August 2001

 
3G Licensees Face Challenges, Choices -- Infrastructure Issues Are Key In Implementing Advanced Cellular Networks

BY STUART LITTLE
 

Lured by "smart" handsets and killer applications, users are responding en masse to the promise of 3G. Micrologic Research, in its annual study of the worldwide cellular telephone market, forecasts that 535 million "Internet ready" cellular telephones will be sold this year, an increase of 33 percent over shipments in 2000. The study, Wireless2001, projects that shipments of microbrowser-equipped cell phones will surpass one billion phones in 2005. OEMs are racing to market entry-level 3G systems that will deliver high-fidelity audio and full-motion video from the Internet while also providing voice communications.

For operators, this translates to higher subscriber numbers, increased minutes of use and increased average revenue per user. But with the 3G revolution already underway, telecom executives around the globe are taking a hard look at the numerous challenges of rolling out a wideband 3G network. Their first considerable expense has been the assignment of bandwidth. 3G operates in 2GHz frequency band, meaning that operators -- many of whom had already invested billions in capital for their 2G networks -- had to purchase costly new spectrum.

With more than 60 new 3G licenses awarded to date, there is no doubt that in some countries, particularly Great Britain, Germany, and South Korea, the acquisition costs were exorbitant. In other parts of Europe, bidding prices have been reasonably contained due to the operators' awareness of pending budgets for 3G infrastructure.

Finally there are countries such as Sweden where the government, more interested in information technology "awareness, access, and adoption" by society than in the changing value of spectrum, has assigned the licenses for free. In every case however, the launch of 3G services will require further investments. A whole new network infrastructure must be put in place -- base stations, switches, and transmission connectivity between all elements of the network. What operators are asking is "How soon and how much?"

GPRS: No Transmission, No Charge
In terms of technology and revenue model, 3G introduces significant differences with GSM. The GSM-based packet radio services (GPRS), already extremely popular in Europe, are being rolled out now in the United States. GPRS is an upgrade technology to the existing GSM networks and is central to the promise of mobile Internet capability, delivering voice, video, and data to subscribers at up to 115 Kbps. GPRS is a packetized service, meaning that data-streams are broken up into packets of data, rather than the continuous stream of GSM circuit-switched networks. Packetized GPRS offers "always on" connectivity versus GSM networks, where users pay if they occupy a channel and don't transmit data or voice.

The next stage in GSM evolution is EDGE (enhanced data rates for global evolution), with potential 384 Kbps capability. EDGE is a new modulation scheme for the air interface that retains the basic frame structure of GSM and uses GPRS packet data protocols. GPRS and EDGE are real steps towards a universal mobile telecommunications standard (UMTS) and the mobile Internet, proving that 3G will continue to evolve.

By the end of this year, a total of 75 3G spectrum licenses will have been awarded in Europe since 1999. In contrast, it took five years to award only 60 GSM licenses. For new operators, the opportunities offered by 3G mean that they can reach an important position within their national markets.

At the same time, operators of existing GSM networks will be competing to maintain their market positions as they migrate their subscribers from 2G to 2.5G, and finally over to 3G networks. They must provide higher backhaul capacity to support new users, higher usage rates, and enhanced data services. The infrastructure will not be put in place overnight. Moreover, with dozens of new GPRS and EDGE-enabled networks to be built, the demand for infrastructure equipment may easily outstrip supply.

A 3G network will be a parallel network, requiring different base stations and repeater towers. The switching network behind the base stations, however, is much the same for GSM and its 3G version, wideband code-division multiple access (W-CDMA).

In many cases, 3G W-CDMA Node B base stations will be co-located with existing 2G base stations, thereby leveraging existing sites, towers, and backhaul links. Co-located site transmission requirements are estimated to be at least three times that of the original 2G site. A mature 3G network will require three times the number of base stations of current 2G networks. GSM operators who plan to overlay a new 3G network will be required to more than triple the capacity of their existing transmission infrastructure. In Britain, according to a forecast by Close Brothers Technology Group, average estimates for the cost of this infrastructure are $3.6 billion.

Recouping the Cost of Spectrum Investment
While 3G will increase traffic across the networks, it will require lower -- not higher -- per minute bills to make it attractive to a highly price-sensitive consumer market. Operator revenue must come from new, expanded, or enhanced applications that deliver value to subscribers. Some believe that Multimedia Messaging Service (MMS) will be the first killer app. MMS lets users record text messages synchronized with audio and video, and transmit them in non-real-time to cell phones and other hand-held devices. It is derived from the Short Message Service (SMS), which is widely popular among teen users of GSM networks in Europe and Japan.

Handset manufacturers and application developers are also teaming up to deliver real time, interactive, multiple player gaming over a wireless device that will support 2.5G and 3G technologies.

Packet-based services present new challenges for carriers who are used to billing calls based on time and distance. Now they're faced with the need to measure, track, and bill for information as digital packets of data. SMS costs work out to one quarter to one third of per-minute talk-time costs. But the amount of data sent in an SMS is a fraction of the 800 Kbit or so needed for a minute-long call. From a billing perspective, five bytes of data are more valuable than five minutes of talk time.

However, since these killer apps are still in development, operators may need to tighten important alliances with other industry sectors (not just content and service providers but also manufacturers) to try to distribute the initial costs of their spectrum investment. With an estimated $200 billion in second-generation infrastructure already installed worldwide, their initial concern is to limit the costs for the construction of a new network that can support three times their existing transmission capacity.

The Case for a Wireless Solution
Throughout the rollout of GSM in Europe and for cellular networks internationally, mobile operators with the rights to self-provide the transmission infrastructure have overwhelmingly chosen digital microwave radio as the interconnect solution for base stations. Looking ahead, wireless will be a critical element for the provision of infrastructure links in 3G access networks.

The reasons are compelling: Microwave radio can be installed, commissioned, and re-deployed easily and quickly. It provides a high degree of flexibility in terms of distance and traffic capacity, enabling links to be designed to precisely fit operator requirements and local conditions.

Wireless enables an operator to establish connections in a matter of a few days, to quickly begin delivery of revenue-producing data services. Wireless enables newly licensed operators to self-provide backhaul links without the need to rely on leased circuits from competitive, incumbent operators. Wireless microwave links can be engineered for very high availability, usually superior than that offered by leased line operators.

Microwave is ideally positioned to meet the capacity/distance sweet spot for Node B connections. It fills the gap left by copper-based technologies such as xDSL, and fiber optic cable which, apart from "downtown" sites, malls, and office developments, is far too costly and impractical as a connection to every node. DSL, with limitations in terms of distance and speed of delivery, cannot provide the required connections over copper to meet the demands of 3G networks.

Shifting To Higher Capacity
By contrast, wireless can be easily redeployed and upgraded for capacity in the access portion as the network grows and capacity demands increase. For example, at the "Layer 1" level of interconnection (the physical layer), existing 2G network infrastructure requires low-capacity 4xE1 links. In the transition to 3G networks, higher numbers of medium-capacity 16xE1 and high-capacity 1x and 2xSTM-1 links will eventually become the norm. A Layer 1 solution spans all these capabilities, including integrated Add and Drop multiplexing. In this way, operators can build a network geared to the demands of 2.5G network expansion and additional 3G overlay requirements.

By sharing existing structures, operators are able to ensure faster network rollout and minimize the environmental impact of adding new sites. The desire to minimize the number of new sites required for 2.5/3G deployment is leading more operators to consider the sharing of sites and even equipment. This is represented in the extreme case by the emergence of mobile virtual network operators (MVNOs) such as Virgin Mobile in the UK, who provide service leased from incumbent operators while owning no network infrastructure at all.

The Crucial Edge for Success
From applications to billing requirements and communications standards, the challenges faced by operators in rolling out their 3G networks are overwhelming. In the short term, an alternative to 3G could be the 2.5G services such as GPRS and EDGE. However, the evolution of GSM is already underway in all telecommunications markets. Operators are eager to begin delivery of the advanced data services while minimizing their investment in new networks and technologies.

The challenge is not easy, but the decisions are crucial. 3G will give operators the best return on spectrum and required network investments. Microwave radio for wireless backhaul represents an opportunity for carriers to implement GPRS and EDGE services on the actual network today, and a cost-effective strategy for those who will become leaders in the 3G market of tomorrow.

Stuart Little is director of broadband marketing at DMC Stratex Networks. DMC Stratex Networks provides cellular network and broadband wireless access solutions that enable, speed, and revolutionize the delivery of data, voice, and video in global communications.

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