Download - Ultra-efficient network factory: Network sharing and other means to leapfrog operator efficiencies
The ultra-efficient network factory: network sharing and other means to leapfrog operator efficiencies.Broadband MEA, March 26th 2012, Dubai, UAE.
Dr. Kim Kyllesbech Larsen,
Technology, Deutsche Telekom AG.
Deutsche Telecom … Mobile Business …
Network partnerships in UK, Poland, Cz, Austria, … Network partnerships in UK, Poland, Cz, Austria, …
GSMEDGE, UMTSHSPA+ (42), LTE @ 800MHz2.6GHz & WiFi.GSMEDGE, UMTSHSPA+ (42), LTE @ 800MHz2.6GHz & WiFi.
100+m mobile subscribers over 100+ thsd radio nodes.100+m mobile subscribers over 100+ thsd radio nodes.
2Dr. Kim Kyllesbech Larsen, Broadband MEA, March 26th 2012, Dubai, UAE.
Last 10yrs more than doubled the size of its mobile networks ….Last 10yrs more than doubled the size of its mobile networks ….
AND reduced or kept Technology Opex stable
AND reduced or kept Technology Opex stable
Revenue Decline
&
Profitability Squeeze
Business model
Breakdown
Data Tsunami
Spectrum
Crunch
Transformor
Perish
3Dr. Kim Kyllesbech Larsen, Broadband MEA, March 26th 2012, Dubai, UAE.
The profitability challenge…NOT only a problem for mature markets!
Feb. 2011 Tellabs reports mobile operators profitability challenged within 2 - 3 years, and mobile internet is forcing operators to transform their networks and business models 1.
Oct 2011 China Telecom Corp reported third-quarter profit that missed analysts' estimates, as additional 3G users increased the company's costs3
Aug. 2011 China Unicom, at the moment only Chinese carrier selling iPhone in the country, H1 profit down 9% …. has been struggling to grow its profitability due to heavy subsidies2.
1 Tellabs; 2 Reuters; 3 China Daily; 4 Business Review India; 5 MediaNama; 6 Telecom Asia;
Nov. 2011 Bharti Airtel reports profit dip again, in the seventh quarter4.
Oct. 2011 Idea Celluar profit down 40.3% QoQ, despite revenue increases of 13.2%5.
Nov. 2011 South Korea’s KT reported a 41% slump in Q3 net profit , as a result of discounts and other initiatives to lure more smartphone users6.
4Dr. Kim Kyllesbech Larsen, Broadband MEA, March 26th 2012, Dubai, UAE.
Mobile growth in perspective.Globally Cost per Customer increased 8×, ARPU remained constant (or declined) with a doubling of mobile subscriptions1.
Profitability drop of almost 10%.
Opex growth faster than Revenue.
Highest ARPU YoY decline.
ca. 70% mobile penetration today.
Main 3G growth still ahead.
Profitability drop of almost 10%.
Opex growth faster than Revenue.
Highest ARPU YoY decline.
ca. 70% mobile penetration today.
Main 3G growth still ahead.
Example: Emerging Asia
Emerging Market Growth on expense of profitability? Long-term outlook could be troublesome.
Emerging Market Growth on expense of profitability? Long-term outlook could be troublesome.
5Dr. Kim Kyllesbech Larsen, Broadband MEA, March 26th 2012, Dubai, UAE.
1 Looking over the period 2005 to 2011.
When data demand exceeds spectral efficiency.”Houston we have problems”.
Illustration10 20 40 60 85 120 120 120 120 120 120
0
5
10
15
2010 2012 2014 2016 2018 2020
Total spectrum in use
Effective Spectral Efficiency (*)
Spectral Demand
Spectral Demand Limited
Proportionalincreasesover 2010
Not good at all!!
(*) realWireless report for Ofcom,: 4G Capacity Gains, Final Report, January 2011.
An operator can NOT get enough of the (RIGHT) spectrum.An operator can NOT get enough of the (RIGHT) spectrum.
6Dr. Kim Kyllesbech Larsen, Broadband MEA, March 26th 2012, Dubai, UAE.
HSPA HSPA+ LTE LTE-adv
Rural / Nation-wide: Digital dividend up-to 900 MHz
Cost-optimized deployment models (1 of 2).Availability of a wide range of frequencies essential for more profitable & economical network deployment.
Urban – Suburban:
Up-to 2100 MHz
Hot-Spots
1.8To
3.6 GHz
Throughput / Capacity
1.8 - 3.6 GHz Typical BWs/Operator > 40 MHz
small cells & smart-antenna systems.
Rural Fixed-likeTypical BWs/Operators < 20 MHz
LTE connectivity
Illustration
7Dr. Kim Kyllesbech Larsen, Broadband MEA, March 26th 2012, Dubai, UAE.
macro
Cost-optimized deployment models (2 of 2).Small cells are an essential tool to optimize RAN deployment and mitigate the mobile data capacity crunch.
8Dr. Kim Kyllesbech Larsen, Broadband MEA, March 26th 2012, Dubai, UAE.
Backhaul challenge!
Interference issues with macro network.
Radio planning complexity.
Backhaul challenge!
Interference issues with macro network.
Radio planning complexity.
Small Cell off-loading strategies.
What to look out for!
Coverage & Capacity optimization.
Often only alternative to capacity addition.
Favorable Capex & Opex economics.
New business models emerging.
Coverage & Capacity optimization.
Often only alternative to capacity addition.
Favorable Capex & Opex economics.
New business models emerging.
Small cell benefits.
macro macro
macromacro
Small cell
Small cell
Small cell
Small cellSmall cell Small cellSmall cellSmall cell
Illustration
DWDM
DWDM
DWDM
DWDM
100 GbpsDWDM
EvolvedPacketCore
Backhaul requirements will pressure the Economics.HSPA+ & LTE’s power-full air-interface, i.e., 100+ Mbps, will require extensive backhaul fiber deployment.
FTTS1 100+ Mbps
LTE air-interface30mean to 100+peak Mbps
(per sector)
eNode
100GbE
Illustration
32:1 320:1eNodes per element 3200:1
BH Throughput 3+ 32+ 320+ In Gbps
9Dr. Kim Kyllesbech Larsen, Broadband MEA, March 26th 2012, Dubai, UAE.
The backhaul challenge … macro vs micro.Distribute mobile broadband traffic differently.
10
Node
300 – 7,000 active devicesper macro-cellular node(dense-urban / urban)
100+ Mbpsshared with
up to 7,000 devices.
FTTS1 100+ Mbps
Home Environmentwith ca. 2.3 people per Home 1
connected to Fiber, Cable or VDSL.
Up-to 100+ Mbpsshared by
2+ people.
AP (e.g., WiFi / Femto,..)LTE provides up-to 100 Mbpsper sector
100+ to40 Mbps
1 Average for Western Europe.
Illustration
10Dr. Kim Kyllesbech Larsen, Broadband MEA, March 26th 2012, Dubai, UAE.
The mobile profitability & cash crunch.
Total Revenue
Technology Cost (15% to 20%)
Usage Cost (Voice dominated < 25%)−
Market Invest SAC ↔ SRC (< 20%)
−
= EBITDA (WEU ca. 37% 1)
Personnel Cost (<15%)
Other Cost (< 10%)
−
−
−
Network depreciation (ca. <20% of Revenue)−
Spectrum Amortization−
Capex (ca. 10% to 25% of Revenue)−
Mobile Profit & Loss - Today
1 BoA ML Global Wireless Matrix 1Q11, margin data for 4Q 2010, 2 math looks like Ot2 /Ot1 = 1 - R/(1-Margin) with t1 & t2 being initial time and a time after initial time, R is the revenue difference between t2 and t1.
70% of Total Revenue Today
= Maintain Today’s EBITDA of ca. 37%
Mobile Profit & Loss - Tomorrow
Reduce Cost with
48%! 2
↓
↑→
→
↑
New business, operation and cooperation modelsNew business, operation and cooperation models
Network sharing.
Network Factory / Network spin-off.
Increased purchasing power
Procurement Industry Alliances.
New partnership models – de-risk mobile.
Network sharing.
Network Factory / Network spin-off.
Increased purchasing power
Procurement Industry Alliances.
New partnership models – de-risk mobile.
New Business Models
↓
↓
↑
11Dr. Kim Kyllesbech Larsen, Broadband MEA, March 26th 2012, Dubai, UAE.
− Net Device Cost (>10%)
↓
↓
RAN
Core
IT & Platforms
Technology cost distribution – the helicopter view.
RANCa. 65%
< 15%
Ca. 30%Other Costs incl. Energy
Rental &
Leasing
Personnel
CostsServices,Maintenance& Repair.
Illustration
Note RAN: Radio Access Network includes both 2G and 3G Opex. 1 With increasing leased line based transport this proportion will grow substantially in the future.
15%>10%
40%
<25%
10%Backhaul
Cost 1
12Dr. Kim Kyllesbech Larsen, Broadband MEA, March 26th 2012, Dubai, UAE.
1 2
No spectral limitations
spectral limitations
Data growth
100%50%0%
Sites
0%
20%
40%
60%
80%
100%
Cu
mu
late
d R
ev
enu
e (
Tra
ffic
)
The ugly tail …Should drive sharing in low-traffic areas
50% revenue ≈ 10% sites
Low profitability sites
Top 30% sites ≈ 80% revenue.
50% sites takesless than 10% revenue
13Dr. Kim Kyllesbech Larsen, Broadband MEA, March 26th 2012, Dubai, UAE.
Illustration
Rollout PhaseUK: 3G T-Mobile – 3 UK
Steady StateUK. T-Mobile UK – Orange JV (EE Ltd).
Stages of sharing benefits.The best sharing strategy depends on the business cycle and technology age.
High Capex prevention. Opex prevention. Cash optimized startup. Best network.
Little Capex benefits. Opex savings. Significant write-off. High re-structuring cost. Extended coverage.
Capex prevention. Opex savings. Minor write-off. Re-structuring cost. Instant cell split. Better network.
< 5 years 5+ years
UMTS - GSM LTE
> 5+ years
UMTS
Passive sharing: Site Lease & Civil Works,Mast/Tower sharing, Ancillary & Rack sharing, and Backhaul Sharing.
Active sharing: e.g., Frequencies, TRXs, PAs, Baseband, CPU, ports, ….
ModernizationPoland: PTC – Orange incl. LTE
GSM – UMTS(LTE piggybacking)
Illustration
Dr. Kim Kyllesbech Larsen, Broadband MEA, March 26th 2012, Dubai, UAE. 14
Anatomy of network sharing.RAN sharing guaranties competitive differentiation, operator independency and vast consumer quality improvements.
• Sharing: Costly Radio Access Network infrastructure will be shared,
• Not shared: All core network and service infrastructures that provides respective customers with differentiated services, applications, handsets, rate plans, etc.
• Result: A network with greater capacity (i.e., instant cell split) and improved coverage.
Dr. Kim Kyllesbech Larsen, Broadband MEA, March 26th 2012, Dubai, UAE. 15
Network sharing flavors …
Capacity limited Coverage limited Rural
Passive sharing. shared transport (possible). Independent frequencies.
Active sharing (MOCN1) Shared transport. Frequencies sharing.
Geographic sharing. One frequency sufficient. Wholesale/cost-sharing.,
HLRHSS
Core Core
HSS
Shared site and passives Independent BTS, NB, eNB.
BSCRNC
BSCRNC
HLRHSS HSS
Shared Radio, aggregation & frequencies (optional).
CoreCore
BSCRNC
16Dr. Kim Kyllesbech Larsen, Broadband MEA, March 26th 2012, Dubai, UAE.
1 Multi-Operator Core Network supporting RAN Shairng, (*) For LTE there is no BSC/RNC, core networks connected directly to the eNode-B.
Site sharing (*) RAN Sharing (*) National Roaming (*)
HLRHSS HSS
BSCRNC
BSCRNC
Core Core
Wholesale arrangement, geographical partnership.
Frequency(MHz)
Site(acq. + build)
Radio(electronics)
Backhaul(transport)
Backbone(transport)
Core(switch & control)
BSS(bill & care)
Capex prevention
Efficiency enabler 40%-60% < 35% up-to 50% up-to 50% Partly
possible Less likely
Opex prevention
Efficiency enabler < 35% ca. 35% scale
discountscale
discountPartly
possible Less likely
Regulatory complexity HIGH LOW LOWER LOWER LOWER HIGH HIGH
Partnership with an incumbent operator will provide the Greenfield better economics and market timing.
BTS / NODE-B
eNodeBBSS
BSS
MNO 1Core
MNO 2Core
17Dr. Kim Kyllesbech Larsen, Broadband MEA, March 26th 2012, Dubai, UAE.
plmn 1
plmn 2
plmn 1 + plmn 2(optional)
PTC (DTAG) – Orange (FT)
Network sharing case study – Poland.Improving consumer experience at better operational efficiency.
PTC1 & Orange2 to share 10 thousand sites, 2G, 3G & LTE radio infrastructure
as well as spectrum for 3G & LTE.
Improved coverage, capacity and services to the Polish consumer at a
quality levelnot economical viable standalone.
PTC1 & Orange2 to share 10 thousand sites, 2G, 3G & LTE radio infrastructure
as well as spectrum for 3G & LTE.
Improved coverage, capacity and services to the Polish consumer at a
quality levelnot economical viable standalone.
Safe for Service by Sharing.
18Dr. Kim Kyllesbech Larsen, Broadband MEA, March 26th 2012, Dubai, UAE.
• Opex savings.• Substantial Capex savings.
• Shared Modernization.• Shared LTE deployment.
• Much better network.
• Opex savings.• Substantial Capex savings.
• Shared Modernization.• Shared LTE deployment.
• Much better network.
Benefits.
UMTS900 LTE800GSM900 GSM900
2G, 3G & LTE RAN incl. BACKHAUL SHARE
CORE CORE
SERVICES SERVICES
BILL PRICE BRAND SALES BILL PRICE BRAND SALES
Rural areas
LTE SHARING800, 2100 & 2600 MHz
GSM900 & 1800
GSM900 & 1800
2G, 3G & LTE RAN incl. BACKHAUL SHARE
CORE CORE
SERVICES SERVICES
BILL PRICE BRAND SALES BILL PRICE BRAND SALES
Urban areas
UMTS900 & 2100
Note: frequency bands not to scale!
SHAREDPTC Orange
SHAREDPTC Orange
1 14mio subscribers (2), 2 14.5mio subscribers (3)
Profitability & cash crunch.
Incumbent spectrum crunch.
MVNO / tier-2&3 MNO appetite.
Profitability & cash crunch.
Incumbent spectrum crunch.
MVNO / tier-2&3 MNO appetite.
Other business models …LTE as a Service.
Enablers.
Emerging business models – LTE network factory
Attractive (startup) cost economics.
Relative low Capex – cash optimized.
Increased spectral efficiency & utilization.
Attractive (startup) cost economics.
Relative low Capex – cash optimized.
Increased spectral efficiency & utilization.
Provides.
19Dr. Kim Kyllesbech Larsen, Broadband MEA, March 26th 2012, Dubai, UAE.
MMEIMS
SmartCo SharedAll IP EPC
SHARED E-UTRAN (Yota or LightSquare model)
User Equipment (own, MVNO, MNO1, MNO 2 etc...)
Air-interface
Service clouds& Internet
access
MVNOsCableCos
Service clouds& Internet
access
MNO1
Service clouds& Internet
access
MNO2, etc...
Network Control& Service clouds& Internet access
SmartCo,Optional CDN &SDN
SmartCoe.g., 60+ MHz of
shared/ pooledspectrum
HSS
PCRF
P-GW
S-GW
MNO1 EPC MNO2 EPCetc..
Option:Small cell centric startup and Capacity as a Service.
Cash optimized startup via virtualization & OTT based services.
Regulatory support.
Spectrum.
MNO & MVNO appetite.
Regulatory support.
Spectrum.
MNO & MVNO appetite.
Other business models … ultra-efficient transformation.
Enablers.
Emerging business models – piggybacking on Virtualization & Cloud
PrivateCloud:
ProvidesMobile Core
NetworkFunctionalities
NetworkCorporation
Content & ServicesCloud
BSS & OSSCloud:
ProvidesMobile Core
NetworkFunctionalities Access
off the shelf OSS& BSS-light due
to wholesalebusinessmodel
New business model
Data-only QoS transparent network.
Network services to MNO & MVNO.
Dedicated OTT network services.
Data-only QoS transparent network.
Network services to MNO & MVNO.
Dedicated OTT network services.
Provides.
3rd parties delivers BSS /
OSS cloud services to
SmartCo (off-the-shelf)
3rd party, media companies, MNO/MVNO CDN & SDNs.
3rd parties (supplier) delivers core network functionality (i.e., HSS, PCRF, etc..)
20Dr. Kim Kyllesbech Larsen, Broadband MEA, March 26th 2012, Dubai, UAE.
Key messages.What we need to be passionate about.
Cloud, Virtualization, Small Cells, Multi-Mode Single RAN, ….Cloud, Virtualization, Small Cells, Multi-Mode Single RAN, ….
Network sharing provides cost reduction AND increased quality.Network sharing provides cost reduction AND increased quality.
Utilize technology to achieve the best operational performanceUtilize technology to achieve the best operational performance
21Dr. Kim Kyllesbech Larsen, Broadband MEA, March 26th 2012, Dubai, UAE.
Sharing models for mobile applies to fixed broadband as well.Sharing models for mobile applies to fixed broadband as well.
& don’t forget!& don’t forget!
Think!Think!
Even more so!Even more so!
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Contact: Issa Nasser Phone +971 2 4434778
Abu Dhabi United Arab Emirates
The key value proposition of a mobile network is ....
Freedom
Contact: [email protected]: +31 6 2409 5202http://nl.linkedin.com/in/kimklarsen
Acknowledgement: Dr. Larsen is indebted to Bin Xi, David Haszeldine and Denis Gautheret for their great suggestions and improving this presentation. Last but not least Dr. Larsen acknowledge his wife Eva Varadi for her great support and understanding during the creation of this presentation.
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