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halfband
Premium
join:2002-06-01
Huntsville, AL
| reply to pspcrazy
Re: We need caps again why?
said by pspcrazy  :The cables are already set, and the support doesn't cost much per customer, so honestly they don't need caps. Caps are just another way of controlling their customer when the push there video services. So you and your neighbors are not using any more bandwidth this year than last year? I know that mine has increased significantly due to video/streaming. For cable companies the issue is in the last mile until DOCSIS 3 gets rolled out. I am not sure why telco's seem to see the need promote caps.
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patcat88
join:2002-04-05
Jamaica, NY
| said by halfband :said by pspcrazy :The cables are already set, and the support doesn't cost much per customer, so honestly they don't need caps. Caps are just another way of controlling their customer when the push there video services. So you and your neighbors are not using any more bandwidth this year than last year? I know that mine has increased significantly due to video/streaming. For cable companies the issue is in the last mile until DOCSIS 3 gets rolled out. I am not sure why telco's seem to see the need promote caps. Their Bay Networks equipment was amortized over 30 years and it must generate revenue for 30 years before being permitted to be removed. | |
funchords
Hello
Premium,MVM
join:2001-03-11
Washington, DC
 ·Verizon Online DSL
 ·Skype
| said by patcat88 :Their Bay Networks equipment was amortized over 30 years and it must generate revenue for 30 years before being permitted to be removed. Can you say more about this? | |
patcat88
join:2002-04-05
Jamaica, NY
1 edit | said by funchords :said by patcat88 :Their Bay Networks equipment was amortized over 30 years and it must generate revenue for 30 years before being permitted to be removed. Can you say more about this? »en.wikipedia.org/wiki/Amortize
Its a financial/financing trick of some sort. I believe its loaning/financing equipment onto yourself (you remove the cost for the equipment each month rather than instantly, you can also finance it through outside parties, or your can finance your corporation's general activities (see commercial paper, etc)), or claiming the equipment is actually near liquid $ on the books, sort of like a car, and therefore no cost $ was actually spent to buy it.
There might be some tax tricks to this too, that you pay tax on the equipment only on the portion of the equipment you paid or wrote off that year.
Its something the bean counters invented, and bean counters aren't IT folks, so they get a loan/self finance/bond/etc to pay for the equipment for much longer than the real world life of the equipment, and fight tooth and nail when they are told this is an 386 and has to go by IT and that IT wants to buy new equipment. Usually execs will support the beancounters and stock holders on this one, not IT dept.
Then execs hire consultants to figure out how to not retire this equipment (and not screw up the books), and consultants recommend caps and throttling to keep the old equipment usable for much longer and not buy new routers, switches, and line cards every 2 years.
The phone company is famous for doing this. All the POTS switches are amortized to 20, 30, or 40 years. And thats sorta true, a POTS switch will last that long.
edit: I'm not sure if a market exists for used line cards, core routers, switches, HFC plant, telco switches. So if equipment is retired, your suddenly must write off the entire remaining value of the equipment in 1 shot, big drain on the finances, unless your can sell the equipment to cancel that out, which depends on a market for used carrier grade network hardware.
Another question is will the manufacturers (cisco, juniper, foundry, etc) offer replacement parts, or service contracts for non-orignal owners of the hardware? Financially they shouldn't since they are bastardizing themselves by supporting old equipment and not selling new equipment to pay off R&D on new equipment product lines. No carrier except the basement IT geek will then buy used carrier grade hardware (or they will steal from the dumpster at work  ), or maybe a 3rd world nation national telco for the president for life's villa. | |
funchords
Hello
Premium,MVM
join:2001-03-11
Washington, DC
·Verizon Online DSL
·Skype
| said by patcat88 :So if equipment is retired, your suddenly must write off the entire remaining value of the equipment in 1 shot, big drain on the finances, unless your can sell the equipment to cancel that out, which depends on a market for used carrier grade network hardware. Yes, and a company is, of course, allowed to upgrade even if it can't sell the used equipment (unless the equipment is collateral on a loan). Usually, it will be replaced by something, so the balance sheet will have a new asset -- and since it is technology, that replacement may be less expensive than the remaining depreciation of the capital item (now residing in the dumpster) or worth more than that in additional income capability.
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Robb Topolski -= funchords.com =- Hillsboro, Oregon
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wentlanc
You Can't Fix Dumb..
join:2003-07-30
Maineville, OH
| reply to halfband
said by halfband :So you and your neighbors are not using any more bandwidth this year than last year? I know that mine has increased significantly due to video/streaming. For cable companies the issue is in the last mile until DOCSIS 3 gets rolled out. I am not sure why telco's seem to see the need promote caps. Bandwidth costs / usage are not a linear function. It is a step function. You add capacity for a fixed cost, and you can use all the way up to that capacity for no additional charge. So not only are people using a bit more traffic, but the cable companies have been increasing speeds and adding customers. If bandwidth is really an issue, then don't oversell it so badly. This means managing congestion if a node is full, and splitting it to reduce the oversubscription rate. These costs should be covered by the additional subscribers that are being added. If the average usage goes up, then it's time to upgrade. But as the cable co's have stated, their mean usage is 3GB per month, so where's the big crunch?
cw | |
wierdo
join:2001-02-16
Tulsa, OK
·Future Nine Corpor..
·Teliax VOIP
| reply to patcat88
said by patcat88 :Their Bay Networks equipment was amortized over 30 years and it must generate revenue for 30 years before being permitted to be removed. There isn't a company in the world amortizing the cost of networking equipment over 30 years. That's a likely figure for property and plant, though.
5 years or less is more likely.
Also, it's nothing nefarious, it's just how you treat capital expenditures for accounting and tax purposes. Essentially you spend x dollars on a building, router, or whatever, and you get to write off the value over a certain number of years, so if you buy some industrial equipment expected to last 30 years, you get a yearly tax benefit of x/30. If you buy a router expected to last 5 years, you get x/5. (approximately, this is a general description, residual value complicates things somewhat)
Fiber construction cost is probably amortized over 30 years, but the electronics on it certainly aren't.
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It's wierdo, not weirdo. Yes, I know that's not the 'proper' spelling of the similar english language word.  | |
funchords
Hello
Premium,MVM
join:2001-03-11
Washington, DC
·Verizon Online DSL
·Skype
| said by wierdo :There isn't a company in the world amortizing the cost of networking equipment over 30 years. That's a likely figure for property and plant, though. When the term "plant" is used in this context, is that simply building (roof/floors/walls)? Would "vaults" be plant? Thanks.
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Robb Topolski -= funchords.com =- Hillsboro, Oregon
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K Patterson
Premium,MVM
join:2006-03-12
Columbus, OH
 ·RoadRunner Cable
| reply to wierdo
Depreciation and amortization schedules for financial reporting are set by GAAP - bean counters. For tax purposes, they are set by the IRS. The depreciation allowed is treated as an expense and is deducted from income, reducing the taxes paid. The two get reconciled on financial statements by listing the tax savings on the larger deduction allowed by the IRS as "deferred federal taxes".
You don't get to choose your own equipment life. If it lasts longer than the depreciation schedule, there is no more expense to be deducted. If it lasts less, then you can deduct the remaining undepreciated value when you dispose of the equipment. | |
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