### SWITCHED NETWORK VS LEASED LINE ECONOMICS COMPARISON

A leased line is billed on a monthly basis regardless of its level of utilization. In comparison, a switched network service, such as the use of the switched telephone network, is billed on a usage basis.

To illustrate an example of the manner by which you would compare the usage of the switched network with the use of a leased line, let’s assume you are investigating an application that is estimated to require two hours of communications per day.

Let’s further assume there are 22 business days in the month, your long distance communications carrier’s rate plan permits calls to be made any time during the day for 10 cents per minute, and a leased line used to connect the two locations would have a monthly cost of \$300.

Because our estimate involves two hours of communications per business day and there are 22 business days per month, this results in 44 hours of communications per month. Based upon the use of a flat rate dialing plan that charges 10 cents per minute, the cost of using the switched network becomes:

44 hours/month X 60 min/hr X 10¢/min = \$264.00/month

If we compare the cost of anticipated switched network usage to the cost of a leased line, it is apparent that the cost of the switched network is more economical. However, what happens if we expect daily usage to increase to three hours per day?

Based upon communicating three hours per day, the total usage of the switched network becomes 3 hours/day X 22 days/month, or 66 hours per month. Continuing our use of a flat rate calling plan of 10¢/min, the monthly cost of the switched network becomes:

66 hours/month X 60 min/hr X 10¢/min = \$396.00/month

Note that the cost of using the switched network now exceeds the cost of a leased line. The preceding computations illustrate several key communications concepts. First, as usage of the switched network increases, it is possible to reach a point where the monthly cost of a leased line is more economical.

Secondly, because the monthly cost of a leased line is fixed regardless of usage, many times a decision to install a leased line should be made even when it appears that the cost of using the switched network may be more economical. This is because if we are slightly wrong in our estimate of switched network usage, a leased line could be more economical and its expense is fixed, making its cost easier for budgeting purposes.

In addition, if estimated usage is on the low side but the cost of using the switched network and a leased line are within close proximity of one another, we should probably select the usage of a leased line. This is because its use caps our communications cost.

To illustrate the use of rate tables, let’s examine a second comparison of the use of the PSTN versus a leased line. For this example, assume that a personal computer located 50 miles from a mainframe has a requirement to communicate between 8 a.m. and 5 p.m. with the mainframe once each business day for a period of 30 minutes.

Suppose the communications application lengthened in duration to 2 hours per day. Then, from Table 4.1, the cost per call would become 0:31 X1รพ 0:19 X 119 or \$22.92. Again assuming 22 working days per month, the monthly PSTN charge would increase to \$504.24, making the leased line more economical.

If data communications requirements to a computer involve occasional random contact from a number of terminals at different locations and each call is of short duration, dial-up service is thus normally employed. If a large amount of transmission occurs between a computer and a few terminals, leased lines are usually installed between the terminal and the computer.

Since an analog leased line is fixed as to its routing, it can be conditioned to obtain a uniform level of attenuation and delay distortion, as well as provide a minimum signal-to-noise ratio which will reduce errors in transmission.