machines serve more customers, however, a breakdown in a large machine has greater consequences for the company The costs of an outage have three elements The first is lost revenue from calls that would otherwise have been completed Second, the FCC requires companies to provide a credit of one month of free service after any outage that lasts longer than one minute Finally, an outage damages a company’s reputation and inevitably results in dissatisfied customers—some of whom may switch to other companies But, there are advantages to larger machines A company has a “portfolio” of switching machines Having larger machines lowers costs in several ways First, the initial acquisition of the machine generates lower cost per call completed the greater the size of the machine When the company must make upgrades to the software, having fewer—and larger—machines means fewer upgrades and thus lower costs In deciding on matrix size companies should thus compare the cost advantages of a larger matrix with the disadvantages of the higher outage costs associated with those larger matrixes Mr Smith concluded that the economies of scale outweigh the outage risks as a company expands beyond 6,000 ports but that 36,000 ports is “too big” in the sense that the outage costs outweigh the advantage of the economies of scale The evidence thus suggests that a matrix size in the range of 12,000 to 24,000 ports is optimal Source: Donald E Smith, “How Big Is Too Big? Trading Off the Economies of Scale of Larger Telecommunications Network Elements Against the Risk of Larger Outages,” European Journal of Operational Research, 173 (1) (August 2006): 299–312 Attributed to Libby Rittenberg and Timothy Tregarthen Saylor URL: http://www.saylor.org/books/ Saylor.org 453