Julian Lake, Andrea Schrick and Phil Brown of PA Consulting Group look at the choices facing wireless access operators
All the current rumpus over access to last-mile copper, especially in Europe, has seen wireless local loop (WLL) technology become an increasingly attractive option for alternative carriers desperate to get their own lines into customer premises. But WLL is not the preserve of startups - incumbent operators also require cost-effective solutions to provide voice and data services in their chosen markets.
WLL is an attractive method of connecting subscribers in rural as well as urban environments, in both developed and developing economies. Globally, WLL deployments are gaining momentum as operators realise the benefits of using wireless technology. However, the number of different technical solutions on offer is proliferating, as more equipment vendors vie for a share of the growing fixed wireless market.
Furthermore, with broadband wireless offerings now available from many vendors, the technology choice for operators becomes more and more complex.
Telcos face a difficult decision - how to make the optimum technology investment when presented with a wide variety of solutions and sometimes conflicting claims from equipment vendors. As a result of insights gained through worldwide experience in WLL assessments, for both manufacturers and telcos, we believe there are four key factors that help determine the optimum technology selection:
- regulatory environment
- customer and service mix
- technical characteristics of available solutions
- deployed cost characteristics of relevant solutions.
By addressing these in turn, telcos stand a much better chance of maximising the rewards from their investment, whether measured simply in financial terms or, for example, in terms of the development of the local economy.
Regulatory Environment
A telco's technology choice will be influenced substantially by the local regulatory environment. In developing economies, incumbent operators are likely to be under government pressure to roll out voice service to under-served areas. Even so, the take-up of WLL in these countries has been slower than predicted, partly due to recent problems of financing.
In developed economies, incumbents may view WLL as a cost-effective method of realising their Universal Service Obligations. Competing operators in either environment may use WLL for rapid, direct access to high-value or business customers over large areas, where wireline costs would be prohibitive.
Both national and international regulations are thus likely to apply, covering the following areas, each of which will have a different impact on a telco's business plan:
Frequency band standards and licence fees: Early WLL systems used standard cellular and cordless technologies to gain access to spectrum. These are at low frequencies which have become congested and expensive as mobile operators are able to pay premium rates
While there is no 'standard' for WLL, various higher frequency bands are now becoming allocated for fixed wireless access worldwide. In these bands there is more spectrum, which can be exploited to deliver higher bandwidth services.
Competitive environment: The number of competitors, and service capability, influences likely penetration, and hence capacity and range requirements of the technology solution. Balancing these issues has resulted in the development of customised, proprietary solutions such as Nortel's Proximity and Airspan.
Licence conditions: There may be minimum population or geographic area coverage requirements to prevent cherry-picking of the most lucrative areas.
Restrictions on types of traffic permitted (eg local calls only, with low margin): Successful telcos, in choosing the optimum technology, require not only a good technical understanding, but also the ability to influence and drive the governing regulatory environment.
Customer and service mix
As the telecomms marketplace has become increasingly liberalised and competitive, customer expectations in recent years have changed dramatically, becoming highly price and quality sensitive. The services offered now must be sufficient to attract customers away from the incumbent or other new entrants, but without over-providing, and hence at optimum cost.
For competing operators, the cost of providing service must be carefully matched to the expected revenues. However, for incumbent telcos, matching revenue to network expenditure is usually less important than providing the minimum service that customers need at lowest cost, or in retaining high-usage customers who form the most profitable subscriber segment.
A successful telco will therefore have to assess both:
- its intended customer segments and their generated traffic;
- the customer segment's service requirements.
- Customer segments and generated traffic
The most highly valued customers will generally be those with the highest usage, to ensure that companies gain the maximum return from their deployed resources. Usually, an incumbent telco's customer base will be diverse, covering a wide variety of segments, while new entrants often focus on a particular segment or number of segments, which are often 'described' by their spend profiles. Atlantic Telecom in the UK has been successful through targeting high usage customers with bundled packages; by contrast, Ionica failed partly because its low spending customers' revenues did not justify the cost of the installed equipment.
Various segments will generate different traffic volumes and hence revenues; examples of the mix of business and residential subscribers, the traffic generated, and numbers of lines for a typical developed country are shown in Table 1 above.
The average number of lines per subscriber is set to continue to increase, due in particular to the rising demand for Internet access. While there is also a trend towards use of mobile for basic telephony, fixed access will continue to be preferred for the increasing data rates demanded by Internet users. As a result, many WLL suppliers and operators are seeking to differentiate themselves by providing a second line for this purpose as a standard element of the residential subscribers' package.
Clearly, the highest revenues will be obtainable from the urban business segment, though the cost of delivering the required capacity and hence the most appropriate technology must be assessed carefully. Urban business customers are the principal targets for broadband wireless operators, currently the most active WLL segment.
Service requirements
The services offered will depend strongly on the customer segment. These will in turn impact the bandwidth required to deliver the service and hence the supporting technology, since not all can deliver the high rates required for advanced services.
The emergence of ADSL, cable network upgrades for data services and developments in 2G-3G mobile all impact the WLL service offering in a competitive environment. These drive the minimum data rate needed for a fixed wireless solution to remain competitive in the residential segment.
With the introduction of broadband wireless technologies, data rates of more than 10Mbit/s are now possible, accommodating bandwidth-intensive applications such as video-on-demand or LAN interconnect. The broadband wireless systems being deployed worldwide today are targeting mainly multi-tenant business buildings with E1/T1 services for aggregated telephony or IP traffic.
In all cases, the grade of service (service availability) and quality (measured by speech quality, data error rate or delay) must be at least comparable, if not better than, existing services from alternative suppliers. A summary of service needs for different customer segments is shown in Table 2 above.
Each telco must assess where it wishes to operate within this matrix before it can choose the optimum technology solution(s) for service delivery. In practice this is likely to be an iterative process, with the costs of provision being compared against the available revenues for a representative mix of services.
Successful telcos also understand their customers' needs for applications, rather than simply capacity.
Technical characteristics of available solutions
A large variety of technology solutions are now available for WLL, broadly falling into the following categories:
- cordless
- cellular (mainly digital, but some analogue)
- proprietary narrowband WLL
- proprietary broadband WLL.
Each technology has its own key characteristics and merits and is best suited to the environment for which it was designed, and this is summarised in Table 3.
Currently the biggest share of WLL fixed access connections is taken by DECT, with 4 million lines installed or contracted worldwide. While PHS has peaked as a mobile solution, it is now being deployed for WLL in south-east Asia. Cellular techniques are used for fixed access, especially in developing countries where wide coverage and basic services are required. Mobility support is an added feature and there are economies of scale with mobile networks.
Variations on these technologies are also possible. For example, digital cellular technologies are evolving to higher end-user data rates at the expense of capacity per cell, while the range of DECT and PHS-based systems can be increased to reduce the number of cells required. In addition, there are very long range point-to-multipoint systems designed to serve isolated rural communities.
In the narrowband and broadband WLL arena, different equipment vendors have developed countless proprietary systems. The availability of different standards such as cordless and cellular, as well as the proprietary WLL systems, makes the technology decision for operators hugely complex. The emergence of broadband wireless solutions and the need to future-proof network investment has had made telcos more cautious about selecting narrowband solutions.
Satellite has also been successful in the supply of voice telecomms in remote areas, and increasingly it can provide voice, fax and data in conjunction with WLL, for example by providing links to WLL network 'islands', although this track record to date has been somewhat chequered.
Each technology solution, therefore, has a natural area of application in terms of both geography and service level. Telcos require an effective compromise between service capability, quality and radio range for their specific market conditions, and this may involve a combination of several different solutions.
Deployed costs of WLL technologies
A telco will want to provide the maximum service level possible, to as many subscribers as possible, in the most cost-effective manner. And whether tariffs are either regulated or fixed by competitive activity, there is a level of cost of service provision above which a business case cannot be made.
Cost per line is the ultimate criterion on which technologies should be judged and WLL networks are fundamentally no different to conventional wireline networks in that total life-cycle costs need to be considered when selecting the optimum technology. This means the telco must evaluate:
- investment costs - capital expenditure;
- operational costs;
- total life-cycle costs;
- investment costs.
Both trunk and local distribution networks will determine investment costs. Trunk network costs are substantially the same for all technologies serving the same end-customer base with the same service and traffic requirements, and may often be ignored for the purposes of comparing WLL technologies.
On the other hand, capital costs for the local distribution part of the network depend heavily on the technical characteristics of each solution being considered and the resulting network topology. The two main components of these costs are distribution infrastructure (base station equipment and site establishment) and customer premises equipment (CPE).
The main drivers for distribution infrastructure costs lie in the number, size and complexity of base station sites. CPE costs, including installation, may also have to be considered as part of the telco's infrastructure, rather than being customer-owned, even if some of this cost can be recovered directly.
A short-range technology, such as cordless, will require many sites to cover a specific area. Cordless base stations and terminals are usually low cost, being designed primarily for low capacity residential or office building use. A longer-range technology, such as cellular, will require fewer sites; cellular base stations and terminals are comparatively more expensive, being designed to maximise range and capacity for wide area networks.
There is clearly a trade-off that can be made between site numbers, infrastructure and CPE costs. The proprietary technologies attempt to optimise range and capacity/cost trade-offs, but inevitably only succeed for the particular scenarios considered during their own design phase.
Operational Costs
Within the local distribution network, these costs are driven primarily by maintenance requirements and cost of the backhaul to the switching centre or concentration point. Maintenance costs are generally taken to be a small percentage of the investment cost, typically 5%-10% of capital cost per annum.
Backhaul cost is highly dependent on the capacity required per site, the number of sites, the network topology and the degree of concentration available within the backhaul itself. Whether leased lines or microwave feeders are used, these costs can be substantial when considered over a period of a few years.
Total life-cycle costs
No generalised conclusion can be reached for all scenarios, but it is useful to consider how the costs compare for a typical suburban scenario. The costs are much more dependent on traffic than might be expected in a wireline environment, particularly due to backhaul requirements. The narrowband CDMA (IS-95) and Proximity approaches cost almost exactly the same, though the breakdowns are quite different.
The proprietary wideband-CDMA is more expensive, but is also capable of a considerably higher service offering, from which greater revenues may be realised. The advantage offered by DECT in terms of low cost infrastructure is somewhat eroded by its much higher backhaul needs, based on a much larger number of base stations. Thus, the ability of each technology to serve the needs of different customer segments in various environments constrains its overall applicability.
The present wave of broadband wireless deployments and the ongoing roll-out of narrow- to medium-band technologies in developing countries demonstrate that wireless can be used to provide cost-effective access networks in diverse environments.
However, there is no panacea technology solution for WLL. Each telco must examine its local environment, its customers and their service needs to understand potential revenues and the cost base presented by the various products that are, and will become, available.
