STEM newsletter

Learning to read with STEM

30 January 2004

The STEM network investment modelling software is a powerful and complex tool backed by a comprehensive programme of training and support. Once a core competence has been established, it is often desirable to distribute results to colleagues and even customers who may then engage in the refinement of scenarios. The D-STEM (distributable) and especially eSTEM (Web-based) publishing models do not require any specific knowledge of STEM, but this wider audience may soon demand it! This one-hour introduction is being developed as a companion guide aimed at the infrequent or peripheral user.

Fundamental links between revenue and cost

Models are presented in the STEM Model Editor, where each element of a business plan appears as an icon. The arrows linking these elements automatically reflect the dependencies and other relationships in the business and these links reveal the high-level logic. The best way to get a quick feel for a model is to hover over various icons, looking at the floating summaries of related assumptions which then appear.

First, look for the Service elements – these are the sources of revenue from the various services offered to customers, such as residential telephony, dial-up Internet and so on. Here you can look into demand assumptions – relevant market penetration, calling volumes and busy-hour traffic calculation (or nominal data rate and volume calculation for data services) – and tariffs – connection, flat-rate rental and usage/metered.

Then look for Resource elements – these represent the direct and indirect costs incurred in the provision of services, from core and line hardware components through to software and spectrum licences, buildings, vehicles, personnel and other administration costs. Here you will find planning dimensions – unit capacity for demand, maximum utilisation, mean replacement lifetime, depreciation rate and period – and unit cost assumptions – capex and maintenance or fixed and variable lease costs.

A green arrow denotes a requirement for a Resource by a Service: double-click to review the basis for this mapping – connections, busy-hour traffic, volume or revenue.

The Requirement dialog for an individual Resource shows that this demand is mapped on the basis of Connections

Right-click an icon to access the associated inputs from a menu. You will find many time-series buttons in the various input forms or ‘data dialogs’: these buttons show a summary of the data and accept constants or formulae. Click the button to enter parameters for exponential growth, S-curve or interpolated-series inputs, which may be previewed via the graph button on the dialog menu. Alternatively, the time-series button expands the assumptions to show the implied values for each period of the model run.

Accessing time-series inputs from an icon menu

In order to access the results, select Run from the File menu or just press <F5>. The model will be run if the inputs have been changed, and then the results are loaded into the STEM Results program.

A selection of charts and tables may be restored from a previous session (workspace), with optional additional screens accessed from the View menu. Exploring the full range of available results is easy:

  • Select Draw… from the Graphs menu. The Draw Graphs dialog is displayed, with a list of graphs ordered by type of element, such as Service, Resource or Network.
  • Select Network NPV, for example, and click OK. The NPV result is charted as a time-series in a new graph window.
  • If multiple scenarios have been run, then you will be prompted to select some or all of these for the graph, or to appear on separate graphs.

Drawing a graph for Services or Resources requires on extra step:

  • First select the desired graph as above, e.g. Service Revenue. After you have clicked OK (and selected the desired scenario, if applicable), then the Choose Elements to Draw dialog is displayed, with a list of the Service elements defined by the modeller.
  • Again, select some or all of these for the graph, or to appear on separate graphs.

By default, a line graph is drawn, but you can readily change this by selecting Format Graph… from the Format menu, or by right-clicking directly on the graph. If you have selected all Services, it may be instructive to use a stacked column format for a breakdown of network revenues (and similarly for charts of Resource costs). Select Show Graph as Table to view the underlying numerical data.

A closer look at how elements fit together

Returning to the STEM Model Editor – select Editor from the STEM menu in the Results program, or just press <Alt + Tab> – you may also be able to explore the modeller's preferred views of the structure. As soon as a model outgrows a single screen, it may be separated into multiple views for market analysis, CPE, local loop or radio network, backhaul, switching, transmission, management, administrative costs and so on. Common elements may have icons in more than one view, each bound to the same core data.

You will notice many Transformation elements – these provide a range of built-in calculations, such as Erlang B and time-lag, plus user-defined expressions (or formulae) which combine the results of input elements at run-time. A Transformation is defined, first by its inputs – look for the pink links – and then by the type and related parameters or formulae as defined in the Input and Transformation dialog (icon menu). For each input, a suitable basis is selected, such as Installed Units or Used Capacity of a Resource. These identify the specific results which will drive the calculation at run-time.

Transformations act on specified results (input basis) at run-time

Services may be linked to optional Market Segment elements which simply identify a common time-series assumption for a range of Services (and specific tariffs) offered to the same group of potential subscribers. STEM automatically aggregates related Service revenues and costs for these elements.

Many Resources are linked to optional Location elements which define the geographical spread of demand in terms of the number of separate sites where a given Resource must be deployed. The Deployment dialog provides a pragmatic model for the general distribution or variance of this demand, for macro-economic analyses where it is either unnecessary or impractical to model each site individually. (Template replication, described later, provides a manageable solution for detailed per-site modelling.)

Global options are selected from the Data menu. The Run Period defines the model start date and time-frame, plus optional quarters and months for the initial years. Financial settings include the currency unit, tax and interest rates, and gearing assumptions for the balance sheet.

The scenario space for a model is framed by one or more Dimension elements, each of which identifies a number of input parameters which vary across scenarios.

A Variant element then defines one coherent set of values for the specific parameters associated with a particular Dimension. (Select Variant Data from the Dimension icon menu to access a table comparing the alternative values for its parameters.)

An individual scenario is generated from the core (working) model by copying Variant Data from one specific Variant for each Dimension in turn. Select Scenarios from the File menu (or press <Shift + F5>) to select and run some or all of the available scenarios, and (optionally) the working model. The Results program automatically offers a selection of up-to-date scenario results when drawing graphs after one or more scenarios have been run. Select All Scenarios on One Graph to compare results such as NPV.

All of the input data are checked for certain bounds and consistency when a model is run. If any errors are found, these are immediately highlighted in the Editor. Select Next Error from the File menu to step through and fix multiple errors before running the model again.

The modeller may have linked certain groups of Services or Resources into Collection elements – these are used to calculate aggregate results and also provide a tabular interface for the associated input data from the Collection icon menu. Multiple aggregation hierarchies may be created by nesting or overlapping Collections. When drawing graphs of Service or Resource results, you will notice that the names of relevant Collections appear in the Choose Elements to Draw dialog, prefixed with asterisks (‘*’). For example, a stacked column chart may be used to provide a categorised breakdown of Resource costs by Collections such as ‘Network’, ‘Personnel’ and so on.

Collections are used to group elements and to calculate aggregate results

Technology substitution, geographical replication and auditing

STEM has a special grouping mechanism for functionally equivalent Resources – a Function element indicates that expiring capacity of one Resource may be replaced with capacity of another Resource in the same Function if the requirements of a particular Service change over time, e.g. install latest technology once it is available. The pace of such a migration may be accelerated if the original requirement (double click the green link) has a non-zero Churn Proportion after a certain time.

New technology replaces expiring capacity of another Resource in the same Function

Individual Resources may also be associated with Cost Index elements – these represent separate cost trends which combine to form a composite capital cost trend as defined in the Resource Capital Cost structure dialog (icon menu).

You can press <F1> in any of the input forms or data dialogs mentioned above in order to find more information in the online help.

At the bottom of the toolbar you will notice the Template button – these elements are used occasionally in large models when significant calculation structure must be repeated, perhaps to perform separate regional calculations. Rather like a Dimension, a Template has a number of associated Variants which provide differing values for key parameters identified by the Template, which also identifies which elements should be replicated.

In order to run such a model, STEM first generates an expanded model with one replica per Variant, with respective Variant Data applied where appropriate. Then the expanded model is run, generating results for each individual template replica, plus aggregate results (over all replicas) from automatically created Collections which replace the original template elements. Press <Ctrl+F5> in the Editor to preview the structure of the expanded model.

Aggregate results are generated by automatically created Collections which replace the original template elements

This replication process is non-destructive, so future changes in structure will propagate automatically across all replicas whenever the model is run, in the most striking example of how STEM manages the complexity inherent in all detailed whole-network cost models.

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