Document

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Research Report

Nadine Manjaro Senior Analyst – Wireless Infrastructure

Stuart Carlaw

Vice President and Chief Research Officer

IP Transformation All IP Architectures, IMS, Mobile Backhaul, Mobile Softswitch, Session Border Controllers, and Core Gateways

NEW YORK LONDON SINGAPORE

IP Transformation

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© 2010 ABI Research • abiresearch.com 2 The material contained herein is for the individual use of the purchasing Licensee and may not be distributed to any other person or entity by such Licensee including, without limitation, to persons within the same corporate or other entity as such Licensee, without the express written permission of Licensor.

Section 1.

EXECUTIVE SUMMARY

1.1 What Is IP Transformation? IP transformation refers to the migration from a circuit-switched network to an all-IP network that is taking place in core, access, and backhaul networks. It also denotes the transformation of the service architecture to a common service layer.

Transformation of the network to all-IP began in the core and various portions of the wireless network. Some operators have IP in the core or access network, or only at interconnection points. True transformation will occur when the end-to-end network is transformed to IP. The strong growth in 3G data traffic is driving network utilization to new capacity limits and choking the backhaul of at least one large US operator’s network. AT&T reported that its data traffic has increased by 5000% over the last three years. Operators with high data utilization will need to start the transformation in the backhaul network since this is typically the limiting factor.

Most transformations will include a migration to Ethernet-based solutions. In the radio access network (RAN), the base stations will be equipped with Ethernet ports for connectivity to Ethernet over fiber or Ethernet over microwave backhaul. Operators are migrating their backhaul networks to Ethernet over fiber or Ethernet over microwave to support increased traffic on their networks. Ethernet is a low-cost solution that is widely deployed and – through efforts of the Metro Ethernet Forum – robust enough to be considered carrier grade and meet required QoS performance expectations.

In general, IP transformation started in fixed-line networks over five years ago and is now evolving to the wireless networks. As wireless networks are developed further to offer mobile broadband services, operators are faced with the same bandwidth constraints that wireline operators once faced. Thus, operators are migrating their mobile networks to IP to simplify the architecture, reduce latency, lower costs, and improve network performance.

1.2 Mobile Operator Perspective In wireline networks, operators upgraded to IP and Ethernet to increase bandwidth, reduce costs, increase flexibility, and improve performance. They were able to throw bandwidth at network constraints. Mobile network operators are migrating to IP for the same reasons. Operators managing wireless networks are limited by air interface, spectrum, and mobility. However, they can upgrade the core, transport networks and application layers to gain some of the benefits described above.

1.2.1 Challenges of All-IP Mobile Networks The challenge in moving to all-IP is ensuring that the carrier-class service and reliability of the TDM network is carried over to the IP network. QoS, reliability, and security have to be robust enough to support voice and real-time services. IP was not initially designed to support real-time services. It tends to create jitter when packets arrive at irregular intervals, which results in disorder in the packet stream. For large mobile operators like Verizon Wireless, latency and jitter are the most important considerations, along with high availability. OEMs have developed solutions to enhance resource control, which has resulted in improved QoS. They have also implemented jitter buffers to eliminate the risk of jitter.

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1.2.2 IMS Impact In terms of service delivery, operators have long talked about deploying an IMS platform whereby services can be quickly added and removed without significant incremental costs. However, the transition to IMS has been a lot slower than predicted. Operators are reluctant to interfere with their mobile switching center (MSC) platforms. The MSC is the center of circuit-based services such as voice and SMS, which to date account for over 70% of most operators’ revenue. In addition, the MSC is tied to current billing systems and operators are reluctant to interfere with the operation of any of these systems.

While IMS can theoretically help operators reach the next level of service delivery, they are reluctant to make the full transition to IMS. Part of the reason is that the initial deployment cost for IMS is typically high and most operators lack the business case to justify this cost. The lack of solid IMS products also contributes to operator reluctance to adopting IMS. Some operators have implemented IMS for one or a few services, but have not fully committed to IMS across all services.

Another barrier to IMS has been the lack of IMS-capable devices. The completion of the Rich Communication Suite (RCS) standard in early 2009 and global support for the standard among GSM operators and several large device manufacturers such as Nokia, Samsung, LG, and Motorola will help to drive new life into IMS. In fact, Nokia is expected to have commercial terminals with RCS by 2010.

In more recent developments, several leading operators and OEMs defined IMS as the standard to deliver voice and SMS over LTE. The participating operators include Verizon Wireless, Vodafone, Orange, Telefonica, and TeliaSonera, while the OEMs are Ericsson, Alcatel-Lucent, Samsung Electronics, Nokia, Nokia Siemens Networks, and Sony Ericsson. This development will definitely drive IMS deployments for those operators with LTE plans and no IMS network.

1.3 OEMs May Finally See Return from IMS Investments OEMs have developed a plethora of products to support IP transformation. These products range from backhaul solutions to RAN, core, and service layer solutions. Several of the large OEMs provide products for IP transformation in fixed networks and leverage their skills to support transformation in the mobile networks. OEMs like Alcatel-Lucent have developed end-to-end IP products – from transmission and core solutions to service layer architecture solutions. Others like Starent and WiChorus provide key elements such as core network gateway solutions.

The challenge for the OEMs is understanding an operator’s timeframe for deploying these new IP networks. Mobile operators have been slow to fully implement some of the new IP technologies, such as IMS. Operators sometimes spend years evaluating a solution that costs vendors millions of dollars to develop; consequently, the vendors have no real revenue to offset the costs.

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1.4 Global Market Forecast In order to accurately forecast the opportunity or cost of IP transformation, each segment of the network has to be analyzed. The RAN, which mainly includes the base station equipment, will have to be transformed. Most of the transformation will occur in 3G and 4G base stations as operators upgrade their equipment from legacy base stations with ATM or TDM interfaces to newer models with Ethernet interfaces. In 2009, 2G is the most commonly deployed base station, accounting for 71% of accumulated base stations. However, the number of 3G base stations is forecast to surpass 2G base stations in 2011. As a result, industry-wide base station transformation to IP will occur in the 2011 timeframe.

Chart 1.1 Base Station Deployments by Technology Generation, World Market, Forecast: 2009 to 2014

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1.5 Scope of the Study IP transformation impacts multiple segments of the network, including operations and billing support. In order to limit its scope and size, this study focuses on a few key areas, including backhaul, session border controllers, IMS, media gateways, and softswitches. This by no means underscores the importance of areas like OSS/BSS; these segments will be addressed in future versions of the report. Backhaul will have the most immediate impact on network performance, especially for operators that are faced with capacity limitations. Therefore, backhaul is one of the first segments addressed. The other elements discussed are being upgraded by operators in their IP transformation process.

1.5.1 Backhaul Transformation Transformation of the backhaul network to IP has already begun as mobile operators scramble to meet 3G capacity demands. The type of backhaul used will vary by region and network, but will most likely include Ethernet. Generally, Ethernet over fiber will be used in developed markets like parts of Asia, North America, and Western Europe. Ethernet over microwave is becoming the backhaul technology choice for greenfield operators like Clearwire and Digicel. Ethernet over copper will be used in regions like Eastern Europe in the form of ADSL2 or VDSL. Since 3GPP

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standards for UMTS specify ATM, some operators with large WCDMA or HSPA networks will continue to leverage pseudowire in the near term to encapsulate ATM. However, the longer-term solution is to migrate to Ethernet because pseudowire solutions add delay and overhead due to encapsulation requirements and are also limited in terms of bandwidth.

Global backhaul distribution in 2009 is as follows:

• Copper T1 accounts for 39% of all backhaul • Microwave accounts for 37% of backhaul • Ethernet over fiber accounts for 12% • Ethernet over copper accounts for about 9%

In North America, T1 is still the most common type of backhaul used due the low cost of T1s compared to similar technologies in other regions, strong QoS, and high availability. T1s also enable bundling for higher capacity. However, they become less feasible as backhaul capacity requirements increase, thus requiring more than seven T1s. As a result, operators are looking to higher-capacity solutions such as Ethernet as an alternative.

Backhaul distribution in 2009 in North America is as follows:

• T1s account for 47% of deployed backhaul • Ethernet over fiber accounts for 19% • Microwave accounts for 14% • Ethernet over copper accounts for 12%

Operators like Verizon Wireless and T-Mobile are aggressively upgrading their backhaul solutions to Ethernet over fiber. Verizon Wireless plans to upgrade over 90% of its cell sites during the next three years.

In Asia, fiber is largely deployed in the major telecom markets, such as Japan, Korea, and China. Japan and Korea are densely populated with smaller geographic footprints; thus, it is more cost-effective to deploy fiber. China has also deployed a lot of fiber, though there is more PDH fiber than Ethernet over fiber. Since fiber is already deployed in these regions, it is easier to upgrade the backhaul compared to in the United States. In India, microwave accounts for about 80% of backhaul due to faster deployment speed and lower costs versus competing technologies.

In Europe, microwave is the primary technology used in Western Europe (72%) while copper-based solutions are more common in Eastern Europe (32%). The cost for an E1, which is the European equivalent of a T1, is higher than in the United States due to government-regulated pricing. As a result, operators have looked for different options. Eastern Europe has a broader distribution of backhaul technologies without a heavy focus in any one area.

Latin America also uses a combination of copper T1s and microwave backhaul. Copper is the most common solution used. In Africa and the Middle East, microwave is the more commonly used backhaul because of the time to market issues and expenses associated with copper. Additionally, copper deployments are more subject to theft due to the black market opportunity for copper.

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Chart 1.2 shows the number of new base stations connected by Ethernet fiber. Asia-Pacific leads and will continue to lead in new Ethernet over fiber opportunities, followed by Western Europe and North America. The Asia-Pacific region has a large installed base of SDH fiber due to fiber to the home deployments in countries like Japan and Korea. China has a large installed base of PDH fiber. Most deployments in these regions will just need an upgrade from SDH or PDH fiber to Ethernet over fiber.

Chart 1.2 New Ethernet over Fiber Opportunities, World Market, Forecast: 2008 to 2014

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1.5.2 Session Border Controllers Session border controllers are critical for interconnecting different networks and enabling access to different content. They are used to manage the flow of data between borders, as well as to manage access control and conversion. While the overall quantity of session border controllers is low compared to other network elements, their function is critical to overall network performance.

The global market for session border controllers for mobile networks is limited. In 2009, ABI Research estimates a net addition of 627 SBCs, a figure that will rise to 1,546 by 2014. The price for this element varies depending on the number of sessions supported and whether it is used to interconnect different networks or used to manage access to specific content. On average, per session price is in the $7 per session range. In 2009, the overall market opportunity for session border controllers is $156.8 million. This figure will increase to $386.5 million by 2014.

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Chart 1.3 shows the global revenue opportunity for session border controllers by region. Western Europe leads the market in 2009, followed by the Asia-Pacific region.

Chart 1.3 Session Border Controller Mobile Networks Revenue, World Market, Forecast: 2009 to 2014

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1.5.3 Media Gateways/Softswitches Most media gateways and softswitches are sold to fixed network operators. While mobile operators are implementing these elements, adoption may be curtailed by the migration to IMS, which provides wider-scale support for multiple products. Most of the RAN vendors, such as Ericsson, Alcatel-Lucent, and ZTE, also provide softswitches. Ericsson is the self-proclaimed leader in mobile softswitch installation and reportedly serves more than 50% of GSM/WCDMA subscribers globally. Each vendor is a leader in its own market. For example, 98% of ZTE’s softswitch/media gateway ports are sold in China. Most of Alcatel-Lucent’s ports are sold in former Lucent’s home market, the United States.

Western Europe is the strongest market for mobile softswitches with 2009 revenue estimated at $1.8 billion. North America is second with revenue of $1.37 billion, followed by Asia-Pacific at $1.18 billion. 3G is aligned with mobile softswitch deployments, and these regions have the highest 3G penetration rates.

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Chart 1.4 Mobile Softswitch Revenue, World Market, Forecast: 2008 to 2014

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1.5.4 IMS IMS is necessary in any IP transformation discussion since it is the most likely solution for migrating subscriber management and managing voice and SMS traffic, signaling, and several other required features in a packet domain. In addition, IMS will be critical to providing converged service offerings for those operators with more than one network.

Ericsson is the leader in overall contract wins with over sixty-nine commercial contracts to date. Alcatel-Lucent follows with forty full IMS contracts and sixty IMS contracts tied to application servers. Nokia Siemens Networks is in third place with thirty full IMS contracts and multiple trials.

ABI Research estimates mobile IMS revenue of $8.4 billion in 2009, and this figure will grow to $17.3 billion by 2014. LTE deployments and fixed mobile convergence will be the two biggest drivers for IMS deployments. Asia-Pacific will lead in IMS revenue, followed by Latin America and North America. In Asia-Pacific, demand will be driven by 3G and 4G deployments, while in Latin America IMS is and will be driven by converged network services. North American IMS deployments were once tied to push-to-talk, video share, and converged services. Now 4G will drive additional IMS deployments in the region.

IMS revenue includes revenue for call session control function (CSCF) servers, home subscriber servers (HSS), and common application servers used for VoIP. Application servers do vary depending on operator and services deployed, but these are the most commonly deployed elements. For example, AT&T is using IMS for its video share service so the company would use the baseline elements including the CSCF, HSS and video share application servers.

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Chart 1.5 Mobile IMS Revenue, World Market, Forecast: 2009

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Chart 1.6 Mobile IMS Revenue, World Market, Forecast: 2014

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1.6 Conclusion IP transformation has different meanings to different companies. In the scope of this research, it refers to transforming the network from TDM, ATM, and different legacy architectures to an IP or packet domain. Mobile network transformation to IP has already started and will continue to expand over the next five years as operators seek ways to minimize operational and capital expenditure while increasing network capacity. Network traffic is growing by 12% per month, according to leading network infrastructure vendor Ericsson, while AT&T reported that the iPhone uses thirty times the amount of traffic as a regular cellphone. The general industry consensus is that data traffic is growing much faster than expected. Revenue growth is also increasing, but not enough to offset the cost of meeting traffic demand. Operators are seeking means of reducing the cost to deliver each bit of data. It has been proven in the wireline industry that IP provides high data delivery at a much lower cost than alternative technologies. As mobile traffic grows and network usage becomes more like wireline networks, operators are looking to a solution similar to that used in wireline networks – and IP is that solution.

The transition to IP is not without cost. In terms of backhaul, operators typically purchase T1s through five- to seven-year agreements and may have to pay a penalty to transition to Ethernet over fiber. Many operators will do a flash cut to Ethernet over fiber during the maintenance window once the solution is in place. Others will gradually migrate traffic from the T1s to Ethernet. If the operator is the anchor tenant, it will also typically share the cost to deploy the fiber, which can cost $10,000 to $50,000 per mile depending on the location.

Note also that IP transformation requires new equipment, which means an increase in CAPEX during the transformation and a boost in OPEX during the cut-over period. In addition, engineers require IP training to manage and operate the new equipment, and there is always the potential for outages during the transition. However, operators will work with skilled vendor technicians and their own staff to mitigate risks. Vendors like Alcatel-Lucent and Ericsson have proven step-by-step processes to transition operators’ networks and have handled hundreds of transformation projects.

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Section 2.

IP TRANSFORMATION – STRATEGIC RECOMMENDATIONS

2.1 Overview IP transformation relates to how to optimize the performance and design of the wireless network to reduce costs and improve an operator’s ability to monetize the network. It requires the following:

• The use of IP multimedia subsystems (IMS) elements to manage and bill for subscriber sessions

• High-performance routers to transport data • Session border controllers to convert traffic from TDM to IP at interconnection points • In-line functions such as deep packet inspection (DPI) to monitor network traffic and

implement dynamic or static rules

In the backhaul, IP transformation refers to the migration from TDM-based solutions to primarily high-capacity carrier Ethernet solutions over fiber or microwave. When operators upgrade RANs to meet growing traffic demand, they upgrade the backhaul to prevent bottlenecks in the network. Ethernet over fiber or microwave has become the solution of choice for several Tier One operators, including Verizon Wireless and Vodafone.

Services will be transformed as operators move from traditional Internet access and voice calls to richer communications and less consumer-centric services. New services will include but are not limited to the following:

• Expansion of e-health services with remote monitoring, diagnostic, and imaging capabilities • Machine-to-machine communications • Digital signage • Mobile advertising • In-vehicle video and audio services • Personalized services combining location, preferences, presence, and address

book information

Operators’ business models will also transform as they reach out to a wider ecosystem for new service ideas through new entities like ng Connect, Verizon Wireless’ LTE Innovation Center, and the Joint Innovation Lab established by Vodafone, China Mobile, Verizon Wireless, Softbank, and others. In addition, changes in business models may require vendors to absorb some of the development costs and participate in revenue-sharing to reduce operators’ risks. Over time, the roles of equipment vendors, software and content partners, and integrators will evolve and become more interwoven into the management and running of the operators’ networks. Operators will choose vendors with expertise in managing and administering multi-vendor, multi-technology networks, which will lead to more cooperation and coordination among vendors.

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2.2 Radio Access Network (RAN) Today, most of the new base stations have Ethernet interfaces, even though operators continue in some cases to use TDM via pseudowire to transport this traffic. Most of the legacy base stations deployed have TDM or ATM interfaces, which necessitate multi-technology or pseudowire backhaul solutions. As a result, not much change will be needed in the deployed RANs. However, LTE will change the RAN architecture. Some of these changes include an increase in RAN intelligence due to the migration of radio network controller (RNC) functions to the base stations. There will be more direct base station-to-base station communications through the X2 interface defined in 3GPP Release 8.

2.2.1 Strategic Recommendations Operators should look to retire legacy base station equipment with TDM and ATM interfaces to standardize their networks. This will diminish the need for the multi-technology backhaul solutions, thus reducing operational costs. Standardizing on a multi-technology platform also reduces the number of network elements, which will cut operational costs further. Newer base stations are being developed to support multiple radio access technologies, especially when deployed in the same frequency band. Operators can migrate legacy base station traffic to the new converged platform via card additions, which will reduce long-term operational costs, backhaul costs, and power consumption.

Most vendors already have multi-technology base station offerings, but they need to ensure that the offerings are more than marketing hype. Self-optimized networks, which can sense suboptimal performance for individual subscribers and self-correct to improve user experience, will be a tremendous help to operators in reducing deployment time, costs, and radio planning requirements. Most vendors only have baseline SON support; consequently, they need to extend this capability.Self-optimized networks will be a true differentiator.

2.3 Core Networks Although it is evolving to similar features as the fixed network core, the mobile network core still has to maintain mobility management and handoff. The mobile network core is migrating from a hierarchical network to a flat architecture that minimizes delays and reduces the number of network elements. Included in the 3G core are the radio network controller (RNC), serving GPRS support node (SGSN), and GPRS gateway support node (GGSN). In this architecture, data traffic and control traffic traverse the SGSN and the GGSN from the RNC. As part of the transition of the core network to a flat IP architecture, the RNC is incorporated into the base station and data traffic goes directly to the GGSN (bypassing the SGSN). The SGSN is replaced by the Mobility Management Entity (MME), which only manages control traffic.

As operators move from UMTS/HSPA or CDMA to LTE, one of the main areas of change is the IP core. The core network will be optimized to accommodate higher processing capabilities, less network elements, and the in-line functions required for subscriber-level management, as well as evolved billing options for LTE. In the evolved packet core (EPC), there is a distinct separation of signaling and data traffic. This results in the elimination of the RNC and a reduction in the number of MMEs because the MME is solely responsible for signaling while the PDN gateway and serving gateway manage data traffic.

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Chart 2.1 shows ABI Research’s projections for LTE gateways. Since the P-gateway and S-gateway can be combined into one element depending on operator preferences, they will be shown in the forecast as one element.

Estimates indicate that only 361 PDN and serving gateways have been deployed in 2009. Operators are ramping up to roll out LTE in 2010. The majority of the gateways deployed during this time will be in trial networks, with the exception of Verizon Wireless, NTT DoCoMo, TeliaSonera, Tele2, and a few others. By 2011, many Tier One operators will begin deployments or preparation for commercial deployment, which will increase the number of gateways to 5,695 units. Western Europe and Asia-Pacific will lead the way in LTE deployments. Initial deployments will be centralized as operators deploy macro networks to provide hotspot-like coverage in the major cities. However, the number of gateways deployed will rise over time as the number of LTE network deployments increases and operators deploy more distributed architectures to meet capacity and coverage demands. By 2014, LTE gateway shipments will grow to over 41,736 shipped annually.

Chart 2.1 LTE Gateway Shipments, World Market, Forecast: 2009 to 2014

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2.3.1 Strategic Recommendations Operators should look for core solutions that have been developed for the higher processing required for LTE. Some vendor solutions have been marginally updated with MME or serving gateway software, but are not optimized to meet next-generation network requirements. Gateway products should be designed with multi-threaded processing technologies and the latest chipset processing technologies, such as 35 nm processing, to serve increasing data traffic demand.

Equipment vendors need to ensure that their solutions have the latest processing technologies and are scalable to evolve with changing traffic demands. The solutions should also be flexible to meet centralized deployments in early networks and decentralized deployments in more distributed

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networks due to larger serving areas or operators’ deployment strategies. In addition, core network elements should include in-line functions such as security features and DPI to help operators optimize network performance. Mobile networks will soon face security issues similar to the wireline network. Vendors that plan ahead to address these concerns will have an advantage.

2.4 IP Backhaul In developed countries where 3G is widely deployed, the backhaul network will experience the biggest transformation as smartphones and data cards proliferate, significantly increasing network traffic. In countries like the United States, Japan, and Sweden, where are operators have spectrum and defined LTE plans, operators are upgrading their backhaul networks as the first step in upgrading to a 4G network. Even operators without fully defined 4G plans, such as T-Mobile USA, are upgrading their backhaul network (T-Mobile USA is upgrading its backhaul to Ethernet over fiber).

Most of these operators are migrating to Ethernet-based backhaul either over microwave or fiber. The primary reason for using Ethernet is that it is now carrier grade, widely available, and low cost. In two of the markets studied (China and the United States), the average cost for an Ethernet over fiber solution is approximately $80 per Mb. This figure includes the cost to deploy the fiber. Yet, one has to be mindful that labor costs vary from region to region, which will impact the cost per Mb. Clearwire declares that the average cost per link for its Ethernet over microwave is in the $10 per Mb range; however, this does not include the cost to deploy the equipment.

In Europe, operators will look to leverage their DSL networks to provide Ethernet over copper solutions. Improvements in bonded copper solutions such as VDSL2 and ADSL2 have enabled higher-capacity links.

2.4.1 Strategic Recommendations The backhaul can no longer be the bottleneck in the network. Although T1s may still be needed to support synchronization and some real-time services such as voice, higher-capacity backhaul is a requirement – even in emerging markets. Operators deploying high-capacity data networks must start with the backhaul; if they do not do so, they are wasting their spectrum investment. While fiber is the ideal solution, it will not be available everywhere and is cost-prohibitive in less populated markets.

Operators should ensure that the backhaul solution is scalable and robust enough to meet both their short-term and long-term needs. Microwave technologies have improved enough to make them viable, low-cost backhaul options. Vendors have implemented dynamic bandwidth via adaptive modulation. This solution enables the use of a lower modulation scheme with lower capacity to accommodate for rain fade. As a result, operators can set a minimum capacity level acceptable for meeting traffic demand during poor weather conditions. The issue with this solution is that most implementations do not use the dynamic capability; rather, they fix the modulation to a specific level. Future improvements should include true dynamic modulations and higher-capacity solutions since operators are seeking Gigabit Ethernet with guaranteed minimum bandwidth.

While microwave is being deployed by some greenfield operators and established operators in developed and emerging markets, most North American operators will only consider microwave for sites greater than 2 miles from the central office or wireline facilities. Thus, continuing improvements in microwave solutions are critical to ensuring more operator support, especially in developed markets.

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2.5 Service Architecture Evolution Several factors will lead to differentiated LTE services, including open networks and devices, which were mandated as part of the 700 MHz C-block requirements. These requirements will spur third-party development. In addition, the completion of RCS (Rich Communication Suite) specifications will enable device-to-network IMS capabilities that were not previously present. Efforts by vendors and operators to formalize the service development ecosystem will also lead to innovations.

Over time, the service architecture will evolve to IMS, and operators are already designing 4G networks to include IMS. When Verizon Wireless announced vendor selection, it also named Nokia Siemens Networks as its IMS provider. IMS is being considered both as a potential softswitch replacement and as a way to support 4G multimedia services.

Operators can deploy many more services at a reduced cost if they deploy IMS. Additionally, they can support a lot more voice calls using their LTE architecture compared to using legacy voice architecture. For example, LTE is expected to support sixty-three VoIP calls in the uplink and forty-nine in the downlink compared to GSM, which supports up to five calls.

2.5.1 IP Multimedia Subsystems (IMS) IMS is essential to IP transformation and has been discussed for a long time. However, most IMS implementations to date have been on fixed networks. Mobile operators have been trialing IMS and a few have implemented IMS for some applications. Yet, the migration to LTE will probably be the biggest driving force for IMS deployment. Although IMS has been defined in 3GPP standards since Release 5, with enhancements in subsequent releases, it is not required for LTE deployment. Operators looking to deploy advanced services leveraging presence, location, advanced address book options, personalized user services, and other applications are considering IMS to support these features.

Voice over LTE will be the primary driver from an application perspective. In order to get the full benefits of LTE, operators will need to leverage IMS to support all applications. Most operators have legacy networks in place that are already optimized for voice services. VoIP on LTE is probably the ideal solution, except for those operators that do not have IMS deployed in the network. IMS is seen as a costly and complex solution by these operators.

One of the drivers to deploy LTE is to leverage a single carrier for voice and data to reduce the cost of delivering both services. Today, deployed CDMA networks leverage separate carriers for voice and data. Verizon Wireless, a CDMA operator, plans to continue on this path – at least for the next few years. It will use its CDMA2000 1xRTT network for voice services and move its EV-DO data customers to LTE. Most WCDMA or non-CDMA operators will use GSM for their voice solution for the near term.

Softbank is one of the few operators using voice over cellular with IMS. The company is also planning to launch LTE in 2012 and will mostly likely continue using voice over cellular with IMS. IMS is the only solution currently supported by 3GPP standards.

Operators are presently considering at least three options to support voice over LTE, including: voice over LTE via generic access (VoLGA), NSN’s NVS solution, and the One Voice Profile.

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2.5.1.1 VoLGA VoLGA is an initiative by T-Mobile Germany and several equipment vendors (Kineto, Motorola, Ericsson, Huawei, Alcatel-Lucent, T-Mobile, ZTE, Nortel, Starent, and LG Electronics) to support voice over LTE networks. This solution will enable the transparent delivery of traditional circuit-switched services such as voice, SMS, and VMS over LTE without IMS deployment. The overall objective is to enable GSM/UMTS operators to reuse existing equipment to deliver circuit-based services over LTE and reduce costs.

Figure 2.1 VoLGA

GERAN LTEUTRAN

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A/Iu-CS

(Source: Kineto Wireless)

The proposed architecture will require a client on the devices and gateway (VAN-C) deployed in the LTE network (in or behind the EPC). The gateway will connect legacy R4 switches to the EPC via the 3GPP Generic Access Network (GAN) standard. Circuit-based services like voice, SMS, and VMS will be encapsulated in packets to traverse the LTE network. This will not require any changes to the MSC and operational systems. The advantage of the proposed solution is that it will minimize the number of elements required to deploy VoIP over LTE. Additionally, the architecture will enable the handoff of circuit-based services between GSM/UMTS and LTE networks. Thus, operators with legacy networks will be able to migrate portions of their network to LTE while still supporting legacy services in rural and suburban areas. The architecture will also facilitate roaming between LTE and GSM/UMTS networks.

2.5.1.2 Nokia Siemens Networks’ NVS Solution Other vendors, such as Nokia Siemens Networks, have developed their own solutions. NSN’s solution replaces the VAN-C gateway with an NVS VoIP server and uses the operator’s existing mobile softswitch equipment along with media gateways and session border controllers. The solution uses SIP (Session Initiated Protocol), which is also used in IMS. SIP eliminates the need for additional device clients since it will be supported on LTE devices. This solution enables the smooth migration to IMS-based VoIP solutions over time.

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2.5.1.3 One Voice Profile The One Voice Profile is an initiative by Verizon Wireless, Samsung, Ericsson, Motorola, AT&T, Vodafone, TeliaSonera, Sony Ericsson, Nokia, Nokia Siemens Networks, Telefonica, Orange, and Alcatel-Lucent to standardize multimedia services over LTE on IMS. Since 3GPP has defined multiple ways to complete a single function, the group agreed to a common recommended feature set for voice. The profile lists the essential features to launch IMS voice, including components of the evolved packet core, eNodeBs, user equipment, and IMS.

The standardization of voice over LTE solutions will facilitate the development of the ideal solution. Such a solution will be implemented by most (if not all) operators to enable roaming and service continuity across networks. One common solution is needed to fit all LTE operators. Implementing voice over LTE with IMS eliminates the need for circuit-switch fallback, which results in delays and sometimes an increase in the number of dropped calls. The challenge with IMS is that currently there is no support for prepaid services. In addition, there are concerns regarding SMS support, which is not defined in the LTE standards. Yet, SMS support is mandated by regulators and is also needed for operators to manage devices in the field.

2.5.2 Strategic Recommendations Operators and vendors should work toward a standardized solution for next-generation services. History shows that mass market adoption requires standardization. SMS did not take off until there was full interoperability across platforms and networks. IMS is defined by the 3GPP as the standard services platform and is also standardized across cable, wireline, and wireless networks. As a result, operators and vendors should embrace IMS as the common service architecture platform.

2.6 Business Model Evolution Most of the existing 3G business models are very consumer-centric models geared toward increasing mobile broadband usage. This business model has been successful to the extent that many more consumers are using mobile broadband. In fact, mobile data revenue is increasing. The United States reported over $32 billion in data revenue for 2008 and Japan reported $26.8 billion. In 2010, this number is expected to increase to $39 billion and $27 billion respectively.

Globally, operators are reporting increased uptake of laptop cards and a rise in mobile data traffic. AT&T reported a 50% increase in laptop connect cards subscribers in the second quarter of 2009 compared to first quarter 2009. Orange reported a five times increase in mobile data traffic in four of its operating countries during 2009 The increased traffic resulted from HSPA devices that support video and Internet-based services.

The issue with the consumer-centric model is that operators offer reduced flat-rate pricing to increase uptake. As a result, the revenue increase is not proportional with the increased cost to support the traffic spike. Operators are looking to vertical markets for 4G applications. Verticals like the energy sector will use 4G for meter reading, which is expected to provide constant revenue of $1 per connection with minimal traffic impact. Another vertical is the healthcare industry. In this market, operators are looking at e-health solutions with remote monitoring capabilities. This model will enable patients and healthcare providers to share information and perform remote diagnostics at a monthly recurring cost and with periodic network usage versus the “always-on” nature of traditional consumer services.

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Another change in the business model is that operators are now looking to their infrastructure partners to assist in new product and services development. Vendor partners will share the cost of developing new services, but will also share revenue from the new services. An example of such a partnership is Verizon Wireless’ Joint Innovation Lab, which is being co-developed with the company’s LTE vendors, Alcatel-Lucent and Ericsson.

2.6.1 Strategic Recommendations Operators need to expand beyond traditional business models to recoup their investment in 4G technologies. In developed markets like North America, Japan, and Europe, competition has forced an erosion in data and voice revenue. Operators need to evolve their business plans from flat-rate pricing, bundling, and subsidized contract models to a more open model whereby customers with unlocked devices can access an operator network easily and with simplified billing. Improvements in network speeds, latency, and device processing capabilities open new opportunities for expansion into other vertical markets beyond healthcare monitoring, smart metering, and machine-to-machine communications. Operators need to invest more in researching and developing new, non-traditional business models. While partnerships with equipment vendors are important, stronger partnerships with chipset vendors and their ecosystem will be more helpful in terms of service innovation. Chipset-level focus will remove some of the device limitations, thus resulting in more non-traditional solutions.

Several vendors are pushing unified subscriber database solutions for personalized service offerings. This approach is a great start in evolving services, but more definition around specific services is needed. Vendors like Alcatel-Lucent conduct their own end-user studies to determine the types of services that customers are willing to purchase. However, further work is needed on leveraging this information to create new services.

2.7 Conclusion IP transformation impacts several areas of the network, thus requiring operators to take a well-planned approach to transforming their networks. Operators will begin the transformation in areas of the network that are critical to improving network performance, such as the backhaul. They will work to consolidate all wireless technologies deployed in their networks into a single backhaul solution. As a result, they will leverage high-capacity, Ethernet-based solutions with pseudowire to support legacy 3G requirements such as ATM.

Operators will also transform the RAN by deploying new base stations with Ethernet interfaces. The core network will evolve based on the elements defined in the standards. Technologies like LTE require flat IP architecture, which combines existing functions with other elements to simplify the architecture and reduce delays. The 3GPP standards also define requirements for the new elements.

Operators are more reluctant to change elements in the network that are critical to overall performance, such as the mobile switching center (MSC). The MSC is tied to Prepaid, billing, and call control; consequently, operators are hesitant to make any changes without understanding the impact.

A thorough transformation plan will include a detailed analysis of each element impacted and potential issues, as well as workaround solutions. Operators will need vendor partners to help define and implement the transformation process.

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Section 3.

DRIVERS AND INHIBITORS FOR IP TRANSFORMATION

3.1 Drivers The primary driver for IP transformation is cost. Network utilization and capacity are increasing while revenue remains relatively flat. In the voice-centric network, utilization was tied to revenue and there was a direct correlation between the two. Now utilization is increasing steadily, but operators cannot charge consumers for the cost to meet growing capacity demand due to competition and market pressures. As a result, operators are focused on reducing network costs. IP and Ethernet are fairly low-cost solutions that have been optimized for the wireline network. As the wireless network becomes more like the wireline network, especially at the core, operators are looking to leverage the proven, low-cost solutions used for wireline networks.

Network capacity is another driver for the transformation to an all-IP network. As wireless technologies improved, operators began selling data cards and USB dongles. The use of these devices simulates utilization on the wireline network. Lower-capacity networks like EDGE/GPRS replicate dial-up networks while 3.5G networks like HSPA imitate utilization on always-on DSL or cable networks. The primary differences between these networks are capacity and latency. When users employ data cards in a similar fashion as wireline connections, operators face capacity limitation issues. Since spectrum is a scarce resource, operators cannot throw bandwidth at the problem as they did in the wireline world. Network capacity is limited by channel bandwidth, which in turn is limited by spectrum availability and the technology used. It is also restricted by the backhaul technology and capacity used to connect the base stations to the core network.

Legacy technologies like GSM are limited to 200 KHz for channel bandwidth, CDMA2000 is limited to 1.25 MHz, and WCDMA is limited to 5 MHz channel bandwidth. Newer technologies such as WiMAX and LTE enable the more efficient use of spectrum by eliminating waste caused by the guard bands used between smaller channel sizes and increasing the number of bits per hertz. WiMAX and LTE use larger channel bandwidths such as 10 MHz and 20 MHz, thus significantly increasing network capacity. These technologies also require the transformation to a flat IP core, which reduces overall network latency.

3.1.1 Device Migration Traditional wireless devices were handsets focused on voice communications. Newer devices are more data-centric, with QWERTY keyboards to simulate PC-like usage, Internet access, e-mail capability, and more multimedia-centric usage. End users are connecting to the network with more devices than ever. New devices include:

• Netbooks • USB dongles • Ultra mobile PCs • iPhone • eBooks • Mobile Internet devices • Handheld gaming devices

All of these new devices need a means to connect to the Internet and thus require an IP address.

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3.1.2 Services and Business Models Operators will need new business models to monetize the use of off-portal content. Today, many services are offered in silo, which is more costly to grow and maintain. Consequently, operators are migrating to a centralized service platform that enables them the quickly evaluate and deploy new services without incurring high incremental costs. An IP-based service platform enables sharing across multiple access networks.

3.1.3 Cost Reduction Data revenue is not increasing on par with bandwidth utilization, as was the case with voice traffic. As a result, operators are looking for a way to reduce costs. The migration to IP will lower costs since IP networks are already widely deployed by fixed operators, resulting in reduced costs due to economies of scale.

Flat IP architecture lowers costs by minimizing the number of network elements. In addition, IP platforms are widely available in off-the-shelf configurations. Most OEMs focus on software developments for gateways and core infrastructure products. They are then able to purchase ATCA chassis or Sun servers with the configurations that most closely meet their needs. ATCA products are standardized and can easily be scaled as needed.

Centralized service architecture also helps to reduce costs since systems and platforms can be shared across access networks and different services. Operators do not have to purchase a discrete set of network elements for each application developed.

3.1.4 Data Bandwidth Mobile networks are expected to be on par with wireline network speeds. Wireline broadband networks provide the baseline for consumer expectations of always-on services. These expectations will drive the wireless core to be comparable with wireline networks. The challenge with wireless networks is that the air interface is limited and customers are mobile.

One potential solution to increase network capacity is to deploy a more distributed network with smaller cell sites and more in-building solutions. However, the smaller cell site will require high-capacity backhaul. This means that operators will have to deploy more distributed services and backhaul architectures, which can be very costly.

Femtocells may solve some of the backhaul issues since the traffic is routed off the wireless network onto the wireline infrastructure at each site. Yet, femtocells present a different set of challenges, such as how to manage interference with the macro network’s overall management of radio resources.

The common theme across the industry is that data traffic is growing exponentially, thereby increasing operator costs. At the same time, data revenue is relatively flat, as indicated in Chart 3.1. The United States is the only country where data revenue is increasing at a relatively steady rate – though not enough to keep pace with data utilization.

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Chart 3.1 Data Service Revenue, Countries with Strong Data Growth, Forecast: 2008 to 2014

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3.1.5 4G Network Migration The migration toward 4G or OFDMA-based networks will be the strongest driver for IP transformation. 4G, unlike 2G and 3G technologies, does not include a circuit-switched component. The circuit-switched component is not as efficient as the packet-switched network because it establishes a dedicated path between the communicating end points, which is more wasteful. In contrast, the packet-switched network routes each packet independently and reassembles them at the termination points for optimal use of the network resources. 4G networks will begin with the evolved packet core, which is all-IP.

Since 4G is one of the primary drivers for IP transformation, the regions that are the first to adopt 4G technologies will be the earliest adopters of end-to-end IP networks. Such regions include North America, parts of Asia (Japan and Korea), and Western Europe. The migration to 4G is also aligned with the release of much needed spectrum resources. Countries that release new spectrum will be the earlier adopters.

The migration to 4G or OFDM networks started with mobile WiMAX (802.16e) and LTE deployments. Mobile WiMAX deployments started in 2008 and will continue over the next several years. LTE deployments will start in late 2009 and continue over the next ten years or so with improved versions on the 3GPP Release 8 standards. Once operators begin to convert their networks to all-IP, the trend toward all IP will continue.

3.2 Inhibitors Cost is a major inhibitor to IP transformation. While operators can save money over the long run by upgrading to all-IP networks, there are still costs associated with the upgrade. New equipment is needed and business cases are typically linked to revenue – not cost savings. Many of the legacy systems are still operational and are tied into complex billing schemes. Given all of the unknowns, operators are reluctant to invest in transitioning their networks.

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Section 4.

WHY IP TRANSFORMATION?

4.1 Service Evolution Services will transform to become more personalized. They will also shift from the traditional consumer-centric services to vertical applications such as e-health or telemedicine, remote meter reading, automotive services, and machine-to-machine communications. Meanwhile, traditional services will be enhanced by faster data rates, lower latency, and improved QoS.

Service transformation will also lead to changes in business models as operators move toward more open networks, devices, and applications. Operators will leverage third-party services and rely less on their own internal development teams. They will also have to rely less on subsidy and contracts and more on strong products and services to retain customers. Operators are now collaborating with vendors and a larger ecosystem to develop new applications and services. As a result, OEMs will share some of the risks and revenue of the new services.

The completion of the Rich Communication Suite (RCS) standards will further enhance service delivery. RCS enables richer communications by enhancing and integrating multiple features that already exist. Some of these features include the integration of location-based services, enhanced address book video share, multimedia messaging, file sharing, and Presence.

4.1.1 Service Brokering 3GPP Release 8 provides enhancements to IMS that improve service brokering. New features include:

• Improvement in application server support to prevent termination of primary session when there is an application server error

• Explicit sequence of services can be invoked in the application server • The user device can trigger the service delivery process • Identity of the original called party is retained through multiple service activations to prevent

operator policy violations

4.2 Radio Access Network (RAN) Evolution 4.2.1 3.5G Evolution

Transforming the RAN to all-IP results in the ability to reliably deliver many sessions of bursty data to a large number of users in a cell. WCDMA (with its dedicated channels) and its predecessor technologies were not designed to manage bursty data. The process used in those technologies to handle a mix of regular and bursty traffic was slow. In terms of 3GPP technologies, Release 5 (HSDPA) was the first release designed to manage IP traffic. Instead of using dedicated channels, HSDPA extends the use of shared channels. Shared channels, as the name implies, allow data for many users to share one higher bandwidth channel – similar to Ethernet in the wireline world. Release 5 also improved the channel configuration process from 500 ms to 100 ms.

Moreover, Release 5 moved the MAC control from the RNC to the base station. This improved the responsiveness of the base station by enabling the base station to quickly schedule those users with the best channel quality. The base station uses a fast scheduling algorithm to determine channel quality and adjust modulation and coding schemes for the best results.

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Otherwise, if served first, those users with poor channel quality would have high error rates based on the past algorithm, which used the average channel condition to determine modulation and coding schemes.

Release 5 (HSDPA) also introduced higher order modulation (16 QAM), thereby increasing the peak data rates. Release 5 of the 3GPP standards also moved Hybrid –Automatic Repeat Request (H-ARQ), which enables the retransmission of dropped or corrupted packets, from the RNC to the base station. This shift resulted in an improvement in base station latency. Due to the combination of an 80% reduction in response time, moving the intelligence to the edge of the network, and adaptive modulation, the performance of HSDPA is significantly better than that of WCDMA. HSDPA demonstrates a seven times improvement in data rate and an 80% reduction in response time compared to WCDMA.

Release 6 (HSUPA) balanced overall performance by providing improvements in the uplink. Such progress is essential for real-time services such as VoIP and video chat, which require more synchronous transmission.

4.2.2 3.9G Evolution The transformation of the RAN will focus on 3.9G or 4G base stations and smaller form factor base stations such as picocells and femtocells. LTE base stations will have more intelligence than traditional base stations since the RNC function will now be incorporated into the base station. In addition, the introduction of the X2 interface will enable direct communications between base stations, which was not possible in predecessor 3GPP technologies. There will also be some transfer of data during handoff between LTE base stations without the data traversing the core network.

While pico and femtocells will be critical in enabling operators to offer higher data rates in smaller cell sizes, they will present unique challenges. IP transformation will be required for management of these elements. Operators are concerned about how best to manage large numbers of femtocells. IP capabilities will enable operators to automatically detect when new femtocells or picocells join or leave the network, help in troubleshooting these elements, and support the self-optimization feature of LTE networks.

Remote radio heads also mark a transformation to more intelligence at the top of the tower. In the past, operators were reluctant to place electronics at the top of the tower for fear of failure, which would result in costly tower climbs. Now operators are looking to remote radio heads to increase deployment flexibility. Remote radio heads enable the deployment of the radio away from the base band unit.

4.3 Backhaul Evolution The primary evolution taking place is in the backhaul. As operators migrate to 4G technologies or solidify their 3G networks to deal with the increase in 3G traffic, they are turning to Ethernet-based solutions in the backhaul. The main solutions will be Ethernet over fiber or Ethernet-based microwave solutions. Operators with mostly 2G networks will use pseudowire solutions to aggregate TDM and ATM traffic onto Ethernet backhaul. However, due to the high growth in 3G traffic, pseudowire solutions will no longer be a good option. Most backhaul solutions will leverage Layer 2 solutions such as switched Ethernet while Layer 3 functions will occur chiefly in the network core.

Ethernet is the technology used in the wireline network to manage bursty IP traffic. It is a proven, low-cost technology that is widely available. Over time, operators and vendors have worked through issues to improve the reliability and performance of Ethernet solutions. As

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operators migrate to 3G and now 4G, they are evolving their backhaul networks to an all-IP architecture by leveraging Ethernet. 3G and 4G traffic are more bursty than typical voice and SMS traffic and have higher peak-to-average requirements. Ethernet was developed to handle this type of traffic. As mentioned, it is widely available and provides higher-capacity solutions at lower cost than most other technologies.

In the past, operators were reluctant to use Ethernet due to its connection-less state (less reliable) and inadequate synchronization support. Yet, improvements in synchronization technologies and the standardization of Ethernet solutions have optimized the technology for backhaul. Today, Ethernet solutions are optimized to provide predictability, QoS support, security, reliability, and reductions in overall delay. Standardization efforts in groups like the Metro Ethernet Forum (MEF) are improving the key features of Ethernet and establishing a strong ecosystem for Ethernet-based solutions.

Chart 4.1 shows the number of base stations connected via Ethernet over fiber. ABI Research estimates the number of base stations connected by fiber in 2009 is approximately 582,700. This number will grow to 1.1 million by 2014. Most of the growth in Ethernet over fiber backhaul will be attributed to LTE deployments. However, countries like China, Japan, and South Korea already have a large installed base of fiber and will evolve their solutions to Ethernet over fiber. Operators in markets like North America with large TDM bases are also migrating to Ethernet over fiber to meet growing traffic demand.

Chart 4.1 Ethernet over Fiber Base Stations, World Market, Forecast: 2008 to 2014

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Ethernet over microwave solutions provide the benefits of using Ethernet without the cost of deploying fiber and the time to install fiber, which can take six to nine months. Today, microwave over Ethernet is primarily used by greenfield operators or as a fill-in solution for those operators deploying Ethernet over fiber. Clearwire is an example of an operator that uses Ethernet over microwave for 90% of its backhaul network. The operator uses microwave backhaul with Ethernet switches to form a ring architecture that provides SONET-like resiliency in case of

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failure. This ring architecture provides resiliency to ensure four nines (99.99%) backhaul availability. Each cell site is connected via two microwave links, with Ethernet switching connecting the links. Clearwire recently selected DragonWave as its microwave provider. Enhancements in microwave backhaul include a built-in Ethernet switch to enable ring-like architecture for redundant routing options in case of failure.

4.4 Mobile Core The evolution of the mobile network to an all-IP core began with 3GPP Release 5, which introduced IMS, then continued with Release 6 through Release 8. In Release 7, one-tunnel architecture was introduced to flatten the network. Flattening the network reduces the latency in the network by minimizing the number of hops that the traffic traverses. It also leads to a more decentralized core network architecture. Additionally, the one-tunnel architecture prepares the network for evolved packet core migration. In the evolved packet core, the RNC function is incorporated into the base station and the MME.

A lot of the focus has been on operators migrating their 3G or 3.5G networks to 4G. However, there are operators that are trying to get the most out of their 3G networks while meeting increasing capacity demand. These operators are looking for a means of leveraging their current networks to meet growing demand. Telstra is one such operator, and it is operating an HSPA network optimized for coverage and capacity. The network has been upgraded to support a peak data rate of 21 Mbps in the downlink and 11.5 Mbps in the uplink.

4.4.1 Quality of Service Jitter is inherent in IP networks, and it degrades voice quality. This is an issue that needs to be addressed. Jitter occurs when IP packets arrive at the destination at irregular intervals, thus causing disorder and intermittence in the voice stream and resulting in poor voice quality. Some solutions include the use of jitter buffers in the media gateway to gather voice packets, reduce jitter, and rectify packet order.

4.4.2 Mobile Softswitches/Media Gateways The softswitch is sometimes referred to as the media gateway. Softswitches are used in VoIP architecture to control the media gateways. They are also used in IP networks to improve voice quality by providing the following voice quality enhancement features: echo cancellation, echo suppression, gain control, and mute detection. Improvements made to the softswitch include the use of MSC pools to increase reliability (instead of a simple dual-home solution). The A/lu interface is used to connect the softswitch to multiple MSCs.

Ericsson commercialized the first softswitches in 2003 and used them in 3 Italy’s network. The latest version of the mobile softswitch is deployed in server blade clusters. Server blade clusters can support over 8 million subscribers with two cabinets of equipment, which enables a 90% footprint reduction.

Media gateways are needed to bridge the gap between 2G/3G and the IP core. They are used for interworking functions between IP and non-IP networks. The challenge with media gateways is that they add cost and delay to the network.

Media Gateways also provide transcoding functions. In all-IP networks, transcoding is needed to make different networks work together. Transcoding is similar to the role of session border controllers in TDM to IP transformations.

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4.4.3 Session Border Controllers Session border controllers are used in the delivery of IP-based voice and data services. For the most part, they are employed to enable real-time traffic sessions (VoIP and other real-time services) to traverse network address translation (NAT) boundaries and firewalls. They perform this function by incorporating signaling control elements to process different signaling protocols.

More specifically, session border controllers are used at network interconnection points to convert TDM traffic to IP and vice versa, secure subscriber access, enable interoperability between different end points, and service infrastructure elements and networks. As the core transforms to IP, more session border controllers will be needed to control admission, balance IP transport, and meet service level agreements. Session border controllers also help in meeting lawful intercept requirements, government priority services, and emergency services requirements. Primary functions include:

• Security – Manages subscriber access and interconnect points at peering borders; prevents denial of service (DoS) attacks and protects subscriber session privacy

• Enables interoperability between different types of networks and devices • Assures session capacity and quality • Optimizes session routing to minimize costs • Enables compliance with various government agencies such as emergency services, lawful

intercepts, and government emergency telecommunication services

One of the leaders in this space, Acme Packet, provides Net-Net session border controllers. The company has sold over 8,000 units since 2002, a figure that indicates the relatively low-volume opportunity for these elements. Overall volume is expected to increase as operators are forced to transition to IPv6 due to the lack of address space in IPv4. Typical costs for session border controllers are in the low $200,000 range, but can be as high as $800,000 depending on the number of sessions supported.

Session border controllers are used in carrier-to-carrier peering, carrier-to-enterprise access, and carrier-to-residential access. Today, most session border controllers are sold to fixed network operators. Only about 15% to 20% are sold to mobile operators. However, the number is expected to rise as mobile operators move to 4G and IP-based architecture.

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Note that the forecast provided in this study reflects the mobile opportunity for session border controllers and not the overall market opportunity, which covers fixed and enterprise networks.

In 2009, North America leads in terms of the market for session border controllers; Western Europe and then Asia-Pacific are next. These positions are primarily tied to the fact that the United States is one of the strongest markets for data, followed by the Asia-Pacific region (Japan and South Korea), and Western Europe.

Chart 4.2 Session Border Controllers, World Market, Forecast: 2009 to 2014

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In 2009, North America and Western Europe account for over 57% of session borders shipped. By 2014, Asia-Pacific and North America will comprise approximately 56% of session border shipments while Western Europe will account for 22.9% of new session border controllers. The completion of the RCS standards, which extend IMS to devices, will have a positive effect on the session border controller market. LTE deployments in these regions will also boost the market as networks migrate to all-IP and more real-time services are delivered over LTE networks.

4.4.4 CDMA EV-DO Networks Many CDMA operators, especially those in North America, are migrating their networks to non-CDMA technologies. Verizon Wireless, the largest CDMA operator with over 86 million subscribers, started migrating to LTE in late 2009. Sprint Nextel, the second-largest CDMA operator, began migrating to WiMAX as its 4G technology choice. In Canada, CDMA operators (including Bell Mobility and Telus) started migrating to HSPA in 2009 while maintaining their CDMA EV-DO networks. In Asia, Reliance, the second-largest CDMA operator globally with over 73 million subscribers, started deploying GSM in 2009. KDDI in Japan is also upgrading its CDMA network to LTE. China Unicom is one of the few large incumbent CDMA operators focused on CDMA (it recently began its 3G upgrade to CDMA EV-DO Rev. A).

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As a result, CDMA operators migrating to 4G have to enable interworking between their current CDMA networks and LTE or WiMAX networks. The Evolved High Rate Packet Data (eHRPD) gateway was developed to replace the Packet Data Serving Node or (PDSN). EHRPD will act as a serving gateway to connect LTE and EV-DO networks. This platform will be critical for companies like Verizon Wireless and other CDMA operators migrating to LTE. Since LTE will be deployed in hotspot-like locations initially before it is widely available, operators will need strong interworking between both networks. EHRPD enables seamless handover between EV-DO networks and LTE, which will be essential for real-time applications such as voice and other low-latency applications.

ABI Research’s forecast indicates that the number of LTE base stations deployed as CDMA overlay will begin with approximately 4,200 units in 2009 and grow to over 118,660 by 2014. The majority of the growth will result from North America, where operators like Verizon Wireless, MetroPCS, Telus, Bell Mobility, and others are upgrading their CDMA networks to LTE. Asia-Pacific will be second as operators such as KDDI in Japan and CDMA operators in Korea upgrade to LTE. Chart 4.3 shows the global trend for CDMA base station migrations to LTE.

Chart 4.3 LTE Base Stations Deployed in CDMA Networks, World Market, Forecast: 2009 to 2014

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4.4.5 WCDMA Networks – SGSN and GGSN As 3G traffic increases, operators are addressing the issue by adding more SGSNs and GGSNs to meet traffic demand. This solution is both temporary and costly. Additionally, in most cases 3G core network elements cannot be reused for 4G. The SGSN is typically collocated with the mobile switching center (MSC), and there is usually one per serving area. It manages the data traffic while the MSC manages the voice traffic. In addition, the SGSN receives and forwards packets to and from the GGSN, which is the mobile IP router. The GGSN forwards and receives traffic from the Internet and assigns IP addresses to mobile devices for data sessions. There is typically one GGSN per external network. SGSNs and GGSNs are used in both GSM-based networks and WCDMA/HSPA networks.

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LTE architecture requires a Mobility Management Entity (MME) and the packet data node, or P-gateway, which makes up the evolved packet core. These elements differ from their 3G counterparts in that they require a lot more processing power. In the EPC, there is more of a separation of roles; the MME focuses on control layer functions while the P-gateway manages the actual data traffic. The role of the radio network controller is incorporated into the eNodeB and the MME, which reduces the number of elements in the EPC.

4.4.6 HSPA Networks As the first mobile cellular network to deliver VoIP capabilities, HSPA leads the way to true IP. The 3GPP Release 7 standard includes enhancements to IMS and true QoS capabilities to support voice. Continuous packet continuity (CPC) is one feature that enhances voice support by reducing uplink interference. It enables discontinuous uplink transmission and discontinuous downlink reception. CPC allows the modem to be turned off during a period of inactivity, thereby reducing the power consumption of VoIP devices.

Operators will probably defer voice support on HSPA networks since it will require IMS or other elements. In addition, UMTS networks already support circuit-switched voice and packet data simultaneously, which reduces the urgency for 3GPP operators to move to VoIP.

It is within the 3G network where true mobile IP transformation begins. OEMs have already introduced base stations with software-defined radios and core network elements on ATCA chassis to standardize and simplify the core network platforms. HSPA Evolved begins the transformation to a flat IP core with direct tunnel architecture. This architecture provides a direct path for user data between the RNC and the GGSN, while the SGSN focuses solely on control functions. For packet-based services, there is an optional architecture whereby the RNC is incorporated in the NodeB. Both architectures reduce the number of elements in the network, thus resulting in lower costs and less transmission delay.

4.4.7 LTE Network Evolution The LTE core network architecture is the evolved packet core, or EPC. The EPC consists of two primary nodes: the control plane node, which is the MME; and the data plane nodes, which consist of the serving gateway (S-GW) node and the packet data node (PDN). LTE core architecture includes the following elements:

• MME • S-GW • P-GW • eNodeB • PCRF (Policy and Charging Rule Function)

The EPC spurs the migration to an all-IP core network and flat network architecture. It also causes an overall reduction in the number of network elements since the radio network controller (RNC) function is mostly integrated into the eNodeB; some functions are on the MME and the data plane functions are on the S-GW.

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More specifically, the EPC provides connectivity from the operators’ base stations to the Internet, as well as connectivity between LTE, legacy 3GPP networks, and non-3GPP networks. EPC elements are separated into control plane functions and data plane functions. These elements include the MME, the S-GW, the P-GW, and the PCRF. Their functions are as follows:

• The MME is a control plane element that manages signaling and control, mobility, end-user equipment, gateway selection, and security parameters.

• The PCRF element is also a control plane element, and it enables service data flow detection, policy enforcement, and flow-based charging.

• The S-GW is a data plane element that terminates the interface from the eNodeB, provides a local mobility anchor for inter-eNodeB handovers, and routes data traffic to the P-GW.

• The P-GW is also a data plane element that routes data traffic from the S-GW to the Internet or external packet networks.

Elements that provide control plane functions can be combined onto one platform, and likewise for data plane elements. The S-GW and the P-GW can be combined on a common hardware platform and remain logically separated by the S5 interface, or they can be deployed on separate physical hardware. Actual deployments will depend on an operator’s requirements for distributed or centralized architecture and vendor implementation. Deployment configuration will also depend on the size of the operator’s network and coverage area. Operators may choose to separate the elements to minimize network latency since low latency is critical for mobility. Equipment scalability is also important. Function-specific devices enable higher scalability without impacting other function performance. Operators like Verizon Wireless prefer a more distributed architecture whereby each element is located near the traffic origin. The P-GW will need to process large amounts of data quickly for a large number of subscribers while the S-GW will need to quickly process base station signaling and provide feedback.

In general, the EPC provides a unified platform with the following features:

• Common policy and charging control • Unified user data management • Tightly coupled mobility management • Converged gateway for multiple access technologies • Common service control and service creation environment

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Figure 4.1 Evolved Packet Core

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4.4.8 WiMAX Network Evolution WiMAX, like LTE, also uses a flat mobile packet core. The packet core sits behind the backhaul network and terminates all of the connections from every mobile device.

Figure 4.2 WiMAX Architecture


The primary function of the WiMAX Access Service Network (ASN) gateway is to aggregate subscriber traffic and control traffic from the base station. In addition, the ASN gateway provides radio resource management, mobility management, Layer 3 connectivity for devices, and WiMAX network discovery based on user preference. It also communicates with the AAA, home agent, and DHCP servers. The WiMAX forum supports three ASN architectures, including: flat, hierarchical, and centralized.

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The centralized architecture, or profile C, is the most commonly deployed architecture. In profile C, the base station handles radio resource control and radio resource management. The mapping of base stations to the ASN gateway depends on the type of applications being supported. In voice applications, the ASN typically supports up to five base stations while a purely data-centric network can support up to thirty base stations.

Chart 4.4 depicts the growth rate for WiMAX gateways. ABI Research forecasts that the net additions of new WiMAX gateways will peak in 2009 then decrease over the next five years. This is largely due to the strong impact of the Asia-Pacific market. During late 2008 into 2009, the certification of 2.5 GHz and 3.5 GHz products was completed, which resulted in a stronger deployment rate. In 2009 to 2010, WiMAX operators will build out their networks, after which they will focus on growing their subscriber base. WiMAX will continue to grow in all markets. However, the rate of growth will be slower due to the availability of LTE, which will be more cost-competitive because of economies of scale.

Note that WiMAX ASN gateways are designed with software and a common off-the-shelf (COTS) platform, which lowers overall costs.

Chart 4.4 WiMAX Gateway Net Additions, World Market, Forecast: 2009 to 2014

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4.5 IP Multimedia Subsystem (IMS) Implications for IP Transformation IMS and IP UTRAN were defined by the 3GPP Release 5 standards around 2005. Although there have been a lot of discussions around IMS, issues such as cost, complexity, and lack of clarity have limited deployments. The introduction of LTE and its flat, all-IP core architecture is expected to increase IMS deployments. IMS will be instrumental in supporting rich multimedia applications developed for LTE, but it is not an absolute requirement. Device implementation was once one of the key bottlenecks to IMS. OEMs are now collaborating to standardize IMS implementation through efforts like the Rich Communication Suite (RCS) standards.

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Operators such as Sprint in the United States and Softbank in Japan are using IMS to deploy push-to-talk, presence, and group list management services. In addition, operators are leveraging IMS for mobile VoIP over HSPA networks. This solution was first demonstrated in 2007.

In the core network, IMS will be used to implement the common service layer, QoS, and call control. HSUPA was the first cellular technology to provide the bidirectional data rate required to support voice over IP over cellular.

Large operators are more likely to migrate to IMS-based solutions while smaller operators will seek alternative solutions due to the cost and complexity of IMS.

4.5.1 IMS Development In Release 7, the 3GPP defined IMS to be open to non-cellular technologies. It was at this juncture that other 3GPP partners developing IMS standards for fixed-line networks decided to collaborate and shift all IMS development to the 3GPP to simplify IMS solutions and make them standard across all networks. IMS work that was being done by ETSI, TISPAN, and CableLabs will now be done by the 3GPP. This move will simplify the migration to fixed mobile convergence (FMC) by unifying IMS across all access technologies. 3GPP Release 8 was the first release with the common IMS standard.

In mobile networks, IMS is essential for enabling some of the features that were inherent in circuit-switched networks. These features include traffic prioritization, end-to-end QoS, and the delivery of real-time services. In addition, IMS enables a platform for other real-time non-traditional services. IMS combined with RCS facilitates end-to-end IMS-supported applications.

Feature improvements to IMS that are essential for wide-scale acceptance include: security enhancements for home networking, number portability, service customization, and improvements in service brokering.

Recently, a group of mobile operators and Tier One OEMs agreed on a One Voice Profile for LTE based on IMS standard. This decision will increase IMS deployments in conjunction with LTE. LTE deployments will begin in late 2009 into 2010. The One Voice Profile is supported by AT&T, Verizon Wireless, Vodafone, Telefonica, TeliaSonera, Orange, Alcatel-Lucent, Ericsson, Nokia, Nokia Siemens Networks, Sony Ericsson, and Samsung.

Based on ABI Research’s forecast and interviews conducted for this study, IMS adoption in mobile networks is gaining traction starting in 2009 and will accelerate with LTE deployments. The IMS penetration rate will grow to over 40% in North America and roughly 20% in markets like Eastern Europe, Asia-Pacific, and South America. Advanced data services and LTE will be the primary drivers for IMS implementations in North America.

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Chart 4.5 IMS Penetration Rate, World Market, Forecast: 2008 to 2014

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Section 5.

IP TRANSFORMATION STRATEGIES

5.1 Greenfield Operators 5.1.1 Clearwire

In the case of greenfield operators such as Clearwire, the network is designed to be IP-enabled at the onset – so no transformation is necessary. Transformation elements are primarily required at the network interconnection points where Clearwire passes traffic to the Internet or to another operator. This is where network elements such as session border controllers are needed.

In terms of backhaul, Clearwire uses an Ethernet-based microwave solution. Microwave links are connected via Ethernet switches in a ring architecture to provide SONET-like resiliency. Metro Ethernet rings are deployed in each market. Base stations are connected to Ethernet switches for transport back to the core network. This architecture will evolve in the future to leverage fiber in the core ring architecture with microwave in the last mile.

While the company is evaluating IMS as an option for delivering voice and multimedia products, it has not publicly announced its direction. Clearwire does not see IMS as essential for SIP-based VoIP, but may use IMS to interconnect with other carriers and centralize service distribution.

5.2 Mobile Operators 5.2.1 AT&T

AT&T currently deploys an HSPA network at 7.2 Mbps with plans to upgrade to LTE by 2011 while still optimizing its HSPA network. The operator has had exclusive rights with Apple to distribute the iPhone and was one of the first operators to sell the device. AT&T has experienced tremendous success with this device, selling over 9 million units over the last three years. In addition, the operator has been doubling its quarterly sales of laptop data cards. The combined success of these two products has been both a blessing and a curse. In 2008, AT&T reported mobile data services revenue of $10.58 billion. Yet, both devices have caused traffic on the operator’s network to grow over 5000% over the last three years, as reported by AT&T”s chief technology officer.

As a result of the increased traffic, AT&T had to quickly devise a strategy to upgrade its backhaul network to alleviate the strong traffic growth. The operator is upgrading the backhaul network using a combination of technologies such as Ethernet over microwave, Ethernet over fiber, and Ethernet over copper. AT&T has a large deployed base of fiber to support its U-verse video service and will be able to leverage some of this fiber to support backhaul (though this has not been publicly stated by AT&T).

AT&T has also deployed IMS to support its video chat service and is said to be a major proponent of IMS. It is unclear how successful this service is since the operator does not publicly announce subscriber numbers. Still, AT&T is expected to expand its IMS to other services.

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5.2.2 NTT DoCoMo NTT DoCoMo also has an HSPA network deployed at 21 Mbps and will be one of the first operators (along with Verizon Wireless) to deploy LTE. The operator is known for being a global leader in mobile data services, as well as extremely innovative in terms of early technology acceptance and deployment. NTT DoCoMo has also deployed IMS for push-to-talk (PTT) and video chat services and will leverage IMS in its LTE deployment in 2010.

5.2.3 Telstra Telstra is cited throughout the industry as an innovator due to its early adoption of HSPA Evolved. The operator was one of the first to deploy HSPA at 21 Mbps. It has over 828,000 mobile broadband users. However, Telstra has no plans to deploy LTE in the near future; rather, it aims to maximize utilization of its HSPA network.

5.2.4 Verizon Wireless Verizon Wireless is one of the leading operators in regard to transforming its end-to-end network to all-IP. It is also one of the most aggressive in terms of migrating its backhaul network to IP. Verizon Wireless began upgrading its backhaul network from T1s to Ethernet over fiber five years ago according to the operator.

As Verizon Wireless migrated from ATM to Ethernet, it still used copper T1s to transport its backhaul traffic in most markets. It is now in the process of migrating all of its backhaul traffic to Ethernet over fiber, but will use microwave where fiber is not available or where it is cost-prohibitive. As a result of this migration, Verizon Wireless’ CDMA and LTE networks leverage Ethernet over fiber backhaul in some markets. The operator plans to have fiber to 90% of its territory cell sites by 2014.

Verizon Wireless will rely on fiber from Verizon Partners where available and use other carriers in markets like Las Vegas where it does not have its own solution. Cable companies and LECs are the primary alternate backhaul providers for Verizon Wireless. In terms of leased solutions, the operator prefers to work with large partners with solid financial standings.

The primary requirements for Verizon Wireless’ backhaul include an Ethernet-based solution with high availability and minimal jitter (deviation in timing, phase, amplitude, or width of the signal pulse). This solution also has to have SONET-like reliability, which usually relates to synchronous, redundant networks.

5.2.5 Vodafone Vodafone is a multinational operator ranking number two globally with over 289 million mobile subscribers. The operator has operations in over twenty-five markets, including Europe, Africa, Asia, and North America. It currently has HSPA deployed in some of its networks with plans to upgrade to LTE once the technology becomes more stabilized.

Vodafone has about 48% ownership in Verizon Wireless and 3% ownership in China Mobile. Both of these operators plan to deploy LTE. Verizon Wireless will be first to market, launching FDD LTE in 2010, and China Mobile will look to launch TDD LTE in the 2011 timeframe. All three operators have been jointly testing the technology.

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5.3 Equipment Vendors 5.3.1 Acme Packet

Acme Packet is one of the leading providers of session border controllers. The company’s product portfolio includes: session border controllers, session routing proxies, and a multi-service security gateway. Products are sold to enterprise customers, government agencies, and small and large service providers. Acme Packet offers four hardware platforms, a blade solution, and software-only solutions for partners that wish to integrate Acme Packet products into their platforms.

Acme Packet supports three approaches for delivering voice over LTE: VoLGA, MSC VoIP, and IMS/pure SIP. The Net-Net Security Gateway, designed for FMC and femtocell applications, is an element in the VoLGA. The company also advocates SIP based approaches to LTE voice including transition options like MSC VOIP, and IMS, for which it sells session border controllers. Along with its partner Mavenir Systems, Acme Packet supports a MSC VoIP solution that is architecturally similar to the NSN NVS/FastTrack Solution, but is MSC independent.

Acme Packet had 2008 revenue of approximately $116 million and projected 2009 revenue of $134 million. Over 50% of the company’s sales are through channel partners, with OEMs and integrators accounting for 50% to 60% of revenue. Acme Packet currently has about seventy-five channel partners. OEM channel partners include Alcatel-Lucent, Nokia Siemens Networks, and Ericsson. For the first half of 2009, Alcatel-Lucent accounted for 25% of revenue while NSN accounted for 18% of revenue. Sales to mobile operators accounted for 15% to 20% of 2008 revenue while sales to enterprise customers comprised 10% to 20% of revenue.

Acme Packet’s session border controller (SBC) product line includes the following elements:

• Net-Net 2600: Integrated SBC optimized for enterprise and contact centers. • Net-Net 3800: Integrated SBC optimized for smaller enterprise, government agencies, small

service providers, and smaller sites within larger organization. Supports up to 500 sessions. • Net-Net 4000: Most widely deployed carrier-class platform. One rack unit form factor that

includes all three functions: session border controller, session routing proxy, and multi-service security gateway. Supports up to 32,000 sessions.

• Net-Net 9200: Latest platform that supports transcoding and transrating for a wide selection of wireless and wireline codecs. Provides the highest level performance and availability for service providers and large enterprises. Supports up to 128,000 sessions.

• Net-Net OS E: Software-only, integrated SBC for third-party servers. • Net-Net 4500 ATCA Blade: This blade can be integrated into the ATCA chassis of Acme

Packet’s partners. The blade supports all three features (session border controller, session routing proxy, and multi-service security gateway). It is built on the .NET operating system and supports up to 64,000 sessions.

Acme Packet sells directly to operators, but also leverages partners such as Ericsson, Nokia Siemens Networks, and Alcatel-Lucent for wider distribution. The company has over 700 service provider customers.

5.3.2 Alcatel-Lucent Alcatel-Lucent recently announced its EPC solution. The company is leveraging its 7750 service router platform to provide PDN and S-GW functions. This platform is widely deployed, with over 30,000 units in service. The 7750 has been optimized to support 4G with the ability to support up to 100 Gbps of throughput per slot. Additional features include per subscriber, per session control, QoS, and policy enforcement. The PDN function is supported via a card add (Mobile

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Gateway Integrated Service Module, or MG-ISM) to the 7750 platform. New features supported by the card include DPI and IPv4/IPv6 functions. All solutions are designed to support both centralized and distributed architectures. Alcatel-Lucent’s packet core solution and backhaul products leverage the same operating system, which enables tighter end-to-end integration.

The company also provides element management through its 5620 Service Aware Manager (SAM). This platform can be used to manage the 7750 service router, Alcatel-Lucent’s eNodeB, and META backhaul products. In addition, the 5620 SAM can scale to support up to 50,000 network elements.

Alcatel-Lucent will provide MME and PCRF via software add to its in-house ATCA platform, which is widely deployed in 3G networks. Each functional element will be deployed on separate platforms. The ATCA platform also enables MME pooling to improve resiliency and scaling performance. Processing boards are hot-swappable in the event of failure.

The company’s EPC products support hierarchical QoS, which means they can manage traffic and QoS on several levels, including per flow, per subscriber, and per session queuing. This capability enables the optimized use of network resources and the proper prioritization of traffic.

Alcatel-Lucent is the leading CDMA vendor. As such, it has developed an eHRPD solution to assist operators in transitioning their networks from CDMA to LTE. The solution includes software upgrades to existing CDMA network elements, such as the base station, PDSN, RNC, and HLR. In order to support CDMA 1x voice until LTE VoIP is ready, operators will need to upgrade the CDMA MSC and EV-DO RNC via a software upgrade.

The company also provides media gateway products, the 7549 wireless media gateway, which simplifies the transition to all-IP. It supports both TDM to IP for PSTN support and IP to IP for peering. The company has over 200 next-generation mobile network customers.

In addition, Alcatel-Lucent offers a complete set of IMS products, including the 5060 IP Call Server and the 5450 IP Session Controller. The IP Session Controller (IPSC) supports both 3GPP and 3GPP2 call session control functions. Functions supported include: serving call session control function, interrogating call session control, proxy call session control, and break-out gateway call session control function. The IPSC can manage SIP sessions for voice, video, or data and can be deployed in either centralized or distributed architecture. The IP Call Server can be used to support small IMS deployments requiring class 5 functions or a combination of call control functions. Alcatel-Lucent largely coined the term IP transformation and has over forty IP transformation projects to date. IP transformation customers include MTNL (India) for 3G and IMS-based services.

5.3.3 Cisco Cisco is the leading vendor in network routing and security for wireline networks. The company is leveraging this expertise to provide gateway functions for the wireless network core. Cisco purchased P-Cube, a deep packet inspection provider, and has integrated P-Cube’s DPI solution into its routers. The company is leveraging its 7600 and ASR platforms to provide gateway routing functions as operators move away from TDM and ATM to IP. Cisco also provides backhaul products such as the ME3400 for Carrier Ethernet solution.

The company leverages a blade platform model whereby a Service Application Module for IP (SAMI) is added to existing routers to introduce new features and increase processing power. The SAMI blade has six PowerPC processors and supports subscriber management features as well as intelligent service gateway functions. The 7600 with SAMI blade architecture can support up to 600,000 subscribers on a single platform.

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One example of a feature added to a SAMI blade is Cisco’s Deep Packet Inspection feature. Using DPI on a blade enables deployment deep into the network. Platform-specific solutions can be placed in the network where needed to supplement the lighter capabilities of the blade.

The benefit of the blade solution is that it enables integration where needed without requiring additional network elements. Operators are able to evaluate certain network features without installing dedicated platforms for those features. The challenge with Cisco’s blade solution is that it is not well suited for wide-scale deployment; network operators typically prefer platforms. Blade solutions do not scale as well and are usually designed to handle smaller amounts of traffic.

Cisco’s recent gateway wins include the Clearwire WiMAX gateway contract. Nevertheless, the challenge with Cisco’s platform is that the gateways were built as routers and then repurposed for the wireless network. The wireless network has unique challenges related to mobility and handoffs. A platform that was not designed with this in mind may not be as efficient as one designed with mobility management from the onset. Cisco’s recent acquisition of Starent Network will solve this issue since Starent has a comprehensive gateway product line.

5.3.4 Ericsson Ericsson’s EPC has a two-pronged approach to providing EPC elements. The first approach is to reuse existing GGSNs by upgrading the software to support S-GWs or PDNs. (Juniper has provided some of Ericsson’s deployed GGSN products.) The second approach is to use new equipment based on Redback’s SmartEdge platform, which is a router-based platform. Moreover, the MME function can be supported via a software upgrade to the Serving GPRS Support Node (SGSN).

Ericsson provides mobile softswitch products, media gateways, IMS, and MSC servers. The company was first to the market with its softswitch products in 2003. Today, Ericsson’s products are deployed in over 240 networks serving 2.2 billion subscribers. The company has also developed innovative solutions such as MSC pooling and clustered blade solution for its gateway solutions.

5.3.5 Genband Genband provides multiple products used in IP transformation, including: softswitches, security gateways, session border controllers, and signaling controllers. Genband products are deployed in Tier One operator networks throughout the world. The company provides media gateway products to work with the distributed MSC solutions. Its session border controllers are used mostly for interconnection to other providers’ networks.

5.3.6 Huawei Huawei provides a Unified Gateway platform for the EPC. This platform is based on open, scalable architecture. The MME platform can support the SGSN and access gateway on the same node. Additionally, the P-GW node can support the S-GW, ASN (Access Service Network) gateway, PDSN, and GGSN gateway function. The physical architecture can be distributed with a centralized policy server. In-line services include DPI and service-aware features. The policy server is the PCRF, which enables flexible content control, flow-based charging, bandwidth control, online charging, policy control, and service reporting. Huawei’s IP transformation customers include KPN Netherlands and Saudi Telecom.

5.3.7 Motorola Motorola partners with Starent for its gateway products, but developed its own IMS platform and is currently developing its own MME. The company has a line of softswitches that combines the MSC and the VoIP gateway solution on a standard API platform. Overall, Motorola does not seem to be as strong as its competitors in this space.

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5.3.8 NEC NEC leverages an ATCA platform with its middleware software to deliver the MME, S-GW, and P-GW functions. The company also provides a compact EPC node that combines the MME, PDN, and S-GW functions in one piece of hardware. All of the EPC elements and eNodeBs are managed under a single rack unit management platform, the OMC.

5.3.9 Nokia Siemens Networks Nokia Siemens Networks’ response to IP transformation started with its Internet HSPA, or I-HSPA, solutions. The company began with its version of the one-tunnel architecture developed in the 3GPP Release 7 standards. This architecture enables the data to bypass the serving gateway and go directly to the gateway node, which reduces network latency and processing requirements. NSN also incorporated the RNC function into the base station, thereby minimizing the number of elements in the network and further reducing latency and costs.

The company’s EPC solution includes the Flexi Network Gateway and Flexi Network Server. NSN uses its ATCA chassis for all EPC elements. The ATCA service blade architecture supports the high-subscriber density and signaling requirements. It also provides a variety of interface and enough processing power to handle LTE traffic. NSN’s ATCA platform has already been used in over fifty implementation projects and twenty commercial deployments over the course of just more than a year. The company was selected by NEC and Panasonic to provide core equipment for NTT DoCoMo’s network.

5.3.10 Starent Networks (now with Cisco) Starent Networks produces a line of IP gateway solutions supporting multiple technologies, including CDMA2000, HSPA, and LTE. In addition, the company provides multimedia platforms such as the Session Control Manager. This product supports SIP-based solutions, including converged fixed and mobile network messaging, push-to-talk over cellular, and other services. The session manager also includes IMS elements such as an IETF-compliant SIP Proxy/Registrar, a 3GPP-compliant Proxy Call Session Control Function (P-CSCF), an Access Border Gateway, an Interrogating Call Session Control Function (I-CSCF), a Serving Call Session Control Function (S-CSCF), and a Policy Agent (PA).

Starent currently supports two hardware platforms, the ST16 and ST40, equipped with a Linux-based StarOS operating system. Both platforms support multiple mobile core network functions (e.g., GGSN, SGSN, PDSN, and HA) and can support multiple functions simultaneously. As a result, changes in device functions can be accomplished via software upgrades without any hardware changes. The platforms can support data transport and management functions or signaling control functions. Starent designed its hardware with processes distributed across the platform for optimal performance.

Starent’s network elements include the following:

• Packet Data Serving Node/Foreign Agent (PDSN/FA) for CDMA 1x, EV-DO Rev 0, and EV-DO Rev A packet core networks: This element performs multimedia session establishment and termination, accounting, and traffic routing. It also provides redirection to the subscriber home network.

• Gateway GPRS Support Node (GGSN): This element performs a similar role to the PDSN, except it is used in the packet core of the GSM/GPRS and WCDMA/HSPA networks.

• Home Agent (HA): This is the element in the subscriber’s home network that ensures that the subscriber is reachable via the home address – even when it is attached to other networks.

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• Session Control Manager: This element enables integrated multimedia services such as VoIP and IPTV. It serves as a SIP proxy and registrar. In addition, it manages VoIP routing, accounting, mobility, registration, and authentication.

• Access Service Network (ASN) Gateway: This is an element in the WiMAX network that performs multimedia session establishment and termination. It is similar to the PDSN and GGSN in other networks described above.

• Service GPRS Support Node (SGSN): This is an element in GSM/GRPS and WCDMA/HSPA networks that tracks the location of a mobile device on a network and routes the traffic to that location.

• Security Gateway: This element enables interworking between various wireless networks and WLANs. The gateway also terminates tunnels between the different networks. Moreover, it manages session aggregation and termination for Wi-Fi networks and femtocells.

• Internet Protocol Service Gateway (IPSG): This element supports enhanced charging and billing, content filtering, and intelligent packet control. It sits behind the other gateways in the packet core.

Starent develops software for each of the elements mentioned above, including the new LTE EPC elements such as the PDN gateway (P-GW), serving gateway (S-GW), and MME. The company also provides in-line services on the packet core with integrated DPI and policy enforcement for services such as peer-to-peer detection, enhanced content charging, intelligent traffic control, firewall, and content filtering. These in-line services are significant since operators typically have to purchase separate elements to provide these functions. The addition of in-line services reduces the number of elements in the networks, simplifies network configuration and accounting and billing, and supports policy enforcement.

Starent was recently acquired by Cisco Systems for $2.9 billion in an all-cash transaction. The acquisition will help Cisco gain access to the potentially lucrative 4G ecosystem. Cisco has been a leader in IP networking, but has not been a significant player in the wireless infrastructure market. The acquisition of Starent will provide Cisco with a considerable wireless customer base and strong product line to compete for future 4G core businesses. Starent has been selected by Verizon Wireless and Telenor for LTE core equipment and Cox Cable for CDMA then LTE deployment. Other customers include Sprint Nextel, Vodafone, and China Telecom.

However, the acquisition could be a negative for Starent’s products if Cisco does not market or promote the product line well. Cisco has acquired other companies in the past that basically disappeared after the acquisition. Examples include P-Cube’s DPI solution and Navini’s WiMAX products.

5.3.11 WiChorus WiChorus provides four hardware platforms in various sizes (SC26, SC100, SC600, and SC1400). Each platform can be customized via software to provide SGSN, GGSN, MME, PDN gateway, ASN, or CSN gateway functions. The hardware is equipped with IPP cards, which have dedicated accelerators for key functions such as QoS, deep packet inspection (DPI), switching, encryption, compression, and other control functions. WiChorus’ hardware is fully distributed since each IPP card has a switch fabric and processor versus the centralized switch fabric and processor used in legacy routers. Some of the benefits of the distributed architecture include improved scalability, redundancy, QoS, and increased active subscriber density.

WiChorus’ hardware also includes in-line functions. The in-line functions enable network optimization capabilities by providing visibility into the rest of the network (e.g., the backhaul). This allows the operator to pinpoint bottlenecks in the network. The solution also enables

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hierarchical flow control and compression. The compression is done at the line rate to minimize network impact. Network monitoring capabilities provide direct feedback from the base station for dynamic policy control.

WiChorus was recently selected by Clearwire to provide IP core elements for Clearwire’s all-IP WiMAX core network. This was a huge win for WiChorus since it is a relatively new player in a market with strong competitors like Motorola, Samsung, Alcatel-Lucent, and others. The company was recently acquired by Tellabs for $165 million following a similar acquisition of Starent by Cisco Systems for $2.9 billion. These acquisitions are important because they provide entrance to the mobile networking market, which has long been dominated by Tier One vendors such as Ericsson, Nokia Siemens Networks, and Alcatel-Lucent.

5.4 Winners and Losers 5.4.1 Winners

Acme Packet is strong in session border controllers and is considered by competitors and others in the industry to be a leader in this space. There is not much competition in this segment; thus, Tier One OEMs typically partner with Acme Packet or resell its solution. The company’s annual revenue is around $116 million, which does not make this segment lucrative enough for Tier One operators to target it aggressively. Competitors in this space include Sonus, Starent, Genband, and Cisco. Acme Packet will benefit from increased adoption of IMS and RCS products since the company provides proxy call session control functions.

Starent is also a winner because it was purchased by Cisco for a premium of 20% over its closing stock price and more than eleven times its current revenue. The company also won a few LTE contracts, which helped strengthen its position in the market since not many LTE contracts have been awarded to date. The company has streamlined its product to use two hardware platforms that can be customized into different core network solutions. This will simplify integration into Cisco’s product portfolio.

Tellabs is a winner because it acquired WiChorus for $165 million. WiChorus’ products can be used for WiMAX or LTE, thus providing Tellabs with a low-cost entry into the 4G core market. Prior to the acquisition, Tellabs was mostly known for its backhaul products. Now the company has solutions from the backhaul to the core network. Tellabs had 2008 revenue of $1.7 billion, and this acquisition will help the company access new markets and opportunities.

5.4.2 Losers Juniper Networks has failed to capitalize on the wireless migration to IP. The company is strong in IP routing and security, but has not made significant inroads into the wireless market. Over time, wireless will become the primary means of accessing the Internet. Consequently, those companies that miss the opportunity may be risking their long-term viability. Juniper has not made any aggressive moves into this space. Ericsson has been using Juniper’s equipment for 2G and 3G cores, but now the company will leverage its Redback SmartEdge platform for LTE core. This will relegate Juniper’s equipment to legacy networks.

Motorola is also a loser since the company does not have its own evolved packet core products; it has been reselling Starent’s solution. In addition, Motorola’s only LTE win is due to its incumbency in KDDI’s CDMA network. The company seems to be fading into the background. Meanwhile, Ericsson, Huawei, Alcatel-Lucent, and NSN are going after bigger market share more aggressively.

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Section 6.

FORECAST METHODOLOGY

ABI Research conducts primary research by interviewing a wide range of participants throughout the wireless infrastructure ecosystem. For technologies like LTE where there is no historical data, we leverage the Bass forecasting model to develop baseline forecasts for base stations and subscribers. In addition, ABI Research tracks wireless infrastructure contracts on an ongoing basis and leverages this information in developing and validating projected data. Forecast numbers are also validated through direct communications with mobile operators and OEMs.

Subscriber data were used to develop the forecast models in this report relating to network elements such as session border controllers and other session-based elements. Base station data were employed as a baseline for the gateway forecasts since there is an average mapping of each type of gateway to a number of base stations.

A detailed description of the subscriber and base station forecast methodologies is provided below since both were used as the foundation for the forecasts provided in this research report.

6.1 Outline of ABI Research’s Subscriber Forecast Methodology • Quarterly historical subscriber data are gathered from operators • Data are aggregated by technology • Subscriber data are fed into a Bass Model • Set addressable market (m) and growth coefficients (p, q) are determined • Total market forecast is developed • Historical technology market share is analyzed • Underlying technology trends are projected as: Primary (competing 3G platforms); Secondary

(competing 2G platforms); and Thirtiary (competing 1G platforms and operator subscriber market share, by technology)

• Underlying trends are analyzed • Output quarterly subscriber forecasts, by technology, by operator (two years ahead) • Output quarterly subscriber forecasts, by technology (seven years ahead) • Leftover subscribers filter down to next level • Input assumption is based on historical data • Analysis and modeling • Output forecasts for report

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6.2 Base Station Forecast Methodology 6.2.1 Base Station Forecast

ABI Research details the forecast methodology for base station infrastructure deployment in Figure 6.1. Essentially, there are two processes that have to be modeled, including:

• The number of base stations required for rural coverage • The number of base stations required for urban/capacity-constrained coverage

Figure 6.1 Key Assumptions

Key Assumptions

Landmass (km2), population size, rural/urban landmass ratio, rural/urban population ratio, number of 2G & 3G licensees, BTS performance indicators

Each country divided into 1) Wilderness; 2) Rural; 3) Urban (LD and HD)

Wilderness: Excluded from coverage calculations

Rural: Coverage-driven calculation over x years

Urban: Capacity-driven calculation based on subscriber growth and traffic profile

3G co-location assumptions applied

BTS Forecasts


6.2.1.1 Rural Coverage Calculations These calculations take into account the network performance characteristics of the system in question, which vary for GSM 900, GSM 1800, dual-band GSM, TACS 900, etc. Other necessary factors include the following:

• The network deployment schedule of the operators • The competitive conditions, terrain, and distribution of the population (i.e., what percentage of

the population lives in rural parts of the country; what percentage of the landmass is unpopulated wilderness)

• The average range of the base station, which varies for the 900 MHz (GSM and analog), 1800 MHz (GSM), and 2000 MHz (3G) bands

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6.2.1.2 Urban/Capacity-Constrained Calculations These calculations are less dependent on addressing open area coverage requirements; instead, they are derived according to the need to meet subscriber demand for unoccupied mobile communications channels. If the available channels are fully occupied, customer dissatisfaction grows. Therefore, in a capacity-constrained environment, the number of base stations required is a function of the following:

• The number of subscribers in that geographic location • The amount of traffic (either voice or data) generated at the busiest time of the day

6.2.2 Analog and GSM Networks ABI Research’s forecasting model considered the following elements in a variety of ways for analog and 2G networks:

• Variable population densities: Estimates were generated for the percentage of the population living in high-density and low-density population environments. It was then possible to take into account the deployment of higher-capacity base stations in more congested areas within the model.

• Multi-sectored BTS: Base station “sectorization” was considered to enhance the overall capacity of a base station.

• Individual operator characteristics: Operator-specific “network optimization factors” were generated to reflect each operator’s “aggressiveness of deployment,” as operators differ significantly in their attitudes toward rolling out both geographical and capacity-based coverage.

• Active-to-passive caller ratio: In urban environments, operators need to plan the capacity of their networks for the peak busy-hour scenario. Analysts, however, are often not privy to detailed traffic distribution data belonging to the operator, and therefore have to work with the total number of subscribers on the network as the starting point.

• Single-band and dual-band networks: Dual-band startup dates were analyzed. For example, a number of European GSM 900 operators were awarded the GSM 1800 spectrum. Depending on the location within the country, additional GSM 1800 base stations may or may not be required.

6.2.3 3G Networks Due to the unique characteristics of 3G (primarily because it is IP-orientated and does not rely on spectrum reuse like GSM), a very different approach was required compared to forecasting the GSM environment. For 3G equipment, ABI Research also considered the following:

• 2 GHz RF propagation characteristics: For rural environments, the propagation characteristics of the 3G spectrum band and the geophysical challenges were seen as the major limiting factors upon a base station’s range (estimated to be 7 km on average).

• Rollouts: 3G operators were forecast to roll out rural coverage by ABI Research, but at a much slower rate than that witnessed for GSM 1800 or GSM 900.

• The size of 3G spectrum blocks: 3G relies on spectrum carriers that are significantly larger (5 MHz wide) than those for GSM (200 KHz wide). Some operators can take advantage of greater levels of licensed spectrum. On average, 15 MHz of duplex bandwidth and 5 MHz of unpaired spectrum were assumed.

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6.2.4 3G BTS Capacity The capacity of a 3G base station cell is a function of the following:

• The number of active 3G callers in adjacent cells. • The size of the cell (the larger its size, the smaller the bit rate achieved). The corresponding

bit rate for a low-density urban environment was assumed to be 860 Kbps per carrier frequency block, where the typical cell size was a radius of approximately 3 km. For a high-density urban environment, the figure was assumed to be 1.5 Mbps (equating to a 1.2 km radius). The capacity of the 3G base station was extrapolated to reflect new capacity-enhancing technologies, such as HSDPA and HSUPA.

6.2.4.1 Network Suitability for GSM-WCDMA Co-Location GSM operators, of course, will be able to take advantage of their existing GSM (900 MHz and/or 1800 MHz) base stations to co-locate some of their 3G equipment. For a well-established GSM 900 network, it was assumed that 50% of the existing GSM 900 base stations would be utilized, while 66% of GSM 1800 base stations are thought to be available to incumbent GSM 1800 operators such as Orange (UK).

6.2.4.2 Average Data Load per End User It is also important to take into account the variable bit rate streams that end users are likely to employ. In theory, it will be possible to use speeds of up to 2 Mbps in the early days of 3G. In light of the likely interest by end-user segments in different speed rates, ABI Research anticipates the weighted average data load per end user will grow from 33 Kbps in 2002/112 Kbps in 2005 to 180 Kbps in 2007.

6.3 Core Network Forecast Methodology Core network elements include SGSNs, GGSNs, P-gateways, and serving gateways. The core network forecast was based on a combination of the base station forecast numbers and subscriber forecasts. Each operator strategy for the number of gateway elements may vary depending on the operator’s geographic territory. For example, operators with a larger coverage area may choose a more distributed network architecture while those in urban areas may deploy a centralized network. 3G gateway numbers were calculated using the subscriber forecast and an average of 200,000 subscribers per element. The media gateway forecast leveraged the base station forecast and average number of base stations for a gateway element.

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Section 7.

IMPORTANT DEFINITIONS

7.1 What Constitutes a Base Station? It may be beneficial to define what ABI Research means by a “base station.” In a 2G cellular environment, a base station communicates between an end-user device and a network. The term “end-user device” typically denotes a handset. Increasingly, however, end-user devices also comprise PC dongles, mini-PCIe cards, and embedded modems. In addition, base stations can be referred to as NodeB in 3G environments and eNodeB in prospective LTE networks. For the purposes of simplicity, ABI Research uses just the term “base station,” or “BTS.”

A base station has the following general architecture:

• Antenna: Transmits and receives the radio signs to/from the transceiver • Power Amplifier (PA): Amplifies the signal from the TRX for transmission through the

antenna • Combiner: Allows for multiple digital data streams to be combined into one signal • Duplexer: Combines two or more signals into a common channel to improve transmission

efficiency • Transceiver (TRX): Generates and processes the reception of radio signals • Baseband Receiver Unit: Sets up the frequency hopping in signals, as well as the digital

signal processor (DSP) • Cabinet: Provides a secure and weatherproof shelter for the base stations’ electronics • Antenna Mast: Supports the elevation of antennas; the height of the antenna depends on

whether the base station is a macro, micro, or pico deployment • Backup Batteries: In the event of a power cut, the backup batteries cut over and maintain

communications; in the event of a long-term power cut, the backup batteries perform a managed shutdown of the base station

• Monitoring System: Monitors the status of various parts of the base station and communicates the information to the operations & maintenance (O&M) command center

• Control Function: Software-based; controls and manages the functioning of the base station, guided where necessary by the O&M command center

• Base Station Foundations: Especially for macro base stations, the site needs to be prepared for base station installation; this may include installing a concrete base for the cabinet and anchor placements for the antenna mast

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Figure 7.1 Base Station Location Site with Separate GSM and WCDMA Poles (Two Different Operators)

(Source: Mike Pratt, Illustration Only)

7.2 Base Station Accumulative Total A base station is capable of supporting a number of radio transceiver access technologies. Over time, the carrier upgrades the base station to support a number of GSM and WCDMA roadmap technologies. A “GSM Basic.GPRS.EDGE” base station has three access technologies installed on the base station. A “WCDMA” base station may have UMTS, HSDPA, HSUPA, and LTE access technologies installed on the base station. Therefore, the base station “Accumulative Total” represents the total number of base stations deployed, including all supported access technologies.

7.3 Net Additions in Base Stations The “base station” reflects the deployment of the mobile cellular base station that is able to support one or more “access technologies” within a particular access technology roadmap (GSM versus WCDMA versus CDMA). Thus, access technologies such as GSM, GPRS, and EDGE can be installed on a “GSM base station.”

Similarly, UMTS, HSDPA, HSUPA, and LTE can be installed on a “WCDMA base station.” The data included in this study therefore report the underlying industry trends in base stations irrespective of whether the base station supports one or more access technologies. For the CDMA roadmap, 1x, Rev 0, Rev A, Rev B, and UMB have been allocated to the CDMA2000 base station.

Net additions in base stations display tracking data for two underlying infrastructure processes:

• “New Build & Upgrade” base station net additions • “Like for Like” replacement base station net additions

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“New Build & Upgrade” base stations represent either entirely new deployments or upgrades. Thus, a new base station has been deployed on a virgin site or the old 2G equipment has been ripped out and multi-mode 2G-3G equipment has been installed. “Like for Like” replacement base station net additions refer to existing base station equipment that has been replaced by base station equipment consisting of similar functionality. The rationale for the switch is typically improved signal propagation characteristics, reduced OPEX, or a smaller footprint on site.

In summary, “net additions in base stations” represents the total new base stations added in a specified year and therefore does not include base stations already deployed.

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Section 8.

COMPANY DIRECTORY

Alcatel-Lucent (France) www.alcatel-lucent.com

Acme Packet www.acmepacket.com

AT&T www.att.com

Bell Canada (Canada) www.bell.ca

China Telecom (China) http://en.chinatelecom.com.cn

Cisco Systems, Inc www.cisco.com

Cox Communications, Inc www.cox.com

Ericsson (Sweden) www.ericsson.com

France Telecom/Orange (France) www.francetelecom.com

Genband www.genband.com

Huawei Technologies Co, Ltd (China) www.huawei.com

Motorola Inc www.motorola.com

NEC Corp (Japan) www.nec.com

Nokia Siemens Networks (Finland) www.nokiasiemensnetworks.com

Nortel Networks (Canada) www.nortel.com

NTT Communications Corp (Japan) www.ntt.com

NTT DoCoMo (Japan) www.nttdocomo.com

Rohde & Schwarz (Germany) www.rohde-schwarz.com/us/

Tektronix www.tek.com

Telefónica SA (Spain) www.telefonica.com

TeliaSonera (Sweden) www.teliasonera.com

Telstra Corp Ltd (Australia) http://telstra.com.au

Telus Corp (Canada) www.telus.com

T-Mobile (Germany) www.t-mobile.net

Verizon Communications www.verizon.com

Vodafone (United Kingdom) www.vodafone.com

WiChorus www.wichorus.com

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Section 9.

ACRONYMS

1xRTT Single-Carrier Radio Transmission Technology

2G Second Generation

3G Third-Generation Mobile Technology (www.umtsworld.com)

3GPP Third-Generation Partnership Project (www.3gpp.org)

3GPP2 Third-Generation Partnership Project 2 (www.3gpp2.org)

4G Fourth Generation

AAA Access, Authentication, Authorization (www.billingworld.com)

ADSL Asymmetric Digital Subscriber Line

API Application Programming Interface

ASN Access Service Network

ATCA Advanced Telecom Computing Architecture

ATM Asynchronous Transfer Mode

BSS Base Station System

BTS Base Transceiver Station

CAGR Compound Annual Growth Rate

CAPEX Capital Expenditure

CCCF Call Continuity Control Function

CDMA Code Division Multiple Access (www.cdg.org)

COTS Commercial Off-the-Shelf

CPC Continuous Packet Continuity

CPRI Common Public Radio Interface

CS Circuit-Switched

CSCF Call Session Control Function (part of IMS standard)

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CSCP Call Session Control Platforms (Cisco)

CSN Connectivity Service Network

DHCP Dynamic Host Configuration Protocol

DoS Denial of Service

DPI Deep Packet Inspection

DSL Digital Subscriber Line

DSP Digital Signal Processor

E1 European Basic Multiplex Rate (30 voice channels; 2.048 Mbps)

EDGE Enhanced Data for GSM Evolution

eHRPD Evolved High Rate Packet Data

EPC Evolved Packet Core

ETSI European Telecommunications Standards Institute (www.etsi.org)

E-UTRAN Evolved UMTS Terrestrial Radio Access Network

EV-DO Evolution Data Only (optimized version of CDMA2000)

FCC Federal Communications Commission (www.fcc.org)

FDD Frequency Division Duplex

FMC Fixed Mobile Convergence

GAN Generic Access Node or Network (www.thefmca.co.uk)

GANC Generic Access Node Controller

Gbps Gigabits per Second

GERAN GSM/Edge Radio Access Network

GGSN GPRS Gateway Support Node

GHz Gigahertz (thousands of MHz)

GPRS General Packet Radio System

GPS Global Positioning System

GSM Global System for Mobility (www.gsmworld.com)

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HA Home Agent

HARQ Hybrid Automatic-Repeat-Request

HD High Density

HLR Home Location Register

HSDPA High-Speed Downlink Packet Access

HSPA High-Speed Packet Access

HSPA+ High-Speed Packet Access Plus

HSS Home Subscriber Server (www.apertio.com)

HSUPA High-Speed Uplink Packet Access (data access protocol for mobile phone networks)

I-CSCF Interrogating Call Session Control Function

IETF Internet Engineering Task Force (www.ietf.org)

IMS IP Multimedia Subsystem (www.3gpp2.org)

IP Internet Protocol

IPSC IP Session Controller (Alcatel-Lucent)

IPSG Internet Protocol Service Gateway

IPTV Internet Protocol Television

IPv4 Internet Protocol Version 4

IPv6 IP Version 6 (www.ietf.org)

Kbps Kilobits per Second

KHz Kilohertz (1,000 Hertz)

km2 Square Kilometer

LD Low Density

LEC Local Exchange Carrier

LTE Long Term Evolution

MAC Media Access Control

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MB Megabyte

Mb Megabit

Mbps Megabits per Second

MCS Multimedia Communications Server

META Mobile Evolution Transport Architecture

MG-ISM Mobile Gateway Integrated Service Module

MHz Megahertz (million Hertz)

MME Mobility Management Entity

ms Millisecond

MSC Mobile Switching Center (www.gsmworld.com)

NAT Network Address Translation

nm Nanometer

NSN Nokia Siemens Networks

NVS Nokia Siemens Networks' Mobile VoIP Server

O&M Operations & Maintenance

OEM Original Equipment Manufacturer

OFDM Orthogonal (or Optical) Frequency Division Multiplexing

OFDMA Orthogonal Frequency Division Multiple Access

OMC Operation & Maintenance Center

OPEX Operating Expenditure or Expenses

OS Operating System

OSS Operational Support System

PA Power Amplifier

PA Policy Agent

PC Personal Computer

PCIe Peripheral Component Interconnect Express

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PCRF Policy and Charging Rules Function

PCS Policy Control Server

P-CSCF Proxy Call Session Control Function

PDH Plesiochronous Digital Hierarchy

PDN Packet Data Node

PDSN/FA Packet Data Serving Node/Foreign Agent

P-gateway PDN Gateway

P-GW PDN Gateway

PS Packet-Switched

PSTN Public-Switched Telephone Network

PTT Push-to-Talk

QAM Quadrature Amplitude Modulation

QoS Quality of Service

R&D Research & Development

RAN Radio Access Network

RCS Rich Communication Suite

RF Radio Frequency

RNC Radio Network Controller

SAM Service Aware Manager (Alcatel-Lucent)

SAMI Service Application Module for IP (Cisco)

SBC Session Border Controller

SCC Session Call Continuity

S-CSCF Serving Call Session Control Function

SDH Synchronous Digital Hierarchy

S-gateway Serving Gateway

SGSN Serving GPRS Support Node

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S-GW Serving Gateway

SIP Session Initiation Protocol (www.sipforum.org)

SMS Short Message Service

SON Self-Optimized Network

SONET Synchronous Optical Network

SSGN Serving GPRS Support Node

T1 T-Carrier 1 (digital transmission line; 1.544 Mbps, 24 voice channels)

TACS Total Access Communication System

TDD Time Division Duplex (Wireless)

TDM Time Division Multiplex

TI Texas Instruments

TISPAN Telecommunications and Internet Converged Services and Protocols for Advanced Networking

TRX Transceiver

TV Television

UK United Kingdom

UMB Ultra Mobile Broadband

UMPC Ultra Mobile PC

UMTS Universal Mobile Telecommunications System (www.itu.org)

US United States

USB Universal Serial Bus

UTRAN UMTS Terrestrial Radio Access Network

VAN-C VoLGA Access Network-Controller

VDSL Very High Bitrate Digital Subscriber Line

VMS Voice Messaging System

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VoIP Voice over IP

VoLGA Voice over LTE via Generic Access

WAP Wireless Application Protocol

WCDMA Wideband Code Division Multiple Access

Wi-Fi Wireless Fidelity

WiMAX Wireless Microwave Access

WLAN Wireless Local Area Network

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Table of Contents

Section 1. ........................................................................................................................... 2 Executive Summary..................................................................................................... 2 1.1 What Is IP Transformation? ................................................................................................. 2 1.2 Mobile Operator Perspective................................................................................................. 2 1.2.1 Challenges of All-IP Mobile Networks .............................................................................. 2 1.2.2 IMS Impact ......................................................................................................................... 3 1.3 OEMs May Finally See Return from IMS Investments...................................................... 3 1.4 Global Market Forecast......................................................................................................... 4 1.5 Scope of the Study ................................................................................................................. 4 1.5.1 Backhaul Transformation .................................................................................................. 4 1.5.2 Session Border Controllers ................................................................................................ 6 1.5.3 Media Gateways/Softswitches ........................................................................................... 7 1.5.4 IMS ...................................................................................................................................... 8 1.6 Conclusion ............................................................................................................................ 10

Section 2. ......................................................................................................................... 11 IP Transformation – Strategic Recommendations............................................. 11 2.1 Overview .............................................................................................................................. 11 2.2 Radio Access Network (RAN).............................................................................................. 12 2.2.1 Strategic Recommendations ............................................................................................ 12 2.3 Core Networks ..................................................................................................................... 12 2.3.1 Strategic Recommendations ............................................................................................ 13 2.4 IP Backhaul ......................................................................................................................... 14 2.4.1 Strategic Recommendations ............................................................................................ 14 2.5 Service Architecture Evolution........................................................................................... 15 2.5.1 IP Multimedia Subsystems (IMS) ................................................................................... 15 2.5.1.1 VoLGA ............................................................................................................................ 16 2.5.1.2 Nokia Siemens Networks’ NVS Solution ..................................................................... 16 2.5.1.3 One Voice Profile ........................................................................................................... 17 2.5.2 Strategic Recommendations ............................................................................................ 17 2.6 Business Model Evolution................................................................................................... 17 2.6.1 Strategic Recommendations ............................................................................................ 18 2.7 Conclusion ............................................................................................................................ 18

Section 3. ......................................................................................................................... 19 Drivers and Inhibitors for IP Transformation.................................................... 19 3.1 Drivers.................................................................................................................................. 19 3.1.1 Device Migration .............................................................................................................. 19 3.1.2 Services and Business Models ......................................................................................... 20 3.1.3 Cost Reduction .................................................................................................................. 20 3.1.4 Data Bandwidth ............................................................................................................... 20 3.1.5 4G Network Migration ..................................................................................................... 21 3.2 Inhibitors.............................................................................................................................. 21

Section 4. ......................................................................................................................... 22 Why IP Transformation? .......................................................................................... 22 4.1 Service Evolution................................................................................................................. 22

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4.1.1 Service Brokering ............................................................................................................. 22 4.2 Radio Access Network (RAN) Evolution ............................................................................ 22 4.2.1 3.5G Evolution .................................................................................................................. 22 4.2.2 3.9G Evolution .................................................................................................................. 23 4.3 Backhaul Evolution ............................................................................................................. 23 4.4 Mobile Core .......................................................................................................................... 25 4.4.1 Quality of Service ............................................................................................................. 25 4.4.2 Mobile Softswitches/Media Gateways ............................................................................. 25 4.4.3 Session Border Controllers .............................................................................................. 26 4.4.4 CDMA EV-DO Networks.................................................................................................. 27 4.4.5 WCDMA Networks – SGSN and GGSN.......................................................................... 28 4.4.6 HSPA Networks................................................................................................................ 29 4.4.7 LTE Network Evolution ................................................................................................... 29 4.4.8 WiMAX Network Evolution ............................................................................................. 31 4.5 IP Multimedia Subsystem (IMS) Implications for IP Transformation ............................ 32 4.5.1 IMS Development ............................................................................................................. 33

Section 5. ......................................................................................................................... 35 IP Transformation Strategies ................................................................................. 35 5.1 Greenfield Operators ........................................................................................................... 35 5.1.1 Clearwire........................................................................................................................... 35 5.2 Mobile Operators ................................................................................................................. 35 5.2.1 AT&T ................................................................................................................................. 35 5.2.2 NTT DoCoMo .................................................................................................................... 36 5.2.3 Telstra ............................................................................................................................... 36 5.2.4 Verizon Wireless ............................................................................................................... 36 5.2.5 Vodafone............................................................................................................................ 36 5.3 Equipment Vendors............................................................................................................. 37 5.3.1 Acme Packet...................................................................................................................... 37 5.3.2 Alcatel-Lucent................................................................................................................... 37 5.3.3 Cisco .................................................................................................................................. 38 5.3.4 Ericsson ............................................................................................................................. 39 5.3.5 Genband ............................................................................................................................ 39 5.3.6 Huawei .............................................................................................................................. 39 5.3.7 Motorola ............................................................................................................................ 39 5.3.8 NEC ................................................................................................................................... 40 5.3.9 Nokia Siemens Networks ................................................................................................. 40 5.3.10 Starent Networks (now with Cisco)............................................................................... 40 5.3.11 WiChorus ........................................................................................................................ 41 5.4 Winners and Losers............................................................................................................. 42 5.4.1 Winners ............................................................................................................................. 42 5.4.2 Losers ................................................................................................................................ 42

Section 6. ......................................................................................................................... 43 Forecast Methodology............................................................................................... 43 6.1 Outline of ABI Research’s Subscriber Forecast Methodology .......................................... 43 6.2 Base Station Forecast Methodology ................................................................................... 44 6.2.1 Base Station Forecast....................................................................................................... 44 6.2.1.1 Rural Coverage Calculations ........................................................................................ 44 6.2.1.2 Urban/Capacity-Constrained Calculations .................................................................. 45

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6.2.2 Analog and GSM Networks.............................................................................................. 45 6.2.3 3G Networks ..................................................................................................................... 45 6.2.4 3G BTS Capacity .............................................................................................................. 46 6.2.4.1 Network Suitability for GSM-WCDMA Co-Location .................................................. 46 6.2.4.2 Average Data Load per End User ................................................................................ 46 6.3 Core Network Forecast Methodology ................................................................................. 46

Section 7. ......................................................................................................................... 47 Important Definitions ............................................................................................... 47 7.1 What Constitutes a Base Station?...................................................................................... 47 7.2 Base Station Accumulative Total ....................................................................................... 48 7.3 Net Additions in Base Stations........................................................................................... 48

Section 8. ......................................................................................................................... 50 Company Directory ................................................................................................... 50

Section 9. ......................................................................................................................... 51 Acronyms...................................................................................................................... 51 Sources and Methodology ........................................................................................ 62 Notes.............................................................................................................................. 62

Please be aware that an Excel worksheet containing all market forecasts accompanies this document. When downloading this report as a PDF from the ABI Research Web site, please check to see if the Excel worksheet is also available for download. If you have any questions regarding this, please contact our client relations department.

TABLES

Table 1-1. Session Border Controller Mobile Networks Revenue, World Market, Forecast: 2009 to 2014 Table 1-2. Mobile Softswitch Revenue, World Market, Forecast: 2008 to 2014 Table 1-3. Mobile IMS Revenue, World Market, Forecast: 2008 to 2014 Table 2-1. LTE Gateway Shipments, World Market, Forecast: 2009 to 2014 Table 3-1. Data Service Revenue, Countries with Strong Data Growth, Forecast: 2008 to 2014 Table 4-1. Session Border Controllers, World Market, Forecast: 2009 to 2014 Table 4-2. LTE Base Stations Deployed in CDMA Networks, World Market, Forecast: 2009 to 2014 Table 4-3. WiMAX Gateway Net Additions, World Market, Forecast: 2009 to 2014 Table 4-4. IMS Penetration Rate, World Market, Forecast: 2008 to 2014 Table A-1. Session Border Controller Mobile Networks (Net Additions), World Market, Forecast: 2009 to 2014 Table A-2. Session Border Controller Total Market( Net Additions), World Market, Forecast: 2009 to 2014 Table A-3. MME and Serving Gateways, World Market, Forecast: 2009 to 2014 Table A-4. Media Gateways (Net Additions), World Market, Forecast: 2009 to 2014 Table A-5. ASN and CSN Gateways , World Market, Forecast: 2009 to 2014 Table A-6. SGSNs and GGSNs (Accumulated Total), World Market, Forecast: 2009 to 2014

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Table A-7. Total Traffic Through the Mobile Core, World Market, Forecast: 2009 to 2014 Table A-8. IMS Upgrade Capital Expenditure Estimates, World Market, Forecast: 2009 to 2014 Table A-9. Carrier IMS Capital Expenditure, World Market, Forecast: 2009 to 2014 Table A-10. OSS/BSS Deployments, World Market, Forecast: 2009 to 2014 Table A-11. Session Border Controller (Mobile Market) Revenue, World Market, Forecast: 2009 to 2014 Table A-12. Mobile Softswitch Revenue, Middle East and Africa, Forecast: 2008 to 2014

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SOURCES AND METHODOLOGY

An analyst was assigned to coordinate and prepare this Research Report. Research and query specialists helped lay the data and information groundwork for the analyst, who also developed a focused interview strategy.

ABI Research teams follow a meticulous process when examining each market area under study. The three basic steps in that process are: information collection, information organization, and information analysis.

The key element in ABI Research’s information collection process is developing primary sources, that is, talking to executives, engineers, and marketing professionals associated with a particular industry. It is from these conversations that market conditions and trends begin to emerge, free from media hype.

Analysts use secondary sources as well, including industry periodicals, trade group reports, government and private databases, corporate financial reports, industry directories, and other resources.

Analysts’ conclusions take several forms. The text addresses hard data and well-defined trends and is supported by forecast tables and charts. The text also addresses issues and trends that are difficult to quantify and present in neat, tabular form. Lying at the margins of an industry, they are often precursors of the next technology wave.

NOTES

CAGR refers to compound average annual growth rate, using the formula:

CAGR = (End Year Value ÷ Start Year Value)(1/steps) – 1.

CAGRs presented in the tables are for the entire timeframe in the title. Where data for fewer years are given, the CAGR is for the range presented. Where relevant, CAGRs for shorter timeframes may be given as well.

Figures are based on the best estimates available at the time of calculation. Annual revenues, shipments, and sales are based on end-of-year figures unless otherwise noted. All values are expressed in year 2009 US dollars unless otherwise noted. Percentages may not add up to 100 due to rounding.

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Published 1Q 2010

©2010 ABI Research PO Box 452

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