Tuesday, November 17, 2009

The Telecommunications Carrier Costs That The Consumers Rarely See

Will 4G Networks Break The Bank?

This article does an excellent job pointing out some of the fixed costs that a telecommunications carrier faces while attempting to keep up with the "need for speed" that their customer base demands of them.

That $59 per month for 5Gb of traffic might seem expensive. Increased competition will likely drive this price lower.

With mobile traffic more than doubling each year due to the rapid adoption of wireless broadband and data-hungry smart phones and laptop data cards, operators face a dilemma—build out existing mobile networks or upgrade to new, faster technology. In mid-2007, data surpassed voice traffic, with traditional time-domain multiplexing (TDM) traffic expected to level out by the close of 2009 as the move to Internet Protocol (IP) packet data transport continues.

This shift to IP has left carriers with no choice but to foot the bill for additional equipment to upgrade their backhaul network to accommodate the increased traffic. To ease costs associated with network buildouts, carriers turned to end users by raising the price on data plans, but have come up short. Current unlimited data plans have set end-user service expectations high and the idea of data caps has already attracted media backlash, forcing mobile operators and carriers to evaluate options for cutting costs associated with upgrading network infrastructure.

Studies show backhaul accounts for approximately 50% of mobile networks’ operational costs. As wireless networks evolve from voice-only services to broadband data services, there is an increasing need for high-capacity transport between cell sites. Future backhaul expenses such as these have become the cost-cutting target of mobile operators.

Presently, operators seeing a tenfold increase in data capacity may only see a corresponding 20% to 30% increase in data service revenue. This decoupling of revenues from traffic capacity requires any increases in the cost of backhaul to parallel modest revenue growth, rather than the higher traffic growth. To be profitable, carriers must weigh their options carefully.

Technologies selected for future backhaul deployments must deliver substantial economies of scale as backhaul capacities grow from tens of megabits per second to gigabits per second. Copper circuits clearly fail to deliver such economies of scale, with costs rising linearly with capacity beyond T3/E3 data rates.

Cost considerations greatly influence the choice of backhaul technology, with the relatively low cost of T1 lines driving the much higher use of copper backhaul in North America. Carriers have a few options for fattening backhaul pipes, the most popular and costly being fiber. Subsequently, wireless options have to provide fiber-equivalent bandwidth and performance for a lower price tag.

Fiber As The Preferred Solution

All things being equal, most operators would choose fiber as their preferred backhaul solution. It is perceived as a well-proven technology, as it has been deployed in core networks for decades, with nearly limitless scalability. Unfortunately, most of the time operators do not already happen to own fiber running directly to a basestation site and therefore must either pay to install a new fiber run or pay installation and recurring costs to another operator to provide fiber-based services to the site.

When the costs of installing fiber are low and the time to complete the installation is acceptable, fiber usually becomes the preferred solution. Yet fiber installation is expensive in most developed countries, ranging from $250,000 to $1 million per mile in dense urban areas. So, running anything more than a short fiber lateral to a nearby ring is typically prohibitive except in extremely dense subscriber areas. Also, lengthy construction and permitting delays often make fiber installation unacceptable.

Leasing high-capacity data services from another operator is almost always unacceptable from a cost perspective. Even without upfront installation charges, the lowest-cost short-range Gigabit Ethernet or SONET/SDH services typically range from $5000 to $15,000 per month and can run much higher based on the recovery of any required fiber construction costs. These costs run far higher than what operators pay to lease four T1/E1 circuits for backhaul today, typically under $1000/month in the U.S. and higher in Europe.

Wireless Backhaul Alternatives

Single-channel 6- to 38-GHz microwave links top out at around 350 Mbits/s due to the limited RF channel bandwidth they’re permitted to use. Maximum allowed channel bandwidths are normally no more than 56 MHz, and even using high-order modulation (256-QAM), these links are limited to transmitting around 350 Mbits/s per channel. To scale beyond this data rate in the traditional microwave bands, it is necessary to transmit multiple signals using multiple RF channels.

Each channel used requires an additional set of radio electronics and an additional spectrum license, further increasing the total cost of ownership for a particular link. When carriers seek capacities beyond 350 Mbits/s, higher-capacity alternatives tend to offer cost-effective performance, particularly when transitioning backhaul applications to the new 80-GHz millimeter-wave spectrum, where radios are permitted to use up to 5-GHz channels to deliver multi-gigabit data rates using cost-effective single RF channel designs.

Given their multi-gigabit potential, 80-GHz radios can provide cost advantages over 6- to 38-GHz links for data rates exceeding 350 Mbits/s. They also enable operators looking to scale their backhaul capacities beyond the limits of 6- to 38-GHz technology to do so. Capacity advantages such as this enable the use of ring and mesh topologies to increase service availability and offer the potential to simultaneously carry high-capacity TDM and IP traffic to ease migration between the circuit-switched and packet worlds.

For urban backhaul scenarios, 80-GHz links are most appropriate as gigabit capacities are most needed. Urban scenarios also require backhaul distances consistent with highly available 80-GHz link deployments of 99.999% or better. Additionally, 80 GHz brings to dense urban scenarios the ability to deploy a very large number of high-capacity links within a given geographic area due to the very narrow beamwidths of their antennas.

The ultimate goal is a scalable, cost-effective backhaul strategy that does not forsake carriers’ legacy TDM investments while accounting for the stress that bandwidth-hungry IP-based 4G applications will place on networks. Mobile operators must consider future bandwidth needs and the network traffic flexibility necessary to minimize network build-out costs and investments, resulting in more profitable mobile data services.

No comments: