Outsourcing and Network Sharing: Key considerations to solve the Backhaul Challenge Franck Chevalier Head of Broadband Sector Consulting - Operations 2 Contents About Analysys Mason Market Context and Outsourcing Models Backhaul Strategies and Cost Conclusion 3 About Analysys Mason The world’s leading specialist advisor in telecoms, media and technology Full service offering covering Strategy, Planning, Implementation and Optimisation Clients include operators, media companies, regulators, financial institutions, Governments, vendors and end users A global presence with over 300 staff in 11 offices in Europe, Asia and the USA Washington DC Cambridge Dublin Edinburgh London Madrid Manchester Milan Paris Dubai Singapore Key Assignments completed Analysys Mason office 4 There are four main pillars to the Analysys Mason Service Portfolio Strategy Establishing direction • Strategy development and business planning • Market strategy • Tariffing and profitability analysis • Economic modelling and cost analysis • Regulation and policy development • Wholesale service strategy • Due diligence and financial transaction support • Wireless network roll-out management • New services/products Launch • BSS/OSS Implementation • Project and programme management • Operations change management Implementation Delivering success Market Intelligence Planning Preparing to excel • Technical architecture and design • Market planning • Network planning • Network Procurement and outsourcing strategy • Operations design and planning • Business continuity planning/Disaster recovery • Research reports and industry intelligence services Review Measuring up • Operational performance review • Network Optimisation • Industry benchmarking • End user behaviour 5 Contents About Analysys Mason Market Context and Outsourcing Models Backhaul Strategies and Cost Conclusion 6 Mobile Operators have an increasing requirement to lower their OPEX to maintain Margins Issues Decrease In Voice Revenues Maintaining Profits Solutions New Revenues Creation OPEX Reduction Outsourcing Wireless Broadband Mobile TV SDP* (iTunes, OVI ) Advertising Other new services *SDP = Service Delivery platforms Full UTRAN Outsourcing Operators need to ensure they innovate in both streams to remain competitive in developed countries Outsourcing Network O&M Sharing of Site and Infra. Optimisation of Infrastructure Optimising Internal resources Ownership 7 Mobile Operators have many options to reduce their OPEX… Outsourcing Full UTRAN Outsourcing Full UTRAN outsourcing describes the scenario whereby the operator outsources rollout, I&C and O&M. There are many options available in this scenario, as the third party may be the owner of the active equipment as well as the owner of the backhaul network. Outsourcing Network O&M Outsourcing Network O&M is the operational model whereby the operator outsources all of its O&M services to an equipment vendor. Sharing of Site and Infra. Sharing of sites involves two or more operators using the same site to install their active equipment using a single tower. There are many sub-options available in this scenario depending on whether the operators share antennas, Node B and backhaul networks. Optimising of Infrastructure By using new technologies and architectures, some networks can be optimised to save OPEX. This scenario is not considered in this presentation Optimising Internal resources Ownership The optimisation of internal resources and process is not specific to a telecom operator but is often use to try to optimise the OPEX. This scenario is not considered in this presentation Full UTRAN Outsourcing 8 Full outsourcing often involves a tower operator, able to host many operators on a single site One example of full outsourcing strategy is T-Mobile and NGW (Macquarie) in Northern Ireland NGW were awarded a contract in 1999 with T-Mobile for the rollout and the full maintenance of T-Mobile GSM Radio Access Network (RAN) in Northern Ireland NGW owns their own transmission network, covering the whole of Northern Ireland Where practical, NGW has acquired large enough sites to host several operators, each with their own cabin. Currently, each operator uses their own transport Network or a BT leased line to backhaul their traffic. Outsourcing Network O&M Sharing of Site and Infra. Optimisation of Infrastructure Optimising Internal resources Source: http://www.uk.nationalgridwireless.com/downloads/Casestudy _T-Mobile_NI.pdf Full UTRAN Outsourcing 9 Outsourcing Network O&M fits both operator and equipment vendors strategies Outsourcing Network O&M Sharing of Site and Infra. Optimisation of Infrastructure Optimising Internal resources Traditional Equipment vendors are trying to move up the value chain to maintain profits. Outsourcing Network O&M Selling of Telecoms equipment is not highly profitable due to fierce competition Outsourcing O&M also provides the opportunity to refocus on more core business activities such as marketing and customer retention strategy Outsourcing O&M provides some scope to reducing OPEX Vendors’ drivers Operators’ drivers O&M outsourcing contracts include Ericsson and 3UK, Base-Alcatel, TNZ-Alcatel and One –Alcatel and many others… Full UTRAN Outsourcing 10 Site / RAN sharing is increasingly popular but difficult to implement in brownfield deployments Operators Telstra and Hutchinson 3G Optus and Vodafone Country Australia Australia Date of Announcement August 2004 November 2004 Date Of Launch September 2005 Q3 2005 Comments Outsourcing Network O&M Sharing of Site and Infra. Optimisation of Infrastructure Optimising Internal resources Reduction in Optus capex of AU$100 million in the first three years. Reduction in opex for maintenance, operations and site leases of approximately AU$10 million per year. Vodafone and Orange Spain November 2006 October 2007 Improve the 3G network coverage provided by both operators by approximately 25%. Reduce the number of base stations needed to deploy both the Orange Spain and Vodafone Spain networks by around 40%. 20%-30% savings on RAN opex and capex in long-term, onethird reduction in combined sites, faster 3G roll-out and improved coverage Vodafone and Orange UK February 2007 Looking at site sharing only T-Mobile and 3 UK December 2007 Expect to take 2 Cost savings of GBP2 billion (USD4 billion) over ten years, by years to consolidate decommissioning over 5000 duplicate base station sites the networks Source: Analysys Mason Group 11 There are also other business model that includes a combination of site sharing and setup of a Tower company In India, Bharti Infratel and Vodafone Essar have announced in February 2007 the sharing of their remoter sites Subsequent to this announcement, Bharti Infratel, Idea Cellular and Vodafone Essar, announced in a joint statement that they are forming an independent tower company, Indus Towers Limited, to provide passive infrastructure services in India to all operators on a non-discriminatory basis. These 3 companies will merge their existing telecom towers in 16 telecom circles in India. Bharti and Vodafone Essar will own approximately 42 per cent each and Idea will own the remaining 16 per cent stake in Indus Towers. Indus Towers will be an independently managed and operated company, offering services to all telecom operators and other wireless services providers. “The company will have approximately 70k towers at inception, and will undertake a significant roll out of telecom infrastructure to propel the mobile sector towards achieving India’s teledensity and rural coverage goals,” Source: http://www.deccanherald.com/Content/Dec92007/business2007120840233.asp 12 Contents About Analysys Mason Market Context and Outsourcing Models Backhaul Strategies and Cost Conclusion 13 Up to 70% of transmission OPEX is associated with the backhaul Distribution of Transmission OPEX Typical Break down of OPEX for a Western Mobile Operator 2G/3G 8.0% 4.7% 9.8% 2G BTS Leased Lines 3G Links Microwave licenses Dark Fibre and SDH IP Network Interconnect Links Inter-MSC Other Links 37.0% Up to 70% of transmission OPEX is associated with backhaul of 2G/3G 7.3% The rest of the OPEX is spread between core network, interconnect and other Links 12.7% 6.0% 14.5% Source: Analysys Mason Group Real opportunity to save significantly on OPEX by optimising Backhaul network 14 Today, 2G and 3G backhaul can be accommodated using TDM transport Network 2G MS (voice only) BSS Abis A Mc BSC BTS Gb IuCS RNS ATM Iub IuPS RNC Node B 3G UE (voice & data) BSS — Base Station System BTS — Base Transceiver Station BSC — Base Station Controller CN — Core Network MSC — Mobile-service Switching Controller VLR — Visitor Location Register HLR — Home Location Register RNS — Radio Network System RNC — Radio Network Controller AuC — Authentication Server GMSC — Gateway MSC SGSN — Serving GPRS Support Node GGSN — Gateway GPRS Support Node TDM CS-MGW CN Nb Nc Mc B C VLR D H Gr HLR Gn SGSN GGSN GMSC server CS-MGW PSTN PSTN MSC Server Gs SS7 IP/ATM Gc Gi AuC PSDN 15 With R5 of the 3GPP standard, 3G network now has the option to use IP for both IuCS and IuPS Interfaces… IP CS-MGW Nc UTRAN Iub IuCS Mc B MSC Server Gs RNC Node B IuPS Gr HLR Gn SGSN 3G UE (voice & data) BSS — Base Station System BTS — Base Transceiver Station BSC — Base Station Controller CN — Core Network MSC — Mobile-service Switching Controller VLR — Visitor Location Register HLR — Home Location Register RNS — Radio Network System RNC — Radio Network Controller AuC — Authentication Server GMSC — Gateway MSC SGSN — Serving GPRS Support Node GGSN — Gateway GPRS Support Node CN Nb CS-MGW Mc C PSTN PSTN VLR D H GMSC server SS7 IP Gc Gi GGSN AuC PSDN 16 The migration from TDM to IP will enable operators to decouple bandwidth from costs… The incremental bandwidth required by new application such as mobile broadband is not proportional to additional revenues. TDM backhaul does not allow to decouple bandwidth from CAPEX investment Q Cost of TDM Vs Ethernet leased lines 250 STM-16 200 Cost of E1 leased lines is proportional to bandwidth : nxE1 = n x cost(1 E1) Cost of higher TDM capacities (SDH) is in discrete steps and does not allow operator to shape and control the cost of the backhaul 150 ti tra s Il l u ve "TDM" STM-4 "Ethernet" 100 STM-1 50 E3 Q 0 1 10 100 Bandwidth (M bps) 1000 10000 Ethernet Backhaul breaks away from this model by: Following a logarithmic cost profile Having a finer granularity for bandwidth upgrade Providing a “pay as you go” capacity increase model to enable the operators to better shape up their cost structure. Technology Ethernet TDM Increase in capacity (x) 10 4 Corresponding increase in cost 2-3 times 2-3 times Ethernet Vs TDM leased lines Cost comparison: [source Analysys Mason] 17 But without an efficient aggregation network infrastructure, the cost benefits of IP will be limited Increased Packet Multiplexing Gain in ing om loop Gro s No cces A in ng mi l o Gro hau No Back ork tw Ne Multi-service Switch (Concentrator) RNC in ng m i op roo lo o G ces s N c A Multi-service Switch (Concentrator) in ng m i loop o Gro ess a cc Multi-service Switch (Concentrator) Multi-service Switch (Concentrator) Multi-service Switch in ng m i aul o Gro ackh rk B t wo Ne Multi-service Switch (Concentrator) RNC in ing om ha ul Gro ack rk B t wo Ne Multi-service Switch (Concentrator) (Concentrator) RNC Point to Point Star Aggregation Daisy Chain Aggregation The key will be to aggregate the traffic as close as possible to the Node B / BTS 18 In the case of full outsourcing models, tower operators could provide backhaul services at a very competitive rate BTS Operator A TDM Ethernet IP Node B BTS PBT Operator B Edge Mux With Pseudowire Ethernet Operator A Operator B TDM VLAN 1 Ethernet IP Node B BTS Operator C PBT Multiservice Platform Operator C VLAN 2 VLAN 3 VLAN 4 VLAN 5 Ethernet TDM VLAN 6 Tower Site IP Node B 19 Contents About Analysys Mason Market Context and Outsourcing Models Backhaul Strategies and Cost New Transmission technology Impact of new technology in Outsourced Networks Conclusion 20 Conclusions Driven by market requirements, outsourcing strategies are increasingly popular There are many outsourcing models, ranging from Full RAN outsourcing to Outsourcing just O&M Site / RAN share can be considered as an outsourcing model especially if JV is created The principal actors are Equipment vendors, Tower operators and MNO themselves Levering on traffic density achieved by multi-operator collocation makes it very attractive to offer backhaul services PBT is one of the technology that will enable Multi-operator traffic to be backhauled to their respective aggregation networks. 21 Franck Chevalier
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