Industry white paper

The road to LTE for GSM and UMTS operators

By Dr Terry Norman
January 2009

We predict that mobile traffic will grow ten-fold in developed countries by 2015. Mobile operators must meet this
demand while maintaining a healthy profit margin.

The challenge facing mobile operators in developed and developing markets is to reduce costs while profitably
meeting the rising demand for data. It is well recognised that this requires an all-IP network that is optimised to
carry data in both the access and core network.
3GPP LTE (Long Term Evolution) will be the likely choice for operators in developed markets, as well as many
emerging markets. As the latest evolution of the UMTS family, it is the natural successor to UMTS for GSM and
UMTS operators. However, deploying a new access and core network, while existing UMTS assets are not fully
utilised is difficult for many operators to accept. The predicted growth in data traffic means that most operators
must now recognise that there is a need to deploy LTE. So the question is not why, but where and when.
This paper considers the issues that are influencing operators decisions about where and when to deploy LTE.
The following questions are discussed:

The growing demand for data what are the main features and implications for RAN architecture?
What are the operational benefits of deploying LTE?
Before deploying LTE, is there room for growth in existing GSM/UMTS assets?
Will femtocells affect the deployment of LTE?
How will WiMAX, Wi-Fi and ADSL affect LTE deployment plans?
How does the availability of spectrum affect operator deployment strategies?

Finally, we conclude with our vision of deployment strategies that operators might employ.

The road to LTE for GSM and UMTS operators

The growing demand for data what are the main features and
implications for RAN architecture?
Compared with today, total wireless network traffic generated from voice and data services will increase ten-fold
by 2015 in developed regions.1 Traffic per cellular user per month in developed regions will rise from an average
of 56MB in 2008 to 455MB in 2015, as shown in Table 1. By 2015, 94% of traffic will be data and 74% of this
will be generated indoors. However, if operators continue to apply their current pricing models, the revenue per
megabyte will fall from USD0.86 in 2008 to USD0.12 in 2015. Developing regions will follow a similar trend.

Table 1: Key forecasts for mobile traffic in developed and developing regions [Source: Analysys Mason, 2009] 2
Traffic metric

2008 (developed)

2015 (developed)

2008 (developing)

2015 (developing)

Total traffic per month

57PB

557PB

50PB

307PB

Traffic per mobile user

per month

56MB

455MB

22MB

83MB

Percentage of data in
total traffic

49%

94%

7%

79%

Percentage of data traffic 54%

that is generated indoors

74%

34%

62%

These conditions point towards the need for:

a data-optimised network architecture

a network carriage cost per megabyte that is able to realise a profit on a ten cent per megabyte revenue model
excellent indoor coverage.

It is envisaged that an LTE network will deliver against the rising demand for data at a profit. As a bonus, there
are operational benefits of deploying LTE.

What are the operational benefits of deploying LTE?

LTE can offer considerable operational savings by:

deploying fewer access nodes compared with 3G UMTS. This is known as the flat-RAN architecture it
makes deployment more cost effective and easily scalable, although it should be noted that flat-RAN
architectures are also available with HSPA

We report here our baseline figures. In such a long-term prediction, a number of factors could result in traffic levels differing substantially
from our baseline forecast. In a low-traffic scenario, traffic per customer in developed regions is 4 times higher in 2015 than it was in 2008,
while in a high-traffic scenario it is 22 times higher.

For more information, see Heath, M. and Brydon, A., Wireless network traffic 20082015: forecasts and analysis, Analysys Mason
(Cambridge, 2008).

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The road to LTE for GSM and UMTS operators

allowing the early switch-off of GSM. Operators will be able to streamline their operations by switching off
GSM and replacing it with LTE. Operators must weigh the benefits of this strategy against the cost of
migrating subscribers, and the loss of roaming revenue and legacy services

offering an opportunity for RAN sharing. RAN share has often failed in the past because operators could not
agree on the value of existing assets. This will not affect LTE RAN sharing, because LTE is a new
deployment. RAN sharing is a very significant way of reducing the deployment cost of LTE.

LTE offers some operational savings and a significant increase in network capacity, but it is not the only
solution. When considering how to meet the demand for data, network operators have a number of possible
technology alternatives that can be mixed to create a cost-effective solution with a phased deployment,
ultimately leading to LTE. These alternatives include: GSM, UMTS, HSPA, HSPA+, femtocells and Wi-Fi.

Before deploying LTE, is there room for growth in existing GSM and
UMTS assets?
When considering whether or not to deploy LTE, operators are most likely to ask the following three questions:

Why deploy LTE to replace UMTS when we still have so many GSM subscribers?
Many countries have not yet deployed UMTS, why deploy LTE?
Is there the potential to develop UMTS before deploying LTE?

By the end of 2008, 3.5 billion mobile subscribers were using networks based on the GSM family of standards,
of which only 350 million subscribers were on 3G UMTS. In theory, operators could migrate a substantial
number of subscribers to UMTS before moving on to LTE. However, this ignores local regulatory constraints,
availability of suitable spectrum, local legacy services and the relatively limited roaming capability of UMTS.
Moreover, many GSM subscribers will not be prepared to pay for new handsets and/or data devices, nor is it
commercially viable for the operator to migrate them.
UMTS could be deployed more widely, because 3G spectrum has not yet been fully allocated in many countries,
but many wonder why deploy an older technology when LTE can be deployed for a similar cost.
In developed countries, many operators with UMTS HSPA networks have to decide whether to upgrade to
HSPA+ or to move directly to LTE. Most operators say they will carry out software upgrades to HSPA and
HSPA+ without deploying MIMO. Leading operators have, however, conducted public trials of HSPA+ with
hardware MIMO: clearly there is a feeling that HSPA+ still has growth potential. Some operators are
considering combining HSPA+ with a direct solution to the problem of indoor coverage, like femtocells or
Wi-Fi, as an effective data-optimised solution instead of LTE.

Will femtocells affect the deployment of LTE?

By 2015, we predict that more than 70% of data traffic will originate indoors in developed regions and more than
60% in developing. This traffic will need to be supported by good-quality indoor coverage. Femtocells are one
way of providing this coverage. Consumers can install these small UMTS base stations in their homes, rather
like the ubiquitous home Wi-Fi, and are connected to the mobile operators switching network, usually through
the home ADSL line. Business femtocells are usually installed and integrated into the existing IT network of the

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The road to LTE for GSM and UMTS operators

business by a trained installation team provided by the operator. Backhaul is via the existing business external
connectivity.
The wide-scale use of femtocells may ease the pressure on operators to deploy LTE by transferring some of the
traffic from the macrocell network to the femtocells. Figure 1 shows the growth in traffic from 2008 to 2012 for
a mobile operator with 10 million subscribers. Demand will outstrip HSPA capacity in 20102011 and HSPA+
capacity by 2012. However, if indoor traffic is offloaded to a femtocell network, HSPA and HSPA+ will offer
sufficient capacity for 2012 and beyond.

Figure 1: Network traffic generated by an example mobile service mix, split between indoor and outdoor usage,

Total downlink traffic per month (terrabyte)

20082012 [Source: Analysys Mason, 2009]3

10000
LTE (20MHz)

9000
8000
7000

Network
capacities

6000
5000
4000

LTE (10MHz)

3000
HSPA+ (10MHz)

2000
1000

HSPA (10MHz)

0
2008

2009
Outdoor

2010
Indoor

2011

2012

Indoor capacity overhead

The femtocell solution has four major hurdles to overcome:

The business case is challenging.

The success of the solution depends on the use of an ADSL backhaul, which will disadvantage the mobile
operator unless its parent company also owns the backhaul.
Operators would have to learn to manage millions of femtocells, as opposed to tens of thousands of base
stations, which was their previous experience.
Femtocells continue to have some technical problems associated with managing interference and handover.

While the femtocell solution is technically elegant, it is not straightforward to implement and mobile operators
must carefully consider their position before relying on a femtocell solution to meet their rising capacity demand.
Femtocells are not the only means of providing indoor coverage. Other options include Wi-Fi, combined with
WiMAX and ADSL.

For more information, see Heath, M. and Brydon, A., 3G Network Evolution from 2007 to 2012: HSPA+, LTE, WiMAX and femtocells,
Analysys Mason (Cambridge, 2008)

Analysys Mason Limited 2009

January 2009

The road to LTE for GSM and UMTS operators

Will Wi-Fi, WiMAX and ADSL affect LTE deployment plans?

Evolving from the vast base of GSM/UMTS networks that are already deployed, LTE has a major commercial
advantage over WiMAX . Discussion with leading vendors and operators shows that the majority of MNOs will
upgrade their networks to LTE rather than WiMAX. We predict that UMTS technologies (including HSPA,
HSPA+ and LTE) will dominate wireless broadband services, with possibly twenty times as many users as
WiMAX by the end of 2015. It is likely that WiMAX will be focussed on developing regions, where it is already
finding ready markets. We believe that 92% of the 98 million WiMAX customers at the end of 2015 will be in
developing regions. WiMAX will be one of the technologies available to UMTS operators that might want to
take advantage of opportunities in developing countries and/or countries where the reach of ADSL at broadband
speeds is poor.
The greatest competitor in the indoor broadband market is from the fixed ADSL line with Wi-Fi capability. The
long-term trend in cost per mobile subscriber is downward, whereas we do not think there is as much scope for
cost reduction in fixed. Therefore, we believe that wireless will progressively increase its market share of
broadband subscribers. In Europe we predict that wireless will account for about 22% of the European fixed
broadband subscriber base in 2013. We expect a similar trend to follow worldwide.

How does spectrum affect operator deployment strategies?

The success of wireless solutions relies on the availability of spectrum. Several suitable bands are likely to
become available either now or within the next few years, including 2600MHz and the re-use of existing GSM
900MHz and 1800MHz. There are other bands that are available throughout the world, due to the poor
harmonisation of spectrum. The most important are 700MHz, 850MHz, 1500MHz, 1700MHz and 1900MHz.
For the purpose of this paper, we have chosen the European set (900MHz, 1800MHz, 2100MHz and 2600MHz)
to illustrate our arguments, but they have propagation characteristics and usage with similar bands worldwide.
The most discussed band at the moment is 2600MHz, the International Telecommunication Union (ITU)
wireless broadband frequency. Most European countries plan to auction 2600MHz in the next two years, if they
have not done so already. Most network operators have publicly declared an interest in deploying LTE in this
band.
There is no similarly clear view about the deployment of data-optimised access technologies in existing GSM
bands of 900MHz and 1800MHz. Low frequencies like 900MHz offer good coverage, both outdoors and into
buildings, from the outdoor network. Therefore, it would be useful to deploy LTE in this band, but 900MHz is a
well-established GSM band worldwide. It offers revenue streams through incoming roaming and other legacy
services. The same is also true for 1800MHz. Operators would need to think carefully before deploying LTE in
these bands and losing these valuable revenue streams and worldwide roaming capability.
Some operators are beginning to question whether they should continue to use UMTS in the 2100MHz band, or
deploy LTE instead. 2100MHz is well established as the standard UMTS band. UMTS has the potential to
become a data-optimised network by upgrading through HSPA and on to HSPA+, with MIMO technology.
Again, operators will need to weigh the cost of upgrading older technology against the cost of deploying a new
technology with a longer life cycle ahead of it.

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The road to LTE for GSM and UMTS operators

So, what are the likely operator strategies?

There are four important considerations that influence operators when developing a strategy for deploying a
data-optimised radio access network architecture:

Spectrum and local regulatory constraints: the availability of spectrum and bandwidths, and the timing of
auctions. There may also be regulatory conditions attached to licences, such as population coverage
requirements.

Existing infrastructure: for example, GSM or GSM plus UMTS.

Local markets: demand and competition.

The operators business objectives: for example early stage coverage driven or later stage capacity driven.

There are as many pathways to a data-optimised radio access networks as there are operators. In order to
summarise our discussion, we consider the three main operator types: the combined GSM and UMTS operator,
the UMTS-only operator and the GSM-only operator.

The combined GSM and UMTS operator

Operators with both 2G and 3G spectrum, for example 900/1800MHz and 2100MHz respectively, are likely to
retain GSM voice at 1800MHz, upgrading through GPRS and possibly Evolved EDGE to support VoIP as it
matures.
Spectrum in the UMTS expansion band, 2600MHz, will be used as a capacity overlay in urban and dense-urban
areas.
The real challenge is to provide reliable mobile broadband coverage indoors. In this, operators have three
realistic choices:

direct indoor coverage from femtocells and/or Wi-Fi

macrocell coverage using 900MHz
macrocell coverage using 2100MHz and/or 2600MHz.

With direct indoor coverage using femtocells/Wi-Fi, the quality of coverage is likely to be far better than
macrocell coverage. Wi-Fi has the advantage of being a proven technology that can be deployed today with a
proven business model. Femtocells are a natural evolution for the mobile operator from a GSM/UMTS family
background, but the business case and technical challenges may yet prevent the wide-scale deployment of
femtocells. In both cases, success depends on the ADSL backhaul. This may make the mobile operator
unacceptably vulnerable to the fixed operator, especially given that our predictions are that the mobile operator
may take more than 20% of the fixed operators broadband business. A converged operator, with both fixed and
mobile networks, of course would not be concerned.
If it transpires that it is impossible to reconcile a profitable femtocell business case, and/or the operator does not
wish to rely on ADSL backhaul to provide its mobile broadband offering, then the operator will need to provide

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The road to LTE for GSM and UMTS operators

indoor coverage with the macrocell network. This is best done using low frequencies like 750MHz4 or 900MHz.
Whether the operator decides to buy 750MHz spectrum when it becomes available or to replace 900MHz GSM
with data-optimised access technology, such as LTE or HSPA+, depends on when the spectrum becomes
available, and how strong the demand for data is predicted to be. We believe that if the operator goes for the
refarmed 900MHz option then the operational costs of revisiting sites to make hardware upgrades mean that
most operators will deploy LTE in 900MHz when it becomes available rather than follow an upgrade path to
LTE via UMTS and HSPA.
It is also likely that the 2G/3G operator will take advantage of incidental indoor coverage from 2100MHz, in the
first instance. However, extending this strategy to include indoor coverage at 2600MHz may require a
prohibitively high site density. The site density required to achieve good coverage indoors at 2600MHz will need
to be weighed against alternative indoor coverage techniques like direct indoor coverage, refarmed 900MHz or
new, low-frequency spectrum.

Operators with 3G-only spectrum

Operators with 3G-only spectrum face different problems to their 2G/3G counterparts. Firstly, they must acquire
spectrum at lower frequencies, which can then be used to provide data coverage in rural areas and indoors. In
rural areas, due to the limited population, the demand for capacity tends to be less, and coverage is the most
important consideration. So a mobile operator may want to acquire some low-frequency spectrum in order to
provide a thin (few sites and big area) layer of coverage. The operator would then need to decide between
deploying LTE or HSPA+ in this spectrum. In all likelihood, an operator would opt for LTE given the improved
capacity, reduced operational and capital costs and good in-building coverage that low frequencies provide.
However, as with all other operators, the 3G-only operator must trade this strategy against the use of indoor
femtocells and/or Wi-Fi. It is also highly likely that this type of operator would want to acquire 2600MHz
spectrum to be used as a capacity overlay in heavily populated areas.

GSM-only operators
Before LTE, the upgrade path for GSM-only operators would typically be through UMTS and on to HSPA.
Many are now considering moving directly to LTE, assuming that local spectrum regulations allow this strategy.
It is also possible that some operators in developing countries will consider using WiMAX, due to local
spectrum constraints.
The GSM-only operator must carefully consider how to provide indoor coverage. As with all other operators, the
choices are between direct indoor coverage solutions, like femtocells or Wi-Fi, or coverage from the macrocell
network, probably using low frequencies, like 900MHz. In developing countries, it is more likely that 900MHz
GSM will be retained because of its good rural coverage and the high proportion of voice usage. So a direct
indoor solution may be more appropriate, but this must be traded against the cost and potential revenue. An
alternative may be GSM 900 with Evolved EDGE, to provide the required data.

To be made available to mobile operators as a consequence of the switch over from analogue broadcast TV to digital in the UHF band.

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The road to LTE for GSM and UMTS operators

Summary
Because of the advantages it offers over existing technologies, it is a given that LTE will find worldwide use.
However, given the complexity of the decision process it is not surprising that many operators are adopting a
wait and see approach when it comes to upgrading their networks. It is predicted that LTE will be deployed by
early adopter operators in developed countries in 2009 and it will be in commercial use in 20102011. LTE
deployment will predominantly take place during the following two to three years.
There are many alternative paths to LTE. We have talked to numerous operators, and most say that they will not
add MIMO technology to HSPA, but will carry out software upgrades only, and yet operators are conducting
public trials of HSPA+ with MIMO technology. The availability of direct indoor coverage solutions like Wi-Fi
or femtocells will have a marked impact on the use of HSPA+. We expect that in developing countries
particularly, operators will consider deploying LTE, instead of UMTS/HSPA, as a replacement for GSM. In the
end, the path an operator chooses depends on four key factors: its existing technology, the local market
conditions, local spectrum availability and its business objectives. These are all very localised decisions. If
operators deliberate carefully, weighing up the costs and benefits of the various technology mixes and choosing
when to deploy rather than following the leader, they will profit from the growth in the demand for data. Any
mistakes made now, however, could cost them dearly in five to ten years time.

Analysys Mason Limited 2009

January 2009