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How to Plan for an Upgrading Investment in a Data Network?
Abstract
We illustrate how a mobile data network operator can plan an upgrading investment to anticipate explosions of the demand, taking into account the expected profit and the customer satisfaction. The former parameter grows with the demand, whereas the latter sinks if the demand is too high, as throughput may collapse. As the equipment price decreases with time, it may be interesting to wait rather than to invest immediately. We then propose and discuss two methods that help in making the decision. The first one is an actualization algorithm, where the upgrade should be performed when the loss of profit, derived analytically, exceeds the expected discount. The second is a real option-like strategy to hedge against the risk that the investment has to be anticipated. The evaluation of the investment date is then performed, in the latter, by a backward dynamic programming approach, using recent improvements based on least-squares estimations, whereas, in the former, a forward actualizing algorithm is investigated through simulations.
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