mobile backhaul evolution

© Copyright 2010. Yankee Group Research, Inc. All rights reserved. April 2010Mobile Backhaul Evolution

Mobile Backhaul Evolution

Jennifer M. Pigg April 27, 2010


Agenda

Drivers: Over the Edge

Cell Site Bingo

Ethernet Everywhere

Media Money

Conclusions


Mobile Devices 2010

Which of the following devices do you personally own or use? (n=1,267)

7%

9%

12%

24%

27%

48%

47%

1%

2%

3%

6%

5%

9%

12%

0%

1%

2%

6%

5%

6%

7%

0% 10% 20% 30% 40% 50% 60% 70%

Mobile hotspot router

Netbook

Wireless data card modem

USB modem

Smartphone

Mobile phone

Laptop

Percent of respondents

1 2 3+


How likely is it that your next personal mobile phone will be a multimedia handset with a data plan (such as the iPhone, BlackBerry Storm, G1, Nokia N97, etc.)?

8%11%18%

24%33%34%32%27%25% 8%

12%

19%

23%

26%24%25%

17%20%

21%

30%

29%

28%

26%24%26%

31%33%

27%

21%

17%

14%

10%12%11%15%13%

37%26%

17%11%

6%5%7%9%10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

13-15(n=221)

16-17(n=164)

18-19(n=133)

20-24(n=331)

25-34(n=671)

35-44(n=745)

45-54(n=664)

55-64(n=505)

65+(n=426)

Percentof

respondents

Very likely Likely Unsure Not likely Very unlikely

Future Smartphone Purchase: Likelihood Q1 2009

Base: People who own a mobile phone


How likely is it that your next personal mobile phone will be a a smartphone with a data plan?

16%25%25%

37%37%41%34%

28%22%

3%

20%18%

25%27%

33%

25%28%

29%20%

21%28%

23%21%

16%

30%24%

26%

34%

17%

16%

9%10%9%

7%13%

15% 27%18%

12%6%5%1%5%7%8%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

13-15(n=73)

16-17(n=46)

18-19(n=44)

20-24(n=104)

25-34(n=209)

35-44(n=239)

45-54(n=190)

55-64(n=117)

65+ (n=74)

Percentof

respondents

Very likely Likely Unsure Not likely Very unlikely

Future Smartphone Purchase: Likelihood Jan. 2010

Base: People who own a mobile phone


More Emphasis on Mobility for Internet Connectivity

Source: Yankee Group Anywhere Consumer: 2008 EU Web/Data Survey

n 2007 = 2,500

n 2008 = 2,535

n 2009= 13,002 (6,338 for MP3 Player)


Time Spent Watching Video Q1 2009

How much time do you spend watching video on …?

11%13%13%9%

28%

43%

24%

63%

7%

19%17%16%

25%

29%

35%

14%

4%

9%10%

11%

13%

8%

23%

5%

8%

14%13%15%

14%

7%

14%6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

TV (live TV)(n=1,132)

TV (VOD)(n=368)

TV (programsrecorded on

DVR) (n=511)

Online (on acomputer)(n=1,204)

Video gameconsole (n=689)

Handheld gameconsole (n=408)

Digital audioplayer or MP3

(n=581)

Mobile phone(n=1,079)

Percentof

respondents

At least once a day At least once a week At least once a month Less than once a month

Base: People with each device


Time Spent Watching Video Q1 2010

How much time do you spend watching video on …?

5%

14%16%12%16%

31%

41%

20%

74%

8%

9%

18%18%

20%

24%

34%

37%

13%

5%

4%

8%16%13%

13%

8%

26%

5%

6%

10%

14%12%

17%

14%

7%15%

4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

TV (live TV)(n=1,231)

TV (VoD)(n=371)

TV (programsrecorded on

DVR) (n=606)

PC/laptop(n=1,244)

Video gameconsole(n=800)

Handheldgame console

(n=473)

Digital audioplayer or MP3

(n=593)

Mobile phone(n=994)

Retail set-topbox (n=764)

Percentof

respondents

At least once a day At least once a week At least once a month Less than once a month

Base: People with each device


Agenda


Cell Site Bingo

Ethernet Everywhere

Media Money

Conclusions


Operational Cost Structure for Mobile Must Change


• 80% of network operational costs for the MNO are attributable to the RAN

• But… the RAN is continually changing:TDM PacketSONET/SDH EthernetTDMA/CDMA

UMTS/GSM/LTEMNO A MNO A+B+C

• A single MSO can be running three base stations from a cell site:

• GSM – Voice, low-speed data• EDGE – Higher-speed data• UMTS – Very high-speed data

Where Are the Costs?


Projected Cell Site Growth Worldwide

Number of Cell Sites in 2009 Five-Year CAGR

United States 245,100 7.5%

South America 119,880 8%

Europe 601,020 6%

Middle East and Asia 1,219,000 6%

Africa 59,400 8%

Australia/New Zealand 33,075 5%


A Brief History of Cell Site Penetration in the U.S. and What Has To Change

264.7

183.7

104.3

22.75.60.913

0

50

100

150

200

250

300

1985 1990 1995 2000 2005 2010

U.S. Cell Sites (in 000's)

Source: CTIA and Yankee Group, 2009

2009 value = 245

• The voice offload model was the safe solution in 2008, but service providers, particularly wireline, cannot support parallel backhaul models and the resulting opex for another five years.

• Service providers are demanding strict SLAs, which are essential for IP voice and converged voice/data/video mobile networks.

• One-way jitter or 1-3 ms• One-way latency 3-5 ms• 99.999% availability• Multiple SLAs and flows per user site

• The MNOs are looking to low-cost, simple, ubiquitous Ethernet for next-generation backhaul via dark fiber, MPLS, or SONET today, and MPLS-TP or PBB-TE in 2010 and beyond.


How Much Backhaul Do You Need To Support LTE?

10 Mbps backhaul 2009

50 Mbps Backhaul in two years


The Backhaul Challenge

• Yankee Group research shows that mobile network operators in the U.S. spent $6.7 billion on backhaul in 2009. This was for 245,000 cell sites supporting, on average, just under 10 Mbps of backhaul capacity.

• Globally, over $25 billion was spent in backhaul services in 2009.

• In 2012, there will be more than 300,000 cell sites in the U.S., each supporting, on average, 100 Mbps. If we were to just keep throwing T1s at the problem, this would result in a backhaul bill of $82 billion. The monthly average cost per site, per mile, would be about $23,000, compared to today’s average of $2,100.


Agenda


Cell Site Bingo

Ethernet Everywhere

Media Money

Conclusions


Ethernet: Compelling Economics

• Ethernet service average • $40 per month per Mb

• T1/E1 (1.54/2.048 Mbps) average cost• $200-$800 per month • U.S. average slightly over $300 per

month

• 3G cell sites have smaller coverage footprint than 2G

• More cell sites with higher backhaul speeds mean greater impact on opex

• Ethernet bandwidth can be allocated remotely

• Increments as small as 1 Mb• No lag time, no on-site visit


Example: 500-Node Network

10 Mbps or equivalent to

500 sites

Backhaul Cost Per Month: One Site

Backhaul Cost Per Month: 500 Sites

Backhaul Cost Per Year: 500

Sites

7 T1s @ $300 per month per

T1$2,100 $1,050,000 $12,600,000

Ethernet @ $75 per month

per Mb$750 $375,000 $4,500,000

Ethernet @ $40 per month

per Mb$400 $200,000 $2,400,000

For a 500-node network, Ethernet saves the MNO between 65% and 80% in bandwidth costs per year


Ethernet Mobile Backhaul Services

• Requirements: • Synchronization

— ITU SyncE — IEEE 1588

• Ethernet OAM —EEE 802.1ag Connectivity Fault Management (CFM) — ITU Y.1731 performance monitoring

• Emulation support: pseudo-wires• Support for not only TDM circuits, but frame/cell services

• Ethernet mobile backhaul architecture alternatives• Virtual private LAN service (VPLS) • Multiprotocol label switching (MPLS) • Ethernet transport • All connect to the MPLS core network


Poll

How far into the Mobile Network will we push MPLS?


Agenda


Cell Site Bingo

Ethernet Everywhere

Media Money

Conclusions


Backhaul Media Breakdown: 2009

0%10%

20%30%

40%50%

60%70%

80%90%

100%

North America Europe Worldw ide

Microw ave

Fiber

Copper


Regional Considerations as Drivers

• Availability of spectrum

• License costs

• Regulatory environment

• Labor costs

• General accounting practices

• Availability of fiber and copper infrastructure

• Ability to hold onto the copper infrastructure


Lease vs. Own Strategies

• Incumbents: Leverage existing resources where possible, deploy new where necessary

• Challengers: Capital constrained and limited footprint; build out microwave or lease copper and fiber facilities

• Rural (both incumbent and challenger): Greater reliance on microwave backhauling to fiber rings where available


A Rural Challenge

• What we expect to see in innovative implementation while waiting for the impact of the Broadband Regulatory Act

• Daisy-chain and Tree microwave implementations giving way to more stable, recoverable ring implementations

• High-speed copper DSL implementations supporting increased femto and Wi-Fi implementations


MNO Dominant Backhaul Strategies

MNOs have a dominant, but not exclusive, strategy

• Leased Lines• Vodafone UK • T-Mobile

• 3 • SFR (France)

• Microwave• Orange • Paltel (Africa)

• Clearwire Telecom (Middle East) • Hi Link Telecom (Middle East)

• Sprint (Canada) • WIND Mobile (Canada)

• Maxis (Malaysia) • Digicell

• Fiber• Verizon • PTC

• DoCoMo • China Mobile


Copper

• T1s widely available

• DSL targeted at mobile backhaul from many including: ALU, Actelis, Hatteras, Positron

• As speed increases on the copper, four things have been common in the past:

• Move to asymmetrical send/receive speeds to give more bandwidth to downstream data

• Increase the number of copper pairs• Increase the likelihood of electromagnetic fields (EMF) interference impacting

other pairs in the cable• Pairs had to be conditioned pairs

• Despite the news of its demise, copper technology has improved to the point where it is a viable, robust, available and inexpensive solution for mobile backhaul


Copper (cont.)

• Actelis just introduced a solution offering 20 Mb over 2 pair

• Reduced pairs means reduced hardware costs, footprint, increased density per rack unit

• Will benefit from femto growth

• Does not sacrifice EFM performance, i.e., maintains ANSI T1.417 compliance

• In a lab test of “DSL Phantom Mode” this month, Bell Labs achieved downstream transmission speeds of 300 Mbps over distances up to 400 meters (or 100 Mbps at 1 km) on a single pair. Will not emerge as a product until 2012


Poll

How long will it be before we have no more than 5 percent of base stations connected via copper backhaul?


Trenching Fiber

• Costs include: right-of-way, construction, site reconstruction, fiber cable, connectors

Cost Per foot Per mile

Rural $12 $63,360

Metro $30 $158,400

Urban $42 $221,760


Microwave Costs

Microwave backhaul systems $4k to $50k depending on capacity and degree of redundancy

Antennas, cable and power$4k to $10k per link based on antenna size, radio configuration and tower height

Installation $3k to $8k including cabling, etc.

Maintenance Not trivial – 5-10% of equipment costs per year

Licenses Varies widely – can be below $200 per month in U.S. or over $2,000 per month in western Europe

Site lease for antenna space Up to $700 per month


Microwave Start-Up Costs

Source: Ceragon


Agenda


Cell Site Bingo

Ethernet Everywhere

Media Money

Conclusions


Adding It Up: Lower-Cost Mobile Backhaul

• Linear or near-linear growth in backhaul expense is not an option. Within the next five years, service providers will have to:

• Transition from TDM to packet-based backhaul• Transition to fiber backhaul and microwave• Simplify backhaul connectivity with Ethernet• Unify voice and data, particularly for wireline mobile backhaul

• A focus on capex will not result in the least-cost network. Focus instead on:

• Operational costs (management, provisioning, spectrum licensing) • Network design and architecture. Keep the low RAN flexible and the high

RAN aggregation nodes scalable and robust. • Business decisions. Share. Leverage someone else’s fiber, flexibility and

economies of scale; use managed and outsourced RAN services.


Thank You

www.yankeegroup.com

Jennifer Pigg, Research VP

[email protected]

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Upcoming Yankee Group webinar:Evolving Service Provider Business ModelsTuesday, May 25, 2010 | 11 a.m. ETRegister at www.yankeegroup.com

mobile backhaul evolution

Technology

edge cell site bingo

ubiquitous ethernet

g cell sites

mpls ethernet transport

opex ethernet bandwidth

mbps average cost

projected cell site

mobile phone