3g wireless in the us: cdmaone to cdma2000 migration

3G WIRELESS IN THE US:CDMAONE TO CDMA2000

paper prepared for:

Information and Telecommunications Protocols: Modeling and Policy Analysis

Kennedy School of Government, Harvard University (STP-308)Massachusetts Institute of Technology (ESD.127)

Fletcher School of Law and Diplomacy, Tufts University (DHP P251)

May 8, 2000

Jonathan Liew, Kennedy School of Government, HarvardSohil Parekh, Technology and Policy Program, MIT

Maureen Rivaille, Fletcher School of Law & Diplomacy, TuftsChris Zegras, Department of Urban Studies & Planning, MIT

Table of Contents

1. INTRODUCTION..................................................................................................... 1

2. MARKET ANALYSIS.............................................................................................. 2

2.1 HISTORY ................................................................................................................ 22.2 DEMAND AND SUPPLY FORCES ............................................................................... 32.3 CONCLUSION........................................................................................................ 14

3. POLICY ANALYSIS: 3G, REGULATION & CONVERGENCE PROCESS..... 15

3.1 TECHNOLOGY OVERVIEW ..................................................................................... 153.2 COMPETING STANDARDS VS. THE BENEFITS OF CONVERGENCE .............................. 173.3 ACTORS IN THE STANDARDIZATION PROCESS ........................................................ 183.4 CHRONOLOGY OF THE STANDARDIZATION PROCESS .............................................. 193.5 SPECTRUM ALLOCATION ....................................................................................... 223.6 THE NORTH AMERICAN CASE ............................................................................... 253.7 INTERNETWORKING AND BILLING ......................................................................... 263.8 CONCLUSION........................................................................................................ 27

4. CDMA STANDARDS, ARCHITECTURES AND MIGRATION – 2G AND 3G28

4.1 INTRODUCTION..................................................................................................... 284.2 CURRENT STANDARD – 2G/2.5G .......................................................................... 284.3 1XRTT, 3XRTT – CDMA’S 3G ........................................................................... 284.4 THE IS-95 (2G) ARCHITECTURE ........................................................................... 294.5 THE 1XRTT (3G) ARCHITECTURE ........................................................................ 304.6 ARCHITECTURE MIGRATION ISSUES ...................................................................... 34

5. MODEL ANALYSIS AND RESULTS................................................................... 36

5.1 METHOD LOGY ..................................................................................................... 365.2 BASIC ASSUMPTIONS ............................................................................................ 375.3 CDMAONE (1S-95A) MODEL............................................................................... 385.4 CDMA2000 (1XRTT) MODEL............................................................................. 405.5 MODEL RESULTS AND ANALYSIS .......................................................................... 435.6 SENSITIVITY ANALYSIS ........................................................................................ 45

6. KEY FINDINGS AND IMPLICATIONS .............................................................. 50

6.1 PRIMARY FINDINGS .............................................................................................. 506.2 RESULT IMPLICATIONS ......................................................................................... 516.3 MIGRATION IMPLICATIONS ................................................................................... 526.4 MARKETS, REGULATION & COMPETITION............................................................. 536.5 DIRECTIONS FOR FUTURE RESEARCH .................................................................... 53

Introduction

1. INTRODUCTION

The wireless market is large and growing rapidly in the United States. Increasingly, data,rather than voice, services are being demanded. It is estimated that in 2003 as much as15% of the $60 billion wireless market will involve wireless data and internet services.However, the current wireless infrastructure in the US only supports first generation (1Gor analog) and second generation (2G or narrowband digital) technologies. Furthermore,there are multiple technology standards, such as TDMA, GSM and CDMA.1 Thechallenge for the US wireless industry is to migrate to a “third generation” (3G orbroadband digital) of wireless technology, which will permit broadband digitaltransmission of rates up to 384 kKbps.2 The cost of migration from second to third-generation wireless will depend on the technology standard of the existing infrastructure.This paper provides a preliminary estimate of the cost of migration for a generic CDMAinfrastructure in the US market.

Section 2 of this paper provides a market overview of the wireless services industry.Section 3 discusses the key regulatory and public policy issues for the US wirelessindustry, including the international process of standards harmonization, the difficultproblem of spectrum allocation and the need for convergence. In Section 4, genericnetwork architectures of second and third generation CDMA technologies are presentedand the details related to the migration from 2G to 3G are outlined. The fifth sectionpresents and discusses the methodology and assumptions used in the model to estimatethe costs of 2G and 3G architectures and provides model results and test sensitivities.The paper concludes with a presentation of the implications of the work.

1 These technology standards will be described later in the paper. For now, TDMA stands for TimeDivision Multiple Access, GSM stands for Global System for Mobile Communications and CDMA standsfor Code Division Multiple Access.2 Though data rates of up to 2 Mbps may be supported.

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2. MARKET ANALYSIS

The wireless industry is complex, growing rapidly, and involves numerous participants.This section will provide:§ A brief overview of the history of wireless in the US; and§ A comprehensive summary of the market demand and supply forces influencing the

wireless industry.

2.1 HISTORY

In the US, wireless technology emerged in the 1920s. Police departments in Michigan,New Jersey and Connecticut were among the first to use, in their patrol cars, similarradiotelephone service technology as that used in oceangoing vessels3. Over time,sophisticated advances were made, such as the invention of Frequency Modulation andcall “handoff” technology. In 1977, the Federal Communications Commission (FCC)authorized an experimental license in Chicago, and AT&T rolled out a beta-test analogcellular service covering Illinois.4

The analog based system proved so successful that it soon dominated the cellular marketand delayed the introduction of the technically superior digital systems. Nonetheless,digital technologies finally emerged, beginning with the TDMA IS-54 standard. GSMtechnology, which dominated the international digital cellular market, was commerciallydeployed in the US in 1996 following additional spectrum allocation by the FCC. Then,Qualcomm, a US cellular firm, developed a technically more efficient digital technology,CDMA. The end result was the emergence of a multiple second-generation (2G)technology standards.

In contrast, there has been a very different evolution of wireless technology in Europe.Multiple analog standards developed early, which created a range of incompatiblenetworks. There was the Nordic Mobile Telephone System in 1981 that operated inDenmark, Sweden, Finalnd and Norway. Total Access Communications was an analogmobile technology, launched in 1985, in the UK. France developed the Radiocom 2000,Italy the RTMI/RTMS5 and West Germany the C-Netz.6 Deliberate efforts were taken toevolve to a single digital standard in Europe. The result was an open, non-proprietarydigital cellular standard that allowed equipment to be easily multi-sourced by differentoperators. That technology was the Global System for Mobile Communications (GSM).By 1991, commercial GSM networks, operating at 900 MHz were operating in Europe,and at 1.8Ghz in the UK.7

"3 http://www.wow-com.com/consumer/faqs/faq_history.cfm, “The History of Wireless”4 Kibati, Mugo, “Wireless Local Loop in Developing Countries: Is it Too Soon for Data? The Case ofKenya,” M.S. Thesis, MIT, May, 1999,p.415 RTMI stands for “Radio Telefono Mobile Integrato” and RTMS stands for “Radio Telefono Mobile diSeconda generazione”6 Kibati, op. cit., p.427 ibid, p.42

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Consequently, Europe has evolved from incompatible, multiple analog standards into oneopen and interoperable digital cellular standard. In contrast, the US has evolved from onedominant analog standard into multiple incompatible digital cellular standards.

2.2 DEMAND AND SUPPLY FORCES

The need for 3G technology has evolved from a combination of two forces - consumer“pull” demand for wireless data services, and a vendor and carrier “push” supply ofwireless data infrastructure.

Consumer “pull” demand

The key determinants of demand for wireless technology infrastructure are the growth inwireless subscribers and data services, innovation, technology and pricing of handsets,and the relative pricing of wireless and internet access.

Increase in wireless and data services

The market size of wireless services is large and growing. As at 30 June 1999, annualtotal service revenues were $37.2 billion from a subscriber base of 76.3 million in theUnited States8. The growth rate in the number of subscribers was 52.7%pa over 1985 to1999. In recent times, this growth has slowed, but is still high in absolute terms; over1992-1998, compound annual growth in wireless was 32%pa, compared to 5%pa in longdistance and 4%pa in local telephony9 (Figure 2.1).

Wireless consumers in the US are starting to demand data, in addition to voice, services.However, the US market appears to be 2-5 years behind the European market in theadoption of wireless internet and data services. Preliminary research indicates that mostconsumers have difficulty understanding the form and impact of mobile data services andfunctionality. For example, 42% of respondents to a Yankee survey10 that covered 3,414respondents who were primarily technology users, did not know or did not answer if theywould be interested in mobile data services. In addition, most consumers do not associatetheir wireless phone with the internet. 51% of users interested in online accessnominated the portable computer as the most appropriate device for internet access, andonly 22% nominated the wireless phone.

Furthermore, there currently does not appear to be substantial interest in wireless internetconnectivity. The following statistics help frame this ambivalent level of consumerinterest:§ Only 8% of households express interest in data services over cell phones at today’s

prices;11

§ Between 9%12 and 17%13 of PDA users are interested in PDA wireless internet usage;and

8 CTIA Semi Annual Wireless Industry Survey, June 30 19999 Forrester, “A Second Wind for Wireless”, January 199910 Yankee, “1999 Mobile User Survey: Enhanced Services, Paging and Messaging Services and MobileData”, August 199911 Forrester, “Net Devices Ascend”, June 1999

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§ 22% of respondents were very or somewhat interested in wireless connectivity withpersonal web pages.14

Figure 2.1: Number of wireless subscribers and total wireless revenue (1985-99)15

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Nonetheless, Europe provides clear evidence that consumers desire wireless dataservices, with the popularity of data applications such as Short Messaging Services, andthe migration towards a 2.5G “GPRS over GSM” technology that promises a potential115 Kbps network speed.16 Despite an apparent slowness of consumers to warm towireless data service in the US, recent industry surveys in the US confirm an emerginginterest in wireless data services: almost 25% of people have “Quite a Bit” or a “Greatdeal” of interest in owning a wireless phone with data services17 and 37% of wirelessphone users were very or somewhat interested in mobile data communications18 (SeeFigure 2.2).

12 Forrester, “Net Devices Ascend”, June 199913 Forrester, “PDAs Need Traction”, July 199914 Yankee, “1999 Mobile User Survey: Enhanced Services, Paging and Messaging Services and MobileData”, August 199915 CTIA Semi Annual Wireless Industry Survey, June 30 199916 Yankee, “Next Generation Cellular Data: Now for the Rollout”, p.1, 417 Peter Hart Research Associates, “The wireless marketplace in 2000”, February 2000, p.1418 Yankee, “1999 Mobile User Survey: Enhanced Services, Paging and Messaging Services and MobileData”, August 1999

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Figure 2.2: Interest in the Following Wireless Data Functions19

33%26%

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67%74%

78% 79%84%

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Send/receive email Internet access Send/receive faxes Remote network access Document transfer

Interested Not Interested

Demand for greater bandwidth in wireless is likely to initially emerge from corporationsthat seek to establish mobile data networking and wireless data access for theiremployees. Yankee believes that the number of remote and mobile employees in largecorporations will double in five years.20 Furthermore, in order to support mobile datanetworking of an increasingly mobile workforce, 77% of corporations believe that speedsof at least 56 Kbps will be required.21 Corporations believe that network speed, inaddition to security and reliability, is one of the three most significant barriers tocorporate adoption of mobile data networks.22 Clearly, there will emerge a need forwireless broadband digital capabilities.

Consequently, high growth in wireless data services is expected in the future. Forresterforecasts annual growth rates of 8.9% in total wireless spending from 2000 to 2005.23

This is driven by a 47% annual growth rate in data, as distinct from voice, services.Consequently, revenue from wireless data services as a percentage of total revenue willgrow. Industry analysts such as Forrester24 and Robinson Humphrey25 predict that dataspending will be as much as 14% to 15% of total spending in 2004.

19 Yankee, “1999 Mobile User Survey: Enhanced Services, Paging and Messaging Services and MobileData”, August 1999 (sample size of 1,981 valid respondents).20 Yankee, “Corporate Mobile Data Strategies: Higher Speeds Are a Prerequisite for Enterprise-WideDeployment”, September 1999, p.321 ibid, p.122 ibid, p.623 Forrester, “A Second Wind for Wireless”, January 1999, p.924 ibid

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Figure 2.3: Data as a percent of total wireless spending (1998-2004F)26

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Innovation, Technology and Pricing of Handsets

Continual innovation in wireless devices will drive greater penetration of wireless mobilephones. Forrester believe that a winning wireless device is one that will retain arelatively focused purpose and will fulfill a single consumer need.27 It will includeadditional features such as web access that will supplement this primary purpose. Moreimportantly, innovation will drive greater ownership of mobile phones, particularlyamongst technology optimists. Forrester also predicts that carriers will begin to capturemore customer segments by emphasizing new user benefits such as:28

§ Security blankets for young and old: Location specific technology, that will help lawenforcement agencies to pinpoint callers in an emergency, will appeal to securityconscious consumers;

§ Closer touch for couples/families: Wireless technology is location sensitive, whichwill allow wireless phone numbers to be associated with a person rather than a place.

§ Stylish phones for the fashion aware: As phone prices fall, phones will be associatedwith fashion labels such as Nike and Ralph Lauren. New colors and styles willengender repurchases on a seasonal basis.

The wireless handset industry is dominated by incumbents, such as Nokia, Motorola andEricsson, and new market leaders such as QUALCOMM and Samsung. Broadly, thereare four types of handset technology – analog, TDMA, CDMA and GSM. Currently,analog technology handsets dominate. However, 34% of the estimated 32.6 million UShandsets sold in 1999 used CDMA technology, 30% used TDMA technology, and only 25 Robinson-Humphrey, “Wireless Internet: The Internet Goes Mobile”, January 2000.26 Forrester, “A second wind for Wireless”, January 1999.27 Forrester, “The New Consumer Electronics”, September 1999.28 Forrester, “A Second Wind for Wireless”, January 1999.

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15% were analog.29 Yankee argues that the lead of CDMA in the US market is primarilydriven by the availability of high quality dual band phones from handset providers suchas Motorola and QUALCOMM.30 Figure 2.4 illustrates the anticipated change in thecomposition of handset technology in the US.

Figure 2.4: Composition of handset technology in the US31

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Table 2.1: Retail Price Changes from 1999Q1 to 1999Q432

CDMA TDMA GSM

High-tier phones 43% N/a 20%

Mid-tier phones 9% 5% 11%

Low-tier phones -20% -58% -32%

The pricing of handsets has diverged such that low-tier33 phones are getting cheaper andhigh-tier phones are getting more expensive. The implication is that the low-tier phoneswill engender greater penetration amongst the more price sensitive customer segments.Cheap low-tier phones will be effective in stimulating new demand given Forrester’sprediction that wireless penetration will be limited due to 80% of nonsubscribers beingdeterred by high prices and lack of need34. High-tier phones may become more

2929 Yankee Group, “Mobile Phones Drive Wireless Sales in the Next Millennium”, December 1999, p.230 Yankee Group, “Mobile Phones Drive Wireless Sales in the Next Millennium”, December 1999, p.131 2000 MultiMedia Telecommunications Market Review and Forecast.32 Yankee Group, “Mobile Phones Drive Wireless Sales in the Next Millennium”, December 1999.33 Low tier phones are <$150, mid tier phones are between $150-$349 and high tier phones are >$35034 Forrester, “Net Devices Ascend”, June 1999, p.8

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expensive, as less price sensitive technology optimists seek continual technologyupgrades (See Table 2.7).

Average standard retail prices increased for GSM, TDMA and CDMA technologiesbetween the first quarter and fourth quarter of 1999. Yankee suggests that operators areno longer subsidizing handsets as strongly as before and is predicting that operators willstart viewing handsets as profit makers rather than profit takers.35 Nonetheless, analystspredict that the average price of handsets will drop from $185 in 1999 to $150 in 200336,which will further encourage handset sales.

Figure 2.5: US Cellular Penetration Over Time37

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As a result, there will be greater ownership of wireless data devices in the US. It ispredicted that cellular penetration in the US will increase rapidly as illustrated in Figure2.5. Despite this growth, an anticipated level of 31% penetration of cell phones in the USin 2003 will be much lower than the ownership levels expected in Europe. High cellularpenetration is expected in 2003 for most European countries, such as Sweden (79.4%),Italy (70.9%), the UK (64.2%), Germany (57.6%) and France (50.2%).38

Cost of wireless and Internet access

Wireless access is competitive due to the large number of national and regional players.AT&T launched the industry’s first one-rate plan in mid 1998, which has been

35 Yankee Group, “Mobile Phones Drive Wireless Sales in the Next Millennium”, December 1999, p.636 2000 MultiMedia Telecommunications Market Review and Forecast, p.18037 2000 MultiMedia Telecommunications Market Review and Forecast,38 2000 MultiMedia Telecommunications Market Review and Forecast, p.177

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subsequently replicated by most other carriers.39 The simplified one-rate plans haveincreased the transparency of wireless pricing. Furthermore, it is expected that greaterprice competition will arise from carriers seeking greater market share of voice and dataminutes. Table 2.2 shows a pricing survey of one rate plans for wireless carriers isindicative of the level of competition in the industry.

Table 2.2 Comparison of One-Rate Plans (as at November 1999)40

Carrier Coverage Price Minutes CommentsAT&T Wireless National 89.99

119.99149.99

60010001400

Industry leader

Sprint PCS National 70.0099.99149.99

70010001500

Attractive pricing

Bell Atlantic Mobile National 159.99 1600 Depends on other carriers tocomplete calls

Omnipoint National 139.99 1200 North American averageBell Atlantic Mobile Regional 39.99

59.9999.99

200500

1000

East Coast

Nextel Regional 49.9969.9989.99

30300600

Expensive for Regional

American Cellular Regional 75.00 600 Midwestern Baby Bell

The average monthly bill per subscriber has fallen from $95.00 in 1988 to $39.00 in1999, and is forecasted to fall to $37.00 in 200341. This is despite the average length of acall remaining constant over time at approximately 2.40 minutes per call42 (See Figure2.6).

US consumers are currently required to pay for both outgoing and incoming calls. Forexample, in the case of one-rate plans, minutes incurred from both outgoing and receivedcalls are deducted from minute usage limits. The system of Calling Party Pays (“CPP”)instead requires the calling party to pay for the call; incoming calls are free to the cellphone user. This system is common overseas. It is expected that CPP will furtherencourage cellular penetration, as it will reduce the cost of use to the cell phone user.Analysts suggest that CPP may be a US standard by 2003.43

39 Wohl, Phillip “Telecommunications: Wireless”, Standard & Poors Industry Surveys, December 1999, p.240 Wohl, Phillip “Telecommunications: Wireless”, Standard & Poors Industry Surveys, December 1999, p.241 2000 MultiMedia Telecommunications Market Review and Forecast, p.17442 CTIA Semi-annual wireless industry survey results43 Wohl, Phillip “Telecommunications: Wireless”, Standard & Poors Industry Surveys, December 1999, p.3

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Figure 2.6: Average local call length and Average local monthly bill (1988-2003F)44

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Pricing for wireless internet access is currently bundled with the pricing for voiceservices. Table 2.3 describes Sprint PCS’s wireless web pricing schedule as anillustration of the current level of pricing for wireless internet access in the market.

Table 2.3: Sprint PCS Wireless Web Plans45

Price Voice and DataMinutes

Number ofInternetupdates

Cost peradditionalvoice/data

minute

Cost peradditional

Internet update

Wireless Web Add-on option9.99 50 50 0.30 0.10

Wireless Web Plans59.99 300 200 0.30 0.1089.99 500 200 0.25 0.10

129.99 800 200 0.25 0.10179.99 1200 200 0.25 0.10

Carrier “push” supply of wireless data infrastructure

The supply of 3G technology infrastructure in the US is also being “pushed” by vendorsand carriers. Vendors, such as Ericsson and Lucent, have an incentive to push the virtuesof 3G technology; with capital spending on 2G networks plateauing, these vendors are

44 CTIA Semi-annual wireless industry survey results, 2000 MultiMedia Telecommunications MarketReview and Forecast.45 “New Wireless Data Services Deliver the Power of the Web to the Hands of Mobile Users”, YankeeGroup, September 1999.

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actively pushing 3G technology.46 Numerous wireless carriers, including Sprint PCS, andBell Mobility already have or will have nationwide and regional coverage of wirelessdata services using circuit switched and packet switched networks of up to 14.4 Kbps innetwork speed.47 It is predicted that there will be over $15 billion in wirelesscommunications infrastructure spending over 2001 to 2003.48 The following sectionprovides an overview of the wireless carrier market in the context of the multiple 2Gdigital technologies. It describes the:

• Market share and national coverage of each technology standard;• Prevalence of technology by US carrier; and• The emerging dominance of CDMA technology worldwide.

Market share by technology

The market share of the different technologies of CDMA, TDMA and GSM can bemeasured using either the number of subscribers or POPs. POPs refers to the populationof potential customers. Table 2.4 outlines the estimated market share statistics of eachtechnology.

Table 2.4: Estimated Market Share of Technology in the US (!998)49

CDMA TDMA GSM iDEN

POPs (millions) 208.5 191.6 174.5 191.5

Est number of subscribers (millions) 6.4 8.0 2.7 2.9

Market penetration 3.1% 4.2% 1.5% 1.5%

Number of licenses 358 341 231 187

Note: Includes cellular and PCS POPs and licenses; iDen refers to another technology, currently provided by thelargest Short Mobile Radio provider, Nextel. This technology is not explained here as it does not immediatedly relateto cellular or PCS technology. Nonetheless it is included for completeness; POPs are based on 1990 US Census data;Number of subscribers is based on 1998 data.

Though TDMA technology currently has more subscribers than CDMA technology, themarket shares are relatively equal by POPs and number of license as seen in Figure 2.7

There is significant national coverage offered by each technology. Wireless subscribersin the top 50 US markets will have a choice from carriers that offer nearly four digitaltechnology standards, plus analog, once the GSM markets and some remaining AT&TWireless, Sprint PCS and Nextel licenses are built out.50 In terms of carrier choice andoverall footprint, CDMA dominates by a factor of about 2 to 1.51

46 Forrester, “The Dawn of Mobile cCommerce”, October 199947 Yankee, “New Wireless Data Services Deliver the Power of the Web to the Hands of Mobile Users”, p.148 2000 MultiMedia Telecommunications Market Review and Forecast, p.17349 U.S. Federal Communications Commission, (FCC), Wireless Telecommunications Bureau, FourthAnnual Report and Analysis of Competitive Market Conditions With Respect to Commercial MobileServices, 99-136, ppB-7, B-10.50 Yankee, “Mid-1999 North America Wireless Update: Emergence of the New Wireless Industry”, p.551 Yankee, “Mid-1999 North America Wireless Update: Emergence of the New Wireless Industry”, p.6

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Figure 2.7 Market Share of POPs, subscribers and licenses by technology52

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Prevalence of technology by US carrier

Though the market currently appears quite fragmented it is becoming increasinglyconcentrated. Yankee notes that prior to the PCS auctions, no one carrier covered morethan 30% of the US population. However, in 1999, four carriers had licenses that nearlycovered a nationwide footprint and four other carriers covered 30% to 60% of POPs.53 Itis clear that the race is on to expand coverage and capacity. Recent acquisition pricesindicate multiples of between $1,900 to $6,400 per subscriber and between $170 to $280per POP,54 which demonstrate that high prices will be paid for market consolidation.

Three clear market leaders have emerged, AT&T Wireless55, GTE, and Sprint PCS.Table 2.5 identifies major US carriers in the market, outlines the technology and vendorsemployed and describes their approximate subscriber base.

52 U.S., FCC, op. cit., 99-136.53 Yankee, “Mid-1999 North America Wireless Update: Emergence of the New Wireless Industry”, p.1254 ibid, p.1855 AT&T Wireless was floated as a company separate from AT&T on 26 April 2000

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Table 2.5: Outline of Carriers by Market Share and Technology56

Carrier Digital AirInterface

Technology

Subscriber Base(thousands)

Penetration(of covered

POPs)

Vendors

AerialCommunications

GSM 332 1.6% Nokia

Airtouch CDMA 8128 9.2% Motorola, Nortel,Lucent

Ameritech CDMA 3400 13.5% LucentAT&T Wireless TDMA 7624 5.3% Lucent, EricssonBell Mobility CDMA NortelBell AtlanticMobile

CDMA 6391 9.0% Lucent, Motorola

BellSouth Mobility TDMA 426 3.0% EricssonRogers Cantel TDMA N/a N/a EricssonGTE Wireless CDMA 4889 7.4% Motorola, LucentMicrocell GSM N/a N/a NortelNextel iDEN 3375 1.8% MotorolaPowertel GSM 338 2.3% EricssonPrimeCo CDMA 1105 3.4% LucentOmnipoint GSM 466 1.0% Lucent, Ericsson,

Nortel, SiemensPBMS (Pacbell?) GSM 967 3.2% EricssonSprint PCS CDMA 3350 2.4% Lucent,

Motorola, NortelSBC GSM, IS136-

TDMA6232 15.6% Ericsson

US West CDMA N/a N/a Lucent,QUALCOMM

Western Wireless GSM 696 9.0% Nortel, Nokia

Emerging dominance of CDMA technology worldwide

Although GSM is widely installed in Europe, CDMA appears to be the dominatingtechnology worldwide. Numerous companies in the US, including GTE, Bell AtlanticMobile and Sprint PCS, have selected CDMA as their primary technology.

Japan, China, Korea, Thailand and the Philippines, in Asia, and Brazil, Peru, and Chile,in Latin America, have also adopted the CDMA platform.57 Furthermore, countries suchas Poland and Russia, which currently have no wireless networks, are currently leaningtowards CDMA, and Middle Eastern and African countries such as Israel, Zambia, Egypt,Nigeria and Yemen are adopting CDMA technology.58 It appears that CDMA is a more 56 Yankee Group, “Mid-1999 North America Wireless Update: Emergence of the ‘New’ WirelessIndustry”, June 1999.57 57 Wohl, Phillip “Telecommunications: Wireless”, Standard & Poors Industry Surveys, December 1999,p.457 Yankee, “1999 Mobile User Survey: Enhanced Services, Paging and Messaging Services and Mobile”58 58 Wohl, Phillip “Telecommunications: Wireless”, Standard & Poors Industry Surveys, December 1999,p.5

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efficient long term technological choice. Consequently, there is an industry trendtowards adopting CDMA technology in the US and worldwide that will rival GSMtechnology in Europe. Figure 2.8 shows the anticipated dominance of CDMA technology.Figure 2.8: Market Share of technology by worldwide subscribers59

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2.3 CONCLUSION

The US wireless industry has evolved from one first generation anlog standard tomultiple, second generation narrowband digital standards. The industry is subject to bothconsumer “pull” forces and carrier “push” forces in its evolution towards third generationbroadband digital technology. Consumer pull forces are arising from burgeoning demandfor wireless data and internet services, innovation and cheap pricing of handsets andcompetitive pricing of wireless and internet access. Carrier push forces are coming fromthe emergence of competing national footprint carriers, consolidation in the industry andthe rise of CDMA technology in the US and worldwide to rival GSM technology inEurope. The industry trend towards third generation wireless technology and highcapacity data services appears inevitable.

59 Wohl, P. “Telecommunications: Wireless”, Standard & Poors Industry Surveys, December 1999, p.5.

Policy Analysis: 3G, Regulation & Convergence

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3. POLICY ANALYSIS: 3G, REGULATION & CONVERGENCE

The market overview introduced the reader to the different technologies available in theU.S. Currently each country or region of the world has its own second-generationstandard for mobile telephones. The case of the United States is particularly blatant:there, the juxtaposition of different technologies and standards results in a fragmentedmap of mobile telecommunications networks. This in turn slowed down the adoption ofmobile technologies by the end-consumers. On the other hand, the unification ofstandards in the European Union enabled the fast development of mobile networks.

As industry players move towards third-generation mobile telephony, the advantages ofharmonizing standards towards a universal norm become more pressing. Indeed, behindthe development of 3rd generation network lays a powerful dream: enabling the users tocommunicate anywhere at anytime. To fulfill this dream, global roaming has to becomereality, which requires universal standards and internetworking agreements.

The International Telecommunications Union is a powerful force behind the standardsharmonization process. International Mobile Telecommunications-2000 (IMT-2000) isthe ITU vision of global mobile access. Scheduled to start service around the year 2000,subject to market and other considerations, IMT-2000 is an advanced mobilecommunications concept intended to provide telecommunications services on aworldwide scale regardless of location, networks or terminals used. However, the ITU’stask has been made difficult in the past by serious divergence in commercial interests,and uncertain technological features.

Fortunately, the standards wars seem to be over, which is a huge step in enabling themobile Internet dream. Still, convergence remains an on-going process, involvingmultiple actors, and encompassing many difficult issues, such as internetworking andbilling. In addition, on a regulatory level, spectrum allocation has not yet been resolvedin the United States, threatening the smooth deployment of 3G networks in NorthAmerica. This section will provide:

• A brief introduction to the technology;• An analysis of the benefits of convergence vs. competing standards;• A presentation of the different actors involved in the standardization process;• A chronology of the Standardization process;• A discussion of the difficult problem of spectrum allocation;• An introduction to the issues of billing and internetworking.

3.1 TECHNOLOGY OVERVIEW

The term cellular derives from the cell-based nature of the network (the honeycombhexagons in Figure 4.1) a structure which is key to the provision of service across a widegeographic area using a limited amount of spectrum. In a typical application, a numberof radio frequency (RF) channels is assigned to each cell in a service area, with no


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adjacent cells operating on the same frequency.60 Cells that are spaced far enough apart,however, can reuse the same set of frequencies without causing “cochannel interference.”

Cellular systems operate within a limited frequency spectrum – a given carrier isnormally awarded this spectrum by a regulatory body (i.e., through spectrum auctioning –further discussed below). Given a fixed amount of spectrum, cellular systems currentlyuse one of three basic multiple access methods to share this limited resource amongusers: frequency division multiple access (FDMA), time division multiple access(TDMA), and code division multiple access (CDMA). FDMA was the principle initialmultiple access technique employed in the first generation, analog commercial cellulartelephone systems and is based on the relatively simple division of the frequency intotraffic channels, with each channel going to a user based on demand. TDMA, a standardnow widely deployed in much of the world (including in GSM networks, as discussed inSection 1), also divides the spectrum into channels. These channels, however, are thendivided into time slots which are allocated to a specific user, who then gets access to thechannel for the allocated time slot period. Both TDMA and FDMA systems require“guard bands” – in the case of FDMA, these are necessary to separate signals in eachchannel; in TDMA, guard bands are necessary to separate both the frequency channelsand the time slots. The requirement of guard bands, plus the fact that both TDMA andFDMA each have periods of dedicated spectrum (whether that spectrum is actually beingused or not) results in a sub-optimal use of spectrum.61

In CDMA systems, on the other hand, users share a block of spectrum through the use ofa spreading code (pseudo-random noise or PN code), which is unique to the individualuser. A PN code essentially acts as a form of encryption (indeed the technique was firstdeveloped for military radio communication purposes during World War II) – theinformation sent from a user is “spread” (or modulated) using the unique PN code; thePN-modified information then travels across the entire spectrum; the information is then“de-spread” using the same PN code at the receiving end. One of the benefits of CDMAis that the use of PN coding allows the entire spectrum to be used (i.e., spectrum re-use inadjacent cells), reducing the need for guard bands and increasing efficiency of use.62

This, combined with the fact that CDMA systems use the same set of frequencies inevery cell in the network, provides a large improvement in network capacity over othercellular systems.63 In addition to improved capacity, CDMA advantages include: fewer

60 Strictly speaking, adjacent cells can share channels through sub-dividing cells into sectors. This isdiscussed further below.61 Pandya, Raj, Mobile and Personal Communication Systems and Services, IEEE Press, New York, 2000,pp. 16 –18; Kibati, op. cit., pp. 50 –51. Though FDMA is less efficient than TDMA (many other importantdifferences and complications between FDMA and TDMA exist, but are beyond the scope of this paper;see Kibati, op. cit.).62 Pandya, op. cit., p. 18.63 Rappaport, T., Wireless Communications: Principles and Practice, Prentice Hall, 1996, p. 6.


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dropped mobile calls due to “soft-handoff;”64 security and privacy, due to the PNtechnique; and lower power consumption and longer mobile unit battery life.65

3.2 COMPETING STANDARDS VS. THE BENEFITS OF CONVERGENCE

Mobile carriers, depending on their existing infrastructure and technology, havedeveloped several paths towards 3rd generation telephony. Figure 3.1 below MigrationPaths to 3G, summarizes the various propositions:

Figure 3.1 Migration Paths to 3G

2G 2.5G 3G

As one can see in Figure 3.1, specific upgrades and new standards have been created foreach of the three leading 2nd generation technologies: CDMA, GSM and TDMA.However, it should be pointed out that GSM and TDMA technologies have started toconverge in the 2.5G phase, with the development of the GPRS/EDGE standard. Thus,many observers bet that TDMA operators will probably adopt W-CDMA rather thanUWC-136 in their move towards 3G, thus only leaving two main competing standards inthe 3G phase: cdma2000 versus W-CDMA. The risk of emergence of two majorincompatible and competing proposals is a serious one, especially when compared to thebenefits of universal convergence.

Harmonization would lead to a quasi world standard which would allow economicaladvantages for customers, network operators, and manufacturers. Indeed, convergenceentails a wide array of benefits. First of all, by reducing the total research anddevelopment costs, convergence ultimately results in lower prices for the end-consumers.Secondly, convergence may render backward compatibility easier, which fastens newtechnology adoption and also reduces initial costs. Thirdly, and most importantly,convergence allows global roaming, which involves positive network effects.

64 A key function of a mobile cellular system is the ability to hand off calls as the mobile user passes fromone cell to the next – a resulting key quality of service indicator for the user is the quality (transparency) ofthis hand-off.65 Kibati, op. cit., p. 57.

CDMA(IS-95A)

GSM

TDMA EDGE

GPRS

CDMA(IS-95B or

HDR)

UWC-136

W-CDMA

1xRTT/3xRTT(CDMA)


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Most are convinced of the benefits of convergence, yet standards unification has provento be a difficult process. The reader shall first be introduced to the different partiesinvolved in the process. Then, the several stumbling blocks along the overall successfulroad towards harmonization will be recalled. Finally, the remaining issues to be dealtwith in order to ensure global roaming will be identified.

3.3 ACTORS IN THE STANDARDIZATION PROCESS

The standardization process is the result of the interaction of many different actors withwidely divergent interests. Three categories of actors can be identified: internationalorganizations, regional and national institutions and industry players. The following listdoes not pretend to be exhaustive, as we emphasize those aspects most relevant tocdma2000.• ITU: the International Telecommunications Union is an international organization

headquartered in Geneva, within which governments and the private sector coordinateglobal telecom networks and services. The ITU is a specialized agency of the UnitedNations. The ITU is working to guide carriers towards a global standard that it callsInternational Mobile Telecommunications 2000, or IMT-2000. IMT-2000 is knownin Europe as UMTS (Universal Mobile Telecommunications Systems).

• TIA: the Telecommunications Industry Association carries on the internationalstandardization activities for IMT-2000 in the U.S. TIA has prepared severalproposals for 3G with UWC-136 as an evolution of IS-136 (TDMA), cdma2000 as anevolution of IS-95 and a WCDMA system called WIMS.

• FCC: The Federal Communications Commission is an independent United Statesgovernment agency, directly responsible to Congress. The FCC was established bythe Communications Act of 1934 and is charged with regulating interstate andinternational communications by radio, television, wire, satellite and cable. TheFCC's jurisdiction covers the 50 states, the District of Columbia, and U.S.possessions.

• E.U.: the European Union has set up a timetable for introducing UMTS services in itsmember countries by January 1, 2002, via the ETSI: European TelecommunicationsStandards Institute.

• 3GPP: the 3rd generation partnership project is an international group formed byGSM-supporting standards bodies, in order to formulate proposals for IMT-2000.

• 3GPP2: the 3rd generation partnership project two is an international group formed byCDMA-supporting bodies, in order to formulate proposals for IMT-2000. 3GPP2supports the cdma2000-based proposals from TIA.

• OHG: the Operator’s Harmonization Group is an ad hoc group of cellular operatorsand manufacturers. Nicknamed as the OHG initiative, the OHG is a formal attempt tomerge 3GPP and 3GPP2 proposals under a new, common proposal known asGlobal3G (G3G).

• CDG: the CDMA Development Group is a consortium of companies who have joinedtogether to lead the adoption and evolution of CDMA wireless systems around theworld. The CDG is comprised of the world's leading CDMA service providers andvendors, working together to help ensure interoperability among systems, whileexpediting the availability of CDMA technology to consumers.


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All these organizations have been working on various concepts to be submitted to theITU. Thus, while contributing to the emergence of several standards for 3G, they alsoparticipate to different degrees to the harmonization activities and to the internationalconsensus building that we will now expose.

3.4 CHRONOLOGY OF THE STANDARDIZATION PROCESS

1998: Uncertainty and Competing Standards

In 1998, 3G wireless communications is still far from being a reality. On the issue ofstandards, the ITU is strongly pushing for a single specification that would enableubiquitous coverage across the world.

However, some actors oppose its unification efforts. In particular, the European Unionshows some signs of bad will, as it consistently refuses to compromise on minor technicalissues. For instance, the European Union’s insistence on a different chip rate forcdmaOne’s proposed standard is clearly an unnecessary decision, probably intended toprotect the commercial interests of European GSM-based operators. Indeed, some GSMoperators show a lot of reticence to the adoption of the rival CDMA technology: “WhenCDMA was being developed [by San Diego-based Qualcomm], they [the European GSMindustry] said it wouldn’t work. When CDMA was introduced, they said it was too little,too late66”.

In the meantime, CDMA-based 2nd generation networks start to expand (REFERENCE).Looking forward, the CDMA Development Group (CDG) is particularly active insupporting the harmonization process for 3rd generation wireless. However, its efforts donot systematically pay off. According to Perry Laforge, executive director of CDG:“Political games remained a major stumbling block for quick development of 3Gsystems”, as he refers to the European protectionism.

By the end of the year, two new international groups are separately launched on bothsides of the Atlantic: the 3GPP initiative (whose goal is to merge the various W-CDMAproposals for GSM networks), and 3GPP2 (created around the American proposal of TIATR45.5 or cdma2000, a proposal with several modes). This crystallization of the“standard war” bears the risk of emergence of two major incompatible and competingstandards in global mobile networks.

1999: Steady Progress for Convergence

In 1999, the ITU embraces the multi-standard approach to 3G, as its single standardapproach encountered many stumbling blocks (i.e.: Intellectual Property Rights, politicalpressures). Indeed, the ITU is not in a position to arbiter the GSM/CDMA debate, as itprefers to let the market decide.

66 Debunking the myth of Europe’s wireless, by Ira Brodsky, Network World, www.nwfusion.com, 1/17/00.


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Thus in March 1999, the ITU adopted a 3G air interface plan that included 2 standards,and 3 modes: a TDMA standard, a CDMA standard in 3 modes: cdma2000 (Qualcomm),W-CDMA (European backed), and a 3rd technology for unlicensed PCS spectrum.Operators are to choose among the technologies based on their existing systems. TheIMT-2000 specifications for 3G networks are finalized at the end of 1999, and aresummarized in Figure 3.2.

Figure 3.2: IMT-2000 Specifications

CDMA TDMA FDMA

The IMT-2000 terrestrial standard consists of a set of radio interfaces that allowperformance optimization in a wide range of radio operating environments. Thus, thenew specification supports a wideband CDMA specification with three parts, a single-carrier standard for TDMA/GSM systems, and a frequency-time Digital EuropeanCordless Telephone (DECT) specification.

The dissonance between GSM and CDMA operators played a critical role in the ITU shiftto a multi-standards approach. While CDMA representatives were generally in favor ofharmonization, the GSM Alliance consistently supported a multiple-technology solution.According to Don Warkentin, chairman of the Alliance and CEO of Aerial Comm.: “It isimperative that wireless operators have the right to choose a mode that works best fortheir technology and satisfies the needs of their customers”67.

67 cf. Group looks at CDMA harmonization, by Peggy Albright, Wireless Week, 4/26/99.

IMT-DSDirectspread

IMT-MCMultiCarrier

IMT-TCTimeCode

IMT-SCSingleCarrier

IMT-FTFrequency

Time

IMT-2000Terrestrial

Radio Interfaces


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In this context of dual standards, the maximization of common aspects of the divergentstandards seems to be the right way to go, given the impossibility of reaching a consensuson a universal standard. To put it in a nutshell, multi-standards will not impedeinternetworking and global roaming.

That is precisely what the industry is working on, revitalizing the unification processfrom “inside”. These efforts have been incorporated in the IMT-2000 3G specifications.The OHG, for instance, was created as a formal attempt to merge 3GPP and 3GPP2proposals under a new, common proposal known as Global3G (G3G). Recognizing thebenefits of convergence, the OHG put forward a way of technically aligning cdma2000and WCDMA to create a single three-mode CDMA standard. 3GPP and 3GPP2 agreedto align their standards with those recommended by the OHG, which will “ensure globalroaming and seamless service providing”, reduce cost and avoid duplication, accordingto 3GPP. The work of the OHG is integrated in the IMT-2000 specifications.

The dynamics that motivated the actors to work towards convergence were diverse.Indeed, the convergence process can also be read as an interesting economic battle, whichhas been won by the CDMA camp.

As explained previously, CDMA-supporters have always been defending the merits ofharmonization. But it is the rapid successes of the technology that forced the GSM-campto soften its position. Indeed, CDMA “is spreading like wildfire in North & SouthAmerica & Asia68”, due to its superior technological features for both voice and data. TheGSM world has very recently, and quite reluctantly, adopted a converging path, asEuropean GSM networks are running out of capacity. In that sense, convergence means along-due acknowledgment by Europe’s GSM industry of CDMA superiority, as we enter3rd generation wireless. European operators don’t really have a choice: when the rest ofthe world is speeding up its mobile telecommunications (14.4K bit/sec in the U.S., 64Kbit/sec in Korea and Japan), the norm for GSM operators: 9.6K bit/sec, seems outdated.

The protectionist European model has failed in front of the competitive U.S. model. It isnow time for European carriers to catch up, and prepare for the next big challenge:international competition, from which they were until now relatively protected.Domestically, this is resulting into intense merger and acquisition activities, and thedevelopment of risk-sharing partnerships. Internationally, this implies a need to gainaccess to foreign markets, including Asia. As Figure 3.3 shows, by 2015, the combinedU.S. and the European markets will represent less than one-fifth of the world subscribers,with a stagnating demand to be contrasted with explosive growth in the rest of the world.

68 Debunking the myth of Europe’s wireless, by Ira Brodsky, Network World, www.nwfusion.com, 1/17/00.


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Figure 3.3 Projections69

To conclude on the 3G harmonization process, it can be said that the standardsconvergence process has so far been quite successful, which makes a compellingargument for market forces and competitive environment versus government-mandatedstandards. However, standards harmonization is only the first step in allowing globalroaming, and the IMT-2000 vision. The remaining issues, which need to be resolved inorder to successfully deploy universal 3G networks, will now be analyzed.

3.5 SPECTRUM ALLOCATION

Spectrum is a continuous range of radio frequencies. Spectrum allocation andcoordination are essentially national issues, but the ITU plays a critical role in spectrumregulation, as harmonization is necessary to ensure global roaming. The RadioRegulations (RRs) of the ITU are updated in World Administrative Radio Conferences(WARCs). National regulators are not bound to follow the ITU guidelines for spectrumallocation. However, the ITU RRs form a tool to encourage national regulators to do soin order to achieve a global harmonization of spectrum.

Three different sets of issues constitute areas for common spectrum regulation:Identification of spectrum; Allocation of spectrum for specific purposes (and cleaningfrom other usages); Licensing the spectrum.

69 UMTS Forum.


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International Spectrum Identification and Allocation

In 1992, the ITU identified the IMT-2000 spectrum below the 230 MHz range. Moreprecisely, WARC-92 freed up some new spectrum in the 1.8-2.2 GHz band for 3G usage.Figure 3.4: IMT-2000 Frequency Allocations70

Europe generally follows the ITU recommendations for spectrum issues via theConference Européenne des Postes et Télécommunications (CEPT). However, in theU.S., the FCC has already allocated a significant part of the WARC spectrum in the lowerband to second-generation personal communication services (PCS) systems. Figure 3.4shows the IMT-2000 frequency allocations, and the use of this spectrum in differentregions.

The use of IMT-2000 spectrum in the U.S. certainly complicates the adoption of 3Gtechnology. However, one advantage of CDMA technologies is that they don’t requirenew spectrum or clean spectrum in the existing band. Still, despite the availability ofclean or dirty spectrum, a spectrum shortage is expected in almost every regions of theglobe. The E.U.’s 15 Member States intend to negotiate additional radio spectrum at theupcoming World Radio Communications Conference (May-June 2000). According tothe EU Commissioner for the Information Society, Erkki Likanen: “If we cannot ensuresufficient spectrum availability for third generation mobile phones, this will severelyhandicap the leap of the Internet from being screen-based to hand-held71”. The lack ofspectrum is a serious issue for data-voracious 3G networks, and calls for the developmentof more spectrum-efficient technologies.

70 CDMA Development Group, 3G presenttions, www.cdg.org.71 Europe needs more spectrum, by Alan Osborn, Total Telecom, 3/8/2000.


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In addition to the spectrum shortage, a lack of available bandwidth might also impede theimplementation of 3G. As more and more people exchange multi-media files via theirmobile devices, the IP network runs a serious risk of being over burdened. As pointed byVincent Cerf: “The issue is not fiber. The problem is the switches. That’s the bigchallenge. (…) You have to rearchitect the system to change the way the traffic ismanaged and the way it flows through the Net72”. One solution envisaged by Cerf is theadoption of optical switches. However, such a shift is likely to be expensive, and it willadd up to the already high infrastructure costs required by 3G technologies.

Licensing the Spectrum at the Regional Level

Once the necessary spectrum has been allocated for 3G telecommunications, specificfrequencies range need to be licensed to individual carriers. At the regulatory level, threebroad types of issues arise:• The division of available spectrum.• Mechanisms for attributing spectrum.• Roll-out and roaming agreement obligations.

The first issue: division of available spectrum concerns the principles guiding regulatoryauthorities when attributing licenses. The typical questions that arise are: How manylicenses should be offered? Should these licenses cover a regional or a national area?Typically, authorities must balance their decisions with regard to competition versusefficiency concerns.

A way to allow regulators to achieve competitive objectives without fragmenting thespectrum could be opened up with the development of Mobile Virtual Network Operators(MVNOs). MVNOs would do not hold spectrum licenses, but would instead buy airtimefrom licensed network operators, while owning switches and intelligent networkplatforms to offer advanced services not provided by incumbents. Therefore, MVNOscould provide new revenue streams for carriers.

The second issue relates to the choice of mechanisms for attributing the spectrum.Basically, there are two different attribution processes: comparative bidding and auctions.In a comparative bidding (or beauty contests), bids are evaluated on the basis of manycriteria such as coverage, financing, and operational experience with networks & servicesbeing offered. This mechanism tends to favor the applicants with telecom experience,typically the incumbents, whose large existing coverage ensures speed of development.On the negative side, competitive bidding might create an environment with intensepolitical pressures for the license-awarding authority.

Auctions have the advantage of transparency and openness. New entrants can beawarded spectrum more easily, which increases the level of competitiveness in themarket. However, as auctions tend to push license costs up, they might favor providerswith deep pockets, if not telecom experience. In addition, high license costs ultimatelyresult in higher end-users prices. A counter-argument might be that high initial costs willencourage maximum efficiency on the operators’ side in order for them to break-even 72 What will it take to shift to the Net, Interview with Vincent Cerf, Upside Today, 4/13/2000.


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earlier. Once again, the tension between competition versus efficiency is apparent.Indeed, the main concern in licensing the spectrum should be to ensure a low-cost andfast deployment of 3G networks, while increasing competition by avoiding handing alllicenses to the incumbents.

3.6 THE NORTH AMERICAN CASE

In the U.S., the FCC and other U.S. government agencies still have to lay the groundworkfor assigning spectrum allocation in the 2 GHz band. The FCC has planned to hold twospectrum auctions for 3G licenses this year. The Congress has already included in itsspending plans the expected revenues from the first sale. The Congress forecast anincome of $2.6bn from the June 2000 sale.

U.S. carriers desperately need additional spectrum to roll out new 3G services. However,they have expressed doubts regarding the utility of the airwaves to be sold. Severalcompanies with the strongest interest in bidding, such as BellSouth Corp. and VerizonWireless, fear that the spectrum could be riddled with interference and held hostage bytelevision broadcasters with overlapping claims: “In filing with the FCC, the companieshave expressed worries they might endure years of negotiations with the broadcastersbefore they could put the airwaves to use. Wireless networks and television channelsacross the border in Canada and Mexico could bleed across their signals (…), perhapsembroiling them in multigovernmental negotiations while their sprectum goes fallow73”.

Four years ago, the Congress awarded a large chunk of available spectrum tobroadcasters for their transition to digital television. Today, digital broadcasters only usea small part of the spectrum. The FCC therefore made plans to compress the televisionbroadcasters airwaves, and the Congress requested that the FCC sell the leftovers, morespecifically the spectrum for television channels 60 to 69 to telecom carriers.

The 60-69 spectrum is especially valuable because it allows signals to be transportedaround obstacles, such as trees or walls. Telecom carriers expect to use this spectrum forhigh-speed Internet connections to mobile devices. The FCC has until 2006 to relocatebroadcasters, which might prove a daunting task: currently, 84 TV stations broadcastbetween 60 and 69, and 54 more have the right to do so. They are not likely to retracteasily. According to a broadcasting industry analyst: “Congress gave them that propertyright. The only thing that’s going to get them off of there is enough money74”.

In such a context, the spectrum could be worth as much as $25bn. However, 3G wirelessproviders will not bid unless the clearance process is clarified. In the meantime, theauctions will probably be delayed, which has threatening implications for the 3Gindustry. According to Barry West, CTO for Nextel Communications: “The U.S.government has badly screwed up the allocation of spectrum for 3G75”. Ken Wood, from

73 Wireless hopes left up in the air, by Peter S. Goodman, Washington Post, 4/27/00.74 Ibid.75 Ibid.


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AT&T Corp., warns the authorities: “If we don’t get the spectrum, the U.S. may berelegated to some sort of Third World status in terms of technology76”.

To conclude, spectrum has become a vital commodity for the deployment of 3Gnetworks. Whereas spectrum shortage remains a huge challenge for every region of theglobe, the physical problem has been worsened in the United States due to incoherentdomestic politics. The FCC needs to act quickly, as Europe and Asia have alreadyearmarked more spectrum for 3G.

3.7 INTERNETWORKING AND BILLING

The third and last issue: roll-out and roaming agreements obligations respectively refer tocoverage and internetworking. As internetworking encompasses broader issues that strictspectrum allocation, we have decided to devote a special part to it.

Regarding roll-out agreements, the issue is whether the regulatory authorities shouldforce mobile operators to achieve a specific level of geographic (or demographic)coverage by a particular date. In that respect, whereas the need for universal serviceshould not be forgotten, profitability rationale remains primordial. Thus, while the roleof the authorities is to promote a large roll-out network, they must avoid doing so in amanner which might threaten the profitability of national carriers. Additionally,authorities must not allow existing operators to continue dominating by virtue of theirexisting infrastructure ownership.

The question of internetworking agreements is intertwined with the extremelyproblematic issue of billing. Indeed, internetworking supposes efficient settlementagreements between carriers, which in turn rely heavily on the existence of data pricingsystems. The switch to IP mobile communications implies that billing will be data-based,and not voice-based as it is the case with 2nd generation networks. Should the users becharged on a flat-rate basis, a per minute basis or a per byte basis? While the per bytebasis seems to be the most appropriate, so that users are charged in accordance with theirpersonal use of the network, such a system might alienate consumers. In addition, theper-byte billing involves huge technical challenges, which are far from being resolved.Keeping track of bytes is a technical nightmare that will require new switches, newclearing houses and new billing settlements. Another complication will be to figure outbilling settlements between carriers, portals, ISPs and value-added services providers.

In any case, internetworking and billing constitute huge challenges. Nobody knows yethow they will be dealt with, but the successful deployment of 3G networks relies on theindustry’s ability to overcome them. Internetworking also constitutes a challenge for theregulators, as they must ensure that new entrants can interconnect seamlessly at fair rateswith the existing operators. Indeed, it is doubtless that interconnection will be resisted bythe entrenched players.

76 Ibid.


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3.8 CONCLUSION

The study of the convergence process helps to put our model into a broader perspective.Of course, regulation has a direct impact on path migration cost, through, for instance, thehigh price of spectrum licenses. But more importantly, standards harmonization andmore generally the possibility of global roaming will change the general economicenvironment, by freeing competition.

The face of the wireless world evolves at a tremendous pace. Yesterday, Europe wasconsidered as the most advanced market, which perfectly illustrated the so-called benefitsof government-mandated standards (GSM in that case). However today, CDMA-basedtechnologies have imposed themselves on a worldwide scale as the most competitiveoffer in the market. It is interesting to notice that the best innovation came from the U.S.market, which was generally considered as backward compared to Europe.

In any case, the opening up of the European market to U.S. operators, expedited by theadoption of IMT-2000 standards and networks, is likely to directly benefit the CDMAcommunity. In that sense, a revenue model would usefully complete our cost model, asboth are of equal interest to the mobile industry.

CDMA Standards, Architectures and Migration

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4. CDMA STANDARDS, ARCHITECTURES & MIGRATION

4.1 INTRODUCTION

This section provides an overview of the current CDMA 2G and 3G network standardsand generic architectures. First, the current standard for 2G (IS-95) and 3G(1xRTT/3xRTT) and their performance characteristics are presented. Next, thearchitectures and component elements for both the 2G and 3G networks are detailed,including the commonalities and differences between the two. Finally, the potential pathsof migration from 2G to 3G CDMA networks and implications for CDMA-based carriersare discussed.

4.2 CURRENT STANDARD – 2G/2.5G

The prevailing CDMA 2G standard is known as IS-95 or TIA/EIA-95 and often referredto as cdmaOne. The IS-95 family of standards are actually disaggregated into 95-A and95-B.77 The primary differences between A and B rests in the potential speed of dataservices offered (9.6 Kb/s vs. >14.4). Technically, IS-95-A could be considered as a 2GCDMA network and IS-95-B as a 2.5G network, since 95-B offers higher data speeds.78

However, we do not emphasize these distinctions in this paper as there are little actualphysical changes required in the move from IS-95-A to IS-95-B (essentially, softwarechanges in the BSC and new – though forward/backward compatible – handsets). TheIS-95 network we model in the following section could essentially be either an IS-95-Aor -B network, since the differences are effectively marginal.

4.3 1XRTT, 3XRTT – CDMA’S 3G

The standards specified for CDMA’s 3G networks are broadly classified within theindustry moniker cdma2000. The cdma2000 standard is actually comprised of twophases: 1xRTT and 3xRTT (RTT – Radio Transmission Technology). The 1xRTT issometimes referred to as Phase I of the cdma2000 3G and 3xRTT as Phase II 3G. 1xRTToffers a doubling of voice capacity over IS-95, and will allow data speeds of up to 384Kb/s (theoretically). It operates in the 1.25 MHz channel. For 3xRTT, data rates of up to2Mb/s are theoretically possible, with support for all channel sizes (5MHz, 10MHz,etc.).79

77 Apparently, IS-95C also exists but is rarely referred to in actual implementation examples.78 This differentiation is not completely analogous to the TDMA based evolution, which can be clearlydifferentiated into TDMA (2G) – EDGE (2.5G) – WCDMA (3G). There is an intermediary CDMA-basedhigher speed data service (HDR), which an enhancement to IS-95-B, but it seems that few US carriers willactually deploy this service, opting instead for the direct path from IS-95-A or B to 1xRTT (3G).79 CDMA Development Group, “CDMA Development Group White Paper: Third Generation Systems,www.cdg.org, p. 2.


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4.4 THE IS-95 (2G) ARCHITECTURE

Although the specific operations and components of a cellular telephone system dependon the specific technology employed (FDMA, TDMA, CDMA, as discussed in Section3), the basic architecture of a cellular network is essentially common across standards(Figure 4.1 provides a basic network depiction).80 As such, the network described here (adepicted in Figure 4.1) can in most ways be generalized to other cellular networks.

The Cell and BTS

Within the cell, the user communicates with the system via the Base Transceiver Station(BTS). Each cell has one BTS, a tower which contains radio transceivers and antenna, aprocessor, channel cards, and other equipment necessary for providing service in the cell.The capacity of a BTS/cell is determined by the number of available channels, cellsectorization, and caller demand (typically measured in Erlangs).

The Base Station Controller (BSC)

Each BTS is controlled by a base station controller (BSC); one BSC typically managesseveral BTSs. A BSC contains a high capacity switch, and provides crucial servicesrequired for controlling the BTSs, including managing call handoffs from one cell to thenext and administering radio resource. The capacity of a BSC is limited by the numberof transmission ports they have to communicate with the transceivers from the BTSs.BSCs are typically loaded at 80% of capacity.81 The BSC has a direct trunk link to theBTS, typically via a T-1 line.

The Mobile Switching Center (MSC)

The mobile switching center (MSC) serves a similar role to the switch in a local phonecentral office (CO). The MSC switch (such as a 5eSS) provides connections to the PSTNas well as the data network via an internetworking function (IWF) (if data services aresupported). It also must support all the functions required to manage the mobile user,including device registration, location updating, and call handoff (from one cell toanother). Additional tasks of the MSC include call setup & supervision, routing, billinginformation collection, managing connections to BSCs and other MSCs. The MSCtypically manages a number of BSC/BTS subsystems (typically via a T-1 connection),with its capacity measured by the number of Erlangs that its switch can handle.82

The Operations Support System (OSS)

We have termed the Operations Support System (OSS) the subsystem of components andfunctionality that enables management of the mobile cellular system. Each of thesecomponents is described below.

80 Ibid., p. 18. The remaining description draws primarily from Pandya.81 Kibati, op. cit., p. 46.82 Kibati, op. cit., p. 72.


Page 30

The Home Location Register (HLR)/Authentication Center (AC)

The home location register (HLR) is a database of information on all subscribers (servicerestrictions and supplementary services, billing information, etc.) within the entirenetwork, including a subscriber’s current location. Typically, there is one HLR percellular network, though it might be deployed in a decentralized manner. Theauthentication center (AC) is often directly associated with the HLR. The AC containsthe key parameters used to ensure authenticity in initial location registration, locationupdates, and call setup.83

The Visitor Location Register (VLR)

The visitor location register (VLR) is a temporary database that contains informationabout the mobile users who are currently in the service area controlled by the MSC/VLR.There is typically one VLR per MSC.

Equipment Identity Register (EIR)

The equipment identity register (EIR) is a database which maintains the informationneeded to validate mobile devices in order to identify and deny service to stolen orfraudulent devices.

4.5 THE 1XRTT (3G) ARCHITECTURE

The basic architecture of the 3G network does not differ significantly in a physical sensefrom that of the 2G (IS-95) network architecture just described. Each of the principal 2Gcomponents exist in the 3G deployment, although there are some changes in theunderlying core network, the link to the data network, the software, and the hardwarecontained in the BTSs, BSCs, MSCs (and handsets) (see Figure 4.2). Specifically,required changes include:84

• the mobile station or handset – new handsets are required that are capable of handlinghigh speed transmission; these handsets will be backward compatible to IS-95 andforward compatible to 3xRTT networks;

• at the BTS – new channel cards and software, which allow for significantly increased(doubled) capacity for voice traffic in the cell;

• at the BSC – a new packet data switch router (such as the Lucent Flexent), providingincreased capacity, plus a direct connection to the data network (through to the“Internet”);

• at the MSC – a new switch (Lucent Softswitch), which is directly linked to Sun NetraServers, the softswitch is greatly expandable with the (relatively) simple addition ofNetra Servers.

83 Pandya, op. cit., p. 35.84 The changes proposed are not universal and are to some degree uncertain since there are not yet anycommercial deployments of cdma2000 and many details are subject to vendor privacy concerns.Ultimately, different vendors and carriers will certainly have configurations different from that proposedhere. We have chosen this 3G architecture based on conversations with Shawn O’Donnell (ITC) andrepresentatives from Lucent and Qualcomm.


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Furthermore, there is a fully functional data network incorporated into the 3Garchitecture. In the architecture that we have proposed, the BSCs have a direct link to thecore data network via the packet data switch node (PDSN). The core data network thenlinks to the public data network (Internet) via a packet data gateway node (PDGN).85

85 This data network architecture is consistent with presentations on the CDMA Development Group(CDG) web-site (www.cdg.org); see for example, Boettger, David, “IP Core Networks for cdma2000 RadioAccess” or Park, Myungsoon, “Evolution to 3G: Financial and Technical Perspectives,” 29 March 2000.


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MS Mobile Station – the portable telephone unit (i.e., cell phone)BTS Base Transceiver Station – transceivers, processors, etc. which allows MS to communicate with network

BSC Base Station Controller – manages BTSs, controlling/managing handoffs, managing frequencies, etc.MSC Mobile Switching Center – serves the role of central office phone switch, setting up and routing calls, collecting billing information,

managing mobility, sending calls through to the PSTN/Internet

VLR Visitor Location Register – a temporary database, containing information about mobile users currently within a particular MSC’sservice area

HLR/AC Home Location Register/Authentication Center – a centralized database with permanent information about the carrier’s user base;the AC maintains the key parameters for location registration and updates.

EIR Equipment Identity Register – keeps information needed to prevent fraud/theft of services

IWF Interworking Function – provides an access point to the packet-based Internet “world”

Figure 4.1 “2G” CDMA (IS-95) Network Architecture, Components & Functions

Internet

BTS

BTS

BTS

BSC

BSC

MS

MSC

MSC

T-1

T-1

T-1T-1

EIR

VLR

HLR/AC

PSTN

IWF


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Figure 4.2 “3G” CDMA (1xRTT) Network Architecture, Components & Functions

PDSN

Internet

BTS

BTS

BTS

BSC

BSC

MS

MSC

MSC

IP

IP

IPIP

EIR

VLR

HLR/AC

PSTN

PDGNDCN

The Principal elements (BSC, BTS, MSC, EIR, VLR, HLR) are as described in Figure 4.1. The elements in italics represent hardwareand/or software changes from the 2G network and include:

• MS – new handsets for maximum data rates (network is backward compatible for older handsets)• BTS – new channel cards• BSC – new switch, router• MSC – new switch principal changes are hardware and software switchouts at the BTS, BSC and MSC).

In addition, the 3G architecture has components specific to packet transport as described below:IP The entire internal network becomes packet-based, an IP-based “core network”

PDSN Packet Data Service Node

DCN Core Network BackbonePDGN Packet Data Gateway Node

Technology: Migration and Network Architecture

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4.6 ARCHITECTURE MIGRATION ISSUES

The proponents of CDMA technology tout many of its inherent benefits. The initial IS-95 2G architecture on its own offers expanded capacity over traditional cellular networks,meaning more voice customers can be reached with fewer cell sites. Furthermore, IS-95is already data capable (although low-speed), since the equipment is IP-based. The moveto 3G not only further increases the capacity of the voice network, but also offers highspeed data rates, with the promise of speeds in the 384 Kb/s to 2 Mb/s range. This can beachieved – according to proponents – via a relatively risk free and affordable incrementalupgrade from cdmaOne to cdma2000 (see Table 4.1).

Table 4.1 Basic Changes Across the CDMA Migration Path86

Packet DataEquipment

requirements

95A 95B cdma20001xRTT

cdma20003xRTT

Handset Forward-compatible -14.4Kbps on higherG networks

Forward/backward-compatible -14.4Kbps on95A and up to114 Kbps on3G

Forward/ backwardcompatible -14.4Kbps on95A, 114 Kbps on95B and 307Kbpson 1x, 3x

Forward/backwardcompatible -14.4Kbps on95A, 114 Kbpson 95B and307Kbps on 1x,2Mbps

Infrastructure Standard New softwarein BSC

New switches/software at BSC/MSC, backbonechanges, new BTSchannel cards

BackbonemodificationsNew BTSchannel cards

The elegance of the CDMA technology seems to back up these claims. In the uncertainworld surrounding future demand for mobile data, a current IS-95 carrier can opt toupgrade to 1xRTT simply as a way to expand voice capacity in already burdenednetworks. This option can even be pursued incrementally within a 2G network, sincethere is full forward/backward compatibility in handsets – in other words, a carrier coulddeploy cdma2000 within a subset of cells in an existing 2G network.87 This option wouldallow an operator to essentially develop data “test beds” within its existing network tohelp determine future data provision needs. This stands in comparison to the optionavailable for TDMA-based carriers which, in order to move to data services, mustemploy a costly packet overlay, while essentially annexing spectrum to dedicate solely todata transport.

86 Carley, W., S. Buckingham, “A Comparison between GPRS and cdmaOne Packet Data,” MobileLifestreams Limited (www.mobilelifestreams.com).87 Dennet, S. “The cdma2000 ITU-R RTT Candidate Submission (0.18),” TIA, 1998, p. 13.

Technology: Migration and Network Architecture

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In general, the path of migration for upgrading to cdma2000 from cdmaOne consists ofmaking the changes outlined in the previous section and summarized in Table 4.1. Onceat 1xRTT (cdma2000 Phase I), the move to Phase II (3xRTT) can be done with relativelyminor upgrades. Throughout these paths, users are not forced to acquire new handsetssince there is compatibility among different generation CDMA networks. Beyond theseapparent benefits, CDMA’s IP-based functionality offers significant potential advantagesin terms of capitalizing on possible scale economies in the IP world - IP-based purchasing(routers), technicians familiar with IP standards, the inherent scaleability of many IPcomponents, and possible purchasing advantages (“IP component feature inheritancefrom other IP product development efforts”88).

Despite these apparent advantages, there are several uncertainties regarding actualpractical network migration from an IS-95 to a 1xRTT network. These include whatmight happen to existing BSCs and/or MSCs, if their required numbers are significantlyscaled back with future network needs.

88 Boettger, op. cit.

Model Analysis and Results

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5. MODEL ANALYSIS AND RESULTS

5.1 METHOD LOGY

Greenfields Approach

The aim of the cost model developed for this project is to provide analytical rigor to acomparative analysis of the costs associated with migrating from second-generationcdmaOne (IS-95A) networks to third-generation cdma2000 (1xRTT) networks.

The methodology adopted for this project mirrors the methodology employed by Bennionet al.89 in their analysis of migration costs from second-generation GSM networks to2.5G GPRS networks in Europe. Specifically, a classic Greenfields approach isemployed – the two architectures are separately modeled. The first model is a 2GcdmaOne (IS-95A) based cellular wireless network. The second model represents theenhanced network architecture, technical and cost assumptions associated with buildingand maintaining a phase I 3G cdma2000 (1xRTT) based cellular wireless network thatprovides robust data services and Internet connectivity. A comparative analysis of thesetwo models is a first step to understanding the incremental costs associated withmigrating from second-generation to third-generation cellular wireless networks forcurrent CDMA-based network operators.

It is important to note here that an alternative approach could have been employed thatdirectly estimates migration costs associated with the technical changes that need to bemade to an existing cdmaOne (IS-95A) network. However, such an approach wouldrequire important assumptions about the rate at which phased migration occurs withincellular networks and would introduce significant complexities from a modelingperspective. In addition, such an approach would not reveal the capacity benefits,technical scalability and cost savings associated with certain network components of athird-generation cdma2000 (1xRTT) network. Consequently, a Greenfields approachwas chosen for the model and the results are interpreted in terms of migration costsbelow.

The rest of this section is organized as follows. Section 5.2 introduces the methodologyand describes the basic modeling assumptions. Section 5.3 describes the cdmaOne (IS-95A) model and clearly specifies the technical and cost assumptions. Section 5.4describes the cdma2000 (1xRTT) model with the associated technical and costassumptions. Section 5.5 describes the results of both models and discusses thesensitivity analysis performed. The results and implications for incremental migrationcosts associated with moving to CDMA-based third generation networks are discussed inSection 6.

89 Bennion, et al., “Wireless Networks: The European Case,” paper for DHP P251, Telecom Modeling andPolicy Analysis, Tufts University, 1999.


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5.2 BASIC ASSUMPTIONS

Although the model developed for this paper consists of two separate Greenfield models,there are certain assumptions that are common to both the cdmaOne (IS-95A) andcdma2000 (1xRTT) models. These assumptions are described below:

Primary Model Driver

For a cost model of a cellular wireless network, the key assumption is the number of cellsrequired to provide network coverage. This determination can be based on two separatevariables: targeted coverage area or targeted subscribers. From a target coverage areaperspective, a second-generation cell can cover 7.17 km2 on average in urban areas and150 km2 on average in rural areas. The target coverage area is a binding constraint froma modeling perspective when population density is low, because cells hit their coveragearea capacity limitations before they hit their subscriber capacity limitations. However,we assume that cdma2000 networks will first be deployed in more densely populatedurban areas in the United States. Based on this assumption, we believe that the targetsubscribers will be the binding constraint from a modeling perspective – cells will hittheir subscriber capacity limitations before they hit their coverage area capacitylimitations. Consequently, the number of targeted subscribers is chosen as the primarymodel driver.

Under this assumption, the entire network scales up to the number of subscribers it hopesto cover. In both models, the number of targeted subscribers determines the number ofcells (BTSs) required. In turn, the number of BTSs determines the number of BSCs,MSCs, OSSs and other core network elements required. Each of these networkcomponents require specific numbers of sub-components. The determination of the exactnumber of network components required is based on technical assumptions that aredescribed in greater detail below. The cost model essentially calculates the number ofnetwork components required and then calculates the total capital cost associated withdeploying these components.

Time Frame and Targeted Subscribers

Both models cover a five-year time period (2000-2004). In each model, the keyassumption is that a network operator is starting a network buildout from scratch in 2000.In subsequent years, the network is scaled to the increase in the number of subscribersyear over year. That is, additional cells (BTSs) and other network components are addedto the network to service the increased subscribers.

The targeted number of subscribers is a key assumption. Both models target CDMA-based subscribers in the United States. We assume that the number of subscribers in2000 is approximately 12 million, growing at 40% a year to reach approximately 47million in 2004 (see Figure 5.1).


Page 38

Figure 5.1: CDMA-based cellular wireless subscribers in the US90

0

10000000

20000000

30000000

40000000

50000000

60000000

2000 2001 2002 2003 2004

Cell Deployment

As the number of subscribers grows, additional cells and other network components aredeployed. Both models assume that the cells (BTSs) deployed are at full capacity. Thatis, each cell is fully sectorized (3 sectors per cell) and each cell sector has its fullcomplement of radio transmitter-receiver couples (6 per sector and 6x3 = 18 per cell).Deployed cells are also used at capacity, such that the total subscriber-generated traffic isoptimally distributed over the entire network. Other network components (BSCs andMSCs) are also operated at capacity, aggregating the maximum number of BTSs that istechnically feasible given the technical assumptions described below. Clearly, these aresimplifying assumptions. In reality, cells are rarely deployed at full capacity. As demandincreases, additional transmitter-receiver couples are added and cells are sectorized asneeded. Similarly, other network components are deployed with an eye on networkexpansion. However, provisioning for future capacity increases would introduceunnecessary complications from a modeling perspective.

5.3 CDMAONE (1S-95A) MODEL

Technical and Cost Assumptions

The model technical assumptions, operating cost assumptions, and capital costassumptions are shown in Tables 5.1, 5.2 and 5.3.

90 1999-2003 Multimedia Telecommunications Market Review and Forecast


Page 39

Table 5.1: cdmaOne Technical AssumptionsBTS AssumptionsChannels / Transmitter-Receiver 12Transmitter-Receivers / Sector 6Channels / Sector 72Capacity / Sector (assuming 72 channels, 1% blocking rate) 58 ErlangsSectors / BTS 3Capacity / BTS 174 ErlangsCapacity Required (voice) / Subscriber 0.1 ErlangsSubscribers / BTS 1740T-1 lines required / BTS 1BSC AssumptionsTransmitter-Receivers / BTS 18Transmitter-Receivers / BSC 120BTSs / BSC 6.67T-1 lines aggregated at BSC 7MSC AssumptionsCapacity / MSC Switch 2500 ErlangsLoad Capacity at MSC 80%BTSs / MSC 11.50T-1 lines aggregated at MSC 11Other AssumptionsOSS / MSC 1 (assumed colocated)Maximum Simultaneous Callers / BTS = Channels / BTS 216

Table 5.2: Operating Cost Assumptions for cdmaOne (IS-95A) networks91

Operations

Direct expenses, subsidies, commissions, interconnections (30%) $105

Maintenance, salaries, benefits, overhead (50%) $175

Marketing, subscription (IS-95A - 20%) $70

Total for IS-95A $350

91 Cost estimates are based on Guyton, Wireless Networks in Europe: A Three Step Model, Masters Thesis,Fletcher School of Law and Diplomacy, May, 2000.


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Table 5.3: Capital Cost Assumptions for cdmaOne (IS-95A) networks92

Base Transceiver Station

Transmitters/Transceivers (18) and Antennas (6) $318,000

70m Lattice Tower - Materials, Installation, Site Preparation $55,000

4xE1 microwave for cell interconnection, installation $30,000

Container for cell site with AC wiring, security, etc. $10,000

Antenna Installation $8,000

T-1 Line to the BSC $18,000

Total Cost for 1 Base Transceiver Station $439,000

Base Station Controller

Cost per Transcoder $3,000

Switch (Autoplex), 120 Transcoders ($3000/TRX) $360,000

T-1 Line to the MSC $126,000

Total Cost for IS95A Base Station Controller $486,000

Mobile Switching Center

Switch (5eSS / 2500 Erlangs Capacity) $3,000,000

Link to PSTN (Public Switched Telephone Network) $206,897

Total Cost for 1 IS-95A Mobile Switching Center $3,206,897

Operations Support System

HLR, VLR, EIR, AC (Authentication Center) $500,000

Billing and Customer Management Center $500,000

OMC (Operations Management Center) $500,000

Total Cost for 1 IS-95A Operations Support System $1,500,000

Software Licensing

Software Licensing Costs / Connected User $30

5.4 CDMA2000 (1XRTT) MODEL

Technical Assumptions

According to industry sources and information from the CDG, cdma2000 (1xRTT)network has double the capacity associated with a cdmaOne (IS-95A) network. Thisdoubling of capacity is represented in our cdma2000 (1xRTT) model in several ways.First, the number of channels per Transmitter-Receiver couple is doubled from 12 to 24.This is a direct consequence of the use of CSM5000 channel cards in the BTS. Second,

92 Cost estimates are based on various sources, including: Kibati, op. cit., Bennion, et al., op. cit.; andavailable industry information.


Page 41

the number of transcoders in the BSC is doubled from 120 to 240. This is a directconsequence of the replacement of the older Autoplex switches in the BSC with newer,higher-capacity Flexent switches. Third, the effective capacity of an MSC goes from2500 Erlangs to 25000 Erlangs. This is a direct consequence of the replacement of theolder 5eSS switch with a Lucent Softswitch and a farm of 10 Sun NetraServers. Giventhe higher-bandwidth Internet connectivity that a third-generation network will provide, itis expected that the capacity per subscriber will increase to reflect data usage.Specifically, the capacity per subscriber increases from 0.1 to 0.2 Erlangs. Thesechanges significantly impact the configuration of the CDMA network, and the newconfiguration is reflected in the technical assumptions detailed in Table 5.4.

Table 5.4: Technical AssumptionsBTS AssumptionsChannels / Transmitter-Receiver 24Transmitter-Receivers / Sector 6Channels / Sector 144Capacity / Sector (assuming 144 channels, 1% blocking rate) 125 ErlangsSectors / BTS 3Capacity / BTS 375 ErlangsCapacity Required (voice) / Subscriber 0.1 ErlangsCapacity Required (data) / Subscriber 0.1 ErlangsSubscribers / BTS 1875T-1 lines required / BTS 1BSC AssumptionsTransmitter-Receivers / BTS 18Transmitter-Receivers / BSC 240BTSs / BSC 13.50PDSNs / BSC 1T-1 lines aggregated at BSC 14MSC (Softswitch and NetraServers) AssumptionsCapacity / NetraServer 2500 ErlangsNetraServers / Softswitch 10Load Capacity of NetraServer 80%BTSs / Softswitch 53.33T-1 lines aggregated at MSC 53Other AssumptionsBTSs / PDGN 260BTSs / DCN 260OSS / MSC 1 (assumed colocated)Maximum Simultaneous Callers / BTS = Channels / BTS 432

Cost Assumptions

Capital Costs

The capital costs assumptions associated with a third-generation cdma2000 (1xRTT)Greenfield model are summarized in the table 5.5. Given that cost information forcomponents of 3G networks is difficult to obtain, some of the cost estimates used in thecdma2000 (1xRTT) model are the costs associated with similar components in theGuyton WCDMA model.93

93 Guyton, op. cit.


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Table 5.5: Capital Costs assumptions for a cdma2000 (1xRTT) network94

Base Transceiver Station

Transmitters/Transceivers (18) and Antennas (6) $318,000

70m Lattice Tower - Materials, Installation, Site Preparation $55,000

4xE1 microwave for cell interconnection, installation $30,000

Container for cell site with AC wiring, security, etc. $10,000

Cost per Channel Card $1,000

Channel Card (1 per channel) $30,857

Antenna Installation $8,000

T-1 Line to the BSC $18,000

Total Cost for 1 Base Transceiver Station $469,857

Base Station Controller

Cost per Transcoder $3,000

T-1 Line to the MSC $252,000

Switch (Flexent), 240 Transcoders ($3000/TRX) $720,000

Total Cost for 1 cdma2000 BSC $972,000

Mobile Switching Center

Lucent Softswitch $800,000

1 cdma2000 Netra Server $200,000

Operations Support System

HLR, VLR, EIR, AC (Authentication Center) $500,000

Billing and Customer Management Center $700,000

OMC (Operations Management Center) $700,000

Total Cost for 1 cdma2000 1xRTT OSS $1,900,000

Core Network

PDSN $26,000

PDGN $37,000

DCN (Core Network Backbone) $4,000,000

Software Licensing

Software Licensing Costs / Connected User $30

Operating Costs

The operating cost assumptions associated with a third-generation cdma2000 (1xRTT)model are summarized in Table 5.6. Cost estimates are based on Guyton [2000].

Table 5.6: Operating Cost assumptions for cdma2000 (1xRTT)95

Operations

Direct expenses, subsidies, commissions, interconnections (30%) $114

Maintenance, salaries, benefits, overhead (50%) $190

Marketing, subscription (cdma2000 - 1.2*IS-95A) $84

Total for cdma2000 $379

94 Cost estimates are based on information from various sources, including: Kibati, op., cit., 1999,;Bennion, et al., op. cit., 1999; and industry information made available to us.95 Guyton, op. cit.


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5.5 MODEL RESULTS AND ANALYSIS

Results

Total Network Costs

The total network costs associated with CDMA-based networks are as follows. For asecond-generation cdmaOne (IS-95A) network, the total discounted costs from 2000 -2004 are $59,100,141,156.

Figure 5.2: Total network costs associated with a cdmaOne (IS-95A) network

$0

$2,000,000,000

$4,000,000,000

$6,000,000,000

$8,000,000,000

$10,000,000,000

$12,000,000,000

$14,000,000,000

$16,000,000,000

$18,000,000,000

$20,000,000,000

2000 2001 2002 2003 2004

cdmaOne DiscountedOperating CostscdmaOne DiscountedCapital Costs

Figure 5.3: Total network costs associated with a cdma2000 (1xRTT) network

$0

$2,000,000,000

$4,000,000,000

$6,000,000,000

$8,000,000,000

$10,000,000,000

$12,000,000,000

$14,000,000,000

$16,000,000,000

$18,000,000,000

$20,000,000,000

2000 2001 2002 2003 2004

cdma2000 DiscountedOperating Costscdma2000 DiscountedCapital Costs


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For a third-generation cdma2000 (1xRTT) network, the total discounted costs from 2000- 2004 are $55,034,948,240. That is, the total network costs for a cdma2000 network areapproximately 6.9% lower than the total network costs for a cdmaOne network. Thebreakdown of these total costs in terms of capital costs and operating costs are shown inFigures 5.2 and 5.3.

Total Operating Costs

As can be seen from the figures above, operating costs constitute the major component oftotal network costs in both models. The total discounted operating costs from 2000 -2004 for a second-generation cdmaOne (IS-95A) network are $37,829,131,207. The totaldiscounted operating costs from 2000 - 2004 for a second-generation cdma2000 (1xRTT)network are $40,963,544,935. That is, the operating costs associated with a cdma2000network are approximately 8.3% higher than the operating costs associated with acdmaOne network.

Total Capital Costs

Capital costs associated with the two models are as follows. The total discounted capitalcosts from 2000-2004 for a second-generation cdmaOne (IS-95A) network model are$21,271,009,950. The total discounted capital costs from 2000 - 20004 for a cdma2000(1xRTT) network are $14,071,403,305. That is, the capital costs associated with acdma2000 network are approximately 33% lower than the operating costs associated witha cdmaOne network.

Network Component Costs

The capital costs associated with both models can be broken down by networkcomponent. The major network components for a cdmaOne (IS-95A) network are theBTSs, the BSCs, the MSCs, the OSSs and the software licensing costs (see Figure 5.4).Of these, the capital expenditure on the BTSs is the largest component of capital costs,accounting for 47% of the total capital costs associated with a cdmaOne (IS-95A)network.

Figure 5.4: Network component capital costs for a cdmaOne (IS-95A) network

OSSs14%

Software1%

BTSs47%

BSCs8%

MSCs30%


Page 45

On the other hand, the major network components for a cdma2000 (1xRTT) network arethe BTSs, the BSCs, the NetraServers, the Softswitches, the OSSs, the PDGs, the PDSNs,the DCNs and the software. Of these, the BTSs are the most significant networkcomponent of capital expenditures, representing 72% of the total capital costs associatedwith a cdma2000 network.

Figure 5.5: Network component capital costs for a cdma2000 (1xRTT) network

OSSs5%

PDSNs0%

PDGNs0%

DCNs2%

"Softswitch"2%

"Netraservers"6%

BSCs11%

Software2%

BTSs72%

5.6 SENSITIVITY ANALYSIS

Target Subscribers

Clearly, the assumptions made about target subscribers have a significant influence onthe total capital costs associated with both network models. Both models assume theannual rate of growth of 40%. To study the influence of the number of target subscriberson the total capital costs associated with both networks, the growth rate is varied from10% to 70% and the results are shown in Table 5.7.

Table 5.7 Capital Costs Sensitivity with Respect to Subscriber Growth Rate% Growth in

Subscribers

CdmaOne cdma2000

10% $7,201,113,374 $4,763,900,210

20% $10,556,825,810 $6,982,359,930

30% $15,138,962,307 $10,016,210,741

Base - 40% $21,271,009,950 $14,071,403,305

50% $29,320,097,632 $19,394,171,947

60% $39,714,614,941 $26,268,285,770

70% $52,944,383,770 $35,020,024,755


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From Table 5.7 we can see that the capital costs associated with cdma2000 networks arealways approximately 33% less than the capital costs associated with cdmaOne networks,irrespective of the rate of subscriber growth. This result can be explained by the natureof the model. Both models scale to the number of subscribers, so it is not surprising thatthe capital costs are directly proportional to the number of subscribers.

Voice Demand

Given that both models are subscriber driven, the assumptions made about the demandfor voice traffic per subscriber should significantly impact the number of cells deployedand have a direct influence on the total capital costs. The baseline assumption made inboth models is that the voice demand per subscriber is 0.1 Erlangs. For the purposes ofsensitivity analysis, the voice demand per subscriber is varied from 0.05 to 0.15 Erlangsfor both models as shown in Table 5.8.

Table 5.8 Capital Costs Sensitivity with Respect to Voice Capacity per SubscriberErlangs per Subscriber

(voice)

cdmaOne cdma2000

0.05 $ 10,638,250,514 $ 10,555,145,524

0.07 $ 14,886,803,018 $ 11,960,086,062

0.09 $ 19,136,811,940 $ 13,365,201,704

Base - 0.1 $ 21,271,009,950 $ 14,071,403,305

0.11 $ 23,392,582,450 $ 14,772,488,889

0.13 $ 27,640,649,460 $ 16,175,218,325

0.15 $ 31,904,746,635 $ 17,588,968,431

The sensitivity analysis reveals that at low levels of voice demand, the capital costsassociated with cdmaOne and cdma2000 networks are most similar. On the other hand,at high levels of voice demand, cdma2000 networks provide the most bang for the buck,with capital costs almost half that of corresponding cdmaOne network capital costs. It isimportant to note here that in this analysis, data demand associated with cdma2000networks was held constant at 0.1 Erlangs per subscriber.

Data Demand in cdma2000 Networks

One of the greatest benefits of third-generation cellular wireless networks is theavailability of wireless Internet access. However, it is unclear what the demand for datawill be. Given this uncertainty, it is important to vary the data capacity per subscriber,which is our proxy for data demand in the cdma2000 model. In the base case, the datacapacity per subscriber was assumed to be equivalent to 0.1 Erlangs. To analyze theimpact of varying data demand on total capital costs, the data capacity per subscriber wasvaried from 0 to 0.2 Erlangs. The results are summarized in Table 5.8.


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Clearly, a variation in data demand has a direct impact on the total discounted capitalcosts associated with cdma2000 networks. The capital costs drop proportionally with theErlang proxy for data demand. This would suggest that low data demand is a favorablesituation for cdma2000 network operators. However, this is a simplification. In reality,networks will be built out before data demand is known. As such, the important messagefrom this analysis is that the relative accuracy of data demand predictions are critical foradequate provision of network infrastructure given the sensitivity of capital costs toprojected data demand.

Table 5.8 Capital Costs Sensitivity with Respect to Data Capacity per SubscriberData capacity per subscriber

(Erlangs)

Cdma2000 Total Discounted Capital

Costs

0 $ 7,037,736,263

0.02 $ 8,443,622,926

0.04 $ 9,848,559,533

0.06 $ 11,256,468,533

0.08 $ 12,660,648,722

Base - 0.1 $ 14,071,403,305

0.12 $ 15,474,275,973

0.14 $ 16,879,100,520

0.16 $ 18,281,926,725

0.18 $ 19,685,777,859

0.2 $ 21,102,823,499

MSC Capacity

Both models make assumptions regarding the capacity contained within the MSC. ThecdmaOne model assumes that the capacity of the 5eSS switch within the MSC is 2500Erlangs. The cdma2000 model assumes that the capacity of a single Sun NetraServerconnected to the Lucent Softswitch is 2500 Erlangs. While these assumptions are basedon the work of Kibati [1999] and on industry information, it is possible that the capacityof these important network components varies from vendor to vendor. To account forthis variance, a sensitivity analysis was performed on the impact of varying switch/servercapacity on total capital costs for both models. The results are tabulated in Table 5.9.

From this analysis, it is clear that for cdmaOne networks, the capacity of the 5eSS switchin the MSC is an important factor. The capital costs jump significantly if the capacity ofthe switch is lower than assumed, because more MSCs are now needed. However, if thecapacity of the switch is greater than assumed, the capital costs drop significantly beforeleveling off, because fewer MSCs are needed until a certain minimum number of MSCsis approached. On the other hand, for cdma2000 networks, the capacity of theNetraServers placed with the Lucent Softswitch in the MSC is important, but does notimpact costs as significantly as in the case of cdmaOne networks. The drop in costsassociated with higher capacity NetraServers is particularly small at the highest


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NetraServer capacity tested. From a deployment perspective, higher capacityNetraServers suggest that fewer MSCs will be needed given the scaleability of cdma2000MSCs.

Table 5.9 Capital Costs Sensitivity with Respect to Server CapacityCdmaOne 5eSS Switch

Capacity (Erlangs)

Discounted Capital

Costs

cdma2000 NetraServer

Capacity (Erlangs)

Discounted Capital

Costs

1000 $34,730,002,493 1000 $16,883,002,055

Base - 2500 $21,271,009,950 Base - 2500 $14,071,403,305

5000 $16,785,178,495 5000 $13,134,379,939

7500 $15,287,579,366 7500 $12,821,367,324

10000 $14,541,910,666 10000 $12,665,996,106

12500 $14,093,433,757 12500 $12,570,958,076

15000 $13,793,719,128 15000 $12,508,378,409

17500 $13,578,521,981 17500 $12,464,802,212

20000 $13,419,126,622 20000 $12,430,769,236

There is an important caveat to this analysis. The capital costs of cdmaOne andcdma2000 networks actually become comparable if the capacity of a cdmaOne 5eSSswitch is significantly higher than assumed and the capacity of an individual NetraServeris correctly estimated or slightly lower than assumed. This suggests that the technicalassumptions that go into both models are extremely important in determining whichnetwork model has higher capital costs.

NetraServer-Softswitch Configuration in cdma2000 Networks

The cdma2000 model assumes a specific network configuration with the MSC. Itassumes that every Lucent Softswitch is connected to 10 Sun NetraServers. However,this technical assumption is inherently variable because a Lucent Softswitch is designedto be almost infinitely scaleable. That is, in reality, the number of MSCs does notreasonably change with subscriber growth as it does in the model.

At each MSC, the number of NetraServers is simply increased to scale the switchingcapacity to the increase in subscriber demand. To analyze the impact of differentNetraServer-Softswitch configurations on total discounted capital costs, the number ofNetraServers per Softswitch is varied from 1 to 40. The results are in Table 5.10.

The sensitivity analysis reveals that there at first there are significant cost benefitsassociated with increasing the number of NetraServers per Softswitch in cdma2000networks. However, the cost savings begin to plateau after a point. This suggests thatgiven a certain level of subscriber demand, there is an optimal NetraServer-Softswitchconfiguration. Clearly, this optimal configuration also depends greatly on the individualcapacity of a NetraServer, which was examined above.


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Table 5.10 Capital Costs Sensitivity with Respect to NetraServer-SoftswitchConfiguration

cdma2000 NetraServers per

Softswitch

Discounted Capital

Costs

1 $ 23,761,772,460

5 $ 15,148,077,589

Base - 10 $ 14,071,403,305

15 $ 13,711,337,162

20 $ 13,533,167,590

25 $ 13,424,501,488

30 $ 13,353,115,155

35 $ 13,301,872,876

40 $ 13,264,163,239

6. KEY FINDINGS AND IMPLICATIONS

6.1 PRIMARY FINDINGS

This paper has focused on the development of a particular technology becomingincreasingly predominant in today’s rapidly growing cellular wireless industry - CDMA.As shown in Section 2 of this report, the worldwide growth in cellular wireless usage hasbeen phenomenal. This growth has arisen through a convergence of demand and supplyforces – an ever more mobile and information hungry population around the world isincreasingly embracing the concept of mobile communications, while continuoustechnological advances (in handsets and networks) and competition in markets continuesto drive improvements in service quality and prices. Today, the wireless world is abuzzwith the dream of wireless Internet access and promises of high-speed data access(upwards of 2Mbits per second) to mobile users, anywhere and anytime.

Within this context, something of a global standards battle emerged, as the varioustelecommunications carriers and equipment vendors wed to particular spectrum sharingtechniques (FDMA, TDMA, CDMA or their derivatives) each aimed to ensure theviability and dominance of their respective technology as the market evolved. Severalkey factors are involved here:

1. carriers’ large sunk investments in second generation (2G) networks and the desire toensure that the move to higher speed data access can occur in a low-risk, cost-effective way, capitalizing on the 2G infrastructure;

2. the need to operate within existing spectrum allocations and/or develop serviceswithin new spectrum (with the associated high costs of spectrum acquisition);

3. the desire to ensure global inter-operability (so called “global roaming”) for usersacross different networks, implying either the use of common 3G spectrum acrossregions or devices that can operate in multi-spectrum environments (likely translatinginto higher consumer costs);

It now seems clear that in the move to 3G, CDMA-based networks will dominate,whether it be current 2G CDMA networks evolving to cdma2000 or the GSM/TDMAcamp eventually moving to W-CDMA. This success of CDMA technology constitutes apowerful case in favor of decentralized innovation systems versus government-mandatedtechnology specification. In the case of Europe, the TDMA-based GSM standard formobile wireless enabled an initial rapid proliferation of cellular usage and an apparentbenefit to the region’s telecom carriers and consumers. However, the subsequent marketdominance of GSM put European carriers in the difficult position of being unable toeasily take advantage of the superior technical features of CDMA once this technologybecame commercially viable.

In the U.S., on the other hand, the lack of a unified cellular standard – which had beenviewed by many as a limitation to wide-scale cellular penetration – created an incentivefor carriers and vendors to develop innovative new techniques, thus leaving the market as

the ultimate technology arbiter. Thus, as CDMA became a commercial reality, carriers inthe US were able to develop wireless networks based on this technology (if, of course,they were not already invested in TDMA-based networks). Since it is now quite clearthat 3G networks will be CDMA-based, the CDMA carriers stand better situated on acost-effective, less technically complicated migration path.

To explore the technical and financial implications of the migration from 2G CDMAnetworks to 3G CDMA, we developed a cost-engineering model of 2G and 3Garchitectures in the United States. The final part of this paper is devoted to presenting thekey findings and implications of our model.

6.2 RESULT IMPLICATIONS

The results and sensitivity analysis obtained from the model provide several importantinsights. Given the Greenfield nature of the two models developed for this paper, theseinsights and their corresponding implications are most relevant to carriers consideringdeployment of third-generation cdma2000 (1xRTT) networks from scratch in the UnitedStates. The most important implications of this study are detailed below.

Significantly Lower Capital Costs for cdma2000 Networks

The analysis of model results reveals that the capital costs associated with cdma2000networks are significantly lower (upto 33%) compared to cdmaOne networks serving thesame subscriber base. This suggests that carriers considering from-scratch deploymentsof thirg-generation cdma2000 networks will enjoy significant capital cost advantagesrelative to operators of second-generation cdmaOne networks. In addition, these newplayers will have the advantage of increased network capacity and wireless Internetconnectivity.

Operators with Lowest Operating Costs best positioned to benefit from cdma2000Networks

The analysis of model results reveals that operating costs are more important than capitalcosts in determining total network costs for both second-generation cdmaOne and third-generation cdma2000 networks. This suggests that operators who are able to operatemost efficiently and reduce their operating costs will incur the least total costs associatedwith deploying and maintaining third-generation cdma2000 networks. By reducing theiroperating costs, these network operators will be best able to remain profitable in acompetitive market.

Forecasting of Data Demand for cdma2000 Networks is critical

The sensitivity analysis reveals that the capital costs associated with cdma2000 networksare quite sensitive to the proxy for data demand. This suggests that network operatorsinterested in deploying third-generation cdma2000 networks must carefully assess theprojected demand for data before building out their networks. If network operatorsoverestimate the demand for data, they may build out networks that have significantlygreater capacity than is needed. This will translate into unrecoverable capital investments(unless they can expand their voice subscriber base to fill capacity, which may be

possible). Given uncertainty, it may be better for network operators to err on the side ofcaution. However, operators would need to be cognizant of potential customer serviceissues that may arise from under capacity. If demand for data is greater than projected,then network operators could selectively deploy scaleable network components incdma2000 networks to compensate.

Technical Assumptions regarding cdma2000 network architectures are important

The sensitivity analysis also reveals that capital costs associated with deployingcdma2000 networks are somewhat sensitive to technical assumptions regarding thecapacity of MSC equipment. This suggests that network operators consideringdeployment of such networks must ensure that the overall network is optimallyconfigured given a certain number of subscribers and based on certain voice and datatraffic assumptions. Such network optimization might involve NetraServer-Softswitchconfiguration in the MSC.

6.3 MIGRATION IMPLICATIONS

The models developed for this paper also provide several indirect but important insightsfor current owners of second-generation cdmaOne (IS-95A) networks consideringmigration to third-generation cdma2000 (1xRTT) networks. Given the large base ofexisting CDMA-based second-generation networks in the US, these implications mayhave the greatest relevance to the industry as it stands today. The most important of theseimplications are detailed below.

Existing investments in 2G networks leveraged during Migration to 3G networks.

One of the greatest benefits associated with CDMA-based cellular wireless networks isthat the technology allows for a graceful transition to next-generation networks. In otherwords, operators can upgrade their networks from cdmaOne (IS-95A) to cdma2000(1xRTT) with relatively minor incremental equipment and software upgrades.Specifically, migration will involve replacing channel cards in the BTSs, and switchupgrades in the BSCs and MSCs. Internet connectivity is provided with the addition of acore IP network that connects at each BSC through a PDSN and to the Internet through aPDGN. Existing investments in other second-generation hardware (such as BTSs, OSSs,etc.) is preserved.

Phased migration strategies will dominate

Given the uncertainty that exists surrounding the demand for data, it is likely thatcdma2000 migration will occur in a phased manner. Operators may decide to upgrade aportion of their coverage area to cdma2000 (1xRTT). These pilot upgrades are mostlikely to occur in the downtown areas of large cities, where demand for data is perceivedto be the greatest. These phased migration strategies are made possible by characteristicsspecific to CDMA networks. First, complete internetworking between cdmaOne andcdma2000 networks is possible. Subscribers can use cdmaOne cellular phones incdma2000 cells and enjoy the same services that they have in cdmaOne cells. Second,cdma2000 networks are built to be extremely scaleable in nature. This is particularlyevident in the configuration of the cdma2000 MSC as consisting of a Lucent Softswitch

and a farm of Sun NetraServers which can be scaled to increase capacity. Lastly,migration to third-generation phase 2 cdma2000 (3xRTT) networks will also occur in aphased manner, building on 1xRTT networks.

6.4 MARKETS, REGULATION & COMPETITION

Since in the US established operators can only use currently available PCS spectrum for3G deployment, backward compatibility is crucial96 – a big plus for CDMA.Furthermore, cdmaOne carriers can effectively migrate to “3G” within their existingspectrum. Our research suggests that in the US, CDMA-based carriers have a largeadvantage for both expanding voice capacity and moving to data.

For Greenfield developers, with free selection of technology, cdma2000 is the likelyoption. For those TDMA-based 2G providers who have large sunk (non-depreciated)investments they will attempt to maximize their existing infrastructure through theEDGE97 overlay and hope that this will meet the data demand of consumers for the nearfuture.98 There is the possibility that some current TDMA carriers may make the switchto CDMA, not over their existing networks, but in their future network expansions(AT&T, for example, has many PCS licenses not yet built out and could theoreticallypursue a channel by channel migration to CDMA99). In that case, our results of relativelylow cost cdma2000 deployment may offer a compelling reason to seriously contemplatethat path. Some industry analysts suggest that “non-CDMA operators are nervous aboutthe capital expenditures involved with the data market and are uncomfortable that CDMAcarriers may have a large cost advantage.”100

6.5 DIRECTIONS FOR FUTURE RESEARCH

The models developed for this paper represent a mere first step in understanding the costsassociated with second- to third-generation migration for CDMA-based networks.Further research could provide more analytical rigor to the preliminary work presentedhere. Specifically, further research could develop a non-Greenfields migration modelthat will more accurately calculate the migration costs associated with moving fromcdmaOne to cdma2000 networks. It is also important to note here that the workpresented here represents only the first incremental step to a phase 1 third-generationnetwork. Further work could focus on the next incremental step of moving fromcdma2000 1xRTT network to the cdma2000 3xRTT network, which is expected tocomply fully with the ITU's IMT-2000 third-generation standard.

96 Chaudhury, P., W. Mohr, S. Onoe, “The 3GPP Proposal from IMT-2000, IEEE CommunicationsMagazine, December, 1999, p. 76.97 Enhanced Data98 Chaudhury, et. al, p. 77.99 Luna, L. “AT&T explores 1xRTT technology,” RCR, October, 11, 1999.100 Ibid.

3g wireless in the us: cdmaone to cdma2000 migration

Technology

g wireless

g architecture

generation wireless

wireless data

model analysis

market analysis

us wireless industry

xrtt model