Drummond Company began in Sipsey Alabama in 1936 as a coal provider for farms an

Question

Drummond Company began in Sipsey Alabama in 1936 as a coal provider for farms and homes. The company has passed from H. E. Drummond, the founder, to the second generation of family members, and is now headed by Mr. Garry Drummond. As the company grew, so did production of coal. Between 1960 and 1970 Drummond began selling coal to Japan. In 1976 Drummond began selling coal to Alabama Power. In the mid 1980s the company began producing coke for use in steel production, and began laying the political and operational groundwork for expanding coal-mining operations into Colombia, where they are still aggressively operating.

As Drummond began to actively mine coal in the early to mid 1990s there were three primary pieces to the operation; the mine in La Loma-Cesar which is about 120 miles inland from the coast, the port near Santa Marta, Colombia, where a conveyor belt loads coal onto ships bound for Europe, and the railroad that transports coal from the mine to the port.

At the beginning of mining operations in the early 1990s, the company’s telecommunication infrastructure in Colombia was limited to voice calls. Drummond had a Private Branch Exchange (PBX) that handled internal calls at the port and another PBX at the mine. Drummond depended only on the local telephone company for communication between the port and mine. Calls back to the Birmingham office were through the local phone company’s connection to the inter-continental long distance system. Calls between the port and mine, and the long distance calls were unreliable, slow to set up, and very costly (many thousands of dollars a month).

Question #1

By 2005 the state of telecommunications and computing was rapidly changing. The company decided that it was important to connect the computers at the mine, the port, and the Birmingham office for the purpose of communicating accounting information. They also wanted to improve the voice communications. Options to connect the three systems were still limited. Satellite communications were available at 512 KBps. But the cost was relatively high, and due to the high orbit (22,236 miles), there is a significant and annoying delay in the signal for voice communications. Fiber optic cables into Colombia from the USA were relatively rare but could be available at very significant cost. U.S. T-carrier (e.g. T-1: 1.544 Mbps) and European E-1 (2 Mbps) twisted pair copper wires were available but difficult and expensive to obtain. During this “Internet Boom” period, a number of companies began laying bundles of undersea telecommunications cables. However this was extremely expensive and Drummond only needed a small portion of bandwidth within a cable. It would also put Drummond in the role of being a telecom company, which is not the primary focus of a coal mining company. A number of companies began offering hardware that allowed phone signals from a PBX to be digitized and transmitted as Internet packets (VOIP).

Based on the telecommunication options of 2005, select a telecommunications solution or craft one of your own for Drummond.

   A) In partnership with the Colombian phone company ETB (Empresa de Telecomunicaciones de Bogotá S.A.), run an undersea cable to the United States. Use the cable for Drummond’s needs and sell the excess bandwidth. Establish VOIP communications to the Birmingham office. Run a Drummond owned fiber optic cable between the port and the mine.

   B) Make arrangements to have access to one of the expensive and rare already-existing fiber optic cables back to the USA. Run a fiber optic cable along the rail right-of-way. Use VOIP to connect the PBX to the Birmingham office.

   C) Acquire a data channel on a satellite for communications between Birmingham and the mine. Acquire a second satellite data channel for communications between the mine and the port. Use VOIP to connect voice communications to the satellite channels.

   D) Craft your own solution

Clarification of how to answer Drummond case questions.

As discussed in the Q&A session for Drummond, you will refer to the table for each question.

You will see how much they have budgeted. You will see what Drummond’s requirements are in terms of availability, reliability, speed

Make your choice, and state that as your claim. IF you are choosing to craft your own, then you will give the details of your recommendation in the claim statement.

For your support, you must identify each connection that is to be made, and what will be used for that connection, the monthly cost for each connection, and then the total monthly cost for the recommendation.

You will also point out how this recommendation meets Drummond’s requirements. Regardless of budget, Drummond’s requirements MUST be met. If you cannot meet all requirements without going over budget, then simply get as close to the budget as possible.

Costs Time frames Availability ReliabilitySpeed Drummond's needs in 2005 Monthly Good to512 ExcellentKbps $20,000Immediate Needed capability and availability were highly dependent on a minimal infrastructure available in Colombia. Drummond was willing to work with providers and partner with them in an effort to obtain needed support infrastructure Satellite communications monthly $16,000 Immediate Existing Excellent 512 Kbps Existing fiber optic cables $50,0002 to3 monthly years Extensive infrastructure buildExcellent Up to out requirements 1Gbps 1.5-2 Mbps T-1/E-1 carriers $21,0006 Months Carrier Provided w/multiple Good Monthly providers for last mile solution New under-sea $170,000 1 to 2 telecom cable Monthly years Carrier provided Governmentally Negotiated Excellent5 Mbps year commitm ent

Explanation / Answer

Based on the telecommunication requirement of Drummond. The option C is most appropriate for them, to discuss it as follows:

Option C: Acquire a data channel on a satellite for communications between Birmingham and the mine. Acquire a second satellite data channel for communications between the mine and the port. Use VOIP to connect voice communications to the satellite channels.

Uses of Each Connection are as follows:

Activity

Monthly cost

Purpose

In USD

Satellite between Birmingham and the mine

16000

Connect Birmingham and the mine

Satellite between mine and the port

16000

Connect Mine and the port

VOIP

Actual calling cost will be charged

Voice communication

Total

32000

Activity

Monthly cost

Purpose

In USD

Satellite between Birmingham and the mine

16000

Connect Birmingham and the mine

Satellite between mine and the port

16000

Connect Mine and the port

VOIP

Actual calling cost will be charged

Voice communication

Total

32000

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