The three points talked about in every Femtocell customer meeting:
1 - Price and potential savings
2 - The indoor coverage advantage
3 - Architecture and how to integrate with existing network infrastructure
The Femtocell marketing effort can benefit from addressing three other areas:
1- Targeting new breed of customers: Most of the effort is spent towards soliciting the traditional operators (VF, FT/Orange, T-Mobile ...etc), all of which either already have mature networks or in the process of building them. One of the important selling points of the Femtocell concept is that the network can be operational from the day the first router is shipped. There is no time wasted acquiring sites and building them....etc. Therefore the prospects for new entrants are great and therefore targeting these new market entrants instead of traditional operators is a good strategy. These new entrants will have a discernibly different business model from the traditional mobile operator model.
2- High rise buildings and vertical cities: I don't know why everybody assumes that Femtocells are ideal for the typical US and European suburbia. Most people around the world live in flats in high rise buildings, tower blocks and apartments. I'd like to see the Femtocell concept pitched for this type of deployment. The benefit over typical macro deployment is easily recognisable.
3- Community Networking: I've talked about this in a previous post. This is essentially copying the FON model of community based networking. This also requires the emergence of a new breed of operators who are ready to experiment with new business models instead of the traditional linking of minutes and ARPU.
Showing posts with label Next billion subscribers. Show all posts
Showing posts with label Next billion subscribers. Show all posts
13 Jun 2007
Femto cell Architecture
The business case for indoor femto cells has gained increasing traction in the last few weeks, and lots of news comments about various femto cell development companies. For example, check here, here and here.
Although the femto cell concept is quickly gaining grounds towards complete and operational products, there is still some misunderstanding on how the overall network architecture will look like. I'll try to address this issue in this post.
A femto cell router is a small device, the size of any Wi-Fi router, which is in effect a miniature base station. The radio is a standard based radio such as UMTS/HSPA which the operator will likely require a license to operate on. The router connects to a DSL line. The idea is to enable the subscriber to make and receive mobile calls indoors, with low signal levels which has a number of benefits to the operator:
- Hopefully accelerate fixed line substitution.
- Reduce the cost of building a full macro layer network.
- Lock subscriber in to the operator and reduce the likelihood of churn.
- Provide a viable medium for content distribution (the ugly walled garden paradigm)
It is not my intention here to argue for or against these benefits. I will dedicate a full post on the business case for the femto cell and the potential cons sometime soon. So let us stay on the technology side and try to investigate how a UMTS based femto cell routers will be integrated with the operator's core network.
Basically, there are a number of ways, the first of which is the conventional hierarchy using an RNC . Just like any node-b is connected back to an RNC which is then in turn is connected to the core network, the femtocell routers can be treated like individual node-bs and connect to RNCs. This may appeal to big manufacturers who already have substantial deployments and many RNC on the ground. The downside to this approach is the limited chances of inter-operable devices if the operators chooses to diversify their suppliers. Although the Iub interface (base station to RNC) is standardised, the reality is most implementations are proprietary. Typically operators don't like to put all their eggs in one basket and would prefer to get solutions from various suppliers. The other downside of this approach is that most available RNC solutions are geared towards Macro/Micro type of deployments. In other words they are built in order to support relatively small number of cells with a huge number of subscribers in each cell. They don't scale very well to support Femto cell deployments with almost as many cells as there are subscribers, and a handful of subscribers per cell.
An alternative approach is to use UMA (or now called GAN). UMA was originally conceived to support dual mode cellular/WiFi-over-Internet type of connectivity. When the mobile is detected indoors within the range of pre-determined WiFi coverage, a UMA concentrator does the core network negotiation on behalf of the mobile, e.g. registering, and updating location ... etc. It is thought that a similar procedure can be used for femto cells. When the mobile is detected within the coverage of a femto cell, UMA kind of hand shaking takes place to ensure that: 1. the mobile is allowed to access the network at this particular femto cell, 2. the traffic between the mobile and the core network is forwarded accordingly. Using this method a UMA concentrator is required, so in a way, the solution is still hierarchical and it is certainly one of the criticisms of this method is that it is not a fully flat architecture. Kineto is one of the companies promoting this approach.
Yet another alternative approach is enabling femto cell connectivity through an IMS service. In this approach, the femto cell router talks SIP over the internet back to an IMS service which acts as a bridge between the femto layer and the rest of the network. Although this is considered the "flattest" approach, it is yet to understand how it will work in practice, the delay in working fully featured IMS platforms is one of the concerns of femto cell development companies.
Incidentally, my current clients are hedging their bets by supporting more than one approach and have developed partnerships with various companies in their respective fields to make the Femto architecture as flexible as possible.
Although the femto cell concept is quickly gaining grounds towards complete and operational products, there is still some misunderstanding on how the overall network architecture will look like. I'll try to address this issue in this post.
A femto cell router is a small device, the size of any Wi-Fi router, which is in effect a miniature base station. The radio is a standard based radio such as UMTS/HSPA which the operator will likely require a license to operate on. The router connects to a DSL line. The idea is to enable the subscriber to make and receive mobile calls indoors, with low signal levels which has a number of benefits to the operator:
- Hopefully accelerate fixed line substitution.
- Reduce the cost of building a full macro layer network.
- Lock subscriber in to the operator and reduce the likelihood of churn.
- Provide a viable medium for content distribution (the ugly walled garden paradigm)
It is not my intention here to argue for or against these benefits. I will dedicate a full post on the business case for the femto cell and the potential cons sometime soon. So let us stay on the technology side and try to investigate how a UMTS based femto cell routers will be integrated with the operator's core network.
Basically, there are a number of ways, the first of which is the conventional hierarchy using an RNC . Just like any node-b is connected back to an RNC which is then in turn is connected to the core network, the femtocell routers can be treated like individual node-bs and connect to RNCs. This may appeal to big manufacturers who already have substantial deployments and many RNC on the ground. The downside to this approach is the limited chances of inter-operable devices if the operators chooses to diversify their suppliers. Although the Iub interface (base station to RNC) is standardised, the reality is most implementations are proprietary. Typically operators don't like to put all their eggs in one basket and would prefer to get solutions from various suppliers. The other downside of this approach is that most available RNC solutions are geared towards Macro/Micro type of deployments. In other words they are built in order to support relatively small number of cells with a huge number of subscribers in each cell. They don't scale very well to support Femto cell deployments with almost as many cells as there are subscribers, and a handful of subscribers per cell.
An alternative approach is to use UMA (or now called GAN). UMA was originally conceived to support dual mode cellular/WiFi-over-Internet type of connectivity. When the mobile is detected indoors within the range of pre-determined WiFi coverage, a UMA concentrator does the core network negotiation on behalf of the mobile, e.g. registering, and updating location ... etc. It is thought that a similar procedure can be used for femto cells. When the mobile is detected within the coverage of a femto cell, UMA kind of hand shaking takes place to ensure that: 1. the mobile is allowed to access the network at this particular femto cell, 2. the traffic between the mobile and the core network is forwarded accordingly. Using this method a UMA concentrator is required, so in a way, the solution is still hierarchical and it is certainly one of the criticisms of this method is that it is not a fully flat architecture. Kineto is one of the companies promoting this approach.
Yet another alternative approach is enabling femto cell connectivity through an IMS service. In this approach, the femto cell router talks SIP over the internet back to an IMS service which acts as a bridge between the femto layer and the rest of the network. Although this is considered the "flattest" approach, it is yet to understand how it will work in practice, the delay in working fully featured IMS platforms is one of the concerns of femto cell development companies.
Incidentally, my current clients are hedging their bets by supporting more than one approach and have developed partnerships with various companies in their respective fields to make the Femto architecture as flexible as possible.
19 May 2007
Top 20 best selling handsets in UK
The list of top 20 selling handsets with contracts from Mobile Today shows the weakest performance of Motorola handsets this year.
In the top 20 there are: 7 SonyEricsson, 6 Nokia, 4 Samsung, 2 LG and only one Motorola made handset. The only Motorola handset in the list is the KRZR, ranking 14.
I'm not sure if analysts use this kind of market trends at all when they make investment decisions, but somebody has to question the reasons behind such a dismal performance.
Motorola has failed to find a followup to the best selling RAZR phone. The company was a victim of its own success with the RAZR by thinking that they found the right formula for a best selling handsets. Instead of developing new handset ideas with new concepts, they kept on releasing models that essentially copy the RAZR concept over and over.
I remember vividly how my casual suggestion of developing a new mobile platform that enables handset customisation was met with ridicule at Motorola.
Since the news that the ex head of mobile devices Ron Garriques is to join Dell came out a couple of months ago, the analysts suggested that one of his tasks may be to develop Dell-style user customised handsets. Well done Ed, another opportunity lost for Motorola.
In the top 20 there are: 7 SonyEricsson, 6 Nokia, 4 Samsung, 2 LG and only one Motorola made handset. The only Motorola handset in the list is the KRZR, ranking 14.
I'm not sure if analysts use this kind of market trends at all when they make investment decisions, but somebody has to question the reasons behind such a dismal performance.
Motorola has failed to find a followup to the best selling RAZR phone. The company was a victim of its own success with the RAZR by thinking that they found the right formula for a best selling handsets. Instead of developing new handset ideas with new concepts, they kept on releasing models that essentially copy the RAZR concept over and over.
I remember vividly how my casual suggestion of developing a new mobile platform that enables handset customisation was met with ridicule at Motorola.
Since the news that the ex head of mobile devices Ron Garriques is to join Dell came out a couple of months ago, the analysts suggested that one of his tasks may be to develop Dell-style user customised handsets. Well done Ed, another opportunity lost for Motorola.
21 Feb 2007
The drive for cost reduction in mobile networks
A while back I wrote about getting the next billion subscribers and discussed the importance of mobile networks that are cheap to build and run in low ARPU markets.
I take another look here at some of the activities involved in building and maintaining a network and identify ways to make those activities more efficient.
CapEx:
- Network architecture: Choosing the right architecture can make a big difference in terms of expenditure. For example, choosing an architecture that requires a lot of infrastructure or which restricts the options for choosing backhaul and interconnect suppliers can be costly.
- Network design: out of experience, network dimensioning and design activities tend to make pessimistic assumptions about the network layout, so most of the time networks tend to be over-dimensioned for the purpose they were built for.
- Hardware/Software features: Vendors tend to promote bundles of features with their products. Low ARPU operations rely on very few and basic features such as voice and text. Low ARPU operators can demand an almost "bare bones" system from their suppliers, without the bells and whistles.
- Installation/Integration/Commissioning: Having been involved in II&C of various trial networks, these activities can be very costly, typically because of lack of proper project management. Putting processes to eliminate multiple site visits can reduce cost of deployment. In a recent project I was involved in, due to an arrangement the operator had with the company that owns various site locations, accessing sites to install /upgrade /maintenance equipment cost the operator a standard £300 per site per day. Experienced II&C engineers can make a big difference here, getting sites (or nodes) up and running in few hours.
- Spectrum: in low ARPU markets, the business model is very sensitive to the assumptions you make about the business. Try to reflect the spectrum cost accurately and, depending on your business case, decide what is the absolute maximum you are willing to pay to get a license.
OpEx:
- Interconnect: Cost of interconnect is typically around 15% of the network OpEx. There is a huge opportunity to reduce cost of interconnect. There are many providers these days, so managing relationships with interconnect providers and exploiting competition between them can get you good deals. Unfortunately, this is less possible in low ARPU economies where market liberalisation has not been fully achieved yet.
- Site Rental: Site sharing and network sharing is definitely the next area to explore in network operations. Even big players like Vodafone and Orange have decided that network sharing is the way to go. In a small country like UK, there are five network infrastructure layers to essentially cover the same population. Imagine the savings if operators share sites on a larger scale, or even better: share infrastructure.
- Personnel: Personnel charges in labour, training, ..etc is typically around 20% of CapEx. Vendors who aim to build products for low ARPU markets have to design them with simplicity in mind. Some of the equipment I worked on has a ridiculous list of counter intuitive parameters that need to be set. the result is wasted time and effort. When it comes to network infrastructure, usability tend to be at the end of the list. If the effort wasted on fairly mundane activities were to be properly cost-ed, i am sure network operators will force vendors to change their approach.
- Asset Depreciation: This can be as high as 30% of network Opex!. Think of the product life and what you are going to do with it at the end of its life cycle. This is clearly linked to your business model. Financial consultants can often suggest ways to retrieve some of the depreciation charges in tax relief or other ways.
I take another look here at some of the activities involved in building and maintaining a network and identify ways to make those activities more efficient.
CapEx:
- Network architecture: Choosing the right architecture can make a big difference in terms of expenditure. For example, choosing an architecture that requires a lot of infrastructure or which restricts the options for choosing backhaul and interconnect suppliers can be costly.
- Network design: out of experience, network dimensioning and design activities tend to make pessimistic assumptions about the network layout, so most of the time networks tend to be over-dimensioned for the purpose they were built for.
- Hardware/Software features: Vendors tend to promote bundles of features with their products. Low ARPU operations rely on very few and basic features such as voice and text. Low ARPU operators can demand an almost "bare bones" system from their suppliers, without the bells and whistles.
- Installation/Integration/Commissioning: Having been involved in II&C of various trial networks, these activities can be very costly, typically because of lack of proper project management. Putting processes to eliminate multiple site visits can reduce cost of deployment. In a recent project I was involved in, due to an arrangement the operator had with the company that owns various site locations, accessing sites to install /upgrade /maintenance equipment cost the operator a standard £300 per site per day. Experienced II&C engineers can make a big difference here, getting sites (or nodes) up and running in few hours.
- Spectrum: in low ARPU markets, the business model is very sensitive to the assumptions you make about the business. Try to reflect the spectrum cost accurately and, depending on your business case, decide what is the absolute maximum you are willing to pay to get a license.
OpEx:
- Interconnect: Cost of interconnect is typically around 15% of the network OpEx. There is a huge opportunity to reduce cost of interconnect. There are many providers these days, so managing relationships with interconnect providers and exploiting competition between them can get you good deals. Unfortunately, this is less possible in low ARPU economies where market liberalisation has not been fully achieved yet.
- Site Rental: Site sharing and network sharing is definitely the next area to explore in network operations. Even big players like Vodafone and Orange have decided that network sharing is the way to go. In a small country like UK, there are five network infrastructure layers to essentially cover the same population. Imagine the savings if operators share sites on a larger scale, or even better: share infrastructure.
- Personnel: Personnel charges in labour, training, ..etc is typically around 20% of CapEx. Vendors who aim to build products for low ARPU markets have to design them with simplicity in mind. Some of the equipment I worked on has a ridiculous list of counter intuitive parameters that need to be set. the result is wasted time and effort. When it comes to network infrastructure, usability tend to be at the end of the list. If the effort wasted on fairly mundane activities were to be properly cost-ed, i am sure network operators will force vendors to change their approach.
- Asset Depreciation: This can be as high as 30% of network Opex!. Think of the product life and what you are going to do with it at the end of its life cycle. This is clearly linked to your business model. Financial consultants can often suggest ways to retrieve some of the depreciation charges in tax relief or other ways.
2 Jan 2007
Getting the next billion subscribers - enabling low cost infrastructure
At the end of 2005, the number of global subscribers exceeded the 2 billion mark. Vendors were preparing themselves for the challenge of adding the next billion subscribers. The most optimistic forecasts estimated that the next billion subscribers will be added by the end of 2010.
What happened in fact is that more than 500 million subscribers have already been added by the end of 2006, 41% of which are in AsiaPac area alone. The estimates have changed now, adding the next 500million is expected in the coming 18 months!
In the long term, there is no doubt that developing economies will drive growth in the wireless industry over the next 10 years (should rather use the politically correct term: "emerging markets" instead of "developing countries". The term "developing countries" itself is a milder way of saying "under-developed countries"). Although the telecomm vendors have been talking for a while about the huge opportunities in these emerging markets, they have done very little in the way of efficiently enabling it.
The wireless/mobile business in the merging markets typically exhibit low ARPU, therefore the focus should be on coming with ways to enable a low ARPU business models. There are so many things that can be done by both vendors and operators to reduce cost of deployment and running costs of mobile networks. The emphasis has to shift towards building "no frills", low cost networks that copy the Ryan Air business model of cost competitiveness in every respect with an integrated and holistic approach to cost competitiveness.
Instead, both vendors and operators alike continue to invest huge sums to develop advancements that will offer increasing speeds and better performance, which suggests they learnt very little from the Personal Computer story.
When PCs were first introduced, the driver was providing more technology and better performance, and this was the motivation for Moore's law. With time, the technology matured, and consumers demanded cheaper products, and they were less concerned with the technology content of their PCs. In his book the Invisible Computer Donald Norman argues that as technology develops it reaches a transition point where it offers excess quality that customers tend to be uninterested in. The transition point what differentiates technology-rich, high-performance products from commoditized products that offer just the right level of technology and reliability. (This paradigm perhaps explains why processor makers made the shift to multi-core processors). For today's telecomm vendors to succeed, they need to come up with commoditized, stable, and standard products that can achieve economies of scale, not feature rich ones.
(Graph from Donald Norman's article: the life cycle of technology)
Most handset makers have certainly worked hard to bring about low-cost handsets that can sell below the $30 mark. Qualcomm is already talking about a 3G handset to sell below $120 and prices are in decline. Infrastructure cost reduction however is not on everybody's agenda. The only exceptions to this that I could find are Nokia's announcement in 3GSM last year that they intend to build an inexpensive and “robust” 3G base station, as well as Motorola's “Reach” GSM product line that enables low cost infrastructure.
But low cost infrastructure is not the only part of the puzzle. As I mentioned above, there should be a holistic approach that encompasses virtually everything: planning, deployment, operation, and servicing.
Cheap infrastructure: By providing the very basic features and capabilities, and commoditizing the product to achieve economies of scale. Vendors can leverage some of the commonalities between platforms for example or rely on pure ASIC instead of DSP.
Cost reductions in supply chain: Horizontal integration in the industry will help vendors get cheaper parts if they have large enough economies of scale. Using commoditized products with low variation, operators can source fairly standard ancillaries such as antennas and cables at low prices.
Network Design and deployment: A slight relaxation of network design parameters can save the operator millions in infrastructure equipment. There are various concepts that operators can also benefit from, such as Network Pre-optimisation (this is a concept I invented three years ago) . Operators can also save money by forcing vendors to simplify their products for testing and deployment purposes.
Low cost transmission networks: by using low cost technologies (e.g. over microwave) and Infra structure sharing
Both vendors and operators alike have to think how to reduce network running costs and how to reduce subscriber churn in the network.
I barely touched the surface here. There are hundreds of things that can be done to make mobile telephony as cheap as air.
What happened in fact is that more than 500 million subscribers have already been added by the end of 2006, 41% of which are in AsiaPac area alone. The estimates have changed now, adding the next 500million is expected in the coming 18 months!
In the long term, there is no doubt that developing economies will drive growth in the wireless industry over the next 10 years (should rather use the politically correct term: "emerging markets" instead of "developing countries". The term "developing countries" itself is a milder way of saying "under-developed countries"). Although the telecomm vendors have been talking for a while about the huge opportunities in these emerging markets, they have done very little in the way of efficiently enabling it.
The wireless/mobile business in the merging markets typically exhibit low ARPU, therefore the focus should be on coming with ways to enable a low ARPU business models. There are so many things that can be done by both vendors and operators to reduce cost of deployment and running costs of mobile networks. The emphasis has to shift towards building "no frills", low cost networks that copy the Ryan Air business model of cost competitiveness in every respect with an integrated and holistic approach to cost competitiveness.
Instead, both vendors and operators alike continue to invest huge sums to develop advancements that will offer increasing speeds and better performance, which suggests they learnt very little from the Personal Computer story.
When PCs were first introduced, the driver was providing more technology and better performance, and this was the motivation for Moore's law. With time, the technology matured, and consumers demanded cheaper products, and they were less concerned with the technology content of their PCs. In his book the Invisible Computer Donald Norman argues that as technology develops it reaches a transition point where it offers excess quality that customers tend to be uninterested in. The transition point what differentiates technology-rich, high-performance products from commoditized products that offer just the right level of technology and reliability. (This paradigm perhaps explains why processor makers made the shift to multi-core processors). For today's telecomm vendors to succeed, they need to come up with commoditized, stable, and standard products that can achieve economies of scale, not feature rich ones.
(Graph from Donald Norman's article: the life cycle of technology)
Most handset makers have certainly worked hard to bring about low-cost handsets that can sell below the $30 mark. Qualcomm is already talking about a 3G handset to sell below $120 and prices are in decline. Infrastructure cost reduction however is not on everybody's agenda. The only exceptions to this that I could find are Nokia's announcement in 3GSM last year that they intend to build an inexpensive and “robust” 3G base station, as well as Motorola's “Reach” GSM product line that enables low cost infrastructure.
But low cost infrastructure is not the only part of the puzzle. As I mentioned above, there should be a holistic approach that encompasses virtually everything: planning, deployment, operation, and servicing.
Cheap infrastructure: By providing the very basic features and capabilities, and commoditizing the product to achieve economies of scale. Vendors can leverage some of the commonalities between platforms for example or rely on pure ASIC instead of DSP.
Cost reductions in supply chain: Horizontal integration in the industry will help vendors get cheaper parts if they have large enough economies of scale. Using commoditized products with low variation, operators can source fairly standard ancillaries such as antennas and cables at low prices.
Network Design and deployment: A slight relaxation of network design parameters can save the operator millions in infrastructure equipment. There are various concepts that operators can also benefit from, such as Network Pre-optimisation (this is a concept I invented three years ago) . Operators can also save money by forcing vendors to simplify their products for testing and deployment purposes.
Low cost transmission networks: by using low cost technologies (e.g. over microwave) and Infra structure sharing
Both vendors and operators alike have to think how to reduce network running costs and how to reduce subscriber churn in the network.
I barely touched the surface here. There are hundreds of things that can be done to make mobile telephony as cheap as air.
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