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EconomicsofQuality of Service

Jitender Singh

Jetendar YadavAnkit Anand

A S y n d ica te 7 Pre se n ta tio n

B h a n u G a rg

G eken EtteR o m ita R a zd a n

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Economics of QoS

In simple words it is an analysis ofcost and benefit associated withdelivering a particular quality of

service.

B e n e fitIn cre

ased M arket share

In crea sed R ev en u e

In cre a se d Pro d u ctiv ity

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Pre v e n tio n co stFa ilu re C ost

A p p raisal cost

.1 N e t w o rk

re la te d

.2 O rg a n iza tio n

re la te d

.3 Process

re la te d

.4 P u b licity5.

.1 N e tw o rk re la te d

.2 &Pro b le m

co m p la in t

h a n d lin g

.3 Poor p rod uct

la u n ch

.4 R e v e n u e re b a te s

& litigation

.5 Loss of m arket

share

.6 O rg a n iza tio n

re la te d

.1 Te ch n ica l

m e a s u re m e n t

.2 O p in ion m ea surem en t

C ost

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1. Failure cost: cost associated withthe failure to achieve a

satisfactory level of QoS 2. Appraisal cost: cost relates to

activities concerned with the

assessment of QoS 3. Prevention Cost: cost necessary

to ensure that a desired level ofQoS is obtained

o st o f Q u a lityThe Cost of quality isnt the price of creating a quality

product or service, it is cost of not creating a quality

product and services

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Traditionally Total cost of service is summation offailure and prevention cost. However it ignoresthe benefits aspects of QoS and may not be themost profitable solution

%0 defective%100defective

Qualitycost

Optimum qualitylevel

Prevention cost Failure

cost

Total qualitycost

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Network prevention cost:

3 parameters that affects the design &dimensioning of the network are:

Cost

Performance

Throughput

Generally, the designed n/w is optimized forminimum cost for a prescribed throughput andperformance..

QoSis broadly the summation of individualperformance of each link and node making upthe connection..

Tradeoff between prevention cost & Failurecost..capital expenditure & operating

expenditure

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Prevention Costs

Prevention costs are those which arenecessary to ensure that theproducts and services delivered tocustomer, that is the offered

quality, meet an acceptable level ofquality. They include:

Network prevention Costs Network Resilience Costs

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Network Prevention cost

Primarily associated with networkand design

Main Parameters

Cost Performance

Throughput

To obtain good performance there istrade off between nodes and linksin such a way that it minimizesoverall cost

Trade off between Local access

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Network Prevention Costs(Maintenance)

C

P

E

L

E

L

ET ET E

C

P

E

N T P N T

P

Loca

lLoop

Loca

lLoop

Ju n ctio n Ju n ctio nTru n k C ircu it

OSperceived

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MTTR

Fault detection, fault localization, faultnotification, hold-off & computationtime

It is a critical QoS parameter & isaggregate time of process from faultreception to solution

Queuing, travelling & repair

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Network Prevention Costs

(MTTR)

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MTBF

Mean time between failures

Use of equipment with less stringentMTBF may reduce capital costrequirement but to meet customersrequired availability moremaintenance costs may be required

A trade off between capital &operating cost and a optimumshould be to minimize whole life

cost

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Network Prevention Costs

(Effect of ageing)

F

A

U

L

T

L

I

A

B

I

L

I

T

Y

Time

S e ttlin g

p e rio dE ffe ct

O f

a g e

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Effect of intervention

Capacity is provided in increments tomeet growth for a period of time inlocal loop

Often there is need of manualintervention at flexibility points

Services for new customer can hinder

due to non availability

Sufficient capacity independent offorecast

Will increase the capital cost but physical

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Network Prevention Costs

(Effect of intervention)

In te rv e n tio

nTim

effect of intervention on fault liability

FA

ULT

LIA

BILITY

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Network Resilence

Physical Layer (1): Protection againsttransmission failures

Function Layer (2,3): concerned with

traffic routing & congestion innodes & links

Capex involved is high, so

combination is necessary to meetthe needs of network operators atan acceptable cost

Difficult to analyze the cost and

benefits

R l ti hi b t

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Relationship betweenrestoration and effective cost

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Failure Cost

Failure costs are incurred when a product failsto conform to its design specifications.

Internal Failure Cost-

Costs associated with defects found before

the customer receives the product or serviceExternal Failure Cost-

Costs associated with defects found after thecustomer receives the product or service

Such costs can decimate profits

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Cost

Net cost of scrapNet cost of spoilageRework labor andoverheadRe-inspection ofreworked products

Retesting of reworkedproductsDowntime caused byquality problemsDisposal of defectiveproductsAnalysis of the causeof defects inproduction

Re-entering databecause of ke in

Cost

Cost of field servicingand handlingcomplaintsWarranty repairs andreplacementsRepairs and

replacements beyondthe warranty periodProduct recallsLiability arising fromdefective productsReturns andallowances arisingfrom quality problemsLost sales arising from

a reputation for poorualit .

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Eff t C t d P fit D T

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Effect on Cost and Profit Due ToFailure

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Failure Model

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Investigation of Failure Cost

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Cost of failure of network

integrity1.Catastrophic failure: Where large outages occurs like

failure of switching nodes.

It can be very costly in terms of lostrevenue.

This cost can be evaluated if theaverage customers is knowntogether with the average trafficand the duration of outage.

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Cont.

2. Failure of inter connect

Where all the calls passing betweenthe networks are prevented from

completing.

Here lost revenue can be calculatedand would affect both the operator

and the one in whose network thecall terminates.

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Cont

3. Failure of particular service

Failure of one service or services inone or other network or those that

require interoperatibility,theoretical revenue loss can becalculated.

4. Degradation of performance. Its the performance that DOESNT

affect the call completion. For eg-

high error rate.

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Protection at Points ofinterconnect

Detail and unambiguous interconnectand feature standards insuringcompatibility of implementation ofstandards require close cooperation

between operators. Mediation and policing devices, and

cost apportionment betweenoperators will be a major issue.

Conformance testing- it may requireexpensive captive models as well asinternetwork trials and it raises issuesregarding when such testing takes

place.

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Major issues when new services areinterconnected or when major

software upgrading takes place

Responsibility for conformanceapproval

Self certification

Funding of test models

Requirement for testing

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Commercial implications of an operatorrestricting access to its network

Potential loss of revenue to the serviceprovider or network operator deniedaccess.

The costs to customers who might bedenied cheaper services- impossibleto quantify.

Reduction in market growth. Low Innovation and development of

new services resulting from thereduction of competition and lack ofcreative service providers.

Conflict with regulator whose policy is

to open networks for interconnection

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Network modernization

Good QoS and new services are difficult toachieve when a network operator ismodernizing its network because of the legacyburden of obsolete plant.

it is necessary for the network operator toschedule carefully the order in whichexchanges are modernized.

Early priorities must obviously be given to

large towns with high business penetration. It becomes more difficult to prioritize the

residual majority of exchanges to ensure thatthe supply of digital exchanges is deployed in

the most cost effective manner, particularlywhen re lacin exchan es.

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The financial worth of modernization can beassessed by trading off the capitalrequired to modernize each exchangeagainst the savings in operating costs and

the incremental revenue from newservices, usage stimulation from improvedQoS and the loss of revenue protectedfrom competitors.

There is evidence that improved QoS can

stimulate usage. Conversely in a partially modernized

network, the variability of performancedue to the mix of analogue and digitalroutings can give rise to increased

complaints about QoS.

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Clearly reduction in congestion due toautomatic alternative routing anddynamic alternative routing strategiestogether with network traffic

management increases the trafficthroughput and hence revenue.

Some calls lost due to congestion areeventually successfully repeated.

The repeat call button on moderntelephones assists in this, although itcan exacerbate the problems of heavycongestion by exponentially

increasing call attempts.

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Appraisal Cost

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Definition

Appraisal costs are costs that occurbecause of the need to control productsand services to ensure a high quality levelin all stages, conformance to quality

standards and performance requirements.Examples include the costs for:

Checking and testing purchased goods

and services In-process and final inspection/test

Field testing

Product, process or service audits

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Examples of Appraisal Cost

Incoming Inspection

Testing Inspection in process

Quality audits

Incoming test and laboratory tests

Checking labor Laboratory or other measurement service

Setup for test and inspection

Test and inspection material

Outside endorsements for certification Maintenance and calibration work

Product reengineering review and shippingrelease

Field testing

Example :

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Example :Software

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Network management

Network management is the use ofcomputer support system to reducefailure costs and to improve the

performance of the network. Such systems are effective when

they interact with the network witheach other in a coherent fashion.

A well structured set of networkmanagement support systemsshould detect problems before they

affect customers.

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Service Management

No matter how good the networkmanagement is the impact on QoScan be reduced by a poor interface

to the customer. Whilst network management ensures

that the operation of the network is

optimised to the desiredperformance levels, servicemanagement should optimiseservices to the best of customers

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Service Management

Service management can be definedas the coordinated management ofa portfolio of service customers use

and gives the network providers asingle integrated view of itscustomers.

It includes customer reception. The development of network and

service mgt support systems is

very expensive.

C t ti f ti

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Customer satisfactionMODEL

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Case Study

Economies of QoS AllocationStrategies in Internet

Junseok Hwang, Syracuse University

Martin Weiss, Pittsburg University

Addresses the technical andeconomic problems of QoS-

Interconnection

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Issues

Network valuation vs. incentive ofoptimal interconnection

The economic affect of various QoS-mechanisms and QoSinternetworking options among the

interconnecting networks.

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Method

Modeled the opportunity costfunctions for bandwidth of QoS byusing the proxy usable bandwidth

The values were assessed bysimulating the parameters of thecost functions for various QoSnetworks

Using the cost functions of variousQoS networks, the optimal strategyfor the QoS allocation was

discussed

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Analysis

QoS-Interconnection is aboutconnectivity for multiservicenetwork services

Different QoS service may havedifferent cost functions, andadditional services can be both

beneficial and costly to thenetworks

QoS Outsourcing

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BW Cost Vs Quality

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Results

Cooperative Interconnection : BestStrategy as it lowers end-to-endQoS cost

QoS outsourcing : Saves own cost upto 70% : Increase counterparts

cost uptoa factor of 6 : Worst Case total cost

2x of joint

optimal cost

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Conclusion

In the absence of QoS-basedinterconnection prices, that powerfulincentives exist for networks to

reduce their local costs byoutsourcing quality to the othernetwork. This behavior produces

costs that are above the globallyoptimum costs and transfersignificant costs onto the othernetwork.

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Summarizing QoS

Quality of service is the ability toprovide different priority todifferent applications, users, or

data flows, or to guarantee acertain level of performance to adata flow

(Source Wikipedia)

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Is it about QoS...only

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QoS.not sufficient alone

Technological consideration

Economic consideration

Subjectivity

End User Perception

Customer Experience

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What is QoE ?

Quality of Experience (QoE) is asubjective measure of a customer'sexperiences with a vendor

(Source - Wikipedia)

QoE = f {Change in Experience w.r.t.vendor}

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Service Experience Matrix

Q o E

High Low

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In Brief

QoS Vendor Side Importance

QoE Customer Side Importance

Economics = f {Return onInvestment, Value forMoney}

= f {QoS * QoE}

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Thank You

Your queries are welcome