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UMTS Deployment, Version 3.1.3 1DG/Slide of 24

UMTS DeploymentUMTS Deployment

Issues and EconomicsIssues and Economics

Overvieweing key options and economic aspects

of UMTS deployment

Davide Grillo

UMTS Task Force

ITU Sub-Regional Seminar on IMT-2000Warsaw, 2-4 October 2001

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UMTS DeploymentThe operators decisions

! Entry level network

! Timing of functional enhancements

! Timing of capacity increases

! Tariff policy and its evolution

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UMTS Deployment

Rel-5" IP real time application support

Rel-4" More reliable packet transferin the core network

" Evolution from GPRSand best effort

Rel-99" Full set of WCDMA technology

" Evolution of the core network

from GSM to support the new RAN

Features of UMTS releases (1)

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4/24UMTS Deployment, Version 3.1.3 4DG/Slide of 24

UMTS DeploymentFeatures of UMTS releases (2)

Services as available

with GSM

Multimedia messaging

Authentication algorithm

Transcoder-Free

Operation (TrFO)

Tandem Free aspects for

3G and between 2G and3G systems

Development/Selection

of a Multi-Rate Wideband

Speech Codec (50Hz-7kHz)

for Wideband SpeechTelephony in multiple

radio environments

IP-based multimedia

services

Virtual Home

Environment (VHE) and

Open ServicesArchitecture

(OSA) evolution

Location Services (LCS)

in

Circuit Switched andPacket Switched domains

Push Services Enhancements to:

Security

VHE

OSA

Global Text Telephony Location Services

3G radio access

Services & System Aspects

Release 1999 Release 4 Release 5

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UMTS DeploymentFeatures of UMTS releases (4)

CAMEL Phase 2 and 3

Basic UMTS Security issues

Enable Bearer Independent

CS Architecture

Provisioning of IP-Based

Multimedia Services (SIP CallControl protocol)

Packet Switched (PS) EmergencyCall Enhancements

CAMEL Phase 4

ACSI (Advanced SpeechCall Items) Call ForwardingEnhancements

Evolution of Transport in the CN

Non-Transparent Real TimeFacsimile

Circuit Switched (CS)Emergency Call Enhancements

Intra Domain Connection ofRAN Nodes to Multiple CNNodes

Reliable end-to-end QoS forPacket Switched domain

Core Network

Release 1999 Release 4 Release 5

EDGE

GPRS Tunnelling ProtocolEnhancements

Handover

GPRS

GSM-UMTS internetworking

OSA

Mobile Station Classmark Multicall Circuit Switched Bearers

in UMTS

Unstructured SupplementaryService Data

Transcoder-Free Operation ASCI Enhancements Operator Determined Barring(ODB) for Packet Oriented

Services

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UMTS DeploymentUMTS Release 99

HLR SCP

Circuit Domain

UTRANRNC

Node B

BSSBSC

BTS

PSTN/PLMN

IP/ATMTransport Plane

Packet Domain

GGSN

2G-3GMSC 2G-3GMSC

Service & HomeEnvironment Plane

IuPS

IuCS

INTERNET2G-3GSGSN

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UMTS DeploymentUMTS Release 5

HSS SCP

UTRANRNC

Node B

INTERNET

PSTN/PLMN

QoS Enabled

IP Transport Plane

Packet DomainGGSN

SGSN

Service & HomeEnvironment Plane

MultimediaSessionControl Plane

ApplicationServer

IM Domain

MGCF

CSCF T-SGW

MRF MGW

IuPS

MGCF: Media Gateway Control FunctionCSCF: Call State Control Function

T-SGW: Transport-Signalling GatewayMRF: Multimedia Resource FunctionMGW: Media Gateway

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UMTS DeploymentUTRAN transport solutions

HubNode

HubNode

HubNode

HubNode

Node B

Node B

Node B

Node B

Node B

Node B

Node B

RNC

RNCBackhaulNetwork

UMTSAccessNetwork

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UMTS DeploymentRAN: Key options

! Physical media and the transport technique

#Low capacity microwave (PDH)

# High capacity microwave or optical links (SDH STM-1/STM-4)

# ATM, LMDS, XDSL, leased lines

! Topologies

# Tandem

# Ring

# Star

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UMTS DeploymentArchitecture for core network

transport

MSC

ControlPlane

Region 1

UserPlane

RNC

RNC

RNCIu

Iur

GGSN GGSN

Gn

SGSN

UserPlane

ControlPlane

RNC

RNCIu

Iur

SGSN

Region 3

MSC

IP & ATM/SDH-WDM

GGSN

RNC

RNC

RNC

MSC

UserPlane

ControlPlane

Iu

Iur

Gn

SGSN

Region 2

Iucs

Gn

Gn

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UMTS DeploymentCore Network: Key options

! Different types of UMTS terminals

! Multimedia services

! UMTS standards with respect to IP Multimedia aspects

! Replacement of first-release 3G terminals

! Speed of UMTS market growth

UMTS D l

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UMTS DeploymentService Platform: Functional

architecture

MultiMediaPortal

ProfileSyndacation

Content

Mngmt& Translation

ContentProviders

GW & SCS

UMTS Network

3G Applications

Others

Video-AudioStreaming

InfotainmentGaming

UnifiedMessaging

ConvergentApplications

LocationBased

Services

Users

Presentation UsersServices

PaymentM-Commerce

ChargingRating

IdentificationAuthentication

Application Middleware

Customer Data

Service Request

Charging Data Application

Open Bus

Network Mngmt& Operation

Common Services andOperations & Business

Support

UMTS D l t

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UMTS DeploymentService platform: Key options

Service Category Market Segment

Mobile Intranet/ExtranetAccess

Mobile Internet Access

Location Based Services

Rich Voice

Customized Infotainment

Multimedia MessagingService

Business

Business, consumer

Business, consumer

Business, consumer

Consumer

Consumer

UMTS D l t

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UMTS DeploymentBusiness Analysis modeling

CapitalExpenditures

Macro

economic

Model

Market

Share

Model

Marke

tingandtechnicalModel Economic

Model

Capital

Cost

Model

GDP (Gross Domestic Product)

PopulationIncome distribution

Inflation

Market shareChurn

Revenues

OperatingExpenses

License

Tariff

Usage

MaintenanceSalaries

Interconnection

Quality target

Coverage target

Corporate tax rate

Depreciation

Tax

Net Income

Cash-flow statement

Total addressablemarket Subscribers

IRR ($ or Eand local currency)

Service

price

UMTS D l t

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UMTS Deployment

Total population over the service area

RAN planning and UMTS deployment

(1)

Userpopulation &

servicepenetration

64128384

PS

1264

128

C S

Packet switched services

Circuit switched services

Customerbase

Customerbase

Customerbase

Customerbase

ConsumerBusiness

Rural

ConsumerBusiness

Suburban

ConsumerBusiness

Urban

ConsumerBusiness

Dense urban

UMTS Deployment

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UMTS DeploymentRAN planning and UMTS deployment (2)

Packet switched services

Circuit switched services

Trafficloading

Trafficloading

Trafficloading

Trafficloading

RAN Dimensioning and Planning Tools

UMTS Network Deployment

Deploymentstrategies &

policies

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UMTS Deployment

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UMTS DeploymentNet Present Value: Definition

! Net Present Value (NPV):

#Cumulative discounted cash-flow generated to date, or less

formally

# The profitability of a business, as appreciated a Year 0, over a

span of N years - N ranging from 1 to the economic life of the

system

UMTS Deployment

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UMTS DeploymentShare of investments over network components

Year 0 Year 3 Year 4 to Year 10

Rel-99 from Rel-99 Capacity increasesto Rel-5

RAN- Node Bs- RNCs- UTRAN transport infrastructure

Core Network

- MSCs & MSC servers- SGSNs & GGSNs- MGWs- CSCFs, MGCFs, T-SGWs,MRFs- Core network transport

infrastructure

Service Market Segment- Business- Consumer

Tariffs

55%30%15%

50%35%0%0%15%

65%35%

55%35%10%

0%60%10%20%10%

60%40%

60%30%10%

0%65%10%15%10%

50%50%


3% yearly reduction in over the wholeeconomic life cycle

UMTS Deployment

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UMTS DeploymentNet Present Value: Reference

scenario

SM: Service Mix SP: Service Penetration TE: Tariff Erosion

2000

4000

6000

8000

10000

12000

14000

16000

-6000

-4000

-2000

0

-8000

[M

Euro]

[time]

Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10

Reference scenario

SM+ & SP+ & TE+

SM- & SP- & TE-

Reference offering

Reference scenario

SM+ & SP+ & TE+

SM- & SP- & TE-

UMTS Deployment

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UMTS DeploymentUMTS business plan: Sensitivity

analysis

Deviation from

assumed service mix

Deviation fromassumed service

penetration

Yearly deviationfrom tariff erosion

Alternative scenario

Service Market Segment

- Business- Consumer


65%35%

60%40%

50%50%

SM+ Y3: +10%, Y10: +25%

SM- Y3: -10%, Y10: -25%

SP+ Y3: +10%, Y10: +25%SM- Y3: -10%, Y10: -25%

TE+ +10%TE- -10%

SM: Service Mix SP: Service Penetration TE: Tariff Erosion

UMTS Deployment

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UMTS DeploymentNPV: Alternative business plan

2000

4000

6000

8000

10000

12000

14000

16000

-6000

-4000

-2000

0

-8000

[M

Euro]

[time]

Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10

Reference offering

Reference scenario

SM+ & SP+ & TE+

SM- & SP- & TE-

Alternative offering

Alternative scenario

UMTS Deployment

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UMTS DeploymentConclusions

! Strategic, market and economic decisions play a fundamentalrole in planning investments for phased functional and capacityenhancements along the economic life of the network

! A balance has to be striven between actions decided in the

early stages of the network deployment and actions which maybe deferred

! Whatever deployment policy is chosen, a significant margin of

flexibility for adjusting the deployment plan has to be factored

from the outset

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