Mark KelleyFormulate Wireless

Build, Buy or RentBackhaul Strategies for 4G

Build, buy or rent?- Strategic Network Planning for Wireless Backhaul

4GWE Conference

Los Angeles, CA5 October, 2010

Wireless Network Business • Wireless business remained strong through the recession

– In late 2008 and early 2009, US Economy (GDP) declined over 6% each quarter…but…

– US Wireless subscriber growth continued adding 14 million new subs in 2009 and on track to do the same this year (Frost and Sullivan)

– ARPU has grown 2% in this period, data ARPU up 25% (Aberdeen)

• WSJ – 13 July, 2010 – “Prepare for the Tower Surge”– For investors seeking a defensive play in a time of economic

shakiness, operators of cell towers stand out in the landscape.

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Wireless Subscriber Growth

2008 2009 2010 2011 2012 2013 2014 20150

50

100

150

200

250

300

350

400

US Mobile Wirelss Subs

Millions

Source: Visant Strategies

Annual Base Station Growth

2008 2009 2010 2011 2012 2013 2014 2015

Cumulative 267905 286360 306445 335347 362873 389801 413399 432600

New BTSs 28984 18455 20085 28902 27526 26928 23598 19201

25,00075,000

125,000175,000225,000275,000325,000375,000425,000475,000

2,5007,50012,50017,50022,50027,50032,500

New BTS Additions

Tota

l BTS

s

New

BTS

s

Source: Visant Strategies

Technology Deployment

2008 2009 2010 2011 2012 2013 2014 2015

2G BTSs De-ployed

108143 99318 89940 85031 80171 73103 60031 52301

3G BTSs De-ployed

152912 174582 194245 210644 218862 226700 229965 221655

3.5/4G BTSs De-ployed

6850 12460 22260 39672 63840 89998 123403 158644

To-tal BTS

267905 286360 306445 335347 362873 389801 413399 432600

25,000

75,000

125,000

175,000

225,000

275,000

325,000

375,000

425,000

2G BTSs Deployed3G BTSs Deployed3.5/4G BTSs DeployedTotal BTS

Source: Visant Strategies

New network weak link: backhaul• Backhaul is Achilles heel of 3G and 4G networks

– Today’s typical BTS has 4-9 T1s (approximately 15 Mbps max)– Some estimates are that 20% of existing BTSs may be

“under provisioned”• >50% by 2015

– Cause of many smartphone driven capacity issues• Example : single 3-sector WiMAX BTS

– 3 x 10 MHz, 7 Mbps peak traffic/sector = 21 Mbps • Will grow when second BTS added• In 2005 – 3 x 1XRTT, 5 Mbps max

• LTE – High use BTSs expected to require 100-300 Mbps by 2015– With 3 carriers/site will exceed 1 Gbps/tower

Backhaul Penetration

• TDM still holds the lions share of backhaul traffic – leased copper is close to 70% of today’s backhaul (source – ABI)

• This will migrate to a split approach before becoming all IP by the end of the decade

2008 2009 2010 2011 2012 2013 2014 20150

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Fiber connected Base Stations% of Total BTS with Fiber

Fiber Connection: Slowly Increasing

Growth of 4G

2008 2009 2010 2011 2012 2013 2014 2015

Total Subs 282.3 301.5 318 334.2 344.8 352.9 359.5 368.1

3.5 and 4G 0.1 0.8 1.7 5.2 12.9 30.3 63.3 110.5

Percentage 0.0004 0.003 0.005 0.02 0.04 0.09 0.18 0.3

25

75

125

175

225

275

325

375

2.50%

7.50%

12.50%

17.50%

22.50%

27.50%

32.50%

4G Growth Through 2015

Build or pay as you go: T1/E1• T1 prices have dropped precipitously– (up to) $1500 down to <$500 today• Still at >$100/ Mbps• Linearly increasing cost with capacity – no “volume

discount”• Limit of many towers/rooftops => DS3

• Still – it’s TDM 2G, not ideal for 3G, really not ideal for 4G Ethernet/IP

• Upgrading carrier backhaul alternatives:– Fiber installation

• Cost/time depends on distance and topology• Cost effective where it’s easy/short (<500M)• Prohibitive and time consuming in suburbs, exurbs, and rural

– But – virtually unlimited capacity

– Microwave• Reusable gear can provide up multi-Gbps• Cheaper/faster to deploy, shorter ROI

Both are complex with multi-service (Ethernet, TDM) protocols, and both are used ideally

Roll your own: self deploy

• Increasing complexity of backhaul– Exploding bandwidth • >50Mbps/cell site

– Multi protocol• 2G (voice, TDM), 3G (some data, TDM/IP), 4G (IP)

– Costs• T1s don’t scale to tomorrow needs• Huge CAPEX for re-piping backhaul to 80% of cell sites

on legacy networks

Summary – 2010 backhaul

Ideal Solution – Shared backhaul• Tower model – shared critical component– Many carriers see the network as the business• Excellent viewpoint – emphasizing network quality

– But every carrier shares tower resources

• Higher quality can be maintained, at lower cost– Five towers in the same location?

• Neutral host – splits costs, passes savings– Complexity eliminated by focused effort of experts– Costs lowered by sharing fat pipe of hybrid

fiber/microwave network

Conclusions

• Carriers today spend $1300 (average) monthly on backhaul OPEX at each cell site

• The carrier business model is highly sensitive to OPEX

• The expected backhaul throughput requirements over 10 years (2005 – 2015) increase from 5 Mbps to 50 Mbps – but the cost cannot change

• Technology and network backhaul sharing can provide the means to meet the speed/latency/quality need, and maintain the cost