White Paper on the Role of EDGE Technology

2002 02 - 08
Some confusion still surrounds the future role of EDGE technology in the wireless industry. Northstream clarifies the issue in this white paper by outlining three EDGE usage scenarios and evaluating their potential to trigger the market take up of EDGE. We conclude that EDGE can offer attractive cost savings when used in combination with WCDMA in a 3G service launch. This scenario, applicable to many GSM operators with IMT-2000 spectrum, could be useful enough to make EDGE a widely used mainstream component in general GSM products. For this to happen, the GSM operator community must act now by clearly showing their interest in EDGE products. If decisions are not taken soon, EDGE may become a mere niche technology, as, in the absence of firm requirements from operators in control of major parts of the GSM subscriber base, terminal manufacturers in particular will prioritise products without EDGE capabilities. In essence, an industry dialogue needs to replace the current wait and see approach. Such dialogue could potentially lead to a clearer operator backing of EDGE, which would pave the way for global utilisation of EDGE with its indisputable technical merits. 1
1.1 1.1.1 1.1.2 1.2 1.2.1 1.3

The EDGE Opportunities.................................................................................. 2

Stand-alone EDGE as a 3G services solution ............................................................................2 Service capabilities - what EDGE delivers......................................................................................2 In which markets is stand-alone EDGE applicable as a 3G service solution? ................................4 EDGE as a short/medium term complement to a WCDMA-based 3G roll-out .........................5 Example business case: EDGE as a complement to WCDMA.......................................................6 Long term optimisation of 2G spectrum capacity ...................................................................10

2
2.1 2.2

EDGE - current industry status ..................................................................... 11

Operator plans/commitments....................................................................................................11 Predicted product availability....................................................................................................12

3
3.1 3.2 3.3

Potential Risks with EDGE............................................................................. 13

Terminal availability ...................................................................................................................13 Perception of not real 3G .........................................................................................................13 Economies of scale ....................................................................................................................14

4 5

Conclusion ...................................................................................................... 14 References ...................................................................................................... 15

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The EDGE Opportunities

EDGE (Enhanced Data Rates for GSM/Global Evolution) is a standardised set of improvements to the GSM radio interface that brings higher data rates and increased spectral efficiency for GSM data services. With this white paper, Northstream attempts to mitigate the confusion currently prevalent in the industry, a confusion caused by the fact that EDGE is not generally considered as a default component in the migration path from GSM to WCDMA. The paper presents and examines (in Sections 1.1-1.3) three EDGE usage scenarios and analyses their potential to trigger the EDGE market and make EDGE a mainstream technology used throughout the GSM industry. We make a clear distinction between usage scenarios that are promising enough to drive the entire EDGE market to develop, and those which might be useful for the operator, but rely on other factors to trigger the actual EDGE market take off. The opportunity analysis is supplemented by a review of the current status of EDGE in the industry, and an evaluation of the potential risks for an operator that includes EDGE as a key component in the 2G to 3G technology migration. Further details on EDGE are available for example in a Northstream report [5]. The term EDGE is used in this paper to denote a GSM/GPRS network that has been upgraded with enhanced GPRS (EGPRS) capability. There is also a circuit switched data aspect to EDGE (ECSD), but we believe it to be of negligible commercial importance.

1.1

Stand-alone EDGE as a 3G services solution

We define stand-alone EDGE as a scenario in which the service offering is solely based on an EDGE network, i.e. the operators network does not include any other IMT-2000 radio access. This was the original plan for EDGE when the concept was defined. We examine its usefulness below and its potential as a driver for the EDGE market. 1.1.1 Service capabilities - what EDGE delivers

In order to assess how stand-alone EDGE should be positioned as a 3G technology, it is very important to first understand its service capabilities in comparison to the 3G technologies that will exist in the same markets, i.e. WCDMA and cdma2000. Service capabilities for 3G networks are generally a complex issue, and include capabilities to support different realtime and non-realtime applications, and even indirect services such as international roaming. However, most emphasis tends to be placed on the data rate capabilities of different technologies, and since misconceptions are abundant in this area, we first briefly explain what EDGE can actually offer in terms of data rates. The standardised maximum data rate for EDGE is 474 kb/s. However, as for all wireless data technologies, the actual data rates available are reduced as a result of coverage planning, terminal capabilities and network capacity dimensioning. Figure 1 illustrates how these aspects affect the data rates for EDGE. With ambitious network dimensioning, actual downlink data rates can reach approximately 150 kb/s (i.e. 3 times higher than Northstream AB
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the approximate 50 kb/s practically achievable with GPRS), whereas less network investments typically leads to 60-100 kb/s in the downlink and 25-70 kb/s in the uplink. Note that these are data rates guaranteed on the cell borders; in parts of the cells the data rate will be higher, implying that the data rate averaged over all sessions is significantly higher.
Guaranteed data rate on the cell border (kb/s)

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400

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4

200
Practical timeslot usage (1-4 timeslots) depending on terminal capability and capacity dimensioning )

Approximate range of guaranteed data rate

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Channel quality

Only reusing GSM sites Tight frequency reuse

Network planning

Extensive amount of new sites Moderate frequency reuse

Figure 1. Standardised upper limit for EDGE data rates is 474 kb/s. Due to terminal capabilities, network planning and capacity dimensioning, guaranteed data rates achievable in the short term are lower, but sufficient for virtually all early commercially important 3G services. WCDMA and cdma2000 are affected by the same laws of physics as EDGE, and similar real world restrictions will therefore apply to these systems. However, based on current market indications, WCDMA and cdma2000 appear to have fewer terminal limitations, resulting in peak data rate roadmaps beyond what EDGE terminals timeslot capability allows. Other service capabilities are essentially similar for EDGE and WCDMA, including the evolution towards IP-based multimedia services. The WCDMA standard allows circuitswitched realtime services with a data rate higher than EDGEs 57.6 kb/s, but we do not believe this to be a key differentiator. Regarding roaming, EDGE is a part of the GSM/GPRS family which already has an extensive network of roaming agreements. It is likely this will also be the case for WCDMA. International roaming is instead a weak aspect of cdma2000. From a service capability perspective, there is thus little more than the high theoretical peak data rates supporting the view that WCDMA and cdma2000 is superior to EDGE. The importance of this difference should not be over-estimated, since we believe that Northstream AB
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virtually all commercially important services anticipated in the near to medium term are within reach for EDGE. Therefore, aspects other than pure technology will determine the role of EDGE as a stand-alone 3G service enabling technology. 1.1.2 In which markets is stand-alone EDGE applicable as a 3G service solution?

General 3G migration strategies and the availability of IMT-2000 spectrum in different markets must be considered when assessing the potential role of stand-alone EDGE.
GSM operators with IMT-2000 spectrum

In Europe and most parts of Asia, the IMT-2000 spectrum allocation recommendation is adhered to, i.e. 2x60 MHz of spectrum in the 2 GHz band is being made available for IMT-2000. The GSM community and Japan have chosen WCDMA radio technology for this migration. A vast majority of GSM operators in these regions will choose to acquire IMT-2000 spectrum and will thus deploy WCDMA. For those operators, stand-alone EDGE can only be viewed as an intermediate step before WCDMA launch. Northstream believes that this is only useful if there is a sufficient time interval between the availability of EDGE and WCDMA technologies. More specifically, for stand-alone EDGE to be useful, it is required that: Data services usage takes off very quickly after GRPS launch (causing a high quality and data service capacity demand that can be satisfied by EDGE); EDGE equipment, including terminals, is made available in volumes at latest by end 2002; and WCDMA is not in full commercial operation for GSM operators before 2004. The outcome is still difficult to accurately predict, but Northstreams opinion is that a GSM operator with IMT-2000 spectrum will not benefit extensively from launching EDGE prior to WCDMA. Thus, this usage scenario will not be a driver for the EDGE market. However, if the strategy is to involve EDGE in the WCDMA 3G roll-out, it can still be rational to deploy EDGE as soon as it is available. This is further discussed in Section 1.2.
Operators without IMT-2000 spectrum

Operators without IMT-2000 spectrum face a different situation. In Europe and Asia there will be few such operators and we believe it to be rational for most operators to attempt to get access to IMT-2000 spectrum whenever possible. Currently, very few GSM operators in Europe remain without IMT-2000 spectrum after completed allocation in their respective countries. For those operators without IMT-2000 spectrum, EDGE is an attractive path, possibly when combined with taking an MVNO role to get access to the long term service development of WCDMA. However, since this is a small group of operators, their potential EDGE plans are not a strong driver for the EDGE market. In North America, IMT-2000 spectrum is not allocated. Furthermore, the regional cellular (800 MHz) and PCS (1900 MHz) auctions have resulted in quite a fragmented spectrum situation. In general, operators with GSM, or plans for GSM, do not have sufficient spectrum assets to deploy WCDMA as well on a nationwide basis. For example, VoiceStream as well as AT&T have 2x5 MHz or less of PCS spectrum in areas Northstream AB
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covering approximately 20% of the population. Plans exist for additional 3G spectrum allocations in the 700 MHz and 1700/2100/2500 MHz bands, but even though the process has started, it is unlikely that spectrum will be available for use before 2004. Discussions now underway include trading of spectrum between operators, use of GSM in the 800 MHz band by cellular operators such as AT&T and Cingular, and possible operator mergers and acquisitions, further complicating the picture. In the 2003 timeframe, GSM/GPRS will probably not compete well with Sprint PCS and Verizons cdma2000-based offerings. In light of that, EDGE can be a useful means for GSM (TDMA) operators to offer competitive service capabilities. The strategy for these operators may either be to stay with EDGE, or to evolve further to WCDMA when spectrum is made available, a choice that need not necessarily be made immediately. In summary, there is use for EDGE as a stand-alone technology, primarily for those operators lacking IMT-2000 spectrum. If most American operators clearly commit to using EDGE, products will most probably be made available, since the Americas as a whole form a considerable market. However, the issue is: Is such American commitment to EDGE a sufficiently strong driver to make EDGE a mainstream technology rather than a niche product line, from the perspective of the entire GSM world? We believe not. For EDGE infrastructure and terminals to be developed by virtually all GSM providers and used on a large scale, therefore creating necessary momentum and economies of scale, there must also be an obvious advantage to EDGE deployment for the majority of GSM operators, i.e. the ones who possess or will possess IMT-2000 spectrum.

1.2

EDGE as a short/medium term complement to a WCDMA-based 3G roll-out

For operators with IMT-2000 spectrum, EDGE could potentially act as an inexpensive and rapid 3G coverage enabler in the context of a less than aggressive WCDMA launch. Provided that GSM/GPRS equipment can be inexpensively upgraded to EDGE capability, an operator could extend its 3G offering in the 2002-2004 timeframe beyond that possible only with WCDMA. Typically, EDGE would be deployed in rural/suburban areas whereas WCDMA deployment would take place in urban areas. Assuming availability of GSM/EDGE/WCDMA multimode terminals, in this scenario, the operator is then able to market 3G services that in fact are provided over both EDGE and WCDMA. The user need not know whether these are provided via EDGE or WCDMA at any particular instant. If WCDMA were delayed, e.g. beyond 2004, EDGE deployment could potentially start earlier with a stand-alone EDGE offering as described in Section 1.1 (provided that the US market triggers early EDGE availability), which would then be transformed into a combined roll-out as WCDMA became available. The main problem with this is that the initial stand-alone EDGE deployment would make most sense in urban areas and not the rural/suburban areas where it is needed for the combined roll-out. This scenario would then result in a two-fold investment in urban areas, first with EDGE and shortly Northstream AB
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after with WCDMA. It is difficult to see the clear benefits with such approach, but it cannot be ruled out completely. An illustrative business case is provided below, to highlight the rationale behind the use of EDGE as a supplement to WCDMA, and to investigate the economic consequences of such an approach. 1.2.1 Example business case: EDGE as a complement to WCDMA

Two scenarios are compared in this business case, both based on a fictitious Western European GSM operator that has been awarded IMT-2000 spectrum. In the first scenario the entire 3G service deployment is carried out using only WCDMA, whereas in the second scenario EDGE replaces WCDMA in suburban and rural areas. In both scenarios, GSM/GPRS is used as fallback technology. The objective of the case study is to compare these two scenarios and to provide guidance for an operator faced with these options. Since a fair comparison between these two scenarios is difficult to carry out, many simplifying assumptions have been made. The numerical values presented should therefore only be treated as indicative. Furthermore, it should be understood that actual comparisons between technology solutions should always be carried out on a case-bycase basis. Any detailed study would naturally require access to information about the operators supplier situation, existing and planned traffic volumes and demographical, geographical and market related factors.
Scenario and assumptions

The study assumes an aggressive roll-out starting in 2001 and a commercial launch of 3G services by mid 2002. The operator will roll out 3G services in suburban and rural areas from 2003 onwards. Although such roll-out schedule may seem overly aggressive given the likely equipment availability dates, the principal result of the cost comparison still applies. Further assumptions include the following: In suburban and rural areas EDGE will be utilised on the 900 MHz band. Link budgets (cell ranges) are calculated with a coverage criterion stating that 64 kb/s non-real-time data in the downlink shall be obtained either with WCDMA or EDGE on the cell border. With EDGE, the assumption is that this shall be achieved with two timeslots, which is a likely maximum uplink capability for early EDGE terminals. Country population is 50 million, geographical area is 300 000 km2. Operators current GSM population coverage is 95%. Population coverage targets are the same for both scenarios throughout the period. Current mobile penetration is just below 60%, rising to 87% in 2007. The operator retains a 30% market share over the whole time period of the study. The same revenue sources, segments, usage and traffic models are used in both scenarios. This is based on the fact that service levels are assumed identical in both scenarios. WCDMA services and GSM/WCDMA terminal devices are assumed to be available one year before triple-mode GSM/EDGE/WCDMA devices. 2002 02- 08
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We used advanced traffic modelling to obtain the total aggregated traffic per year and service type, which forms a basis for the revenue and the cost calculations. The traffic model used takes into account more than 30 different services, which are divided into five main categories: Communication and Personal Information (e.g.: E-mail, Internet access, Calendar, Contacts, Messaging, Corporate LAN access) Content (e.g.: Information Services, Location Based Information Services, News Headlines, Stock alerts, Web Directory, Advertising) M-commerce (e.g.: Banking, Stocks, Shopping, Tickets, Reservations, Micro payments) Voice and Streaming (e.g.: Video conferencing, live audio/video streaming, Video On Demand) Machine-to-Machine communication (e.g.: Telemetry, Remote Monitoring, Point Of Sales Applications)

Values in the traffic model are based on knowledge of various factors, including recent Internet statistics, traffic characteristics of voice, traffic characteristics of non-voice services such as multimedia services and transaction-based services, and device characteristics. Transformation of the statistics into forecasts is based on Northstreams and a number of analysts estimates. Revenues were analysed on the basis of three service components: Voice, non-real-time low speed data (possible with GPRS, EDGE, WCDMA) and non-real-time high speed data (possible with EDGE, WCDMA). Figure 2 illustrates the assumed average monthly revenues per subscriber and includes revenue from sources such as advertisers and sponsors. Although price erosion is high, the growth in voice minutes, due to fixed line substitution, partially compensates.
7 0 ,0

6 0 ,0

5 0 ,0

4 0 ,0

3 0 ,0

H ig h S p e e d D a ta L o w S p e e d D a ta V o ic e

2 0 ,0

1 0 ,0

0 ,0 2001 2002 2003 2004 2005 2006 2007

Figure 2: Average monthly revenue per subscriber in Euro, segmented by service type. (Identical for both deployment scenarios) Northstream AB
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Data revenue is calculated in terms of monthly average revenue per user (ARPU) and consists of four components: Data traffic, transactions, premium data and M-commerce. Voice revenue is also calculated in terms of ARPU and consists of the following three components: Monthly fees for post-paid subscriptions and fees from prepaid cards, mobile originated/terminated call revenues and roaming and interconnection. Costs are divided in two categories: capex (capital expenditure) and opex (operational expenditure). Capex is investments in assets that have a lifetime longer than 1 year, such as telecom equipment, sites and buildings. Opex are costs incurred within 1 calendar year such as handset subsidies, marketing, maintenance fees and salaries. No fees for spectrum licences are assumed. This certainly affects the total business case, but not the relative difference between scenarios. Due to the intense competition and predicted fast price erosion, we have assumed that the capex for hardware and software is the same for both EDGE BSS and WCDMA radio access network. However, we estimate that 20% of the existing sites in rural and suburban areas could be upgraded to EDGE only by slotting in new EDGE transceivers in existing base station cabinets. For WCDMA roll-out, we assumed that this would not be possible. When slotting in a transceiver, the assumed cost for adding EDGE capability to the site is assumed to be 17% of the cost of deploying a new site with EDGE capability. Furthermore, for both EDGE and WCDMA, capex is reduced by the extensive re-use of existing GSM sites. The assumed cost of adding a new base station cabinet at an existing site is assumed to be is 44% of the cost of a new site. The difference in core network related capex is very small. Opex has been divided into following four categories: Marketing costs, sales costs, network running costs and personnel costs. Other (excluded) costs mainly relate to interconnect and national roaming. We have assumed a higher handset subsidy for scenario 2 to compensate for the slightly higher price for GSM/EDGE/WCDMA terminals compared to GSM/WCDMA terminals and to cater for the twelve months delay in WCDMA/EDGE/GSM terminal availability.
Results

The results are based on the incremental business case based on a common base case. For both scenarios this base case is the continuation of the existing GSM/GPRS network without any 3G upgrades. The main difference between the two scenarios is the higher number of base stations required for the WCDMA-only roll-out. This stems primarily from better coverage in the 900 MHz GSM/EDGE band than the 2 GHz WCDMA band. This larger number of sites naturally leads to a greater capital expenditure, including both higher hardware and software costs and higher costs associated with acquiring and building new sites. The cumulative capex figures are presented in Figure 3. The cumulated difference in radio access network related capex rises to 600 million Euros. In addition to this, opex related to maintenance, site rentals, electricity, etc. is higher with the pure WCDMA scenario.

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1400 1200 M illion Euros 1000 800 600 400 200 0 2002 2003 2004 2005 2006 2007

E DGE /W CDM A

W CDM A

Figure 3: Cumulative Radio access network capex for the two roll-out scenarios As can be seen from Figure 4, the reduced capital expenditure in the EDGE scenario results in quicker payback time and smaller peak financing need. The importance of the peak financing need is however relatively small in these scenarios, because the operator has steady revenues from existing GSM customers.

3 500 3 000 2 500 2 000 1 500 1 000 500 0 2001 -500 -1 000

Cumulative Cash Flow EDGE/WCDMA Cumulative Cash Flow WCDMA

2002

2003

2004

2005

2006

2007

Figure 4: Cumulative cash flow for the two scenarios in Millions of Euro

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Based on this short analysis, it seems that quite significant savings can be achieved for a GSM operator with UMTS spectrum by using EDGE technology to cover areas where traffic volumes will remain low. In fact, we expect that differences might be even more pronounced, because quite conservative parameters were used for the case traffic and network planning. The results are especially sensitive to the 3G coverage criterion. The assumed criterion of 64 kb/s on the cell border with two EDGE timeslots is fairly strict and leads to an extensive amount of new sites. A more relaxed criterion in the early launch phases would lead to fewer new sites, which in turn would put an emphasis on the reuse of base station equipment. The significance of simple EDGE transceiver upgrading of existing GSM base stations would thereby increase, and if a large percentage of base stations were to be upgradeable in such a manner, the EDGE scenario would benefit in comparison.

1.3

Long term optimisation of 2G spectrum capacity

Following 3G service launch, a GSM/WCDMA operators 3G subscriber penetration will increase over time. As the GSM bands (900/1800/1900 and potentially 800 MHz) are substantial parts of its total spectrum assets, it will become more and more essential to be able to use the GSM spectrum for 3G services and maximum spectrum efficiency. This can be achieved in two different ways: By using EDGE, which gives higher data rates and is 2-3 times as spectrum efficient for data as GPRS, or by refarming GSM spectrum and deploy WCDMA also in these bands. In a case where EDGE has been deployed earlier, driven by the scenarios in Sections 1.1 and 1.2, it is rather straightforward and economically efficient to continue on the EDGE path. For example, assuming that EDGE deployment were to start in 2002, in the 20062009 timeframe the installed base of EDGE transceivers and terminals would be very large, so in vast parts of the network the GSM spectrum would already be 3G service capable and spectrum efficient. Seamless load sharing of GSM/EDGE/WCDMA traffic would be needed for this to work properly, and such radio resource management functionality seems feasible in the timeframe in question. This is a long-term effect of EDGE deployment that is important to consider when evaluating the economic consequences of different EDGE strategies. If EDGE has not generally taken off in the market earlier, it is less evident that there will be an installed EDGE transceiver base and any terminals in the 2006-2009 timeframe when GSM spectrum optimisation is needed. It seems quite unlikely that EDGE deployment would suddenly start within that timeframe. In that situation, it must instead be considered probable that, when faced with an overall capacity problem, the operator will choose to refarm GSM spectrum and migrate to a single future-proof WCDMA technology. The single obstacle we see to a long-term refarming strategy would be an emergence of severe administrative issues in the necessary freeing up of 5 MHz spectrum chunks in the GSM bands.

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In essence, we do not believe this long-term EDGE usage scenario to be important enough to become a substantial driver for making EDGE happen in the industry. Other arguments must trigger an EDGE take-off, but once EDGE is a mainstream technology, it does have merits for long-term utilisation of GSM spectrum.

EDGE - current industry status

The GSM industry is currently very much focused on WCDMA. The default roadmap from GSM is via GPRS directly to WCDMA. Clearly, the commercial launch of GPRS, IMT-2000 spectrum acquisition and WCDMA contracts and product development together form a full workload for operators and manufacturers. As a consequence, issues perceived as non-critical, such as the role of EDGE, have suffered from lack of interest.

2.1

Operator plans/commitments

The GSM migration trend among American TDMA operators was initiated by AT&T Wireless Services announcement in November 2000 of their plans to migrate to WCDMA (via GSM/GPRS/EDGE) [1]. This forced other TDMA operators to re-think their strategies, and e.g. Cingular Wireless in the US, Rogers Wireless in Canada and Telcel in Mexico have also announced migration paths involving GSM/GRPS/EDGE [23, 6]. In essence, when considering the spectrum situation in the Americas, it seems likely that operators in both the TDMA and GSM communities have (or should have) a high interest in the EDGE technology. However, with the exceptions above the American operators have not yet been very vocal about this issue. In Europe, almost no GSM operator remains without an IMT-2000 licence after the completion of spectrum allocations. Bouygues Telecom in France is one operator that has indicated plans for an EDGE-based evolution [4], but the French spectrum allocation is not yet completed. In Scandinavia, where largely rural geography could suggest WCDMA deployment in cities and EDGE elsewhere, WCDMA coverage regulations have in practice shut the door on EDGE. Hence, Telia in Sweden, which was not awarded a licence, was effectively forced to team up with Tele2, a successful IMT-2000 licence applicant and a GSM competitor, and the two are now deploying a common WCDMA network. Among the IMT-2000 spectrum licensees, very few public EDGE indications have been given. Leading operators/operator groups such as Vodafone Group have not publicly indicated detailed plans. Considering the size of some of these operators, public statements/commitments could potentially affect the entire market, an opportunity that these operators could exploit. It is not unlikely that these operators make use of this opportunity in the near future, at least if their plans involve EDGE. Still, at the time of this writing, public EDGE commitment from European operators remains weak.

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2.2

Predicted product availability

The EDGE product family essentially consists of base stations, base station transceivers, BSC software and, last but not least, terminals. On the infrastructure side, EDGE products seem not too far from availability from the big manufacturers. In [5], six leading manufacturers are interviewed about their product plans, and when considered together with general current signals from the industry, it seems feasible that total EDGE solutions could be made available during 2002. The manufacturers newest base station platforms typically support the coming EDGE transceivers. Some vendors made these platforms available six years ago; others have still to make them available. For the operator, this makes the EDGE upgrade roadmap dependent on his BSS vendor(s), where it must consider both the backwards compatibility of EDGE transceivers in base stations that are already deployed, and forward compatibility in terms of single future base station platforms that support both EDGE and WCDMA transceivers. Ericsson and Nokia are the manufacturers with the largest footprint in the GSM BSS market. Their active product support is definitely needed if EDGE is to take off. Judging by information currently available, both companies seem able to offer EDGE infrastructure products during 2002. On the terminal side, things are different. Having earlier stated quite detailed plans for EDGE terminal availability, it now appears that many terminal manufacturers have put their development on hold and are waiting for more operators to state their requirements. There are currently few public commitments regarding EDGE terminals. Key resources within the companies seem, quite logically, focused on GPRS and WCDMA terminals for which there is a well-defined upcoming market. We assume that the US discussions between operators and suppliers include the terminal provisioning issue, and that at least Nokia, SonyEricsson and Siemens have plans for EDGE terminals operating on 850 and 1900 MHz. The level of potential commercial commitments is not public to date. In general, Northstream believes that it is possible to make EDGE terminals available by end 2002, provided that manufacturers prioritise design and production resources as a consequence of operator requirements. Certainly, technical challenges exist, two of them being the radio frequency (RF) design itself due to the 8PSK modulation, and the heat dissipation and battery life consequences of the high data rate. But these are quite limited compared to corresponding WCDMA challenges. As the GPRS experience shows, challenges in bringing terminals to the market in volumes also include protocol design and interoperability testing. The terminal issue is in fact even more complex: The combined EDGE/WCDMA 3G launch described in Section 1.2 needs a multimode terminal supporting GSM/EDGE/WCDMA to be viable. It is however fair to assume that the manufacturers main focus for the first generation of WCDMA phones in the GSM markets will be the GSM/WCDMA capability, and that a potential 3-way multimode phone will not be a Northstream AB
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reality until significantly later. But again, the availability schedules and resource focus are dependent on operator requirements, and since the technical complexity of adding EDGE to a GSM/WCDMA phone cannot be fundamental, the situation is still highly dynamic and subject to influence by dominant market players.

Potential Risks with EDGE

Currently, EDGE is not generally viewed as a necessary step on the migratory path from GSM to WCDMA. Therefore an operator potentially takes a few risks by including EDGE as a key component in its migration plan.

3.1

Terminal availability

Timely availability of attractive EDGE terminals, preferably from a large set of vendors, is an absolute must for any EDGE-based 3G migration. For the stand-alone EDGE approach, GSM/EDGE terminals are sufficient. This type of terminal is likely to be developed for the Americas. However, the risk is that it will remain a niche product line unless EDGE also takes off in Europe and Asia. For a combined 3G launch with EDGE/WCDMA, multimode GSM/EDGE/WCDMA terminals are absolutely critical. Most of the WCDMA manufacturers must provide attractive terminals with this capability in a relatively early phase of WCDMA launch. The alternative case, where most early terminals only have GSM/WCDMA capability, will of course put most early 3G users beyond the reach of EDGE, which would render the EDGE investment meaningless. Assuming that the first generation of terminals is GSM/WCDMA, the issue is how much later the multimode terminals will be. Considerable operator momentum is needed behind the combined EDGE/WCDMA roll-out approach to lessen the risk that the GSM/EDGE/WCDMA terminal type becomes a niche product, with associated delayed availability and reduced economies of scale. For the combined roll-out to work really well, the eventual ambition should be that EDGE is part of every data-capable GSM/WCDMA terminal.

3.2

Perception of not real 3G

The wireless industry has a history of being technology-focused. Communications towards both end-users and the investor community often emphasise the technology used rather than the services offered. Although the introduction of a multitude of services has gradually mitigated this historical tendency, obvious traces can still be seen: Numerous operators have for example recently launched GPRS to their subscribers, rather than focusing on marketing the new services that GPRS enables. Northstream believes that this traditional approach is not the way forward, and that the service offering will (and should) be the focus in the 3G era. Therefore, our opinion is that with clever marketing of well-packaged, attractive services and applications, both to investors and end-users, the radio access technology chosen to deliver these services will become less important. We believe the potential risk of being perceived as not offering real 3G due to the use of EDGE in a 3G service deployment, is Northstream AB
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limited, if the service offering instead of the technology remains in focus. However, an active plan for this is necessary, since competitors not using EDGE are likely to, for example, play the data rate game, by claiming advantages of the high theoretical peak data rates of WCDMA and cdma2000.

3.3

Economies of scale

3G network operators obviously want the technology they use to be a mainstream technology in widespread use. Potential differentiation gains from using an unusual (potentially superior!) technology are most often dwarfed by the benefits of a mainstream technology in terms of availability schedules, market competition, roaming and economies of scale. Therefore it is very important for an EDGE operator that EDGE takes off as a default technology component in most operators 3G offering. From the perspective of such an operator, ideally, EDGE capability would be included in all GSM transceivers, these transceivers would fit into the same base station cabinets as WCDMA transceivers and EDGE would be implemented in all data-capable GSM and WCDMA terminals. This is by no means technically impossible; it is instead a matter of setting priorities in product development. Without an evolution in this direction, using EDGE will imply less economies of scale than GSM/WCDMA, which may tend to reduce the economic benefit that was the initial reason for EDGE deployment. Major operator backing of EDGE can prevent this.

Conclusion

EDGE technology has quite an uncertain future. Unlike GPRS and WCDMA, which are technical components regarded as necessary for GSM operator evolution, many in the industry view EDGE as just an add-on technology with unclear benefits. It is now likely that EDGE products will ultimately exist, and at least be deployed by GSM and TDMA operators in the Americas, due to the American spectrum situation. However, without extensive use in Europe and Asia, EDGE will be a niche product line from the perspective of the entire GSM community. This will in turn reduce its attractiveness for American operators and make it at best an interim technology. What could change this situation into global acceptance of EDGE is explicit, public backing from leading GSM operators with an IMT-2000 licence. The strategy so far employed by this operator segment has been to wait and see how the situation evolves. Northstream believes that there is reason for these operators to make a careful evaluation of what EDGE can do for them. If an increased momentum among these operators ultimately would transform EDGE to a mainstream technology, its undisputable technical merits could be exploited, foremost as a complement to WCDMA in a 3G roll-out, and subsequently in optimising use of existing GSM spectrum.

Northstream AB
http://www.northstream.se

2002 02- 08
Re-publication permitted, stating Northstream as your source

White Paper on the Role of EDGE Technology

15 (15)

Less evident which path to choose. Depends on 1. Economic benefits 2. GSM/EDGE/WCDMA terminal availability, etc

Likely in the 2007-2010 timeframe GSM WCDMA WCDMA (also in 900/1800 MHz)

GSM (incl GPRS)

Probably needed in the Americas due to lack of IMT-2000 spectrum Usefulness for GSM operators with IMT-2000 spectrum questionable

Stand-alone EDGE (GSM/EDGE)

Combined 3G offering (GSM/EDGE /WCDMA)

With EDGE deployed, this step can be postponed longer

Figure 5. Alternative roadmaps for GSM operators with and without EDGE

References

1. AT&T press release, November 30, 2000, http://www.att.com/press/item/0,1354,3502,00.html 2. Rogers/Ericsson press release, January 31, 2001, http://micro.newswire.ca/releases/November2000/30/c9412.html/5804-0 3. Telcel/Ericsson press release, December 21, 2000, http://www.ericsson.com/press/20001221-0112.html 4. Bouygues Telecom press release, January 31, 2001, http://www.bouygues.fr/english/actualite/cp_groupe.asp?id=19 5. Northstream, Positioning EDGE in a 3G World, Baskerville Communications, November 2000, http://www.northstream.se/edge 6. Cingular press release, October 30, 2001 http://www.cingular.com/about/latest_news/01_10_30

Northstream AB
http://www.northstream.se

2002 02- 08
Re-publication permitted, stating Northstream as your source