communications regulatory authority of the republic...

Communications Regulatory Authority of the Republic of Lithuania

Reference paper for creating model for calculation of bottom up long run average incremental costs (BU-LRAIC) for operator of public mobile communications network

2012 m. September

1. Glossary

The terminology used in this document is defined in the legal acts of the Republic of Lithuania and

international practices. The list of other terminology and abbreviations is placed in the following

table.

No. Abbreviation Term Explanation

1. - � �X A function that returns the highest integer less than or equal to X.

2. - � �X A function that returns the smallest integer not less than X.

3. A A interface Link between the BSS and MSC/MGW.

4. B Byte Basic unit of information equal to 8 bits

5. bit Bit

A bit is a binary digit, taking a value of either 0 or 1. Binary digits are a basic unit of

information storage and communication in digital computing and digital information

theory

6. BSC Base Station

Controller

The BSC is the functional entity within the GSM architecture that is responsible for

radio resource allocation to a mobile station, frequency administration and

handover between BTS controlled by the BSC.

7. BTS Base Transceiver

Station

In cellular GSM system the Base Transceiver Station terminates the radio interface.

Each BTS may consist of a number of TRX, typically between 1 and 16.

8. BHCA Busy hour call

attempts Number of call attempts in a busy hour.

9. BHE Busy Hour Erlangs Measurement of traffic in telecommunications network during a busy hour

expressed in Erlangs.

10. BHT Busy Hour Traffic Amount of traffic in a busy hour.

11. - Call Connection established by means of a publicly available electronic communications

service allowing two-way communication in real time.

12. CAPEX CAPEX Capital expenditure costs. CAPEX costs comprise depreciation and ROI.

13. - Channel Logical unit in a circuit used for transmitting electric signals.

14. - Circuit Telecommunications line which ensures transmission of electric signals.

15. CSD Circuit Switched Data

CSD is the original form of data transmission developed for the time division

multiple accesses (TDMA)-based mobile phone systems like Global System for

Mobile Communications.

16. CJC Common and joint

costs Costs that need to be allocated to several services.

17. CCS Common-Channel

Signaling

CCS is the transmission of signaling information (control information) on a separate

channel to the data.

18. - Cost driver A factor that influences the existence and amount of costs.

19. CVR Cost volume

relationship Relationship between total value of cost and cost driver.

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20. - Costs

Decrease in the economic value for a company due to usage of fixed assets, sale

of assets, loss of assets, decrease in asset value or increase in liabilities over a

period, which results in a decrease in equity capital.

21. CCA Current cost

accounting Accounting of costs in terms of current costs and prices of products and services.

22. CD Current depreciation Depreciation cost expressed in current cost accounting terms.

23. DDF Digital distribution

frame

DDF is the distribution equipment used between digital multiplexers, between

digital multiplexer and exchange equipment or non voice service equipment,

carrying out such functions as cables connection, cable patching and test of loops

transmitting digital signals.

24. EIR Equipment identity

register

EIR is a database employed within mobile networks. It stores information about

user equipment state (stolen, non-conforming and other).

25. - eNode B The eNode B is the function within the LTE network that provides the physical radio

link between the user equipment and the network

26. - Erlang Measurement of traffic indicating number of call minutes on a network during one

minute time.

27. EPC Evolved Packet Core The EPC serves as equivalent of GPRS networks (via the Mobility Management

Entity, Serving Gateway and PDN Gateway subcomponents).

28. FC Fixed costs Costs that are fixed and not influenced by change in volume of service.

29. - Forward looking cost

accounting

Accounting of costs in terms of forward looking costs and prices of products and

services.

30. GGSN Gateway GPRS

Support Node GGSN supports the edge routing function of the GPRS network.

31. Gb Gb interface Link between the SGSN and PCU.

32. GSM

Global System for

Mobile

communication

GSM is a cellular network, which means that mobile phones connect to it by

searching for cells in the immediate vicinity.

33. GBV Gross book value Acquisition cost of an asset.

34. GRC Gross replacement

cost

Cost incurred for replacing object of similar type and characteristics not taking into

account accumulated depreciation.

35. HSCSD High Speed Circuit

Switched Data HSCSD is an enhancement to Circuit Switched Data.

36. HSDPA High Speed Downlink

Packet Access

HSDPA improves system capacity and increases user data rates in the downlink

direction, that is, transmission from the Radio Access Network to the mobile

terminal.

37. HCA Historic cost

accounting

Accounting of costs in terms of historic (actual) costs and priced of products and

services.

38. HG Holding gain Income that results due to increase in asset value.

39. HLR Home Location

Register

The Home Location Register is a database, which provides routing information for

mobile terminated calls and SMS.

40. HCC Homogenous cost

category

A set of costs, which have the same driver, the same cost volume relationship

pattern and the same rate of technology change.

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41. IMS IP multimedia sub-

system

An architectural framework of core network for delivering multimedia services over

IP protocol.

42. - Incremental cost Increase in costs due to increase in volume of service.

43. - Indirect costs Costs that are indirectly related to a specific product and service and that need to

be allocated to different products or services using economically justifiable drivers.

44. Iub Iub Interface Link between the RNC and the Node B.

45. LRAIC Long run average

incremental costing

The principle of long run average incremental costing – estimating change in costs

as a result of change in cost driver volume and dividing them over a unit of service.

The costs are measured in the long run, which means that the company based on

the level of demand can change the amount of resources involved in providing a

service i.e. all costs become variable.

46. LTE Long term evolution

Standard for wireless communication of high-speed data for mobile phones and

data terminals. It is based on the GSM/EDGE and UMTS/HSPA network

technologies, increasing the capacity and speed using new modulation techniques.

47. Max (…) Maximum It is a function, which returns the biggest number in a set of values defined in

brackets.

48. MGW Media Gateway A gateway that supports both bearer traffic and signaling traffic. It provides

conversion between TDM and IP traffic.

49. Min (…) Minimum Min (minimum) is a function, which returns the smallest number in a set of values

defined in brackets.

50. MME Mobility management

entity

The MME is the key control-node for the LTE access-network. It is responsible for

idle mode UE (User Equipment) tracking and paging procedure including

retransmissions.

51. MSC Mobile Switching

Centre

A Mobile Switching Centre is a telecommunication switch or exchange within a

cellular network architecture which is capable of inter working with location

databases.

52. MSS MSC Server

MSC Server handles call control for circuit-based services including bearer

services, tele services, supplementary services, charging and security, besides

controlling resources related to circuit-based services.

53. MMSC

Multimedia

Messaging Service

Centre

The Multimedia Messaging Service Centre provides a store and forward facility for

multimedia messages sent across a mobile network.

54. NBV Net book value Remaining value of an asset calculated as a difference between gross book value

and accumulated depreciation plus changes in asset revaluation over time.

55. NRC Net replacement cost Cost incurred for replacing object of similar type and characteristics taking into

account accumulated depreciation.

56. NC Network Component Network Components represent logical elements that are functionally integrated

and in combining those elements any services may be modeled.

57. NE Network element Any network object, which physically or logically can be identified as an

independent network unit.

58. - Node B In cellular UMTS system NodeB terminates the radio interface.

59. OPEX OPEX Operating expenditures that comprise salaries, material and other external service

costs.

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60. ODF Optical distribution

frame

ODF are used for connection and patching of optical cables, mainly used as the

interface between optical transmit network and optical transmit equipment and

between optical cables in access network of optical fiber subscribers.

61. - Port A device for connecting lines with network nodes accepting and forwarding electric

signals.

62. PGW Packet gateway

PGW includes Serving Gateway and PDN Gateway subcomponents, which

together provide connectivity from the user equipment (UE) to external packet data

networks by being the point of exit and entry of traffic for the UE.

63. RNC Radio Network

Controller

The main element in Radio Network Subsystem that controls the use and the

reliability of the radio resources.

64. ROI Return on investment Required return on investment calculated by multiplying WACC and capital

employed.

65. - Routing matrix Matrix which represents the intensity of NE usage for different services.

66. SCP Service Control Point The SCP processes the request and issues a "response" to the MSC so that it may

continue call processing as appropriate.

67. SGSN Serving GPRS

Support Node

SGSN keeps track of the location of an individual Mobile Station and performs

security functions and access control.

68. SMSC Short Message

Service Centre

The SMSC forwards the short message to the indicated destination subscriber

number.

69. SFH Soft Handover

Soft handover is a category of handover procedures where the radio links are

added and abandoned in such manner that the mobile always keeps at least one

radio link established.

70. SDCCH

Stand-alone

Dedicated Control

Channel

This channel is used in the GSM system to provide a reliable connection for

signaling and SMS messages.

71. - Supporting activity Supporting activity comprise administration, accounting, planning, human resource

management and other supplementary activities.

72. - Switch (switching

host) Network element that switches calls between two network nodes.

73. -

Electronic

Communications

network

Electronic communications network used to provide public telephone service

including transmission of voice between network end points and other services

such as fax or data transmission.

74. - Termination

Transmission of a call from a switch (including switch) where interconnection can

be established, located closest to the subscriber receiving the call, to the final

network point where the call ends.

75. TRX Transceiver A device that is capable of both transmission and reception of a signal.

76. TRC Transcoder Controller Function of TRC is transmitting data between switching controllers in a data

transmission network.

77. - Transit

Transmission of a call from a switch where interconnection can be established

located closest to a subscriber initiating a call (excluding the switch ) to a switch

where interconnection can be established located closest to a subscriber receiving

a call (excluding the switch) via one or more switches.

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78. - Transmission link A link which ensures transmission of optical and electric signal between two remote

geographic units.

79. - Transmission network Electronic communications equipment which ensures transmission of optical and

electric signals among separate core network components.

80. - Tributary card Component of a multiplexer constituting interface between multiplexer and other

telecommunication equipment.

81. UMTS

Universal Mobile

Telecommunications

System

It is a 3G mobile communications system which provides an enhanced range of

multimedia services.

82. - Unsuccessful call Unsuccessful calls comprise calls when the line is busy and calls when the

recipient does not answer the call.

83. VC Variable costs Costs that are directly related to change in volume of services.

84. VLR Visitor Location

Register

The Visitor Location Register contains all subscriber data required for call handling

and mobility management for mobile subscribers currently located in the area

controlled by the VLR.

85. VMS Voice Mail Service Network element, which executes recording of voice messages for users, who are

unable to answer a call.

86. - WAP Gateway WAP Gateway accesses web content for a mobile.

87. WACC Weighted average

cost of capital Cost of capital calculated as a weighted cost of borrowed and equity capital.

88. - Wholesale billing

system

Information system which involves wholesale Usage Detail Records collection,

validation, analysis and processing.

89. WAP Wireless Application

Protocol

A standard designed to allow the content of the Internet to be viewed on the screen

of a mobile device such as mobile phones, personal organizers and pagers.

90. – Recommendation European Commission Recommendation 2009/396/EC on the Regulatory

Treatment of Fixed and Mobile Termination Rates in the EU as of 7 May 2009.

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2. Table of contents

1.� Glossary ............................................................................................................................... 2�

2.� Table of contents .................................................................................................................. 7�

3.� Introduction ........................................................................................................................ 10�

3.1.� Legal background ........................................................................................................... 11�

3.2.� Document objective ........................................................................................................ 13�

4.� LRAIC methodology ........................................................................................................... 13�

4.1.� Network modeling ........................................................................................................... 15�

4.2.� Increments ...................................................................................................................... 15�

4.3.� Modeling period .............................................................................................................. 16�

4.4.� Cost accounting .............................................................................................................. 17�

4.5.� Cost of capital ................................................................................................................. 17�

4.6.� Technological background .............................................................................................. 17�

4.7.� Mark – ups ...................................................................................................................... 18�

5.� Outline of the modeling principles ....................................................................................... 20�

5.1.� Sub-models .................................................................................................................... 20�

5.2.� Model scenarios ............................................................................................................. 21�

6.� Flow of BU-LRAIC modeling ............................................................................................... 21�

6.1.� Network demand ............................................................................................................ 21�

6.2.� Network dimensioning .................................................................................................... 21�

6.3.� Network valuation ........................................................................................................... 22�

6.4.� Service cost calculation .................................................................................................. 22�

7.� Scope of the model ............................................................................................................ 24�

7.1.� List of services ................................................................................................................ 24�

7.2.� List of homogeneous cost categories .............................................................................. 26�

7.3.� List of network components ............................................................................................ 30�

8.� Vocabulary of formulas ....................................................................................................... 31�

9.� Demand ............................................................................................................................. 31�

9.1.� Service demand conversion ............................................................................................ 34�

9.1.1.� Conversion of video calls ......................................................................................... 38�

9.1.2.� Conversion of SMS and MMS .................................................................................. 39�

9.1.3.� Conversion of GSM packet data .............................................................................. 40�

9.1.4.� Conversion of UMTS data........................................................................................ 41�

9.1.5.� Conversion of LTE VoIP calls and packet data ........................................................ 42�

9.2.� Calculation of total traffic in minutes ............................................................................... 43�

10.� Network Dimensioning ....................................................................................................... 46�

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10.1.� Dimensioning of GSM network .................................................................................... 47�

10.1.1.� Base Transceiver Station ..................................................................................... 47�

10.1.2.� Transceiver .......................................................................................................... 52�

10.1.3.� Base Station Controller ........................................................................................ 53�

10.1.4.� Transcoder Controller .......................................................................................... 53�

10.2.� Dimensioning of UMTS network .................................................................................. 54�

10.2.1.� Node B ................................................................................................................. 54�

10.2.2.� Radio Network Controller ..................................................................................... 58�

10.3.� Dimensioning of LTE network ...................................................................................... 59�

10.3.1.� eNode B ............................................................................................................... 59�

10.3.2.� Evolved Packet Core ............................................................................................ 63�

10.4.� Dimensioning of BSS, RNS and PSS system .............................................................. 64�

10.4.1.� Base and extension units ..................................................................................... 64�

10.4.2.� Sites ..................................................................................................................... 67�

10.4.3.� Packet control unit (PCU) / Serving GPRS support node (SGSN) ........................ 68�

10.5.� Dimensioning of Network Switching System ................................................................ 70�

10.5.1.� Mobile Switching Centre ....................................................................................... 70�

10.5.2.� Mobile Switching Centre Server ........................................................................... 74�

10.5.3.� Media Gateway .................................................................................................... 75�

10.5.4.� Media Gateway Controller .................................................................................... 79�

10.5.5.� Network Session Border Gateway (N-SBG) ......................................................... 80�

10.5.6.� Short messages service center ............................................................................ 81�

10.5.7.� Multimedia messaging service center (MMSC) .................................................... 81�

10.5.8.� IP multimedia Sub-System ................................................................................... 82�

10.5.9.� Voice Mail Service and Home Location Register .................................................. 84�

10.5.10.� Centralized User Database (CUDB) ..................................................................... 84�

10.5.11.� Service Control Point (Intelligent Network) ........................................................... 85�

10.5.12.� Network Functionality ........................................................................................... 86�

10.5.13.� Billing IC system .................................................................................................. 86�

10.5.14.� Number portability system .................................................................................... 87�

10.5.15.� Lawful interception system ................................................................................... 88�

10.6.� Transmission ............................................................................................................... 90�

11.� Network valuation ............................................................................................................. 101�

11.1.� Cost annualization ..................................................................................................... 101�

11.2.� Mark-ups ................................................................................................................... 103�

12.� Service cost calculation .................................................................................................... 106�

12.1.� Homogeneous cost categories allocation to Network Components ........................... 106�

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12.2.� Network Component average unit cost ...................................................................... 109�

12.3.� Service cost .............................................................................................................. 114�

13.� Annex 1. Second sub-model: cost calculation of Auxiliary services for network interconnection ........................................................................................................................... 116�

14.� Annex 2. Economic depreciation method: analysis and results ........................................ 122�

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3. Introduction

This document is based on the mobile BU-LRAIC reference paper originally created in 2008. All of

the key changes to the document are marked with grey color – aa. Key changes to the document

are presented below:

Key changes affected these areas of the document: 3.� Introduction ........................................................................................................................ 10�

3.1.� Legal background ........................................................................................................... 11�

4.� LRAIC methodology ........................................................................................................... 13�

4.2.� Increments ...................................................................................................................... 15�

4.3.� Modeling period .............................................................................................................. 16�

4.6.� Technological background .............................................................................................. 17�

6.4.� Service cost calculation .................................................................................................. 22�

7.� Scope of the model ............................................................................................................ 24�

7.1.� List of services ................................................................................................................ 24�

7.2.� List of homogeneous cost categories .............................................................................. 26�

7.3.� List of network components ............................................................................................ 30�

9.� Demand ............................................................................................................................. 31�

9.1.� Service demand conversion ............................................................................................ 34�

9.1.5.� Conversion of LTE VoIP calls and packet data ........................................................ 42�

10.� Network Dimensioning ....................................................................................................... 46�

10.3.� Dimensioning of LTE network ...................................................................................... 59�

10.3.1.� eNode B ............................................................................................................... 59�

10.3.2.� Evolved Packet Core ............................................................................................ 63�

Model the costs of an efficient service provider

Based on current costs

Forward looking BU LRAIC model

Comply with the requirements of "technological efficiency” – NGN

Take into account 2G and 3G technology

Take into account pure incremental costs of call termination in determining the per item cost

Previous RRT approach New Recommendation

�

�

�

�

��

Included

Not included

�

�

�

�

�

�

�

�

New topic

Take into account development of LTE technology in mobile telecommunications �� New topic

11

10.5.� Dimensioning of Network Switching System ................................................................ 70�

10.5.3.� Media Gateway .................................................................................................... 75�

10.5.4.� Media Gateway Controller .................................................................................... 79�

10.5.5.� Network Session Border Gateway (N-SBG) ......................................................... 80�

10.5.8.� IP multimedia Sub-System ................................................................................... 82�

10.5.15.� Lawful interception system ................................................................................... 88�

10.6.� Transmission ............................................................................................................... 90�

3.1. Legal background

Elaboration of a tool for the calculation of cost-based carrier specific interconnection prices of the

Lithuanian mobile networks developed by bottom-up method of long-run incremental costs

(hereinafter, BU-LRAIC ) method is maintained by these legal regulations:

� European Union Electronic Communications Regulation System (directives);

� Law on Electronic Communications of the Republic of Lithuania;

� Market analysis conducted by the Communications Regulatory Authority of the Republic of

Lithuania (hereinafter, RRT);

� Executive orders and decisions of the Director of the RRT;

� European Commission recommendation (2009/396/EC).

In 2008 RRT initiated a project to estimate call termination costs for mobile networks.

Ernst & Young created a BU-LRAIC cost calculation model for mobile networks according. Taking

into account the results of cost calculation, RRT started regulation of call termination prices from

20101.

However, in 2009 the European Commission released a new recommendation (2009/396/EC)

regarding price regulation of call termination prices on mobile and fixed networks. Therefore and

the aim of the project is to update the BU-LRAIC model to calculate costs of call termination in

mobile operators’ networks in order to comply with the requirements set out in the

Recommendation, in particular the following:

� Model the costs of an efficient service provider;

� Calculations shall be based on current costs;

1 Orders No. 1V-1515, No. 1V-1516 and No. 1V-1517 of 24 December 2009 of the Director of RRT.

12

� Implement a forward looking BU LRAIC model;

� Comply with the requirements of "technological efficiency” – NGN;

� Take into account 2G and 3G technology mix;

� May contain economic depreciation method;

� Take into account the incremental costs (Pure LRAIC) of call termination in determining the

per item cost.

13

3.2. Document objective

The objectives of this reference paper (hereinafter, BU-LRAIC model reference paper or MRP) are:

� To present the scope and the detailed principles of the BU-LRAIC modeling (guidelines

and concept of the BU-LRAIC model);

BU-LRAIC modeling is theoretical and might differ from the real market situation; however, it

models mobile network operator operating efficiently in a competitive market.

While using BU-LRAIC method, there is a risk that some of the practical aspects will be excluded

from the scope of the model. In order to avoid this kind of situation, it is expected that all market

players will take an active participation in model implementation. In case there is a lack of data for

BU-LRAIC modeling, benchmarks will be used.

4. LRAIC methodology

All calculations in the model are based on Forward – Looking Long Run Average Incremental Cost

(LRAIC) methodology, assuming Bottom-up approach and efficient operator operating in a fully

competitive market. Below is provided a short introduction to the model of BU-LRAIC. The meaning

of the definition of BU-LRAIC is as follows:

1. LRAIC costs: There are 3 LRAIC methods of cost calculation: Pure LRAIC, LRAIC+ and

LRAIC++.

� Pure LRAIC method – includes only incremental costs related to network components

used in the provision of the particular service

� LRAIC+ method – includes only incremental costs related to network components used

in the provision of the particular group of services, which allows some shared cost of

the group of services to become service incremental as well. The group of service could

be total voice services and total data services.

� LRAIC++ method – includes costs described in LRAIC+ method description plus

common and joint cost. The common and joint cost related to each group of service

(total voice services and total data services) are calculated separately for each Network

Component using an equally-proportional mark-up (EPMU) mechanism based on the

level of incremental cost incurred by each group of service (total voice services and

total data services).

Approaches in calculating using each method are illustrated in the picture below:

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Figure 1: Illustration of LRAIC cost allocation methods

BU-LRAIC model will have functionality to calculate costs using all three methods.

2. Long run. In the short run incremental costs can split into fixed and variable incremental costs;

however, in the long run all costs are variable, which is the principle of LRAIC. Consequently,

all input factors (as well as capital) should be included to the forecasted demand for services.

3. Average Incremental. The principle of average incremental costs involves estimating a

change in costs which is caused by production (service) increment (or decrease) and allocating

estimated costs to one unit of service. Figure 2 illustrates the concepts of incremental and

average incremental costs.

Figure 2: Incremental and average incremental costs

Average incremental costs

Increment Output

Costs

Incremental costs

15

4. Forward looking. Forward-looking costs are the costs incurred today building a network which

has to face future demand and asset prices. In practice this means that if modeling is done in a

year X, the cost of services is calculated for the year up to X+10 (e.g. if modeling is done in

2009, service costs are calculated for the years 2010 - 2020).

5. Bottom-up. A bottom-up approach involves the development of engineering-economic models

which are used to calculate the costs of network elements which would be used by an efficient

operator in providing interconnection services.

Bottom-up models perform the following tasks:

� Dimension and revaluate the network.

� Estimate non-network costs.

� Estimate operating maintenance and supporting costs.

� Estimate services costs.

In a broader meaning, BU-LRAIC (together with the efficiency assumption) is the approximation of

incremental costs, which, according to the economic theory, reflects the economic costs (and the

price) of an efficient operator operating in a fully competitive market. As a result, for the purpose of

efficient competition, mobile termination rates should come up to the same rates as calculated

using the pure BU-LRAIC method.

4.1. Network modeling

Current BU-LRAIC network modeling is not constrained by current network design or topology. It is

assumed that network is built from scratch with forward-looking technology. Number of network

elements and their locations are derived from technological models. Consequently, this approach

determines the level of optimization, that closely approximates long-run economic costs of

providing interconnection and other services and assures that Operators have incentives to

migrate to a more efficient architecture.

Following the network modeling principles described above, the detailed calculations of required

network elements are provided in section 10. Network dimensioning.

4.2. Increments

In LRAIC methodology increments refer to elements that influence costs of objects subject to

analysis (objects under analysis are provided in section 7.1 List of services). Calculating the

incremental costs of wholesale services in mobile networks using Pure LRAIC method, it is

necessary to identify only those fixed and variable costs that would not be incurred if the wholesale

16

services were no longer provided to third-party operators (i.e. the avoidable costs only). The

avoidable costs of the wholesale service increment may be calculated by identifying the total long-

run cost of an operator providing its full range of services and then identifying the long-run costs of

the same operator in the absence of the wholesale service being provided to third parties. This

may then be subtracted from the total long-run costs of the business to derive the defined

increment.

When calculating costs using LRAIC+ method, it is necessary to identify only those fixed and

variable costs that would not be incurred if the group of services were no longer provided to third-

party operators and retail subscribers (i.e. the avoidable costs only). The avoidable costs of the

group of services increment may be calculated by identifying the total long-run cost of an operator

providing its full range of services and then identifying the long-run costs of the same operator in

the absence of the group of services being provided to third parties retail subscribers. This may

then be subtracted from the total long-run costs of the business to derive the defined increment.

When calculating costs using LRAIC++ additional mark-ups are added on the primarily estimated

increments to cover costs of all shared and common elements and activities which are necessary

for the provision of all services.

Increments of current BU-LRAIC model are:

� Coverage (geographical scope of mobile network);

� Traffic;

� Subscribers.

The increment “coverage (geographical scope of mobile network)” effect on costs is assessed

respect to costs, which are incurred seeking to accomplish territory coverage obligations, which are

stated in the licenses of frequency handling.

4.3. Modeling period

In order to get a deeper insight into the mobile network operator cost structure, it is common

practice to calculate service costs for at least several periods. BU-LRAIC model will calculate

nominal service costs for the years 2010 – 2020.

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4.4. Cost accounting

It has to be noted that BU-LRAIC calculation, as a rule, is based on current cost basis. The

objective of the current cost accounting approach is to derive information what it would cost to

acquire assets and other required resources now or in the near future. The current cost is

calculated by using the current (or the latest) market prices (replacement cost) or adjusting the

historical cost for asset specific inflation and therefore getting more realistic values of assets and

other resources used in business.

In the situation, when fixed assets that are still in use are outdated or no longer available on the

market, it may be difficult to assign their current price. In this situation the concept of modern

equivalent asset (MEA) has to be adopted. MEA means an asset that would perform the same

function as the asset to be replaced and is currently available on the market. Historical costs may

also be used as a proxy for current costs when assets have been purchased quite recently and no

better source for current costs (including MEA) is available.

4.5. Cost of capital

Weighted Average Cost of Capital (WACC) is used in BU-LRAIC model for cost of capital

estimation. WACC measures a company’s cost of debt and equity financing weighted by the

percentage of debt and percentage of equity in a company’s target capital structure.

Calculation and elaboration of WACC of Lithuanian mobile network operators will be provided in a

separate report.

4.6. Technological background

At the moment of the BU-LRAIC modelling, all Operators used GSM and UMTS network

technologies to provide services. As there are new tendencies of developing Long term evolution

(LTE) mobile network technology, the model will have a functionality of modelling costs using joint

GSM / UMTS / LTE network.

It is assumed that in the following years voice traffic can be fully accomodated in GSM and UMTS

network; nevertheless, modeled network will be capable to provide voice services over LTE.

According to the data available as of 31th of December 2011, the total number of mobile network

18

subscribers was 4938.01 thousand, the number of UMTS subsribers was 1201.52 thousand and

there were no LTE subscribers reported for that period. Assuming that the majority of new LTE

subscribers are going to use LTE network mostly for data services3, LTE voice traffic proportion will

be insignificantly small in the total voice traffic.

Taking into account operators’ practical experience in Lithuania and abroad, three alternative core

network architectures are being evaluated:

� Establishment of Mobile Switching Centres (all voice in MSCs);

� Establishment of Mobile Switching Centre Server and Media Gateways (all voice in MSS

and MGW).

� Establishment of Evolved Packet Core and IP multimedia subsystem (all LTE voice in EPC

and IMS).

BU-LRAIC model has a functionality to model all three scenarios.

Dimensioning rules for all network elements are given in the section 10. Network Dimensioning.

4.7. Mark – ups

As already discused in section 4.2 Increments a mark-up approach is provided for in the BU-LRAIC

model to cover network related operational cost, administration and support operational and capital

costs and network management system capital cost. The major driver of network structure and

development is service demand. Increasing service demand requires additional network capacity

and appropriate network elements. This results in increased network related operational costs (e.g.

more designing engineers are needed to built and supervise network). Network related operational

cost (headcount) is a driver for administration and support operational and capital costs. Service

demand and mark-up relation is illustrated in figure 3:

Figure 3. Service demand and mark-up relation

2 Report on the electronic communications sector 2011 Quarter IV. www.rrt.lt 3 Based on data provided by Operators

Network demand

Network infrastructure

Network related operational costs

Admin/support operational and capital costs

% %

19

A more detailed description of mark-ups usage and allocation is provided in section 11.2 Mark-ups.

Referring to the best practices and international experience, mark-ups to cover network related

operational cost, administration and support operational and capital costs and network

management system capital cost are estimated by collecting data from Operators, further they are

adjusted by benchmarks derived from foreign operators’ data. Currently it is assumed that the

latest data from the following sources will be adopted for the purpose of mark-up calculation:

1. Questionnaire data provided by Operators.

If data provided by the Operators is not sufficient for modeling purposes, the following data sources

will be used:

1. Reports published by the Information Society Directorate of the European Commission

related to bottom-up costing models used for the interconnection cost calculation in

European Union member states.

2. Reports and documents published by the Federal Communication Commission related to

bottom-up costing models used for the interconnection cost calculation in the European

Union member states;

3. Public reports on LRAIC projects, LRAIC models that are used in other EU member states.

4. EY knowledge of the global telecommunications sector.

20

5. Outline of the modeling principles

5.1. Sub-models

BU-LRAIC model consists of two separate sub-models. Each of them includes different services

(see Table 1). The sub-models are physically separated into two independent (not inter-linked) MS

Excel models.

Table 1. Sub-models of the BU-LRAIC model

First sub-model – services included Second sub-model – services included

Call origination

Call termination

Call transit

Short messages services (SMS) (initiation,

termination, sending on-net SMS)

Multimedia messages services (MMS)

(initiation, termination, sending on-net MMS)

Capacity based services

Provision of auxiliary services for network

interconnection

In the First sub-model the following costs are calculated:

� CAPEX related network costs;

� OPEX related network costs;

� CAPEX – administration and support;

� OPEX – administration and support.

CAPEX related network costs cover network components listed in section 7.3 List of network

components. CAPEX related network management system costs4, OPEX related network costs,

OPEX and CAPEX for administration and support, are listed and discussed in section 11.2. Mark-

ups.

The modeling principles used in the second BU-LRAIC sub-model are presented in Annex 1.

4 Costs of network management system (NMS) are calculated as a mark-up.

21

5.2. Model scenarios

First BU-LRAIC sub-model will contain individual model scenarios for each Operator (in total three

scenarios). Model for auxiliary services for network interconnection will contain a single scenario

for all Operators.

6. Flow of BU-LRAIC modeling

The objective of BU-LRAIC method is to measure the costs of services that would be incurred by a

efficient operator in a competitive market assuming that network is rebuilt to meet the current and

the forward looking demand.

Figure 4 illustrates the overall flow of BU-LRAIC methodology. Accordingly, the structure of this

reference paper is aligned with the provided flow as well.

Figure 4: the overall flow of BU-LRAIC methodology.

6.1. Network demand

The network demand section of the model is required to translate the relevant portfolio of service

demand into the network dimensioning demand. As the dimensioned network should handle the

traffic during the peak period, measured service volumes are translated into busy-hour throughput

network element demand.

No network is built for the current demand. Networks are constructed to meet future demands. In

order to reflect this requirement the planning horizon for which networks are designed has to be

considered. In principle this is determined on the basis of economic considerations by examining

the trade-off between the costs of spare capacity in the short term and the costs of repeatedly

augmenting capacity on a just-in-time basis.

The detailed explanation of network demand principles is provided in section 9. Demand.

6.2. Network dimensioning

Following the identification of demand on a network element basis, the next stage in the process is

identification of the necessary network equipment to support the identified level of busy-hour

demand. This is achieved through the use of engineering rules, which consider the modular nature

of network equipment and hence identify the individual components within each defined network

Network demand

Network dimensioning Service costs calculation

Network valuation

22

element. This then allows variable cost structures to determine the costs on an element-by-

element basis.

The detailed explanation of network dimensioning principles is provided in section 10. Network

dimensioning.

6.3. Network valuation

After all the necessary network equipment is identified, Homogenous Cost Categories (HCC) are

derived (physical units of network elements identified are multiplied by current prices and

investments calculated later on are annualized). HCC is a set of costs, which have the same driver,

the same cost volume relationship (CVR) pattern and the same rate of technology change. HCC

values are calculated by multiplying physical units of network elements by current prices. Later on,

calculated investments are annualized and mark-ups (both for CAPEX and OPEX costs) are set.

HCC list is provided in section 7.2 List of homogeneous cost categories.

All mobile network elements identified during network dimensioning must be revalued at Gross

Replacement Cost (GRC). On the basis of GRC value its annual cost is calculated. This cost

includes both:

� Annualized capital costs (CAPEX); and

� Annual operating expenses (OPEX).

CAPEX costs consist of Return on Investment (ROI) and depreciation. OPEX costs consist of

salaries (including social insurance), material and costs of external services (external services –

transportation, security, utilities, etc).

The detailed analysis of methodologies to annualize CAPEX costs is provided in section 11.1. Cost

annualization.

A detailed explanation of Mark-ups used to recover costs related with CAPEX and OPEX is

provided in sections 4.7. Mark-ups and 11.2. Mark-ups.

The list of HCCs, Network Components (NCs) and services used in the model is provided in

section 7. Scope of the model.

6.4. Service cost calculation

The fundamental principle of LRAIC methodology – costs are allocated to network components,

network components are mapped with network services and in this way the costs are calculated

(see figure 5).

23

Figure 5: Cost allocation principle

After HCC are derived they are allocated to a particular Network Component (NC). NCs represent

logical elements that are functionally integrated and any services may be modeled by combining

those elements. NC list is provided in the section 7.3 List of network components. Later, the total

NC costs are calculated by summing up the appropriate HCCs. NC costs are divided by service

volumes. Costs of services are calculated on a basis of network component unit costs according to

network component usage statistics.

The detailed explanation of service cost calculation is provided in secion 9. Service cost

calculation.

Homogeneous cost categories

Network components

Services

24

7. Scope of the model

The scope of the model is defined with respect to the range of services, network components and

homogenous cost categories to be included into the BU-LRAIC model. This determines the

modeled network architecture and its granularity level.

7.1. List of services

The list of services included in the first BU-LRAIC sub-model comprises:

1. Call origination;

2. Call termination;

3. Call transit:

� Transit of call via network originated and terminated in Lithuania – Transit 1

� Transit of call via network originated in Lithuania and terminated abroad – Transit 2

� Transit of call via network originated abroad and terminated in Lithuania – Transit 3

4. Short messages services (SMS): initiation, termination and on-net SMS

5. Multimedia messages services (MMS): initiation, termination and on-net SMS

6. Capacity based services

Call origination, call termination and transit services in addition to average cost per unit have peak

and off-peak hour perspective. Other services do not have a perspective of peak and off-peak.

Average cost of the Provision of auxiliary services for network interconnection is calculated in

second BU-LRAIC sub-model.

BU-LRAIC model is fitted to estimation of costs of services modeling the provision of services on

the ground of GSM (900 MHz), DCS (1800 MHz), LTE (2600 MHz), UMTS (2100 MHz) and

HSDPA/HSUPA standards.

Referring to the list of services in the first BU-LRAIC sub-model provided above and BU-LRAIC

modeling principles covered in this reference paper, respective outcome of the first BU-LRAIC sub-

model is expected as presented in Table 2.

Table 2. Outcome of the first BU-LRAIC sub-model

Service

Network Component

Tower and site preparation

BTS / NodeB / eNodeB

BSC / RNC / EPC

MSC / MSS / MGW / IMS TX backhaul

TX aggregation TX core SMSC MMSC

SGSN / GGSN HLR

Billing and regulatory

Number portability platform

Call transit 1, per minute



Call origination, per minute

Call termination, per minute

Initiation of Short messages services (SMS), per unit

Termination of SMS, per unit

On-net SMS, per unit

Initiation of Multimedia messages services (MMS)

Termination of MMS, per unit

On-net MMS, per unit

Capacity based services

7.2. List of homogeneous cost categories

As mentioned in section 6. Flow of BU-LRAIC modeling, HCC values are calculated by annualizing

CAPEX costs calculated in the network dimensioning part of the model and by application of a set

of mark-ups (both for CAPEX and OPEX costs).

Table 3 indicates the list of homogeneous cost categories (HCC) in BU-LRAIC model.

Table 3. List of HCC in BU-LRAIC model

HCC name HCC sub-components

Site Macro cell: tower and site preparation

Micro cell: site preparation

Pico cell: site preparation

Stand-alone transmission radio link: tower and site

preparation

BTS

Macro cell: equipment (omni sector)

Macro cell: equipment (2 sector)


Micro cell: equipment

Pico cell: equipment

Macro cell: TRXs

Micro cell: TRXs

Pico cell: TRXs

Node B Macro cell: equipment (omni sector)





eNode B Macro cell: equipment (omni sector)





27


EPC PGW: base unit

PGW: extension units

MME: base unit

MME: extension units

SGSN / GGSN PCU: base unit

PCU: extension units (Gb link)

SGSN: base unit

SGSN: processing extension

GGSN: basic unit and license

IMS IMS - Cabinet

IMS core - Service frame

IMS core - Service card - Type 1 - CSCF

IMS core - Service card - Type 2 – A-SBG

IMS core - Service card - Type 3 - VoIP AS

IMS core - Service card - Type 4 - MRCF/CCTF

IMS core - Service card - Type 5 - BGCF

IMS core - Service card - Type 6 - DNS server

IMS core - Service card - Type 7 - Service delivery

AS

HSS - Service card - Type 1 - Control card

HSS - Service card - Type 2 - Database card

IMS - Licenses - Type 1 – subscriber

IMS - Licenses - Type 2 – traffic

HSS – Licenses

Ethernet Radio link Ethernet radio link 10 Mb/s microwave link

Ethernet radio link 20 Mb/s microwave link




28


BSC / RNC

BSC: base unit

BSC: BS TRX extension

TRC: transcoder base unit

TRC: transcoder E1 (A interface) extension

RNC: basic units

RNC: extension units (Iub link)

RNC: extension units (sectors)

RNC: extension units (sites)

MSC / MGW MSC: basic unit and software

MSC: processor extension

MSC: VLR, EIR extension

MSC: SS7 extension

MSC: trunk port extension

MSC: I/O peripherals

MSS: basic unit and software

MSS: processor extension

MGW: basic unit and software

MGW: processor extension

MGW: trunk port extension

MGC: basic unit and software

MGC: extension

N-SBG: basic unit and software

N-SBG: extension

Network Functionality SFH: soft handover (network-wide)

SFH: soft handover (MSS extension)

SFH: soft handover (RNC extension)

SFH: soft handover (NodeB extension)

GSM/DCS: control (network-wide)

GSM/DCS: control (MSC extension)

GSM/DCS: control (BSC extension)

GSM/DCS: control (BTS extension)

LTE: CS fallback function (eNodeB extension)

LTE: CS fallback function (MME extension)

29


SMSC / MMSC SMSC: base unit

SMSC: extension

MMSC: base unit

MMSC: extension

Other Network SSP: service switching point (network-wide)

SCP: service control point - base unit (pre-paid

related)

SCP: extension - subscribers

VMS: base unit

VMS: extension

HLR: base unit

HLR: extension

Centralized User Database (CUDB): base unit

Centralized User Database (CUDB): extension

Billing IC system: basic unit

Billing IC system: extension

Number portability system: hardware and software

Number portability system: extension

Lawful interception: basic unit and software

Lawful interception: extension

License and frequency fee Concession right - GSM 900 MHz (total value)

Concession right - GSM 1800 MHz (total value)

Concession right - UMTS (total value)

Concession right - LTE (total value)

Data transmission services Data transmission services aggregation, per link

Data transmission services aggregation, per km

Data transmission services core, per link

Data transmission services core, per km

Wholesale & Regulatory specific cost Wholesale & Regulatory specific cost

Network management system5 -

5 Costs of network management system (NMS) are calculated as a mark-up. See section 11.2 Mark-ups

30

7.3. List of network components

List of NC used in BU-LRAIC model is as follows:

� Tower and site preparation

� BTS / NodeB / eNodeB

� BSC / RNC / EPC

� MSC / MSS / MGW / IMS

� TX backhaul - transmission between BTS/NodeB/eNodeB - BSC/RNC/EPC

� TX aggregation - transmission between BSC/RNC/EPC – MSC/MGW/SGSN/GSSN

� TX core - transmission between MSC/MGW/GSSN - MSC/MGW/GSSN

� SMSC

� MMSC

� SGSN / GGSN

� HLR

� Billing and regulatory

� Number portability platform6

6 Number portability platform is only estimated in the particular modeling scenario, when LTE is not used for handling voice services and consequently, IMS is not dimensioned.

31

8. Vocabulary of formulas

In the table below a vocabulary of formulas used to dimension network elements and calculate the demand is described:

Abbreviation Explanation

N Number of x elements

V Volume of x traffic

S Number of subscribers/services

T Throughput x element

HA Headroom allowance

� Proportion expressed in percentage

C Capacity of x element

9. Demand

Mobile networks are dimensioned to handle traffic in the peak periods, not the average traffic

loads. The average traffic load must therefore be converted into peak loads by the application of

traffic distribution factors drawn from the operator’s network management statistics. Consequently,

data related to service demand and customer profile in BU-LRAIC model comprises the following

type of information:

� Service demand in terms of voice and video call minutes, SMS and MMS quantities, data

minutes and bytes;

� Number of subscribers;

� Traffic flows, network element usage factors;

� Service profiles in terms of daily traffic structure, set-up time, rate of unsuccessful call

attempts.

Demand calculation is also split in two parts according to mobile network technology used:

� LTE network;

� UMTS network;

� GSM network.

32

The load is measured with busy hour Erlangs (BHE). BHE is calculated for services in the network

by network element or transmission type between elements. BHE calculation algorithms for

services provided by three mobile network technologies analyzed are presented further in this

section. The summary of services included in the modeling of each mobile network technology is

presented in the table below.

Table 4. Services modeled in GSM, UMTS and LTE networks

Service GSM network UMTS network LTE network

Voice calls7 X X X

Video calls - X X

SMS X X -

MMS X X -

Data services8 X X X

Voice calls minutes are analyzed in four groups:

� On-net minutes (call minutes originated and terminated on own mobile network including,

calls to short telephone numbers, services for Mobile virtual network operator’s (hereinafter,

MVNO) and inbound roaming traffic (calls originated and terminated on the same network);

� Off-net minutes (call minutes originated on own network and terminated on other networks,

on international networks, including calls to short telephone numbers, services for MVNOs

and inbound roaming traffic (calls originated on network but terminated on the other

network);

� Incoming minutes (call minutes originated on other networks, international networks,

including calls to short telephone numbers, services provided to MVNOs and inbound

roaming traffic (incoming roaming calls) and terminated in own network);

� Transit minutes (traffic, which is neither originated nor terminated in the own network,

bridge traffic between different operators).

SMS is split into three groups:

� On-net SMS (SMS sent from own mobile network to own mobile network, including services

provided to MVNOs and inbound roaming traffic (SMS originated and terminated on the

same network);

7 Actual minutes of traffic in the network, not rounded billing system data. 8 Including all retail and wholesale services

33

� Outgoing SMS (SMS sent from own mobile network to international networks and to other

mobile networks including services provided to MVNOs and inbound roaming traffic (SMS

originated on own network, but terminated on the other network);

� Incoming SMS (SMS sent from international networks and from other mobile networks

including services provided to MVNOs and inbound roaming traffic (SMS originated on the

other network but terminated on own network) to own mobile network).

MMS is split into three groups:

� On-net MMS (MMS sent from own mobile network to own mobile network, including

services provided to MVNOs and inbound roaming traffic (MMS originated and terminated

on the same network);

� Outgoing MMS (MMS sent from own mobile network to international networks and to other

mobile networks, including services provided to MVNOs and inbound roaming traffic (MMS

originated on own network, but terminated on the other network);

� Incoming MMS (MMS sent from international networks and from other mobile networks,

including services provided to MVNOs and inbound roaming traffic (MMS originated on the

other network but terminated on own network) to own mobile network).

Packet data traffic volumes comprise yearly total up-link and yearly total down-link traffic loads in

MB9.

Video calls are split into 3 groups:

� On-net minutes (call minutes originated and terminated in own mobile network including

MVNOs and inbound roaming traffic (calls originated and terminated on the same network);

� Off-net minutes (call minutes originated in own network and terminated in fixed networks, in

international networks and in other mobile networks including MVNOs and inbound roaming

traffic (video calls originated on network but terminated on the other network);

� Incoming minutes (call minutes originated in fixed networks, international networks and in

other mobile networks, including MVNOs and inbound roaming traffic (incoming roaming

video calls) and terminated in own network).

9 Volumes also include traffic of roaming data services.

34

9.1. Service demand conversion

The average traffic load conversion to peak loads is needed for the evaluation of network (network

elements, equipment amounts), which would effectively service the required services demand.

Average traffic load conversion to peak loads is done to each network element, i.e. BHE is

calculated to each network element. The amount of network elements is calculated according to

the estimated BHE. The average traffic load consists of statistic raw service data. Peak loads

consist of statistic raw service data evaluated according to routing, inhomogeneity factors other

coefficients.

The average service demand conversion to BHE will be done in the followings steps:

1. Calculating the number of call attempts (for voice and video calls);

2. Weighting billed traffic volumes by routing factors;

3. Adjusting billed voice and video minutes volumes for unbilled traffic;

4. Converting service volumes to minute equivalent;

5. Traffic volumes (minutes) adjusted by de-averaging factors.

The number of call-attempts (NCA, units) is calculated according to the following formula:

CD

callCA

TN

��

(1)

Where:

Tcall – Voice or video calls traffic, minutes;

�CD – Average call duration, minutes.

Call-attempts in BU-LRAIC reference paper are converted to busy hour call-attempts for each

network element. This size is used to estimate the processor part capacity of the mobile switching

centre (MSC), mobile switching centre server (MSS), media gateway (MGW), IP multimedia

subsystem (IMS) and intelligent network (IN).

Busy hour call-attempts per minute are calculated by multiplying the annual number of call-

attempts (NCA) by routing factors (formula No. (2) is applied and instead of services traffic call-

attempts are inserted), average traffic to busy hour traffic factors (respectively applying formula No.

(16)), unsuccessful compared to successful calls ratio and dividing by the amount of minutes in a

year. So, the number of busy hour call-attempts (NBHCA, units) is calculated according to the

following formula:

35

6024365

)1(

��

�� uDAfCA

BHCA

rfrNN

(2)

Where:

NCA – Call-attempts number, units. See formula No. (1)

fR – Routing factor for particular service traffic in a particular network element. See table No. 5

fDA – De-averaging factor. See formula No. (18)

ru – Ratio of unsuccessful calls compared to successful calls, %. See table No. 6

Division by 365 is year to days conversion, division by 24 is day to hours conversion and division

by 60 is hour to minutes conversion.

Weighted traffic volumes (TW, minutes, messages or MB) for particular network element by routing

factors are calculated according to the principle given in the following formula:

RW fTT ��

(3)

Where:

T – Traffic volume, minutes, messages or MB;

fR – Routing factor. Routing factor of traffic for particular service in a particular network element.

See table No. 5

Routing factors are given in the Routing factors matrix (see table 5). In this matrix each row

represents separate traffic of service type and each column represents a separate element in the

network. The routing factor is estimated having in mind traffic nature and shows the minimum

number of times a particular service type traffic utilizes a particular network element. For instance,

on-net SMS messages service in element BTS routing factor is two, which means on-net SMS in

its path from user device to user device steps through BTS element two times on average.

36

Table 5. Routing factors

Service type

1 2 3 4 5 6 7

BTS/ NodeB/ eNode B

BSC/ RNC/ EPC

MSC/ MGW or SMSC or MMSC or SGSN or GGSN or

IMS

TX -backhaul

TX - aggrega

tion

TX - core

MSC/MGW/IMS-IC

Voice traffic (minutes of use)

1 On-net minutes 2,00 2,00 1,20 2,00 2,00 0,20 0,00

2 Off-net minutes 1,00 1,00 1,50 1,00 1,00 0,50 1,00

3 Incoming minutes 1,00 1,00 1,50 1,00 1,00 0,50 1,00

4 Transit 1 minutes 0,00 0,00 2,00 0,00 0,00 1,00 2,00

5 Transit 2 minutes 0,00 0,00 2,00 0,00 0,00 2,00 2,00

6 Transit 3 minutes 0,00 0,00 2,5 0,00 0,00 2,00 2,00

Video traffic (minutes of use)

5 On-net minutes 2,00 2,00 1,20 2,00 2,00 0,20 0,00

6 Off-net minutes 1,00 1,00 1,00 1,00 1,00 0,00 1,00

7 Incoming minutes 1,00 1,00 1,00 1,00 1,00 0,00 1,00

SMS traffic

(units)

8 On-net SMS messages 2,00 2,00 1,00 2,00 2,00 0,00 0,00

9 Outgoing SMS messages 1,00 1,00 1,00 1,00 1,00 0,00 1,00

10 Incoming SMS messages 1,00 1,00 1,00 1,00 1,00 0,00 1,00

MMS traffic

(units)

11 On-net MMS messages 2,00 2,00 1,00 2,00 2,00 0,00 0,00

12 Outgoing MMS messages 1,00 1,00 1,00 1,00 1,00 0,00 1,00

13 Incoming MMS messages 1,00 1,00 1,00 1,00 1,00 0,00 1,00

Circuit data traffic (minutes of use)

14 HSCSD/CSD minutes 1,00 1,00 1,00 1,00 1,00 0,00 1,00

Packet data traffic (Mbytes)

15

Up-link (GSM subscribers) 1,00 1,00 1,00 1,00 1,00 1,00 0,00

Down-link (GSM subscribers) 1,00 1,00 1,00 1,00 1,00 1,00 0,00

Up-link (UMTS subscribers -

data) 1,00 1,00 1,00 1,00 1,00 1,00 0,00

Down-link (UMTS subscribers -

data) 1,00 1,00 1,00 1,00 1,00 1,00 0,00

Up-link (LTE subscribers - data) 1,00 1,00 1,00 1,00 1,00 1,00 0,00

Down-link (LTE subscribers -

data) 1,00 1,00 1,00 1,00 1,00 1,00 0,00

*IMS used instead of MSC/MSS only for LTE voice traffic

The adjustment for unbilled traffic in the network applies separately to the following traffic groups:

voice calls, video calls. Billed minutes traffic or just billed minutes are defined as call duration from

a connection start, when a phone is picked up to a connection end, when a phone is hung up.

37

Performing calculations of billed traffic includes short, emergency, information and similar numbers

minutes traffic, i.e. all actual call minutes in the network. Unbilled traffic is related to call set-up

duration and unsuccessful calls. Unsuccessful calls comprise calls both when the line is busy and

when the recipient does not answer the call.

Other services (SMS, MMS and data) are billed as they use the network resources; therefore, the

adjustment for unbilled traffic is not needed.

Calls traffic (TB+U) (billed plus unbilled traffic) is calculated according to the following formulas:

)1( AWUB fTT ��

(4)

6060 �

�

��

CD

uu

CD

sA

rSSf

��

(5)

Where:

fA – Adjusting factor;

TW – Weighted calls traffic for particular network element, minutes. It is calculated according to the

principle given in the formula No. (3).

Ss – Call set-up duration for successful calls, seconds. See table No. 7

Su – Call set-up duration for unsuccessful calls, seconds. See table No. 7

ru – Ratio of unsuccessful calls compared to successful calls, %. See table No. 7

�CD – Average call duration, seconds. See table No. 7

Division by 60 is second conversion to minute number.

Parameters for the calculation of formula No. (4) and No. (5) are provided in the table 6.

Table 6. TB+U calculation parameters Parameter Unit Values per total network

Call set-up duration for successful calls seconds 8

Call set-up duration for unsuccessful calls seconds 15

Call duration seconds 120

Unsuccessful call attempts as percentage of successful calls % 40

In order to come to homogenous service volume measures, volumes of all non minute services are

converted to minute equivalent. This homogenous service volume measure is needed in order to

dimension elements, which are used in the network dimensioning generally. The list of converted

services is provided below:

38

1. Video calls;

2. SMS (SMS);

3. MMS (MMS);

4. Packet data traffic for GSM network:

� GPRS transmission technology;

� EDGE transmission technology.

5. Packet data traffic for UMTS network:

� UMTS R99 transmission technology;

� HSDPA transmission technology.

6. Packet data traffic and VoIP calls for LTE network:

� LTE transmission technology;

Traffic conversion to minute equivalent is done according to the principle given in the following

formula:

CWC fTT ��

(6)

Where:

TC – Converted particular service traffic, minutes;

TW – Weighted particular service traffic (in this case voice calls traffic is not included), messages or

MB. It is calculated according to the principle given in the formula No. (3).

fC – Refers to a particular service (video calls, SMS, MMS, packet data services) conversion factor.

Factors calculations are provided in formulas (7) - (14).

Different conversion factors are applied to different types of services. Further in the document

conversion factor calculation algorithms are presented.

9.1.1. Conversion of video calls

Conversion factor for video call minutes to voice minute equivalent (fvi) is calculated according to

the following formula:

vo

vivif

��

�

(7)

Where:

39

�vi – Video call bit rate, kbit/s. See table No. 7

�vo – Voice call bit rate, kbit/s. See table No. 7

Video conversion factor is a proportion of video and voice bit rates, the technical average values of

which are given in the table 7.

Table 7. Video conversion parameters Parameter Unit Values per total network

Voice call bit rate kbit/s 12.20

Video call bit rate kbit/s 64.00

9.1.2. Conversion of SMS and MMS

SMS message to minute equivalent conversion factor (fSMS) is calculated according to the following

formula:

608

��ch

SMSSMS

Lf

�

(8)

Where:

LSMS – Average length of SMS message, B. See table No. 8

�ch – SDCCH channel bit rate, kbit/s. See table No. 8

Division by 60 is second conversion to minute number and multiplication by 8 is bytes conversion

to bits.

MMS message to minute equivalent conversion factor (fMMS) is calculated according to the

following formula:

610MMSG

MMS

Lff

��

(9)

Where:

fG – GPRS MB to minute conversion factor. It is calculated according to the principle given in the

formula No. (10)

LMMS – Average length of MMS message, B.

Division by 106 is bytes conversion to megabytes.

SMS and MMS to minute equivalent conversion is based on SDCCH channel bit rate and the

length of a particular message (B), the technical values of which are given in the table No. 8

40

Table 8. SMS/MMS conversion parameters

Parameter Unit Values per total network

SDCCH bit rate bit/s 765.00

Average SMS length B 40.00

Average MMS length B 40,000.00

9.1.3. Conversion of GSM packet data

The packet data traffic conversion factor calculation for GSM network is split in two parts according

to the technologies, on which data transmission is based. So, there will be the following conversion

factors calculated in GSM network:

� GPRS MB to minute conversion factor;

� EDGE MB to minute conversion factor;

� General GSM MB to minute conversion factor.

GPRS/EDGE data traffic conversion factor (fG or fE) in megabytes to minute equivalent is calculated

according to the principle given in the following formula:

EorGEorGf �

1601

81000 ��

(10)

Where:

�G – GPRS bit rate, kbit/s. See table No. 9

�E – EDGE bit rate, kbit/s. See table No. 9

Division by 60 is second conversion to minute, multiplication by 8 is bytes conversion to bits and

multiplication by 1000 is megabyte conversion to kilobytes.

General data traffic conversion factor (fGSM) in GSM network in megabytes to minute equivalent is

calculated according to the following formula:

)()(1

601

81000EWEEGWGG

GSM PPPPf

��

��

(11)

Where:

PGD – GPRS data traffic proportion in GSM network, %;

PGW – GPRS WAP traffic proportion in GSM network, %;

PE – EDGE data traffic proportion in GSM network, %;

41

PEW – EDGE WAP traffic proportion in GSM network, %;

�G – GPRS bit rate, kbit/s. See table No. 9

�E – EDGE bit rate, kbit/s. See table No. 9



9.1.4. Conversion of UMTS data

Packet data conversion to equivalent minutes in UMTS network is done to estimate networks joint

traffic in minutes and allocate for it the network component’s “Tower and site preparation”, which is

employed to provide all the costs of services described in this document ,.

The packet data traffic conversion factor calculation for UMTS R99 network is split in two parts

according to the technologies, on which data transmission is based. So, there will be the following

conversion factors calculated in UMTS network:

� UMTS R99 MB to minute conversion factor;

� HSDPA MB to minute conversion factor;

� General UMTS MB to minute conversion factor.

UMTS R99 and HSDPA data traffic conversion factor (fumts and fHSDPA) in megabytes to minute

equivalent is calculated according to the following formulas:

umtsumtsf

�1

601

81000 �� (12)

HSDPAHSDPAf

�1

601

8 �� (13)

Where:

�umts – UMTS bit rate, kbit/s. See table No. 9

�HSDPA – HSDPA bit rate, Mbit/s. See table No. 9



General data traffic conversion factor (fUMTS) in UMTS network in megabytes to minute equivalent

is calculated according to the following formula:

42

HSDPAHSDPAumtsumtsUMTS PP

f��

�� 1000

1601

81000 (14)

Where:

Pumts – UMTS R99 data traffic proportion in UMTS network, %;

PHSDPA – HSDPA data traffic proportion in UMTS network, %;

�umts – UMTS bit rate, kbit/s. See table No. 9

�HSDPA – HSDPA bit rate, Mbit/s. See table No. 9



9.1.5. Conversion of LTE VoIP calls and packet data

Packet data conversion to equivalent minutes in LTE network is done to estimate the network’s

joint traffic in minutes and allocate it to the network component “Tower and site preparation”, which

is employed to provide all the costs of services described in this document.

LTE data traffic conversion factor (fLTE) in megabytes to minute equivalent is calculated according

to the following formula:

LTELTEf

�1

601

8 ��

(15)

Where:

�LTE – LTE bit rate, Mbit/s. See table No. 9

Division by 60 is second conversion to minute, multiplication by 8 is bytes conversion to bits.

Data to minute equivalent conversion factors are based on specific bit rates, the values of which

are given in the table 9.

Table 9. Data conversion parameters

Parameter Unit Values per total network

GPRS bit rate (�G) kbit/s 13,04

EDGE bit rate (�E) kbit/s 39,12

UMTS bit rate (�umts) kbit/s

optimal throughput is gathered from the operators in the questionnaire

HSDPA bit rate (�HSDPA ) Mbit/s


LTE bit rate (�LTE) Mbit/s


43

9.2. Calculation of total traffic in minutes

To sum up, converted to minute equivalent traffic (TC, minutes) for particular services (video calls,

SMS, MMS, data) is calculated according to the following formula:

jj

Wj

C fTT ��

(16)

Where:

jWT

– Specific service weighted traffic, video minutes, SMS messages, MMS messages, GSM,

UMTS and LTE data transmission).

fj – Specific service type conversion factor to minute equivalent. These factors are calculated,

respectively, in formulas No. (5), (7), (8), (9), (11), (14), (15)

j – Defines a specific service.

Particular service traffic (volume), converted to equivalent minutes is used to estimate network

components average unit costs in section 12.2 Network Component average unit costs . General

GSM and UMTS services and all LTE services traffic converted to equivalent minutes adding GSM

and UMTS voice calls traffic is used to calculate the average unit cost of the network component

“Tower and site preparation”.

In the next step, particular GSM services and video calls equivalent minute traffic (for voice calls –

billed and unbilled traffic) is adjusted to busy hour traffic. Differently from GSM services and video

calls, UMTS and LTE packet data traffic in megabytes is adjusted to busy hour traffic in

megabytes. It is also important to note that every group of network elements has a different traffic

aggregation level, so the inhomogeneity factor (see table No. 10) for peak load distribution in time

should be applied separately for each network element. The average annual traffic is adjusted to

annual busy hour traffic (TBH, minutes or MB) according to the principle given in the following

formulas:

DAWUBCBH fTTTT �� // (17)

HWABADA frrf �� (18)

Where:

TC/TB+U/TW – Particular GSM service or video calls traffic, converted to minute equivalent (minutes),

voice calls traffic (billed and unbilled, minutes) or either UMTS packet data or LTE services

weighted traffic, MB.

44

fDA – De-averaging factor;

rBA – Busy hour traffic to average hourly traffic ratio. This factor shows proportion of busy and

average traffic. Value of this factor is provided in the table No. 10.

rWA – Working days traffic to average daily traffic ratio. This factor shows proportion of working day

and average daily traffic. Value of this factor is provided the in the table No. 10.

fH – Inhomogeneity factor for peak load distribution. This factor shows traffic aggregation level in

the network element. Value of this factor is provided in the table No. 11.

Table 10. De-averaging parameters

Parameter Values per total network

Busy hour traffic to average hourly traffic ratio (rBA) 2.00

Working days traffic to average daily traffic ratio (rWA) 1.40

Table 11. Inhomogeneity factors

BTS/ NodeB/ eNode B

BSC/ RNC/ EPC

MSC/ MGW or SMSC or MMSC

or SGSN or GGSN

BTS/ NodeB/ eNodeB-

BSC/RNC/ EPC

BSC/ RNC/EPC-

MSC/MGW/IMS

MSC/ MGW-MSC/MGW

MSC/MGW/ IMS-IC

1.50 1.00 1.00 1.00 1.00 1.00 1.00

Finally, annual total traffic is converted to busy hour Erlangs (BHE, BHE). The conversion is made

according to formula No. (19). Before the conversion, the following actions are carried out:

a) The total traffic in busy hour is weighted by routing factors and adjusted by unbilled traffic

(applied for voice only);

b) The total traffic of non voice services is converted to minutes equivalents;

c) The total traffic in steps a) and b) is converted to busy hour and de-averaged.

6024365 �� BHT

BHE (19)

Where:

TBH – Annual particular GSM services or video calls busy hour traffic, minutes. It is calculated

according to the principle given in the formula No. (17)

Division by 365 is year to day conversion, division by 24 is day to hour conversion and division by

60 is hour to minute conversion.

To dimension GSM network, the general demand for GSM (BHEGSM, BHE) network is calculated

according to the following formula:

45

�i

iGSM BHEBHE (20)

Where:

i – Particular service in GSM network (voice calls or video calls, SMS, MMS, HSCSD/CSD, GPRS,

EDGE packet data).

Next, to evaluate data transmission equipment in UMTS network, busy hour megabytes traffic

(BHMBUMTS, MB) (weighted by routing factors, converted to busy hour and de-averaged) in UMTS

network is calculated according to the following formulas:

24365 ��

� umtsBHumts

PTBHMB

(21)

24365 ��

� HSDPABHHSDPA

PTBHMB

(22)

HSDPAumtsUMTS BHMBBHMBBHMB � (23)

Where:

TBH – Year total busy hour traffic, MB. It is calculated according to the principle given in the formula

No. (17)

Pumts – UMTS R99 data traffic proportion in UMTS network, %;


Division by 365 is year to day conversion and division by 24 is day to hour conversion.

Finally, to calculate data transmission equipment in LTE network, busy hour megabytes traffic

(BHMBLTE, MB) (weighted by routing factors, converted to busy hour and de-averaged) in LTE

network is calculated according to the following formulas:

24365 �� BH

LTE

TBHMB (24)

Where:

TBH – Yearly total busy hour traffic, MB. It is calculated according to the principle given in the

formula No. (17)

Division by 365 is year to day conversion and division by 24 is day to hour conversion.

46

10. Network Dimensioning

Table 12. List of components used in network dimensioning

Pha-ses Component

Network architecture GSM UMTS LTE

BS

S

Base Transceiver Station (BTS) X Transceiver X Base Station Controller (BSC) X Transcoder Controller (TC) X

RN S Node B X

Radio Network Controller (RNC) X

PS

S eNode B X

Evolved Packet Core (EPC) X

BS

S,

RN

S,

PS

S Base and extension units (BU) X X X

Sites X X X SGSN / GGSN X X X

NS

S

Mobile Switching Centre (MSC) X X X Mobile Switching Centre Server (MSS) X X X Media Gateway (MGW) X X X Short Messages Service Center (SMSC) X X Multimedia Messages Service Center (MMSC) X X IP multimedia sub-system (IMS)10 X Voice Mail Service and Home Location Register X X X Service Control Point (Intelligent Network) X X X Network Functionality X X X Other Network X X X

Transmission X X X

Having in mind the complexity of network dimensioning, the algorithms are further divided into

separate phases according to GSM, UMTS and LTE network architectures, respectively:

1. Base Station System (BSS) for GSM, Radio Network System (RNS) for UMTS and Packet

Switching System (PSS) for LTE;

2. Network Switching System (NSS).

Elements of BSS, RNS or PSS layer are driven by the traffic demand and coverage of the network

that is necessary to provide a given quality of service. Elements of NSS layer are driven by the

number of subscribers, traffic demand (as in BSS/RNS/PSS layer) and other parameters (e.g.

number of voice mailboxes).

10 IMS component will be included in cost calculation only in case of the presence of Voice over IP (VoIP) service in LTE network.

47

Links of dimensioned components with their network architecture and dimensioning phase are

presented in table 12.

10.1. Dimensioning of GSM network

10.1.1. Base Transceiver Station

The first step in dimensioning the Base Station Subsystem (BSS) layer is modeling the Base

Transceiver Stations (BTS). The outcome of the algorithms presented in this section is the number

of BTS locations (sites).

All of the BTS calculations presented in this section are executed by subdividing the territory of the

Republic of Lithuania (for coverage) and traffic (for capacity) into the following geographical areas:

1. Urban – Built up city or large town with large buildings and houses. Building heights above 4

stores (about 10m). As a reference to the Republic of Lithuania, it would be major cities:

Vilnius, Kaunas, Klaip�da, Šiauliai, Panevežys, Alytus, and Marijampol�. If parks, forests fall in

this area, they are treated as suburban or rural geographical area.

2. Suburban – Village, highway scattered with trees and houses. Some obstacles near the

mobile, but not very congested. As a reference to the Republic of Lithuania, it would be

previously not mentioned towns.

3. Rural11 – Open space, forests, no tall trees or building in path. As a reference to the Republic

of Lithuania, it would be the rest of the territory of the Republic of Lithuania.

Traffic and coverage geographical areas equally correspond with geographical areas definitions

when dimensioning the network.

Estimation of the minimum number of BTS locations required is a function of requirements to meet

coverage and traffic demand.

Coverage requirements

The minimal number of localizations required to satisfy coverage requirements ( SiCOVN , units) are

determined by the following formulas:

11 Concepts of geographical areas used in this document are in line with the respective Okumura – Hata model concepts.

48

��

��

��

cC

CSiCOV A

AN

(25)

22 6.235.1 RRAcC ��

(26)

Where:

CA – Coverage area in GSM network for a particular geographical area type, km2. This size is

calculated multiplying particular geographical area coverage proportion in GSM network (%) with

total GSM coverage area.

cCA – Coverage area of one cell, km2;

R – Maximal cell range, km.

The basis of a formula for cell coverage area ( cCA , km2) is a formula to calculate hexagon area.

Maximal cell range in every geographical area in the BU-LRAIC model is given below in the list:

� Urban area R = 0.90 km;

� Suburban area R = 3.00 km;

� Rural area R = 9.00 km.

Parameters given above are taken as the assumed dimensioning parameters of average

effectively utilized BTS in the Republic of Lithuania at a given area to provide the current quality of

services in the network.

Traffic demand

Number of sites required to meet traffic demand are calculated in the following steps:

1. Calculation of spectrum and physical capacity of a sector;

2. Calculation of effective sector capacity;

3. Calculation of a number of sites to meet the traffic demand.

Sector capacities are calculated for each type of a cell (macro, micro and pico) as well as single

and dual bands. As before, calculations for cells are also split by geographical area types. The

traffic is also split by geographical area type .

Consequently, the following cell types for sector capacity calculations are used:

� Macro cell – urban area;

� Macro cell – suburban area;

49

� Macro cell – rural area;

� Micro cell – urban area;

� Micro cell – suburban area;

� Pico cell – urban area;

� Pico cell – suburban area.

Spectrum capacity of BTS is a required TRXs number to cover the spectrum specifications. A

spectrum capacity (CSs, TRXs) for single band cell is calculated according to the principle given in


5.0900 ��

��

�

��

TRXsuSs f

NC

�

(27)

Where:

N900 – Amount of 900 MHz spectrum, 2 x MHz. This value is calculated according to the public

information (permissions to operate radio channels) placed on RRT website and according to

information provided by RRT.

fsu –- Sector re-use factor for 900 MHz, units;

�TRX – Bandwidth of a transceiver, MHz. According to technical transceiver parameters, it is

assumed �TRX equals to 0.2 MHz.

Similarly, spectrum capacity (CSd, TRXs) of a logical sector for dual band is calculated according to


��

��

�

��

TRXduSsSd f

NCC

�1800

(28)

Where:

CSs – Spectrum capacity for single band cell, TRXs. It is calculated according to the principle given

in the formula No. (27).

N1800 –- Amount of 1800 MHz spectrum, 2 x MHz. This value is calculated according to the public

information (permissions to operate radio channels) placed on RRT website.

fdu –- Sector re-use factor for 1800 MHz, units;

�TRX – Bandwidth of a transceiver, MHz. The same assumption is applied as in the formula No.

(27).

50

Physical capacity (CP, TRXs) of a logical sector for single and dual band is a technical specification

value. Effective sector capacity (CE, TRXs) for macro (urban, suburban and rural), micro, pico cell

groups respectively single and dual band frequency is calculated according to the principle given in


);min( PSE CCC � (29)

Where:

CS – Spectrum sector capacity (single CSs or dual band CSd), TRX;

CP – Physical (equipment technical limitation) sector capacity (single or dual band12), TRX. This

value describes maximal TRX amount, which can be physically installed in mikro, pico or makro

cells.

It is assumed in BU-RAIC model, that first TRX in BTS handles 7 traffic channels and each

additional TRX in BTS handles 8 traffic channels.

TRXs conversion (NTRX, units) to channels (NCH, units) is done according to the following formula:

� �187 �� TRXCH NN (30)

Where:

NTRX – Number of TRXs, TRX. See formula No. (39).

As the TRXs number is converted to channels, effective sector capacity (CE) for single and dual

band (in channels) is translated into BHE ( ErlEC ) according to Erlangs table, assuming blocking

probability equals to 2%.

The number of sectors ( SeCAPN , units) to serve the traffic is calculated according to the principle

given in the following formula:

BTSErlE

AGSMSe

CAP HACBHE

N�

� (31)

Where:

AGSMBHE – GSM services busy hour traffic part in a particular geographical area, BHE. This size is

calculated by multiplying a particular geographical area traffic proportion in GSM network (%) by

total GSM traffic.

12 Single or dual band physical capacity. This parameter is included in questionnaire.

51

ErlEC – Effective sector capacity of dual or single band (for a particular cell type), BHE.

HABTS – Headroom allowance of BTS equipment, %. It is calculated according to the principle

given in the formula No. (25)

The number of sites ( SiCAPN , units) to serve the traffic is calculated according to the following

formulas:

SiSe

SeCAPSi

CAP NN

N/

� (32)

�

�

��

3

1

3

1/

i

SiiSe

i

SiiSe

SiSe

N

NiN (33)

Where:

SeCAPN – Sectors number to serve the traffic, units;

NSe/Si – Average number of sectors per site, units.

SiiSeN – i sectored sites in GSM network, units. This size is calculated by multiplying total number of

sites with proportions (%) of i sectored sites in the network.

i – Defines number of sectors in the site (one, two or three).

Total amount of GSM sites

The total amount of BTS sites in a mobile network ( SiTotalN , units) is calculated according to the

following formula:

);( SiCAP

SiCOV

SiTotal NNMaxN � (34)

Where:

SiCOVN – Sites to serve the coverage, units;

SiCAPN – Sites to serve the traffic, units.

It is assumed that each GSM site handles EDGE, single band base stations are present in rural

areas and double band base stations are present in suburban and urban areas.

52

10.1.2. Transceiver

The second step in dimensioning Base Station Subsystem (BSS) layer is modeling of Transceivers

(TRX). The outcome of the algorithms presented in this section is the number of TRX units.

Similarly to BTS modeling case, all of the TRX calculations are executed by subdividing the

territory of the Republic of Lithuania into geographical areas defined in section 10.1.1. Base

Transceiver Station.

The next step to estimate TRX number is calculation of traffic load per sector ( SeGSMBHE , BHE). It is

calculated according to the principle given in the following formula:

Se/SiNNBHE

BHE SiTotal

AGSMSe

GSM ��

(35)

Where:

AGSMBHE – GSM services busy hour traffic part in a particular geographical area, BHE.

SiTotalN – Total BTS sites in a mobile network, units. See formula No. (34).

NSe/Si – Average number of sectors per site, units (see formula No. (33)).

Traffic load per sector ( SeGSMBHE , BHE) is translated into channels per sector (

SeCHN /) according to

Erlangs table with a blocking probability of 2%.

Further, the number of TRXs per sector ( SeTRXN / , units) is calculated according to the following

formulas for macro, micro and pico cells respectively:

� �

�)1(87

)( //

TRX

SeCHSeTRX N

NmacroN

(36)

� �

�)1(87

)( //

TRX

SeCHSeTRX N

NmicroN

(37)

� �

�)1(87

)( //

TRX

SeCHSeTRX N

NpicoN

(38)

Where:

SeCHN / – Channels per sector, units;

NTRX – TRX number, TRX. See formula No. (39).

53

� – TRX utilization adjustment, which equals to 0.5 TRX per sector. Non-uniform allowance is the

½ unit of capacity per sector allowance for the fact that traffic is not evenly distributed (in both time

and space) across each area type.

The total number of TRXs in a mobile network ( TRXN , units) is calculated according to the following

formulas:

� �SeTotalSeTRXTRX NNN �� /

(39)

)()()( //// picoNmicroNmacroNN SeTRXSeTRXSeTRXSeTRX � (40)

�

��3

1i

SiiSe

SeTotal NiN (41)

Where:

SeTRXN / – Average number of TRXs per sector, units. See formula No. (36), (37) and (38).

SeTotalN – Total amount of sectors in mobile network, units;

SiiSeN – i sectored sites in GSM network, units. This size is calculated by multiplying total number of

sites with proportions (%) of i sectored sites in the network.

i – Defines number of sectors in the site (one, two or three)

10.1.3. Base Station Controller

Base station controller comprises two parts:

� Base unit;

� Base station extension (TRXs).

The outcome in this section is the amount of base units and the amount of extension units. The

dividend variable for both units calculation is the number of TRXs.

The total amount of BSC base units and extension units is calculated according to the algorithm

provided in section 10.4.1. Base and extension units with TRXs as dividend variable for both parts.

10.1.4. Transcoder Controller

Transcoder controller (TRC) comprises two parts:

� Base unit;

� Transcoder E1 extension (A interfaces).

54

The outcome of the algorithms presented in this section is the amount of base units and

Transcoder E1 extension (A interfaces) units. Therefore, calculations are described with respect to

these parts. The dividend variable for both parts is total 2 Mbit/s link capacity (CL, E1 A interface).

The total 2 Mbit/s link capacity is calculated according to the following formula:

GSM

PDGSM

b

GSMCL BHE

BHEBHEC

THC

�� (42)

Where:

THGSM – Throughput in TRC, kbit/s. See formula No. (119).

Cb – Basic 2 Mbit/s link capacity, kbit/s.

�C – TRC compression rate, equal to 4;

BHEGSM – Demand for GSM network, BHE (see formula No. (20));

BHEPD – Packet data demand for GSM network, BHE. It is calculated according to the principle

provided in the formula No. (35).

Assumption is made that basic 2 Mbit/s link capacity is 2048 kbit/s.

Next, as in BSC calculations, TRC base units and extension units are calculated according to the

algorithm provided in section 10.4.1. Base and extension units with E1 number (A interface) as

dividend variable for both parts.

10.2. Dimensioning of UMTS network

10.2.1. Node B

In UMTS network, the first step in dimensioning RNS layer is modeling the Node B element. The

outcome of the algorithms presented in this section is the number of Node B sites. All Node B

calculations are divided by geographical area proportions.

UMTS macrocell range and sector capacity are calculated separately for different area types. In

UMTS system the cell range is dependent on current traffic, the footprint of CDMA cell is

dynamically expanding and contradicts according to the number of users. This feature of UMTS is

called “cell breathing”. Implemented algorithm calculates optimal UMTS cell range with regard to

the cell required capacity (demand). This calculation is performed in four steps:

1) Required UMTS network capacity by cell types

55

In this step the required UMTS network capacity for uplink and downlink channel is calculated

based on voice and data traffic demand. The UMTS network capacity is calculated separately for

different area type.

2) Traffic BH density per 1km2

In this step traffic BH density per 1km2 is calculated based on the required UMTS network capacity

and required coverage of UMTS network. The UMTS traffic BH density per 1 km2 is calculated

separately for uplink and downlink channel for each area type.

3) Downlink and uplink calculation

In this section implemented algorithm finds the relationship (function) between cell area and cell

capacity, separately for uplink and downlink channel and different area type. To find relationship

(function) formula algorithm uses two function extremes:

1. x: Maximal UMTS cell range assuming minimal capacity consumption

y: Minimal site capacity volume (single data channel)

2. x: Maximal UMTS cell range assuming full capacity consumption

y: Maximal site capacity volume

Then according to traffic BH density per 1 km2 and found relationship (function) formula, the

optimal cell area and sector capacity is calculated separately for different area type.

4) Total

In this last step the optimal UMTS macrocell range and sector capacity is calculated separately for

uplink and downlink channel and different area type.

The values presenting:

1. x: Maximal UMTS cell range assuming minimal capacity consumption

y: Minimal site capacity volume (single data channel)

2. x: Maximal UMTS cell range assuming full capacity consumption

y: Maximal site capacity volume

will be gathered from operators and verified based on link budget calculation.

56

Coverage

UMTS network area coverage is split by geographical areas defined in section 10.1.1. Base


The minimal number of Node B sites required to satisfy coverage requirements ( SiBCOVN , units) are

determined separately for uplink and downlink, by the following formulas:

��

��

��

cC

CSiBCOV bA

bAN (43)

22 6.235.1 UMTSUMTScC RRbA �� (44)

Where:

CbA – Coverage area in UMTS network for a particular geographical area type, km2. This size is

calculated multiplying a particular geographical area coverage proportion (%) in UMTS network by

total UMTS coverage area.

cCbA – Coverage area of one Node B cell, km2;

RUMTS – Optimal cell range for uplink/downlink, km.

The basis of a formula for cell coverage area is a formula to calculate hexagon area.

Traffic demand

The required capacity of UMTS network is calculated separately for uplink and downlink channel

as well as voice traffic and packet data traffic.

The capacity required (CUMTS, kbit/s) to handle packet data traffic in the UMTS network is


100086060

��

� UMTSUMTS

BHMBC (45)

Where:

BHMBUMTS – Capacity to be handled by UMTS network, MB. It is a busy hour traffic part in a

particular geographical area and cell type (macro, micro and pico) in UMTS network (see formula

No. (23)).

Division by 60 and 60 is hour conversion to seconds, multiplication by 8 is a bytes conversion to

bits and multiplication by 1000 is megabyte conversion to kilobytes.

57

Sector number ( SeBCAPN , units) to meet capacity requirements is calculated according to the principle


ErlV

VSe

UMTSSeBCAP C

BHE

C

CN �

min

(46)

Where:

CUMTS – Capacity required to handle the packet data traffic in UMTS network, kbit/s. See formula

No. (45).

SeC min – Sector capacity in BHT, kbit/s.

VBHE – Capacity required to handle the voice, video, SMS, MMS traffic in UMTS network

ErlVC - Sector capacity in BHT, ERL.

The number of UMTS sites ( SiBCAPN , units) to meet capacity requirements is calculated according to

the following formulas:

�

�3

1i

SiBiSeB

SiBCAP NN (47)

iN

NSeBiCAPSiB

iSeB � (48)

Where:

SeBiCAPN – Sectors number to meet capacity requirements in UMTS network, distinguished by

particular sectorization, units. This size is calculated by multiplying the total number of sectors ( SeBCAPN , see formula No. (46) by respective sectorization proportions (%).

SiBCAPN – UMTS sites number to meet capacity requirements, units;

SiiSeBN – i sectored sites in UMTS network, units;


Total amount of Node B sites

Finally, total number of Node B sites ( SiBTotalN , units) is calculated according to the following formulas:

58

AdjNN SiBCAP

SiBTotal � (49)

2

SiBCAP

SiBCOV NN

Adj

� (50)

Where:

SiBCAPN – Sectors to meet capacity requirements, units (see formula No. (47)).

SiBCOVN – Sectors to meet coverage requirements, units (see formula No. (43)).

Adj – Adjustments (sites number) for planning assumptions, units.

In UMTS network Node Bs number to meet capacity and coverage requirements are correlated

figures; therefore, an adjustment is applied to the calculated total Node Bs number, not the

maximum value out the two, as it is in GSM BTSs case.

It is assumed that each UMTS site handles HSDPA/HSUPA.

10.2.2. Radio Network Controller

In UMTS network, the next step in dimensioning BSS layer is modeling the Radio Network

Controller (RNC). RNC comprises of the following parts:

� Base unit;

� Extension units:

� Iub links extension;

� Sectors extension;

� Sites extension.

The outcome of the algorithms presented in this section is the amount of base units and extension

units.

Estimation of the minimum number of RNC base units required is a function of requirements to

meet particular number of Iub links, particular number of sectors and sites.

Total amount of RNC base units (BURNC, units) is calculated according to the following formulas:

59

��

�

��

��

��

��

SiRNC

SiBTotal

SeRNC

SeBTotal

Iub

IubRNC C

NCN

CTH

MaxBU ;; (51)

�

��3

1i

SiBiSe

SeBTotal NiN (52)

Where:

THIub – Iub link throughput, Mbit/s. The same as UMTS throughput (see formula No. (119))

CIub – RNC maximal operational capacity to satisfy Iub interface throughput, Mbit/s; Calculated

according to the principle provided in formula No. (66).

SeBTotalN – Total number of sectors in UMTS network, units;

SeRNCC – RNC maximal operational capacity to satisfy number of sectors, units; Calculated

according to the principle provided in formula No. (66).

SiBTotalN – Total number of Node B sites in UMTS network, units;

SiRNCC – RNC maximal operational capacity to satisfy number of sites, units; Calculated according to

the principle provided in formula No. (66).

SiBiSeN – i sectored sites in UMTS network, units. This parameter is calculated multiplying the total

number of sites by appropriate proportion (%) according to number of sectors.


Extension units for RNC - lub links extension, sectors extension and sites extension – are

calculated according to the algorithm provided in section 10.4.1. Base and extension units. RNC

Iub link throughput, sectors number and Node B sites number are the respective dividend

variables.

10.3. Dimensioning of LTE network

10.3.1. eNode B

In LTE network, the first step in dimensioning PSS layer is modeling the eNode B element. The

outcome of the algorithms presented in this section is the number of eNode B sites. All eNode B

calculations are divided by geographical area proportions.

60

The optimal LTE cell range regarding to the cell required capacity (demand) will be performed in

the same way as for NodeBs, taking into account the technical parameters specific for LTE

technology.

In the model eNode B is dimensioned for handling both data and voice traffic. Since LTE network is

a packet based network, all the volume of voice traffic in billed minutes must be converted into

packet data traffic (volume of kbps). This calculation consists of the following steps:

1. Calculate the average volume of BHE (Busy Hour Erlangs) for each eNodeB.

The volume of BHE determines how many VoIP channels are required to handle the voice

traffic in the busy hour.

2. Calculate VoIP cannel bandwidth.

This calculation requires to determine some assumptions regarding VoIP (Voice over IP)

technology:

� Voice codec used;

� Payload of each network layer protocols: RTP / UDP / IP / Ethernet.

The VoIP channel bandwidth is calculated according to the following formula:

10008

)( �� PFPPSPLSETHRTPUDPIPVoIP ratebit (53)

Where,

IP - IP header (bytes);

UDP- UDP header (bytes);

RTP - RTP header (bytes);

ETH - Ethernet header (bytes);

PLS- Voice payload size (bytes) – VoIP codec related value;

PPS- Packets per second (packets) – codec bit rate related value;

PF - Priority factor.

The results of calculation are presented in the table below.

Table 13. VoIP codecs and their required channel bandwidth Codec & Bit Rate (Kbps) Bandwidth in Ethernet layer (Kbps) Voice Payload Size (bytes)

G.711 (64 Kbps) 87.2 Kbps 160,00

G.729 (8 Kbps) 31.2 Kbps 20,00

G.723.1 (6.3 Kbps) 21.9 Kbps 24,00

61

Codec & Bit Rate (Kbps) Bandwidth in Ethernet layer (Kbps) Voice Payload Size (bytes)

G.723.1 (5.3 Kbps) 20.8 Kbps 20,00

G.726 (32 Kbps) 55.2 Kbps 80,00

G.726 (24 Kbps) 47.2 Kbps 60,00

G.728 (16 Kbps) 31.5 Kbps 60,00

G722_64k(64 Kbps) 87.2 Kbps 160,00

ilbc_mode_20 (15.2Kbps) 38.4Kbps 38,00

ilbc_mode_30 (13.33Kbps) 28.8 Kbps 50,00

Source: “Voice Over IP - Per Call Bandwidth Consumption”, Cisco

3. Calculate busy hour voice bandwidth for eNodeB.

For eNodeB modeling the busy hour bandwidth will be calculated by multiplying volume of BHE by

bandwidth of voice channel.

Coverage

LTE network area coverage is split by geographical areas defined in section 10.1.1. Base


The minimal number of eNode B sites required to satisfy coverage requirements ( SiECOVN , units) is

determined by the following formulas:

��

��

��

cC

CSiECOV eA

eAN (54)

22 6.235.1 LTELTEcC RReA �� (55)

Where:

CeA – Coverage area in LTE network for a particular geographical area type, km2. This size is

calculated multiplying particular geographical area coverage proportion (%) in LTE network with

total LTE coverage area.

cCeA – Coverage area of one eNode B cell, km2;

RLTE – Optimal cell range, km.

The basis of a formula for cell coverage area is a formula to calculate hexagon area.

Traffic demand

The capacity required (CLTE, kbit/s) to handle the packet data traffic in LTE network is calculated


62

ratebitLTELTE

LTE VoIPBHEBHMB

C ��

� 100086060

(56)

Where:

BHMBLTE – Capacity to be handled by LTE network, MB. It is a busy hour traffic part in a particular

geographical area and cell type (macro, micro and pico) in LTE network (see formula No. (24)).

Division by 60 and 60 is hour conversion to seconds, multiplication by 8 is a bytes conversion to

bits and multiplication by 1000 is megabyte conversion to kilobytes.

LTEBHE - Capacity required to handle the voice traffic in LTE network

Sector number ( SeBCAPN , units) to meet capacity requirements is calculated according to the principle


SeLTESeE

CAP C

CN

min

� (57)

Where:

CLTE – Capacity required to handle the traffic in LTE network, kbit/s. See formula No. (66).

SeC min – Sector capacity in BHT, kbit/s. (will be gathered from the operators).

The number of LTE sites ( SiECAPN , units) to meet capacity requirements is calculated according to the

following formulas:

�

�3

1i

SiEiSeB

SiECAP NN (58)

iN

NSeEiCAPSiE

iSeE � (59)

Where:

SiEiCAPN – the number of sectors to meet capacity requirements in LTE network, distinguished by

particular sectorization, units. This size is calculated total sectors number ( SiECAPN , see formula No.

83) multiplying by respective sectorization proportions (%).

SiECAPN – the number of LTE sites to meet capacity requirements, units;

SiiSeBN – i sectored sites in LTE network, units;


63

Total amount of eNode B sites

Finally, the total eNode B sites number ( SiETotalN , units) is calculated according to the following

formulas:

AdjNN SiECAP

SiETotal � (60)

2

SiECAP

SiECOV NN

Adj

� (61)

Where:

SiECAPN – Sectors to meet capacity requirements, units (see formula No. (58)).

SiECOVN – Sectors to meet coverage requirements, units (see formula No. (54)).

Adj – Adjustments (sites number) for planning assumptions, units.

In LTE network the number of eNode Bs to meet capacity and coverage requirements are

correlated figures, therefore adjustment is applied to calculated total eNode Bs number, not the

maximum value out the two, as it is in GSM BTSs case.

10.3.2. Evolved Packet Core

Evolved packet core (EPC) is dimensioned for the third alternative core network modeling scenario

(see section 4.6. Technological background). EPC handles all traffic in LTE network. EPC consists

of two main groups of components: Mobility management entity (MME), which handles control

functions, and Packet gateway (PGW) which is responsible for the actual transmission of data.

The number of MME basic units is calculated as S1-U link number of sessions [BH sessions / sec]

divided by maximal capacity of MME physical location. The MME extension unit is calculated

according to the formula:

� � � ��

� ��

�

�

��

�

� ��

extOC

baseOCBU

ACAP

BUEUMME

)(

)MME(MME (62)

Where:

EU(MME) – number of MME extension units

BU(MME) – number of MME basic units

CAP(A) – S1-MME link number of sessions [BH sessions / sec]

64

OC(base) – base unit operational capacity of MME

Estimation of the minimum number of PGW base units required is a function of requirements to

meet:

1. Minimal network configurations;

2. Switching capacity (CPU part);

3. Ports number in PGW;

The number of PGW base units ( CPGWBU , units) to meet network requirements is calculated as

S1-U link throughput [BH packets / sec] divided by maximal capacity of PGW physical location.

The PGW extension unit is calculated according to formula:

� � � ��

� ��

�

�

��

�

� ��

extOC

baseOCBU

ACAP

BUEUPGW

)(

)PGW(PGW (63)

Where:

EU(PGW) – number of PGW extension units

BU(PGW) – number of PGW basic units

CAP(A) – S1-U link throughput [BH packets / sec]

OC(base) – base unit operational capacity of PGW

10.4. Dimensioning of BSS, RNS and PSS system

10.4.1. Base and extension units

Having in mind the modular nature of mobile network, the dimensioning of network elements

returns amount of base units (BU) and, if applicable, extensions units (EU) for particular network

elements. Extension unit is an additional piece in a base unit, which enhances BU capacity. EUs

are dimensioned, when there is not enough capacity to serve the traffic with n BUs, but n+1 BUs

would lead to over capacity of the resources needed. It is cost effective to install an extension unit

in a base unit, then to install an additional base unit as long as the required traffic is served.

Algorithms for the calculation of the amounts of BU and EU are general for all network elements

analyzed in the scope of BU-LRAIC model. Figure 6 represents BU and EU calculation algorithm.

65

Figure 6: BU and EU calculation algorithm.

The amount of network element base units (BU, units) required is generally calculated according to

the principle given in the following formula:

��

��

��C

DVBU (64)

Where:

DV – Dividend (demand) variable, measurement unit depends on the network element. DV is a

particular traffic demand, on which the BU dimensioning depends directly.

C� – Maximal operational capacity of network element, measurement unit is the same as for DV.

Calculation principle of C� is provided in the formula No. (66).

Operational capacity of a base unit or extension unit shows what traffic volumes it can maintain.

The amount of network element extension units (EU, units) required, if applicable, is generally


� ��

��

� ��

��

ES

BU

CCCBU

EU (65)

Where:

C� – Maximal operational capacity of a network element, measurement unit is the same as for DV.

Calculation principle of C� is provided in the formula No. (66)

BU – Base unit, units;

�BUC – Base unit operational capacity, measurement unit depends on the network element;

66

�ESC – Extension step (additional extension unit to BU) operational capacity, measurement unit

depends on the network element.

Maximal operational capacity (C�, BHCA, subscribers, etc.) for a particular network element is


OACC �� (66)

BU and EU operational capacity ( �iC , BHCA, subscribers, etc.) are calculated according to the

principle given in the following formula by applying capacity values respectively.

iii OACC ��

(67)

Where:

�C – Maximal technical capacity (including possible extension), measurement unit depends on the

element. �C shows maximal technical theoretical capacity of a network element in composition of

BU and EU.

Ci – Base unit or extension unit capacity, measurement unit depends on the element. Ci defines

technical parameter of BU or EU capacity.

i – Specifies BU or EU.

OA – Operational allowance, %. Calculation principle of OA is provided in the formula No. (68).

Operational allowance (OA, %) shows both design and future planning utilization of a network

equipment, expressed in percents. OA is calculated according to the principle given in the following

formula:

UfHAOA ��

(68)

Where:

HA – Headroom allowance, %. HA shows what part of BU or EU capacity is reserved for future

traffic growth. Calculation principle of HA is provided in formula No. (67).

fU – Design utilization factor at a planning stage, %. It is equipment (vendor designated) maximum

utilization parameter. This utilization parameter ensures that the equipment in the network is not

overloaded by any transient spikes in demand as well as represents the redundancy factor.

Operational allowance and capacity calculations depend on the headroom allowance figure (HA,

%). Headroom allowance is calculated according to the principle given in the following formula:

67

SDGrHA

1� (67)

Where:

rSDG – Service demand growth ratio.

rSDG determines the level of under-utilization in the network, as a function of equipment planning

periods and expected demand. Planning period shows the time it takes to make all the necessary

preparations to bring new equipment online. This period can be from weeks to years.

Consequently, traffic volumes by groups (demand aggregates given below) are planned according

to the service demand growth.

The service demand growth ratio is calculated for each one of the following demand aggregates:

� Total subscribers number;

� CCS traffic, which comprises of voice, circuit data and converted to minute equivalent video

traffic;

� Air interface traffic, which comprises of converted to minute equivalent SMS, MMS and

packet data traffic. Packet data traffic in this case means GSM, UMTS and LTE traffic sum

of up-link or down-link traffic subject to greater value.

A particular demand growth ratio is assigned to a particular network element’s equipment.

10.4.2. Sites

In BU-LRAIC model, to build a mobile network for UMTS, GSM and LTE, a minimal number of sites

is calculated to serve traffic. Sites are distinguished by particular types given in the following list:

� Urban macro cells (omni sector);

� Urban macro cells (2 sector);

� Urban macro cells (3 sector);

� Suburban macro cell (omni sector);

� Suburban macro cell (2 sector);

� Suburban macro cell (3 sector);

� Rural macro cell (omni sector);

� Rural macro cell (2 sector);

� Rural macro cell (3 sector);

68

� All micro cells;

� All pico cells.

The total number of sites (NSI, units) in the mobile network is calculated according to the following

formula:

�i

SiCi

SiBi

SiiSI NNNMaxN );;( (68)

Where:

SiiN – Particular i type sites in GSM network, units;

SibiN – Particular i type sites in UMTS network, units.

SiciN – Particular i type sites in LTE network, units.


10.4.3. Packet control unit (PCU) / Serving GPRS support node

(SGSN)

In this section the PCU basic and extension units is calculated. The number of PCU basic units

(BUPCU) is calculated as follows:

��

��

��

�

��

�� BSCRNC

PCU

GbPCU BUBU

C

THBU ;max

� (69)

Where:

THGb – Gb link throughput [Mbps] �PCUC – Maximal operational capacity of PCU [Mbps]

BURNC – number of RNC base units

BUBSC – number of BSC base units

Gb link throughput [Mbps] is calculated as follows:

��

��

��

GSM

GSMdGSMuGb f

TTTH

);max(601

(70)

Where:

69

TGSMu – Total minute equivalent for up-link packet data megabytes in the GSM network element per

minute in busy hour

TGSMd – Total minute equivalent for down-link packet data megabytes in the GSM network element

per minute in busy hours

fGSM – GSM data traffic to minute equivalent conversion factor

The PCU extension unit is calculated according to formula:

� � � ��

� ��

�

�

��

�

� ��

extOC

baseOCBU

ACAP

BUEU PCU)(

)PCU(PCU (71)

Where:

EU(PCU) – number of PCU extension units

BU(PCU) – number of PCU basic units

CAP(A) – Gb link throughput [BH packets / sec]

OC(base) – base unit operational capacity of PCU

OC(ext) – extension step operational capacity of PCU

Later in this section the SGSN basic and extension units is calculated. The number SGSN basic

units is calculated as Gb link throughput [BH packets / sec] divided by maximal capacity of SGSN

physical location. The SGSN extension unit is calculated according to the formula:

� � � ��

� ��

�

�

��

�

�

��extOC

baseOCBU

ACAP

BUEU SGSN)(

)SGSN(SGSN (72)

Where:

EU(SGSN) – number of SGSN extension units

BU(SGSN) – number of SGSN basic units

CAP(A) – Gb link throughput [BH packets / sec]

OC(base) – base unit operational capacity of SGSN

70

10.5. Dimensioning of Network Switching System

10.5.1. Mobile Switching Centre

Mobile Switching Centre (MSC) is dimensioned for the first alternative core network modeling

scenario (see section 4.6. Technological background).

All voice services traffic is handled by MSC and comprises the following parts:

� Base unit and software;

� MSC extensions:

� Processor extension;

� VLR, EIR extension;

� SS7 extension;

� Trunk port extension;

� Input/Output peripherals.

Estimation of the minimum number of MSC base units required is a function of requirements to

meet:



3. Ports number in MSC;

4. Subscribers number (VLR, EIR part).

In each component’s case calculation algorithms are described below.

For the requirements to meet minimal network configuration demand there is an assumption

adopted in BU-LRAIC model that the minimal number of MSCs in a mobile network is two. This

requirement is for the security reasons; in case one MSC does not work, another will maintain the

traffic.

The number of MSC base units ( CMSCBU , units) to meet switching capacity requirements (central

processing unit (CPU) case) are calculated according to the following formulas:

71

CPU

BHCACMSC C

NBU � (73)

MSCCPUsMSCCPU NCC /, �� (74)

Where:

NBHCA – Call attempts in BHT, BHCA. Look at formula No. (2).

�sMSCC , – Maximal MSC operational capacity, BHCA (see formula No. (66));

CCPU – CPU capacity of MSC, BHCA;

NCPU/MSC – CPUs per MSC, units.

Default MSC’s configuration in a most usual case gives one PCU per MSC, consequently, it is

assumed that there is one CPU per MSC.

The number of MSC base units ( pMSCBU , units) to meet port number requirements is calculated


�pMSC

ppMSC C

NBU

,

� (75)

Where:

Np – Total ports required, units;

�pMSCC , – Maximal MSC operational capacity to satisfy the number of ports (see formula No. (66)).

The total number of ports required (Np, units) is calculated according to the following formula:

isicBSCp pppN � (76)

Where:

pBSC – BSC-facing ports, units;

pic – Interconnect-facing ports, units. See formula No. (77).

pis – Inter-switch 2 Mbit/s ports, units. See formula No. (79).

The number of BSC-facing ports is the same number as total 2 Mbit/s link capacity, E1 A

interfaces, which is calculated in section 10.1.4. Transcoder Controller (see formula No. (42)).

The number of interconnect-facing ports (pic, units) is calculated according to the following formula:

72

311

7.01�� icic Tp (77)

Where:

Tic – Interconnect traffic, BHE.

Division by 0.7 is BHE conversion to channels number and division by 31 is channels conversion to

2 Mbit ports number.

Interconnect traffic (Tic, BHE) is calculated according to the following formula:

TotalTotalic SMSMT � (78)

Where:

MTotal – Total call minutes between MSC and point of interconnection, BHE;

SMSTotal – Total SMS messages between MSC and point of interconnection, BHE.

The number of inter-switch 2 Mbit/s ports (pis, units) is calculated according to the following

formula:

311

7.01�� isis Tp (79)

Where:

Tis – Inter-switch traffic, BHE (see formula No. (80)).



Inter-switch traffic (Tis, BHE) is calculated according to the following formula:

ONONic SMSMT � (80)

Where:

MON – Total on-net minutes in MSC, BHE;

SMSON – Total on-net SMS messages in MSC, BHE.

The number of MSC base units ( SMSCBU , units) to meet subscribers’ requirements (visitor location

register (VLR, EIR) case) is calculated according to the following formula:

73

�subMSC

GSMSubS

MSC CN

BU,

� (81)

Where:

GSMSubN – GSM network subscribers, units;

�subMSCC , – Maximal MSC operational capacity to satisfy number subscribers, subscribers (see

formula No. (66)).

So, the total amount of MSC base units (BUMSC, units) is calculated according to the following

formula:

� �SMSC

pMSC

CMSCMSC BUBUBUMaxBU ;;� (82)

Where:

CMSCBU – Number of MSC base units to meet switching capacity requirements, units (see formula

No. (73)).

pMSCBU – Number of MSC base units to meet port number requirements, units (see formula No.

(75)).

SMSCBU – Number of MSC base units to meet subscribers’ requirements, units (see formula No.

(81)).

The number of extension units is calculated for:

� Processor;

� VLR, EIR;

� Signaling System (SS7);

� Trunk ports.

The dividend variable of a processor part is the number of BHCA, VLR, EIR – number of

subscribers, SS7 – number of SS7 links, trunk ports – the total number of ports required in MSC.

The number of SS7 links is calculated according to the following formula:

7/7

SSp

icisSS N

ppN

� (83)

Where:

pis – Inter-switch 2 Mbit/s ports, units (see formula No. (79)).

74

pic – Interconnect-facing ports, units (see formula No. (77)).

Np/SS7 – Trunks per SS7 link, units.

It is assumed that there are 16 trunks per SS7 link.

As Input/Output peripherals number in MSC is a part of MSC configuration, it equals to the number

of MSCs base units.

The amount of MSC extension units for each, processor, VLR, EIR, trunk port and SS7 is

calculated according to algorithm provided in section 10.4.1. Base and extension units with number

of BHCA, number of subscribers, number of SS7 links, total number of ports required in MSC as

dividend variables respectively.

10.5.2. Mobile Switching Centre Server

Mobile Switching Centre Server (MSS) is dimensioned for the second alternative core network

modeling scenario (see section 4.6. Technological background).

MSS handles video calls and voice services traffic. As MSS is a processing unit of the core

network and it does not handle the traffic, its calculations are based only on the amount of busy

hour call attempts.

The outcome of the algorithms presented in this section is the amount of MSS base and extension

units.

Estimation of the minimum number of MSS base units required is a function of requirements to

meet minimal network configurations and switching capacity (CPU part).

For the requirements to meet the minimal network configuration demand there is an assumption

adopted in BU-LRAIC model that the minimal number of MSS in a mobile network is two.

The number of MSS base units ( CMSSBU , units) to meet switching capacity requirements (central


CPU

BHCACMSS C

NBU � (84)

MSSCPUsMSSCPU NCC /, �� (85)

Where:

– Call attempts in BHT, BHCA (see formula No. (2)). BHCAN

75

�sMSSC , – Maximal MSS operational capacity to satisfy call attempts in BHT, BHCA (see formula No.

(66)).

CCPU – CPU capacity of MSS, BHCA;

NCPU/MSS – CPUs per MSS, units.

Default MSS’s configuration in most usual case gives one PCU per MSS, consequently it is

assumed there is one CPU per MSS.

So total amount of MSS base units (BUMSS, units) is calculated according to the following formula:

� �cMSSMSSMSS BUBUMaxBU ;min� (86)

Where:

minMSSBU – Number of MSS base units to meet minimal requirements of the network, units. This

number is assumption equals to 2 units.

CMSSBU – Number of MSS base units to meet switching capacity requirements, units (see formula

No. (84)).

The amount of MSS extension units is calculated according to the algorithm provided in section

10.4.1. Base and extension units with number of BHCA as dividend variable.

10.5.3. Media Gateway

Similarly to MSS, Media Gateway (MG) is dimensioned for the second alternative core network

modeling scenario (see section 4.6. Technological background). MGW handles video calls and

voice services traffic.

MGW comprises of the following parts:


� MGW extensions:

� Processor extension;

� Trunk port extension;

Estimation of the minimum number of MGW base units required is a function of requirements to

meet:



76

3. Ports number in MGW;



adopted in BU-LRAIC model that the minimal number of MGWs in a mobile network is two.

The number of MGW base units ( CMGWBU , units) to meet switching capacity requirements (central


CPU

BHCACMGW C

NBU � (87)

MGWCPUsMGWCPU NCC /, �� (88)

Where:

NBHCA – Call attempts in BHT, BHCA. See formula No. (2).

�sMGWC , – Maximal MGW operational capacity to satisfy call attempts in BHT, BHCA (see formula

No. (66)).

CCPU – CPU capacity of MGW, BHCA;

NCPU/MGW – CPUs per MGW, units.

Default MGW’s configuration in the most usual case gives one PCU per MGW, consequently it is

assumed there is one CPU per MGW.

The number of MGW base units ( pMGWBU , units) to meet the ports number requirements is


�pMGW

pMGWp

MGW CN

BU,

� (89)

Where:

pMGWN – Total ports required in MGW, units. See formula No. (90).

�pMGWC , – Maximal MGW operational capacity to satisfy number ports, ports. See formula No. (66).

Total number of ports required ( pMGWN , units) in MGW is calculated according to the following

formula:

77

mgwis

mgwicRNC

pMGW pppN � (90)

Where:

pRNC – RNC-facing ports in MGW, units. See formula No. (91).

mgwicp – Interconnect-facing ports in MGW, units. See formula No. (93).

mgwisp – Inter-switch 2 Mbit/s ports in MGW, units. See formula No. (95).

Number of RNC-facing ports (pRNC, units) is calculated according to the following formula:

311

7.01�� RNCRNC Tp

(91)

Where:

TRNC – RNC-MGW traffic, BHE.



RNC-MGW traffic (TRNC, BHE) is calculated according to the following formula:

TotalTotalTotalTotalRNC MMSSMSVMMT � (92)

Where:

MTotal – Total voice minutes traffic in RNC, BHE;

VMTotal – Total video minutes traffic in RNC, BHE;

SMSTotal – Total SMS messages traffic in RNC, BHE.

MMSTotal - Total MMS messages traffic in RNC, BHE.

The number of interconnect-facing ports ( mgwicp , units) in MGW is calculated according to the

following formula:

311

7.01�� mgw

icmgwic Tp

(93)

Where:

mgwicT – Interconnect traffic in MGW, BHE.



78

Interconnect traffic ( mgwicT , BHE) in MGW is calculated according to the following formula:

TotalTotalTotalTotalic MMSSMSMVMT � (94)

Where:

MTotal – Total call minutes between MGW and point of interconnection, BHE.

VMTotal - Total video call minutes between MGW and point of interconnection, BHE.

SMSTotal – Total SMS messages between MGW and point of interconnection, BHE.

MMSTotal – Total MMS messages between MGW and point of interconnection, BHE;

Number of inter-switch 2 Mbit/s ports ( mgwisp , units) in MGW is calculated according to the following

formula:

311

7.01�� mgw

ismgwis Tp (95)

Where:

mgwisT – Inter-switch traffic in MGW, BHE.



Inter-switch traffic ( mgwisT , BHE) in MGW is calculated according to the following formula:

ONONONONmgw

is MMSSMSVMMT � (96)

Where:

MON – Total on-net voice minutes traffic in MGW, BHE;

SMSON – Total on-net SMS messages traffic in MGW, BHE;

VMON – Total on-net video minutes traffic in MGW, BHE;

MMSON – Total on-net MMS messages traffic in MGW, BHE;

So, total amount of MGW base units (BUMGW, units) is calculated according to the following

formula:

� �pMGW

CMGWMGWMGW BUBUBUMaxBU ;;min� (97)

Where:

79

minMGWBU – Number of MGW base units to meet minimal network requirements, units. Value of this

parameter is assumption provided at the beginning of this section.

CMGWBU – Number of MGW base units to meet switching capacity requirements, units (see formula

No. (87)).

pMGWBU – Number of MGW base units to meet port number requirements, units (see formula (89)).

The amount of MGW extension units for both processor and ports part is calculated according to

the algorithm provided in section 10.4.1. Base and extension units with the number of BHCA and

the total number of ports required in MGW as dividend variables respectively.

10.5.4. Media Gateway Controller

Media Gateway Controller (MGC) is dimensioned for the second alternative core network modeling

scenario (see section 4.6. Technological background). MGC handles controlling functions of MGW.

MGW comprises of the following parts:


� MGC extension.

Estimation of the minimum number of MGC base units required is a function of requirements to

meet:


2. Switching capacity;



adopted in BU-LRAIC model that the minimal number of MGCs in a mobile network is one.

The number of MGC base units ( CMGCBU , units) to meet switching capacity requirements are

calculated according to the following formulas:

CPU

BHCACMGC C

NBU � (98)

MGCCPUsMGCCPU NCC /, �� (99)

Where:

NBHCA – Call attempts in BHT, BHCA. See formula No. (2).

80

�sMGCC , – Maximal MGC operational capacity to satisfy call attempts in BHT, BHCA (see formula

No. (66)).

CCPU – Switching capacity of MGC BHCA;

NCPU/MGC – Maximal number of extensions per MGC, units.

The amount of MGC extension units is calculated according to the algorithm provided in section

10.4.1. Base and extension units with the number of BHCA required in MGC as dividend variable.

10.5.5. Network Session Border Gateway (N-SBG)

Network Session Border Gateway (N-SBG) is dimensioned for the third alternative core network

modeling scenario (see section 4.6. Technological background). N-SBG handles inter-domain

inter-working between SIP networks and SIP or H.323 networks

N-SBG comprises of the following parts:


� N-SBG extension.

Estimation of the minimum number of N-SBG base units required is a function of requirements to

meet:


2. Switching capacity;



adopted in BU-LRAIC model that the minimal number of N-SBG in a mobile network is one.

The number of N-SBG base units ( CBU SBG -N , units) to meet switching capacity requirements are

calculated according to the following formulas:

CPU

BHCAC

CN

BU �SBG-N (100)

SBG-N/,SBG-N CPUsCPU NCC �� (101)

Where:

NBHCA – Call attempts in BHT, BHCA.

�sC ,SBG -N – Maximal N-SBG operational capacity to satisfy call attempts in BHT, BHCA/

81

CCPU – Extensions capacity of N-SBG BHCA;

NCPU/ N-SBG – Maximal number of extensions per N-SBG, units.

The amount of N-SBG extension units is calculated according to the algorithm provided in section

10.4.1. Base and extension units with the number of BHCA required in N-SBG as dividend

variable.

10.5.6. Short messages service center

The fourth step in dimensioning NSS layer is modeling the SMSC. Each SMSC comprises two

parts:

� Base unit;

� Extension units.

The outcome of the algorithm presented in this section is the number of base unit and extension

unit for SMSC.

SMSC in BU-LRAIC are dimensioned according to the same engineering rules, so one algorithm

for both network elements is provided.

The dividend variable for both parts is the number of busy hour messages (SMS messages) per

second (MMS/s, messages/s) and is calculated according to the following formula:

MS

MSsMS f

TN ��

601

/ (102)

Where:

fMS – Message to minute equivalent conversion factor. They are calculated in the formulas No. (8)

and (9).

TMS – Total minute equivalent for messages in the network element per minute in busy hour,

minutes.

Amount of SMSC base units and extension units is calculated according to algorithm provided in

section 10.4.1. Base and extension units with busy hour SMS messages as dividend variable.

10.5.7. Multimedia messaging service center (MMSC)

The next step in dimensioning NSS layer is modeling the MMSC. During this step basic and

extension units of MMSC are calculated. The number MMSC basic unit is calculated as the

82

number of BH MMS per second divided by maximal capacity of MMSC physical location. The

MMSC extension unit is calculated according to the formula:

� � � ��

� ��

�

�

��

�

� ��

extOC

baseOCBU

ACAP

BUEUMMSC

)(

)MMSC(MMSC (103)

Where:

EU(MMSC) – number of MMSC extension units

BU(MMSC) – number of MMSC basic units

CAP(A) – number of BH MMS per second

OC(base) – base unit operational capacity of MMSC

OC(ext) – extension step operational capacity of MMSC

10.5.8. IP multimedia Sub-System

IMS is dimensioned for the third alternative core network modeling scenario (see section 4.6.

Technological background). It is responsible for handling the point of interconnection traffic and

control of local traffic and services.

The starting point of dimensioning of the IMS system is calculation of the traffic (BHE, BHCA) and

subscribers volumes which should be handled by this system. The IMS system will handle only a

part of the voice traffic which is provided over LTE network and number of subscribers which are

using LTE user equipment. Therefore it is assumed that the volumes of BHE, BHCA and

subscribers, which are used to dimension the IMS, are calculated by multiplying total volume of

BHE, BHCA and subscribers by ratio of voice traffic provided over LTE to total voice traffic.

The dimensioning of the particular IMS elements is performed in the following steps:

1) For each IMS element determine the main unit (chassis) type based on the volume of supported

volume BHE, volume of BHCA and volume of subscribers.

The number of IMS cabinets needed is determined using the following formula:

��

��

��

CSFC

ISFcIMS C

NN

(104)

Where,

83

cIMSN - Number of IMS cabinets required to serve the network. The number is rounded up

to the nearest integer;

CSFCC - IMS cabinet’s capacity of service frames.

The required service frames are calculated using the following formula:

��

�

�

��

�

�

� � �

)(

)()(6

2

2

1

ICSC

i i

HSSxType

IMSxType

ISF C

NNN

(105)

Where,

ICSCC - IMS and HSS service frame’s card capacity;

IMSxTypeN - Number of x type IMS service cards. The required amount of each type of cards is

dimensioned according to the network specifics;

HSSxTypeN - Number of x Type HSS service cards.

2) For each IMS element volumes of extension cards (TDM processing, VoIP processing) are

calculated. Formulas, according to which volume of each extension card is calculated, are

presented below.

The number of required IMS Type 2, 3, 4, 5, 6, 7 cards is calculated using the following formula:

)2;max(��

�

��

��

capacityx

zIMSxType C

VN

(106)

Where,

capacityxC -Type x IMS service card handling capacity;

zV - Total network volume z handled by x type of component;

z - Total network volume of BHE or BHCAor totalS ;

x - IMS service card Type: 2 or 3 or 4 or 5..

In each IMS service frame there are two IMS Type 1 cards, therefore the number of IMS Type 1

cards is calculated as a number of IMS service frames multiplied by 2.

84

3) The number of required HSS service cards is calculated using the following formula:

)2;(2/1��

�

��

��

capacityx

totalHSSType C

SMAXN

(107)

Where,

totalS - Total amount of voice subscribers in the network;

capacityxC - Type x HSS service card handling capacity;

x - Type of the service card. There are two types in total.

10.5.9. Voice Mail Service and Home Location Register

Each Voice mail service (VMS) and Home location register (HLR) comprises two parts:

� Base unit;


The outcome of the algorithm presented in this section is the number of base units and extension

units for VMS and HLR. The dividend variable for VMS is measured by mailboxes and HLR by the

number of subscribers’.

The amount of VMS and HLR base units and extension units is calculated according to the

algorithm provided in section 10.4.1. Base and extension units with mailboxes and the number of

subscribers as dividend variables.

10.5.10. Centralized User Database (CUDB)

Each Centralized User Database (CUDB) comprises two parts:

� Base unit;


The outcome of the algorithm presented in this section is the number of base units and extension

units for CUDB. The dividend variable for CUDB is measured by the number of subscribers.

85

Amount of CUDB base units and extension units is calculated according to algorithm provided in

section 10.4.1. Base and extension units with mailboxes and subscribers number as dividend

variables.

10.5.11. Service Control Point (Intelligent Network)

Service Control Point (SCP) is the network element, which services pre-paid subscribers. SCP

comprises two parts:

� Base unit (pre - paid related);

� Extension:

� Subscribers part;

� Transactions part.

Estimation of the minimum number of SCP base units required is a function of requirements to

meet the subscribers and traffic demand. In each component’s case calculation algorithms are

described below.

The total amount of SCP base units (BUSCP, units) is calculated according to the following

formulas:

Where:

Npre – Pre-paid subscribers, units;

NTr/s – Busy hour transactions per second, units;

�subSCPC , – Maximal operational capacity to satisfy number of subscribers (see formula No. (66));

�TrSCPC , – Maximal operational capacity to satisfy number of transactions, BH transactions/s (see

formula No. (66));

NTSub – GSM, UMTS and LTE subscribers, units;

��

��

��

TrSCP

sTr

subSCP

preSCP C

NC

NMaxBU

,

/

,

;

(108)

ctBHCA

TSub

presTr

NN

NN // 60

��

(109)

86

NBHCA – Call attempts in BHT, BHCA (see formula No. (2)).

�t/c- Average number of IN transactions per one pre-paid subscriber call (on-net and off-net).

Assumption is made that �t/c is 8 transactions per call.

The amount of SCP extension units for subscribers and transactions part is calculated according to

the algorithm provided in section 10.4.1. Base and extension units with the number of subscribers

and BH transactions per second dividend variables.

10.5.12. Network Functionality

Network functionality (NF) elements in BU-LRAIC comprise the following elements:

� Soft handover (SFH);

� GSM/DCS control;

� LTE fallback function;

BU-LRAIC model assumes that the amount of NE elements is equal to the amount of other NE

according to the table 14.

Table 14. Amount of NE elements

HCC name Total amount of units SFH: soft handover (network-wide) One unit in a mobile network

SFH: soft handover (RNC extension) Equal to a number RNC base units

SFH: soft handover (NodeB extension) Equal to a number of Node Bs

GSM/DCS: control (network-wide) One unit in a mobile network

GSM/DCS: control (MSC extension) Equal to a number of MSC base units

GSM/DCS: control (BSC extension) Equal to a number of BSC base units

GSM/DCS: control (BTS extension) Equal to a number of dual band BTS sites

LTE: CS fallback function (eNodeB extension) Equal to a number of eNodeB

LTE: CS fallback function (MME extension Equal to a number of MME

10.5.13. Billing IC system

Billing IC system is dimensioned for all network modeling scenario (see section 4.6. Technological

background). Billing IC system should present a part of billing system utilized by wholesale

services.

87

Billing IC system comprises of the following parts:

� Billing IC system: basic unit

� Billing IC system: extension

Estimation of the minimum number of Billing IC system base units required is a function of

requirements to meet:


2. Processing capacity.



adopted in BU-LRAIC model that the minimal number of Billing IC system in a mobile network is

one.

The number of Billing IC system base units ( CBICBU , units) to meet processing capacity

requirements are calculated according to the following formulas:

CPU

BHCACBIC C

NBU � (110)

BICCPUsBICCPU NCC /, �� (111)

Where:

NBHCA – Interconnection call attempts in BHT, BHCA.

�sBICC , – Maximal Billing IC system operational capacity to satisfy call attempts in BHT, BHCA.

CCPU – Processing capacity of BHCA;

NCPU/BIC – Maximal number of extension units per Billing IC system, units.

The amount of Billing IC system extension units is calculated according to the algorithm provided in

section 10.4.1. Base and extension units with the number of BHCA required in Billing IC system as

dividend variable.

10.5.14. Number portability system

Number portability system is dimensioned for all network modeling scenario (see section 4.6.

Technological background). Number portability system should present a part of number portability

system utilized by wholesale services.

88

Number portability system comprises of the following parts:

� Number portability system: basic unit

� Number portability system: extension

Estimation of the minimum number of Number portability system base units required is a function

of requirements to meet:





adopted in BU-LRAIC model that the minimal number of Number portability system in a mobile

network is one.

The number of Number portability system base units ( CNPSBU , units) to meet processing capacity


CPU

BHCACNPS C

NBU � (112)

NPSCPUsNPSCPU NCC /, �� (113)

Where:


�sNPSC , – Maximal Number portability system operational capacity to satisfy call attempts in BHT,

BHCA.


NCPU/NPS – Maximal number of extension units per Number portability system, units.

The amount of Number portability system extension units is calculated according to the algorithm

provided in section 10.4.1. Base and extension units with the number of BHCA required in Number

portability system as dividend variable.

10.5.15. Lawful interception system

Lawful interception system is dimensioned for all network modeling scenario (see section 4.6.

Technological background).

89

Lawful interception system comprises of the following parts:

� Lawful interception system: basic unit

� Lawful interception system: extension

Estimation of the minimum number of Lawful interception system base units required is a function

of requirements to meet:





adopted in BU-LRAIC model that the minimal number of Lawful interception system in a mobile

network is one.

The number of Lawful interception system base units ( CLIBU , units) to meet processing capacity


CPU

BHCACLI C

NBU � (114)

LICPUsLICPU NCC /, �� (115)

Where:


�sLIC , – Maximal Lawful interception system operational capacity to satisfy call attempts in BHT,

BHCA.


NCPU/LI – Maximal number of extension units per Lawful interception system, units.

The amount of Lawful interception system extension units is calculated according to the algorithm

provided in section 10.4.1. Base and extension units with the number of BHCA required in Lawful

interception system as dividend variable.

90

10.6. Transmission

Transmission network connects physically separated nodes in a mobile network (BTSs/Node

B/eNode B, BSCs/RNC/EPC, MSCs or MSS/MGWs or SGGSN/GGSN) and allows transmission of

communication signals over far distances.

Transmission network, according to the mobile network topology in BU-LRAIC model, is split into

the following hierarchical levels:

� Backhaul transmission:

� BTS/Node B/eNode B – BSC/RNC/EPC;

� Core transmission:

� BSC/RNC – MSC, BSC/RNC – MGW or EPC – GGSN transmission;

� MSC – MSC, MGW – MGW or MGW- GGSN transmission.

BU – LRAIC model also assumes two different transmission technologies:

� Ethernet technology in backhaul transmission

� Ethernet technology in core transmission. Data transmission services are modeled in core

transmission as well.

The following sections provide algorithms for calculating transmission network capacity in each

hierarchical level of the mobile network.

Backhaul transmission

Backhaul transmission connects BTSs with BSCs (GSM network), Node Bs with RNCs (UMTS

network) or eNode Bs to EPC. Ethernet technology is used to transport data between the

mentioned nodes of mobile network. Ethernet comprise the following transmission modes:

� Ethernet radio link 10 Mbit/s microwave link;



� Ethernet radio link 100 Mbit/s microwave link.

To calculate backhaul transmission costs the proportion of each using Ethernet radio link needs to

be estimated. Consequently, essential assumption in backhaul transmission is made that

BTSs/Node Bs/eNode Bs are linked to one transmission line. Then, the proportion of each Ethernet

radio link is set depending on:

91

� The number of sites (BTS/Node B/eNode B) per transmission line which connects

BSC/RNC/EPC and the furthest BTS/Node B/eNode B;

� Average throughput per site.

Figure 7 illustrates the principal transmission scheme between BTSs/Node Bs and BSCs/RNCs.

N1=N2=N3 - Average throughput per site in (kbit/s)

Figure 7: Calculating proportions of each Ethernet radio link.

Key characteristics for backhaul transmission modeling are13:

� Transmission network equipment is built with minimal capacity level to assure BTS/Node B/

eNode B – BSC/RNC/EPC transmission on the level sufficient to serve the traffic demand.

� Each BTS/Node B/eNode B that belongs to a particular transmission line put additional

volume of data to the transmission line. It results in higher loading of the transmission line

coming up to BSC/Node B/eNode B and lower loading moving backwards.

� Assumption that the average number of sites per transmission line is three is set.

Below, the algorithm of Ethernet radio links number calculation by different transmission modes

(10Mbit/s; 20 Mbit/s; 40 Mbit/s; 100 Mbit/s) is provided. As all Ethernet radio link modes are

calculated with reference to one algorithm, a common Ethernet radio link number calculation

algorithm is provided.

At first, the average throughput per site (�TH, kbit/s) is calculated according to the following formula:

SI

LTEGSMUMTSTH N

THTHTH ��

(116)

Where:

THUMTS – Total throughput per UMTS sites taking in account all type of cells, sub-areas and

sectors, kbit/s;

13 When network is built in a ring structure data traffic is going through the shortest way. This is the reason why these characteristics are accepted.

BSC/RNC/EPC

BTS/Node B/eNode B BTS/Node B/eNode B

BTS/Node B/eNode B

T1=N1 T2=T1+N2 T3=T2+N3

N1 N2 N3

92

THGSM – Total throughput per GSM sites taking in account all type of cells, sub-areas and sectors,

kbit/s;

THLTE – Total throughput per LTE sites taking in account all type of cells, sub-areas and sectors,

kbit/s;

NSI – Total number of sites (GSM, UMTS and LTE networks), units (calculated in formula No. (68)).

THUMTS is calculated according to the following formula:

UMTSkji

kji

UMTSkjiUMTS NTHTH ,,

,,,, �� (117)

Where:

UMTSkjiTH ,, – Throughput per UMTS site, kbit/s. See formula No. (118).

UMTSkjiN ,, – Number of UMTS sites, units;

i – Type of area;

j – Type of cell;

k – Type of sector.

UMTSkjiTH ,, is calculated according to the following formula:

iN

CPCPNTH Si

iSeB

SeHSDPAHSDPA

SeUMTS

SeBCAPUMTS

kji ��

�)( min

,, (118)

Where:

SeBCAPN - Number of sectors to meet capacity requirements in all types of area and cell, calculated in

formula No. (46), units;

PUMTS – UMTS data traffic proportion in UMTS network, %;


SeC min – Sector capacity in BHT in all types of area and cell, kbit/s. Assumptions for this value are

provided in the beginning of section 10.2.1. Node B.

SeHSDPAC - Sector capacity – HSDPA, in BHT in all types of area and cell, kbit/s. Assumptions for this

value are provided in the beginning of section 10.2.1. Node B.

SiiSeBN – i sectored sites in UMTS network, calculated in formula No. (48), units;

i - 1, 2 or 3, respectively to omni sector, 2 sector or 3 sector.

93

THGSM is calculated according to the following formula:

GSMkji

kji

GSMkjiGSM NTHTH ,,

,,,, �� (119)

Where:

GSMkjiTH ,, - Throughput per GSM site, kbit/s;

GSMkjiN ,, - Number of GSM sites, units;

i – Type of area;

j – Type of cell;

k – Type of sector.

GSMkjiTH ,, is calculated according to the following formula:

iTHNTH SeSeTRX

GSMkji �� /,,

(120)

Where:

SeTRXN / - Number of TRXs per sector (taking in account all types of area and cell), calculated in

formulas No. (36), (37), (38), units;

THSe – Throughput per TRX, kbit/s; as there are 8 channels in one TRX and it is assumed that

throughput per one channel equals 16 kbit/s, throughput per TRX is calculated multiplying 8

(channels) by 16 (throughput per one channel);

i - 1, 2 or 3, respectively to omni sector, 2 sector or 3 sector.

Further, link capacity of transmission modes ( liC , circuits) is calculated according to the following

formula:

lcib

li NOACC �� (121)

Where:

Cb – Basic 2 Mbit/s link capacity, kbit/s; Mbit/s will be translated into kbit/s using 1000 multiple.

OA – Operational allowance, %; Algorithm of operational allowance is provided in formula No. (68)

(calculated according to Ethernet equipment).

lciN – Number, which multiplies basic 2 Mbit/s link capacity;

i – Ethernet links at 10 Mbit/s, 20 Mbit/s, 40 Mbit/s, and 100 Mbit/s.

94

lciN values are:

� Ethernet radio link 10 Mbit/s microwave link – 5;



� Ethernet radio link 100 Mbit/s microwave link – 50.

The maximum number of transmission modes sections per transmission line ( sec,MAXiN , units) is


��

��

��

TH

liMAX

i

CN

�sec,

(122)

Where:

liC – Particular link capacity of transmission modes, kbit/s;

�TH – average throughput per site, kbit/s. Calculation of this dimension is provided in formula No.

(116).

The number of transmission modes sections per transmission line is calculated with different

algorithms for different types of Ethernet radio links. The number of 10 Mbit/s sections per

transmission line ( sec5N , units) is calculated according to the following formula:

);( sec,10

sec10 BTS

MAXNMINN ��

(123)

Where:

sec,10MAXN – Maximum number of 10 Mbit/s sections per transmission line, units (see formula No.

(122)).

� BTS – Average number of BTS sites per transmission line, units. Assumption is provided in page

91.

The number of 20 Mbit/s sections per transmission line ( sec20N , units) is calculated according to the

following formula:

sec10

sec,20

sec20 );( NNMINN BTS

MAX � �

(124)

Where:

95

sec,20MAXN – Maximum number of 20 Mbit/s sections per transmission line, units. (see formula No.

(122)).

� BTS – Average number of BTS sites per transmission line, units. Assumption is provided on page

91.

sec10N – Number of 10 Mbit/s sections per transmission line, units. Look at formula No. (123).

The number of 40 Mbit/s sections per transmission line ( sec40N , units) is calculated according to the

following formula:

sec10

sec20

sec,40

sec40 );( NNNMINN BTS

MAX � �

(125)

Where:

sec,40MAXN – Maximum number of 40 Mbit/s sections per transmission line, units. (see formula No.

(122)).

� BTS – Average number of BTS sites per transmission line, units. Assumption is provided on page

91.

sec10N – Number of 10 Mbit/s sections per transmission line, units (see formula No. (123))

sec20N – Number of 20 Mbit/s sections per transmission line, units (see formula No. (124)).

The number of 100 Mbit/s sections per transmission line ( sec100N , units) is calculated according to


sec10

sec20

sec40

sec,100

sec100 );( NNNNMINN BTS

MAX � �

(126)

Where:

sec,100MAXN – Maximum number of 100 Mbit/s sections per transmission line, units (see formula No.

(122))


91.




96

Share of transmission modes sections per transmission line ( seciP , %) is calculated according to the

following formula:

); ( secBTS

secsec

NMINN

P ii �

�

(127)

Where:

seciN – Number of transmission mode sections per transmission line, units. Look at formulas (123)

– (126).

i – Ethernet10 Mbit/s, 20 Mbit/s, 40 Mbit/s, 100 Mbit/s;


91.

Nsec – Total number of transmission modes sections per transmission line, units. Calculated

summing up the results of formulas No. (123) – (126).

Finally, Ethernet radio links number by different transmission modes ( ETHiN , units) is calculated


SiTotali

ETHi NPN �� sec

(128)

Where:

seciP – Share of transmission modes sections per transmission line, %;

i – 10 Mb/s, 20 Mb/s, 40 Mb/s, 100 Mb/s;

SiTotalN – Total number of sites in mobile network, units. This number is calculated in formula No.

(68).

Core transmission

Calculation of BSCs/RNCs/EPC - MGW/EPC data transmission links number.

As mentioned before, core transmission connects BSCs/RNCs/EPC and MSCs or MGWs or PGWs

and for core transmission modeling data transmission services are modeled.

First of all, the number of Ethernet radio links in BSC/RNC – MSC, BSC/RNC – MGW or EPC -

EPC hierarchy level is calculated. Below, the calculation algorithm is provided.

97

Total BSC/RNC – MSC, BSC/RNC – MGW or EPC - GGSN links demand for capacity (Mbps) is a

sum of BSC total number of interfaces (E1) multiplied by E1 link throughput, RNC Iub link

throughput, eNodeB interfaces throughput.

BSC/RNC/EPC-MGW/EPC microwave radio links demand for capacity (Mbps) is calculated by

multiplying total BSC/RNC/EPC-MGW/EPC links demand for capacity (Mbps) by share of

microwave radio links in total transmission.

BSC/RNC/EPC-MGW/EPC data transmission demand for capacity (Mbps) is calculated by

multiplying total BSC/RNC/EPC-MGW/EPC links demand for capacity (Mbps) by share of leased

lines in total transmission.

The implemented algorithm uses structure of BSC/RNC/EPC-MGW/EPC links, as presented

below.

The main steps of algorithm calculating the number and throughput of BSC/RNC/EPC-MGW/EPC

links, are:

1. Number of structures presented on above picture calculation (number of structures is equal to

number of MGW/MSC/EPC locations);

2. Average number of BSC/RNC/EPC sites per structure calculation;

3. Number of BSC/RNC/EPC sites in each layer calculation (The maximal number of layers is

assumed to be 3). The BSC/RNC/EPC sites are added to first layer until it reaches its capacity

(maximal number of BSC/RNC/EPC sites), then the rest of MGW/MSC/EPC sites is located in

second layer;

4. Calculation number of links per MGW/MSC/EPC separately for different throughput (1n, 2n, 3n);

Layer 2

Layer 1

MGW/EPC

BSC/RNC/EPC sites

Single link

Double link

Tripple link

98

5. Calculation number of 300 Mbps Ethernet radio links and number of GE data transmission

services;

6. Calculation average distance between MGW/MSC/EPC site and MGW/EPC applying the

following formula:

247,31

) CMGW/MSC/EP)(/()/(��

��

EPCMGWEPCMGWArea

Dist (129)

, assuming unique distance between all BSC/RNC/EPCs and MGW/EPCs.

Where:

Area – total area covered by the network.

MGW/EPC – total number of MGW/EPC. See formulas (62) and (87);

MGW/EPC(BSC/RNC/EPC) – average number of BSC/RNC/EPC sites per MGW/EPC.

Calculation of MGW/MSC/PGW-MGW/MSC/PGW data transmission links number.

The implemented algorithm uses structure of MGW/MSC/PGW-MGW/MSC/PGW links, as

presented below.

The main steps of algorithm calculating the number and throughput of MGW-MGW links, are:

1. MGW/MSC/PGW-MGW/MSC/PGW demand for capacity (Mbps) calculation (number of

interswitch-facing MGW ports, number of interswitch-facing MSC ports, throughput of PGW – PGW

generated by voice services);

2. Number of links between MGW's calculation, according to formula:

MGW/MSC/PGW

MGW/MSC/PGW-MGW/MSC/PGW link

99

��

��

��

2//

//)(//PGWMSCMGW

PGWMSCMGWlinksPGWMSCMGW (130)

, assuming unique distance between all MGW/MSC/PGW.

Where:

MGW/MSC/PGW – total number of MGW/MSC/PGW.

3. Number of GE data transmission lines calculation as average capacity per MGW/MSC/PGW site

(Mbps) divided by capacity of GE data transmission and multiplied by number of MGW/MSC/PGW

sites;

4. Average distance between MGW/MSC/PGW site and MGW/MSC/PGW calculation applying the

following formula:

247,31

//��

PGWMSCMGWArea

Dist (131)

, assuming unique distance between all MGW/MSC/PGWs.

Where:

Area – total area covered by the network..;

MGW/MSC/PGW – total number of MGW/MSC/PGWs.

Stand-alone transmission radio link: tower and site preparation

As the total number of Ethernet is calculated, it is assumed that additional (to traffic and coverage)

towers and sites are needed for transmission. These radio links are further referred to as stand-

alone transmission radio links.

The total number of stand-alone transmission radio link ( tASN , units) is calculated according to the

following formula:

ASC

ASB

tAS NNN

� (132)

Where:

ASBN – Number of stand-alone microwave sites in backhaul transmission, units;

ASCN – Number of stand-alone microwave sites in core transmission, units.

100

ASBN is calculated according to the following formulas:

ETHAS

ETHASB PNN ��

(133)

�i

ETHi

ETH NN

(134)

Where:

NETH – Total number of Ethernet radio links in BTS/NodeB/eNodeB–BSC/RNC/EPC transmission,

units;

ETHASP

– Percent of stand-alone Ethernet radio links, %. Data related to stand-alone Ethernet radio

links will be gathered from Operators.

ETHiN – 10 Mbit/s, 20 Mbit/s, 40 Mbit/s, 100 Mbit/s Ethernet radio links.

ASCN is calculated according to the following formula:

ETHASETH

ASC PNN �� (135)

Where:

NETH – Total number of Ethernet radio links (calculated in formula No.(134)), units;

ETHASP

– Percent of stand-alone Ethernet radio links, %. Data related to stand-alone Ethernet radio

links will be gathered from Operators.

101

11. Network valuation

11.1. Cost annualization

All mobile network elements identified during network dimensioning are revalued at Gross

Replacement Cost (GRC). On the basis of GRC value, its annual CAPEX cost is being further

calculated. In BU-LRAIC model there are four alternative methods that are used to calculate

annual CAPEX costs:

� Straight-line method;

� Annuity method;

� Tilted Annuity method;

� Economic depreciation method.

Algorithms to calculate annual CAPEX cost (depreciation and ROI) using straight-line, annuity,

tilted annuity and economic depreciation methods are described in the following sections.

Straight-line method

The annual CAPEX costs under the straight-line method are calculated according to the following

formula:

ROIHGCDC � (136)

Where:

� lGRC

CD � - current depreciation (l – useful life of an asset (data will be gathered from

Operators); GRC –gross replacement cost of an asset);

� indexGRC

GBVNBV

HG ��, holding gain (loss);

� WACCGRC

GBVNBV

ROI �� - cost of capital;

� Index - price index change (data will be gathered from Operators);

� NBV – net book value;

� GBV – gross book value;

� WACC - weighted average cost of capital.

Annuity method

102

The annual CAPEX costs under the annuity method are calculated according to the following

formula:

� �l

WACC

WACCGRCC

��

��

�

�

11

1

(137)

Tilted annuity method

The annual CAPEX costs under tilted annuity method are calculated according to the following

formula:

� �l

WACCindex

indexWACCGRCC

��

��

�

�

11

1

(138)

Economic depreciation

Economic depreciation algorithm involves a cash-flow analysis to answer the question: what time-

series of prices, consistent with the trends in the underlying costs of production (e.g. utilization of

the network, price change of asset elements), yield expected net present value equal zero (i.e.

normal profit).

Economic depreciation requires to forecast key variables:

� Cost of capital

� Changes in the price of Modern Equivalent Asset

� Changes in operating cost over time

� Utilization profile

The impact of key variables on depreciation, is as follows:

� The lower the cost of capital, the lower the cost of investment that needs to be recovered in

any year

� The greater the future MEA price reductions, the more depreciation needs to be front-

loaded

� The deprecation should be brought forward, according to the increase in the operating cost

of an asset

Economic depreciation is a method to calculate annual costs based on a forecasted revenue

distribution during the useful asset lifetime. This is the main reason why this method is favored in

theory. However, in the current BU-LRAIC model the use of economic depreciation is excluded

103

from modeling scope due to some reasons. Firstly, results from this method are highly dependable

on various forecast assumptions. Forecasted revenue, cost of capital, changes in the price of

Modern Equivalent Asset, changes in operating cost over time, utilization profile are essential for

calculations, though having in mind the dynamic nature of the telecommunications market,

forecasts may be subjective. Secondly, changing the depreciation method during the regulated

period would result in different service cost results and could affect the general business case for

the operators. Finally, using alternative depreciation and annualization methods, such as straight-

line, annuity or tilted annuity, enables to reach comparable results.

A detailed analysis of straight-line, annuity, tilted annuity and economic depreciation and

annualization methods is presented in Annex No. 2.

Recommendation allows using a different depreciation method than economic depreciation if

feasible. The tilted annuity method will be used as the main method to calculate annual CAPEX

costs due to simplicity and a fact that it generates a depreciation profile similar to that of economic

depreciation – method recommended by Recommendation. The comparison of those methods is

presented in Annex 2. It is worth mentioning that the model will have a possibility to calculate

annual CAPEX using straight line, annuity and tilted annuity methods.

11.2. Mark-ups

BU-LRAIC model includes the network related operational cost, administration and support

operational and capital costs and network management system capital cost as a percentage of the

network costs. In the current BU-LRAIC model the following mark-ups are calculated:

Table 15. Mark-ups in BU-LRAIC modeling

Parameter name Activities and equipment included

Mark ups on GRC

Mark-ups of operational costs on network cost:

Site infrastructure OPEX. Operational costs of planning,

management, on—site visits, inspections,

configuration and maintenance works, for

particular network elements.

BSS and RNS infrastructure, eNode B

Transmission

MSC/MGW/EPC-GGSN

Mark-ups of network management system on network costs:

BSS and RNS infrastructure, eNode B CAPEX of network management system

104

Parameter name Activities and equipment included

Transmission equipment.

MSC/MGW/EPC-GGSN

Mark-ups on operational costs

Mark-ups of administration and support operational cost:

Total network infrastructure

OPEX. Operational cost of general

administration, finance, human resources,

information technology management and other

administration and support activities (salaries,

materials, services).

Mark-ups of administration and support capital cost

Total network infrastructure

CAPEX of general administration, finance,

human resources, information technology

management and other administration and

support activities (buildings, vehicles,

computers, etc.).

General table of detailed mark-ups that would be used in calculations are provided in table 16.

Mark-ups are calculated based on the principles described in section 4.7. Mark-ups.

105

Table 16. Mark-ups to cover network related costs

Mark-ups of operational

costs on network cost

Mark-ups of network

management system on

network cost

Mark-ups of

administration and

support operational

cost

Mark-ups of

administration and

support capital cost

Site

All sub-

components

Site infrastructure

(% on HCC GRC value) -

Total network

infrastructure

(% on network OPEX)

Total network

infrastructure

(% on network OPEX) BTS

All sub-

components

BSS infrastructure

(% on HCC GRC value)

BSS infrastructure


Total network

infrastructure

(% on network OPEX)

Total network

infrastructure

(% on network OPEX) Node B / eNode B

All sub-

components

BSS infrastructure


BSS infrastructure


Total network

infrastructure

(% on network OPEX)

Total network

infrastructure

(% on network OPEX) Ethernet radio link

All sub-

components

Transmission


Transmission


Total network

infrastructure

(% on network OPEX)

Total network

infrastructure

(% on network OPEX) BSC/RNC/EPC

All sub-

components

BSS infrastructure


BSS infrastructure


Total network

infrastructure

(% on network OPEX)

Total network

infrastructure

(% on network OPEX) MSC/MSS/MGW

All sub-

components

MSC/MGW and other

network


MSC/MGW and other

network


Total network

infrastructure

(% on network OPEX)

Total network

infrastructure

(% on network OPEX)

Network functionality

All sub-

components

MSC/MGW and other

network


MSC/MGW and other

network


Total network

infrastructure

(% on network OPEX)

Total network

infrastructure

(% on network OPEX) SMSC

All sub-

components

MSC/MGW and other

network


MSC/MGW and other

network


Total network

infrastructure

(% on network OPEX)

Total network

infrastructure

(% on network OPEX) Other Network / IMS

All sub-

components

(network-wide)

MSC/MGW and other

network


MSC/MGW and other

network


Total network

infrastructure

(% on network OPEX)

Total network

infrastructure

(% on network OPEX)

106

12. Service cost calculation

After major costs with the help of engineering model are established, service cost calculation stage

follows. The flow in figure 8 and explanation of processes are provided below.

As the figure 9 shows, after network

elements are established, HCCs are

allocated to NCs (see section 12.1 HCC

allocation to NC). Further total Network

Components costs are calculated by

summing appropriate HCCs. Total

Network Components costs are divided

by service volumes and Network

Component unit costs are calculated.

And finally Network Component unit

costs are multiplied by service usage

factor and service costs are calculated

(see table 19. Service matrix).

Figure 9. Service cost calclation flow

12.1. Homogeneous cost categories allocation to Network Components

Essential part of LRAIC methodology is allocation of Homogenous Cost Categories on Network

Components. Network Components represent logical elements that are functionally integrated and

from combining which services may be established. An example of Network Component is a logical

meaning of BTS which includes the annual cost of BTS’s along with all mark up costs resulting

from maintenance, localization and supporting activities (e.g. administration, accounting etc.).

HCCs to NC allocation matrix is presented in table 17.

HCC1

HCC2

HCC3

…

HCCn

NC1 NC2 NC3

NCn volumes

� � �

NCn unit costs

Service usage

Service costs

��

�

107

Table 17. HCC allocation to NC. Ref. HCC name Allocation on Network Components

NC1 NC2 NC3 NC4 NC5 NC6 NC7 NC8 NC9 NC10 NC11 NC12 NC13 NC14

Tower and site

preparation BTS / NodeB /

eNodeB BSC / RNC / EPC MSC / MSS / MGW

/ IMS TX backhaul TX aggregation TX core SMSC MMSC SGSN / GGSN WAP HLR Billing and regulatory


A. Site 1 Macrocell: tower and site preparation X 2 Microcell: site preparation X 3 Picocell: site preparation X 4 Stand-alone transmission radiolink: tower and site preparation X B. BTS - GSM 5 Macrocell: equipment (omni sector) X 6 Macrocell: equipment (2 sector) X 7 Macrocell: equipment (3 sector) X 8 Microcell: equipment X 9 Picocell: equipment X 10 Macrocell: TRXs X 11 Microcell: TRXs X 12 Picocell: TRXs X C. NodeB - UMTS 13 Macrocell: equipment (omni sector) X 14 Macrocell: equipment (2 sector) X 15 Macrocell: equipment (3 sector) X 16 Microcell: equipment X 17 Picocell: equipment X D.eNodeB - LTE 18 Macrocell: equipment (omni sector) X 19 Macrocell: equipment (2 sector) X 20 Macrocell: equipment (3 sector) X 21 Microcell: equipment X 22 Picocell: equipment X E.Ethernet Radiolink 23 Ethernet radiolink 10 Mb/s microwave link X 24 Ethernet radiolink 20 Mb/s microwave link X 25 Ethernet radiolink 40 Mb/s microwave link X 26 Ethernet radiolink 100 Mb/s microwave link X 27 Ethernet radiolink 300 Mb/s microwave link X F.BSC/RNC 28 BSC: base unit X 29 BSC: BS TRX extension X 30 TRC: transcoder base unit X 31 TRC: transcoder E1 (A interface) extension X 32 RNC: basic units X 33 RNC: extension units (Iub link) X 34 RNC: extension units (sectors) X 35 RNC: extension units (sites) X G.EPC 36 PGW: base unit X 37 PGW: extension units X 38 MME: base unit X 39 MME: extension units X H.MSC/MGW 40 MSC: basic unit and software X 41 MSC: processor extension X 42 MSC: VLR, EIR extension X 43 MSC: SS7 extension X 44 MSC: trunk port extension X 45 MSC: I/O peripherals X 46 MSS: basic unit and software X 47 MSS: processor extension X 48 MGW: basic unit and software X 49 MGW: processor extension X 50 MGW: trunk port extension X 51 MGC: basic unit and software X 52 MGC: extension X 53 N-SBG: basic unit and software X 54 N-SBG: extension X I.Network Functionality 55 SFH: soft handover (network-wide) X 56 SFH: soft handover (MSS extension) X 57 SFH: soft handover (RNC extension) X 58 SFH: soft handover (NodeB extension) X 59 GSM/DCS: control (network-wide) X 60 GSM/DCS: control (MSC extension) X

108

Ref. HCC name Allocation on Network Components NC1 NC2 NC3 NC4 NC5 NC6 NC7 NC8 NC9 NC10 NC11 NC12 NC13 NC14

Tower and site

preparation BTS / NodeB /

eNodeB BSC / RNC / EPC MSC / MSS / MGW

/ IMS TX backhaul TX aggregation TX core SMSC MMSC SGSN / GGSN WAP HLR Billing and regulatory


61 GSM/DCS: control (BSC extension) X 62 GSM/DCS: control (BTS extension) X 63 LTE: CS fallback function (eNodeB extension) X 64 LTE: CS fallback function (MME extension) X J.SGSN / GGSN 65 PCU: base unit X 66 PCU: extension units (Gb link) X 67 SGSN: base unit X 68 SGSN: processing extension X 69 GGSN: basic unit and licence X K.IMS 70 IMS - Cabinet X 71 IMS - Service frame X 72 IMS core - Service card - Type 1 - CSCF X 73 IMS core - Service card - Type 2 - A-SBG X 74 IMS core - Service card - Type 3 - VoIP AS X 75 IMS core - Service card - Type 4 - MRCF/CCTF X 76 IMS core - Service card - Type 5 - BGCF X 77 IMS core - Service card - Type 6 – DNS server X 78 IMS core - Service card - Type 7 – Service delivery AS X 79 HSS - Service card - Type 1 - Control card X 80 HSS - Service card - Type 2 - Database card X 81 IMS - Licenses - Type 1 - subscriber X 82 IMS - Licenses - Type 2 - traffic X 83 IMS - Licenses - Type 3 - HSS X L.SMSC/MMSC 84 SMSC: base unit X 85 SMSC: extension X 86 MMSC: base unit X 87 MMSC: extension X M.Other Network 88 SSP: service switching point (network-wide) X 89 SCP: service control point - base unit (pre-paid related) X 90 SCP: extension - subscribers X 91 VMS: base unit X 92 VMS: extension X 93 HLR: base unit X 94 HLR: extension X 95 Centralized User Database (CUDB): base unit X 96 Centralized User Database (CUDB): extension X 97 Billing IC system: basic unit X 98 Billing IC system: extension X 99 Number portability: basic unit X 100 Number portability: extension X 101 Lawful interception: basic unit and software X 102 Lawful interception: processor extension X N.License and frequency fee 103 Concession right - GSM 900 MHz (total value) X 104 Concession right - GSM 1800 MHz (total value) X 105 Concession right - UMTS (total value) X 106 Concession right - LTE (total value) X O.Data transmission services 107 Data transmission services aggregation, per link X 108 Data transmission services aggregation, per km X 109 Data transmission services core, per link X 110 Data transmission services core, per km X P.Wholesale & Regulatory specific cost 111 Wholesale & Regulatory specific cost X

109

12.2. Network Component average unit cost

After deriving the total costs of each Network Component, the average unit costs of those Network

Components are derived. Unit costs (UC, Lt) are derived by dividing the total cost of each Network

Component by yearly traffic utilizing that Network Component as the formula shows:

VolumeTNCC

UC �

(139)

Where:

TNCC – Total Network Component costs, LTL;

Volume – Annual traffic14 utilizing appropriate Network Component. Below, table 16 is provided

which explains how the appropriate volume is calculated.

As described in section 4. LRAIC methodology, model will have a functionality of calculating costs

of any service included in the economic model according each of Pure LRAIC, LRAIC+ and

LRAIC++ principles. Based on these methods, different calculation algorithms of TNCC costs are

applied (more information provided in section 4. LRAIC methodology):

� Pure LRAIC method – includes only incremental costs related to network components

used in the provision of the particular service

� LRAIC+ method – includes only incremental costs related to network components used

in the provision of the particular group of services, which allows some shared cost of

the group of services to become service incremental as well. The group of service could

be total voice services and total data services.

� LRAIC++ method – includes costs described in LRAIC+ method description plus

common and joint cost. The common and joint cost related to each group of service

(total voice services and total data services) are calculated separately for each

Network Component using an equally-proportional mark-up (EPMU) mechanism based

on the level of incremental cost incurred by each group of service (total voice services

and total data services).

Detailed explanation of links between mark-ups and HCC are provided in Table 16. Mark-ups to

cover network related operational cost, administration and support operational and capital costs

and network management system capital cost. It also has to be noted, that according the

14 Only successful calls are included in this parameter.

110

Recommendation provided in the legal background, all voice services will have to be calculated

using Pure LRAIC approach.

Table 18. Traffic utilizing Network Components.

Network Component Unit Traffic included Tower and site preparation Weighted service volumes in

equivalent minutes (conversion

is not applied to voice traffic)

Voice traffic

Video traffic

SMS traffic

MMS traffic

Circuit data traffic

Packet data traffic

BTS Weighted service volumes in



Voice traffic

SMS traffic

MMS traffic


Packet data traffic (Mbytes):

o Up-link (GSM subscribers)

o Down-link (GSM subscribers)

BSC Weighted service volumes in



Voice traffic (minutes of use)

Video traffic (minutes of use)

SMS traffic (pieces)

MMS traffic (pieces)

Circuit data traffic (minutes of use)


o Up-link (GSM subscribers)

o Down-link (GSM subscribers)

111

Network Component Unit Traffic included Node B Weighted service volumes in



Voice traffic

Video traffic

SMS traffic

MMS traffic


o Up-link (UMTS subscribers)

o Down-link (UMTS subscribers)

RNC Weighted service volumes in

equivalent minutes

Weighted data traffic volume in

megabytes

Voice traffic

Video traffic

SMS traffic

MMS traffic


o Up-link (UMTS subscribers)

o Down-link (UMTS subscribers)

eNode B Weighted service volumes in

equivalent minutes


o Up-link (LTE subscribers)

o Down-link (LTE subscribers)

EPC Weighted service volumes in

equivalent minutes

Weighted sessions volume




Data services (sessions)

MSC/MSS/MGW Weighted service volumes in

equivalent minutes

Voice traffic

Video traffic

112

Network Component Unit Traffic included TX - backhaul Weighted service volumes in

equivalent minutes


megabytes

Voice traffic

Video traffic

SMS traffic

MMS traffic


Packet data traffic

TX - aggregation Weighted service volumes in

equivalent minutes


megabytes

Voice traffic

Video traffic

SMS traffic

MMS traffic


Packet data traffic

TX - core Weighted service volumes in

equivalent minutes


megabytes

Voice traffic

Video traffic

SMS traffic

MMS traffic


Packet data traffic

SMSC Weighted service volumes SMS traffic

MMSC Weighted service volumes MMS traffic

SGSN / GGSN Weighted data traffic volume in

megabytes


o Up-link (GSM/UMTS/LTE subscribers)

o Down-link (GSM/UMTS/LTE subscribers)

o

113

Network Component Unit Traffic included HLR Number of users15 Year end mobile subscribers

(GSM post-paid)

Year end mobile subscribers

(GSM pre-paid)


(UMTS post-paid)


(UMTS pre-paid)


(LTE post-paid)


(LTE pre-paid)

Billing Weighted voice traffic volume


Weighted SMS volume

Weighted MMS volume

Voice traffic:

o Incoming

o Transit


SMS (messages)

MMS (messages)

IMS Weighted voice traffic volume

Weighted SMS volume

Weighted MMS volume




15 User is defined as active subscriber according to the document “General terms and conditions for engaging in electronic communications activities” (Žin., 2005, No 49-1641; 2006, No 131-4976; 2007, No43-1670).

114

Network Component Unit Traffic included Number portability platform Weighted voice traffic volume


Weighted SMS volume

Weighted MMS volume

Voice traffic (call attempts):

o On-net

o Incoming


SMS (messages)

MMS (messages)

12.3. Service cost

In order to calculate the total service cost, average service usage factors by each network

component involved in a service are needed. Average service usage factors refer to the quantity of

a particular network component involved in a service (e.g. average number of base stations,

switches and transmission links involved in termination service).

Service matrix with service usage factors is provided in table 19.

115

Table 19. Service matrix

Tower and site

preparation

BTS / NodeB / eNodeB

BSC / RNC / EPC

MSC / MSS / MGW / IMS TX backhaul

TX aggregation TX core SMSC MMSC

SGSN / GGSN HLR

Billing and regulatory


Call origination fR1.1 fR

1.1 fR1.2 fR

1.3 fR1.4 fR

1.5 fR1.6 - - - - 1,00 0,00

Call termination fR2.1

fR2.1

fR2.2

fR2.3

fR2.4

fR2.5

fR2.6

- - - - 1,00 1,00

Call transit 1 fR4.1

fR4.1

fR4.2

fR4.3

fR4.4

fR4.5

fR4.6

- - - - 1,00 0,00


fR5.1 fR

5.2 fR5.3 fR

5.4 fR

5.5

fR

5.6

- -

- - - - - 1,00 0,00


fR6.1� fR

6.2 fR

6.3 fR6.4 fR

6.5 fR

6.6 - - - - - - - 1,00 0,00

SMS - on-net fR8.1×fsms fR

8.1×fsms fR

8.2×fsms fR

8.3×fsms fR

8.4×fsms fR

8.5×fsms fR8.6×fsms 1,00 - -

- - - - 1,00 1,00

SMS - outgoing fR9.1×fsms

fR9.1×fsms

fR9.2×fsms

fR9.3×fsms

fR9.4×fsms

fR9.5×fsms fR

9.6×fsms 1,00

-

-

-

1,00 1,00

SMS - incoming fR10.1×fsms

fR10.1×fsms

fR10.2×fsms

fR10.3×fsms

fR10.4×fsms

fR10.5×fsms fR

10.6×fsms 1,00

-

-

-

1,00 1,00

MMS - on-net fR11.1×fmms

fR11.1×fmms

fR11.2×fmms

fR11.3×fmms

fR11.4×fmms

fR11.5×fmms fR

11.6×fmms - 1,00 1,00 - 1,00 1,00

MMS - outgoing fR12.1×fmms fR

12.1×fmms fR12.2×fmms fR


12.5×fmms fR12.6×fmms - 1,00 1,00 - 1,00 1,00

MMS - incoming fR13.1×fmms fR



13.5×fmms fR13.6×fmms - 1,00 1,00 - 1,00 1,00

Where:

fR – Appropriate routing factor (Network element routing factors are provided in section 9.1 Service demand conversion in table 5);

fx,y– x – Number of row in table 5; y – number of column in table 5;

fSMS,MMS – Appropriate conversion factor (Network element conversion factors are provided in section 9.1 Service demand conversion).

When the average routes of particular types of services are established, service cost (SC) of any service is calculated according to the following

formula:

� ��

��n

iiusei UCfSC

1

�

(140)

Where:

n – number of Network Component;

�useif – Average service usage factor, provided in the service matrix. See table 19.

UCi – Unit Network Component cost, Lt (see formula No. (139)).

The capacity based services unit cost will be calculated based on average utilization of IC ports, which will be provided by the Operators modeled.

Based on the average utilization of IC ports, the monthly volume of the wholesale voice services (termination, origination and transit) provided over

one IC port will be calculated. The cost of the capacity based services will be calculated by multiplying the unit cost of each type of the wholesale

voice service by the proper monthly volume of the service provided over one IC port.

�

�

116

13. Annex 1. Second sub-model: cost calculation of Auxiliary

services for network interconnection

In this annex, principles of the second sub-model are provided. There are lots of alternatives for network

interconnection. Sometimes networks are interconnected at the premises of one operator near switches

or alternative network elements, but for security and network management reasons networks may be

interconnected at some remote premises (Point of Presence, PoP). In current regulatory practice of call

termination services, RRT has imposed that network elements required for network interconnection have

to be implemented by interconnecting operators themselves and no charge shall be applied for these

elements. RRT has also imposed that interconnecting link shall be installed by party able to implement

such link in cheapest way and costs related with link that connects networks shall be equally split.

Network elements from switches of a particular operator to PoP might be implemented and maintained

by that operator. Access to these network elements might be forbidden for security reasons or particular

charges might me applied for access to premises and network elements that could be used for other

interconnecting party to install a link from PoP to switches. Access to network elements from PoP to

switches might also be used for installation of a interconnecting link not only for call termination services,

but also for origination and transit services. The objective of this model is twofold:

1) to calculate long run average incremental costs of network elements for installation of a

interconnecting link in the PoP where networks can be interconnected for provision of call termination,

initiation and transit services;

2) to calculate long run average incremental costs of intermediate network elements of interconnection

link from PoP to switch (exchange) used in construction of interconnection link for provisions of call

termination, initiation and transit services;

In general access to these network elements could be called Auxiliary services. The general scheme of

Auxiliary service for network interconnection is provided below.

�

�

117

Figure 10. General scheme of auxiliary services.

In Table 20, definitions of the second sub-model services are provided.

Table 20. Service definitions. Service name Service definition Measure

Access to

auxiliary

services for

network

interconnection

1) Provision of network elements in order to

install an interconnection link in Point of

Presence between network elements (from

one operator to the other operator);

2) Provision of network element or elements

as intermediate parts of network

interconnection link.

Costs of access to passive and

(or) active infrastructure for

installation (construction) of a

link for network interconnection.

Depending on the type of agreement between the alternative operator and the provider of auxiliary

services, four types of services will be modeled:

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1. Lease of physical space in premises of the provider of auxiliary services (general scheme of a

services is provided below and notations should be understood as in figure 10);

Figure 11. General scheme of auxiliary services for the first service.

2. Lease of space in cable ladders/trays in the premises of the provider of auxiliary services

(general scheme of a services is provided below and notations should be understood as in figure

10);

Figure 12. General scheme of auxiliary services for the second service.

3. Provision of passive network elements from PoP to switch (exchange) for installation of

interconnection link (intermediate parts of interconnection link used for network interconnection).

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Below is provided a general scheme of this service and notations should be understood as in

figure 10.

Figure 13. General scheme of the third service.

4. Provision of passive and active network elements from PoP to switch (exchange) for installation

of interconnection link (intermediate parts of interconnection link used for network

interconnection). Below is provided a general scheme of this service and notations should be

understood as in figure 10.

Figure 14. General scheme of the forth service.

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It is assumed that for fist – third (inclusive) services all network elementes are presented in

premises of SMP operator. For fourth service it is assumed that PoP might be implemented either

in the premises of SMP operator or in the premises of third party.

Modeling of First service:

In modeling first service, periodical costs related to the rent of the technical infrastructure of the provider

of auxiliary services will be calculated according to following formula:

kiPOP SRE �� (141)

Where: Si – total space required for the installation of ladders and other equipment in the premises of the

provider of auxiliary service, square meters;

�k – average rate of rent of property for one square meter, currency.

Modeling of Second – Forth services: One-off costs of services

One-off costs are related to the second, third and fourth services. In these scenarios the amount of hours

(A hr) required by technical staff to install and set auxiliary services is calculated. Installation process,

depending on the scenario modeled, consists of cable arrangement and installation with cable ledges,

mounting cabinet to the fixed location, cable wiring and installation of equipment into the cabinet.

One-off costs ( POPCO ) are calculated according to the following formula:

MHoffPOP tCO �� (142)

Where:

toff - Total time (A hr) required for one-off activities, man-hours;

�MH – Average activity man-hour costs (of required qualification), currency.

Periodical costs of services

In the modeling of Second – Fourth services, periodical costs of services include both costs related to

network equipment and costs related to periodical specific activities.

While calculating the equipment related costs, following equipment is required:

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1. Space in cabinet or other premises;

2. Optional: security equipment (sensor and cable);

3. Certain length of cable ladders/trays;

4. Certain length of fiber cable (additional component for third and fourth services) (not applicable

for second service);

5. Certain network elements present in the cabinet for POI service to take place (additional

component for third and fourth scenario) (not applicable for second service). For Third service it

is assumed that Optical Distribution Frame is required to connect the networks and for the fourth

service, it is assumed that Aggregation Ethernet Switch is required to make interconnection for

other operators possible.

The cost of this service should represent incurred capital cost (CAPEX) together with mark-ups of:

1. Operational costs (OPEX) on network cost;

2. Network management system (CAPEX);

3. Administration and support (OPEX and CAPEX).

Periodical equipment related annual costs are calculated according to the same principles and using the

same mark-ups as described for transmission in section 11.2 Mark - ups.

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14. Annex 2. Economic depreciation method: analysis and

results

Depreciation can be defined as the systematic allocation of the depreciable amount of an asset over its

useful life. The depreciable amount is the initial cost of an asset less its residual value estimated at the

date of acquisition. Thus depreciation reflects the recovery of invested capital over the asset’s economic

life. It can also be defined as a measure of reduction in the economic life of an asset from the usage,

passage of time and technological or market changes.

There are two main approaches to depreciation, which are commonly used in bottom-up models:

straight-line and annuity (standard or tilted).

Under the straight-line method of depreciation, an asset’s acquisition cost is allocated in equal portions

over its useful life, taking into account the changes of prices over the whole period of depreciation as

well as cost of capital:

� � �� Where:

�� – Current Depreciation

�� – Holding Gain

�� – Cost of Capital

�� – Gross Replacement Cost

�� – useful life of an element

�� – Net Book Value

�� – Gross Book Value

�� – price change index

� �� – Weighted Average Cost of Capital

The first part of the equation reflects the assumption that an asset’s economic benefits are consumed in

equal proportions over its useful life, while the latter is proportional to price changes and cost of capital.

Standard annuity calculates recurring capital payments for a given number of periods as a sum of total

economic depreciation and capital costs:

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� � ��

! � " !! � � ��#

��

It is also possible to reflect economic value of an asset using the tilted annuity method. The aim of tilted

annuity is to:

� Smooth the unit costs by calculating equal charge of capital cost and depreciation over the whole

period of cost recovery;

� Adjust the level of cost recovery to the changes of Modern Equivalent Asset prices in year of

calculation.

The annual CAPEX costs under the tilted annuity method are calculated according to the following

formula:

$ � %&$ � ' ($$ � )*+,-

! � "! � )*+,-! � ' ($$#./

The major advantage of tilted annuity over standard annuity is that it takes into account the adjustment of

prices of MEA in all years of calculation. In comparison to standard annuity, this method results in higher

capital payments if the price of an asset decreases and lower capital payments if the price of an assets

grows. Almost exclusively, in telecommunication industry, the prices of assets have decreasing trend.

It is also possible to reflect the economic value of an asset using economic depreciation methodology.

The aim of calculation of economic depreciation is to:

� reflect an ongoing character of investments and “smooth” costs for the whole period of cost

recovery;

� smooth the unit costs in regard to changing infrastructure utilization over the whole period of cost

recovery;

� adjust the level of cost recovery to the changes of Modern Equivalent Asset prices in all periods

of cost recovery separately

in such manner that the sum of the present value of all incurred capital investments is equal to the sum

of the present value of all recovered costs.

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The major benefit of the calculation of economic depreciation is that it takes into consideration changing

infrastructure utilization and mitigates its impact by spreading it over the whole period of cost recovery.

This could be important if the utilization of the network changes considerably from year to year due to

network roll-out that is not effectively utilized by the increase of the traffic demand in short term. In such

case, the justified cost of lower utilization would be back loaded and recovered in equal charge over

whole period of cost recovery.

Moreover, development of an economic depreciation model requires much more input data and

assumptions (that have to be provided by the operators) than other depreciation methods. This is due to

the fact that economic depreciation calculation is based on the whole period of cost recovery (30 or more

years) and each year of calculation requires an assumption on the profile of price changes and service

volume.

Another drawback of economic depreciation is that it requires a consideration of the entire lifespan of the

network and, due to the increasing with time discount factor applied to each cost, the calculation will

place considerable emphasis on historic events. If a hypothetical operator made less efficient business

decisions in early years, those decisions may have larger impact on the calculated depreciation in the

following years.

Because of the practical as well as theoretical difficulties with the calculation of economic depreciation

more simple approaches are preferred. Tilted annuity approach generates a depreciation profile similar

to that of economic depreciation assuming lack of considerable changes in the utilization of the network

from year to year and requires much less input data from operators and estimates to be made.

Charts 1 and 2 present an exemplary comparison of profiles of economic depreciation and tilted annuity

depreciation.

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Chart 1: Economic depreciation and tilted annuity depreciation under the assumption of constant volume of services and decreasing prices of MEA.

Chart 2: Economic depreciation and tilted annuity depreciation under the assumption of increasing volume of services and decreasing prices of MEA.

The table below presents the main assumptions used to present comparison of profiles of economic

depreciation and tilted annuity depreciation.

Parameter Chart 1 Chart 2 Period of analysis 30 years 30 years

Asset lifetime 10 years 10 years

Price change -1% -1%

Services volume change 0% 1%

WACC 12% 12%

The situation presented on Chart 2 is based on the assumption that the increasing volume of services

will cause additional investments in some period of time, after which level of infrastructure utilization is

lower than the most efficient. The “smoothing” of “volatile” level of utilization is included in the economic

depreciation, while the tilted annuity method does not take it into consideration.

Considering all the above, BU LRAIC model will include straight-line and annuity (standard or tilted)

methods where the tilted annuity approach generates a depreciation profile which is most similar to that

of economic depreciation.

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