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The Dollars and Sense of Broadband Wireless
Signals Research Group, LLC, March 2008, Pages: 998
1.0 Introduction
Although there is widespread and growing interest in broadband wireless in general and OFDMA technologies in particular there are a number of unanswered questions that remain – unanswered questions that can finally be answered.
- What is the crossover point in the demand curve in which the economics of an OFDMA based network become more attractive than those of a CDMA based network?
- How sensitive are the network economics to the spectral efficiency and link budget of the air interface (e.g., what is the value of a dB)?
- How do technology neutral factors, including the frequency, spectrum allocation, and services offered on the network, cause the demand crossover point to shift?
- Do license requirements, such as those being proposed by TRAI in India and those being implemented by the FCC for the 700MHz band in North America affect the operator’s business case for delivering an economically sustainable broadband wireless service?
- Can OFDMA based networks extend beyond “hot zone” deployments and eventually provide ubiquitous nationwide coverage?
- What is the market opportunity for these next generation networks in developing markets where basic voice and dialup Internet services do not currently exist?
- What distinguishes the three OFDMA technologies from each other and how do they differentiate themselves from existing or y et to be deployed CDMA based technologies?
- Can next generation broadband wireless technologies support affordable unlimited voice and data usage that is on par with usage patterns that exist on landline networks?
- Can a Greenfield operator with an OFDMA network compete with an incumbent broadband wire line operator or with a 3G operator and under what circumstances?
- When should operators utilize smart antenna technologies, such as beam forming or MIMO, when they deploy their networks?
- How does the choice of backhaul technology impact the network economics?
Signals Research Group, LLC (SRG) has spent the last twelve months researching these questions, developing a sophisticated modeling tool, and ultimately publishing our findings in this 998 page report which we have conveniently published in five volumes. During this time we received feedback from virtually all of the major proponents of each technology that we studied, including most of the major infrastructure suppliers, wireless operators, subsystem suppliers and other technology leaders who play a vital role in the future direction of the wireless industry.
Additionally, we leveraged third party consultants and independent data sources to help us obtain the information that we needed in order to conduct our analysis. Most notably, we used a global database from The Mobile World which contains current wireless adoption and usage metrics in the countries that we studied. We also worked with EDX Wireless to help us graphically depict the likely coverage areas for a given set of inputs – these results are presented in Chapter 4.
Since some readers may not have the appetite to read nearly 1,000 pages, we have included a lengthy executive summary which follows the table of contents. We also provide a short summary section at the beginning of those chapters that provide economic results for a specific region or on a global basis. These summaries are followed by more detailed studies and analyses within the chapter which support our findings. Most importantly, we strongly encourage readers to not jump immediately to the results sections of their country or region of interest since without an appreciation of the terminology used in this report, not to mention our modeling methodology; it may be difficult to grasp the meaning and significance of our findings. We offer a quick synopsis of each chapter in the report.
Volume 1 – Executive Summary
Executive Summary – This chapter provides the 26 most important “ah hahs” from the report. This chapter is designed for readers that want the Readers Digest version of the report. Although we don’t support these key findings with specific examples in this section, we do point readers to the appropriate sections of the report where these findings are supported with case studies or other analytical analysis.
A Technology Primer – This chapter introduces the readers to the technologies that we are modeling in this report along with the multitude of permutations that exist for many of the technologies (e.g., duplex scheme, MIMO and AAS, etc). The chapter explains at a very high level the different network architectures that exist in the Radio Access Network (RAN) and Core Network (CN) and the different backhaul technologies that we include in the report. Finally, this chapter identifies the frequency bands that we include and explains the different device types that we believe will exist in next generation networks and why the device type can have a significant impact on the network economics. This chapter is written at a relatively high level in order to ensure that all readers have a basic understanding of next generation technologies.
Volume 2 – A Global View of Telecommunications Demand, Network Economics and Sensitivities
Service Concepts and Telecommunications Demand – In total, we look at the economic results for eleven different service concepts, which include everything from a basic cellular service with limited data traffic to a network that supports “DSLlike” data traffic with full mobility and deep inbuilding penetration. This chapter defines the eleven service concepts so that readers will understand the nuances between each service concept and why the choice of service concept can impact the design of the network, the amount of voice and traffic on the network, and ultimately the underlying network economics. This chapter also explains how the service concept determines the type of traffic on the network and the way in which we use current measures of teledensity as the basis for predicting the demand that could exist on the next generation networks that we model. We believe this is a much better approach than making our own assumptions, which inevitably introduce an extra degree of freedom and which detract from the focus of this study. We define seven levels of demand (0.1x to 10x), which are a function of the subscriber penetration rate and their voice and/or data usage relative to what exists today, when evaluating the network economics of various scenarios. Therefore, it is important that readers understand our methodology and how we define the seven potential levels of demand in order to interpret the results and understand our conclusions.
Measuring Global Demand - This chapter provides our assumptions regarding the current demand that exists in the sixtyfive countries and the seven geographic regions that we modeled. We explain how we calculated the current demand for cellular and landline mvoice and data traffic, including the adoption rate and the average individual/household usage patterns – and examine how this demand varies across countries, regions of the world, and between emerging and developed markets. This chapter contains a wealth of information which can impact network economics, including the current voice usage per pop and data usage per pop for both cellular and landline services, as well as the population distribution by morphology and the land distribution by morphology for the major regions and/or countries included in this report.
An Economic View of the World – In this chapter, we familiarize readers with how the choice of service concept, frequency band, and geography impacts network economics. We compare 11 different service concepts, whose services range from fully mobile to portable to fixed, and from voiceonly or dataonly to voiceplusdata. We compare networks at 700MHz and 2500MHz. We consider geographic coverage from 10% of the population to 99% of the population. Instead of looking at individual countries or regions we view the world as two large clusters: “mature economies” and “emerging economies,” whose economies and telecommunications markets are fundamentally different. Finally, we look at behavior on a very local level, including how the “commuter effect” and the “wealth effect” shift demand between morphologies.
Technology and Deployment Decisions: Impact on Unit Costs – This chapter explores how basic assumptions, such as the link budget of a technology, its spectral efficiency and voice capacity, and the capital requirements and operating expenses, including the impact of the core network and transmission network, influence the network economics. By providing a rich set of results, readers will be able to see how one facet of a nextgeneration network can influence the network economics. This section is particularly important because in other sections we simultaneously adjust several parameters, thus making it virtually impossible to grasp the individual contributions of each part of the network.
Performance and Financial Assumptions: Impact on Unit Costs – Although we have attempted to accurately depict the performance characteristics and costs of the next generation technologies, we recognize that it is almost impossible to make accurate assumptions for technologies which are not currently commercially available. This chapter provides a host of sensitivity studies so that readers understand how altering one assumption impacts the network economics. Sensitivity studies include the impact of varying the link budget, spectral efficiency and voice capacity assumptions of the air interface, adjusting our assumptions for RAN capital requirements, such as site acquisition costs, as well as sensitivity studies involving the core network and transmission network. Finally, this chapter includes several financial sensitivity studies, such as the impact of varying the annual depreciation expenses for network infrastructure, cell sites, and CPEs.
Volume 3 – Regional and Country Specific Analyses
United States – This chapter looks at critical issues and potential operator strategies that could occur in the United States. Specific topics include the economic merits of 700MHz and 1700MHz, the economics of EVDO (1900MHz) versus Mobile WiMAX (2500MHz) for numerous service concepts, the economics of narrow channel OFDMA implementations and the relative economics of new entrants competing with incumbent operators. In total, there are 49 scenarios.
Western Europe – This chapter looks at critical issues and likely operator strategies that are most likely to occur in Western Europe. Scenarios include the relative economics of 900MHz for HSPA Evolved or LTE versus those same technologies at 2100MHz and likely operator strategies for 2500MHz and 3500MHz. In total, there are 26 scenarios.
Eastern Europe – This chapter leverages the same 26 scenarios that are used for Western Europe. In addition to presenting the results, the focus of this chapter is on how and why the results for Eastern Europe are so dramatically different than they are for Western Europe. In total, there are 26 scenarios plus sensitivity studies.
India – This chapter looks at critical issues and likely operator strategies that are most likely to occur in India. Key issues include the best means of providing lowcost voice and broadband data services to the underserved, including smart antenna technologies and network sharing, and the best means of providing voice and broadband data services to the more densely populated regions. In total, there are 25 scenarios.
China – This chapter looks at critical issues and likely operator strategies that are most likely to occur in China. Key issues include the best means of providing lowcost voice and broadband data services to the underserved, including smart antenna technologies and network sharing, and the best means of providing voice and broadband data services to the more densely populated regions. In total, there are 28 scenarios.
Developed Asia – This chapter looks at critical issues and likely operator strategies that are most likely to occur in Developed Asia. Key issues include the best means of providing voice and broadband data services to the more densely populated regions and the best means of achieving ubiquitous coverage with sufficient capacity to meet expected demand levels. In total, there are 15 scenarios.
Latin America – This chapter looks at critical issues and likely operator strategies that are most likely to occur in Latin America. Key issues include the best means of providing lowcost voice and broadband data services to the underserved and the best means of providing voice and broadband data services to the more densely populated regions. In total, there are 20 scenarios.
Volume 4 – Modeling Methodology and Technical Discussions
Modeling Methodology – This chapter discusses our modeling methodology in detail. We provide our cost assumptions for the network elements that we model and we discuss how an operator’s CapEx and OpEx are allocated across voice and data traffic. This chapter also describes in detail our engineering assumptions, including how we model the RAN, CN, transmission, and backhaul networks. We include the RAN planning methodology and the underlying assumptions, such as spectral efficiency and link budget calculations, which we used to dimension networks for coverage and capacity. This methodology includes how we leveraged demographic information for each country/region in order to determine the appropriate “size” of the network based on the network coverage requirements (e.g., POPs covered, morphology(s) covered, etc) and the quality of coverage requirements.
Detailed Technology Discussions: Radio Access Network/Core Network - These two chapters provide interested readers with a deep technical dive into the RAN technologies and CN architectures that we model in this report. The RAN chapter describes many of the technical differences between CDMA and OFDMA and how the three OFDMA technologies are different from each other. From a CN architecture perspective, the Core Network chapter explains the legacy and next generation network architectures that will exist and provides a roadmap of how (and why) the CN needs to evolve to a flat IP core. Finally, the CN chapter includes a discussion on the pros and cons of different backhaul technologies and it provides a solid overview of IMS/MMD. These two chapters should be excellent resources for readers that want to understand more than just the basics. While these chapters are very engineering oriented, we believe that most readers will be able to grasp the material while the chapters also provide a large number of illustrations, including network diagrams, to provide further insight.
Volume 5 – Appendices
Appendix A: Worldwide Results –Sixtyfive countries – This appendix provides unit cost results and other KPIs in a tabular format for all 65 countries and for all 11 service concepts. It also shows the impact of frequency band, duplex method, and antenna technology (traditional versus 4element AAS). Its color coded results enable the reader to quickly identify those countries in which a particular strategy is most likely to succeed. A consistent set of inputs is used in each analysis so that the reader can clearly see how geography and other fundamental decisions impact unit costs. Regulators, investors, and equipment manufacturers should find this chapter very valuable since it helps the reader identify likely “winning strategies” and avoid losing ones on a countrybycountry basis. Finally, while we do not provide a market forecast for these technologies, this chapter quantifies the potential market size, as defined by the number of cell sites, for various deployment scenarios across the 65 countries that we analyzed.
Appendix B: About the Authors – This appendix provides the biographies of the report’s five authors.
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