Valuation of Flexibility in Optical Layer Network Planning: a case study for a Belgian network

This paper discusses the economic evaluation of different fiber deployment scenarios on the optical network layer, based on dark fiber and wavelength lease. Upfront planning based on predicted traffic leads to a network expansion plan which is probably not optimal for the actual traffic evolution. Real Options valuation determines the value of choosing a certain network deployment scenario, taking into account the ability to switch to another scenario based on information that is unknown upfront, but becomes available during the course of the planning horizon. Based on realistic assumptions for equipment and lease contract costs in a case study for a Belgian network, we show that dark fiber lease provides the most cost efficient solution. An Indefeasible Right of Use on dark fiber allows to cope with growing traffic without the need to update the contract immediately, however, its long contract term is little flexible and therefore in general not beneficial in case of uncertain traffic evolutions. Lambda lease was shown to benefit from its flexibility switch fast to another network scenario in case of uncertain traffic evolutions.