On Distributed Communications Series

X. Cost Estimate

II. Cost Breakdown

Research and Development

Research and development items are individually detailed below (Tables III-VII). It is proposed that construction be delayed until after a thorough engineering test evaluation has been made. Mass production techniques are envisioned for actual major equipment construction costs--but these costs will accrue only after successful completion of the earlier stages of development.


The following set of studies (Table III), listed in ODC-XI, are intended to provide a firm technical foundation before proceeding with the system development.

While a total figure is shown for each study, it is anticipated that the money for each item will be divided into a few relatively long-term studies by companies already expert in the particular fields.

More-successful studies in these fields are generally found in those situations where the company performing the research study is sufficiently interested to also underwrite a portion of the costs.

Design Costs

Test Unit Construction and Test


Final Test

Engineering and Installation

Switching Node and Multiplexing Station

The pricing for the Switching Node and the Multiplexing Station is based on the assumption that the preliminary logical design of the equipment in ODC-VII and ODC-VIII is representative of system complexity.

Several people familiar with computer manufacture and pricing were asked their opinion as to the expected price for units of the described level of complexity and construction. No specific acknowledgment of individuals is included because of a common reluctance to be quoted on an estimate based upon so many unknowns. Among the ground rules given was the assumption of use of known and understood 1962-63 technology and the use of low-cost components. (One more-recent estimate based upon silicon, high-reliability, 1964-era microminiaturized equipment indicated prices on the same order of magnitude as the 1962-63 lower-reliability, germanium transistor assumption.)

Terminal Devices

The cost estimate for the analog-to-digital telephone units was reviewed by members of a company involved in the manufacture of digital communications equipment, familiar with the complexity of equipment required. The consensus was that size and cost goals could probably be met using about 1965 technology.

Transmission Links

Total Mileage

While the amount of transmission path-length required is computed on the basis of airline miles, unit costs for transmission by mini-cost microwave include the "round-about" factor caused by real-world topographical constraints.

Detailed pricing of the mini-cost microwave is described in ODC-VI.

Although several different types of links have been under consideration, the assumed cost was primarily based upon the acceptable development of a mass-produced, simplified "mini-cost" microwave digital relay equipment, inasmuch as this appears to be the cheapest way of buying new high-data-rate routes (with the possible exception of TV links).[1]

Originally it was thought that pulse-regenerative line would turn out to be the least expensive way of building new high-data-rate links. It was surprising to discover how much cheaper mini-cost microwave could be. The pulse-regenerative line required the operation of each piece of terminal equipment at a synchronous rate matching the regenerative repeaters used. This 1.54-megabit/sec data rate poses an awkward constraint, since the devices feeding the network operate at data rates in the 75 x 2n bits/sec series (where n is an integer). Much of the equipment in both the Multiplexing Station and the Switching Node has been included in order to provide buffering between different data rates to match the narrow timing constraints of the link data rate.

The mini-cost microwave imposes no such constraints upon terminal timing, thereby facilitating an equipment simplification and providing for a cost savings by being able to design the links to fit the terminals--not the other way around. Further savings may possibly result from combining the Multiplexing Stations and Switching Nodes and increasing to 400 the number of major input points into the network. This arrangement would allow construction of 400 such stations at a lower unit cost than envisioned for the present Multiplexing Station, and would eliminate the need for the separate Switching Nodes. Even if the cost of the combined node was similar to the cost of the present Multiplexing Station, the overall costs would be identical.[2]

The maintenance cost for the mini-cost microwave has not yet been accurately determined. Almost all the cost of repairs resides in the travel time spent reaching microwave repeater sites. Since these repairs can be done on a delayed basis, and since no special skills are required in effecting repairs, we could let the repairmen who service the Switching Nodes and the Multiplexing Stations (who also spend much of their time traveling) also service the microwave repeaters. These repeaters will generally be situated alongside the roads between the Multiplexing Stations and Switching Nodes.

Alternatively, we could contract the servicing of the microwave repeaters to independent television servicemen who specialize in antenna work. Independent operators should be able to perform first-echelon repairs at a labor charge of less than about $30 per repair call. As a worst-case estimate we can assume that each repeater has a 100-day mean-time-to-fail rate. As there are about 6000 repeaters in 120,000 miles of link, we would experience a maximum average of 60 failures per day. This would result in a cost of about $1800 for contract labor per day, or $657,000 per year if the entire system were serviced by contractors. Second-echelon repairs would be done by the repairmen at the Multiplexing Stations.

To the labor costs, we must also add the costs of repair parts. There are very few components which can fail, so a budget of $200 per mini-cost microwave repeater per year is felt to cover replacement parts (not including amortization).

This concept of building a reliable network out of unreliable low-cost elements is, admittedly, a highly unorthodox approach. Construction techniques are proposed that are not common practice. It is only the particular redundant network configuration, using all-digital modulation and switching, that allows the consideration of the low-cost, lower-reliability techniques proposed.

Item Costs

A conservative overall cost of $400 per airline mile, including the factor of round-about construction necessary because of topographic limitations, is used for mini-cost microwave. The cost basis for this and other links may be found in ODC-VI.

Purchasing Major System Items

Annual Maintenance Costs

Annual Cost Computation

[1] Baran, Paul, Coverage Estimate of FM, TV and Power Facilities Useful in a Broadband Distributed Network, The RAND Corporation, RM-3008-PR, March 1962.

[2] 400 Switching Nodes @ $150,000 plus 200 Multiplexing Stations @ $300,000 equals $120,000,000; 400 Composite Stations @ $300,000 equals $120,000,000.

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