where he leads the work package on extended evaluation techniques.
Prior History

The first instructor has given previous tutorials on the techno-economic evaluation of network deployment planning, which can be seen as the traditional approach on which real options can be applied as an extension.
[1] S. Verbrugge, K. Casier, J. Van Ooteghem, B Lannoo, “Practical steps in techno-economic evaluation of network deployment planning”, Globecom2009, Global Communications Conference
(tutorial T11), November 30th, 2009, Honolulu, Hawaii, USA,
[2] S. Verbrugge, K. Casier, J. Van Ooteghem, B. Lannoo. “Practical steps in techno-economic evaluation of network deployment planning”, Networks 2008, 13th International
Telecommunications Network Strategy and Planning Symposium (tutorial T12), September 28 -
October 2, 2008, Budapest, Hungary.
Major References
[1] S. Verbrugge, K. Casier, J. Van Ooteghem, and B. Lannoo, “Practical steps in techno-economic evaluation of network deployment planning,”
IEEE Globecom, Tutorial T , vol. 11, p. 2009, 2008.
[2] T. E. Copeland and P. T. Keenan, “How much is flexibility worth?,” McKinsey Quarterly , no. 2, pp. 38-50, 1998.
[3] T. E. Copeland and V. Antikarov, Real Options - a practitioner’s guide . New York: Texere,
2003, p. 320.
Supplementary Materials
Anything that might help the reviewers evaluate the proposal, such as sample viewgraphs, links to potential course web pages of the instructor or, if already available, draft tutorial slides.
- Master course at Ghent University: Network modeling and design, course material partially provided by proposed instructor, more info on http://www.opleidingen.ugent.be/studiegids/2007/EN/FACULTY/TW/COURSE/EHPOOL/000000
75/INDEX

Flow and Capacity Design in Content-Oriented Networks
Speaker: Krzysztof Walkowiak ( krzysztof.walkowiak@pwr.wroc.pl
), Wroclaw University of
Technology, Poland
Abstract
Multimedia content is currently becoming increasingly common and voluminous in the Internet. For instance, Cisco Visual Networking Index (VNI) provides a forecast that by 2014 more than 90 percent of the Internet traffic will be based on video content distribution using P2P, or streamed from servers. Remarkable examples of emerging multimedia content-oriented network services include: video streaming (e.g., YouTube, Hulu), multicasting/broadcasting over IP networks (e.g.,
IPTV), Content Delivery Networks (e.g., Akamai). However, majority of existing network solutions is not fully prepared to provide the effective delivery of time-sensitive multimedia traffic, partially due to the currently visible dominance of unicast (i.e., point-to-point) transmission. In order to tackle this challenge, a concept of content-oriented networking (CON) has been introduced. This approach includes a wide range of new solutions developed to provide delivery of various content
(mostly multimedia) to requesting users. This tutorial will focus on one of the aspects of the CON idea, i.e., how to effectively deliver the content. In particular, it will outline characteristics of various approaches proposed to provide the effective content delivery, e.g., multicasting, anycasting, Peerto-Peer (P2P) systems, and overlays. The main part of the tutorial will be focused on flow and capacity design problems in content-oriented networks including ILP (Integer Linear Programming) approaches and heuristic algorithms. Moreover, issues related to survivability of content-oriented networks will be discussed.
Outline of the tutorial
1. Introduction to Content-Oriented Networks
2. Modeling of Computer Networks
3. Flow and Capacity Design Problems in Content-Oriented Networks
• Multicasting Systems
• Anycasting Systems
• Peer-to-Peer Systems
4. Survivability of Content-Oriented Networks
5. Concluding Remarks
After completing this tutorial, the participants will be able to:
• outline the key features of content-oriented networks,
• formulate ILP models related to optimization of content delivery including multicasting, anycasting, and P2P systems,
• solve basic flow and capacity design optimization problems in content-oriented networks,
• describe survivability aspects of content-oriented networks.
Biography of speaker
Krzysztof Walkowiak was born in 1973. He received the Ph.D. degree and the D.Sc. (habilitation) degree in computer science from the Wroclaw University of Technology, Poland, in 2000 and 2008, respectively. Currently, he is an Associate Professor at the Department of Systems and Computer
Networks, Faculty of Electronics, Wroclaw University of Technology. His research interest is mainly focused on optimization of network distributed systems like P2P systems, multicasting

systems, Grid systems; network survivability; optimization of connectionoriented networks (MPLS,
DWDM); application of soft-optimization techniques for design of computer networks.
Prof. Walkowiak has been involved in many research projects related to optimization of computer networks. He received the Best Paper Award in the International Workshop on Design of Reliable
Communication Networks (DRCN 2009). Moreover, he has been consulting projects for large companies including Ernst and Young, Skanska, TP SA, PZU, PKO BP, Energia Pro. Prof.
Walkowiak published more than 150 scientific papers. He serves as a reviewer for many international journals and he is actively involved in many international conferences. Prof.
Walkowiak is a member of IEEE and ComSoc.

Tutorial 3 October 17, 9.00-12.30, Pentagono room
Ethernet Metro Networks: understanding the present to envision the future
Instructors:
Prof. Guido Maier, Assistant Professor , Dipartimento di Elettronica e Informazione, Politecnico di
Milano, Piazza Leonardo da Vinci 32, I-20133 Milano (MI) – ITALY
Phone Number: +39 02 2399 3575 maier@elet.polimi.it
Dr. Alessandro Valenti, Researcher , Fondazione Ugo Bordoni, viale del Policlinico 147, 00161
Rome –
ITALY
Phone Number: +39 06 5480 2125 avalenti@fub.it
Short summary of the tutorial proposal
The evolution of the Metro Area Networks (MAN) is currently driven by the pressure of demand for broadband Internet, cloud computing and other new services for both residential and business subscribers. Most of these advanced services, not only need large network capacity, but also have stringent requirements on some performance parameters, such as guaranteed bandwidth and delay.
Despite its limited extension, a metro network interconnects nodes with very high throughput, such as point-of-presences, Internet exchange points, central offices of the access network, local service centers used for cashing and distributed content delivery. Traffic engineering of the MAN is complicated by the co-presence of multiple carriers and by functions such as aggregation, multicasting, data synchronization. Energy efficiency and reliability are further important extra requirements. These elements explain why particular networking solutions and protocols have been developed for the MANs, most of them (but not all) based on the concept of Carrier-grade Ethernet
(CE). This tutorial guides the attendees through a panorama of such solutions and protocols, which will be presented in their essential technical aspects. Besides CE and a quick summary of legacy technologies (Sonet/SDH, “old-fashion” Ethernet), the overview will comprise: Ethernet over
MPLS,
VPLS, VLAN switching, PBB, PBB-TE, MPLS-TP and RPR. A final section will be dedicated to open issues and latest developments. For instance it will be shown how some of the solutions originally developed for the MANs are reputed useful in the hot-topic context of datacenter networking.
Length of the tutorial: 3 hours
Outline of the tutorial:
The tutorial is divided into 9 sections. Presenters alternate their presentations during most of the sections, according to their specific expertise, and also to better capture the audience attention.
Here follows the detailed table of contents:
A. Evolution of network applications for residential and business users
B. Traffic growth and convergence towards a packetized service
C. Legacy technologies: Sonet/SDH, Ethernet
D. From VLAN to PBB
E. MPLS-based MANs
F. The Transport Profile
G. PBB-TE vs MPLS-TP
H. Open issues and future developments
I. Concluding remarks

Importance of the topic and motivations of the tutorial
We are witnessing a tremendous increase of end users’ bandwidth demand, coming from the access segment. This trend will continue in the near future due to applications such as storage area networks, wireless backhauling, VoIP, IPTV, P2P file/video sharing, and the Internet of things.
Also, ubiquitous broadband access to data and computing resources (the “cloud” concept) and broadcasting of video content over Internet (video-streaming, Video on Demand, WebTV) require a strong improvement of the metro network, as the segment performing an intelligent and energyefficient distribution of information from the core towards the access. Understanding the technological solutions that were found for the MAN is very important to be able to deal with the innovation and with the next-coming metro-network generations. It is also helpful in related fields, such as datacenter interconnection.
In the frame of this tutorial, we are offering a comprehensive picture looking at the entire panorama of metro networks. After attending this tutorial the attendee will learn the basic technical aspects underlying the protocols developed for the MAN from the recent past up to now.
History of the tutorial
The roots of this tutorial are to be found back in the European FP6 ‘e-Photon/One+’ and FP7
‘BONE’ projects in the frame of which teaching material for a European Master program in Optical
Communications and Networks had to be prepared. The course comprised various modules, one of which (of 6 ECTS, a duration of more or less 40 -hours of lessons) being dedicated to Access and
Metro Networks. We (Guido Maier and Alessandro Valenti) were among the authors of this specific module of the BONE Master. In this frame, we mixed and merged material from regular courses at
PoliMi and tutorial presentations at FUB and added new material to generate an extended overview of metro networks. After the end of BONE project, we have decided to adapt the material of the course in order to attempt exploitation in the form of a conference tutorial, and thus this is the origin of the present proposal.
Short biography of the instructors:
Guido Maier received his Ph.D. degree in Telecommunication Engineering at Politecnico di Milano
(Italy) in 2000. From 1995 until February 2006 he has been at CoreCom (research consortium supported by Pirelli and Politecnico di Milano). On March 2006 he joined Politecnico di Milano as
Assistant Professor. He is co-author of more than 60 papers (h-index: 11) and co-inventor of 6 patents. His main interests are in optical networks, optical switching networks and photonic interconnections. From 2008, he is Senior Member of IEEE. He took part to European Projects FP6
“MUPBED”, “NOBEL2”, “e-Photon/ONe+” and FP7 “BONE”, and he is currently involved in the
Project
FP7 “STRONGEST”.
Alessandro Valenti received a Dr. Eng. Degree in telecommunication engineering from the
University of Rome “La Sapienza” in 2007. In the same year, he joined Fondazione Ugo Bordoni, Rome, Italy.
His research interests are in the fields of passive optical access networks (EPON, GPON, WDM-PON) and