Understanding engineering economics

One of the most important books in my telecom library is entitled Engineering Economy, A Manager’s Guide to Economic Decision Making, by AT&T – the original, pre-divestiture, full Bell System, AT&T.

Mine is a copy of the third edition, dating back to 1977, just a couple years before I got into the industry, but likely well before many of my readers were born.

The age of the book doesn’t change the utility of the training contained within.

Fundamentally, when there are alternatives available for the deployment of capital, engineering economics provides a disciplined approach to evaluating the economic outcomes, considering revenue, operating expense, capital and other cash flows.

For any given project, there are usually a number of possible alternatives. For example, for a given area, should fibre or fixed wireless be deployed? The analysis tools allow the manager to assess the difference in cash flows, revenue and expenditures, over the live of the project analysis.

In each case, an option that must be considered is maintaining the status quo, a “do nothing” alternative.

I’m not an economist and I’m not a professional engineer. This book was designed to help managers like me understand how to assess business decisions.

Among other benefits, an appreciation of engineering economics provides a framework to recognize the difference between “threatening” to reduce a budget, and a budget reduction occurring as a logical consequence or outcome of a policy determination.

Why am I highlighting a 43-year-old, out-of-print text book? The concepts are just as important today. A basic understanding of economic analysis should be considered a prerequisite for regulatory or government policy work in the telecommunications industry.

Scroll to Top