Crsm2010 nov22 gronsund_pal_businesscasesendora_v4

A Business Case Study for a Cognitive Radio System based on a Wireless Sensor NetworkPål Grønsund, Ole Grøndalen, Markku Lähteenoja

CRSM 2010, IBBT-MIT Brussels, November 22nd, 2010

Spectrum owner 1

Spectrum owner 2

Spectrum owner N

Joint venturesystem operator

SEVENTH FRAMEWORK PROGRAMME

THEME ICT-2007-1.1 The Network of the Future

Project 216076

The SENDORA concept can be described as a "Sensor Network aided Cognitive Radio" technology

Primary Network

Cognitive Network

Wireless Sensor Network

queries on spectrum status

reports on spectrum status

The SENDORA system architecture has 3 main parts: sensor network, communication network and fusion centre

The remainder of this presentation will focus on an example of a SENDORA business case for a “Joint Venture”

Cash Flow

Customers

Revenue

OPEX

Cost

CAPEX

Sensors and fusion centre

Cognitive functionalities

New sites

Customer acquisition

Operation & maintenance

Site rental

Overview of the business case for a “Joint Venture”

Introduction to Cash Flow analysis and business case assumptions

Cash Flow results and sensitivity analysis

A set of spectrum owners establishes a “Joint Venture” that gets the right to use its owners unused spectrum

Spectrum owner 1

Spectrum owner 2

Spectrum owner N

Joint ventureSENDORA system operator

At least one of the owners is an operator having a cellular infrastructure in the area

Easy to implement from a regulatory point of view since only the joint venture owners’ own spectrum are used

Rationale for the “Joint Venture” scenario

The joint venture can be composed in a way that makes it very probable that:

• at least some unused spectrum is available at all times

• little new cognitive radio access infrastructure is required

The scenario is an example of spectrum sharing, which can be seen as a natural extension of infrastructure sharing

• The joint venture is a good way to share the expenses and incomes between the companies

In the business case scenario, the joint venture will

• Deploy the system in a hypothetical European city:

o 1 million inhabitants

o covering an area of 200 km2,

downtown area is 50 km2

• Study period: 2015 – 2020

NOTE!SENDORA is an innovative concept and much research and development remains before commercial realizations will appear

=> the input data for the business case is uncertain

=> the results give indications, not definite answers or strong conclusions

Cash Flow

Customers

Revenue

OPEX

Cost

CAPEX

Sensors and fusion centre

Cognitive functionalities

New sites

Customer acquisition

Operation & maintenance

Site rental

Traditional cash flow analysis is used to get an indication of the profitability, enhanced with sensitivity analysis

Discount rate: 10%

Revenue assumptions

• ARPU (Average revenue per user) per month for nomadic broadband user:

o 20 € (2015) decreasing to 18,1 € (2020)

• Number of nomadic broadband subscribers for the joint venture

o 10 000 (2015) increasing to 100 000 (2020)

Number of users

0

20 000

40 000

60 000

80 000

100 000

120 000

2014 2015 2016 2017 2018 2019 2020 2021

Year

Customers

Revenue

Fixed sensors

• Density: 65 sensors per km2

• Roll-out

o 2015: 50 km2 (most dense areas of the city)

o 2016 and 2017: 75 km2 for each year

• Sensor price 300 € (2015) decreasing to 177 € (2020)

• Installation 40 € (2015) decreasing to 35 € (2020)

Integrated sensors

• 50% of the cognitive terminals have an integrated sensor

CAPEX (CApital EXPenditure) assumptionsCost

CAPEX

Sensors and fusion centre

Cognitive functionalities

New sites

Fusion centre

• One fusion centre for the city

• One time CAPEX 150 000 € in 2015 and10 000 € for installation

Cognitive functionalities

• Starting from 50 “cognitive” base stations in 2015 and increasing to 450 in 2020

• CAPEX for updating a base station is 5000 € (2015) decreasing to 2953 € (2020)

• Cognitive functionality in the terminals is assumed to be a part of the normal terminal development

New sites

• 60 000 € per new site establishment

CAPEX (CApital EXPenditure) assumptionsCost

CAPEX

Sensors and fusion centre

Cognitive functionalities

New sites

OPEX for fixed sensor network

• Power supply, maintenance visits

• 15 € (2015) per sensor per month decreasing to 13,6 € (2020)

OPEX for base stations

• Maintenance, backhaul rental and site rental

• 1000 € (2015) per base station per month decreasing to 904 € (2020)

OPEX (OPerational EXPenditure) assumptions

OPEX

Cost

Customer acquisition

Operation & maintenance

Site rental

General OPEX

• Customer acquisition, operation of the company

• 8 € (2015) per user per month decreasing to 5,6 € (2020)

• Net Present Value (NPV): 1,36 million € (2015-2020)

• Internal Rate of Return (IRR): 16%

• Pay-back period about 5 years

Cash flow results with assumptions presented above show that there is a potential for profitability

Required fixed sensor density might be reduced by e.g.:

• Improved sensing technology

• More terminals with integrated sensors

It will be a challenge to produce sufficiently cheap fixed sensors:

• Includes inter-sensor communication

• Outdoor environment

Fixed sensorsper km2

NPV [million Euro]

10 11.4430 7.7765 1.36 Base case72 0

120 -8.72

Fixed sensor price [Euro]

NPV [million Euro]

50 3.98150 2.93300 1.36 Base case430 0500 -0.74700 -2.841000 -5.99

Sensitivity analysis show that sensor performance and costs are critical parameters

Fixed sensors must be very power efficient and robust:

• Power consumption must be low

• High number of sensors => MTBF must be very low for each

New sites should be avoided:

• Will favour joint ventures of operators with “complementary” base station sites

Fixed sensor OPEX [€/month/sensor]

NPV [million Euro]

5.0 6.8210.0 4.0915.0 1.36 Base case17.5 020.0 -1.3725.0 -4.10

Share of new sites

NPV [million Euro]

0 % 1.36 Base case6 % 0.0010 % -0.8920 % -3.0330 % -5.2840 % -7.4350 % -9,67

Sensitivity analysis show that sensor OPEX and share of new sites are critical parameters

This business case is probably one of the best cases for SENDORA, because it is based on the “joint venture” idea

• Free access to frequency resources from the mother companies

• Good possibilities for re-using existing infrastructure

• Exploit detailed knowledge of the primary systems

The accumulated cash flow is quite similar to many other infrastructure projects in telecommunication

• The joint venture must be patient with financial strength to wait a longer period for the ROI. But there is a potential for a long term profitability.

In summary and conclusion

The main value of this business case calculation is to identify the critical aspects for SENDORA profitability, so that the technical R&D work can focus on them. Examples of those are:

• Sensor network planning (density of sensors and coordination between fixed and integrated sensors)

• Sensor design to minimize CAPEX and OPEX

• Solutions that allow re-use of existing infrastructure and require few new sites

Questions?Pål Grønsund (http://palgronsund.com/about)