STEM help / Calculation framework

10.3.2.2 Financial implications as customers disconnect and reconnect

The second churn concept models the financial impact of churn on a Service. You specify a Service Churn Proportion, together with a Churn Tariff, both of which are time series.

Churn Proportion

This determines the proportion of connections to a Service that will churn during the course of the year. It must be a number between 0 and 1, inclusive. 0 represents no Churn and 1 represents 100% Churn.

The number of connections churned in a year is the product of the Churn Proportion and the number of Connections. These churned connections do not cause additional demand to be allocated through the Service Resource Requirements. The effects of this churn are captured in the Resources used by the Service, either as additional costs or inflated demand for individual Resources.

Churn Tariff

Churn has administrative costs associated with it, even if demand and the level of equipment stay the same. The Churn Tariff is designed to cover those costs. However, unlike the basic Connection, Rental and Usage Tariffs, the Churn Tariff cannot be directly driven by costs and is a simple, cost-independent tariff.

The Churn Revenue is the product of the Churn Tariff and the number of churned connections.

 

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