Analysys Mason Presentation

Outsourcing and Network Sharing:

Key considerations to solve the Backhaul Challenge

Franck Chevalier

Head of Broadband Sector

Consulting - Operations

2

Contents

Conclusion

About Analysys Mason

Backhaul Strategies and Cost

Market Context and Outsourcing Models

3


� The world’s leading specialist advisor in telecoms, media and technology

� Full service offering covering Strategy, Planning, Implementation and Optimisation

� Clients include operators, media companies, regulators, financial institutions, Governments, vendors and

end users

� A global presence with over 300 staff in 11 offices in Europe, Asia and the USA

Analysys Mason office

Assignments completed

Key

Dubai

Singapore

Washington DC

Cambridge

Dublin

Edinburgh

London

Madrid

Manchester

Milan

Paris

Analysys Mason office

Assignments completed

Key

Dubai

Singapore

Washington DC

Cambridge

Dublin

Edinburgh

London

Madrid

Manchester

Milan

Paris

4

There are four main pillars to the Analysys Mason Service Portfolio

PlanningPreparing to excel

• Technical architecture and design

• Market planning

• Network planning

• Network Procurement and outsourcing strategy

• Operations design and planning

• Business continuity planning/Disaster recovery

ImplementationDelivering success

• Wireless network roll-out management

• New services/products Launch

• BSS/OSS Implementation

• Project and programme management

• Operations change management

StrategyEstablishing direction

• Strategy development and business planning

• Market strategy

• Tariffing and profitability analysis

• Economic modelling and cost analysis

• Regulation and policy development

• Wholesale service strategy

• Due diligence and financial transaction support

ReviewMeasuring up

• Operational performance review

• Network Optimisation

• Industry benchmarking

• End user behaviour

Market

Intelligence

• Research reports andindustry intelligence

services

5

Contents

Conclusion




6

Mobile Operators have an increasing requirement to lower their OPEX to maintain Margins

Decrease In Voice Revenues

OPEX Reduction

Maintaining Profits

New Revenues Creation

Issues

Solutions

Wireless Broadband

Mobile TV

SDP* (iTunes, OVI )

Advertising

*SDP = Service Delivery platforms

Operators need to ensure they innovate in both streams to

remain competitive in developed countries

Full UTRAN Outsourcing

Sharing of Site and Infra.

Optimisation of Infrastructure

Optimising Internal resources

Outsourcing Network O&M

Other new services

Ownership

Outsourcing

7

Mobile Operators have many options to reduce their OPEX…



Optimising of Infrastructure



Full UTRAN outsourcing describes the scenario whereby the operator outsources rollout, I&C and O&M. There are many options available in this scenario, as the third party may be the owner of the active equipment as well as the owner of the backhaul network.

Outsourcing Network O&M is the operational model whereby the operator outsources all of its O&M services to an equipment vendor.

Sharing of sites involves two or more operators using the same site to install their active equipment using a single tower. There are many sub-options available in this scenario depending on whether the operators share antennas, Node B and backhaul networks.

By using new technologies and architectures, some networks can be optimised to save OPEX. This scenario is not considered in this presentation

The optimisation of internal resources and process is not specific to a telecom operator but is often use to try to optimise the OPEX. This scenario is not considered in this presentation

Outsourcing

Ownership

8

Full outsourcing often involves a tower operator, able to host many operators on a single site






� One example of full outsourcing strategy is T-Mobile and

NGW (Macquarie) in Northern Ireland

� NGW were awarded a contract in 1999 with T-Mobile for

the rollout and the full maintenance of T-Mobile GSM

Radio Access Network (RAN) in Northern Ireland

� NGW owns their own transmission network, covering the

whole of Northern Ireland

� Where practical, NGW has acquired large enough sites

to host several operators, each with their own cabin.

� Currently, each operator uses their own transport

Network or a BT leased line to backhaul their traffic.

Source:http://www.uk.nationalgridwireless.com/downloads/Casestudy

_T-Mobile_NI.pdf

9

Outsourcing Network O&M fits both operator and equipment vendors strategies

Selling of Telecoms equipment is not highly profitable due to fierce competition

Traditional Equipment vendors are trying to move up the value chain to maintain profits.

Vendors’ drivers

Outsourcing O&M also provides the opportunity to refocus on more core business activities such as marketing and customer retention strategy

Outsourcing O&M provides some scope to reducing OPEX

Operators’ drivers

Outsourcing Network

O&M






�O&M outsourcing contracts include Ericsson and 3UK, Base-Alcatel, TNZ-Alcatel and One –Alcatel and many

others…

10

Site / RAN sharing is increasingly popular but difficult to implement in brownfield deployments






Cost savings of GBP2 billion (USD4 billion) over ten years, by

decommissioning over 5000 duplicate base station sites

Expect to take 2

years to consolidate

the networks

December 2007UKT-Mobile and 3

20%-30% savings on RAN opex and capex in long-term, one-

third reduction in combined sites, faster 3G roll-out and

improved coverage

Looking at site

sharing only

February 2007UKVodafone and Orange

October 2007

Q3 2005

September 2005

Date Of Launch

Improve the 3G network coverage provided by both operators

by approximately 25%. Reduce the number of base stations

needed to deploy both the Orange Spain and Vodafone Spain

networks by around 40%.

November 2006SpainVodafone and Orange

Reduction in Optus capex of AU$100 million in the first three

years. Reduction in opex for maintenance, operations and site

leases of approximately AU$10 million per year.

November 2004AustraliaOptus and Vodafone

August 2004AustraliaTelstra and Hutchinson 3G

CommentsDate of

AnnouncementCountry Operators

Source: Analysys Mason Group

11

There are also other business model that includes a combination of site sharing and setup of a Tower company

� In India, Bharti Infratel and Vodafone Essar have announced in February 2007 the sharing of their remoter

sites

� Subsequent to this announcement, Bharti Infratel, Idea Cellular and Vodafone Essar, announced in a joint

statement that they are forming an independent tower company, Indus Towers Limited, to provide passive

infrastructure services in India to all operators on a non-discriminatory basis.

� These 3 companies will merge their existing telecom towers in 16 telecom circles in India. Bharti and

Vodafone Essar will own approximately 42 per cent each and Idea will own the remaining 16 per cent stake

in Indus Towers.

� Indus Towers will be an independently managed and operated company, offering services to all telecom

operators and other wireless services providers.

Source: http://www.deccanherald.com/Content/Dec92007/business2007120840233.asp

“The company will have approximately 70k towers at inception, and will undertake a significant roll out of telecom infrastructure to propel the mobile sector towards achieving India’s teledensity and

rural coverage goals,”

12

Contents

Conclusion




13

Up to 70% of transmission OPEX is associated with the backhaul

� Typical Break down of OPEX for a Western

Mobile Operator 2G/3G

� Up to 70% of transmission OPEX is

associated with backhaul of 2G/3G

� The rest of the OPEX is spread between

core network, interconnect and other Links

Real opportunity to save significantly on OPEX by optimising Backhaul network

Source: Analysys Mason Group

Distribution of Transmission OPEX

37.0%

14.5%6.0%

12.7%

7.3%

8.0%

9.8%

4.7%

2G BTS Leased Lines

3G Links

Microwave licenses

Dark Fibre and SDH

IP Network

Interconnect Links

Inter-MSC

Other Links

14

Today, 2G and 3G backhaul can be accommodated using TDM transport Network

SS7

IP/ATM

BTS

BSCMSC Server

VLR

HLRAuC

GMSC server

BSS

SGSN GGSN

PSTN

PSDN

CN

CD

GcGr

Gn Gi

Gb

Abis

Gs

B

H

BSS — Base Station System

BTS — Base Transceiver Station

BSC — Base Station Controller

RNS — Radio Network System

RNC — Radio Network Controller

CN — Core Network

MSC — Mobile-service Switching Controller

VLR — Visitor Location Register

HLR — Home Location Register

AuC — Authentication Server

GMSC — Gateway MSC

SGSN — Serving GPRS Support Node

GGSN — Gateway GPRS Support Node

ANc

2G MS (voice only)

Node B

RNC

RNS

Iub

IuCS

IuPS

3G UE (voice & data)

Mc

CS-MGW

CS-MGWNb

PSTNMc

ATM

TDM

15

With R5 of the 3GPP standard, 3G network now has the option to use IP for both IuCS and IuPS Interfaces…

SS7

IP

MSC ServerVLR

HLRAuC

GMSC server

SGSN GGSN

PSTN

PSDN

CN

CD

GcGr

Gn Gi

Gs

B

H

BSS — Base Station System

BTS — Base Transceiver Station

BSC — Base Station Controller

RNS — Radio Network System

RNC — Radio Network Controller

CN — Core Network

MSC — Mobile-service Switching Controller

VLR — Visitor Location Register

HLR — Home Location Register

AuC — Authentication Server

GMSC — Gateway MSC

SGSN — Serving GPRS Support Node

GGSN — Gateway GPRS Support Node

Nc

Node B

RNC

UTRAN

Iub

IuCS

3G UE (voice & data)

Mc

CS-MGW

CS-MGWNb

PSTNMc

IuPS

IP

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The migration from TDM to IP will enable operators to de-couple bandwidth from costs…

� The incremental bandwidth required by new

application such as mobile broadband is not

proportional to additional revenues.

� TDM backhaul does not allow to decouple

bandwidth from CAPEX investment

� Cost of E1 leased lines is proportional to

bandwidth : nxE1 = n x cost(1 E1)

� Cost of higher TDM capacities (SDH) is in

discrete steps and does not allow operator to

shape and control the cost of the backhaul

� Ethernet Backhaul breaks away from this model by:

� Following a logarithmic cost profile

� Having a finer granularity for bandwidth upgrade

� Providing a “pay as you go” capacity increase model to enable the operators to better shape up their cost structure.

Cost of TDM Vs Ethernet leased lines

0

50

100

150

200

250

1 10 100 1000 10000

Bandwidth (Mbps)

"TDM"

"Ethernet"

E3

STM-1

STM-4

STM-16

2-3 times4TDM

2-3 times10Ethernet

Corresponding

increase in cost

Increase in

capacity (x)

Technology

Ethernet Vs TDM leased lines Cost comparison: [source Analysys Mason]

Illustra

tive

17

But without an efficient aggregation network infrastructure, the cost benefits of IP will be limited

Multi-service

Switch

(Concentrator)RNC

No Grooming in

Access loop

No Grooming in

Backhaul

Network

Multi-service

Switch

(Concentrator)RNC

No Grooming in

Access loop

No Grooming in

Backhaul

Network

Point to Point

Multi-service

Switch

(Concentrator)

Multi-service

Switch

(Concentrator)

Multi-service

Switch

(Concentrator)RNC

No Grooming in

Access loop

Grooming in

Backhaul

Network

Multi-service

Switch

(Concentrator)

Multi-service

Switch

(Concentrator)

Multi-service

Switch

(Concentrator)RNC

No Grooming in

Access loop

Grooming in

Backhaul

Network

Star Aggregation Daisy Chain Aggregation

Multi-service

Switch

(Concentrator)

Multi-service

Switch

(Concentrator)

Multi-service

Switch

(Concentrator)RNC

Grooming in

access loop

Grooming in

Backhaul

Network

Multi-service

Switch

(Concentrator)

Multi-service

Switch

(Concentrator)

Multi-service

Switch

(Concentrator)RNC

Grooming in

access loop

Grooming in

Backhaul

Network

Increased Packet Multiplexing Gain

The key will be to aggregate the traffic as close as possible to the Node B / BTS

18

In the case of full outsourcing models, tower operators could provide backhaul services at a very competitive rate

EthernetBTS

IP Node B

TDM

Ethernet

PBTEdge Mux

With Pseudowire

PBT

Multiservice

Platform

BTS

IP Node B

TDM

Ethernet

BTS

IP Node B

TDM

Ethernet

Operator A

Operator B

Operator C

Operator A

Operator B

Operator C

Tower Site

VLAN 1

VLAN 2

VLAN 3

VLAN 4

VLAN 5

VLAN 6

19

Contents

New Transmission technology



Impact of new technology in Outsourced Networks

Conclusion


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Conclusions

� Driven by market requirements, outsourcing strategies are increasingly popular

� There are many outsourcing models, ranging from Full RAN outsourcing to

Outsourcing just O&M

� Site / RAN share can be considered as an outsourcing model especially if JV is

created

� The principal actors are Equipment vendors, Tower operators and MNO

themselves

� Levering on traffic density achieved by multi-operator collocation makes it very

attractive to offer backhaul services

� PBT is one of the technology that will enable Multi-operator traffic to be backhauled

to their respective aggregation networks.

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Franck Chevalier

[email protected]

Analysys Mason Limited

Canal Court, 40 Craiglockhart Avenue

Edinburgh EH14 1LT, Scotland

Tel +44 (0)131 442 6327

Fax +44 (0)131 443 9944

www.analysysmason.com

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