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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

Our legacy

www.informatm.com
Confidential

11/09/2009

Informas key strengths

WCIS: 5 million data points, 10000+ cellular handsets, MNO ownership, network
summary data
Intelligence Centre: Quantitative and qualitative analysis, including subscriber,
traffic and base stations forecasts

30/03/2011

How can we make this data relevant to the business case of a

mobile operator or an infrastructure vendor?

I.e translate our subscriber and traffic data to revenues, ROI, CAPEX,
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.informatm.com
Confidential

30/03/2011

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

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, 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.informatm.com
Confidential

30/03/2011

Our model

www.informatm.com
Confidential

11/09/2009

Inputs
Network deployment scenarios
Radio access Technologies: HSPA, HSPA+, LTE
Traffic Management: Optimization, policy based management, 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, social networking, portable Internet etc

Technology: HSPA, HSPA+, LTE
Geotype: Dense Urban, Urban, Suburban, Rural
Indoor/outdoor traffic segmentation

Methodology validation
Results validation

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.informatm.com
Confidential

30/03/2011

11

Population size & growth

Population density by
geotype (dense urban,
urban, suburban, rural)

Traffic
demand
methodology

Operator network
coverage

Country
demographics

Penetration of population
Subscribers by device type
(non-smartphones,
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, traffic

class & geotype

By device type, traffic class,

geotype
Optimised & unoptimised
www.informatm.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

Case study: UK operator

HSPA vs LTE

www.informatm.com
Confidential

30/03/2011

13

UK market: Subscriber information

Rural
7,686,764
12%
Dense Urban
16,625,473
27%
Suburban
15,164,784
25%

Urban
22,167,297
36%

Dense Urban and suburban areas dominant

Rural deployments still driven by coverage

www.informatm.com
Confidential

11/09/2009

14

UK: traffic profiles

Device class
Non-smartphone
Smartphone
Portable

20

Annual growth rate

30%
30%
30%

15
18000
16000

10

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.com
Confidential

30/03/2011

2012

2013

Smartphone data

2014

2015

Portable data
15

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.informatm.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

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.informatm.com
Confidential

30/03/2011

2012

2013

2014

2015
17

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.
A new LTE deployment will cost a minimum of US$58 million compared
to upgrades to existing networks, assuming that the LTE deployment
begins during 2013

www.informatm.com
Confidential

30/03/2011

18

US operator case study

WiFi offload

www.informatm.com
Confidential

30/03/2011

19

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 1.9GHz for WCDMA and HSPA/HSPA+

Backhaul
T1/E1, owned/leased fiber and microwave

www.informatm.com
Confidential

11/09/2009

20

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.informatm.com
Confidential

30/03/2011

21

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.informatm.com
Confidential

30/03/2011

2012

2013

2014

2015

Traffic after offload

22

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.informatm.com
Confidential

2012

2013

2014

2015

New base stations with WIFi offload

30/03/2011

23

US network scenario comparison

1,400

Annual TCO (millions)

1,200

1,000

800

600

400

200

2011
New BTS only

www.informatm.com
Confidential

2012

New BTS and upgrades

2013
Private offload

2014

Public offload - leased

30/03/2011

2015
Public offload - owned

24

WiFi offload key takeaways

Offload strategies need to be carefully addressed in order to avoid additional costs.
Private WiFi offload
Best case in terms of cost, but no visibility on user behavior or traffic patterns.

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.

Leasing WiFi
Additional costs may break the offload business case and increase overall network costs as high as
radio access upgrade costs.

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.
Costs involved in deploying nationwide hotspot networks but the available WiFi capacity to the
mobile operator can be significant.

Specialist solutions for WiFi offload will appear in the market during 2011, including
gateways that interface WiFi with cellular networks. Standardization is also ongoing to
integrate two networks and allow mobility between WiFi and cellular networks.

www.informatm.com
Confidential

30/03/2011

25

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, optimization, offload are some examples

www.informatm.com
Confidential

30/03/2011

26

Click to
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Dimitris
Click to Mavrakis
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Senior Analyst, Networks
Informa Telecoms & Media
Email: dimitris.mavrakis@informa.com
www.informatm.com

11/09/2009
30/03/2011