dimensioning and cost structure analysis of wide area data service network - report

Wireless Infrastructure Deployment & Economics Homework 3 – Dimensioning and Cost Structure Analysis

of Wide Area Data Service Network

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This document is public version of the submitted report. Please contact the author for download / correspondent query. Author : Laili Aidi Introduction

This report contains discussion of the radio access network design and the cost structure analysis of different deployment options of Radio Access Technologies (RATs). The objective is to provide specific amount of user, with specific traffic demand and deployment scenario. The requirements of the deployment are based on [1]: 1. The type of the area to be coverage is “Urban”, with population density of 2000 / km2 in total

area of 10,000 km2. 2. The usage / user is defined as “MBB Substitute”, starting from 5 GB/Month in year 0, and

predicted to increase 1 GB/Month each year. 3. The penetration is defined as “Substitute_1”, starting from 1 % of total population in year 0,

and predicted to increase 1% each year. 4. The analysis is designed for “Greenfield” operator case that has to deploy the network from

scratch. 5. The RATs that are discussed in this report are “UMTS Macro, “HSDPA Macro” and “HSDPA

Micro”. The approach that is used to fulfill those requirements is listed as several steps below:

1. Calculate the coverage demand (km2) for each year 2. Based on calculation Step 1, calculate the capacity demand (Mbps). 3. Calculate the total site needed in order to fulfil that coverage and capacity demand 4. Based on calculation Step 3, calculate the CAPEX and OPEX, and then get the Total Cost for

each year, including 5 % price erosion in all of the price 5. Based on the calculation Step 4, calculate the NPV of each of these 3 different solutions 6. Based on the trend in Step 4 and calculation Step 5, make the analysis and recommendation

The step 1 - 2 will be covered in section “Part A - Coverage & Capacity Demand”. The step

3 – 4 will be covered in section “Part B - Cost Structure & dimensioning”, where the discussion is separated based on each RAT deployment. The step 5 is presented in “Part C – DCF Analysis” and finally the last section “Part D - Summary & Recommendation” presents the discussion of step 6. Part A. Coverage & Capacity Demand

This section discusses the implementation of calculation in step 1 and 2. For example Year 0 calculation, the coverage area 20 % and User penetration 2 % from 10,000 km2 areas with density 2,000 means:

20 % x 10,000 km2 = 2000 km2 total required coverage 2 % x (2,000 x 10,000) = 400,000 total predicted user



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Using the same formula, we can get the total coverage and user for the all 5 years, as below:

Table 1. Coverage & Total User

Year Coverage Demand (%) Total Required Coverage (km2) User Penetration (%) Total Predicted

User 0 0 % 0 1 % 200,000 1 20 % 2,000 2 % 400,000 2 40 % 4,000 3 % 600,000 3 60 % 6,000 4 % 800,000 4 80 % 8,000 5 % 1,000,000 5 100 % 10,000 6 % 1,200,000

As the usage per User in year 1 is 6 GB/month/user, thus the user demand on that year in MB would be:

6 GB/month/user x 1,024 = 6144 MB/month/user Using this number, we can calculate the user demand in second (Mbps), where that traffic is

assumed to be concentrated in 4 hours / day: (6144 MB/month/user)/(30 days x 4 hours x 60 minutes x 60

seconds) x 8 = 0.113777778 Mbps/user Then we can calculate the total capacity needed for this system according to the total

number of user in the specific coverage area requirement in the Table 1: 0.113777778 Mbps x 400000 users = 45511.1 Mbps

Using the same formula, we can get the total capacity demand for the all 5 years, as below:

Table 2. Capacity Demand Year Usage per User (GB/Month/User) Total Capacity Demand (Mbps)

0 5 18,962.9 1 6 45,511.1 2 7 79,644.4 3 8 121,362.9 4 9 170,666.7 5 10 227,555.6

Part B. Cost Dimensioning

This section will cover the calculation in step 3 – 4, where the discussion will be separated based on 3 different cost structures of RATs. According to the data in [1], we can present the cost structure of those RATs in the Table 3 and Table 4 tables below:

Table 3. UMTS/HSDPA Macro Cost Structure No. Cost Type Note 1. CAPEX Radio &

Transmission Equipment

UMTS/HSDPA Macro BTS, first cell at site

• UMTS Macro’s Max cell range 0.6 km, capacity 1 Mbps

• HSDPA Macro’s Max cell range 0.4 km,



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capacity 3 Mbps

UMTS/HSDPA Macro BTS, additional cells (sectors or carriers)

Maximum 6 cells in total in 1 BTS

UMTS /HSDPA Macro BTS site installation

-

UMTS/HSDPA Macro BTS site build out URBAN

-

Site Installation and build out costs

Data line installation per UMTS/HSDPA site URBAN

-

Site lease, Macro BTS, URBAN - Electricity UMTS/HSDPA site Macro – URBAN -

Leased line, E1 or Ethernet type URBAN (2 Mbps) -

2. OPEX

Operation & Maintenance (OM) 10 % of current year’s CAPEX

Table 4. HSDPA Micro Cost Structure

No. Cost Type Note Radio &

Transmission Equipment

HSDPA Micro BTS, one cell only (i.e. no build out)

Max cell range 0.1 km, capacity 3 Mbps

UMTS/HSDPA Micro BTS site installation

-

UMTS/HSDPA Micro BTS site build out URBAN

-

1. CAPEX

Site Installation

and build out costs

Data line installation per UMTS/HSDPA site URBAN

-

Site lease, Micro BTS, URBAN - Electricity UMTS/HSDPA site Micro -

Leased line, E1 or Ethernet type URBAN -

2. OPEX

Operation & Maintenance (OM) 10 % of current year’s CAPEX

Apart from the data mentioned in [1], there are several assumptions and equations that are

also used in the calculation, as mentioned below: 1. BTS & Additional Cell Demand Calculation

The calculation of BTS demand is done by taking into account the coverage area and user demand that have been presented in Table 1 and 2. The Coverage achieved by BTS deployment (Cv) would be:

Cv = Maximum cell range * Amount of BTS

Thus, total Coverage achieved on that year (CvTot) would be: CvTot = Cv + CvTot last years

However, as the number of BTS is the function of coverage and capacity, thus the assumption



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that is used regarding the coverage is: the inter-cell interference can reduce the coverage area of each BTS if they have to be deployed very close each other, in order to fulfill the capacity demand in that coverage area. Means that if the coverage demand has been fulfilled but the capacity demand has not been fulfilled yet even by adding more cell into maximum, thus the addition of new BTS will not increase the coverage, as it has to be deployed closer each other in that target coverage area.

Moreover, the Capacity achieved by BTS deployment would be (Cp1): Cp1 = Maximum capacity * Amount of BTS

Meanwhile, as the “UMTS/HSDPA Macro BTS, additional cells (sectors or carriers)” is only increase the capacity, not the coverage, and as the maximum cells per BTS are 6, thus the maximum amount of purchase for additional cells in UMTS/HSDPA Macro calculation (Cell) would be:

Cell = Amount of BTS * (6-1) Then, the Capacity achieved by additional cell deployment (Cp2) would be:

Cp2 = Maximum capacity * Cell Thus, total Capacity achieved on that year (CpTot) would be:

CpTot = Cp1 + Cp2 + CpTot last years

Using these data, assumptions and equations, we can get the BTS and or Additional Cell demand in each year (Qty) of every RAT option, both from coverage and capacity point of view, as presented in Table 5, 6 and 7 below:

Table 5. UMTS Macro Radio & Transmission Equipment Demand UMTS Macro BTS, first cell at site UMTS Macro BTS, additional

cells Year

Price per Unit (k€)

Qty.

Coverage (km2)

Capacity (Mbps)


Qty.

Capacity (Mbps)

Total Coverage achieved

(km2)

Total Capacity achieved (Mbps)

0 20 3161 1000* 3161 10 15805 15805 1000 18966 1 19 4425 1000* 4425 9.5 22125 22125 2000 45516 2 18.05 5689 2000* 5689 9.03 28445 28445 4000 79650 3 17.2 6953 4000* 6953 8.6 34765 34765 6000 121368 4 16.3 10000 6000 10000 8.2 39500 39500 8000 170688 5 15.5 13400 8040 13400 7.8 43300 43300 10040 227568

* The BTS purchase is focused to add more capacity, not coverage, thus it is deployed closer than its coverage distance, therefor the adding of coverage in not based on equation

Table 6. HSDPA Macro BTS & Additional Cell Demand HSDPA Macro BTS, first cell at site HSDPA Macro BTS,

additional cells Year


Qty.

Coverage (km2)

Capacity (Mbps)

Price per Unit

(k€)

Qty.

Capacity (Mbps)


(km2)

Total Capacity achieved (Mbps)

0 25 1054 421.6 3162 15 5270 15810 421.6 18972 1 23.75 3950 1580 11850 14.25 4897 14691 2001.6 45513 2 22.56 5000 2000 15000 7345 6378 19134 4001.6 79647



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3 21.43 5000 2000 15000 12.86 8906 26718 6001.6 121365 4 20.36 5000 2000 15000 12.21 11434 34302 8001.6 170667 5 19.34 5000 2000 15000 11.6 13963 41889 10001.6 227556

Table 7. HSDPA Micro BTS Demand

HSDPA Micro BTS, one cell only (i.e. no build out)

Year Price per Unit (k€) Qty.

Coverage

(km2) Capacity (Mbps)


(km2)

Total Capacity achieved

(Mbps)

0 15 6321 632,1 18963 632.1 18963 1 14.25 13700 1370 41100 2002.1 60063 2 13.54 20000 2000 60000 4002.1 120063 3 12.86 20000 2000 60000 6002.1 180063 4 12.22 20000 2000 60000 8002.1 240063 5 11.6 20000 2000 60000 10002.1 300063

2. Installation & Build Out and Running Cost Demand Calculation

The purchase amount of “Installation and Build out” elements would be calculated as below: • “Data line installation per UMTS/HSDPA site URBAN” (DL):

DL = (Cp1 + Cp2) / Data line capacity Where the Data Line capacity per UMTS/HSDPA site URBAN is 10 Mbps [1].

• The purchase amount of “EDGE/UMTS/HSDPA Macro BTS site installation” (SI) and “UMTS/HSDPA Macro BTS site build out URBAN” (SB) are calculated as:

SI or SB = Amount of BTS purchased The Running Costs in each year is assumed to has to include the cost to run the equipments

bought from previous years, as the equipment/lease/electricity/etc that are purchased in previous year are still be used in the next following year. Thus: • The purchase amount of “Site lease, Macro BTS, URBAN” (SL) and “Electricity UMTS site

Macro -‐ URBAN” (EL) are calculated as: SL or EL =

Amount of BTS purchased + Amount of BTS purchased last year

• The purchase amount of “Leased line, E1 or Ethernet type URBAN” (LL) is calculated as: LL = CpTot / Leased line capacity

Where the Leased line, E1 or Ethernet type URBAN is 2 Mbps [1]. Then finally, the Cost for each of that element would be calculated as below:

Cost = DL or SL or El or LL + Annual cost per unit

Thus, using these data, assumptions and equations, and after getting the total BTS & Additional cell demand in each year (Qty), now we can get the amount for Installation & Build out and Running demand elements, as presented in Table 8, 9 and 10 below:



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Table 8. UMTS Macro Installation & Build out and Running Demand

UMTS Macro BTS site

installation

UMTS Macro BTS site build out URBAN

Data line installation per

UMTS site URBAN

Site lease, Macro BTS,

URBAN

Leased line, E1 or Ethernet

type URBAN

Electricity UMTS site

Macro - URBAN

Year


Qty


Qty.


Qty.


Qty.


Qty.


Qty.

0 30 3161 40 3161 5 1897 8 3161 1 9483 2 3161 1 28.5 4425 38 4425 4.8 2655 7.6 7586 0.95 32241 1.9 7586 2 27.1 5689 36.1 5689 4.5 3413 7.2 13275 0.9 72066 1.8 13275 3 25.7 6953 34.3 6953 4.3 4172 6.9 20228 0.85 132750 1.7 20228 4 24.44 10000 32.58 10000 4.07 4950 6.52 30228 0.8 218184 1.63 30228 5 23.21 9480 30.95 9480 3.87 5688 6.19 37928 0.77 331878 1.55 37928

Table 9. HSDPA Macro Installation & Build out and Running Demand

HSDPA Macro BTS site

installation

HSDPA Macro BTS site build out URBAN


HSDPA site URBAN

Site lease, Macro BTS,

URBAN


type URBAN

Electricity HSDPA site

Macro - URBAN

Year


Qty


Qty.


Qty.


Qty.


Qty.


Qty.

0 30 1054 40 1054 5 1898 8 1054 1 9486 2 1054 1 28.5 3950 38 3950 4.8 2654 7.6 5004 0.95 32243 1.9 5004 2 27.1 5000 36.1 5000 4.5 3413 7.2 10004 0.9 72066 1.8 10004 3 25.7 5000 34.3 5000 4.3 4930 6.9 15004 0.85 132749 1.7 15004 4 24.44 5000 32.58 5000 4.07 4929 6.52 20004 0.8 218082 1.63 20004 5 23.21 5000 30.95 5000 3.87 5689 6.19 25004 0.77 331860 1.55 25004

Table 10. HSDPA Micro Installation & Build out and Running Demand

HSDPA BTS site installation

HSDPA Micro BTS site build out URBAN


HSDPA site URBAN

Site lease, Micro BTS,

URBAN


type URBAN

Electricity UMTS site

Macro - URBAN

Year


Qty


Qty.


Qty.


Qty.


Qty.


Qty.

0 20 6321 20 6321 5 1896.3 4 6321 1 9482 0.2 6321 1 19 13700 19 13700 4.8 4110 3.8 20021 0.95 39513 0.19 20021



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2 18.05 20000 18.05 20000 4.5 6000 3.61 40021 0.9 99545 0.18 40021 3 17.15 20000 17.15 20000 4.3 6000 3.43 60021 0.85 189576 0.17 60021 4 16.29 20000 16.29 20000 4.07 6000 3.26 80021 0.8 309608 0.16 80021 5 15.48 20000 15.48 20000 3.87 6000 3.09 100021 0.77 459639 0.15 100021

3. CAPEX and OPEX Calculation

The Step 4 (CAPEX, OPEX, Total Cost) in Introduction section is calculated as below: CAPEX = (Radio & Transmission Equipment Cost) + Installation & Build

out Cost

OPEX = Running Cost + (10 % x CAPEX)

Total Cost = CAPEX + OPEX

Using these equations and result of previous calculations, now we can summarize the Cost

modeling for all of these 3 RAT options, as presented in table 11, 12, and 13 below: Table 11. UMTS Macro Scenario – Cost Modeling

CAPEX OPEX Year

Radio & Transmission Equipment Cost (k€)

Installation and build out Cost (k€)

Running Cost (k€) Operation & Maintenance (k€)

Total Cost (k€)

0 221270 230753 86295.3 45202.3 538318.3 1 294262.5 306873.8 102695.9 60113.6 763945.8 2 359402.6 374805.5 184846.4 73420.8 992475.4 3 417292.9 435176.9 287246.3 85246.9 1224963.3 4 484631.2 590313.4 423921.2 107494.5 1606360.3 5 542420.4 747743.2 594455.7 129016.4 2013635.7

Table 12. HSDPA Macro Scenario – Cost Modeling

CAPEX OPEX Year

Radio & Transmission Equipment Cost (k€)

Installation and build out Cost (k€)

Running Cost (k€) Operation & Maintenance (k€)

Total Cost (k€)

0 105400 83266 38892,6 18866,6 227558.6 1 163594.8 275281.9 78168.4 43887.7 560932.8 2 199154.7 331277.9 155325.6 53043.3 738801.6 3 221708.6 317965.2 242455.8 53967.4 836097 4 241509.2 305155.6 340562.9 54666.5 941894.3 5 258787.2 292833.1 450263.1 55162 1057045.5

Table 13. HSDPA Macro Micro – Cost Modeling

Year CAPEX OPEX

Radio & Transmission Equipment Cost

(k€)

Installation and build out Cost

(k€)

Running Cost (k€)

Operation & Maintenance

(k€)

Total Cost (k€)



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0 94815 262321.5 71743.4 35713.65 428879.9 1 195225 540122.5 117421.1 73534.75 926303.4 2 270750 749075 241538.5 101982.5 1363346 3 257212.5 711621.3 378671.8 96883.37 1444388.9 4 244351.9 676040.2 525923.2 92039.21 1538354.5 5 232134.3 642238.2 680716.1 87437.25 1642525.8

Part C. DFC Analysis

Discounted Cash Flow (DFC) also can be used to analyze these 3 RAT deployment options, as it is actually a method to valuing the project. As we have the Discount rate information from [1], we can use the Net Present Value (NPV) as the tool to do DFC analysis. This value can give more insight into the financial viability of the investment that can be calculated using this equation [2]:

PV = CF / (1 + r)^n

Where: PV = Present value, means the value now of a stream of future cash flows, can be negative or positive. CF = Cash Flow, represented by the Total Cost in each year that we calculated in Section B. In this case, this is always negative (investment), and there is no positive cash flow (profit, etc) that is taken into account. r = Discount Rate, which based on [1] is 10 %. n = The period we are examining, in this case, the year value (0-5).

For example, the Present Value of Year 1 in UMTS Macro deployment would be: PV umts_macro_year1 = - 992475.4 / (1 + 0.1)^1 = - 820227.6

Then we calculate the NPV as below:

NPV = PV0 + PV1 + .. + PV5

The result of the PV and NPV of each of the RAT deployment option in Table 14. From

this, it can clearly be seen that HSDPA macro shows the best financial viability compare to the other 2 RAT deployment options, as it has the highest NPV value.

Table 14. Net Present Value of UMTS Macro, HSDPA Macro, HSDPA Micro UMTS Macro HSDPA Macro HSDPA Micro

Year (1 + r)^n Cash Flow Present Value Cash Flow Present Value Cash Flow Present Value

0 1 -538318.3 -694496.2 -227558.6 -227558.6 -428879.9 -428879.9

1 1,1 -763945.8 -820227.6 -560932.8 -509938.9 -926303.4 -842093.9

2 1,21 -992475.4 -921025 -738801.6 -610579.8 -1363346 -1126732.2

3 1,33 -1224963.3 -1100246.7 -836097 -628644.4 -1444388.9 -1086006.7

4 1,46 -1606360.3 -1250705.4 -941894.3 -645133.1 -1538354.5 -1053667.4



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5 1,61 -2013635.7 -694496.2 -1057045.5 -656549.9 -1642525.8 -1020202.4

NPV -5325019.3 -3278404.7 -5557582.6 Part D. Summary & Recommendation

Figure 1. Cost Structure Comparison

As what can be seen in the graph in Figure 1 above, the network deployment using UMTS

Macro RAT would cause operator highest CAPEX in Radio & Transmission Equipment, while the other 2 RATs (HSDPA Macro and Micro) does not show striking difference. Even the CAPEX using HSDPA Micro shows decreasing trend in the last couple years of deployment. However, the deployment using UMTS Macro and HSDPA Micro impacts on much higher cost for Installation & builds out (CAPEX), as well as they tend to have sharply increasing in OPEX. This is because, they need much more BTS and or additional cell to build the network with the same requirement (coverage and capacity), as shown in Figure 2, thus result on higher cost on OPEX as well. On the contrary, HSDPA Macro deployment result on smallest amount of BTS as well as additional cell needs, thus result in lower OPEX.

0 100000 200000 300000 400000 500000 600000 700000 800000 900000

UMTS Macro

HSDPA Macro

HSDPA Micro

UMTS Macro

HSDPA Macro

HSDPA Micro

UMTS Macro

HSDPA Macro

HSDPA Micro

CAPEX Radio & Transmission Equipment

CAPEX Installation and buildout

OPEX

UMTS Macro, HSDPA Macro & HSDPA Micro Deployment CAPEX and OPEX Comparison

Year 0

Year 1

Year 2

Year 3

Year 4

Year 5



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Figure 2. Number of BTS and Additional Cell Demand

Meanwhile, using that cost structure, we also can see how it gives impact to the capacity

performance of each RAT in each year of deployment. As we can see in Figure 2 and 3, the deployment using HSDPA Micro would cause much higher need of BTS installation in order to cover the same amount of coverage area, but it also result on higher capacity.

Figure 3. Capacity Required vs Achieved

Indeed, HSDPA Macro deployment clearly shows stable performance that fulfills

promotionally the coverage and capacity requirement in each year. It also give relative increasing trend, that is not much extreme both in the CAPEX and OPEX, and the amount of investment HSDPA Macro itself also lower compare to the other 2 RATs. Another aspect that makes HSDPA Macro as a better RAT deployment option is the NPV value, where it shows the highest value, which means, it has the best financial viability of investment. Thus, it can be concluded that,

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among these 3 RATs, HSDPA Macro is the most visible and best solution to be implemented in this scenario. Appendix - Reference(s) [1] Markendahl, Jan. 2011. “Course IK2514, Wireless Infrastructure Deployment and

Economics. Description of Home Work 3” https://www.kth.se/social/course/IK2514/ [Dec. 07, 2011]

[2] “Evaluation Cash Flow Result”. http://www.money-zine.com/Investing/Investing/Evaluating-Cash-Flow-Results/ [Dec. 08, 2011]

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