It's bizarre that some are talking about a 16 call femtocell. The whole idea of a femtocell is that it's a compact consumer device that provides adequate coverage and capacity within the home or place of work. Having a 16 call femtocell at home or in a shop is like driving your own bus to work everyday. It will get you to work, inefficiently, painfully and probably late...
My view is that what is often flagged as a high capacity femtocell is a re-branded picocell. This is because some vendors got the wrong end of the stick when they assumed that a femtocell is simply a downsized picocell, so they picked their existing picocell products, massaged transmission power and capacity to make it feel like a femtocell, and then branded it as a femtocell product.
A femtocell is not about putting a transmission mast at home or work. It is not a shrunk picocell. It is not a picocell with cheap IP backhaul. I believe that the term "femtocell" should get a better and clearer definition to avoid muddying the water and confusing customers.
Nobody will gain out of reducing the femtocell race to a simple "umph" comparison. Why? because operators who examine the so-called "high capacity femtocells" closely will lose faith in the whole femtocell technology. The femtocell concept is about deploying thousands and thousands of these small cells everywhere. Potentially the number of femtocells in a network will be many folds the number of macro sites the operator owns. Operators should not be drawn into the "My femtocell is bigger and meaner than yours" rhetoric and should concentrate on what the product offers in terms of simplicity of deployement, provisioning, configuration and management.
What's the point of having thousands of high capacity small picocells "aka big and mean femto :-)" if:
1. you do not have the processes to provision them and distribute them to your consumers in an efficient and streamlined fashion?
2. you have to partially or fully configure and radio engineer each one?
3. You have to manually change their configuration every time you do an optimisation sweep on your macro network?
3. you can't manage them in volume?
It's unfortunate that some vendors have concentrated on the technology parity with traditional indoor solutions and totally ignored what is truly important and exciting about the femtocell concept.
There is an urgent need to better clarify and define what a femtocell is. I will make few attempts to do so in my next few postings.
Showing posts with label cost reduced infrastructure. Show all posts
Showing posts with label cost reduced infrastructure. Show all posts
27 Nov 2008
25 Nov 2008
The hidden benefits of femtocells
I have spent some time now looking at various femtocell business cases and find it very interesting how creative some of the operators are when it comes to using femtocells to generate new revenue streams.
It occured to me that sometimes it's the straightforward and simple things that get over looked in these business cases, and I wanted to go back to basics and look at the simplest scenario of using a femtocell to generate revenue.
One of the revenue streams that operators rely on is the income from call termination charges. All operators negotaite commerical wholesale interconnection agreements with other operators, these are often wholesale agreements regulating the conditions under which the agreement parties can connect to each other.
The call termination rate is a wholesale price one network pays in order to terminate a call originating from its own network to a destination in the other network. Typically, the call termination rates are based on an average cost of delivery plus a margin.
With the increased regulatory pressure to reduce call termination rates (e.g. in UK and Europe) operators are having to drop their margins and have to live on a smaller revenue stream from terminating calls from other networks. Changes to termination rates is having a significant impact on the profits of mobile telecoms companies.
The average cost of delivering mobile terminated calls is greatly reduced if the penetration of femtocells in the network is high enough. And therefore it becomes cheaper -on average - to terminate calls from other networks. This automatically translates into higher call termination profits.
It occured to me that sometimes it's the straightforward and simple things that get over looked in these business cases, and I wanted to go back to basics and look at the simplest scenario of using a femtocell to generate revenue.
One of the revenue streams that operators rely on is the income from call termination charges. All operators negotaite commerical wholesale interconnection agreements with other operators, these are often wholesale agreements regulating the conditions under which the agreement parties can connect to each other.
The call termination rate is a wholesale price one network pays in order to terminate a call originating from its own network to a destination in the other network. Typically, the call termination rates are based on an average cost of delivery plus a margin.
With the increased regulatory pressure to reduce call termination rates (e.g. in UK and Europe) operators are having to drop their margins and have to live on a smaller revenue stream from terminating calls from other networks. Changes to termination rates is having a significant impact on the profits of mobile telecoms companies.
The average cost of delivering mobile terminated calls is greatly reduced if the penetration of femtocells in the network is high enough. And therefore it becomes cheaper -on average - to terminate calls from other networks. This automatically translates into higher call termination profits.
19 Oct 2007
Femtocells are much more than cheap telephony
The compelling selling points of femtocells are increasingly becoming more noticeable.
The apparent strong compelling factor is the disruptive value proposition in terms of cost of delivering a minute of calls (or Mbytes of data) to the end user. Another obvious one is related to service bundling and other innovative marketing ideas.
One area that is increasingly getting attention is the femtocell as platform for added value services (VAS) . The femtocell concept can be extended to make it an integrated 3G access point and intelligent home gateway that offers added value services to the customer. Imagine what can be achieved if a mobile operator can offer something like this, but with a proper cellular flavored radio. This will make femtocells ideal candidates for IMS type of deployments.
The femtoell can also be used as a content distribution platform. In this model content/services/application can be pushed to the UE when the femtocell senses the UE is in its vicinity.
Even a more exciting proposition, is what I call Reverse Content Distribution, where a roaming user outside the femtocell zone can access his content remotely. The femto can orchestrate the user’s access to various equipments at home, such as the PC, Home Media Server, Apple TV, …etc. It can also perform various remote home control functions, like switch on the heating, prepare the bath, access the burglar alarm …etc. There are various mechanisms to enable this. For example, it can be via a femto access interface on the application level. Alternatively, the femtocell can be a passive element and home control can be achieved pretty much in the same way it can be done today from a PC across the internet.
The apparent strong compelling factor is the disruptive value proposition in terms of cost of delivering a minute of calls (or Mbytes of data) to the end user. Another obvious one is related to service bundling and other innovative marketing ideas.
One area that is increasingly getting attention is the femtocell as platform for added value services (VAS) . The femtocell concept can be extended to make it an integrated 3G access point and intelligent home gateway that offers added value services to the customer. Imagine what can be achieved if a mobile operator can offer something like this, but with a proper cellular flavored radio. This will make femtocells ideal candidates for IMS type of deployments.
The femtoell can also be used as a content distribution platform. In this model content/services/application can be pushed to the UE when the femtocell senses the UE is in its vicinity.
Even a more exciting proposition, is what I call Reverse Content Distribution, where a roaming user outside the femtocell zone can access his content remotely. The femto can orchestrate the user’s access to various equipments at home, such as the PC, Home Media Server, Apple TV, …etc. It can also perform various remote home control functions, like switch on the heating, prepare the bath, access the burglar alarm …etc. There are various mechanisms to enable this. For example, it can be via a femto access interface on the application level. Alternatively, the femtocell can be a passive element and home control can be achieved pretty much in the same way it can be done today from a PC across the internet.
22 Jul 2007
Google invests $25 million in Ubiquisys
The recent news of Google's $25 million investment in Ubiquisys is the beggining of a major change in the race to win the Femtocell race.
While architecture, coverage and RF performance are some of the important areas to keep a close eye on, content and applications will be the major differentiating aspects. I talked in a previous post about content personalisation and customisation possibibilities with FemtoCell solutions, which is going to be an exciting area to watch over the next 6 months.
While architecture, coverage and RF performance are some of the important areas to keep a close eye on, content and applications will be the major differentiating aspects. I talked in a previous post about content personalisation and customisation possibibilities with FemtoCell solutions, which is going to be an exciting area to watch over the next 6 months.
5 Jul 2007
Femtocell Forecasts
Cellular News published an interesting short article suggesting that femtocell shipments will reach 36million in 2012, which in my view a rather conservative estimate. The estimate is contingent on a couple of big operators tidying up their messy business models. If operators grasp the big potential offered by the femto concept, then one can easily predict an estimate closer to 100 million plus. Nevertheless I perfectly understand why other experts do not see it this way.
An interesting quote in the article mentioned above:
"...no matter how attractive the service offerings a femtocell-based solution can bring, the sheer savings from backhaul and energy costs could equate to over $70 billion by 2012, outshining service revenues and providing enough financial incentive for carriers to actively support this solution".
Obviously, the operators that will gain the most are the ones that do not have yet a fully deployed 3G infrastructure.
An interesting quote in the article mentioned above:
"...no matter how attractive the service offerings a femtocell-based solution can bring, the sheer savings from backhaul and energy costs could equate to over $70 billion by 2012, outshining service revenues and providing enough financial incentive for carriers to actively support this solution".
Obviously, the operators that will gain the most are the ones that do not have yet a fully deployed 3G infrastructure.
20 Jun 2007
Femtocell Challenges
In a previous post I talked about the potential benefits of femtocells to the operators as well as consumers. In this post I'd like to investigate the potential hurdles in the road to viable femtocell solutions.
Looking at various analysts remarks I narrowed the list of potential show stoppers to the following items, all of which are not unresolvable, but one has to be aware of:
Cost:
This is the obvious one. There is no doubt that we are well into the cost reduction era. This is by far the number one item on every operator's agenda. The bottom line is that operators want to see a nice dollar savings associated with Femto cells, which increases pressure on femto cell development firms to reduce their price tag. Traditionally, pricing is based on a BOM plus margins. An alternative way for development firms is to price based on potential benefits/savings. My firm has recently been engaged in a similar pricing activity with a potential investor.
The cost challange means that there is a limit to the amount of effort and features developers will bundle in the femto cell box. Deciding what is "sufficient" feature list is a difficult call (check the technology life cycle model proposed by D. Normann in one of my previous posts)
Radio Planning and interference management:
Unlike Wi Fi, the Femto cell is likely to use the licensed spectrum e.g. UMTS band. Although it is my view that the femto network is better have its own carrier, many clients would like the femto cell concept to work on the same carrier frequency used by existing infrastructure be it a macro, micro or pico layer.
Femtocells are expected to coexist with the rest of the network by automatically configuring themselves. Operator or user intervention is undesirable...a femto cell box has to be fully plug and play without the need to setup,configure or optimise it in anyway. Therefore lots of effort is being spent on femto cell radio management features e.g. choosing the right carrier, automatic setting of power levels, protecting other infrastructure from harmful interference, handoff ...etc .
Core Network Integration:
I touched upon this in a previous post (Femtocell Architecture).
In a nutshell, a legacy architecture is too old fashioned, while on the other hand a full flat IP architecture with an IMS core is an expensive undertaking with no sign of becoming available soon.
Interim solutions relying on some kind of concentrator seem to attract some attention. I can't really comment much on this and I'll leave it to the core experts to make their minds.
With converged solutions such as femto cells there is also an increased expectation of a higher level of network intelligence and features at the edges of the network (as opposed to the traditional model of core intelligence).
End user perception:
The consumer will (and has to) ask: "what's in it for me". At the moment most of the promises revolve around cheaper calls as well as using the often over hyped word: "convergence". The fact is that most people do not know what this word means! The operators will find it challenging to convince the consumer that the femtocell is the way to go.
In addition, there is the issue of backward compatibility in terms of usage. Many people have Internet access at home and a big proportion use WiFi routers to have wireless coverage at home. Is the Femtocell going to replace that? if so, then there is a need to have a combined WiFi/Femto router to enable legacy equipment to access the Internet. Alternatively people will end up with a stack of routers, from different suppliers.... hardly a convergent solution!.
Therefore the extent of device convergence will play a significant role in any operator's femtocell strategy.
There are also health concerns about exposure to increased levels of RF waves.
Looking at various analysts remarks I narrowed the list of potential show stoppers to the following items, all of which are not unresolvable, but one has to be aware of:
Cost:
This is the obvious one. There is no doubt that we are well into the cost reduction era. This is by far the number one item on every operator's agenda. The bottom line is that operators want to see a nice dollar savings associated with Femto cells, which increases pressure on femto cell development firms to reduce their price tag. Traditionally, pricing is based on a BOM plus margins. An alternative way for development firms is to price based on potential benefits/savings. My firm has recently been engaged in a similar pricing activity with a potential investor.
The cost challange means that there is a limit to the amount of effort and features developers will bundle in the femto cell box. Deciding what is "sufficient" feature list is a difficult call (check the technology life cycle model proposed by D. Normann in one of my previous posts)
Radio Planning and interference management:
Unlike Wi Fi, the Femto cell is likely to use the licensed spectrum e.g. UMTS band. Although it is my view that the femto network is better have its own carrier, many clients would like the femto cell concept to work on the same carrier frequency used by existing infrastructure be it a macro, micro or pico layer.
Femtocells are expected to coexist with the rest of the network by automatically configuring themselves. Operator or user intervention is undesirable...a femto cell box has to be fully plug and play without the need to setup,configure or optimise it in anyway. Therefore lots of effort is being spent on femto cell radio management features e.g. choosing the right carrier, automatic setting of power levels, protecting other infrastructure from harmful interference, handoff ...etc .
Core Network Integration:
I touched upon this in a previous post (Femtocell Architecture).
In a nutshell, a legacy architecture is too old fashioned, while on the other hand a full flat IP architecture with an IMS core is an expensive undertaking with no sign of becoming available soon.
Interim solutions relying on some kind of concentrator seem to attract some attention. I can't really comment much on this and I'll leave it to the core experts to make their minds.
With converged solutions such as femto cells there is also an increased expectation of a higher level of network intelligence and features at the edges of the network (as opposed to the traditional model of core intelligence).
End user perception:
The consumer will (and has to) ask: "what's in it for me". At the moment most of the promises revolve around cheaper calls as well as using the often over hyped word: "convergence". The fact is that most people do not know what this word means! The operators will find it challenging to convince the consumer that the femtocell is the way to go.
In addition, there is the issue of backward compatibility in terms of usage. Many people have Internet access at home and a big proportion use WiFi routers to have wireless coverage at home. Is the Femtocell going to replace that? if so, then there is a need to have a combined WiFi/Femto router to enable legacy equipment to access the Internet. Alternatively people will end up with a stack of routers, from different suppliers.... hardly a convergent solution!.
Therefore the extent of device convergence will play a significant role in any operator's femtocell strategy.
There are also health concerns about exposure to increased levels of RF waves.
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.
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.
14 Feb 2007
The advent of Femto cells - cont'd
Both Epen and Martin made valuable comments on my last posting, so I thought that expanding some of the ideas is in place.
From the consumer point of view, reduced call prices are definitely an important aspect of Femto cells. As for the interference aspect, whether Femto cells will cause more or less interference to Macro cells is debatable. On one hand the signal will be contained within indoors. On the other hand it is likely there will be so many of them. Also, there has to be a reasonable signal penetration into (or out of) buildings to facilitate handover between the two layers.
Will DSL providers get a piece of the pie? It depends who the DSL provider is. As Martin suggested, there are many operators buying DSL assets and are thinking of service "convergence" on the long run. If you are a mere DSL provider, your business model is unlikely to be affected much with Femto cells. Somebody is paying for the DSL subscription (could be the consumer, but could be the operator too), and that's all that matters. If you are someone competing with mobile operators (e.g. BT), then it is likely they will put any hurdle they can think of in the way of Femto cells, unless they make some money out of it.
Femto cells will definitely face fierce competition. If mobile operators loose the battle, at least they can claim that they tried, instead of sitting back and watching the market slip away. They may well loose, but they will loose more by not trying.
There are many handsets with WiFi capabilities around. Whether someone would want to use Skype and ditch the conventional mobile network is a matter of personal preference. For the time being, only technology suave people with love of experimentation do this.
There are also many hurdles that internet based VoIP (e.g. Skype) has to pass before it is adopted on a full scale for mobility. For example, seamless call transfer between the home cell and Macro layer can not happen if you use a simple VoIP routed over the internet: the mobile operator has to be involved somehow. This makes the Femto solution more appealing, because the call is managed easily and seamlessly.
It is not perceived that wireless calls over WiFi will pick up on a large scale, simply because powerful operators (who by the way spent billions on spectrum) will not allow it to happen. So the issue of mobility support is intertwined with the spectrum license and the regulatory aspects associated with it. For example it is not permitted to support mobility on a system using the fixed wireless broadband spectrum in UK.
All in all, here is a summary of all the factors that will influence the Femto cell strategies going forward:
Indeed... only time will tell.
From the consumer point of view, reduced call prices are definitely an important aspect of Femto cells. As for the interference aspect, whether Femto cells will cause more or less interference to Macro cells is debatable. On one hand the signal will be contained within indoors. On the other hand it is likely there will be so many of them. Also, there has to be a reasonable signal penetration into (or out of) buildings to facilitate handover between the two layers.
Will DSL providers get a piece of the pie? It depends who the DSL provider is. As Martin suggested, there are many operators buying DSL assets and are thinking of service "convergence" on the long run. If you are a mere DSL provider, your business model is unlikely to be affected much with Femto cells. Somebody is paying for the DSL subscription (could be the consumer, but could be the operator too), and that's all that matters. If you are someone competing with mobile operators (e.g. BT), then it is likely they will put any hurdle they can think of in the way of Femto cells, unless they make some money out of it.
Femto cells will definitely face fierce competition. If mobile operators loose the battle, at least they can claim that they tried, instead of sitting back and watching the market slip away. They may well loose, but they will loose more by not trying.
There are many handsets with WiFi capabilities around. Whether someone would want to use Skype and ditch the conventional mobile network is a matter of personal preference. For the time being, only technology suave people with love of experimentation do this.
There are also many hurdles that internet based VoIP (e.g. Skype) has to pass before it is adopted on a full scale for mobility. For example, seamless call transfer between the home cell and Macro layer can not happen if you use a simple VoIP routed over the internet: the mobile operator has to be involved somehow. This makes the Femto solution more appealing, because the call is managed easily and seamlessly.
It is not perceived that wireless calls over WiFi will pick up on a large scale, simply because powerful operators (who by the way spent billions on spectrum) will not allow it to happen. So the issue of mobility support is intertwined with the spectrum license and the regulatory aspects associated with it. For example it is not permitted to support mobility on a system using the fixed wireless broadband spectrum in UK.
All in all, here is a summary of all the factors that will influence the Femto cell strategies going forward:
- License: Is it needed, who owns it and what does it cover? What spectrum?
- Mobility: Will seamless communication (handover,routing of incoming and outgoing calls) be part of any competing solutions?
- Content: who has control of it, and how much will it cost to access it?
- Backhaul: who controls DSL backhaul?
- Regulatory: how will the spectrum be allocated and what are the conditions attached to it by the regulatory bodies?
- HW costs: What volumes? Economies of scale? Cost in handset or router?
Indeed... only time will tell.
9 Feb 2007
The advent of Femto Cells
Home base station solutions, also called Femto cells have recently attracted a lot of attention. The idea is to give the mobile user a small box similar to wireless routers, which provides mobile cellular coverage at home. But why would mobile operators want to do that?
In order to answer this question, one has to look at what mobile operators are competing against. Fixed line carriers and DSL service providers are seriously threatening the mobile business by offering new products centered around Fixed Mobile Convergence, which in essence utilises wireless access technology to capture mobile users when at home, and divert their mobile originated voice and data calls to the fixed line network.
Mobile operators found themselves in a predicament: the traditional Macro cellular networks are not able to compete with what DSL service providers can offer, neither from a cost structure point of view, nor in terms of access speeds. (of course the mobile operators are partly to blame because they picked the wrong battle by trying to compete on the basis of access speeds rather than mobile centric applications).
A home base station or femto cell can help mobile operators in many ways. First they can compete directly with other home access solutions which rely on other types of access technology such as WiFi or WiMax. This is because low cost mobile handsets are widely available, whereas dual mode handsets with WiFi capabilities are pricey and still limited in variety.
The femto cell will also enable the operator to cater for subscribers where the service is most needed. Compare this with traditional macro deployment where the infrastructure is first built in places where subscribers are "likely" to appear and even before subscribers start using the network. A femto cell also circumvents the issue of outdoor-to-indoor propagation which typically kills the capacity of 3G and 3.5G systems.
The deployment costs associated with a femto cell are marginal in comparison with Macro cell deployment. This is because the customer is providing the "real estate" to keep the box, the power, as well as the backhaul (e.g. DSL subscription). I don't assume here that Femto cells will replace the macro layer, nevertheless the extent of investment in the macro layer will be considerably less.
Femto cells will also enable the operator to offer creative and disruptive tariffs to directly compete with fixed line. Home zone offers can also be more effective than traditional home zone offers using macro cells which extend for kilometers sometimes (because they rely on a cell ID parameter).
So where is the catch? I will discuss the downside in a future post.
In order to answer this question, one has to look at what mobile operators are competing against. Fixed line carriers and DSL service providers are seriously threatening the mobile business by offering new products centered around Fixed Mobile Convergence, which in essence utilises wireless access technology to capture mobile users when at home, and divert their mobile originated voice and data calls to the fixed line network.
Mobile operators found themselves in a predicament: the traditional Macro cellular networks are not able to compete with what DSL service providers can offer, neither from a cost structure point of view, nor in terms of access speeds. (of course the mobile operators are partly to blame because they picked the wrong battle by trying to compete on the basis of access speeds rather than mobile centric applications).
A home base station or femto cell can help mobile operators in many ways. First they can compete directly with other home access solutions which rely on other types of access technology such as WiFi or WiMax. This is because low cost mobile handsets are widely available, whereas dual mode handsets with WiFi capabilities are pricey and still limited in variety.
The femto cell will also enable the operator to cater for subscribers where the service is most needed. Compare this with traditional macro deployment where the infrastructure is first built in places where subscribers are "likely" to appear and even before subscribers start using the network. A femto cell also circumvents the issue of outdoor-to-indoor propagation which typically kills the capacity of 3G and 3.5G systems.
The deployment costs associated with a femto cell are marginal in comparison with Macro cell deployment. This is because the customer is providing the "real estate" to keep the box, the power, as well as the backhaul (e.g. DSL subscription). I don't assume here that Femto cells will replace the macro layer, nevertheless the extent of investment in the macro layer will be considerably less.
Femto cells will also enable the operator to offer creative and disruptive tariffs to directly compete with fixed line. Home zone offers can also be more effective than traditional home zone offers using macro cells which extend for kilometers sometimes (because they rely on a cell ID parameter).
So where is the catch? I will discuss the downside in a future post.
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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