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EDGE, Competitive Assessment 2004
Visant Strategies, Inc., April 2004, Pages: 51
1.1 What is EDGE?
EDGE (enhanced data for global evolution) is an upgrade to GPRS (general packet radio service) that includes support for a higher order modulation, 8PSK (eight level phase shift keying), than that used in GPRS. This higher modulation translates into higher data capacity, which is what operators are searching for today although many are wary of large capital expenditures in the attempt to sign up data users.
EDGE is promoted as supporting up to 384 kbps but actual users rates are expected from 50kbps to 70 kbps on average since the channel is shared among simultaneous data users. In addition, use of this higher order modulation is dependent on a high signal to noise ratio in the signal channel. Users who receive a weak signal or who are in an area with considerable interference will not be able to employ a data speed of 50 kbps to 70kbps and may receive a much lower rate.
Due to these air interface characteristics, the advantages of EDGE are only available to a portion of the cell at any time, generally those who are closest to the base station transmitter. While this is a limitation, EDGE nonetheless improves the overall capacity in the cell. Keep in mind that EDGE is generally being used in urban areas alone, where cells are already quite small. Just as importantly, it reduces the number of time slots required to transmit a given piece of data that in turn can results in more free time slots, an attractive benefit to carriers who face capacity shortages.
1.2 Why EDGE?
EDGE was originally anticipated to be a niche technology. GSM carriers were expected to deploy WCDMA shortly after deploying GPRS. However, uptake of GPRS services has been slower than expected and WCDMA has proven more costly than expected and a suitable handset for WCDMA networks is not yet available. Due to these reasons, among others, EDGE has regained support from many carriers. This is especially true in North America, South America and throughout Europe where EDGE had gained the support of smaller-tier carriers looking to provide data at a reasonable cost per subscriber.
1.2.1 An inexpensive air interface
WCDMA costs an estimated $100 per pop to deploy. EDGE is far less expensive although the cost to deploy EDGE varies according to the type of GSM infrastructure deployed in the network in question. In a new system, such as those deployed by AT&T and Cingular, the cost to upgrade to EDGE is minimal, about $2 per pop. For these carriers, the upgrade to EDGE is primarily a software upgrade.
Older GSM networks generally require an upgrade of the both the power amplifier and the line card. In these cases it can cost up to $500 per radio channel to upgrade to EDGE, a $5 per pop cost for upgrade. Yet another group of carriers will only require an upgrade of a line card, resulting in a cost of about $100-$200 per radio channel, a cost of about $2 for pop for the upgrade.
1.2.2 Slower than expected take up of data
With the exception of two markets, Japan and South Korea, data has failed to meet expectations. In Western Europe revenues from data services ranged from 8% to 20% of total revenues. Messaging services account for 75% of total data revenues in Western Europe. Mobile Internet services such as Vodafone’s Live in England or DoCoMo’s iMode in Japan account for the remaining 25% of data services or 4%-5% of total revenues together with enterprise data services. In the US, all data accounts for less than 5% of total mobile revenues on average.
The slower than expected uptake of data services has led carriers to focus on creating consumer mobile services with specialized content and applications which are optimized for low data speeds and small screens. It has also led many operators to question the need for WCDMA in the short term.
1.2.3 Few bandwidth intensive applications
Messages and email remain the drivers in the mobile data market. Specialized mobile content and applications are popular in Japan and South Korea and are growing in popularity in Europe and elsewhere. These applications can be supported on existing GPRS and EDGE networks.
1.2.4 EDGE gets the job done
Perhaps the main reason for interest in EDGE is that it is considered the least expensive way to enable some operators to provide “3G” services such as mobile Internet, picture messaging, games, audio clips, and short messaging. The cost advantages are especially great for those operators who have deployed GSM infrastructure within the last five years.
1.2.5 GSM voice upgrades available
WCDMA is fundamentally a voice upgrade to existing GSM networks. The availability of inexpensive voice upgrades to GSM, including frequency hopping and half rate voice encoders and decoders (vocoders), enable operators to put off migration to WCDMA. In the interim many carriers will embrace EDGE.
1.2.6 WCDMA challenges continue
Though there are now over 80,000 WCDMA base stations deployed, economic and technical challenges remain. Reliability and supply of WCDMA handsets has fallen short. Handoffs between GSM and WCDMA are still problematic and the economics of WCDMA remain suspect when considering this slow deployment rate coupled with the slow uptake of data services.
Most of the WCDMA base stations have been deployed in three nations, the United Kingdom, Japan and Sweden, leaving the current overall evaluation of WCDMA dependent on the travails of these three nations and the carriers utilizing WCDMA. Visant Strategies sees WCDMA doing well, but leaving the door open for EDGE in most markets.
1.3 Why EDGE Will Succeed
1.3.1 A small step from GPRS
Upgrading to GPRS proved to be more complex than expected. It involved several steps including changes to line cards and modifications to networking equipment, including changes to the MSC (mobile switching center), BSC (base station controller), and HLR (home location register) and additions of an SGSN (serving GPRS support node), and a GGSN (gateway GPRS support node). Backhaul capacity also needed to be upgraded in some networks. For those operators who have already changed over to GPRS, EDGE is a relatively small step involving an upgrade of software and a line card and in some cases a power amplifier.
EDGE handsets also represent a relatively small step from GPRS on the semiconductor side. EDGE requires additional processing power in the baseband IC (up to 400 MIPS total) and greater linearity from the RF power amplifier. These additions add 10%-15% to the cost of the semiconductor transceiver. The radio transceiver itself accounts for 15%-20% of the BOM (bill of materials) of a cell phone on average. Compared to WCDMA handsets, which will run 100% or more than the average handset today, EDGE handsets seem to be a bargain.
1.3.2 Strong support
Virtually all of the major GSM chip, phone, and infrastructure vendors have announced support for EDGE. These include Siemens, Alcatel, Motorola, Nokia, Ericsson, Sony-Ericsson, Skyworks, Texas Instruments, Philips, Analog Devices, Broadcom, and a host of others.
1.3.3 Low risk
EDGE is an inexpensive and consequently low risk update. It builds on existing GSM infrastructure and technology. By contrast, WCDMA require construction of new towers, a significantly larger investment, and deployment of a new technology, CDMA, which most GSM carriers and vendors do not have experience with.
1.3.4 Phones
As is mentioned above, adding EDGE capabilities to existing GSM phones involves a small increase in cost (less than10%) and limited boost in processing capabilities and RF performance. Phone vendors can also integrate EDGE into their devices without a size or performance penalty. They can use the existing supplier base of GSM components and testing since virtually all vendors now support EDGE.
1.4 The Role EDGE Will Play
1.4.1 Extends life of existing infrastructure
To many operators, EDGE is an inexpensive upgrade to their existing networks that will enable them to put-off forklift upgrades until a later time. These operators may upgrade to WCDMA; they may upgrade to 802.20. In any case, EDGE is a means to extend the life cycle of existing GSM networks.
1.4.2 A complement to other next generation technologies
EDGE will also be used as a complement to next generation technologies such as WCDMA. In this scenario, EDGE would be used to cover rural areas and suburban regions with low population density. WCDMA or another next generation technology, such as 802.20 or another 4G alternative, would be used to cover areas with a high population density.
Evidently the problem with this model is the requirement for devices with multiple radios. However, the GSM world is already following this path. There are also already GPRS/CDMA2000 devices and chipsets.
1.4.3 EDGE will provide a capacity upgrade and premium service
We expect the technology will be used as a simple capacity upgrade to GPRS throughout the world. In the short-term, due to limited handset availability, it may be used to offer a premium service such as the one AT&T/Cingular is offering in it’s all you can eat data plan that is targeted to laptop users. As handset supply increases, it will be used to maintain or improve the performance of data-oriented services such as Vodafone Live that currently relies on GPRS.
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