Umts900 Full Report

Market Study for UMTS900
A report to GSMA
February 2007
Project Number CLW28

Version V1.1
Ovum Consulting, Cardinal Tower, 12 Farringdon Road, London EC1M 3HS
Telephone +44 (0) 20 7551 9000 Facsimile +44 (0) 20 7551 9090/1
www.ovumconsulting.com
Contents
1
Executive summary ..................................................................1
Introduction.............................................................................3
Report findings ........................................................................4
Deployment analysis ..............................................................20
Regulatory analysis ................................................................48
Handset and chipset analysis..................................................73
Economic analysis ..................................................................77
Annex A Model description ...................................................................93

Annex B Operator benchmarks ........................................................... 105
Annex C GSM-900 and E-GSM bands.................................................... 112
UMTS 900 Market Study Final Report V1.1
MARKET STUDY UMTS 900

A report to GSMA
1 Executive summary
GSMA is investigating the issues that can impact the use of the 900MHz frequency
band for UMTS services. This report was commissioned to assess the benefits and
limitations of UMTS900 deployment.
The report indicates that UMTS900 provides between 44% (in urban areas) and
119% (rural areas) increased coverage per Node-B compared with UMTS2100. This
is primarily due to the propagation characteristics of the lower frequency band and
leads directly to lower capex and increased mobility benefits, providing a new
option, with greater service capability, for operators who may wish to replace their
GSM networks.
To maximise the benefits of UMTS900 through lower equipment and device
costs, and greater certainty of outcome there needs to be international
harmonisation of the 900MHz band to allow UMTS900 use, which is one of the
most used bands in the world.
The analysis for this report considered potential capex reductions (UMTS900
compared with UMTS2100) for a typical mix of geography types in 4 world regions.
The case for Sub Saharan Africa shows that cumulative capex reductions of 41%
may be possible over a five year period if UMTS900 is used rather than UMTS2100.
Other regions are Western Europe - 40%, Middle East - 36% and Asia Pacific 32%. Slightly lower reductions are indicated if a more typical mix of UMTS900 and
UMTS2100 is deployed.
If revenues over a five year period are also considered, then a simple analysis
indicates NPV improvements ranging from 40% - 55% in the Middle East and SubSaharan Africa respectively (with investment in UMTS900 to provide the same
coverage as would be provided with UMTS2100). If the cost savings are reinvested to enable the operator to reach a larger customer base by extending
geographic coverage, then the NPV improvements of 39% - 105% are indicated in
Western Europe and Asia Pac.
Considering specific countries to illustrate the benefits indicated by our high-level
modelling: Finland could provide UMTS900 coverage for $700M less than it might
cost to deploy UMTS2100; in Saudi Arabia it would be a $2.1bn reduction; South
Africa $500M and Sri Lanka $24M.
There are several factors important for the successful introduction of UMTS900.
Co-ordinated policy to refarm 900MHz spectrum, which is currently primarily used
for GSM, is required to allow UMTS. Some NRAs have already initiated discussions
and the EC has indicated that the GSM900MHz and GSM1800MHz bands will be
approved for UMTS900/1800 use in September/October 2007. The co-ordination
will need to address the interest of GSM users, interference between bands and the
potential for cross border interference. NRA spectrum policy on pricing and
roaming has also to be considered.

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The success of UMTS900 introduction will also require economies of scale to help
drive down handset and device prices. Chipset and handset vendors will not push
product into immature markets, the markets will have to be stimulated by market
pull. This in turn will be greater if it is possible to introduce services in multiple
markets in parallel.
Our modelling indicates that UMTS900 can generate cost reductions of up to 40%
in capex and 30% in overall costs when compared to a baseline case scenario of
deployment using UMTS at 2100MHz. These lower costs are primarily due to the
radio propagation characteristics in the lower band which provide greater reach of
UMTS900 and improved in-building coverage.
At a qualitative level, UMTS900 can bring economic benefits, especially to less
developed countries. Capital investments would be stimulated and improved
communications can stimulate productivity and job creation and business working
practices.

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2 Introduction
There is a growing interest in deploying UMTS in the 900MHz frequency band in
order to reduce the cost of coverage for mobile communications services,
especially into rural areas. This may allow an operator to economically roll out
higher data rate services to a larger percentage of the rural population. In addition
there is the need to increase coverage indoors which is easier to achieve in the
lower frequency bands.
This report was commissioned by GSMA and QUALCOMM to help their investigation
into the issues that may impact the deployment of UMTS900 and to better
understand how any transition may be achieved over time.
The objectives were to investigate the key factors around the UMTS900 business
case, assess the benefits and limitations and evaluate the deployment scenarios
that could meet operator needs for service deployment.
The report provides:
A summary of the findings of the study in Chapter 3
In Chapter 4, an assessment of the reduction in costs when deploying a

3G/UMTS network when an operator has access to 900MHz as well as 2.1 GHz
spectrum, in 4 different regional markets. An assessment of how any
reduction in deployment costs may help business case NPV, and the impact of
extending 3G deployments beyond limits possible at 2.1 GHz (due to reduced
deployment costs) is also provided
An analysis of the regulatory situation in each region in Chapter 5, together

with analysis of the issues related to refarming of 900MHz spectrum
Chapter 6, which looks at the status of handset and chipset supply and the
impact of their availability on the development of UMTS900 services
A qualitative economic analysis of the benefits of introducing UMTS900, in

Chapter 7
The annexes to the report provide:
A detailed overview of the network dimensioning and cost modelling

methodology
Case studies of Telstra and Cingular two operators that have deployed
UMTS 850.

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3 Report findings
This section of the report provides a summary of the main findings of the study.
3.1 Demand and network cost analysis

UTMS 900 provides increased coverage
The propagation characteristics of the 900MHz spectrum allow UMTS900 base
stations to cover a greater geographic area than UMTS2100. The relative coverage
area increase is shown in Figure 3.1. The results are based on the assumptions
used in the modelling and, given the wide variations between national and
international regions, the results should be considered to be indicative only.
Figure 3.1 Percentage increase in coverage area

Frequency
900MHz vs. 2100MHz
Percentage increase in coverage area per Node-B (km 2)

Dense Urban
Urban
Suburban
Rural
87%
44%
60%
119%
Source: Ovum model

The reason for the differences in coverage area per Node-B in dense urban and
rural areas is due primarily to lower signal attenuation, which improves reach and
in-building coverage. In more densely populated regions a combination of
UMTS900 and UMTS2100 may be needed to provide capacity as well as coverage.
The difference in coverage areas for each Node-B will directly affect the number
required to serve a given geographic area and consequently the Capex costs.
UMTS900 improves mobility management
The improved Node-B coverage of UMTS900 technology reduces the number of
cells in a region. This should decrease the potential number of gaps between cells,
which will help overcome handover problems and thus improve the customer
experience.
Network capex efficiencies and enhanced capabilities
Whilst each case is operator and network specific, UMTS900 offers a new option for
operators facing a GSM network equipment replacement cycle. As well as UMTS900
requiring lower up-front investments than UMTS2100 it also enhances network
efficiencies and the networks capability to handle both voice and data traffic.
Additionally, the increased coverage capabilities of UMTS900 allow high speed data

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and more efficient voice traffic handling, with reduced Capex, when compared to
UMTS2100.
Harmonisation of the 900MHz band
The 900MHz band is one of the most used bands in the world. GSM operators all
over Europe, Africa and Asia use this band extensively, which makes it one of the
most harmonised bands in the world. All operators using the 900MHz have
started with GSM services and most of them have already acquired 3G licenses at
2.1 GHz. This business evolution makes UMTS900 a most attractive option for
operators and a likely follow-up technology in the 900MHz band.
In order for operators to be able to utilise UMTS technology in the 900MHz band
two prerequisites are required regarding spectrum availability:
the NRA must allow the deployment of UMTS in the 900MHz band
re-farming of 900MHz spectrum band is needed in order for the operators to be

able to deploy 5MHz (WCDMA) carriers. For those operators having largely
deployed GSM in the 900 MHz band 2 x 10MHz is an indicative amount of
spectrum required to roll out GSM and UMTS in parallel. In some countries
where 900 MHz is still available, operators may start UMTS900 with 2x5 MHz of
clean spectrum.
If these prerequisites are met and if both GSM and UMTS technologies can be
deployed in the 900MHz band then this harmonisation of spectrum will improve the
flexibility of mobile operators to use spectrum efficiently (through network and
frequency planning process) to meet coverage and capacity requirements.
Demand analysis and network costs
The demand analysis model was developed to provide a high level view of service
demand based on scenarios for each of the four major world regions considered in
the study (W. Europe, Asia Pacific, Sub-Saharan Africa, Middle East).
For each world region Capex and Opex costs were modelled to take account of
demand, subscriber base and network coverage. The radio access network was
dimensioned to provide coverage and capacity, the core network was determined
and network capital costs derived for each type of deployment area (rural,
suburban, urban and dense urban). Opex was derived using industry norms for
capex/ opex ratios for network related opex and non network-related opex.
Figures 3.2 and 3.3 show the 5 year cumulative network capex costs for UMTS900
only, and combined UMTS900 and UMTS2100 deployments respectively when
compared to a network with only UMTS2100. In the UMTS900 case, the Sub
Saharan Africa case shows the highest cumulative capex reductions of 41%
followed by Western Europe with 40%, Middle East with 36% and Asia Pacific with
32%. In the case of UMTS900 and UMTS2100, the Sub Saharan Africa case shows
the highest cumulative capex reductions of 37% followed by Middle East with 31%,
Western Europe with 27% and Asia Pacific with 16%.

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These results reflect a modelled scenario and there are many factors which will
influence the actual capex reduction benefits in real-world networks. Although the
case for UMTS900 seems to be the better of the two sets of results, it must be
recognised that in many cases a combined UMTS900 and UMTS2100 network will
be preferred, in order to meet market conditions for coverage and capacity.
In the regions examined it is to be expected that coverage and not capacity will be
the main driver for network deployment. This is mainly due to the expectation that
high-speed data service coverage and usage will be limited in most of the
emerging markets due to cost of deployment. It is for this reason that the
UMTS900 only case shows higher capex savings compared to both the UMTS2100
only case and the combined UMTS900 and UMTS2100 case. If analysis is
performed on a country level with more detailed data on end-users usage profiles
and traffic split then it is expected, especially in W. European developed markets,
that an overlay solution of UMTS900 for coverage issues combined with a
deployment of UMTS2100 networks for capacity issues in hot-spots will be the
optimal one. Detailed analysis is not covered in this report and results shown in
subsequent graphs show the magnitude of capex savings expected when operators
use UMTS900 as a stand-alone or as a combined technological option.
Figure 3.2 Cumulative Capex costs for UMTS900 only as a percentage of
Cumulative Capex costs for UMTS2100 only
Cumulative Capex: UMTS900 only
Ba seline scenario: 2.1 GHz only
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Middle East
Asia-Pac
Low Demand
Source: Ovum
W. Europe
Medium Demand
Sub-Saharan
Africa
High Demand

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Figure 3.3 Cumulative Capex costs for UMTS900 and UMTS2100 as a percentage
of Cumulative Capex costs for UMTS2100 only
Cumulative Capex: UMTS900 and UMTS2100
Baseline scenario: 2.1 GHz only
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Middle East
Asia-Pac
Low Demand
W. Europe
Medium Demand
Sub-Saharan
Africa
High Demand
Source: Ovum
Figure 3.4 presents a similar assessment, but broken down by geographic country
area. In the case of UMTS900 only, dense urban environment case shows the
highest cumulative capex reduction in the range of 37%-46%, followed by rural
environment (range of 33%-46%), suburban environment (range of 26%-34%)
and finally urban environment (range of 20%-36%) for all of the regions
examined. The Sub Saharan Africa case shows for all types of environments
(except urban) the highest cumulative capex reduction.

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Figure 3.4 Cumulative Capex costs per type of environment for UMTS900 only as
a percentage of Cumulative Capex costs for UMTS2100 only
Cumulative Capex for different environments - UMTS900 only
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
W. Europe
AsiaPac
Dense Urban
Middle East
Urban
Suburban
Africa
Rural
Source: Ovum
Figures 3.5 and 3.6 show the 5 year cumulative network capex and opex costs for
UMTS900 only, and combined UMTS900 and UMTS2100 deployments respectively
when compared to a network with only UMTS2100.
Figure 3.5 Total Capex and Opex costs for UMTS900 only as a percentage of Total
Capex and Opex costs for UMTS2100 only
Total Costs: UMTS900 only
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Middle East
Asia-Pac
Low Demand
Source: Ovum
W. Europe
Medium Demand
Sub-Saharan Africa
High Demand

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Figure 3.6 Total Capex and Opex costs for UMTS900 and UMTS2100 as a
percentage of Total Capex and Opex costs for UMTS2100 only
Total Costs: UMTS900 and UMTS2100
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Middle East
Asia-Pac
Low Demand
W. Europe
Medium Demand
Sub-Saharan Africa
High Demand
Source: Ovum
In the case of UMTS900 only, the Sub Saharan Africa case shows the highest total
Capex and Opex costs reductions, when compared to UMTS2100 only, of 38%. The
other regional total cost reductions are the Middle East with 32%, Asia Pacific with
17%, and Western Europe with 10%.
In the case of combined UMTS900 and UMTS2100,deployments, the Sub Saharan
Africa case shows the highest total Capex and Opex costs reductions of 33%
followed by Middle East with 27%, Asia Pacific with 8% and Western Europe with
7%.
Initial NPV Analysis
By means of a straightforward cash flow calculation, a simple NPV analysis was
prepared for all of the cases and regions examined.
Revenues were derived by calculating total service usage and associated prices for
all of the services examined (voice, SMS, data) along with their evolution over time
for all four regions.
Figure 3.7 presents NPV percentage improvements for UMTS900 deployment
compared with the case of UMTS2100 only and for combined UMTS900 and
UMTS2100 compared with UMTS2100 only, for all four regions. The main
conclusions drawn are that UMTS900 only presents greater opportunities for NPV
improvements over a 5-years period than combined UMTS900 and UMTS2100
deployments. The Sub-Saharan Africa and Middle East regions present the greatest
opportunities for NPV improvements due to the reduced capex and opex costs
incurred.

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Figure 3.7 NPV percentage improvements (medium demand scenario) over

UMTS2100 only case for both UMTS900 only and UMTS900 and UMTS2100
cases
NPV improvements over UMTS2100 only (*)
120%
100%
80%
60%
40%
20%
0%
W. Europe
AsiaPac
UMTS900 only
ME
Africa
UMTS900 and UMTS2100
(*) refers to Medium Demand scenario
Source: Ovum model

Revised NPV analysis
The assumptions for inputs leading into the initial NPV analysis (such as WCDMA
penetration, geographic coverage) have remained the same in order to calculate,
on an equal basis, potential capex reductions through the introduction of UMTS900
technology. However, capex reductions can be re-assessed to reflect a more
realistic situation, in which the operator is able to take advantage of the cost
reductions to fund further capex, to attract more customers and hence increase the
number of connections or increase geographic coverage.
By adjusting the model to take account of changes to the number of WCDMA
connections and WCDMA geographic coverage the NPV calculations were revised.
The results are shown in Figure 3.8. The main reasons for greater NPV
improvements in W Europe and Asia Pacific are that the absolute number of
additional subscribers is higher in these two regions (due to higher potential
addressable market) which contributes to higher expected revenues. Additionally,
the capex spending per subscriber required to increase coverage/capacity
requirements is lower due to landscape characteristics and existing WCDMA
penetration it is easier to provide additional capacity in existing areas than to
greatly increase coverage in rural areas with no coverage.
There is potential for virtuous circles to develop:
the lower the cost of deployment of mobile infrastructure, the greater the
coverage - leading to more users and greater national benefit
more users will drive a greater the volumes of handsets and devices, leading to
a wider range of products becoming available and, when economies of scale
cut in, leading to lower device costs.
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Figure 3.8 Updated NPV percentage improvements over UMTS2100 only

NPV improvements over UMTS2100 only
120%
100%
80%
60%
40%
20%
0%
W. Europe
Asia Pacific
UMTS900 only
Middle East
Sub-Saharan Africa
UMTS900 & 2100
Source: Ovum model
3.2 Case studies examples

In this section, a brief analysis of the UMTS900 benefits on a country level is
presented. One countries in each of the four regions has been examined.
For each of the countries examined the following conclusions can be derived:
a) When the same population and geographic requirements are met in
both scenarios - UMTS2100 only and UMTS900 only: As expected there are
direct financial savings for operators in the UMTS900 case due to reduced capex
spending, which is in the range of 25% to 40%. However, apart from the direct
capex reduction benefits for the operators there are some also indirect benefits due
to the reduced number of cell sites needed to be deployed; time and effort savings
and reduced environmental and health impact.
b) When the same cumulative capex spending (over 5-years) is assumed
for both scenarios - UMTS2100 only and UMTS900 only: In this case,
there is an increase in population and geographical coverage when deploying
UMTS900 only as opposed to the UMTS2100 only. The increase varying with
each country. However, as noted in Section 7 of the report, it in the UMTS900
only case, countries can enjoy significant socioeconomic benefits as the 3G
addressable market enlarges and more people have access to wireless broadband
services. This is also discussed in Section 3.5 of the report.
In cases presented below only a high level analysis has been performed. To derive
more accurate results a more detailed approach which assesses the countrys
market and geospatial characteristics would be needed. However, the analysis sets
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the overall picture and provides some useful insights of the benefits that are
expected with the deployment of UMTS900 networks.
3.2.1 Sri Lanka

Sri Lanka is a developing market with the first WCDMA subscribers expected by the
second half of 2007. The same assumptions about deployment analysis are made
as previously discussed and comparative outcomes between use of UMTS900 and
UMTS2100 technology are derived. There is the opportunity for countries like Sri
Lanka, which do not have existing UMTS2100, to start with UMTS900 if the
regulatory path for its deployment is clear, and a there is reasonable handset and
device availability.
When deploying UMTS2100 technology (assuming 8% population coverage and
15% geographic coverage by 2011) a total cumulative capex (over 5 years) of
around $126m is required to deploy approximately 1,100 sites to meet coverage
and capacity requirements.
In the case of UMTS900 technology, and with the same requirements, a cumulative
capex spending of $94m is required to deploy approximately 750 sites.
In the second case there is a 25% reduction in capex spending required, mainly
driven by the reduced number of cell sites and other core and transport cost
savings..
In the case where we assume that the operator will spend the same amount as in
the case of UMTS2100 (i.e. $126m), over 5 years, but by deploying UMTS900
networks instead, then both population and geographic coverage can be
significantly increased. By following a linear cost-oriented approach
(capex/subscriber driver), it is estimated that by 2011 population coverage could
increase by 50% from 8% to 12% and geographic coverage increases to 20% as
compared to 15% previously.
3.2.2 Finland
In Finland, 3G penetration at the start of 2007 is almost 15% and is forecast by
Ovum to rise to approximately 78% by 2011. The same assumptions about
deployment analysis are made as previously discussed and comparative outcomes
between use of UMTS900 and UMTS2100 technology are derived.
around $1.86bn is required to deploy approximately 11,000 sites to meet coverage
capex spending of $1.1bn is required to deploy approximately 7,000 sites.
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savings.
the case of UMTS2100 (i.e. $1.8bn), over 5 years, but by deploying UMTS900
increase by 30% to reach almost 100% and geographic coverage increases to 95%
as compared to 75% previously.
3.2.3 Saudi Arabia

In Saudi Arabia, the first WCDMA (3G) networks are expected to be launched in
2007. Ovum forecasts that population penetration will rise to reach 45% by 2011.
The same assumptions about deployment analysis are made as previously
discussed and comparative outcomes between use of UMTS900 and UMTS2100
technology are derived.
savings.
3.2.4 South Africa

In South Africa, 3G penetration is gradually increasing and is forecast by Ovum to
rise from around 2% to approximately 25% by 2011. The same assumptions
about deployment analysis are made as previously discussed and comparative
outcomes between use of UMTS900 and UMTS2100 technology are derived.
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savings.
3.3 Key regulatory issues

Spectrum availability
Some NRAs, especially in developed countries, have already initiated discussions
about new 2G spectrum management policies, the re-farming of GSM bands and
the processes to be followed for the migration of GSM services to UMTS services.
Spectrum allocation is made more difficult by the requirement to allocate UMTS
spectrum in 5MHz blocks. It is essential to ensure that both GSM and UMTS
services can continue to operate in a parallel and well-balanced manner as GSM
networks will continue to be the core business for the majority of mobile operators
for many years.
Sharing of 900MHz spectrum
NRAs will have to access the impact of allowing the GSM and UMTS services to coexist. Interference effects among the services operating within the same band
need to be minimised, and co-ordination with adjacent countries will also be
necessary. In Europe, this is being addressed in CEPT/ECC reports 82 and 96.
GSM licence renewal
In the majority of the cases second generation licences are technology specific
allowing only GSM services to be used in the designated bands. Although the refarming of the GSM bands allows the co-existence of second and third generation
mobile services, such arrangements may raise concerns and competition issues
among the mobile industry.
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Impact of UMTS900 on existing GSM and UMTS operations

The full use of 900MHz spectrum for the provision of 3G services in the future may
be a barrier for new entrants. The licence holders of 900MHz band may be able to
deploy UMTS900 in current GSM spectrum in some countries without applying for a
separate 3G licence.
Furthermore, holders of current 3G licences may believe that their spectrum will be
undervalued as a result of additional spectrum becoming available for 3G. It is
therefore important that before altering the current market conditions or the
conditions upon which the licences were granted, NRAs have to consider future
implications.
Spectrum pricing or national roaming
NRAs may have to develop new pricing formulas for spectrum fees. In cases where
2G operators who are not 3G licence holders are allowed to use their spectrum for
3G services, NRAs need to consider whether these operators should pay a levy as
an additional payment for the extra usage of the spectrum. Mobile operators need
to know what is available and its cost in order to define their strategies and invest
accordingly. Vendors and handsets manufacturers need also a clear view when
deciding to invest in new equipment. Alternatively, NRAs may provide a regulatory
framework for national roaming agreements to compensate the higher network
costs of the operators without 900MHz spectrum.
The impact of EU directives and national developments
The regulatory framework of the EU directives is a significant factor which could
speed-up or delay the deployment of UMTS900 networks. Most of the NRAs are
reluctant to move towards the UMTS900 adaptation due to these directives.
However, at the European level there are processes in progress to develop the
regulatory framework for the deployment of 3G networks within the 900MHz and
1800MHz bands. The regulatory situation in a range of countries is discussed in
Section 5 of the report, some countries specify the technology that can be used,
others are technology neutral. In summary:
Western Europe/EU: Second generation licences are technology specific, and

there is no free spectrum in the 900MHz band. There is strong interest in
UMTS900 and regulators in France, UK, Germany and Finland take a
technology neutral approach with regard to GSM/3G. It is expected that
demand from operators will accelerate regulatory developments
Asia/Pacific: in the leading countries (in terms of mobile development), NRAs

have either adopted a technology neutral policy or have proposed spectrum
liberalisation policies. Whilst UMTS networks have a strong uptake, alternative
solutions in the 900MHz are available (e.g. CDMA-2000)
Middle East: In most countries, mobile licences are technology specific, but
key regulators (e.g. Saudi Arabia, UAE) in the region are in favour of mobile
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technology neutrality. UMTS network deployments are still immature and

there is no current demand for UMTS900 licences and UMTS2100 is preferred
Sub-Saharan Africa; UMTS networks deployments are immature with very slow
uptake. 2G re-farming policies and UMTS900 are not considered as part of the
short-term spectrum strategy. NRAs wish to safeguard GSM operations, due
the national revenues which are derived
3.4 Handset and chipset analysis

All major chipset and handset manufacturers agreed that UMTS900 will happen.
They are all either currently developing or planning to develop UMTS900 chipsets
and handsets. Product evolution will start with UMTS2100/900 (dual band) devices
before moving towards quad band.
The vendors were unable to predict expected volumes as that depends on demand
from operators. It is the success in rolling out UMTS900 services that will pull
demand for devices to support UMTS900. Vendors stressed that operators will
need to create the pull to ensure that the UMTS900 market is seeded with
handsets / devices. This seeding is needed to ensure device availability before
the network is enabled, without which customer take-up is bound to be limited.
Manufacturers expect that between a few hundred thousands and up to a few
million handsets will be produced by 2009. With these low quantities, volumerelated cost reductions are not expected. However, advances in chipset design,
e.g. higher levels of integration, will be the main driver for cost reduction.
Furthermore, chipset manufacturers do not in general expect cost reductions to be
necessarily reflected in prices.
3.5 Economic analysis

The modelling for this study demonstrates that UMTS900 can effectively generate
cost reductions of up to 40% in CAPEX and 30% in overall costs when compared to
a baseline case scenario of deployment using UMTS at 2100MHz. These lower
costs are primarily due to the radio propagation characteristics in the lower band
which provide greater reach of UMTS900 and improved in-building coverage.
In a study of this nature which assesses costs and demand at a macro level it is
not possible to model the affect between capital costs, the price of services and the
demand for services, however, some general economic principles were assessed.
Impact of UMTS900 on prices
It is considered unlikely that operators will pass on capex and opex savings from
deploying UMTS900 to customers immediately. The major reasons for operators
not to reduce their prices being that they are incurring capital expenditure for new
infrastructure, which is funded by debt, and continued shareholder pressure to
realise higher returns. Also, in a market with high mobile penetration and where
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operators deploy more than one technology (e.g. GSM and UMTS in multiple
bands), operators would not wish to undermine their established pricing structures
and profitability.
In the medium term, as investments in the GSM network have already been
amortised and the declining contributions of the GSM platform represent a residual
net present value which is low when compared with the potential NPV with an
UMTS only network, we might expect a more accelerated replacement of GSM by
UMTS900. When this happens, prices will tend to change reflecting the lower long
run costs of UMTS.
Impact of UMTS900 on demand for services
UMTS900 will impact demand for services in three ways:
Elasticity of demand to changes in price
Expansion of the addressable market
The effect of tariffs on service usage
Analysis of the UK market shows that a 10% change in average price per minute
for mobile voice services results in a 12% increase in usage. This cannot be
assumed to be a direct result of price elasticity, as one of the natural drivers of the
demand for mobile services is fixedmobile substitution. This is not strongly driven
by price of the mobile service and therefore we would not expect lower costs of
UMTS900 deployment to influence this major driver.
Analysis of data from Wireless Intelligence shows that there is greater elasticity of
demand in developing countries. The main impact of UMTS900 on the demand for
services is expected to come from developing countries and regions, which may
create an incentive for operators to deploy in these regions.
One valuable characteristic of UMTS900 is that it makes it possible to extend
mobile coverage in developing countries as it becomes more economically viable to
deploy UMTS services in suburban or rural areas where this was not possible
previously. A detailed national study would be required to assess the value of such
additional network roll-out to a nations economy.
If lower costs are passed on in the form of lower prices, then this will expand the
usage of services. If flat rate tariffs are introduced for data services, then this can
be a major stimulator of demand.
Impact on country economics
There are many other ways in which UMTS900 can bring economic benefits. These
are illustrated by examining how, according to economic growth theory, it might
contribute to economic growth:
Through the stimulation of capital investments
By stimulating job creation, by virtue of improved communications
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By improving productivity
By stimulating change in business working practices.
Regional differences
The major benefits from the introduction of UMTS900 are expected to vary by
region.
In Western Europe it is expected that economic benefits from the introduction of
UMTS900 technology be from the long term benefits that the diffusion of mobile
broadband wireless access and mobile internet will have in reshaping business
practices.
In the Middle East there is still room for increase in the penetration of services and
capital investment is one key economic benefit. However, as oil-rich countries look
into diversifying to tourism and financing, UMTS900 can be also instrumental in
improving labour productivity.
In Asia Pacific there is a mixed picture. In countries with high population density,
the economic benefit that deployment of UMTS900 can yield is to speed-up the
substitution of 2G to 3G thus stimulating the reshape of business models. In
countries such as Australia and New Zealand, UMTS900 can also play an important
role in bringing 3G to more remote areas improving economic activity of
indigenous population and reducing transaction costs for farmers.
In sub Saharan countries the case is clearly to bring prices down and to make
mobile services accessible to a larger percentage of the population while also
expanding the supply by extending the coverage to rural areas. Capital investment
will influence growth in a higher degree that it does in other areas but UMTS900
has a much bigger role in helping people find employment or as an enabler of
informal economic activities.
Additional economic benefits
The benefits of UMTS900 to the economy are not restricted to the economic growth
that increased voice-centred mobile service penetration and usage prompts.
Because of its native broadband data capabilities the introduction of UMTS900 has
a much broader impact in the ICT sector as a whole.
One direct consequence of the introduction of UMTS900 will be to speed up the
penetration of 3G services in the different regions.
UMTS900 will also impact Internet access. It will allow more individual users to
access content in the Internet using web-browse enabled handsets or data cards.
The positive effects will be felt particularly in rural areas where, in many occasions
in developing countries, Internet access is not available because there are no fixed
lines or broadband service available. It will also provide one more channel for
enterprises to keep its workforce connected to the Internet even when on the
move. In developing countries, the broader availability of Internet access for
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enterprises may also stimulate that more companies decide to launch their own
websites.
All in all, UMTS900 can be instrumental in reducing the digital divide between
developed and developing countries and urban and rural environments.
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4 Deployment analysis
This section of the report analyses the following areas:
Implications of UMTS900 technology: a summary of the impact that

UMTS900 technology might have on a mobile operators current operations and
of the opportunities that the technology provides
Scenario analysis: describes the different deployment scenarios from which

results and conclusions have been developed. The different scenarios allow the
effect of different combinations of input parameters to be assessed
Demand analysis: analysis of the affect of varying input parameters, such as

penetration, usage profiles, ARPU levels and service pricing in each of the
regions examined. Demand analysis has a direct impact both on costs (number
of subscribers, bandwidth demand, etc.) and revenues (number of subscribers,
services pricing, etc.)
Capex and Opex analysis: provides a high level description of the Capex and
Opex calculations. Full details of the model methodology are provided in
Annex A
Comparative analysis of the regions: compares the of key indicators, e.g.

relative differences of Capex and Opex costs from the baseline scenario for
each of the regions studied.
4.1 Implications of UMTS900 technology

There are many areas in a mobile operators network, both technical and
operational, that could be affected by the introduction of UMTS900 technology.
Five main areas are assessed:
Network coverage capability
Mobility management
Network capabilities/ efficiencies and Capex
Positioning against other access technologies
Harmonisation of spectrum in the 900MHz band
4.1.1 Network coverage

The main benefit of UMTS deployment in the 900MHz band is lower signal
attenuation when compared to the 2.1 GHz band. This directly impacts cell
coverage and will also improve handover quality as explained below under mobility
management.
Figure 4.1 presents the cell radius for both UMTS900 and UMTS2100 technologies
for four different types of environments: dense urban, urban, suburban, rural. The
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cell radius for different environments is derived from standard 3GPP dimensioning
models1 after first calculating the maximum allowed path loss in each
environments for each of the two technologies (UMTS900 and UMTS2100) under
consideration.
Figure 4.1 Cell radius for different types of environments
Frequency
Cell radius (km)

Dense Urban
Urban
Suburban
Rural
900MHz
1.03
1.62
3.47
12.50
2100MHz
0.75
1.35
2.74
8.44
Source: Ovum model

By applying the hexagonal calculation1 the total area covered by each Node-B the
coverage area per site is calculated, as shown in Figure 4.2.
Figure 4.2 Coverage area for different types of environments and for both
UMTS900 and UMTS2100 technologies
Coverage area (km2)
Frequency
Dense Urban
Urban
Suburban
Rural
900MHz
2.06
5.15
23.47
304.87
2100MHz
1.10
3.57
14.65
139.06
Source: Ovum model

Figure 4.3 Percentage increase in coverage area
Frequency
Percentage increase in coverage area per Node-B (km2)
900MHz vs.
2100MHz
Dense Urban
Urban
Suburban
Rural
87%
44%
60%
119%
Source: Ovum model

As it can be seen, there are significant variations in the maximum coverage area
that can be achieved per Node-B between the two technologies, presented in
percentage terms in Figure 4.3. This difference will directly affect the number of
Node-Bs required to serve a given geographic area and consequently the Capex
costs. It must be noted that the greatest differences in coverage area per Node-B
are observed in dense urban and rural areas.
Okumura-Hata propagation models - described in Annex A
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These differences are indicative of improvements which might be expected when

deploying UMTS900 technology and apply only with specific input parameters, as
explained in more detail in Annex A.
4.1.2 Mobility Management

Mobility management is an issue faced by mobile operators due to non-uniform
coverage of Node-Bs, which can lead to coverage holes. This is related to
limitations of coverage provided per Node-B and the associated costs, and can
impact call handover, which can directly affect a customers service experience.
The improved Node-B coverage of UMTS900 technology will help overcome
handover problems and thus improve the customer experience.
Whilst it cannot be quantified at this point, it is believed that UMTS900 will lead to
better mobility management by avoiding coverage holes in the network by
enabling overlap of adjoining Node-B coverage areas. Moreover, 2.1 GHz can be
used to complement the 900MHz band by using overlay deployments in areas with
high capacity demand using macro-cells and micro (pico)-cells configurations in
hotspot areas such as train stations and stadiums.
4.1.3 Network capex efficiencies and enhanced capabilities

When considering the deployment of UMTS900 technology, it is important to
consider the replacement cycle of GSM network equipment and the strategic
options and choices that an operator might have to make during this replacement
phase.
If an operator has an operational GSM network equipment, which is amortised
(especially on the access side as BTS account for around 65% of Capex), the
operator has to take strategic replacement strategy decisions. One option is to
replace existing GSM equipment with new GSM systems, possibly with enhanced
capabilities; another option (if the operator holds a UMTS license) is to replace with
UMTS equipment.
By following the first option the operator will limit the capabilities and efficiencies
of their networks and there is the possibility that the technology may become
obsolete within 10-15 years through lack of vendors support. In the second option
operators might be restrained by the up-front investments needed to deploy
UMTS2100 networks. The decision is easier if the operator faces problems which
would be eased by deploying a UMTS network, such as voice channel congestion,
lack of frequency channels to support more and significant take-up of bandwidthhungry services.
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Whilst each case is operator and network specific, UMTS900 offers a new option for
operators facing a GSM network equipment replacement cycle, with lower up-front
investments compared to the UMTS2100, at the same time as enhancing network
efficiencies and capabilities to handle both voice and data traffic.
4.1.4 Positioning against other access technologies

Cellular operators are about to face competition in their traditional markets from
other access technologies, the most prominent of these being Mobile WiMax
802.16e. The roadmap planned for Mobile WiMax is to offer all-IP high data speed
wireless services with lower up-front Capex investments than can be achieved with
UMTS. This may present a viable business case especially in developing (emerging)
markets, where mobile penetration or geographic coverage is relatively low and
geospatial characteristics (majority of land comprises of rural areas) require
significant Capex investments.
However, in these cases, UMTS900 technology, due to its increased coverage
capabilities as discussed in this paper, could possibly also provide a viable solution
since it could also offer high data speed rates and provide voice traffic handling
efficiencies with reduced Capex investments, when compared to UMTS2100.
It must be noted that the issues discussed above are case-specific, dependent also
on regional and market characteristics. Different access technologies do not
necessarily have to compete, and in many cases they can complement each other.
UMTS900 technology provides an extra option for mobile operators to position
themselves and pursue their strategic choices based on both market characteristics
and competitive forces in their respective markets.
4.1.5 Harmonisation of spectrum in the 900MHz band

The 900MHz band is one of the most used bands in the world. GSM operators all
over Europe, Africa and Asia use this band extensively, which makes it one of the
most harmonised bands in the world. All operators using the 900MHz have
started with GSM services and most of them have already acquired 3G licenses at
2.1 GHz. This business evolution makes UMTS900 a most attractive option for
operators and a likely follow-up technology in the 900MHz band.
In order for operators to be able to utilise UMTS technology in the 900MHz band
two prerequisites are required regarding spectrum availability:
a.
the NRA must allow the deployment of UMTS in the 900MHz band.
b. re-farming of 900MHz spectrum band in order for the operators to be able to

deploy 5MHz (WCDMA) carriers This is an important issue as not all GSM
license holders may have enough spectrum to accommodate the 5MHz carriers
required for the deployment of UMTS technology. In this case, spectrum
restructuring may necessary in order for operators to be able to deploy
UMTS900.
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If these points are resolved and both GSM and UMTS technologies can be deployed
in the 900MHz band then this harmonisation of spectrum will allow maximum
flexibility for mobile operators to use spectrum efficiently (through network and
frequency planning process) to meet coverage and capacity requirements.
4.2 Scenarios
Scenarios have been developed for each of the four regions being considered (W.
Europe, Asia Pacific, Sub-Saharan Africa, Middle East) which are characteristic of
typical countries in each region.
4.2.1 Region characteristics

The characteristics of each region differ and the following parameters are taken
into consideration:
a. Geo-types: In each region the land area for each geo-type (dense urban
(indoors / hotspots), urban, sub-urban and rural) is modelled. The proportion
of land in each of these four types differs greatly in each region
b. Network coverage: UMTS coverage varied dependent on the type of
environment and, importantly, between regions
c.
Population split: the population split between regional geo-types varies in

each of the four regions. This factor affects network capacity drivers and
profiles have been assigned to different population groups in each region
d. Demand analysis: the demand for service will vary in each of the four
regions, and three parameters have high variation: the penetration of WCDMA
technology; usage profiles and ARPU. The analysis does not include any
variation of penetration for UMTS900 and UMTS2100 since UMTS900 handsets
availability is not considered as a significant impediment to UMTS900 take-up.
Within each usage profile we consider the annual service usage per user (as
Minutes of Usage (MoU), number of SMS and MB of data) and these
parameters vary by region. ARPU is directly impacted by both levels of usage
and service pricing. Further details and analysis are provided in Section 4.3
e. Operational costs: which vary between each of the four regions, e.g.
subscriber acquisition costs and average churn rates.
For every region there are two input parameters that can be altered and thus lead
to different results:
Type of mobile operator
Demand scenario
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4.2.2 Type of mobile operator

The baseline scenario is the case in which an operator deploys UMTS2100 to serve
a specific geographic coverage and service demand. The analysis assumes that the
operator is only deploying UMTS with no obligations to also deploy a GSM network.
The implications and interoperability issues between GSM and UMTS900
technologies are analysed in Section 4.5. The starting point of UMTS coverage and
penetration differs between each of the four regions examined, and the analysis
assumes that an, WCDMA deployments before start of the modelling period are
UMTS2100, after which time operators have the flexibility to choose between
different technologies.
The baseline scenario is compared with two others; one where an operator deploys
UMTS900 technology only and the other where an operator has access to both
900MHz and 2100MHz spectrum and deploys both UMTS900 and UMTS2100
technology. In the latter case, it has been assumed that the operator deploys
UMTS900 technology in dense urban (indoors/hotspots) and rural areas to provide
extended coverage and in-building coverage, and UMTS2100 technology in urban
and sub-urban areas to benefit from increased capacity, as discussed in Section
4.1.
4.2.3 Demand scenarios

The demand parameters, such as WCDMA penetration, usage profiles and ARPU
differ significantly between the regions. Within each region three different
scenarios related to demand and usage are used reflecting high, base and low
demand. The base scenario data are derived from Ovum and Wireless Intelligence
forecasts and other sources such as the Economist Intelligence Unit and the World
Bank. The adjustments for the high and low scenarios and discussion on demand
data is provided in Section 4.3.
4.3 Demand analysis

4.3.1 Overview of cost model
Figure 4.4 presents an overview of the structure of the cost model. The demand
analysis is based on forecasts of subscriber penetration and usage profiles (voice,
SMS, data) over the examined period. It drives the network dimensioning
component to provide bandwidth demand calculations and also the Opex costs and
service revenues as explained below.
A detailed description of the model cost (Capex and Opex) calculations and
financials is provided in subsequent sections of the report.
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Figure 4.4 Overview of model structure

Key:Input sheet
Calculation sheet
Demand
Output sheet
Demand_Inputs
Subscriber Calcs
Costs
Network
Cost & Financials
Voice usage Calcs

and
Data Usage Calcs
Capex Calcs
Demand Summary
Opex Calcs
Cost Calcs
Bandwidth Demand
Financial
Network dimensioning
Network Design
Inputs
Service Pricing
D3
D2
D1
Equipment Calcs
Revenue Calcs
Depreciation schedules
RoI
NPV
(*) Note: Indicative (major) flows shown only
Source: Ovum
4.3.2 Demand analysis model

The demand analysis model provides a high level view of the possible revenue
from the development of WCDMA in various world regions. It incorporates data
from Wireless Intelligence and other sources for each country to provide a region
based view for each parameter to model.
The model revenue outputs are derived from voice minutes, SMS and data volumes
and tariffs. The model does not include international call / SMS revenues or
premium rate SMS and data services. All national data is treated at a flat rate,
without special pricing for html, ringtones or any other content.
Data sources
The Wireless Intelligence service provided data for subscriber numbers and
population per country, growth over the previous years by quarter per country,
penetration of WCDMA in certain countries and average by region, as well as
growth for these selected countries and average voice minutes per user in each of
the major regions.
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Information on the percentage of subscribers that use a certain feature and the
frequency of usage was derived from various sources including press releases,
third party studies and extrapolation between countries and regions.
Pricing information was derived from the lowest data tariff available, which tend to
be business tariffs, in selected countries.
Data sources were complemented by reasoned assumptions where specific data
sources were not available.
Volume
The data sources were used to determine the demand on spectrum bandwidth,
based on the penetration of each feature, the number of active users of SMS, voice
and data features and frequency of use.
Voice is calculated in minutes of use per user, SMS per average messages sent per
user and data as an average volume downloaded. Capacity drivers such as games,
ringtones, and web browsing are all calculated only in terms of the amount of data
traffic each will generate.
Reasonable assumptions regarding consumer behaviour and how this might evolve
with time have been made, based on experience in the mobile and fixed internet
content industries, first hand observations and data available for selected
countries.
Growth per region
The variable that most affects results derived from the model are related to the
growth of mobile phone connections and in particular WCDMA connections within
the wider mobile phone base.
The growth assumptions in the model are based on current and forecast mobile
phone penetration in each country compared to the countrys population and the
relative penetration of WCDMA phones within this installed base. The growth in the
last year and last quarter of available data were assessed in order determine
whether the market penetration had reached saturation point or not, and the
growth prospects towards market saturation.
The data is aggregated into a region profile, which includes the average
penetration of connections and WCDMA connections in the region the homogeneity
of the region, spread, standard deviation, etc is also assessed.
This region profile is the used to model growth, assuming that growth in the region
based on average growth for recent periods. Because WCDMA has been recently
introduced in some regions there is little information to indicate how growth will
slow as it approaches a saturation point, in these case we have made assumptions
that seemed reasonable in light of more mature markets such as Asia.
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Regulation, cultural factors, speed of product development and the business

environment also affect growth. As such we have modelled the high demand case
to assume a 20% increase in medium demand forecasts (based on Wireless
Intelligence data). The low demand scenario assumes a 20% decrease in medium
demand forecasts (based on WI data).
Most of the variation in results can be accounted for changes in the growth in
WCDMA penetration in the Asia region. This is both due to the already high
penetration relative to other regions in percentage terms and to the very large
population in the area. As the annual growth is compounded a small change in the
expected growth of WCDMA becomes even more significant. Other variables
produce the results that would be expected, as for example lowering price by a
given percentage reduces the ARPU by the same percentage, but applying these
changes within reasonable ranges only modify the results slightly when compared
to growth.
Demand analysis outputs
Figures 4.5 presents the projections for WCDMA connections for all three scenarios
(low demand, base (medium) demand, high demand) and for all four regions
examined, over a 5 year time period.
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Figure 4.5 WCDMA connections forecast

W. Europe: WCDMA connections
300
Millions
250
200
150
100
50
0
2007
2008
2009
Low Demand
Medium Demand
2010
2011
High Demand
Asia Pacific: WCDMA connections

600
Millions
500
400
300
200
100
0
2007
2008
2009
Low Demand
Medium Demand
2010
2011
High Demand
Middle East: WCDMA connections

30
Millions
25
20
15
10
5
0
2007
2008
Low Demand
2009
Medium Demand
2010
High Demand
2011
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25
Sub-Saharan Africa: WCDMA connections
Millions
20
15
10
5
0
2007
2008
Low Demand
2009
Medium Demand
2010
High Demand
2011
Source: Ovum
Reasonable assumptions were made for the subscriber usage profiles for voice,
SMS and data services for each of the four regions examined. These were based on
Ovum and Wireless Intelligence data and forecasts. This demand data was fed into
the revenue analysis, to produce the ARPU per subscriber forecasts shown in
Figure 4.6 for all four regions examined. ARPU levels along with usage profiles per
subscriber and overall WCDMA penetration then determine the services revenues
calculation.
Figure 4.6 Annual ARPU ($) per subscriber for four regions examined
Annual ARPU ($) per subscriber
$900
$800
$700
$600
$500
$400
$300
$200
$100
$0
2007
W. Europe
2008
Asia Pacific
2009
Sub-Sah Africa
2010
2011
Middle East
Source: Ovum
All these demand analysis outputs feed as inputs into Capex and Opex costs and
services revenues calculations respectively and they will overall drive financial
analysis.
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4.4 Network capex analysis

4.4.1 Main assumptions
While conducting the costing analysis there are several assumptions that must be
made. Below the main assumptions that have been adopted in order to derive
results and conclusions are presented:
All assumptions made like WCDMA penetration, usage profiles, population and
geographic area coverage for a specific region have been kept the same for all
different scenarios examined (i.e. UMTS900 only, UMTS2100 only etc). In this
way comparisons are performed on same grounds. Sensitivity analysis of how
these parameters may be affected are presented in different section
No GSM rollout has been considered. Network dimensioning is focusing only on

WCDMA technology. Specific implications of GSM and WCDMA collocation and
coexistence are addressed in different sections
Starting point of network dimensioning for the four regions examined is

different in terms of WCDMA subscribers, population and geographic coverage
etc. We assume that anything related to the period before the starting point is
irrelevant. In this way both a paper thin network (case of Africa) and a more
advanced and mature one (case of Western Europe) are examined
WCDMA Release 99 has been considered for two reasons. Firstly, because
network dimensioning has been performed considering voice as the main
service offered in all regions examined (especially the ones of Middle East,
Sub-Saharan Africa and Asia Pacific); thus associated quality parameters (as
Eb/No, interference margin) are calculated mainly for voice by taking also into
consideration some of the data services characteristics. Secondly, for simplicity
reasons and in order to avoid complexity of assessing impact on the core
network (moving from Release 99 to Release 5 or 6 entails significant Capex
investment since architecture is different division of switch and control
planes). However, qualitative analysis of how WCDMA Release 5 (HSDPA) and
WCDMA Release 6 (HSUPA) on the access side could possibly impact results is
provided. Moreover, it must be noted that this analysis does not by any means
specify or recommend the use of different WCDMA Releases for different
regions since this is considered to be completely operator specific choice
All final results are based on comparative rather than absolute basis
4.4.2 Capex analysis

After following the methodology described in Annex A (Detailed model description),
the volumes of network equipments required are calculated.
Figure 4.7 provides an example on the type of network equipment that have been
dimensioned in order to satisfy both coverage and capacity requirements on an
annual basis.
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32
Figure 4.7 Example of volumes of network equipment required after network

dimensioning performed
Equipment volumes required
TRX
Node-B
RNC
MSC/VLR
HLR
SGSN
GGSN
2007
354,741
118,247
924
18
13
6
3
2008
2009
37,404
38,406
12,468
12,802
98
101
Illustrative31
18
12
21
11
21
5
9
2010
40,428
13,476
106
57
39
41
17
2011
51,321
17,107
134
106
73
80
32
Source: Ovum model

Network equipments costs, or other related activities (i.e. sites acquisition /
construction) are also taken into consideration in order to derive annual Capex
costs.
Figure 4.8 provides an example of the costs of network equipment or associated
activities that have been considered. It must be noted that this list is by no means
exhaustive and in real life Capex costs include other elements as well. However,
list above comprises of the main access network elements. For the purposes of this
study, which is deriving results on a rather comparative than absolute basis,
analysis conducted is regarded as sufficient.
Figure 4.8 Example of costs of network equipment and associated activities
Network element unit costs (nominal US $)
TRX
Node-B
Node-B installation and site acquisition costs
Node-B annual lease
RNC
MSC/VLR
HLR
SGSN
GGSN
2007
15,000
75,000
30,000
20,000
1,000,000
2,000,000
1,500,000
750,000
750,000
2008
15,000
75,000
30,000
20,000
1,000,000
2,000,000
1,500,000
750,000
750,000
2009
2010
15,000
15,000
75,000
75,000
30,000
30,000
20,000
20,000
1,000,000
1,000,000
Illustrative
2,000,000
2,000,000
1,500,000
1,500,000
750,000
750,000
750,000
750,000
2011
15,000
75,000
30,000
20,000
1,000,000
2,000,000
1,500,000
750,000
750,000
Source: Ovum model

Also, it must be noticed that special considerations have been taken for evolution
of costs over time as well as any possible cost differences between the two
technologies; however rather insignificant in both cases.
By multiplying network elements volumes, and associated activities, with relevant
costs the total Capex spending on an annual basis is thus calculated.
Cumulative Capex is then derived by Capex calculations as described above.
4.4.3 Opex analysis

Opex costs are comprised of network related and non-network related costs.

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33
Figure 4.9 summarises all Opex costs considered and detailed analysis follows in
subsequent sections.
Figure 4.9 Opex costs considered
Total Opex
Network related Opex
OAM&P costs
Other network related

Opex costs
Non-network related Opex
Applicable to new subs
Applicable to all subs
SAC costs
SGA costs
SIM card costs
Customer care costs
Source: Ovum
Network related Opex costs
Network related costs are comprised by Operations, Administration, Maintenance
and Provisioning (OAM&P) costs and other network related operational costs.
OAM&P costs are directly driven by the number of network elements and a well
know and adopted methodology has been followed2 in order to come up with
relevant calculations. OAM&P costs have been calculated as a percentage of
Cumulative Capex costs, as presented above, on an annual basis. The percentage
used is 10% of Cumulative Capex costs per annum.
Other network related Opex costs include transmission annual lease costs, sites
and switches annual lease costs and other minor ones.
Non-network related Opex costs
Non-network related costs are mainly driven by the number of subscribers and
consist of costs associated with acquisition of new subscribers and marketing and
sales costs of all existing ones. More specific, non-network related Opex costs
include Subscriber Acquisition Costs (SAC) (that consist of commissions, handsets
subsidies, promotion packages etc.) and cost of SIM cards that are applicable for
only all the new subscribers in the network (new additions plus churn subscribers)
and sales and marketing costs (calculated as a percentage -in the range 10-12%of revenues) and customer care related costs (i.e. customer care, charging and
billing) that are applicable for all subscribers in the network.
http://www.comlab.hut.fi/studies/3510/PDOTS_Smura_300306.pdf

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It must be noted that in real life operators incur other significant Opex costs (as
interconnection and roaming) that are not considered in this study. The main
reasons for that is simplicity and comparative nature of analysis and final results.
4.5 Comparative analysis / Summary of the

regions
As explained above, different scenarios have been assessed and the combination of
results is numerous.
In order to strengthen the impact of the messages derived we highlight and focus
on the three most important ones which are:
Cumulative Capex (over the course of 5 years) percentage difference from

baseline scenario
Cumulative Capex (over the course of 5 years) percentage difference from

baseline scenario providing breakdown for four types of environments (dense
urban, urban, suburban, rural)
Total Capex and Opex costs (over the course of 5 years) percentage
difference from baseline scenario
A more detailed presentation of results is further provided in Annex B.
4.5.1 Cumulative Capex

Cumulative Capex is calculated by adding Capex costs over the course of 5 years
time period for the four regions and the three scenarios examined as presented
above.
Figures 4.10 and 4.11 present the Cumulative Capex costs for the UMTS900 only
and UMTS900 and UMTS2100 cases as a percentage of the Cumulative Capex costs
for the UMTS2100 only case, for all three demand scenarios.
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Figure 4.10 Cumulative Capex costs for UMTS900 only as a percentage of

Cumulative Capex costs for UMTS2100 only
Cumulative Capex: UMTS900 only
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Middle East
Asia-Pac
Low Demand
W. Europe
Medium Demand
Sub-Saharan
Africa
High Demand
Source: Ovum
Figure 4.11 Cumulative Capex costs for UMTS900 and UMTS2100 as a percentage
of Cumulative Capex costs for UMTS2100 only
Cumulative Capex: UMTS900 and UMTS2100
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Middle East
Asia-Pac
Low Demand
W. Europe
Medium Demand
Sub-Saharan
Africa
High Demand
Source: Ovum
By studying the graphs above, main results derived are summarised below:
Case of UMTS900 only
The Sub Saharan Africa case shows the highest Cumulative Capex reductions
of 41% followed by Western Europe with 40%, Middle East with 36% and Asia
Pacific with 32%
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Apart from the case of Sub Saharan Africa Cumulative Capex differences are
decreased as demand grows (High Demand scenario). This is mainly due to
the fact that the greater benefits of UMTS900 are mainly derived from
coverage and not capacity related issues. In the case of Sub Saharan Africa,
demand does not vary greatly over the three scenarios and due to landscape
characteristics (majority of land considered as rural area ) coverage is always
the main driver as far as Capex investments are concerned
Case of UMTS900 and UMTS2100
The Sub Saharan Africa case shows the highest Cumulative Capex reductions
of 37% followed by Middle East with 31%, Western Europe with 27% and Asia
Pacific with 16%
Apart from the case of Sub Saharan Africa Cumulative Capex differences are
coverage and not capacity related issues. In the case of Sub Saharan Africa,
demand does not vary greatly over the three scenarios and due to landscape
characteristics (majority of land considered as rural area ) coverage is always
the main driver as far as Capex investments are concerned
It must be noted that overall results presented above refer to a rather simplistic
network planning case. The real case of assessing impact of UMTS900 should be
treated as case and more specifically market and operator specific. For example, a
detailed overlay network of using UMTS900 macrocells combined with UMTS2100
microcells in heavy traffic profile hotspots has not been extensively examined.
The results above should by no means disregard or downgrade the business case
of deploying UMTS2100. Overall results might seem to be better in the case when
using UMTS900 only technology; however this can be challenged for the following
reasons:
Scenarios and analysis provided do not necessarily capture real cases at the
greatest extent (explained above)
Operators might face spectrum availability limitations in the 900MHz band

regarding the deployment of UMTS (especially in the case of an existing
GSM900 operator). Frequency re-use pattern might thus be limited and
availability of 2100MHz spectrum might be extremely useful in order to offer
UMTS services in the market
Operators might prefer to deploy UMTS2100 technology in dense urban and

urban areas due to favourable adjacent cell interference (ACI) characteristics.
This last point is especially important in dense populated areas in order to
ensure adequate quality of service
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For all the reasons provided above, results presented and associated conclusions
should be carefully treated.
4.5.2 Cumulative Capex for four types of environments

(dense urban, urban, suburban, rural)
A further breakdown of Cumulative Capex on type of environment basis is further
provided.
In order to calculate the breakdown of costs per type of environment the approach
described below has been followed:
a) Access network: Access network elements (as TRX, Node-B, RNC) and other
associated (as sites construction/acquisition) costs are directly calculated per type
of environment as described in sections 4.1 and 4.2 and Annex A
b) Core network: Core network elements (as MSC/VLR, HLR, SGSN, GGSN etc)
costs have been allocated to different types of environment based on the
percentage of number of subscribers as of total forecasted per type of environment
respectively. Therefore, percentage of subscribers as of total has been used as the
driver for cost allocation of core network elements and provides a proxy of how
core network elements Capex costs might be incurred and distributed per type of
environment
Figures 4.12 presents the Cumulative Capex costs per type of environment for
UMTS900 only case as a percentage of Cumulative Capex costs for UMTS2100
only case and for all four regions examined. Further breakdown per type of
demand scenario for all four regions is provided in Annex B.
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Figure 4.12 Cumulative Capex costs per type of environment for UMTS900 only as
a percentage of Cumulative Capex costs for UMTS2100 only
Cumulative Capex for different environments - UMTS900 only
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
W. Europe
AsiaPac
Dense Urban
Middle East
Urban
Suburban
Africa
Rural
Source: Ovum
By studying the graph above, main results derived are summarised below:
Dense urban environment case shows the highest Cumulative Capex reduction
in the range of 37%-46%, followed by rural environment (range of 33%-46%),
suburban environment (range of 26%-34%) and finally urban environment
(range of 20%-36%) for all regions examined
The Sub Saharan Africa case shows for all types of environments (apart from
urban one) the highest Cumulative Capex reduction among all regions
examined
4.5.3 Total Capex and Opex costs

Total Capex and Opex costs are calculated by adding Capex and Opex costs on an
annual basis over the course of 5 years time period for the four regions and the
three scenarios examined as presented above.
Figures 4.13 and 4.14 present Total Capex and Opex costs for the UMTS900 only
and UMTS900 and UMTS2100 cases as a percentage of Total Capex and Opex
costs for the UMTS2100 only case, for all three demand scenarios.
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Figure 4.13 Total Capex and Opex costs for UMTS900 only as a percentage of
Total Capex and Opex costs for UMTS2100 only
Total Costs: UMTS900 only
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Middle East
Asia-Pac
Low Demand
W. Europe
Medium Demand
Sub-Saharan Africa
High Demand
Source: Ovum
Figure 4.14 Total Capex and Opex costs for UMTS900 and UMTS2100 as a
percentage of Total Capex and Opex costs for UMTS2100 only
Total Costs: UMTS900 and UMTS2100
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Middle East
Asia-Pac
Low Demand
W. Europe
Medium Demand
Sub-Saharan Africa
High Demand
Source: Ovum
By studying the graphs above, main results derived are summarised below:
39

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The Sub Saharan Africa case shows the highest Total Capex and Opex costs
reductions of 38% followed by Middle East with 32%, Asia Pacific with 17%,
and Western Europe with 10%
For all regions examined, Total Capex and Opex costs differences are
coverage and not capacity related issues
Case of UMTS900 and UMTS2100
The Sub Saharan Africa case shows the highest Total Capex and Opex costs
reductions of 33% followed by Middle East with 27%, Asia Pacific with 8% and
Western Europe with 7%
For all regions examined, Total Capex and Opex costs differences are
coverage and not capacity related issues
4.5.4 Implications of upgrading to WCDMA Release 5

(HSDPA) and Release 6 (HSUPA)
As already explained, analysis so far is based on WCDMA Release 99. Reasons for
that have been provided above.
By upgrading access network to Release 5 and eventually Release 6 new
capabilities are further introduced in the network. The case of upgrading core to
Release 5 and 6 is not addressed due to increased complexity entailed.
The areas where cost model is altered for the methodology described above are:
Network dimensioning is now based on voice services at 64.4kbps and basic

data services at 384kbps. This will allow for the case of Circuit Switched video
calls and advanced relatively high-speed data services (wireless broadband)
Maximum capacity per cell is consequently altered (spectral efficiency).

Enhanced capabilities introduced in the network due to higher modulation and
coding rates allow for the offering of higher speed rates per user
Maximum coverage per cell is consequently decreased. The actual cost of

providing higher data speed rates is decreased cell range per Node-B due to
higher noise rise involved
Impact on available spectrum bands should be also considered. Referring to

spectral efficiency issue explained above
Network element costs are changed. Access network elements costs are most
possibly increased (though not significant variations expected) due to
enhanced capabilities embedded in new Releases
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All these factors are taken into consideration and the case of upgrading access to
Release 5 and 6 is assessed.
4.6 NPV analysis

By means of a straightforward cash flow calculation, a simple NPV analysis was
prepared for all of the cases and regions examined. The total costs have been
derived as presented above in Section 4.5.3.
Revenues are derived by calculating total service usage and associated prices for
all of the services examined (voice, SMS, data) along with their evolution over time
for all four regions, as presented below.
4.6.1 Revenue calculations

Cash flow is calculated for all different scenarios and cases. In order to derive NPV
values, a rate of return (WACC) of 10% is used. Usually, WACC (pre-tax) rates
adopted worldwide on behalf of NRAs in the mobile industry are found in the range
of 10% to 16%. The lower end rate of 10% is in this study.
NPV refers to a 5-years time period. As previously discussed, only comparative and
not absolute results are presented in order to capture and reinforce messages
derived.
Figure 4.11 presents NPV percentage improvements, in the case of medium
demand scenario, over the case of UMTS2100 only for both the cases of UMTS900
only and UMTS900 and UMTS2100 respectively and for all four regions.
By studying Figure 4.15 the main conclusions drawn are:
The case of UMTS900 only presents greater opportunities for NPV

improvements over a 5-years period
The cases of Sub-Saharan Africa and Middle East present greater opportunities
for NPV improvements due to reduced Capex and Opex costs incurred (section
4.5.3- Total costs)
Figure 4.16 presents NPV improvements over UMTS2100 only case when
compared to the UMTS900 only case for all three different demand scenarios and
four regions examined.
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Figure 4.15 NPV percentage improvements (medium demand scenario) over

UMTS2100 only case for both UMTS900 only and UMTS900 and UMTS2100
cases
NPV improvements over UMTS2100 only (*)
120%
100%
80%
60%
40%
20%
0%
W. Europe
AsiaPac
UMTS900 only
ME
Africa
UMTS900 and UMTS2100
(*) refers to Medium Demand scenario
Source: Ovum model
Figure 4.16 NPV percentage improvements over UMTS2100 only case for
UMTS900 only case and three different demand scenarios
UMTS900 only: NPV improvements over UMTS2100 only
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
W. Europe
AsiaPac
Low demand
Medium Demand
ME
Africa
High Demand
Source: Ovum model

Figure 4.17 presents NPV improvements over UMTS2100 only case when
compared to the UMTS900 and UMTS2100 case for all three different demand
scenarios and four regions examined.
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Figure 4.17 NPV percentage improvements over UMTS2100 only case for
UMTS900 and UMTS2100 case and three different demand scenarios
UMTS900 and UMTS2100: NPV improvements over UMTS2100 only
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
W. Europe
AsiaPac
Low Demand
ME
Medium Demand
Africa
High Demand
Source: Ovum model
4.6.2 NPV scenarios

The analysis so far has assumed that different inputs (such as WCDMA penetration,
geographic coverage) have remained the same in order to calculate, on an equal
basis, potential capex reductions through the introduction of UMTS900 technology.
The capex reductions derived in Section 4.5 can be re-assessed to reflect a more
realistic situation, in which the operator is able to take advantage of the cost
reductions to fund further capex, which might be to attract more customers and
increase the number of connections or increase geographic coverage. Each of these
is discussed below:
WCDMA connections
In both cases (UMTS900 only and UMTS900 & UMTS2100) Cumulative Capex
requirements are reduced when compared to the case of UMTS2100 only. Mobile
operators might well leverage this advantage by increasing the coverage reach of
their network and hence enhance ability of serving more end-users.
In order to calculate additional subscribers the following approach has been
followed:
Calculate average Capex spending per subscriber over the period of 5-years for
each of the three cases (UMTS2100 only, UMTS900 only, UMTS900 and
2100) respectively and for the medium demand scenario
Calculate additional end-users that can be accommodated by dividing the

differences in Cumulative Capex between baseline case (UMTS2100 only) and
the two examined ones (UMTS900 only and UMTS900 and 2100) by the
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average Capex spending per subscriber for every case respectively. In this way
we assume that baseline cases Cumulative Capex spending is available in two
other cases as well and this can be used by the operators to accommodate
more subscribers in their networks
Additional subscribers numbers for every case are then considered. Figure 4.18
Figure 4.21 present the additional subscribers calculated, with the method
described above, for all four regions examined.
Figure 4.18 WCDMA subscribers for different cases and for all four regions
W.Europe: UMTS subscribers for different scenarios
400,000,000
350,000,000
300,000,000
250,000,000
200,000,000
150,000,000
100,000,000
50,000,000
0
Year 1
Year 2
UMTS2100 only
Source: Ovum model
Year 3
UMTS900 only
Year 4
UMTS900&2100
Year 5
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Asia Pacific: UMTS subscribers for different scenarios

700,000,000
600,000,000
500,000,000
400,000,000
300,000,000
200,000,000
100,000,000
0
Year 1
Year 2
UMTS2100 only
Year 3
UMTS900 only
Year 4
Year 5
UMTS900&2100
Source: Ovum model

Middle East: UMTS subscribers for different scenarios
40,000,000
35,000,000
30,000,000
25,000,000
20,000,000
15,000,000
10,000,000
5,000,000
0
Year 1
Year 2
UMTS2100 only
Source: Ovum model
Year 3
UMTS900 only
Year 4
UMTS900&2100
Year 5
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46
Sub-Saharan Africa: UMTS subscribers for different scenarios
30,000,000
25,000,000
20,000,000
15,000,000
10,000,000
5,000,000
0
Year 1
Year 2
UMTS2100 only
Year 3
UMTS900 only
Year 4
Year 5
UMTS900&2100
Source: Ovum model

WCDMA geographic coverage
Geographic coverage requirements have been consequently adjusted in order to
ensure that additional subscribers can be served and network reach is higher.
Figure 4.22 presents geographic coverage requirements followed in the original
case followed and the updated ones for both cases (UMTS900 only and UMTS900
& UMTS2100) and all four regions examined.
Figure 4.22 WCDMA network geographic coverage requirements

Overall WCDMA geographic
coverage
W. Europe
Asia Pacific
Middle East
Sub-Saharan Africa
Original case
Updated case for UMTS900 only
Updated case for UMTS900 & 2100
84%
92%
88%
58%
73%
67%
34%
53%
46%
11%
31%
23%
Source: Ovum model

NPV scenarios calculation
By adjusting the model to take account of these changes to the number of WCDMA
connections and WCDMA geographic coverage NPV calculations have been
updated. As shown in Figure 4.23, which presents for both cases (UMTS900 only
and UMTS900 & UMTS2100) the updated NPV calculations/improvements
compared to the UMTS2100 only case for the medium demand scenario.

A report to GSMA
Figure 4.23 Updated NPV percentage improvements over UMTS2100 only

NPV improvements over UMTS2100 only
120%
100%
80%
60%
40%
20%
0%
W. Europe
Asia Pacific
UMTS900 only
Middle East
Sub-Saharan Africa
UMTS900 & 2100
Source: Ovum model

The main points derived by studying Figure 4.23 are:
UMTS900 only case presents the greatest opportunities regarding potential

NPV improvements over the course of 5 years
Asia-Pacific and W. Europe present the cases where greater opportunities

regarding NPV improvements for UMTS900 technology (either as a stand-alone
or combined with UMTS2100) are expected. The main reasons for that is on
the one hand absolute number of additional subscribers is higher in these two
regions (due to higher potential addressable market) contributing to higher
expected revenues and on the other that additional Capex spending per
subscriber required to increase coverage/capacity requirements is lower due to
landscape characteristics and already experienced WCDMA penetration (easier
to cover additional capacity than greatly increase coverage in rural areas)
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5 Regulatory analysis
5.1 Introduction
One of the responsibilities placed on communications regulators is to ensure that
the interests of consumers are served by creating an environment which promotes
competition, and in the area of wireless communications the mandate includes
ensuring the optimal use of the electromagnetic spectrum and ensuring that a wide
range of communications services can be provided.
The spectrum management policies followed by the National Regulatory Authorities
(NRAs) together with any legal or regulatory framework defined by European and
International bodies will play a critical role in the deployment of UMTS900
networks.
The issue of whether to re-farm (i.e. reallocate) spectrum in the 900MHz bands
which is currently assigned to GSM services to allow mobile network operators to
operate UMTS services in the spectrum is being considered by a number of
regulators.
Within this section of the report:
the key issues related to UMTS900 deployment and implications for NRAs are
assessed,
estimations of the time schedule for such development are provided, together
with possible future spectrum strategies
the regulatory position of NRAs in four geographical regions are examined, with
regards to spectrum re-farming processes, technology-neutral/technologyspecific policies and UMTS900 deployment.
In the following sections, there are references to technologies developed under the
ITU IMT-2000 framework. This is to encompass technologies used in regions where
UMTS is not the only standard for 3G services (e.g. APAC). The positions, decisions
and strategies of regulators are stipulated in terms of IMT-2000. Hence, any
reference to IMT-2000 technologies also includes UMTS-based services.
5.1.1 What is Spectrum re-farming?

Spectrum re-farming is the process of redeploying spectrum from existing uses and
reallocating it to others. When undertaken by regulatory authorities, it is to benefit
consumers and service providers, to allow spectrum to be used more efficiently or
allocated to another higher value or more important use. Existing spectrum uses,
in particular those assigned with large blocks of spectrum, are invariably affected
by such processes.
Under this definition, re-farming of the existing 2G spectrum to 3G services refers
to the re-designation of some or all of the currently assigned frequency bands for
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GSM networks to UMTS networks. In particular, UMTS900 refers to the deployment

of UMTS network which utilises frequencies in the 900MHz GSM band. Following
this implementation, mobile network operators would allow to (re)use the allocated
GSM spectrum which provides greater UMTS coverage than the current UMTS in
the 2100MHz bands.
5.1.2 Technology-specific and technology-neutral spectrum

management policies
There are two main spectrum management approaches to allocating frequency
bands to current and future technologies: the technology-neutral and the
technology specific approach, although hybrid versions of the two policies have
been adapted by the NRAs.
A technology-specific policy designates technologies to specific frequency bands,
and dictates the use of the spectrum for these technologies. This approach has the
disadvantage the as new technologies and services develop it can be challenging to
optimally manage of the spectrum. To allow the spectrum to be allocated more
effectively and increase spectrum efficiency, the regulators need to define and
predict the future technologies which might be successfully deployed. The
regulators usually do this in an open and transparent way, consulting the potential
players and taking into account new markets and services.
On the other hand, under a technology-neutral spectrum management policy, the
regulator allocates spectrum flexibly without designating the technology to be used
within frequency bands. Spectrum-licence holders are able to use the spectrum
according to their market needs and spectrum demands. The most challenging
issue with this approach is to ensure an interference free environment to other
services, adjacent bands and/or other spectrum users.
Although technology neutrality allows the deployment of new technologies within
certain spectrum allocations, the actual usage of these allocations may depend not
only on the availability of technology equipment to access certain frequency bands,
but also on the international (or regional) regulatory framework. Neutrality can
therefore be interpreted in different ways across the spectrum bands. For example,
a technology-neutral frequency band could be used only for UMTS networks,
allowing the use of TDD or FDD multiplexing techniques in the same band or the
use of compatible radio equipment. In addition, the same policy could allow the
deployment of only same generation mobile networks within the same band. For
the purpose of this study, the term technology-neutral for mobile services
indicates the use of the spectrum for GSM or/and any UMTS version standard. This
is exactly what led to the definition of an IMT-2000 family at the International
Telecommunications Union.
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5.2 Key issues

Spectrum availability
Some NRAs, especially in developed countries, have already initiated discussions
about new 2G spectrum management policies, the re-farming of GSM bands and
the processes to be followed for the migration of GSM services to UMTS services.
Spectrum availability in the GSM-900 and E-GSM bands is one of the key issues to
be addressed by the NRAs, since these bands are highly populated by current GSM
operators. In many countries the deployment of UMTS900 networks will require the
redevelopment of national frequency plans to ensure better spectrum utilisation
and distribution. This is made more difficult by the requirement to allocate UMTS
spectrum in 5MHz blocks. It is essential to ensure that both GSM and UMTS
services can continue to operate in a parallel and well-balanced manner as GSM
networks will continue to be the core business for the majority of mobile operators.
The protection of GSM operation needs to be reassured, since the GSM bands will
continue to be used for many years.
Sharing of 900MHz spectrum
Apart from the spectrum availability issue, technical considerations also need to be
taken into account. NRAs will have to access the impact of allowing the GSM and
UMTS services to co-exist. Some of the regulators are considering the UMTS900
deployment under certain technical criteria which will ensure interoperability and
compatibility of both services. Interference effects among the services operating
within the same band need to be minimised. In most countries, extensive coordination with adjacent countries is also an important task in order to ensure an
interference-free environment on each side of the border.
GSM licence renewal
Another challenge NRAs will face is the renewal process of the current GSM
licences. For the majority of the cases the second generation licences are
technology specific allowing only GSM services to be used in the designated bands.
Although the re-farming of the GSM bands allows the co-existence of second and
third generation mobile services, such arrangements raise concerns among the
mobile industry. Competition issues are crucial to be addressed especially in
countries with UMTS greenfield operators. Mobile operators, who granted 3G
licences under specific market conditions, will face a disadvantageous effect
compared to other operators in case GSM-900 band will be made available for the
provision of 3G services.
Impact of UMTS900 on existing GSM and UMTS operations
The full use of 900MHz spectrum for the provision of 3G services in the future may
be a barrier for new entrants. The licence holders of 900MHz band may be able to
deploy UMTS900 in current GSM spectrum in some countries without applying for a
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separate 3G licence. Furthermore, holders of current 3G licences may believe that

their spectrum will be undervalued as a result of additional spectrum becoming
available for 3G. It is therefore important that before altering the current market
conditions or the conditions upon which the licences were granted, NRAs have to
consider future implications.
Spectrum pricing or national roaming
NRAs will have to develop new pricing formulas for spectrum fees. In cases where
2G operators who are not 3G licence holders are allowed to use their spectrum for
3G services, NRAs need to consider whether these operators should pay a levy as
an additional payment for the extra usage of the spectrum. Mobile operators need
to know what is available and its cost in order to define their strategies and invest
accordingly. Vendors and handsets manufacturers need also a clear view when
deciding to invest in new equipment. Alternatively, NRAs may provide a regulatory
framework for national roaming agreements to compensate the slightly higher
network costs of the operators without 900MHz spectrum.
The impact of EU directives and national developments
The regulatory framework of the EU directives is a significant factor which could
speed-up or delay the deployment of UMTS900 networks. Most of the NRAs are
reluctant to move towards the UMTS900 adaptation due to these directives.
However, at the European level there are processes in progress regarding the
formulation of the regulatory framework for the deployment of 3G networks within
the 900 and 1800MHz. This is highlighted with the technical studies which the CEPT
Electronic Communications Commission (ECC) has undertaken and the
consultations which are in progress. In other continents, NRAs are willing to move
towards spectrum-neutrality approaches and allow the deployment of UMTS
networks in the 900MHz band under an international harmonisation process.
In some countries, these issues have been debated and resolved:
In Europe, France has adopted a spectrum liberalisation policy by allowing the

reutilisation of GSM bands. The French regulator, considering UMTS coverage
requirements, industry views and the European and international frameworks,
will issue a transitional implementation plan in 2007-2008 to ensure the
equitable distribution of GSM bands to mobile operators. France is the first
country in Europe where the GSM licenses have been renewed and where the
re-farming of 2G frequencies has been approved
Finland will follow an approach similar to France by the end of 2007
In the UK, Ofcom has already indicated its intention to extend spectrum
trading to the 2G and 3G bands in 2007
The Hong Kong regulator has issued a consultation on the renewal of mobile
networks licences. It was decided that spectrum designated for second
generation services could be used for 2G and 3G services. This plan will be
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implemented in phases to allow operators to upgrade their networks and

review their strategies
In the Middle East, there is limited deployment of 3G/UMTS services. The

NRAs, taking into consideration a rather slow uptake of UMTS deployment in
the region, are in favour of technology specific approaches for mobile services.
The core band of UMTS is the preferred option for allocating UMTS spectrum.
However, CITC (the regulator in Saudi Arabia) is the exception, by allowing the
operators to use either second or third generation mobile technology in any
spectrum band (including the 900MHz) allocated for mobile services.
Similarly, in sub-Saharan region, 3G/UMTS deployment is in its very early

stage. Only one country has granted licences for UMTS deployment. With
technology-specific approaches being widely adopted across these countries,
deployment of UMTS900 networks will not be a concern for the NRAs for the
next 3-4 years, since the NRAs wish to protect national GSM operations.
Although international harmonisation processes and a clear European regulatory

environment will accelerate further developments most of the NRAs examined will
move towards a technology neutral approach in order to allow UMTS networks to
operate in the GSM bands.
Technology neutrality and flexible access to spectrum bands has become a critical
factor to allow new technologies to be introduced. This approach to spectrum
management will eventually allow mobile operators to allocate their spectrum in a
flexible way and increase spectrum utilisation. The operators will be able to
optimise their network capacity according to traffic requirements, market trends
and the introduction of new services. It is expected that GSM networks will
progressively migrate to become IMT-2000/UMTS networks. The migration
schedule will depend on market demand, national regulatory conditions and
licensing schemes.
5.3 Regulatory position in different regions

5.3.1 Western Europe / EU
The European Regulatory framework
To reserve frequency bands for mobile communications in the European
Community the EU has produced specific technology driven directives for GSM900. The designation of specific technologies in certain frequency bands has
however created inflexibilities, according to CEPT / ECC. Any modification or
abrogation of the Directives results in a long administrative process, since any
changes require a proposal from the EC to initiate a co-decision process (requiring
agreement from the Council and the European Parliament). These changes are
required when a market does not develop as expected or, in the case of 3G
services, when a spectrum band might be opened up to include applications and
services due to technological or market developments. In the case of GSM-900, the
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spectrum harmonisation measures have had positive results, since they allowed
spectrum availability in the pan-European market and operational re-usability on a
multi-national basis.
The GSM bands (880-915 MHz, 925-960 MHz, 1710-1785 MHz and 1805-1880
MHz) have been subject to several harmonisation measures taken at EU level or by
the ECC3:
Council Directive (87/372/EEC) and the related Council Recommendation

(87/371/EEC), which came into force in 1987
ERC Decision(94)01 on the frequency bands to be designated for the coordinated introduction of the GSM digital pan-European communications
system
ERC Decision(95)03 on the frequency bands to be designated for the

introduction of DCS 1800
ERC Decision(97)02 on the extended frequency bands to be used for the GSM
Digital Pan-European Communication System
Today, these GSM bands are intensively used by GSM networks while at the same
time UMTS networks are rapidly developing in the 2GHz band.
The New Regulatory Framework for electronic communications infrastructure and
associate services states that the EU-members have to ensure that Spectrum
Management Authorities (SMAs) take the utmost care to make regulation
technology neutral, i.e. they should neither impose the use of a particular type of
technology nor discriminate against it. This does not preclude taking proportionate
steps to promote specific services where justified4.
An important point relates also to one of the conditions mentioned in the
Authorisation Directive is the Designation of service or type of network or
technology for which the rights of use for the frequency has been granted.
Identifying particular technologies is therefore permitted by the Authorisation
Directive as long as it is justified5.
It is important to note that SMAs are not responsible to predict which technologies
will serve the most markets and consumers. The industry itself, standardisation
bodies and key market players will be responsible to identify technologies needs.
ECC (2006) - Cover note to draft ECC/DEC/(06)MM on designation of bands 880-915MHz,
925-960MHz, 1710-1785MHz and 1805-1880MHz for terrestrial IMT-2000/UMTS systems

4
ECC Report 80 (2006) Enhancing Harmonisation and Introducing Flexibility in the
Spectrum Regulatory Framework

5
ECC Report 80 (2006) Enhancing Harmonisation and Introducing Flexibility in the
Spectrum Regulatory Framework
53

A report to GSMA
In the case of IMT-2000 technologies, the ECC/CEPT report mentions that

administrations sometimes need to balance between conflicting requirements in
order to ensure effective use of spectrum. It is therefore necessary in each case to
balance the principle of technology neutrality and the aim of effective and efficient
spectrum use.
The European Commission considers also the harmonisation of radio frequencies
allocations as an important task which member states must promote to ensure
effective and efficient spectrum use. The Commission, following a market-based
approach to spectrum management within the European Union, has proposed that
frequency bands used for terrestrial mobile communication services, such as GSM
and 3G networks, should be under a tradeable and flexible in-use regime in order
to ensure a smooth transition for markets and services relying on spectrum usage6.
At meetings in January 2007, the EC indicated that the GSM900MHz and
GSM1800MHz bands will be approved for UMTS900/1800 use in
September/October 2007.
In summary, for the migration of 2G services to 3G services or even other future
mobile services, it is ECC/CEPTs opinion that the Directive has to be abrogated,
with the process to start as soon as possible. The ECC has proposed the
designation of the above GSM frequency bands (880-915 MHz, 925-960 MHz,
1710-1785 MHz and 1805-1880 MHz) for the terrestrial IMT-2000/UMTS systems,
subject to market demand and national licensing schemes and that administrations
shall take all necessary measures to ensure the protection of continuing GSM
operations in these bands.
Studies of the approach taken by some regulators are examined in more detail
below. These cases present the opinions of NRAs and their views in regards to 2G
spectrum re-farming and UMTS900 deployment, potential implications and
proposed measures. During process of reviewing spectrum re-farming the
regulators have invited operators and other market players to provide comments in
consultation papers and submit proposals.
Appendix A shows the GSM-900 and E-GSM frequency bands allocations in 5MHz
blocks for the EU-15 countries. The table shows the frequency blocks allocated to
operators and the expiration dates. The fact that the expiration dates and the
precise portion of the band allocated may vary, these allocations should not
prevent spectrum in the 900MHz band from being allocated for UMTS900 use.
The situation in the UK
There are four operators currently in the UK offering second generation (2G)
mobile telephony services with licences to use bands of spectrum at 900MHz and
EC COM (2005)400 Communication from the Commission to the council, the European
Parliament and the European Economic and Social Committee and the Committee of the
Regions
54

A report to GSMA
1800MHz. Ofcom, the UK NRA, awarded five licences for third generation (3G)
services in 2000 and 3G services were commercially launched in 2003.
The re-farming of 900MHz spectrum and its use by UMTS services is considered as
part of Ofcoms general spectrum management strategy in regards to 2G spectrum
liberalisation. As an example, part of the band is in the process of being
reallocated7. Ofcom has already indicated its intention to extend spectrum trading
to all of the 2G and 3G bands in 2007. In 2005 Ofcom published the Spectrum
Framework Review: Implementation Plan document, which sets out the options for
the release of spectrum in 2005 - 2008 and extends spectrum trading and
liberalisation to mobile services in order to allow for a smooth transition and
efficient spectrum management8.
Ofcoms key proposals are:
The removal of restrictions from licences that presently prevent the use of
spectrum for the provision of mobile services, including 3G services and mobile
services other than 3G
The consideration of a transitional period before removing restrictions on the

ability to use spectrum that is currently not used for mobile phone services to
develop 3G services in the future, suggesting that this transitional period might
last till 2007, in order to provide an appropriate notice period to the existing
licensees
The consideration of a potential extension of spectrum trading and

liberalisation to the bands currently licensed for 2G and 3G mobile services.
Restrictions on the provision of 3G services could only be removed where it is
possible to do so under law and subject to interference constraints and
international obligations.
Ofcom also identifies a range of considerations that need to be taken into account,
and a range of alternative options. Main issues are:
Technical constraints in relation to the removal of the restrictions
The existence of European harmonisation measures affecting the use of the

bands
The circumstances of the 3G auction held in 2000. Through this auction the
Government created a market structure for the provision of 3G services with
five licences, of which the largest was reserved to a new entrant. It is possible
that variations in the terms of the 2G licences held by existing 2G licensees
Ofcom published a consultation paper regarding the award of available spectrum: 872-
876MHz paired with 917-921MHz. Responses from stakeholders suggested that the band
should be used for UMTS. Ofcom proposal is to auction the spectrum on a technology and
application neutral basis as this will give the market the opportunity to make the decision as
to which service the Spectrum Bands can be most successfully used for.
8
Ofcom (2005) Spectrum Framework Review: Implementation Plan
55

A report to GSMA
(for example to allow 3G services) might have a disadvantageous effect on the

competitive position of this new entrant, compared to the other operators9
Potential constraints may arise also to the scope for new international
obligations in the future. These might take the form of new measures that may
have binding effect on the UK, and/or changes to existing measures that have
new binding effects
Ofcom considers the following three Options to balance the considerations stated
above, as part of its long term strategy.
Option 1 is to defer the decision in relation to the extension of liberation to the
existing 2G bands. Although this option might be an appropriate course of action,
Ofcom considers also the associated risks with the potential benefits of an early
liberalisation of 2G spectrum and the uncertainty imposed to the mobile industry
being the main ones.
Option 2 is to extend liberalisation by removing restrictions on existing licensees
use of 2G spectrum. Alternatively, this option would be followed under one or none
of the following conditions:
Delay date of liberalisation of 2G spectrum in order to minimize any adverse

effect on competition
Impose an additional payment on the existing 2G licensees to counteract any

adverse effect on competition
Define other pre-conditions prior to the 2G spectrum liberalisation
Option 3 is to extend liberalisation by issuing new licences. In this case, the

liberalised 2G bands would typically be used to provide 2G services in addition to
other services than 2G. Under the extended licences the spectrum users would not
be able to make immediate use of these licences unless the incumbent 2G licensee
agrees for this use.
Based on these options, Ofcom will be able to allow a selective liberalisation
according to market demands, while at the same time will allow some time for
future developments.
This is especially the case for Hi3G. In regards to the Spectrum Management Review, Three
UK commented that a different spectrum policy that would allow further 3G capacity to be
made available would alter the original spectrum offering conditions, thereby eventually
affecting 3G future business plans. Thus it is possible that if in the future some spectrum that
can be used to provide substitute products is allocated using administrative pricing, then
there is a significant danger that 3G operators who got a licence through a highly competitive
auction process could be discriminated from certain providers who would have a lower cost
base as a result of government policy, rather than as a result of efficiency.
56

A report to GSMA
Ofcoms next step is to conduct further economic and technical analysis of the
issues raised by the possible extension of spectrum liberalisation to the existing 2G
bands. Ofcom has not published a final decision on the issue, but it is believed that
Ofcom will strongly consider the economic benefits of a liberalised regime for the
use of spectrum and hence allow spectrum users i.e. operators to decide on the
usage of 2G spectrum.
The situation in France
There are currently 3 mobile operators in France. GSM licences were allocated as
follows:
Orange and SFR got their licence in March 1991 for a period of 15 years their
initial licences expired in March 2006
Bouygues Telecom got its licence in December 1994 for a period of 15 years
its licence expires in December 2009.
The reallocation of the GSM licences in France is simply due to the fact that the two
first 15-year licences allocated to mobile operators expired in March 2006.
The conditions of renewal of the GSM licences have to be agreed 2 years before
the expiration date. As a consequence, renewal conditions had to be decided by
March 2004.
Arcep, the French NRA, published a consultation paper which deals with the
renewal of Bouygues Telecoms GSM authorisation in the 900 and 1800MHz bands,
which expires on 2009. This is a similar process followed to the consultation held in
2003 when the licences of Orange France and SFR were renewed.
In October 2006 Arcep launched a second consultation paper which introduces the
re-utilisation of spectrum in the 900MHz and 1800MHz bands for the deployment
and development of 3G networks. Orange France and SFRs GSM authorisations
include the possible reuse of the 900MHz bands for UMTS. Both operators have
notified Arcep of their desire to take advantage of this possibility.
Arceps main considerations, as presented in the consultation paper are:
UMTS coverage and capacity requirements

In terms of UMTS deployment, SFR and Orange are required to provide 70%
population coverage by the end of 2007 and 2008 respectively, which could
result in a improved adoption of innovative and multimedia services. Arcep
considers the wide-area roll-out of 3G as a future goal and important mission.
If must be noted that with high population density in urban and sub-urban
areas, 70% population coverage in France can be achieved with around 30% of
the geographic territory being covered.
The better propagation and building penetration characteristics of UMTS900
will allow increased geographic coverage to be achieved and provides an
57

A report to GSMA
opportunity for operators to increase their population and geographic coverage

beyond the position in early 2007.
Arcep considers also that the quality of UMTS services cannot be guaranteed
by using only the 2GHz band, with currently has a maximum spectrum
availability of 2x60 MHz. Consequently, the 2x110MHz GSM allocations will be
progressively migrated to UMTS spectrum. The introduction of 900MHz and
1800MHz spectrum areas will partially cover the capacity demands.
Market players
From the industry point of view, market players consider that UMTS900 has
been standardised during 2005, which would lead to the necessity of the
provision of new equipment and terminals.
European framework
Arcep is also considering the European and International developments in
regards to the utilisation of 900MHz and 1800MHz bands. In European level
there are processes in progress regarding the formulation of the regulatory
framework for the deployment of 3G networks within the 900MHz and
1800MHz. This is highlighted with the technical studies which are also in
progress. Arcep will use the results of these studies for the determination of
the frequency distribution among the different operators.
Taking into consideration the issues above, Arcep proposes:
The reutilisation of 900MHz and 1800MHz to be implemented in phases and not

in a big-bang approach. There will be a transition phase where GSM and UMTS
will coexist in the same band. This way, GSM will ensure the provision of global
services even in the case where international users wont be able to access the
UMTS network or compatible terminals are not available.
The equitable treatment of all the operators of 2G and 3G networks via the
redistribution of the frequency bands. The authority will modify the
authorisations of the utilisation of the frequency bands of all the parties
involved. Hence, the consultation aims to determine whether the distribution of
the 900 and 1800MHz bands need to be redefined in order to guarantee the
frequencies are distributed equitably among all 2G and 3G mobile network
operators. Arcep has stated its intent to survey the market again to assess
interest in a fourth UMTS licence. If there is no interest for the fourth 3G
licence, the scheme will be defined based on the existing conditions.
Any entitled operator can demand the total or partial reutilisation of the bands
which have been provided to this operator in order to develop 3G networks.
This is in accordance to Arceps decisions early this year in regards to spectrum
authorisations for utilising the frequency bands of 900 and 1800MHz. As stated
above, SFR and Orange have already expressed their desire to put this demand
into practice.
The authority, based on the results of the discussion will put in place a reutilisation
scheme for the bands 900MHz and 1800MHz for 3G networks in 2007-2008.
58

A report to GSMA
The situation in Finland

There are three main mobile (GSM/UMTS) operators in Finland. All operators have
been allocated spectrum from both the GSM-900 and the E-GSM bands. The Ficora
(Finnish NRA) frequency plan indicates that there are frequency allocations within
the GSM-900 band which expire by the end of 2006. In general, spectrum licences
are not provided in a technology-neutral approach, although Ficora is moving
towards this approach for mobile services.
Ficora initially planned to allow the GSM-900 band to be allocated for the
deployment of UMTS network by early 2009. However, the Finnish operators have
requested to be able to deploy UMTS900 networks in an earlier time frame and in
May 2006, the Finnish Ministry of Transportation and Communications officially
decided to allow the deployment of UMTS networks in the 900MHz band. Further to
this decision, Ficora is currently reviewing the frequency allocations and it will
publish a revised plan by the end of 2006, allowing the three operators to utilise
the 900MHz band for UMTS networks.
One of the key issues in the Finnish market is the fact that all three operators have
already met the coverage requirements of their 3G/UMTS operating licences. The
operators therefore did not object to the change of marketing conditions under
which the UMTS licences were granted.
One of the issues that needs to be addressed is the re-calculation of the new
spectrum fee, although there are no plans by Ficora to apply a levy for allowing
operators to utilise the GSM-900 band for UMTS networks. A second issue for the
deployment of UMTS900 is the handset and equipment availability. Finnish
operators expressed their desire to utilise the 900MHz spectrum as soon as the
equipment becomes available. Finnish manufacturers indicated that the network
equipment will become available by the last quarter of 2007.
The situation in Germany
There are four mobile network operators in Germany. T-mobile (D1 network) and
Vodafone (D2 network) were assigned frequencies from the 900MHz band. E-Plus
(E1 network) was licensed in 1994 and was assigned frequencies from the
1800MHz band. In 1997, O2 was granted a licence (E2 network) as the fourth GSM
mobile operator and was assigned frequencies from the 1800MHz band.
Different expiration dates apply for the operators licences. This is due to the
different market entry dates, the variation of the licence period and the different
legal frameworks applicable at the respective time. The D-network licences (Tmobile and Vodafone) expire on 31 December 2009, the licence of E-Plus Mobilfunk
GmbH expires on 31 December 2012 and the O2 licence will end on 31 December
2016.
According to FNA, the German NRA, there is a demand for GSM spectrum in the
900MHz band in the German GSM mobile market, especially for E network
operators (E-Plus and O2), which, if it can be satisfied, will be a precedent for the
59

A report to GSMA
future development of the GSM and the UMTS market towards GSM and UMTS
markets convergence.
GSM and UMTS services are (still) deemed to be as separate markets today.
However, due to the demand for 900MHz spectrum, preparations have started in
order to deploy frequency bands currently allocated to GSM, as extension bands for
mobile services of the third and later generations services. These processes will
eventually result in creating one single market for IMT-2000 technologies such as
UMTS in future.
The regulator, in view of the foreseeable future convergence of GSM and UMTS
services and the principle of technological neutrality, has recently provided a total
of 2x10 MHz so as to allow reasonable use from the technical, regulatory and
competitive perspective. GSM frequency bands will in future also be used on the
basis of wideband technologies such as UMTS/IMT-2000. Future wideband
technology usages will be subject to 5MHz blocks. For this reason the regulator
divided the recently allocated frequency range (880-890/925-935MHz) into 2x5
MHz blocks each (upper and lower band) and to provide spectrum in 5 MHz blocks
accordingly10.
The use of frequency assignments from the 880890/925935 MHz bands will
initially be limited to 31 December 2016 in connection with the adjustment of the
regulatory framework for GSM usages.
According to the German UMTS/IMT-2000 strategy11, frequencies for UMTS/IMT2000 will be allocated basically only in those bands identified by a WRC (global
harmonisation)12.
The situation in Sweden
Although some countries e.g. France and Finland, have publicly expressed plans in
favour of UMTS900 deployments, Sweden has no plans to address the issue in the
short-term.
Sweden has three main GSM operators and one UMTS greenfield operator and
900MHz licences have been granted with limitations for GSM usage. Although the
Swedish regulatory authority (PTS) is in favour of a technology-neutral policy, the
mobile network licences are technology specific. The operators are charged for the
10
FNA - Consultation for the award of further spectrum for public digital cellular mobile
communications below 1.9GHz (GSM concept)

11
FNA - Strategic Aspects of the Spectrum Regulation
12
WARC-92 identified bands of 1885-2025MHz and 2110-2200MHz (core bands) as
the initial bands for IMT-2000 development WRC-2000 identified three additional
bands for terrestrial IMT-2000 i.e. 2500-2690MHz, 806-960MHz and 1710
1885MHz
60

A report to GSMA
use of spectrum, however, the regulator is considering the adaptation of an auction

policy for future spectrum licences.
The situation in Italy
In Italy, the current GSM-900 licences do not allow operators to deploy UMTS
networks utilising the 900MHz band. Mobile operators like TIM and Vodafone have
not expressed any request yet to AGCOM, the Italian regulator, to use their
900MHz licences for UMTS technologies. At the end of December 2005 TIM freed
some spectrum in 900MHz band that was previously used to supply analogue
telecommunications. This freed spectrum, which equates to 2x11.8MHz (880.0891.8/925.0-936.8MHz) is due to be auctioned during the course of 2006.
5.3.2 Asia-Pacific
In the Asia-Pacific region, some regulatory and spectrum management agencies
have already adopted a technology-neutral approach to spectrum allocations. This
is the case for Australia, New Zealand and Hong-Kong, although there are
differences in how the spectrum is acquired. For example, in New Zealand
spectrum can be traded by operators in a manner that best serves their needs
providing the usage does not cause interference in adjacent bands, while in
Australia, a licensee holding an apparatus licence may authorise, by written
instrument, other persons to operate radio-communications devices under the
licence.
The situation in New Zealand
The spectrum policy in New Zealand is, in principle, technologically neutral. The
use of spectrum is mainly decided by the market, which is generally considered to
be in a better position than government and regulatory authorities to make
decisions on technical innovation. The operator which has been authorised the
management rights over a spectrum band, decides the technology to be used in
that spectrum band, under the condition that it does not cause interference in
adjacent bands. The Spectrum Management Unit (under the Ministry of Economic
Development (MED)) seeks to apply technological neutrality as far as is
practicable.
The General User Licence (GUL) allows for flexible arrangements in regards to
spectrum allocations. The operators, under the current spectrum management
regime, are able to migrate from legacy technologies. New technologies are partly
or wholly self-managing, so that operators can access frequency bands without the
need of an individual licence. It is the operators responsibility to ensure that their
transmissions do not cause harmful interference for other users.
New Zealand has an advantage which supports technology-neutral spectrum
policies. Due to its physical isolation from neighbouring countries, much of the
spectrum can be used without having to coordinate with neighbours over potential
61

A report to GSMA
interference. For this reason, New Zealand is considered to be an ideal country in

which to test and develop new wireless technology products, like UMTS900.
In a document which outlines future trends in spectrum usage in New Zealand13,
the MED anticipates significant technology changes within the existing 800MHz/
900MHz cellular bands which will allow future developments with 3G services in the
800MHz/ 900MHz bands, the main spectrum bands currently used for cellular
services in New Zealand. The current holders of management rights to these
bands, which will expire in 2011 and 2012 are Telecom New Zealand (TNZ) and
Vodafone. TNZs management rights represent all of their spectrum holdings for
cellular services in the 800MHz band. Vodafones rights for possible renewal
account for approximately 66 percent of their holdings in the 900MHz band (its
core network for 2G services). It also uses the 1.8GHz and 2.1GHz bands for 2G
and 3G services, respectively14.
A discussion paper on the renewal of management rights in the 800MHz and
900MHz bands, based on recent ITU work, released by The Ministry of
Development (MED) in July 2006, states that the 800MHz and 900MHz bands will
continue to be used for cellular services until at least 2025. These bands are
currently used for 2G and 3G services and are candidate bands for 4G services,
anticipated to be implemented from 2015. The document invites stakeholders
views on such issues as the future of these bands, existing use of the spectrum,
the appropriate renewal period, and the most appropriate pricing approach.
In response to the paper, Vodafone expressed the view that the 800MHz and
900MHz spectrum in the next 10 to 20 years will be utilised not only by UMTS, but
also by systems beyond UMTS and IMT-2000. The 800 and 900MHz bands have
been identified for IMT-2000 (3G) services and are candidate bands for Systems
beyond IMT-2000 (3G LTE).
TelstraClears opinion is that both 800MHz and 900MHz bands in New Zealand will
be used for 2G, 3G and, depending on decisions by the ITU, 4G services also. In
Australia, TelstraClears parent company Telstra Corporation decided to deploy a
UMTS-850 3G network, using the 3GPP standard for the 850MHz band. TelstraClear
also uses this standard in the 2.1GHz band. TelstraClears preference is to deploy
services in 800MHz/ 900MHz bands, if spectrum becomes available, because of the
better propagation characteristics and therefore lower deployment costs.
TelstraClear does not foresee that constraints, such as the availability of suitable
handsets, could act as show-stoppers for the deployment of 3GSM GPP services in
these bands.
TNZs intension is to invest in upgrading its existing 850MHz CDMA network to
meet new business and customer demands. TNZ is concerned that limiting the
13
MED Radio Spectrum: Future Spectrum Usage, A Forecast Of Technical Issues For The
Periods 2001-2006 & 2006-2011

14
MED Radio Spectrum Management: Renewal of Management Rights for Cellular Rights
62

A report to GSMA
850MHz spectrum availability would jeopardise their ability to offer higher data
rates, since all of its existing 850MHz spectrum allocations are required to meet
existing data forecasts in the short to near term. Therefore TNZ does not consider
any of the 850MHz is or will be unused spectrum and they seek to renew the full
20MHz of 850MHz that they currently hold.
In order to facilitate the development of competition in New Zealand there is
currently 15MHz cap, set for an initial period of three years, on the provision of
spectrum for 3G mobile services. The Ministry of Communications reviewed the
spectrum cap policy in 2004 and the Government announced its decision to
continue this policy until May 2007.
Other issues that MED takes into consideration are:
Technology changes that could affect the use of the 800MHz and 900MHz
bands
Industrys perspectives in terms of future investments
Cellular coverage in remote/rural areas. Access to spectrum in the 850MHz and

the 900MHz range is important to minimise site costs. The entire spectrum in
this range is held either by TNZ or Vodafone; hence the unavailability of
spectrum in the 850MHz/ 900MHz range for new entrants is a barrier to entry
as it raises the cost of entry.
The situation in Hong-Kong

In Hong-Kong cellular mobile services are provided in a variety of systems. There
are eleven 2G licences, five of them operate in the 825-960MHz bands, based on
the GSM-900 standard (three systems), IS-95 CDMA standard (one system) and
IS-136 TDMA standard (one system). The remaining six licences operate in the
1710-1880 MHz bands providing Personal Communications Services (PCS) using
the GSM-1800 standard. Before the expiration of these licences (July 2005 to
September 2006), OFTA issued a consultation paper on the licensing of 2G mobile
services.
In this paper, OFTA states that the approach to be adopted regarding the licence
renewal will be consistent with its established technology-neutral policy. According
to the Hong Kong Third Generation Mobile Services Licensing Information
Memorandum issued in July 2001, the existing 2G Operators are free to use any
technology, regardless of whether it is 2G or 3G, in the spectrum under their 2G
Licences. In line with this approach, existing 2G operators will be allowed to refarm their spectrum for 3G, if they so wish, under the current terms and conditions
of their existing Licences for the remaining period of validity15.
15
OFTA (2004): Licensing of Mobile Services on Expiry of Existing Licences for Second
Generation Mobile Services
63

A report to GSMA
According to OFTA the licensees should make the best use of assigned spectrum
with the most efficient technology available for the provision of more advanced
mobile services. Nevertheless, the regulator is aware that 3G equipment is not yet
available to operate in 2G spectrum. Furthermore, the TAs view is that the
convergence of 2G and 3G services should be subject to a transition period, which
would allow sufficient time for mobile operators to upgrade their networks for the
provision of advanced mobile services. TA expects that by the end of this transition
period, the gap between the capabilities of 2G and 3G networks will narrow down
and the two networks will ultimately converge. Even if operators launch services of
more advanced technology, such as 3G services, within the first 5 years of
receiving a Mobile Carrier Licence (valid for 15 years), the same framework will
continue to apply.
The situation in Australia
The spectrum licences in Australia are provided under a tradeable, technologyneutral policy for a fixed non-renewable term of fifteen (15) years. This means that
the licence is not limited to any particular technology, system or service. The
licence holder has the freedom to deploy devices anywhere within its licence area,
provided that the devices are compatible with the core conditions of the licence
and the technical framework for the bands.
Within the licence area, licensees are free to operate whatever type of
communications service they choose, and are able to change that service in
response to technical improvements or changes in consumer demand. Some types
of device must be registered with the regulatory authority before they can be
operated.
As spectrum licences are tradeable, licensees can negotiate in the open market
with others to buy and sell spectrum space as the need arises, or authorise third
parties to use their spectrum space. Spectrum licences can be combined or subdivided to form new licences.
The frequency bands 825845 MHz paired with 870890 MHz are under the
spectrum-licensing regime. Telstra recently announced an intention to re-farm this
spectrum to provide UMTS services.
The Australian Communications and Media Authority (ACMA) has allocated a large
amount of spectrum for mobile telecommunications in bands compatible with both
US and European technologies. The allocated bands are16:
16
825845 MHz paired with 870890 MHz (as used in the Americas)
890915 MHz paired with 935960 MHz (as used in Europe)
17101785 MHz paired with 18051880 MHz (as used in Europe)
ACMA (2004) - From DC to Daylight: Accounting for Use of the Spectrum in Australia A Spectrum
Management Strategy
64

A report to GSMA
19201980 MHz paired with 21102170 MHz (as used in Europe) and
19001920 MHz in major city areas
The spectrum bands 890915 MHz & 935960 MHz is under the apparatus
licensing regime. These bands were assigned to three major telecommunication
operators in 1992. All three operators have rolled out extensive mobile telephone
networks using GSM technology. While initially providing only voice and low-rate
data, upgrades via the GPRS and EDGE platforms have enabled average mobile
data capabilities of 100 kbps. However, any equipment operation, like UMTS900,
under an apparatus licence is subject to device-compliance conditions and the
conditions specified in the licence by ACMA.
The situation India
The GSM operators in India currently have their operations in 900MHz and
1800MHz bands. The Telecom Regulatory Authority of India (TRAI) considers that
since W-CDMA equipment is not currently available for 900MHz and 1800MHz
bands (present GSM spectrum) and that there is no additional spectrum available
in the 900MHz band, the GSM operators are not able to provide 3G services until
they are allocated spectrum from the 2GHz area. Therefore, TRAI does not intend
to allocate the GSM-900 band for 3G services.
The Authority, upon receiving inputs from market players and operators, has
recommended that the Government should not treat the allocation of 3G spectrum
in the same way as 2G spectrum17. Hence, the allocations for 2G and 3G networks
should be allocated separate bands. Under this approach, the Authority has
identified the 450MHz, 800MHz, and 2.1GHz bands for immediate allocation for 3G
services.
5.3.3 Arab/Middle East

The telecom monopoly of the incumbent operator in Qatar (Qtel) ended in
November 2006 and the law was issued to enable the introduction of competition
into Qatars telecommunications sector. The Qtel monopoly included mobile
services and the legal and regulatory processes have started towards the
liberalisation of the market.
Qtel operates GSM services across the state and has launched 3G services in the
2.1GHz band. The regulator has reserved spectrum in which a second operator
could deploy GSM services and intends to adopt a technology neutral approach in
order to encourage innovation, allow better utilisation of the spectrum and speedup the deployment of convergence services. The policy will be based upon certain
technical criteria in order to minimise interference not only with adjacent countries,
but also among services within the same band.
17
TRAI (2006) Recommendations on Allocation and pricing of spectrum for 3G and broadband wireless
access service
65

A report to GSMA
In Egypt, the three GSM operators have been allocated spectrum from all GSM
bands. The GSM-900 and E-GSM bands are fully occupied and only the 1800MHz
band has unallocated/free spectrum. All GSM licences are valid for 15 years. Two
of the licences expire in 2013, while the third has been renewed last year. Only
one of the GSM operators has acquired a 3G/UMTS licence, under the condition of
covering 75% of the land area within the next 4 years. The 2.1GHz band has been
allocated for the provision of UMTS services. Although the regulator is in favour of
a technology neutral approach (allowing the deployment of same generation
networks in the same frequency band), the GSM/UMTS licences are technology
specific. Although there have been no enquiries from the operators to deploy UMTS
network in the 900MHz, the regulators main concern in allowing such development
is spectrum availability in this band. 2G re-farming processes will be considered in
the future to increase spectrum efficiency, under ITU decisions, but the regulator is
concerned to protect GSM services in the 900MHz band.
In Bahrain, there are two GSM operators occupying the full bandwidth of the EGSM and the GSM-900 bands. Both operators are in the process of launching 3G
services using UMTS technology. The regulator has provided GSM licences under a
technology specific policy, although technology neutral policies have been adopted,
in general. The UMTS networks will be deployed using the core band of UMTS.
Allocating spectrum from the GSM-900 band to UMTS services has not been
considered yet by the regulator. The likelihood of such development will be
addressed in the future under a general spectrum management policy according to
ITU decisions, public consultations, internal coordination and international
developments18.
In Saudi Arabia, there are two GSM operators allocated spectrum from the 900MHz
band. By the end of first quarter of 2007 a third licence will be issued. The
remaining free spectrum of the 900MHz band will be assigned to the third
operator. CITC, the national regulator, has adopted a technology neutral/service
specific approach in regards to spectrum licensing. The licences are provided for
specific type of services (e.g. mobile, fixed, broadcasting) and the licensee is
allowed to deploy any technology that meets best his traffic demands. In other
words, the mobile operators are able to migrate users from GSM technology to any
other 3G technology according to their timeframe and business needs. CITC has
coordinated its decisions with adjacent countries, although none of the operators
has yet deployed UMTS services in the 900MHz.
In UAE, there are two GSM operators occupying the full spectrum in the area of
900MHz and E-GSM. Both licences have been provided under a Public Sector
Telecommunication Services regime which actually allows the operators to deploy
the mobile technology of their preference within their allocated spectrum areas.
Due to the slow uptake of UMTS the operators have only recently started to deploy
18
Telecommunication Regulatory Authority (TRA) (2006): Spectrum Policy and Planning - A
Joint Policy Issued by the TRA and the Ministry of Transportation (MoT) of the Kingdom of
Bahrain
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UMTS networks using the core band across the country. The regulator does not
consider competition or licence pricing issues to act as barriers for UMTS900.
However, the operators have to coordinate and inform the regulator before
proceeding to UMTS900 deployment.
5.3.4 Sub-Saharan Africa

In Africa, 3G deployment is still immature and in most countries, operators have
not yet applied for a 3G licence. The majority of countries have technology-specific
policies for spectrum allocations for mobile networks. Although re-farming
processes are being considered from some African NRAs, most of the 900MHz band
spectrum has been allocated to GSM operators or has been reserved for future
GSM applicants.
In Kenya, two GSM mobile networks have been deployed. Both operators have
been allocated frequency allocations from the 900MHz and 1800MHz bands. The EGSM band, although currently allocated for another use, could in the future be
designated for GSM networks. The GSM licences have been granted under a
technology specific policy. Kenyas frequency allocations allow portions of the 880960MHz band may in future be used to implement terrestrial component of IMT
200019. The operators have stated that they are planning to deploy 3G networks,
although none of them has formalised this request to the regulator. Re-farming
processes, as part of a migration plan from GSM to 3G/UMTS networks, are
considered by the regulator as future spectrum management strategies.
In South Africa, three GSM operators occupy the available spectrum in the E-GSM,
GSM-900 and GSM-1800 bands. The licences are valid for 10 years and they have
been renewed recently. Two of the operators have been granted licences to launch
3G networks, which operate in the 1900MHz and 2.1GHz bands. The regulator has
adapted a technology neutral approach for spectrum allocations; however the
second and third generation mobile networks do not operate under this policy.
Potential applicants for 3G licences have submitted inquiries in regards to the
availability of spectrum in the 800MHz band for the deployment of CDMA networks.
This band is currently occupied by broadcasting services and the applicants
questioned whether the CDMA services can coexist with the broadcasting services.
The regulator will consider re-farming processes in the future as a means of
spectrum relief, although issues like user migration and the cost implications also
need to be considered.
In Zambia, currently there are three GSM operators. All operators have allocated
an equal amount of spectrum (6MHz) from the 900MHz and the 1800MHz bands.
The E-GSM frequency band is unused. The regulator has reserved frequency bands
in the 900MHz and 1800MHz area to allow a fourth operator to enter the market.
Two of the operators have expressed their desire to deploy UMTS networks.
Despite the fact that the spectrum management policy is under a technology
19
Communications Commission of Kenya (2006) Table of Radio Frequency Allocations
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neutrality regime and the frequencies are allocated in a first-come-first-served

basis, the operators choice is to perform initial testing for their UMTS networks in
1800MHz and 2.1GHz frequency bands. The first phase of the deployment is
estimated for early 2007. In order to implement a technology neutral approach,
the regulator has bilateral agreements with neighbouring countries. Border
coordination is continuously revisited to allow an interference-free environment on
each side of the border.
In Zimbabwe, three GSM networks operate in the 900MHz and 1800MHz band. The
E-GSM band is currently not is use, but this is due to handset unavailability. The
GSM licences, which are technology specific, have been granted following a beauty
contest process. The incumbent operator has expressed an interest to deploy a 3G
network. The regulator is currently reviewing the request and the process will be
formalised by the end of 2006. Frequencies will be allocated from the free area of
1700MHz band. Re-farming strategies will be considered in case better spectrum
efficiency is required.
In Ivory Coast, there are currently three GSM operators and the regulator has
provided four additional GSM licences to start operating within 2007. Four licences
have been provided for 20-years period, while three licences are valid for 10-years.
The first GSM licence expires on 2016. The GSM licences occupy the whole
spectrum of the GSM-900, E-GSM and GSM-1800 bands. Although the regulator is
currently reviewing the introduction of a 3G/UMTS network in the 2.1GHz band,
none of the current GSM operators has applied for a 3G licence. All GSM licences
are technology specific.
In Mauritius, there are two GSM operators, which have been allocated spectrum in
all GSM bands. The regulator has adopted a technology neutral policy, although the
frequency bands for the mobile networks are technology specific. Hence, the
regulator has granted licences for the deployment of Public Land Mobile Networks
(PLMN). These licences expire on 2015 and 2016 and are valid for 15 years. Since
2004, one of the operators has begun to deploy 3G/UMTS network in the core band
of UMTS, with very low penetration rate mainly due to the expensive pricing of
handsets. Although none of the operators have expressed any interest in the
deployment of UMTS900 network, the regulator is in the process of assessing the
implications of such development. Spectrum re-farming processes have been
adopted in the past for the coexistence of UMTS together with other services.
According to the regulator, competition issues wont be a barrier for UMTS900
deployment and no additional payment is being considered for granting such a
licence. The regulators main concerns are technical and compatibility issues in
order to minimise any interference or degradation may be caused to adjacent
services. These barriers could be lifted under international harmonization
processes, ITU and WRC decisions.
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5.4 Time frame

There are many parties which need to be involved in re-farming of 900MHz
spectrum: regulators, spectrum policy bodies, operators, service providers, chipset
and handset vendors. Cross-border co-ordination is needed to assess and address
potential interference problems. As noted in this report, it will be highly beneficial
to the industry to have the widest possible commonality of approach to ease the
introduction of UMTS900. Because of the long timescales which will be involved, it
would be beneficial to the industry for the issue to be acted on as soon as possible,
with public policy for the long-term management of GSM spectrum needing worldwide co-ordination.
Currently, Europe accounts for 48.3%20 of WCDMA connections around the world.
This fact together with the activities regarding UMTS900 networks development,
not only from the regulatory/EU side but also from the mobile operators point of
view, make Europe the most potential region for widely adopting UMTS900
technology sooner. No later than the end of 2007, three key players - UK, Finland
and France -, will allow UMTS900 deployment. Considering these factors, an
estimated timeframe could be as follows:
by beginning 2008, 50% of the European NRAs allowing UMTS900 networks
by beginning 2009, the rest will follow
In APAC region, the active WCDMA connections reach 47.8%22 of the number
worldwide. Ten countries (Australia, Hong-Kong, Japan, S. Korea, Malaysia, New
Zealand, Philippines, Seychelles, Singapore and Taiwan) in this region have
deployed WCDMA networks. A technology neutral approach for mobile service
seems a preferable option for most of the NRAs. However, in some of the countries
the 900MHz. band is assigned to other services, since other systems like
CDMA2000 provide an alternative 3G solution. Taking into consideration the
above, an estimated time schedule could be as follows:
by end of 2007, 20% (key players) of the APAC NRAs grading licences for
UMTS900
by end of 2008, this percentage may reach 50%
by end 2009, the rest 50% will follow
In Middle East, there are six countries with 3G/UMTS licences (Bahrain, Kuwait,
Oman, Qatar, Saudi Arabia and UAE). In total, their 3G connections account for
0.8%22 of the worldwide WCDMA connections. NRAs tend to adapt a technologyspecific approach for mobile services and showing preference for the core-band of
UMTS for 3G services. Due to neighbouring coordination that needs to take place,
processes for UTMS licences may slow down. The next two years will be crucial for
the UMTS uptake in this region; hence NRAs could aim for licencing UMTS900
networks by end 2008.
20
Wireless Intelligence
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A report to GSMA
In sub-Saharan Africa, 3G/UMTS deployment is in an embryonic stage. Accounting

for 0.5%22 of total WCDMA connections, UMTS networks are commercially launched
only in Mauritius and South Africa. Second generation networks, mainly GSM, are
the main revenue drivers in this region and NRAs aim to safeguard GSM
operations. Coordination activities with neighbouring countries are extensive in this
region; hence processes for UTMS licences may slow down. Taking also into
account the very slow uptake of UMTS services, 10-20% of the NRAs wont be
considering UMTS900 deployment sooner than the end of 2009.
5.5 Compatibility study

The re-farming of the 900MHz band implies that a part of the band gets used to
run UMTS, while the other part gets still used to service users of GSM-only
handsets (or dual-mode GSM-UMTS2100 handsets). Then there are two main
implementation issues:
One must take sure that adjacent GSM and UMTS channels dont interfere
Operators must allocate appropriate spectrum capacity to GSM and UMTS, and
must in particular make sure that enough capacity is left for GSM operations
In relation to the UMTS900 deployment in GSM frequency bands, ECC has

prepared the following study reports:
i)
UMTS and GSM compatibility operating in 900MHz and 1800 MHz bands
ii)
UMTS compatibility operating in 900/1800 MHz with adjacent operating

systems
A preliminary study by comparing the GSM and UMTS link budgets in 900MHz band
has indicated that the cell range of GSM speech service is similar to that of UMTS
CS64 (circuit switched 64 kbps). This means for a GSM900 operator, by re-using
the GSM900 sites without adding any new sites, UMTS CS64 video-telephony
service can be offered by co-locating GSM and UMTS sites. For the practical
deployment of both GSM and UMTS in the 900MHz band a minimum of 2x10MHz
per operator is needed21.
According to the first report, the ECC report concludes that UMTS900/1800 can be
deployed in different types of environments (urban, suburban and rural areas) in
co-existence with UMTS and/or GSM under the following conditions:
1. UMTS900/1800 networks can co-exist with other UMTS900/1800 networks in
the same geographical area with a carrier separation of 5 MHz. The
recommended carrier separation between two uncoordinated UMTS networks is
5 MHz or more, while in a coordinated scenario is 5 MHz or even less. The
UMTS capacity degradation is less than 1% for both uplink and downlink
21
ECC/CEPT (2006): Compatibility study for UMTS operating within the GSM-900 and GSM-
1800 frequency bands
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2. UMTS900/1800 can be deployed in urban, sub-urban and rural areas in coexistence with GSM900/1800 macrocells in coordinated operation and/or in
uncoordinated operation. According to the simulations, the UMTS downlink
capacity loss varies between less than 1.5% (urban) and less than 1.2%
(rural), while the uplink capacity loss is expected to be smaller than 5%
(urban) or smaller than 3% (rural). The GSM system outage degradation is
negligible.
When UMTS900/1800 networks and GSM900/1800 networks are in
uncoordinated operation, the recommended carrier separation between UMTS
carrier frequency and the nearest GSM carrier frequency is 2.8MHz or more.
When UMTS900/1800 networks and GSM-900/1800 networks are in
coordinated operation (co-located sites), the recommended carrier separation
between UMTS carrier frequency and the nearest GSM carrier frequency is 2.6
MHz or more.
3. UMTS900/1800 can be deployed in urban, sub-urban areas in co-existence with
GSM-900/1800 microcell and/or picocell in uncoordinated (non-located sites
between different networks) operation. In this case, the GSM system outage
degradation is less than 1% for both downlink and uplink.
The recommended carrier separation between the UMTS carrier frequency and
the nearest GSM microcell and/or picocell carrier frequency is 2.8MHz or more.
Further separation of the carriers will help to reduce the GSM micro/pico cell
system outage degradation.
4. In order to avoid or minimise the interference between two operators, it is
suggested for the operator who plans to deploy UMTS and GSM in the same
band that it is better to use the so called Sandwich frequency arrangement
as shown below.
Fig. 5.1 UMTS carrier arrangement between GSM carriers Sandwich

arrangement
Source: ECC
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A report to GSMA
The conclusions of the second report for the deployment of UMTS900 systems can
be summarised as follow22:
UMTS900 can be deployed in the same geographical area in co-existence with

GSM-R as follows:
1. There is no need of an additional guard band between UMTS900 and
GSM-R, a carrier separation of 2.8MHz or more between the UMTS900
carrier and the nearest GSM-R carrier is sufficient.
2. Activation of the GSM-R uplink power control is recommended,
especially for the train mounted MS, otherwise the impact on UMTS UL
capacity could be significant when the UMTS carrier is paced at 5MHz
adjacent to the GSM-R band. However, it has to be recognized that this
is only applicable in low speed areas as elsewhere the use of uplink
control in GSM-R will cause significantly increased call drop out rates.
For high speed trains the power control is not fast enough in order to
allow for some interference gains.
3. UMTS operators should take care when deploying UMTS in the 900MHz
band, where site engineering measures and/or better filtering
capabilities may be needed in order to install UMTS sites on the railway
track or close to the railway track when the UMTS network is using the
5 MHz channel adjacent to the GSM-R band.
When UMTS900 is deployed in the same geographical area in co-existence with

PMR/PAMR (CDMA PAMR, TETRA, TAPS) operating at frequencies above
915MHz, some potential interference from PAMR/PAMR BS to UMTS900 BS
could be a problem. Some measures than could be taken into consideration
are: reducing PMR/PAMR BS Tx power, space separation, installation of
external filters, increasing Guard band.
The potential interference from UMTS900 to aeronautical DME operating at

frequencies above 970 MHz is not a problem. Some additional margins may be
required for the protection of aeronautical DME operating at frequencies
between 960 and 970MHz, where the required additional margins are
dependent on DME carriers and aircraft positions.
22
ECC/CEPT (2006): Compatibility between UMTS 900/1800 and systems operating in
adjacent bands
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6 Handset and chipset analysis

6.1 Introduction
Handset availability is crucial to the successful rollout of UMTS900 as the market
will need to be populated with handsets which will work in the UMTS900 band and
in other GSM and UMTS bands also. A reasonable threshold of UMTS900 handsets
will needed in the market for it to make commercial sense for operators and end
users to switch from one network to another. Research with chipset and handset
vendors established the progress in chipset and handset development to date and
outlined the roadmap and timeline for device development.
Key findings
1. All major chipset (and consequently handset) manufacturers agreed that
UMTS900 will happen. They are all either currently developing or planning to
develop UMTS900 chipsets and handsets.
2. They all expect to develop chipsets supporting UMTS2100/900 (dual band)
before moving towards quad band. The usual strategy is to include at least 2
upper bands and 1 lower band. A dual/tri/quad-band chipset refers to a chipset
capable of operating in the corresponding number of radio frequency bands.
The frequency bands can be configured by the use of onboard software to meet
the different requirements of different regions.
3. In the case of UMTS900: dual band usually refers to UMTS2100/900; tri band
usually refers to 2100/1900/900; quad band can refer to any combination with
2100/1900/900/xxx. All UMTS chipset manufacturers interviewed support
GSM 1800/900 in their UMTS900 chipsets.
4. The volume of production is unpredictable as it depends on demand from
operators. However, operators success in rolling out UMTS900 services lies in
the availability of devices to support the transition to UMTS900. This was also
the case in the transition from 2G to 3G. Vendors stressed that operators will
need to create the pull to ensure that the UMTS900 market is seeded with
handsets / devices.
5. Manufacturers expect that between a few hundred thousands and up to a few
million handsets will be produced by 2009. With these low quantities, volume
related costs will not come down significantly in the early stages of
deployment. Advances in chipset design, e.g. higher levels of integration, will
be the main driver for cost reduction rather than economy of scale.
Furthermore, chipset manufacturers do not in general expect cost reductions to
be necessarily reflected in prices. However, the opportunity for economies of
scale reductions in handset prices will be severely limited if there is no
common international policy to make spectrum available for UMTS900.
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6. In low income countries, a minimum cost of ownership of a mobile phone is

critical for increasing penetration or phones and retention of service. Key
components of the cost are phone acquisition costs23 (which includes handset
cost) and taxation24. Price elasticity is discussed in Section 7 of the report.
Handset availability research was conducted through both desktop research and
interviews with major handsets and chipsets manufacturers.
6.2 Chipset availability

Suitable chipsets have to be available before handsets can be developed on top of
them.
The roadmap of chipsets is generally consistent across all major chipset
manufacturers which took part in interviews. They all expect to start the product
line-up with chipsets supporting UMTS2100/900 (dual band) before moving
towards quad band for easy roaming. Some are considering adding additional
frequency bands such as 2.5 GHz which is yet to be approved by regulatory bodies.
However the timelines for chipset development will vary and manufacturers are
considered in two groups in the following market development scenario: Market
Leaders and Followers. The edge that Market Leaders enjoy in the first two years
will become less apparent in 2008 and the distinction between the two groups will
blur.
6.2.1 Market development scenario

2006:
Market Leaders: At least one major chipset manufacturer currently has dual band
(UMTS2100/900) platforms developed, one with HSDPA and one without. One has
development kits for their tri band platforms (UMTS2100/1900/900), thousands of
which have been distributed to handset manufacturers for testing purposes.
Followers: Development of UMTS900 chipsets is still underway because they are
currently focusing on manufacturing chipsets supporting UMTS2100 or 1900, which
are experiencing higher growth.
23
Economic Impact of Wireless and Policy implications in Asian developing countries. McKinsey, 3GSM
World Congress Asia 2006, Singapore, 16th October 2006

24
http://www.gsmworld.com/tax/
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2007:
As the market develops and more customer segments are established, so there will
be different requirements for multi-band baseband chipsets. The total market for
such chipsets is expected to be too small for economies of scale to develop.
Market Leaders: By 2007, market leaders are expecting to have quad-band
platforms available. HSDPA support will become as standard functionality and
some will vendors expect to include HSUPA. The cost difference between dual band
and other multi band chipsets is expected to be USD 5-10 per unit. This is mainly
due to technological advances in chipset manufacturing processes and reduction in
the number of components in each chipset made possibly by using new Systemon-Chip (SoC) technologies.
Followers: Prototype development gradually transforms into commercial shipment
and adoption by handset manufacturers.
2008:
All manufacturers expect that demand for UMTS900 handsets will start to take off
as operators start to develop the markets. However, volumes will remain low, and
only a few million chipsets are expected to be shipped. Ovums research with
chipset vendors indicated that did not expect to get significant economies of scale.
However, some manufacturers are confident that by 2008 they will be able to
integrate several different components into one and power management is
expected to improve significantly. Costs are expected to decrease by 20-30%
annually in the following years, driven by integration and manufacturing processes
rather than volumes. A study by inCode estimates that chipset costs could be
reduced by 58% in 2010 from 2007/8 levels25.
6.3 Handset availability

Handset manufacturers generally take about 3 months to develop handset
prototypes from chipsets, and a further few months to ramp up production for
commercial rollout. The time required for product and production development
depends heavily on the handset complexity and size.
Handset manufacturers are similarly divided into two groups, market leaders and
followers. Most market leaders will have had the advantage of having developed
UMTS 850 handsets. Once again, the distinction between leaders and followers will
blur by 2008.
Manufacturers stressed that the demand for handsets will have to come from
operators to seed the market. The handset market is now much more mature than
when the initial 3G networks were deployed and take-up was slow due to
25
UMTS900 Evolution Handset Roadmap and Penetration Analysis
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disappointing and expensive handsets and poor network coverage. This maturity
and the availability of UMTS 850 devices should allow a much cleaner market entry
for UMTS900, but market pull is still needed.
6.3.1 Market development scenario

2006:
Market leaders and followers: Given the availability of chipsets from chipset
market leaders, prototypes are still under development. All vendors are still
focusing on devices supporting other spectrum bands, with UMTS2100 and 1900
experiencing the strongest growth and hence placing significant demand on the
product development teams.
2007:
Market leaders: market leading manufacturers, with UMTS 850 experience
consider the technology development for UMTS900 not to be a major issue it is
simply a change in radio frequency. These manufacturers expect to be able to roll
out dual band handsets by the second half of 2007.
Although customer migration to UMTS900 is expected to take place, demand from
operators is expected to be negligibly small compared to devices supporting other
spectrum given a small number of operators actually having the infrastructure in
operations. Initial demand of at least hundreds of thousands will be needed to
make mass production commercially viable. The volumes will be insufficient to
allow economies of scale to be achieved.
Since UMTS900 has better coverage than UMTS in higher bands, some handset
manufacturers expect that the market for such handsets will be mainly for voice
traffic in the early stage, and hence mid or low end handsets are more likely to
gain popularity. Therefore, higher volumes of handset shipments will be needed to
compensate for the lower profit margins on low value devices. compared to high
end devices.
Followers: UMTS2100 and 1900 are expected to continue to dominate growth
areas. Manufacturers are still cautious about demand from mobile operators
because of different regulatory environments in different markets.
2008:
Market leaders and other followers: The handset range will start to diversify
and address to both high-end and middle range users, given the availability of a
wider range of chipsets.
Orders from operators are expected to start to build, but economies of scale will
only start to develop once more widespread adoption takes place. However,
manufacturers generally do not expect their reduction in costs to be reflected in
prices.
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7 Economic analysis
This section of the report provides a high level analysis of some of the economic
factors which may influence the deployment of UMTS900 networks and services.
7.1 Impacts of the introduction of UMTS900

on prices and demand
It has been demonstrated through our modelling simulations that UMTS900 can
effectively generate cost reductions of up to 40% in CAPEX and 30% in overall
costs when compared to a baseline case scenario of deployment using UMTS at
2100MHz.
These lower costs are primarily due to the radio propagation characteristics in the
lower band which provide greater reach of UMTS900 and improved in-building
coverage.
Our modelling simulations did not include a comparison between UMTS900 and
GSM technologies. Intuitively, however, given similar costs for coverage build up at
900MHz, overall costs are not likely to be different between these two
technologies.
If this is the case, then in a greenfield implementation case (areas without existing
mobile coverage), provided adequate spectrum is available, operators are likely to
choose the UMTS900 technology over GSM because of the potential upside in
revenues due to high value add data services and a desire to align their networks
to the 3GPP roadmap.
In this section of the report we discuss the effects that the introduction of
UMTS900 might have on the price of services and on the demand for services.
There is however uncertainty about the relationship between these factors in new
markets.
7.1.1 Impact of UMTS900 on the price of services

It is unlikely that operators will pass on savings with CAPEX and OPEX to
customers immediately, especially in markets where overhauling of existing
infrastructure is needed. The major reasons for operators not to reduce their prices
will be:
increased overall indebtedness - as capital expenditure for new infrastructure is

usually financed by debt
shareholder pressure to realise higher returns to compensate for recent capital

outlays demanded by the overhaul
In a market with high mobile penetration and where operators deploy more than
one technology (e.g. GSM and UMTS in multiple bands), operators do not have
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incentive to immediately reduce the price of services for one specific technology
(UMTS900 in this case) because this may impact their ability to charge higher
prices for similar services deployed over technologies with a higher cost base.
Some players, however, may decide to reduce investments in GSM or UMTS2100
and expand coverage and or capacity mainly with UMTS900. Their pricing strategy
might include more aggressive price cuts to stimulate subscriber acquisition.
In markets where mobile penetration is still low, it is more likely that the cost
reductions delivered by UMTS900 are more quickly passed on to the end-user to
accelerate penetration.
There are other cases where the cost advantages of UMTS900 may be more readily
translated into reduction of retail prices of mobile services. These include markets
in which the regulator imposes price control based on regular cost reviews and
cases where competition in the market is strongly price-focused.
In the medium term, as investments in the GSM network have already been
amortised and the declining contributions of the GSM platform represent a residual
net present value which is low when compared with the potential NPV with an
UMTS only network, we might expect a more accelerated replacement of GSM by
UMTS900. When this happens, prices will tend to change reflecting the lower long
run costs of UMTS.
When replacing GSM by UMTS900, there is also a case for cross-subsidisation of
voice and data services by an operator. As data services enabled by 3G enjoy
higher margins, operators might opt to offer bundles with very low effective price
per minute for voice to attract GSM subscribers from other networks.
When operators are introducing UMTS900, they may have to provide additional
handset subsidies to cover the higher costs of the lower volume UMTS900
handsets. These costs have not been considered in the analysis, as any such
handsets will be dual or triple mode and be able to generate revenues on the
operators GSM or UMTS2100 network, which offset the subsidy.
7.1.2 Impact of UMTS900 on the demand for services

We look at the impact of UMTS900 on the demand for services from three different
perspectives:
Effect of tariffs on the service usage

Assuming that cost differentials of UMTS900 are eventually translated into price
reductions, these price reductions may drive an increase in usage. Although the
general idea is very intuitive, its quantification and forecasting are complex.
Demand elasticity to price is a concept widely accepted but rarely demonstrated.
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The analysis of demand elasticity to price at a micro level requires marking a base
of users (to monitor changes of usage after price alterations) and isolating external
effects (e.g. seasonality, public holidays or major events, competition-driven
bundling of services) that also interfere in the usage of mobile services. The results
obtained are relevant to the segment of users analysed and remain valid for a
short period of time. These results can hardly ever be generalised.
On a macro level, some results can be more easily obtained but their relevance is
more questionable as many other factors might also contribute to the change in
usage (notably the effects of fixed to mobile substitution in the increase in usage).
Figure 7.1 plots minutes of use of mobile voice services for different levels of price
per minute using historic data from the UK market.
Figure 7.1 Average revenue per minute vs. average minutes of use per week (per
user) for voice
Price per Minute (USD)
0.29
0.27
0.25
0.23
0.21
R2 = 0.9237
0.19
0.17
0.15
110
120
130
140
150
160
170
Minutes of Use
Source: Ovum, based on Wireless Intelligence data

The graph shows that a 10% change in the average price per minute for voice calls
results in approximately 12% change in usage (expressed as minutes of use per
week). However, one should note that not all of the increase in usage is due to
price reductions and that part of it is due to increased usage of mobile services due
to fixed-mobile substitution and also a general increase in traffic levels.
It should also be noted that there are major differences in elasticity of demand in
relation to price in different regions.
Using data available from Wireless Intelligence, we have compiled the evolution of
minutes of use and average price per minute for mobile voice services in Western
Europe and in Asia Pacific.
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80
Figure 7.2 Demand elasticity to price for mobile voice services in Asia Pacific and
in Western Europe
ASIA PACIFIC
WESTERN EUROPE
0.3
0.15
0.1
R2 = 0.8519
0.05
190
210
230
250
270
290
0.25
0.2
R2 = 0.7422
0.15
110
130
Minutes of Use
150
Minutes of Use
Source: Ovum, based on Wireless Intelligence Data

These graphs show that a reduction of price of USD 0.05 in Asia Pacific will in
average produce an increase of 60 minutes of use in a week while in Western
Europe, for the same decrease in price, there is approximately 35 minutes increase
in use of mobile voice services.
These differences are partially explained by the average level of development and
mobile penetration in these regions.
Figure exemplifies the expected differences between developed and developing
countries.
Figure 7.3 Demand elasticity to price in developed and developing countries
Average Price per Minute
0.2
P1
Demand for Mobile

C ommunication Services
in Developed countrie
P2
P3
Demand in
Developing
countries
Minutes of Use
Source: Ovum
Since the potential customer base in developing countries is much larger and more
price sensitive, it is safe to assume higher price elasticity to demand, which implies
a bigger incentive for operators in developing countries to lower their prices
compared to counterparts in developed countries.
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In the graphical example, Figure , prices are reduced from P1 to P2 in developed

countries while a bigger reduction from P1 to p3 happens in developing countries.
The situation is such that operators in developed countries clearly have less
incentive to lower prices with its relatively inelastic and saturated mobile market,
compared to an extremely elastic demand in developing countries. The price
reduction from P1 to P3 in developing markets may also reflect a land-grabbing
behaviour of operators trying to secure a higher market share (possibly even with
temporary offers priced below cost).
From a cost perspective, operators in developing countries usually benefit from a
much lower customer acquisition cost, and also lower costs for electricity, rent and
labour.
In the GSMA report Tax and the digital divide it has been estimated that the price
elasticity is between -0.54 (post-paid) and -0.76 (pre-paid) in developing
countries. This means that a 10% increase in prices causes between 5.4% and
7.6% decline in usage. From Figure 7.2 we observe that the price elasticity for Asia
Pacific using blended post-paid and pre-paid data is -0.57 which is compatible with
these estimations.
It is difficult, at this stage, to predict by how much mobile voice prices will be
affected with the introduction of UMTS900 in regions such as the sub-Saharan
Africa. However, one could reasonably assume that a 10% decline in prices will
boost mobile usage (or the average minutes of use) by at least 6%.
One valuable characteristic of UMTS900 is that it makes it possible to extend
mobile coverage in developing countries. In Africa, for instance, the lower overall
costs of UMTS900 (in relation to UMTS2100) mean that it may be economically
viable to deploy 3G services in suburban or rural areas where this was not possible
before.
The practical consequences are that the addressable market is enlarged and the
penetration of mobile services accelerates.
However, it is important to note that in some developing countries, the longer
handset replacement times (up to 4 years in some cases) and the prevalence of
second hand handsets mean the uptake curve is shifted one or two years in
relation to more developed markets.
Initiatives such as GSMAs Emerging Market Handsets are already addressing this
issue at the 2G level and will need to be extended to 3G in order to help accelerate
the penetration of UMTS900 capable handsets in markets such as the sub-Saharan
Africa.
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Figure 7.4 Acceleration of penetration of mobile services
Penetration
A ddressable M arket
after UM T S 9 0 0
A ddressable M a rk e t
befo re UM T S 9 0 0
Time
Source: Ovum theoretical model
Effect of tariffs on the service usage
In developing countries, the prevalence of pre-paid plans can distort the effect of
demand elasticity to price. This happens because in low-income countries, the
barrier to usage is commonly the value of the recharge card, independent of the
number of minutes bundled in it.
Therefore, if savings obtained from lower operational costs are passed on to the
price per minute and operators are able to include more minutes in the bundles or
reduce the price of existing bundles, this will expand the usage of services.
In developed countries, the broader availability of UMTS is speeding up the launch
of infotainment services combined with flat-fee style tariffs. As these new data
tariffs and compelling services are made available to end users, the average profile
of usage of data services will change.
While voice pricing will remain the main flex-factor affecting 3G migration and
growth for the next few years, flat-rate data will become an increasingly effective
tool by which pure-play UMTS and second or third ranked mobile operators in
developed countries can improve their position.
There are several effects that take place in a mobile network in few months after
the successful introduction of flat-rate tariffs:
Heavy mobile data users are attracted to the network
Existing users start to gradually increase usage of data services, initially mostly
based on web browsing
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Users are encouraged to experiment new data services such as VoIP and video
streaming using mobile data cards or applications downloadable to smartphone
handsets
The introduction of UMTS900 and consequent broader availability of 3G services is

likely to speed up the transition to flat-rate and bundle tariffs which will in turn
cause a substantial increase in usage of data services.
7.1.3 Impact of UMTS900 on the demand for services in

various regions
A detailed analysis of the impacts of UMTS900 on the demand, as considered in
our simulations, is provided in Section 4 of this report.
7.2 Impacts to country economics

UMTS900 is an ICT technology which provides a very good opportunity to produce
economic benefits.
To the extent that it can reduce prices and extend the supply of mobile services to
new areas, UMTS900 can help to unlock considerable value that can subsequently
revert to new investments.
There are many other ways in which UMTS900 can bring economic benefits. These
are illustrated by examining how it might contribute to economic growth.
The theory of economic growth identifies several channels through which ICT can
influence growth.
7.2.1 Changes in ICT related capital investments

There is scope for UMTS900 investment in all markets:
In countries where mobile coverage is already high, capital investment is likely

to be made for replacement of 2G systems by UMTS900
In countries where coverage is not complete in suburban and rural areas,

capital investments may be directed to extensions of coverage using UMTS900.
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Figure 7.5 Economic benefit of lower prices and expanded supply of mobile
services
Price
Demand
Price reduction
passed on to users
P1
P2
Lower cost base of

UMTS 900 allows
expansion of supply
Economic Benefit
Supply
Quantity
Figure 7.6 Components of the Economic Growth Accounting
7.2.2 Changes in the size of the labour force

The wider availability of mobile services, enabled by the UMTS900 technology, in
developing countries can improve the chances of the unemployed to find
employment. There are several ways by which this may occur:
enabling unemployed people to call for opportunities rather than rely on word
of mouth communications and avoiding unnecessary journeys
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taking advantages of UMTS900 data capabilities to access the Internet to seek

for job opportunities or to receive updates on job vacancies
having access to a mobile phone may improve employability. An employee who

has the means to receive and make calls will be more productive in the eyes of
the employer as they will be easier to contact when away from their location of
employment
improved mobile coverage in the region will stimulate SME business

development and growth.
The increased expenditure for the build-up of the UMTS900 infrastructure will also
help to create other jobs. For instance, employees of the mobile industry spend
money on restaurants, holidays, food etc and generate additional jobs as a result.
Previous GSMA reports26,27 estimate that a multiplier between 1.5 and 1.7 for
developed countries and 2.0 for developing countries exists, i.e. for every ten
direct jobs created in the mobile industry by the introduction of UMTS900, there
will be other five to ten induced jobs created in other industries.
7.2.3 Changes in the productivity of labour

The positive effects that ICT investments have in productivity are referred to as
capital deepening.
In developing countries, the effect will be felt particularly for workers with
unpredictable schedules. Examples would be any workers who are involved in
repair and maintenance activity, plumbers, electricians and workers involved in
collection and delivery of services. For such workers, access to UMTS900 services
allows them greater accessibility and therefore superior knowledge of demand for
their services.
In developed countries, the data capabilities enabled by UMTS900 can be used to
keep workers connected to companies back-office systems (e.g. e-mail, CRM, ERP)
independently of their location or time of the day.
Indeed, the productivity of all workers who, at any time or for any reason, have a
need to be away from their main location of work, or who need to travel frequently
can be enhanced by mobile communications.
26
Lewin, D: The economic contribution of mobile services in the Europe Union before its 2004
expansion
27
Lewin, D and Sweet, S: The economic benefits of mobile service in India
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7.2.4 Solow28 residual

Economic theory developed over the last 20 years has identified other mechanisms
to recognise benefits.
Figure .7 decomposes the element of GDP growth for countries that are member of
the G7 for the period 1995 to 2001.
This analysis by Jorgensen shows that in addition to changes in Capital Input and
changes in Labour Input, there is a residual, commonly named total factor
productivity (TFP), which captures any growth that is not associated with input
usage. Enabled by technological spillovers, phenomena such as creative
deconstruction and network effects play an important role in recycling business
practices promoting growth both in the ICT and in non-ICT sectors.
To the extent that UMTS900 facilitates new working practices (e.g. by improving
the mobility of the workforce) it will indirectly contribute to a creative
deconstruction where firms may reengineer business processes rather than simply
automating them so as to take advantage of the productivity gains that UMTS900
enables. Also, new firms, with new business models enabled by mobility, displace
existing firms which operate legacy business models.
Figure 7.7 Growth components in G7 countries

Sources of Economic Grow th (G7 Countries 1995-2001)
Annual Contribution (%)
5
4
3
2
1
0
-1
US
Canada
UK
France
Germany
Italy
Japan
-2
Labour
Non-ICT Capital
ICT Capital
Non-ICT Total Factor Productivity
ICT Total Factor Productivity
Source: Dale Jorgenson (Harvard University - 2004)

As 3G services become more widely available (with the help of UMTS900), network
effects quick in29. With more companies connected to the mobile internet,
28
Named after Robert Solow, winner of the 1987 Nobel Prize for his work on the Exogenous
Growth Model
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UMTS900 services can help reduce transaction costs by enabling companies and
workers to trade and negotiate electronically. Mobile internet also helps to improve
the dissemination of information to allow markets to operate more efficiently. This
is particularly important in the financial market where banks benefit from having
prompt access to financial information.
Previous studies point to a strong positive relationship between investment in
telecommunications and economic development30,31:
A developing country which had an average of 10 more mobile phones
per 100 population between 1996 and 2003 would have enjoyed [annual]
per capita GDP growth that was 0.59 percent higher than an otherwise
identical country.
These studies however do not account for the combined voice and data capabilities
of 3G communications. The extension of Internet to a much broader audience and
its usage in completely different contexts of use will require an upward review of
the existent estimates.
7.2.5 Regional differences

In Western Europe it is expected that economic benefits from increased investment
in UMTS900 infrastructure or improvement in labour productivity from the direct
use of UMTS900 technology will not be major factors when compared to the long
term benefits that the diffusion of mobile broadband wireless access and mobile
internet will have in reshaping business practices.
In the Middle East there is still room for increase in the penetration of services and
capital investment is one key economic benefit. However, as oil-rich countries look
into diversifying to tourism and financing, UMTS900 can be also instrumental in
improving labour productivity.
In Asia Pacific there is a mixed picture. In countries with high population density,
the economic benefit that deployment of UMTS900 can yield is to speed-up the
substitution of 2G to 3G thus stimulating the reshape of business models. In
29
One consequence of a network effect is that the purchase of a good by one individual
indirectly benefits others who own the good - for example by purchasing a telephone a
person makes other telephones more useful. This type of side-effect in a transaction is known
as an externality in economics, and externalities arising from network effects are known as
network externalities.
30
Rller, Lars-Hendrik and Leonard Waverman, Telecommunications Infrastructure and
Economic Development: A simultaneous Approach, American Economic Review, September

2001, pp 909-923 using OECD data.
31
Ndiri, M Ishaq and Banani Nandi, Telecommunications Infrastructure for Economic
Development, January 2003, NYU working paper on developing countries.
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countries such as Australia and New Zealand, UMTS900 can also play an important
role in bringing 3G to more remote areas improving economic activity of
indigenous population and reducing transaction costs for farmers.
In sub Saharan countries the case is clearly to bring prices down and to make
mobile services accessible to a larger percentage of the population while also
expanding the supply by extending the coverage to rural areas. Capital investment
will influence growth in a higher degree that it does in other areas but UMTS900
has a much bigger role in helping people find employment or as an enabler of
informal economic activities. Farmers could also have their bargaining power
improved as they would have better access to price information of both inputs and
outputs.
7.3 Adoption of complementary technologies

or services
The benefits of UMTS900 to the economy are not restricted to the economic growth
that increased voice-centred mobile service penetration and usage prompts.
Because of its native broadband data capabilities the introduction of UMTS900 has
a much broader impact in the ICT sector as a whole.
7.3.1 Third Generation Mobile Services

One direct consequence of the introduction of UMTS900 will be to speed up the
penetration of 3G services in the different regions.
As shown in Figure 7.3Figure 7.8, apart from Western Europe where 3G
subscribers will account for mare than 60% of the mobile subscriber base by end of
2010, the forecasted penetration of 3G as a total of mobile subscribers is
forecasted to stay relatively low with the second highest penetration below 15% in
Asia Pacific.
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Figure 7.38 Total Mobile connections and 3G connections to 2010

Asia Pacific
400
1,800
350
1,600
300
250
Total
200
3G
150
100
50
Subscribers (in 1,000,000s)
Subscribers (in 1,000,000 s)
Africa
1,400
1,200
1,000
Total
800
3G
600
400
200
0
Q3
2004
Q3
2005
Q3
2006
Q3
2007
Q3
2008
Q3
2009
Q3
2010
Q3
2004
Q3
2005
Q3
2007
Q3
2008
Q3
2009
Q3
2010
Western Europe
Middle East
600
200
150
Total
3G
100
50
250
Q3
2006
500
400
Total
300
3G
200
100
0
0
Q3
2004
Q3
2005
Q3
2006
Q3
2007
Q3
2008
Q3
2009
Q3
2010
Q3
2004
Q3
2005
Q3
2006
Q3
2007
Q3
2008
Source: Ovum, based on Wireless Intelligence data

In the portrayed situation there are huge opportunities for UMTS900. Not only this
technology can help to accelerate the penetration of mobile services as a whole but
it also has the potential to increase considerably the participation of 3G as a
percentage of the total mobile connections.
Supposing that UMTS900 captures half of the mobile connections growth from
2010 and that the overall growth remains unchanged, penetration of 3G
connections is impacted as follows:
Q3
2009
Q3
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Figure 7.9 Possible impact of UMTS900 in the penetration of 3G

3G penetration
(% of total connections)
without UMTS900
Africa
3G penetration
(% of total connections)
with UMTS900
2.8%
8.2%
Asia Pacific
12.9%
16.8%
Middle East
7.1%
11.5%
61.3%
62.7%
Western Europe
7.3.2 Internet
UMTS900 will have two main effects in relation to Internet access.
Firstly, it will allow more individual users to access content in the Internet using
web-browse enabled handsets or data cards. The positive effects will be felt
particularly in rural areas where, in many occasions in developing countries,
Internet access is not available because there are no fixed lines or broadband
service available.
Secondly, it will provide one more channel for enterprises to keep its workforce
connected to the Internet even when on the move. In developing countries, the
broader availability of Internet access for enterprises may also stimulate that more
companies decide to launch their own websites.
All in all, UMTS900 can be instrumental in reducing the digital divide between
developed and developing countries and urban and rural environments.
7.3.3 Broadband spread

In most cases the rollout of UMTS900 infrastructure will be based on release 5,
release 6 or even release 7 of 3GPP. In practice, this means that the UMTS900
infrastructure will most likely be enabled for HSDPA (rel.5), HSUPA (rel.6) and
HSPA+ (rel.7).
The initial deployments of HSDPA demonstrate that this technology typically deliver
average speeds of 1.8Mbps for content download. Comparatively:
Average speed is twice or 3 times that of 3G in the real world
An email with a 4Mb attachment can be downloaded in around 30s (1min30s

with UMTS)
Access to Intranet is possible in 4.5s (10s with UMTS)
A web page of 150Kb appears in 3.5s on an HSDPA users screen instead of 8s

with UMTS
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Mobile Streaming of a TV channel encoded in MPEG-4 and streamed at

300kbps is enabled
Later in release 6 with HSUPA, high speeds will be enabled also for upload and with
release 7, smart antennas and improvements such as Multiple Input and Multiple
Output (MIMO) are likely to double or treble the average speeds available to users
of UMTS.
The increased coverage and enhanced in-house penetration achieved with the
deployment of UMTS900, coupled with the broader availability of laptops and
desktops with UMTS connectivity, can positively affect the rate of adoption of
broadband services in a country.
7.3.4 Other complementary services

Linked to the improvements that UMTS900 will help to foster in relation to
intensification of Internet usage and spread of broadband access, there are two
other areas of complementary services that are worth mentioning:
e-Commerce - Used as a broadband access service, UMTS offers one more

channel for internet based e-Commerce. In addition, service enablers
embedded in the mobile infrastructure make it possible to use mobile handsets
to perform commercial transactions and payments.
Public e-Services Services such as e-Government, e-Learning and e-Health

can be made available as mobile applications in the UMTS network.
Provided the enhanced coverage and increased penetration of 3G services that

UMTS900 can deliver, these services can be accessed in different contexts of use,
for instance while commuting, and will add to elimination of dead time and to the
improvement in individual productivity.
7.4 New services for customers

Less tangible but not least important is the influence that UMTS900 can have on
the introduction of innovative communication services.
Linked to the wider adoption of flat-rate and bundle tariffs, data based services are
set to blossom.
One such service is voice over IP over mobile. It allows users to make use of VoIP
software clients to make calls, for instance, to international destinations without
paying extra (e.g. mobile to computer) or at reduced prices. Besides the savings to
end-users, indirect economic benefits can be achieved through increased
international communications.
As outlined before, investments in UTMS 900 are likely to be linked with mobile
infrastructure compatible with releases 5 and 6 of the 3GPP standards. These
releases introduce the IP Multimedia Subsystem which is a powerful enabler of rich
services. These are services that combine presence capabilities (e.g. as in the case
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of Instant Messaging), location capabilities and combinational capabilities (e.g. the

ability to combine audio, text messages and/or video streaming during a
communication session). The indirect economic benefit of these services is that
they will facilitate to a great extent the conveyance of information and the
consumption of content.
IMS also plays a pivotal role in the convergence of networks. Besides the well
known and extensively discussed economic benefits to mobile operators related to
the lower operational costs and improved revenue potential delivered by converged
networks, users also benefit from services such as FMC where the user is always
best connected either via mobile or via fixed line communications and have a
seamless experience through the use of a single handset.
These are all services that are gradually developing with upgrades in the existent
infrastructure. The deployment of UMTS900 will represent a chance to speed up
considerably the diffusion of such services.
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Annex A Model description

A.1 Introduction
The main benefit of UMTS deployment in the 900MHz band is the lower signal
attenuation compare to 2.1 GHz band. This results in higher cell coverage in rural
areas where there is less demand for services, and better quality of coverage in
urban areas especially for indoor users due to better signal penetration. Apart from
the cheaper deployment (smaller number of Node Bs for coverage driven network
planning), it will also decrease the number of handovers for users with medium
and high mobility. The 2.1 GHz band can be used to complement the 900MHz band
in areas with high capacity demands to serve hotspots such as train stations,
stadiums and tourist areas.
A.2 Network Dimensioning

We perform simple coverage-based dimensioning, simple capacity-based
dimensioning and finally a simple combined coverage and capacity dimensioning. A
simple approach that prevents an under-estimation of the required number of cells
is to curry out the dimensioning exercise using both methods and selecting the
higher prediction for the number of cells required. This is obviously a somewhat
cruel method and a more accurate dimensioning exercise will consider the
interaction between capacity and coverage in a UMTS system.
For the coverage driven dimensioning we initially have a link budget calculation
to estimate the maximum path loss. The path loss is then used to find the
maximum range by using the well known Cost 231-Hata-Model propagation model
with correction factors for suburban and rural environments. The cell range
estimation is following based on the number of sectors used and finally the site
number is calculated as a ratio of the total area over the site area for different
geotypes.
For the capacity driven dimensioning we initially calculate the maximum
capacity per carrier based on the pole capacity and the assumed noise rise. The
overall (voice, SMS and data) offered traffic in busy hour per geotype is then
estimated. Finally the maximum number of sites per geotype is calculated as a
ratio of the offered traffic over the site capacity (i.e. the carrier capacity times the
carriers per site).
The required number of node Bs that fulfill both network coverage and capacity
requirements, for different geotypes, given their sector configuration is taken as
the maximum number of the two independent calculations of node Bs. The process
of evaluating the required number of node Bs is summarised in Error! Reference
source not found.Figure A.1. A more detailed description of the propagation
models, the link budget estimation, the sectorisation and the pole capacity
estimation follows in the next sections.
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Figure A.1 Process of calculating maximum number of Node-Bs required

Bandwidth Demand
Coverage Demand
UMTS Connections
Voice, SMS, Data
Demand
Geotype
Table ()
UMTS Coverage
System Parameters
Pole Capacity
Link Budget
Busy Hour
Traffic Data
Nodes B from coverage

driven calculation
Cost 231 - Hata Model

Transmission Range &
Node B Coverage
Nodes B from capacity

driven calculation
Take
Maximum
Source: Ovum
Coverage Demand: The geotypes represent the morphological structure of the
communication environment. Multiple geotypes can be defined, reaching very
detailed description of the environment. Due to practical reasons, however, the
number of geotypes should be limited for dimensioning purpose to obtain fast
results. Our geographical area has been partitioned into 4 classes. An example of
type of data used is provided in the following Figure A.2.
Figure A.2 Example of type of data used
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Geotype
Dense Urban
Area
Population
UMTS
Coverage
Coverage
Coverage
2%
UMTS
Traffic Share
Capable
Handsets
Voice
SMS
Data
70%
80%
160%
160%
160%
70%
80%
160%
160%
160%
26%
Urban
8%
Suburban
20%
47%
60%
60%
85%
85%
85%
Rural
70%
27%
50%
50%
70%
70%
70%
Source: Ovum
A.3 Propagation Models

In our calculations we use the Cost 231-Hata-Model Error! Reference source not
found. for 900MHz and 2.1GHz frequency bands for urban environments and the
corresponding correction factors for suburban and rural areas.
900MHz - Urban area
L( R) = 69.55 + 26.16 log( f ) 13.82 log(hB ) + [44.9 6.55 log(hB )]log( R) a (hM )
(1)
where
a(hM ) = [1.1log( f ) 0.7]hM [1.56 log( f ) 0.8]

and hB is the base station (BS) antenna high in meters, hM is the user equipment
(UE) antenna high in meters, f is the used frequency in MHz and R is the
distance between BS and UE in km. For some typical values, i.e. hB = 30m ,
hM = 1.5m and f = 920 MHz , and so above formula is simplified to:
L( R ) = 35.2 log( R) + 126.6

2.1GHz - Urban area
L( R ) = 46.3 + 33.9 log( f ) 13.82 log(hB ) + [44.9 6.55 log(hB )]log( R) a(hM )
Where
a( hM )
is given again by
a(hM ) = [1.1log( f ) 0.7]hM [1.56 log( f ) 0.8]
For the same typical values as above and for f = 1950 MHz we have:
L ( R ) = 35 . 2 log( R ) + 137 . 4
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Suburban environments
L(R )
suburban
Therefore for
= L ( R ) urban
2 log
5 .4
28
f = 920 MHz a typical value will be
L( R) suburban = 35.2 log( R) + 116.6 , and for f = 1950 MHz we have:

L( R) suburban = 35.2 log( R) + 125.2 .
Rural environments
L( R ) rural = L( R ) urban 4.78 log 2 ( f ) + 18.33 log( f ) 40.94

Again, for
and for
f = 920 MHz a typical value will be L( R) suburban = 35.2 log( R) + 98 ,
f = 1950 MHz we will have L( R) suburban = 35.2 log( R) + 105 .
A.4 Link Budget

An example of a link budget used based on 12.2 kbps voice service is shown at
Figure A.3. It must be noted that input data provided is just illustrative and link
budget has been built for all different scenarios and regions examined on a case
specific basis.
Figure A.3 Link Budget Calculation table for 12.2 kbps voice service
Values
Formula
Transmitter (mobile)
2.1GHz
900MHz
Max. mobile transmission power (W)
0.25
0.25
As above in dBm
24.0
24.0
Mobile antenna gain (dBi)
2.0
2.0
Body loss (dB)
0.0
0.0
26.0
26.0
d=a+b-c
Equivalent Isotropic Radiated Power (EIRP)

(dBm)
Receiver (base station)
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Thermal noise density (dBm/Hz)
-174.0
-174.0
Base station receiver noise figure (dB)
5.0
5.0
Receiver noise density (dBm/Hz)
-169.0
-169.0
g=e+f
Receiver noise power (dBm)
-103.2
-103.2
h=g+10*log(3840000)
Interference margin (dB)
3.0
3.0
Total effective noise + interference (dBm)
-100.2
-100.2
j=h+i
Processing gain (dB)
25.0
25.0
k=10*log(3840/12.2)
Required Eb/No (dB)
3.1
3.1
Receiver Sensitivity (dBm)
-122.0
-122.0
m=l-k+j
Base station antenna gain (dBi)
18.0
18.0
Cable loss in the base station (dB)
2.0
2.0
Fast Fading margin (dB)
4.0
5.0
Max. path loss (dB)
160.0
159.0
q=d-m+n-o-p
Log-normal fading margin (dB)
7.0
10.0
Soft handover gain (dB), multicell
3.0
3.0
In-car loss (dB)
10.0
10.0
146.0
139.0
u=q-r+s-t-v
Interference due to co-location with GSM

900MHz (dB)
Allowed propagation loss for cell range
(dB)
Source: Ovum
A.4.1 Link budget explanation

Brief description of all the values and formulas used in the link budget (Uplink
case).
Maximum Transmission Power: 3GPP defines four classes for the mobile
terminal with the following nominal power and tolerance values [5]:
1. Power Class 1: 33dBm (2W), +1/-3dB
2. Power Class 2: 27dBm (0.5W), +1/-3dB

A report to GSMA

We use Power Class 4 for voice (Power Class 3 for data).
For the base station, 3GPP has defined upper limits for micro and pico base
stations. This is 38 dBm for micro and 24 dBm for pico BS [6]. For the macro
BS, there is no definition of an upper limit of output power; typically, it varies
between 10 and 45 W ( 2.5 dB tolerance), with the step of 5W, depending on
manufacturer and product line.
Antenna Gain: The gain on a mobile antenna depends mostly on its size and the
application of the UE. In a typical handset application, such as voice, it is assumed
that the antenna gain is equal to 0 dBi. UE used as data cards (PCMCIA) can
contain an antenna with 2 dBi gain.
For the BS antenna the gain depends on the directionality of the antenna. e.g. for
65o horizontal beam width the gain is 18 dBi.
Body Loss: A body loss parameter is introduced due to the usage of the UE near
the users body. It defines the additional loss in the transmitting and receiving
path. Typical values are 2-3 dB on average for voice services and 0dB for data.
Receiver: The receiver sensitivity level is mainly limited by thermal noise. The
thermal noise power spectral density N 0 , normalized to 1 Hz bandwidth is
174 dBm/Hz.
This noise floor is further limited by the quality of internal components (Low Noise
Amplifiers (LNA), filters, synthesizers, etc) which generates additive noise. This
noise contribution is expressed as the receiver noise figure , F ,and has typical
values of 5 dB. The total noise power at the receiver is limited by its filter
bandwidth (for UMTS, the chip-matched filter bandwidth B equals to the frequency
band occupied by the scrambling code, i.e. approximately 3.84MHz, which owing to
spectral side lobes, results in 5MHz carrier raster); thus the total receiver noise
power in dBm is given by:
N r (dBm) = N 0 (dBm / Hz ) + F (dB ) + 10 log(3.84 10 6 ) .

Interference margin: Interference margin is a function of the cell loading. The
more loading is allowed in the system, the larger interference margin is needed
and the coverage area shrinks. For coverage-limited cases a smaller interference
margin is suggested, while in capacity-limited cases a larger interference margin
should be used Error! Reference source not found.. In the coverage limited
cases the cell size is limited by the maximum allowed path loss in the link budget,
and the maximum air interface capacity of the cell is not used. Typical values for
the interference margin in the coverage limited cases are 1.0-3.0 dB,
corresponding to 20-50% loading.
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Cable loss in the base station: Typically, the overall cable system attenuation
should be less than 3 dB for macro base station.
Processing gain: The ratio between the chip rate
is called processing gain
G p . This is
Wc and
the user data rate
3.84 10 6
G p (dB ) = 10 log
Wd
Wd
Required Eb/N0 : The typical Eb/N0 values for different services with 10-20 ms
interleaving and BLER=10% are presented in Figure A.4 Summary of uplink
Eb/NoFigure A.4 and Figure A.5 for the uplink and downlink respectively, as they
have been derived in Error! Reference source not found..
Figure A.4 Summary of uplink Eb/No
Voice 12.2.
Data 64
Data 144
Data 384
kbps
kbps
kbps
kbps
Static
2.9 dB
1.0 dB
0.4 dB
0.6 dB
Multipath 3km/h
4.2 dB
2.2 dB
1.7 dB
2.0 dB
5.5 dB
3.4 dB
2.9 dB
3.4 dB
Voice 12.2.
Data 64
Data 144
Data 384
kbps
kbps
kbps
kbps
Static
4.4 dB
2.5 dB
2.3 dB
2.4 dB
Multipath 3km/h
7.0 dB
5.3 dB
5.0 dB
5.1 dB
7.0 dB
5.3 dB
5.0 dB
5.1 dB
Multipath
120km/h
Source: Ovum
Figure A.5 Summary of downlink Eb/No
Multipath
120km/h
Source: Ovum
Fast Fading Margin: Fast fading margin or power control headroom is needed in
the UE transmission power for maintaining adequate closed-loop fast power control
in unfavorable propagation conditions such as near the cell edge. At the cell edge,
the mobiles can transmit almost at the maximum available power; thus there is no
more headroom to follow and reduce the negative influence of the small-scale or
fast fading. In order to include this phenomenon in the dimensioning process, the
fast fading margin has to be applied. The fast fading margin depends on the mobile
speed and its typical value [1]:
Varies between 4 and 5 dB for slowly moving mobiles (3 km/h)
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Ranges between 1 and 2 dB for mobiles moving with a velocity of 50 km/h
Is marginal and may be assumed at 0.1 dB for high speed mobiles (120 km/h)
Soft Handover Gain: Soft handover occurs if a mobile is connected to at least

two cells at a time. If the cells belong to different Node Bs, the uplink signal
combining is performed at RNC level. If the cells belong to the same Node B, the
uplink signal combining is performed at the same Node B. In the downlink, the
combining is done by the mobiles RAKE receiver. The total soft handover gain is
assumed to be between 2dB and 3 dB Error! Reference source not found..3dB.
Other Losses:
Indoor losses: Typical value 15 dB
In-car losses: Typical value 8 dB
Log-normal fading margin: 10 to 12 dB for indoor, and 6 to 8 for outdoor.
Interference due to co-location with GSM 900MHz (dB):
An interference loss (in dB) has been considered in the case of coexistence of
WCDMA and GSM carries in the same frequency band of 900MHz. If proper
network and frequency planning is followed along with carrier frequency
separation, as specified in ECC Compatibility Study for UMTS in 900MHz and
1800MHz frequency bands [7], then these losses can be minimal.
For the link budgets above, the cell range R can be calculated for the given
propagation models as it is briefly explained in Figure A.6.
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Figure A.6 Calculation of cell range R
System
parameters
Max path loss between mobile and base

station antennas [dB]
Required
coverage
probability
Margins to guarantee service also within

shadowing and indoors
Area type
Propagation model to convert dB to

kilometres (Okumura-Hata)
Source: Ovum
A.5 Sectorisation and calculation of the area of

coverage
After the cell range estimation, the site coverage area and site-to-site distance can
be calculated. The cell area is used to calculate the number of sites required in a
specific environment to fulfill the coverage requirements. Some example figures for
coverage area and site-to-site distance calculation is provided in Figure A.7
Figure A.7 Coverage area and site-to-site distance for different number of sectors
as a function of cell radius R
Site-to-site
distance
Site area
Three
Omni
Two Sectors
3
R
2
2R
1. 5 R
3
R
2
3 3 2
R
2
3 3 2
R
4
9 3 2
R
8
3 3 2
R
2
Source: Ovum
Sectors
Six Sectors
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A.6 Frequency bands

Frequency band available assumed in FDD is 2x5MHz. Bearing in mind that every
UMTS carrier is a 5MHz carrier this leads to 1 carrier per sector/cell for either the
uplink or the downlink. Also, we have considered three sectors Node-Bs and thus
we have considered three carriers per Node-B.
Of course, model allows for flexibility regarding of available FDD spectrum and
considered number of carriers per Node-B consequently.
Proper frequency planning is further required in order to calculate optimal number
of carriers per Node-B. For simplicity reasons we follow initial approach (1 carrier
per sector/cell) described above.
A.7 Pole Capacity for Capacity-Based

Dimensioning
A.7.1 Capacity based dimensioning using different
services
The load factor for the uplink is defined as
noise rise as
For
nUL = 1 ,
Noise _ Rise =
1
1 nUL
(E b
N0 )
NR (1 + i) ,
W
nUL =
and the
the corresponding noise rice approaches to infinity and the system
has reached its pole capacity and becomes unstable.

We want to operate our system for capacity based dimensioning at the 75%
(nUL = 0.75) of its pole capacity; this will give 6dB noise rise.
We calculate the joint service throughput that will give us the desired noise rise for
our capacity driven dimensioning. Let us denote by
to noise ratio for service-k,
( Eb / N 0 ) k
the desirable power
is the activity factor for the service (Typical values
is 1 for data, 0.65 for 50% voice activity in uplink and 0.58 for voice activity in
downlink) and W=3.84 Mcps.
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The other cell to own cell interference ratio

transmission and 0.65 for 3 sectors. By
ck
is 0.55 for omni directional
we denote the ratio of the overall data
from service k, over the overall data from all the services.
Then the available throughput of a cell given the noise rise and the ratio between
the services will be calculated as:
N 0 )v
(E N )
(E N )
Rcv v (1 + i ) + b 0 1 Rc11 (1 + i) + b 0 2 Rc 2 2 (1 + i ) =
W
W
W
(1 + i)
nUL = [(Eb N 0 )v cv v + (Eb N 0 )1 c11 + (Eb N 0 )2 c 2 2 ]
R
W
nUL
W
R=
[(Eb N 0 )v cvv + (Eb N 0 )1 c11 + (Eb N 0 )2 c2 2 ] (1 + i)
nUL =
(E b
In this way, cell throughput (R) is thus calculated.

Example:
Assume A Mbits of voice, B Mbits of data1 service, C Mbits for data 2 service
(overall for the busy hour), then the data ratios for all the services will be:
cv =
A
B
C
, c1 =
, c2 =
.
A+B+C
A+ B+C
A+ B +C
= 0.58,1 = 2 = 1,
Also, v
and
( Eb / N 0 ) k
is given from the 3GPP table
describing desirable signal-to-noise ratio for different services and types of

environments.
Finally, we divide the overall data (A+B+C) over the calculated R for the required
number of sites.
Important: It must be noted that since we use BLER=10% for the desirable
signal-to-noise ratio, we have to include the packet retransmission for the data
services. Thus, the overall data are (A+(B+C)/(1-BLER)).
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A.8 Traffic Assumptions for Capacity-based

dimensioning
Usually telecommunication systems are dimensioned for the busy hour, where the
peak load (network traffic) is served with a required quality of service and given
resource availability and it is qualified by its blocking probability Error! Reference
source not found.. In our calculations we assume that the busy hour carries 10%
of the daily traffic.
A.9 References
[1]. M. J. Nawrocki, M. Dohler, A. H. Aghvami, Understanding UMTS Radio
Network Modeling Planning and Automated Optimization, Wiley 2006.
[2]. H. Holma, A. Toskala, WCDMA for UMTS, Radio Access For Third Generation
Mobile Communications, Wiley 2002.
[3]. 3GPP TR 25.816, UMTS900MHz Work Item Technical Report.
[4]. Cost 231 Final Report, Digital Mobile Radio Towards Future Generation
Systems.
[5]. 3GPP TR 25.101, User Equipment (UE) radio transmission and reception
(FDD).
[6]. 3GPP TR 25.104, Base Station (BS) radio transmission and reception (FDD).
[7]. ECC within CEPT, ECC Report 82, Compatibility study for UMTS operating
within the GSM 900 and GSM 1800 frequency bands, May 2006.
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Annex B Operator benchmarks

B.1 Cingular
B.1.1 Background
Under a previous agreement with NTT DoCoMo, US provider AT&T Wireless (now
Cingular) was required to build and market UMTS networks in four major United
States cities by the end of 2004. At CTIA 2004, Cingular announced that their 3G
network would be a 1900MHz only implementation of UMTS and would launch by
the end of that year as planned. Eventually, Cingular chose to deploy on both 850
MHz and 1900MHz.
B.1.2 Currently available networks

Cingular is the largest wireless service provider in the US. It currently runs:
An AMPS and TDMA Service on 850MHz till 18 February 2008
A GSM/GPRS/EDGE 850/1900MHz.
A UMTS/HSDPA 850/1900MHz which has been in operation since December

2005. It also supports HSDPA in selected cities. It is currently the leader in 3G
in US market.
B.1.3 Reason for Cingular switching from CDMA to UMTS 850

Why UMTS 850?
Since the acquisition of Bellsouth (GSM at 850MHz) and AT&T (GMS 1900MHz),
Cingular has more spectrum in 850 MHz band than 1900MHz. Given the spare
capacity, Cingular had been planning for the past two years on utilizing more of its
850 MHz holdings for 3G, since the demand for TDMA is decreasing as Cingular
migrates customers to its GSM network. The carrier's remaining 3.6 million TDMA
customer account for only about 1 percent of its network traffic.
Cingular holds an average of 58 megahertz of spectrum in the nation's top 100
markets which represents over two thirds of total population, and it would like to
use its 850 MHz spectrum licenses as much as possible, leaving its 1.9 GHz
spectrum for international roaming opportunities. Most international handsets
include support for the 1.9 GHz spectrum bands in addition to the 900MHz and 1.8
GHz spectrum bands used in Europe.
Cingular's UMTS/HSDPA technology can use the same spectrum for both voice and
data, while CDMA2000 1x EV-DO technology requires clean'' channels for voice
and data separately. EV-DO Revision A, which is the next network step for both
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Sprint Nextel Corp. and Verizon Wireless, will offer CDMA carriers the capability to
run both data and Voice over Internet Protocol services over the same channel.
Why Cingular?
Given the fact that Cingular has more subscribers than its competitors, Cingular is
far more powerful to demand for handset support for rolling out UMTS in an
unconventional spectrum than any other operators in the US.
Among other U.S. carriers, a number of smaller carriers are expected to rollout
UMTS 850 under their roaming agreements with Cingular. Apart from 850 MHz,
Cingular and T-Mobile USA Inc. plans to launch their own UMTS networks using the
1.7/2.1 GHz spectrum that it recently purchased in auctions.
B.1.4 Milestones and progress so far

In December 2005 Cingular commercially launched these 3G networks in 16 major
cities. Development and deployment of UMTS with HSDPA continued since then.
This included replacement of the six UMTS systems which had been previously
deployed by AT&T Wireless. By 2Q 2006, Cingular has UMTS coverage of more
than 27 cities.
Device support
Despite the fact that Cingular looks more powerful than anyone else in the US
market, handset support was very limited in the early stage. Although the range
has now grown to 5 handsets, with 2 from LG and 3 from Samsung, only LGs CU
500 has proved to be popular so far. Cingular announced that it also has
agreements with its strategic handset providers Nokia, Motorola Inc. and to deliver
UMTS devices by the end of 2006. The carrier said the devices would include
''attractive form factors and feature functionality that takes advantage of the
increased data speeds.'' e.g. Samsungs Blackjack, which also supports push
emails.
A few PC data cards are also currently available. Laptop access is another popular
access technology to UMTS 850, thanks to the flat rate data pricing. It typically
costs USD 60 per month for unlimited access (effectively about 10GB per month)
to UMTS based data service, with download speed about 400kbps.
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B.2 Telstra
B.2.1 Background
In recent years Telstra has lost overall retail mobile connection share, although it
gained subscribers on its CDMA and 3G networks. It has lost ground in the GSM
market where the bulk of the subscribers are, dropping 6.2% of connections on a
year-on-year comparison. Telstra has responded by launching its 850MHz WCDMA
network in October 2006 which will ultimately replace its existing CDMA network,
simplifying Telstra's mobile network technology and cutting costs. The success of
Telstra's national network with UMTS 850 is integral to maintaining its market
share.
B.2.2 Currently available networks

Telstra currently has :
a 3G network (UMTS2100) running at selected locations in Sydney, Melbourne,

Geelong, Brisbane and Gold Coast, Perth, Adelaide and Canberra,
a CDMA/EV-DO 1X network running at 850 MHz and
a GSM network with GPRS technology
a recently launched UMTS 850 network.
All other operators UMTS services in Australia are running at 2100MHz.

Telstra announced that it would replace its existing CDMA/EV-DO network with
Next G (UMTS 850) in November 2005 and the network became operational in
October 2006. The network will be upgraded and developed by using Ericssons
software enhancements to base stations in 2007. Telstra will also continue to
extend the national coverage until it has the same or better coverage as its
existing CDMA coverage (98% of the population) before it is expected to
decommission the network in early 2008. The current CDMA network and the new
network will run concurrently for some time before Telstra retires the CDMA
network. Arrangements have been made to sell redundant CDMA equipment in a
secondary market.
B.2.3 Reason for Telstra switching from CDMA to UMTS 850

Telstra considered 15 different solutions and chose this option as the one that gave
it the best economic and customer-focused proposition:
1. Why choose UMTS 850:
A national WCDMA network at 2.1 GHz would require three to four times more
base stations than at 850MHz.
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Roaming made easy: International roaming possibilities are greatly increased

in WCDMA compared to CDMA, especially in Europe where few CDMA networks
exist.
Telstra anticipates a set-up similar to many GSM deployments, where the lower
band (850MHz in this case) is deployed for coverage, and the upper band
(2100MHz) is used as a capacity overlay.
2. One network only: To remove duplication and unnecessary costs
The cost of managing two networks with separate core switching systems was
too great for Telstra. The networks also had a massive coverage overlap. At
the time of the announcement, Telstra had over 4,916 GSM towers, over 3,488
CDMA towers and over 2,100 WCDMA towers at 2.1GHz, with three core
switching systems. Geographically, the GSM footprint is 70% duplicated by
CDMA, and the CDMA footprint is 80% duplicated by GSM.
Although a large amount of capex will be required initially, Telstras migration

from CDMA to UMTS 850 will save opex and capex in long run. Annual opex is
important to operators and is usually four times infrastructure capex.
3. One major upgrade is desired :
The national footprint of one 3G network will provide a greater advantage than
subsequent incremental speed upgrades.
B.2.4 Milestones and progress so far

Telstra is constructing Australias only national 3GSM 850 wireless network which
will reach more than 98% of the Australian population when it is completed.
Telstra will operate services over both the GSM and CDMA networks until 2008
when its national 3GSM 850 network will provide the same or better coverage as
the other networks.
Progress:
Nationally, by 30 June 2006 over 60% of the 5,112 sites had equipment
installed, with over 80% of transmission lines completed
First video call on the 3GSM 850 network has already been placed between
country Victoria and Sydney
Currently transmitters are able to throw a signal 80 kilometres on the new

network. Work is still in progress to upgrade the range to 200km, which is on
track for completion in the latter part of 2007.
Telstra has provisioned the network for capacity. Additional backhaul capacity
has been rolled out (using both fibre and microwave solutions) including
some entirely new deployments in rural Australia. In the radio access network,
Telstra anticipates a set-up not unlike many GSM deployments, where the
lower band (850MHz in this case) is deployed for coverage, and the upper band
(2100MHz) is used as a capacity overlay.
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The Option datacard offered at launch supports HSDPA at 850/1900/2100MHz

and EDGE/GPRS at 850/900/1800/1900MHz. It will be able to support
throughput on the downlink to a peak of 7.2Mbit/s. This will be enabled by
software upgrade, which Telstra is planning for early in 2007. Subsequent
technology iterations to the network peak of 14.4Mbit/s and beyond will
require users to upgrade their CPE to a PC card to be supplied by ZTE from
November 2006, which will also support circuit-switched voice calls (using the
PC as a softphone).
This amount of activity in the field offered synergies in expanding and

upgrading its existing footprint. Consequently, an additional 100 3G towers
were deployed in Sydney, and 2,000 GSM towers were upgraded to 3G.
Concurrently, Telstra has upgraded most of its GSM footprint to support EDGE.
Telstra believes that the Next G network is a source of competitive advantage. As

such it has supplanted the fibre to the node (FTTN) plans as a focus for the
business. The FTTN plans were indefinitely shelved in September 2006 as a result
of unreasonable regulatory outcomes. However, contrary to Australian media
reports, this does not mean Telstra aims to provide broadband to rural Australia
primarily with the new network: it is pitched as a premium offering, rather than
any kind of FTTX replacement.
The source of Telstras competitive advantage is two-fold: coverage and
performance. Both are enhanced by the better signal propagation achieved at
850MHz.
The coverage of the network is unparalleled in Australia. When completed, it

will cover 1.9 million square kilometres of country, up from 1.65 million square
kilometres at launch. By contrast, competitor 2G/3G networks will cover capital
cities and some suburbs and transport corridors. Telstra claims its network
currently covers 98% of the population compared to Optuss 37%.
Telstra has an initial throughput advantage, which it hopes to maintain through

incremental upgrades over the next couple of years.
Roaming is covered by tri-band HSDPA and quad-band GSM support: Telstra

has negotiated 3G roaming agreements with 31 countries worldwide so far.
B.2.5 Customer migration will be a challenging process

Telstra plans to slowly decrease CDMA handset sales and then switch users over
once UMTS850 coverage is as good or better than the CDMA network. Since CDMA
and GSM are designed for different purposes given that CDMA covers larger
distances and was deployed first and foremost for rural areas and does what GSM
could not, rural users handset replacement cycles are generally much longer than
those of city. Telstra will have to migrate 1.3 million CDMA users.
At launch, Telstra be offered its customers attractive and competitive plans to
encourage them to take up the new service, including offers like $0 upfront for
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handsets on 24 month contracts. Collectively Telstra claims there are in excess of

30 devices expected to become available in the next 12 to 18 months.
B.3 Issues common to all UMTS900 operators

B.3.1 Interference between UMTS900 and GSM900 networks
Based on simulation results for different scenarios in which UMTS and GSM co-exist
in the 900MHz band, the ECC report has concluded that these two technologies can
technically co-exist without significant interference that can cause call dropping in
either system.
B.3.2 Implications for operators to allow transition from GSM

900 to UMTS900
Cingular and Telstra, the only two operators currently supporting UMTS 850,
require devices that support UMTS 850/1900 and UMTS 850/2100 respectively.
Handset support is still limited and volumes will only build when tri band
(2100/1900/850) devices are available.
In case of UMTS900 is slightly different. The availability of such device technology
will not be a major issue, given most handset manufacturers have either developed
prototypes or have gained experience in supporting UMTS 850 well before the
rollout of UMTS900. Handset and chipset manufacturers will converge towards
developing quad band devices (2100/1900/900/850) as most mobile markets in
the world support UMTS2100 (except North America) and UMTS900 (except North
America, Japan, Australia).
The success of UMTS900 deployment lies in good incentives for subscribers to
migrate or connect to UMTS900, such as price and quality of the devices, and the
price of operators subscription services. This will only happen when tri band or
quad band devices become popular.
B.3.3 Impact of device availability

Device availability is considered to be a key factor for successful service adoption.
It can be shown that limited handset choices have restricted the uptake for all 3G
services, including Cingulars 3G and Telstras Next G.
From Ovums analysis, the following handset factors noted below affect 3G
customer uptake around the world and the key successful factors (KSF).
Telstra declines to reveal its subscriber numbers, but it is understood the Next G
service had at least 30,000 subscribers at the end of October 2006 (11% of all
Telstras WCDMA subscribers), less than a month after its launch.
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Figure B.1 Key factors for successful service introduction
Factors
KSF
Examples and proof points
Quality of
handsets
(physical size,
battery life,
features, etc.)
3G handsets match or
exceed 2G equivalents
The launch of Nokia 7600 and clamshell

LG 3G handsets (which are slimmer
and smaller in size than handsets made
by all other mainstream manufacturers)
in Q1 2004 gave Carphone
Warehouses sales and Hutchison 3s
subscriber uptake a significant boost.
Range of
handsets
Wide range of handsets

at numerous price points
and with brands which
appeal to a wide range
of different customer
segments
The chart below shows that WCDMA

subs grew rapidly as the choice of
handsets increased significantly from
Q2 2004. The chart shows that the
there is only a small reduction in price
during this period (highlighted blue).
35
30
25
20
15
10
5
0
WCDMA Subscribers world-wide (Millions)
Figure B.2 Key Relationship between available WCDMA devices and take-up
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112
Annex C GSM-900 and E-GSM bands

Table 1: GSM-900 and E-GSM frequency band allocations in EU-15 countries in
5MHz blocks (Note includes blocks of 4.8MHz also)
Country
Austria
Belgium
Denmark
Finland
France
Germany
Greece
Ireland
Italy
Luxembourg
Portugal
Spain
Sweden
The Nethe rlands
UK
Operator
GSM- 900
E- GSM
Expiration Date
T-mobile
2 x 2x5MHz
DEC 2015
Mobilkom
2x5MHz
DEC 2015
One
Tele.ring
Proximus
2 x 2x5MHz
JUL 2011
Mobistar
2 x 2x5MHz
NOV 2010
KPN/Orange
2x5MHz
JUL 2013
Sonofon
2x5MHz
TDC
2x5MHz
Telia
2x5MHz
Orange
Radiolinja
2 x 2x5MHz
DEC 2010
Sonera
2 x 2x5MHz
DEC 2010
Finnet
2x5MHz
DEC 2010
Orange
2 x 2x5MHz
MAR 2021
SFR
2 x 2x5MHz
MAR 2021
Bouygues Telecom
2x5MHz
2 x 2x5MHz
DEC 2024
T-mobile
2x5MHz
DEC 2009
Vodafone
2x5MHz
DEC 2009
E-Plus
2x5MHz
DEC 2016
O2
2x5MHz
DEC 2016
Vodafone
2 x 2x5MHz
SEP 2012
TIM Hellas
2 x 2x5MHz
SEP 2012
C osmote
2x5MHz
MAR 2023
Not-allocated spectrum in
GSM-900 & E-GSM bands
(5MHz blocks)
JAN 2011
O2
2x5MHz
2011
Vodafone
2x5MHz
2011
Meteor
2x5MHz
2015
Tim
2 x 2x5MHz
FEB 2015
Wind
JUN 2018
Vodafone
2 x 2x5MHz
FEB 2015
LuxGSM
2x5MHz
JUN 2008
Tango
2x5MHz
MAY 2008
VoxMobile
APR 2020
TMN
2x5MHz
MAR 2007
Telecel
2x5MHz
OCT 2006
Optimus
2x5MHz
NOV 2012
Vodafone/Movil
2 x 2x5MHz
FEB 2025
Telefonica Moviles
2x5MHz
FEB 2015
Amena
2x5MHz
JUN 2020
TeliaSonera
2x5MHz
DEC 2010
Tele2
2x5MHz
DEC 2010
Vodafone
2x5MHz
DEC 2010
Vodafone
2x5MHz
MAR 2010
KPN Mobile
2x5MHz
MAR 2010
Orange
Telfort
T-Mobile
T-mobile
NO EXP DATE
Vodafone
2x5MHz
2x5MHz
NO EXP DATE
O2
2 x 2x5MHz
2x5MHz
NO EXP DATE
Orange
NO EXP DATE
2x 5MHz (E-GSM)
2 x 2x5MHz (E-GSM)
2x 5MHz (E-GSM)
2 x 2x5MHz (E-GSM)
2 x 2x5MHz (E-GSM)
The E-GSM band is assigned

for res e a rch purposes and for
a re g ional GSM opera to r
SOURCE: EUROPEAN RADIOCOMMUNICATIONS OFFICE (ERO) / NRAS

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Market Study for UMTS900

Project Number CLW28

Ovum Consulting, Cardinal Tower, 12 Farringdon Road, London EC1M 3HS

Executive summary ..................................................................1

Report findings ........................................................................4

Deployment analysis ..............................................................20

Regulatory analysis ................................................................48

Handset and chipset analysis..................................................73

Economic analysis ..................................................................77

Annex A Model description ...................................................................93

UMTS 900 Market Study Final Report V1.1

MARKET STUDY UMTS 900

UMTS 900 Market Study Final Report V1.1

MARKET STUDY UMTS 900

UMTS 900 Market Study Final Report V1.1

MARKET STUDY UMTS 900

A summary of the findings of the study in Chapter 3

In Chapter 4, an assessment of the reduction in costs when deploying a

An analysis of the regulatory situation in each region in Chapter 5, together

A qualitative economic analysis of the benefits of introducing UMTS900, in

The annexes to the report provide:

A detailed overview of the network dimensioning and cost modelling

UMTS 900 Market Study Final Report V1.1

MARKET STUDY UMTS 900

3.1 Demand and network cost analysis

Figure 3.1 Percentage increase in coverage area

900MHz vs. 2100MHz

Percentage increase in coverage area per Node-B (km 2)

Source: Ovum model

UMTS 900 Market Study Final Report V1.1

MARKET STUDY UMTS 900

re-farming of 900MHz spectrum band is needed in order for the operators to be

UMTS 900 Market Study Final Report V1.1

MARKET STUDY UMTS 900

UMTS 900 Market Study Final Report V1.1

MARKET STUDY UMTS 900

UMTS 900 Market Study Final Report V1.1

MARKET STUDY UMTS 900

UMTS 900 Market Study Final Report V1.1

MARKET STUDY UMTS 900

UMTS 900 Market Study Final Report V1.1

MARKET STUDY UMTS 900

Figure 3.7 NPV percentage improvements (medium demand scenario) over

UMTS900 and UMTS2100

(*) refers to Medium Demand scenario

Source: Ovum model

UMTS 900 Market Study Final Report V1.1

MARKET STUDY UMTS 900

Figure 3.8 Updated NPV percentage improvements over UMTS2100 only

UMTS900 & 2100

Source: Ovum model

3.2 Case studies examples

UMTS 900 Market Study Final Report V1.1

MARKET STUDY UMTS 900

3.2.1 Sri Lanka

UMTS 900 Market Study Final Report V1.1

MARKET STUDY UMTS 900

3.2.3 Saudi Arabia

3.2.4 South Africa

UMTS 900 Market Study Final Report V1.1

MARKET STUDY UMTS 900

around $1.4bn is required to deploy approximately 19,000 sites to meet coverage

3.3 Key regulatory issues