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Modeling
broadband
network costs:
LTE and offload case studies
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Dimitris Mavrakis – Senior Analyst | Networks
30th March 2011

11/09/2009
30/03/2011

Presentation outline Our legacy The problem Our model Case studies .

informatm.com ©Confidential 11/09/2009 4 .Our legacy www.

10000+ cellular handsets. MNO ownership. traffic and base stations forecasts 30/03/2011 . network summary data • Intelligence Centre: Quantitative and qualitative analysis. including subscriber.Informa’s key strengths • WCIS: 5 million data points.

and network TCO? • First step towards this is to estimate cost to transfer a GB (Cost/GB) and network costs • Why should we do this? www.How can we make this data relevant to the business case of a mobile operator or an infrastructure vendor? • I. CAPEX.e translate our subscriber and traffic data to revenues. ROI.informatm.com ©Confidential 30/03/2011 6 .

Revenues or traffic Challenges facing mobile operators 200 180 160 140 120 100 80 60 40 20 0 Traffic (cost?) Revenues Voice driven networks • • • • All users treated equally Simple dimensioning Simple to add more capacity Abundant backhaul capacity Mobile broadband networks Voice Data 30/03/2011 • • • • All users not treated equally Complex dimensioning Variety of upgrade options Backhaul challenges .

informatm.com ©Confidential 30/03/2011 8 . including WiFi and femtocells? What are the savings from introducing network optimisation? Analyse the impact of indoor traffic versus outdoor traffic? Given the current and expected growth in mobile traffic. what are the most cost effective ways that operators can deploy future networks to successfully manage traffic demand? www.Operators need answers • • • • • • • • When will the network face congestion and demand capacity upgrades? What is the most cost effective solution to meeting future traffic demand? What are the key network cost drivers? How do different geotype deployment strategies affect the cost per GB? Is LTE needed in the short to medium term? What are the savings from data offload.

com ©Confidential 11/09/2009 9 .Our model www.informatm.

Inputs • Network deployment scenarios • Radio access Technologies: HSPA. social networking. offload • Spectrum: Various options for each technology • Relevant network costs • Network OPEX + Depreciation of Network CAPEX = Total Cost of Ownership (TCO) • Cost classification and behaviour (Traffic Demand Scenarios) • • • • Service category: mobile Internet. HSPA+. Rural Indoor/outdoor traffic segmentation • Methodology validation • Results validation . Urban. Suburban. LTE • Traffic Management: Optimization. policy based management. HSPA+. LTE Geotype: Dense Urban. portable Internet etc Technology: HSPA.

informatm.Methodology outline Population information • Total population • Distribution (per geotype) • Operator subscriber base and targets Country information • Total area (per geotype) • Coverage requirements Network deployment Traffic demand • Capacity requirements • Per technology • Per geotype • Per device type • Per subscriber • Indoor/outdoor • • • • • • Spectrum Technology Backhaul Core network Offload Optimization Network TCO Cost/GB www.com ©Confidential 30/03/2011 11 .

•Population size & growth •Population density by geotype (dense urban.informatm. traffic class & geotype By device type.com ©Confidential Network deployment model Operator subscriber base Operator network traffic % coverage of population by geotype 2 options depending on information availability Option 2: Traffic by device type & traffic class Average MB per device type per traffic class Indoor & outdoor traffic split Traffic by geotype Traffic optimisation Network deployment model Total traffic demand Network deployment model 12 30/03/2011 . geotype Optimised & unoptimised www. traffic class. smartphones & portable devices) Average MB per device type Indoor & outdoor traffic split Traffic by geotype Option 1: Traffic by device type only By device type. suburban. urban. rural) Traffic demand methodology Operator network coverage Country demographics •Penetration of population •Subscribers by device type (non-smartphones.

com ©Confidential 30/03/2011 13 .informatm.Case study: UK operator HSPA vs LTE www.

UK market: Subscriber information Rural 7.473 27% Suburban 15.764 12% Dense Urban 16.625.informatm.167.784 25% Urban 22.com ©Confidential 11/09/2009 14 .686.297 36% • • Dense Urban and suburban areas dominant Rural deployments still driven by coverage www.164.

com ©Confidential 30/03/2011 2012 2013 Smartphone data 2014 2015 Portable data 15 .informatm.UK: traffic profiles Device class Non-smartphone Smartphone Portable 20 Annual growth rate 30% 30% 30% 15 18000 16000 10 5 0 2010 2011 Non-smartphone 2012 Smartphone 2013 2014 Portable 2015 Total Totral traffic (PB per year) Active devices (millions) 25 Average traffic per month 25MB 250MB 2GB 14000 12000 10000 8000 6000 4000 2000 Inflection point in 2014 not enough to drive smartphone traffic higher than portable 0 2010 2011 Non-smartphone data www.

informatm.UK network modeling parameters Dense Urban parameters Technology WCDMA 100% coverage Technology HSPA 90% coverage Technology HSPA+ (hotspot) 20% coverage Backhaul technology Mix of T1/E1 for WCDMA/HSPA sites and Point-to-point RF or leased fiber for HSPA/HSPA+ and hotspots Urban parameters Technology WCDMA 100% coverage Technology HSPA 80% coverage Technology HSPA+ 30% coverage Backhaul technology Mix of T1/E1 for WCDMA/HSPA sites and Point-to-point RF or leased fiber for HSPA/HSPA+ Suburban parameters Technology WCDMA 90% coverage Technology HSPA 70% coverage Backhaul technology Baseline WCDMA and HSPA network Mix of T1/E1 for WCDMA/HSPA sites and Point-to-point RF or leased fiber for HSPA/HSPA+ Rural parameters Technology WCDMA 70% coverage Technology HSPA 30% coverage Backhaul technology T1/E1 for WCDMA coverage and Point-to-point RF for HSPA www.com ©Confidential 30/03/2011 Capacity constraints Geotype Dense Urban Urban Suburban Rural Constraint 2013 No constraint 2013 2012 16 .

UK network costs Worst case scenario: Capacity upgrades will be handled through new base station additions 500 400 300 200 8 100 7 0 2011 2012 Dense Urban 2013 Urban Suburban 2014 Rural 2015 Cost/GB (US$) Netork TCO (US$ million) 600 6 5 4 3 2 1 0 2011 www.com ©Confidential 30/03/2011 2012 2013 2014 2015 17 .informatm.

com ©Confidential 30/03/2011 18 .UK case study: Key takeaways • Network costs are dominated by OPEX (~80% of annual TCO) • Dense HSPA network can generally handle traffic – Apart from capacity hotspots that need to be managed • LTE does not present an economically viable solution to meet with traffic demands.informatm. assuming that the LTE deployment begins during 2013 www. • A new LTE deployment will cost a minimum of US$58 million compared to upgrades to existing networks.

informatm.com ©Confidential 30/03/2011 19 .US operator case study WiFi offload www.

informatm.9GHz for WCDMA and HSPA/HSPA+ • Backhaul – T1/E1.com ©Confidential 11/09/2009 20 . owned/leased fiber and microwave www.US network modeling parameters • Area modeled: Dense Urban • Operator market penetration: 30% (today) increasing to 32% (2015) • Traffic profiles: – – – – Non-smartphone = 15MB Smartphone = 250MB Portable = 3GB Annual traffic growth = 30% • Spectrum used for mobile network – 850MHz and 1.

informatm.US WiFi offload assumptions Private offload (home access point) • No cost to operator • No visibility on user behavior and traffic Public offload – leased capacity • Operator leases WiFi capacity from third party • Average cost of $1/GB offloaded Public offload – owned capacity • • • • Operator installed WiFi network Number of hotspots: 23.000 today increasing to 50000 (2015) CAPEX per hotspot: $1000 today decreasing to $800 (3015) OPEX per hotspot: $200 today decreasing to $100 (2015) Data offloaded: 10% of total portable traffic and 20% total smartphone traffic www.com ©Confidential 30/03/2011 21 .

informatm.US network offloaded traffic 700 700 500 600 400 500 300 200 100 0 2010 2011 Dense Urban 2012 Urban 2013 Suburban 2014 Rural 2015 Traffic (PB annually) Total traffic (PB yer year) 600 400 300 200 100 0 2010 2011 Total traffic www.com ©Confidential 30/03/2011 2012 2013 2014 2015 Traffic after offload 22 .

com ©Confidential 2012 2013 2014 2015 New base stations with WIFi offload 30/03/2011 23 .informatm.US network base stations Total number of base stations 90000 80000 70000 60000 50000 40000 30000 20000 10000 0 2010 2011 Only new base station upgrades www.

leased 30/03/2011 2015 Public offload .com ©Confidential 2012 New BTS and upgrades 2013 Private offload 2014 Public offload .owned 24 .US network scenario comparison 1.000 800 600 400 200 2011 New BTS only www.400 Annual TCO (millions) 1.informatm.200 1.

• Public WiFi – Best suited to solve capacity constraints in congested areas and operators can either partner with a hotspot provider or deploy their own networks.com ©Confidential 30/03/2011 25 . including gateways that interface WiFi with cellular networks. • Leasing WiFi – Additional costs may break the offload business case and increase overall network costs as high as radio access upgrade costs. www. • Specialist solutions for WiFi offload will appear in the market during 2011. but no visibility on user behavior or traffic patterns. • Operator owned public WiFi – Best suited to offload traffic in congested areas and allow operators to control the user experience while providing necessary headroom for radio access networks. • Private WiFi offload – Best case in terms of cost. Standardization is also ongoing to integrate two networks and allow mobility between WiFi and cellular networks. – Costs involved in deploying nationwide hotspot networks but the available WiFi capacity to the mobile operator can be significant.informatm.WiFi offload key takeaways • Offload strategies need to be carefully addressed in order to avoid additional costs.

com ©Confidential 30/03/2011 26 .Overall conclusions • Capacity constraints only appear in hotspots – Selective upgrades necessary • LTE not economically viable – From current capacity demands perspective – Other reasons for deploying now: first to market and future • Even WiFi offload needs careful management – Leasing WiFi bandwidth can be expensive • Variety of tools available to operator – Policy. offload are some examples www. optimization.informatm.

Networks Informa Telecoms & Media Email: dimitris.Click to edit Master Thank you.informatm.mavrakis@informa. title style Dimitris Click to Mavrakis edit Master subtitle style Senior Analyst.com www.com 11/09/2009 30/03/2011 .