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AJISAJIS LLCWireless Technology Consulting

Wireless Backhaul Trends: The Future Role of Wireless, Fiber Optics, and Copper Wire

Jonathan Wells PhD MBAPresident, AJIS LLC

8th October 2008

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AgendaAn overview of mobile backhaulDisruptive forcesIndustry trendsBackhaul technologiesConclusions

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Mobile Backhaul Overview

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Huge Cellular Phone Advances

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Cellular EvolutionDr. Martin Cooper of Motorola - “father” of the modern mobile phone - has observed:

The number of simultaneous voice and data connections has doubled every 2.5

years since wireless began (1900)Cooper’s Law

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What is Mobile Backhaul?

“Access” “Transport”“Transmission”

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Typical Mobile Backhaul Network

BST

BST

BST

RPTR

HUB

BST: Base Station, RPTR: Repeater Site, HUB: Hub Site, MSC: Mobile Switching Center

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Some Facts Globally

Over 2.5M cell sites2007 backhaul spending: $20B services, $4B equipmentWireless backhaul dominates

USAAbout 200,000 cell sitesCell site growth >10% pa for last 5 years80-90% copper T1s, ~15% fiber

Source: Heavy Reading, Nov 2007

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Disruptive Forces

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Over 1 B new phones sold annually

Even market for used phones

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AJIS… Mostly In Developing Countries

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Consumer Patterns ChangingEmerging traffic drivers

More content generated outside traditional carrier networkOpen devices drive significantly more traffic

iPhone model fundamentally changing carriers business

“All you can eat” pricing encourages high traffic usage

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Examples

iPhoneData contract requiredStunning traffic growth, despite small market shareChristmas 2007: Google traffic from iPhones exceeded traffic from all other mobile devices combined

BlackberrySignificant growth in network traffic since 2007 Facebook application launch

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AJISNew Technologies Drive Higher Data Rates …

Source: Alcatel-Lucent, 2008

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….And Bigger Channels Sizes

System Peak data rate ChannelWidth

Frequencyreuse

Peak Spectral efficiency

7 / 21 0.0150.032 - 0.048

.070.20.4

HSDPA 14 Mbps 5 MHz 1 2.8

HSDPA+64QAM & 2x2 MIMO 42 Mbps 5 MHz 1 8.4

LTE 2x2 MIMO 172.8 Mbps 20 MHz 1 8.6

LTE 100 Mbps 20 MHz 1 5

16.3

4 / 124 / 124 / 12

1

1

30 kHz200 kHz200 kHz200 kHz5 MHz

20 MHz

9.6 kbps9.6 – 14.4 kbps

171 kbps474 kbps2 Mbps

326.4 Mbps

AMPSGSMGPRSEDGEW-CDMA

LTE 4x4 MIMO

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Increased Cell Site Backhaul

Source: Heavy Reading, 2008

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Increased Backhaul CAPEX

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Revenue & Traffic Decoupled

Voice generates 80% revenue

Data traffic >> voice traffic

Heavy reading, May 2007

Costs follow traffic line!

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Summary of Fundamental Shifts Mobile subscribers and their bandwidth requirements are growing strongly

Mobile users going broadband; broadband users going mobileData traffic grows and video coming2G and 3G collocation at same cell siteMultiple operators at same cell siteWiMAX and LTE coming

Current backhaul networks are a major bottleneck

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Industry Trends

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Shift Towards EthernetScalable CostsT1 costs linear

$300 pm per T1Ethernet non-linear

$75/Mbps pm for 10 M$20/Mbps pm for 100 M$3/Mbps pm for 1 G

Source: Axerra Networks, 2008

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Ethernet Backhaul Challenges

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AJISMetro Ethernet Forum (MEF)

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Expect Rapid Ethernet GrowthWorldwide Mobile 1st Mile Backhaul Equipment Revenue by

Technology

$0

$3,000

$6,000

$9,000

CY05 CY06 CY07 CY08 CY09 CY10Calendar Year

Rev

enue

($M

)

Other

PDH NIU

SONET/SDH

PDH/SDH microwave

Ethernet microwave

Ethernet copper and fiber

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Collocation of 2G and 3G Sites

Source: Alcatel-Lucent 2006

~80% of 3G cell sites are collocated with 2G cell sites2G could be here for another 10 years!

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Mixed Mode (Hybrid) Networks2G network

Public data network

Packet switched network

Public switched telephone network

2G + 3G network

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A Few T1s are OK, For NowMost cell sites today are serviced by 1 to 4 T1s (1.5 Mbps to 6 Mbps)The amount of backhaul required is function of 2 parameters

Amount of wireless spectrum availableSpectral efficiency of the wireless interface.

Examples: 3-sector cell sitesTechnology Spectrum Backhaul

2G GSM 1.25 MHz < 1 T12.5G EDGE 3.5 MHz 4 T13G HSDPA 5 MHz 13 T1

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But LTE and WiMAX ComingLTE and WiMAX →100+ Mbps

Different service offerings require more dedicated bandwidth

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Cell Size Reductions1980s: Macro cells – 35 km radius1990s: Micro cells – 5 km radiusCurrently: Average distance between US cell sites

Urban: 1.7 kmSuburban: 3.8 kmRural: 12.5 km

Current vogue is to talk about femtocells – 10m radiusFemtocells = Home Base StationsEnd-user deployed, but subject to operator controlVery controversial

Break long-standing regulatory assumptionsSeriously challenge current business modelsConsiderable challenges in managing interference due to uncoordinated end-user deployment

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Technology Solutions

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PseudowiresPseudowire (PW) emulates the operation of a “transparent wire”, carrying a native service over a Packet Switched Network (PSN)

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Pseudowire - Pros

Lower network costs – fewer boxesSimpler network – “flat”

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Pseudowire - ConsLatency and overhead penaltiesNetwork synchronization

Timing over packet (IEEE 1588)Differential timing (e.g. GPS)

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Copper Wires

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Ethernet over Copper (EoCu)IEEE 802.3ah – Ethernet over copper wiring in the local loop

10PASS-TS: 10 Mbps to 2,500 ft2BASE-TL: 5.7 Mbps to 18,000 ft

Bonding1 to 8 pairs combined as a unified physical layer, yielding virtual pipe up to 45 Mbps symmetrical

GroomingCompensating for deteriorating effects of often ancient and poorly maintained copper plant

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Ethernet over Copper (EoCu)Pros:

Reuses existing local loop copper wiringPractical as wide use of Cu to cell sitesCost effective

Cons:Imperfect copper transmission mediumSpeed and distance limitations

Conclusion: Good “Mid-band Ethernet” solution for 2 to 20 Mbps in US

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Fiber

PON – Passive optical networksGPON – Gigabit PON

PTP – Direct fiber solution

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GPON

ProsSplits network costs across many cell sitesImproved CO floor space - less patch panelsTDM clocking support

ConsSubstantial fiber install costsComplex trouble shooting – no visibility beyond splitterDifficulty delivering high data rates to end users

Popular for residential triple play

Applications for cellular backhaul

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Point to Point Fiber

Connect point A with point BVery expensive to implement

Fiber trenching $100/ft

Conclusion: If available, fiber is often the best option, if it can becost-effectively leased. If not, expensive and limited to highest

ROI part of network

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Wireless

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Microwave Backhaul

Point to point microwave market worth ~$4B annually

Strong growth in last 4 years~ 1 million units shipped in 2007

>70% shipments for mobile backhaul~50% cell sites worldwide connected by microwave wirelessEthernet microwave is fast growing segment

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Decouples Cost and CapacityRough pricing guide

Leased line cost4 x T1 (6 Mbps) $1,200 per month

$3,000 pm(3.5 X)

$6,000 pm(5 X)

$10,000 pm(8 X)

16 x T1(4 X)OC-3 / Fast Eth (100-155 Mbps)(25 X)GigE (1,000 Mbps)(100+ X)

$35K(3.5 X)

PTP wireless link$10K$15K

(1.5 X)$25K

(2.5 X)

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Total Cost of Ownership (TCO)

Lease costs dominate TCOCAPEX is a small part of TCO

Source: DragonWave 2008

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Mixed Mode and IP Support

Source: Harris Stratex, 2008

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Multi-Protocol Support

Source: Harris Stratex, 2008

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Limitations - Rain Fade

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Used by permission www.tundracomics.com

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Significant Product InnovationAdaptive modulation

All outdoor, small form factor devices

Opening of new bands for ultra-high capacity systems

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Wireless Freq Allocations

Microwave bands have channel sizes up to 50 MHzLimits practical data rates to 200 Mbps

Millimeter-wave bands have 100x greater channel sizes to 5 GHzGbps and beyond data rates possibleShorter distance transmission

0 10 GHz 20 GHz 30 GHz 40 GHz 50 GHz 60 GHz 70 GHz 80 GHz 90 GHz 100 GHz

(2 x 5 GHz channels)Cellular Bands Microwave Bands 60 GHz Band

E-Band90 GHz Band

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Other Applications

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Conclusions

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Dynamic MarketplaceCellular Trends

Mobile ↔ BroadbandData rates increasing

Consumer wants / needsTechnology advances

Subscribers increasingRole of developing countries

CAPEX and OPEX costs rising

Backhaul ChallengesBring Ethernet to all cell sitesConvergence –support 2G, 3G and 4G at same siteMinimize capital and $/bit expensesMaintain high QoS, latency, jitter, sync,etcMigrate legacy services to packet

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Potential SolutionsPseudowires

Convergence of multiple protocols over Ethernet transportLatency and clocking issues

Ethernet over copperReuse of existing infrastructureBandwidth and resiliency issues

Ethernet over fiberIncreased bandwidth and scalability, supports exponential demandExpensive and not widely available

Ethernet over wirelessMultiple flexible and scalable approaches, bypassing wireline providersDistance limitations

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One Possible Progression?Near term:

Reuse as much of existing infrastructure as possibleMigrate to Ethernet where possible in high ROI spots

Install owned or leased Ethernet at green field sitesSignificantly lower leasing costs as demand rises

Long term:Owned fiber & wireless Ethernet backhaulBest economics, with scalability and future proofing

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Thank You For Listening!

AJIS LLCWireless Technology Consulting

Jonathan Wells PhD MBAPresident

jonathan@ajisconsulting.comwww.ajisconsulting.com

2470 Sanderling Drive Pleasanton, CA 94566 Cell: +1 925 200 5124