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The Business of WiMAX
Deepak PareekResource4Business, India
The Business of WiMAX
The Business of WiMAX
Deepak PareekResource4Business, India
Copyright � 2006 John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester,
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Contents
Preface ix
PART One Understanding WiMAX 1
1 Introduction 31.1 Wireless Communication: Any Time, Any Place 31.2 Wireless Networks 61.3 Wireless Technologies 101.4 Third-generation Mobile Systems 121.5 WLAN 171.6 WiMAX 241.7 What Next? 4G 33
2 WiMAX in Depth 352.1 WiMAX: Broadband Wireless Access 352.2 WiMAX Revolution 392.3 WiMAX: Working 422.4 WiMAX: Building Blocks 442.5 WiMAX Technology 472.6 WiMAX Standards 522.7 WiMAX ForumTM 592.8 WiMAX: Regulation 652.9 WiMAX Roll-out 69
3 WiMAX Hype 713.1 The Confusion(s) 723.2 The ‘Ahaa(s)’ 733.3 The ‘Why(s)’ 753.4 The ‘Oop(s)’ 80
PART Two WiMAX Effect 87
4 WiMAX Solutions 894.1 LOS 914.2 Benefits of NLOS 914.3 Self-install CPE 924.4 Nomad, Portable and Mobile Deployment 934.5 Nomadicity and Portability 944.6 Mobility 954.7 Spectrum 964.8 Licensed Spectrum 964.9 Licence-exempt 97
5 WiMAX Applications 1015.1 Metropolitan-area Networks 1025.2 Last-mile High-speed Internet Access or Wireless DSL 1055.3 Backhaul 1105.4 The Rural Broadband Problem 1125.5 3 Vs: VoIP, VPLS and Video 114
6 WiMAX Impact 1216.1 Broadband for the Masses 1216.2 Affordable Broadband 1226.3 Moore Meets Marconi: Wireless Applications 1236.4 Expanding Competition: WiMAX 1276.5 Get Ready For Disruption 1366.6 Catalyst to Economic Growth 1396.7 The Road Ahead 144
PART Three WiMAX Business 159
7 WiMAX Markets 1617.1 Market Dynamics 1617.2 Market Types 1627.3 Market Segment 1687.4 Market Structure 170
8 Economics of WiMAX 1738.1 Why Wireless? 1738.2 When is Wireless Right? 174
vi CONTENTS
8.3 The Economic Analysis 1758.4 The Business Case for WiMAX 1788.5 Business Considerations 1928.6 WiMAX Business Models 201
9 WiMAX Opportunity 2119.1 Broadband Wireless Trends: Building Momentum 214
PART Four WiMAX Strategy 225
10 Strategy for Success: Service Providers 22710.1 Understanding Diversity: Service Providers 22710.2 Strategy Development 23010.3 Wireline Carriers 23410.4 New Entrants 23610.5 Alternative Carriers 23710.6 Cellular and Mobile Service Providers 23910.7 New Revenue Opportunities 24410.8 Value Added Services – The Business Imperative 24610.9 Recommendation 249
11 Strategy for Success: Equipment Vendors 25111.1 WiMAX Value Chain 25311.2 Original Equipment Manufacturers 25611.3 Chip Manufacturers 25811.4 Dynamics of the Value Chain 25911.5 Recommendations 260
12 Strategy for Success: Government and Regulators 26112.1 Making More Spectrum Available 26212.2 Ideal Framework for Spectrum Allocation 26312.3 Reducing Legacy Regulation 26712.4 Governments Can Make a Positive Impact 26912.5 Recommendations 271
13 Strategy for Success: Users and Investors 27313.1 Wireless – Investment Picks Up 27313.2 BWA: Industry Matures 27513.3 WiMAX: Bubble or Lifetime Opportunity 27513.4 Recommendations 277
CONTENTS vii
Appendices 279
A1 WiMAX Certification Process 281Abstract Test Suite Process 283
A2 WiBro 285
A3 Proprietary BWA Systems 289Arraycom 289Flarion 290IP Wireless 290Navini 290Conclusion 291
Glossary 293
Bibliography 309
Index 313
viii CONTENTS
Preface
Modern technologies are revolutionizing the way we work, play andinteract. It is not an exaggeration to suggest that these disruptivetechnologies are altering the way we live and that, with every passingday, these disruptions are becoming greater. This trend has created newcompetitive threats as well as new opportunities in every walk of life.
The telecommunications industry is finding itself most affected bythese developments. The human behavioural trait responsible for theseunprecedented but welcoming tremors is ‘communication’.
WiMAX: THE SUBJECT
When this book was initially planned, WiMAX technology was new,unproven and the subject of much doubt and uncertainty. It heldpromise to be sure, but then so have many broadband wireless formatsover the years, with little result. WiMAX is still very new and unproven,having only just seen initial deployments (in fixed formats) in serviceprovider networks. The big difference, however, and the reason whyWiMAX remains an area of technological promise is the push forstandardization and equipment certification that has occurred overrecent years. Even though commercial deployment and service introduc-tion are still in their infancy, WiMAX is in a standardization andcertification cycle that will potentially lower the costs of equipmentproduction and pave the way for future iterations of the technology tobe released and deployed more efficiently.
To truly understand WiMAX, one must wade through a mass oftechnical talk, market speak and plain old hype about what thespecification can and cannot do. This book will outline how 802.16technology works, how it is likely to evolve, what is driving the
technology, what it will realistically deliver and, just as critically, what itcannot achieve. It will also look at the equipment necessary to bring themarket to life and analyse potential critics of the technology such asincumbent wireline and wireless network operators, competitive DSLsuppliers and enterprises. The likely time frames for commercial avail-ability of WiMAX products will be examined and the obstacles thatstand in the way of widespread WiMAX adoption, ranging fromspectrum issues to the competitive threat of 802.11 and 3G cellulartechnologies. This book will also look at how pricing pressures will beintense in this market, even for first-generation products.
The book will draw on some of the original research reports from aleading WiMAX analysis and research outfit, Research4Business (R4B),which provide the most comprehensive and up-to-date analysis everundertaken on the WiMAX market. Based on information from directinterviews conducted with technology suppliers, service providers andinvestors with a direct interest in the WiMAX market, these reportsprovide an overview of everything linked to WiMAX. Having a grasp onthis information was vital for as an author on this subject, and I amgrateful to R4B.The Business of WiMAX is a book which is a step in the direction ofdemystifying WiMAX. It is divided into four sections, each covering animportant aspect of the subject. The heart of the book is an in-depthexploration of the business case for WiMAX, WiMAX business modelsand success strategies for the players.
Part One – Understanding WiMAX
This section provides an overview of WiMAX landscape and consists ofthree chapters.
Part Two – WiMAX Effect
This section provides a top-level view of solutions provided byWiMAX, their applications and the impact and consists of threechapters.
Part Three – WiMAX Business
This section gives a business perspective of the subject, which includes atop-level view of the market, opportunity and economics of the subjectand consists of three chapters.
x PREFACE
Part Four – WiMAX Strategy
This section discusses Strategies for Success for various stakeholders andplayers in the WiMAX economy; it consists of four chapters, eachcovering a specific player.
Some detailed readings are also included on different topics that havebeen touched upon in the main text but not covered in full so as not tolimit the audience. The Appendix provides a behind-the-scenes look atthe process for certification, from technological tests right down to howthe gear will be labelled once it is certified, as well as present proprietarybroadband technologies and key market players.
Get Ready
The WiMAX is coming. . .
PREFACE xi
PART OneUnderstanding WiMAX
1Introduction
The start of the new millennium is witnessing a telecommunicationsworld that is very different from even the recent past. The hugeexplosion of wireless and broadband technologies over the last fewyears has captured the imagination and innovativeness of technologistsaround the world.
It has been a constant human endeavour to communicate moreeffectively and at the same time to be free of any bondage, physical orpsychological. A similar underlying trend can also be seen in theevolution of telecommunications. The need for mobility and higherspeeds in an ever-changing environment has been of paramount impor-tance.
Clearly with ever-increasing expectation and highly dynamic techno-logies, challenges lie ahead, driven by the intrinsic human trait ofnomadicity and the fundamental need to communicate in a feature-rich environment. With the new-found power of mobility and broad-band, the telecommunications industry has tapped into an explosivetechnology mix that can grow exponentially once creativity and innova-tiveness come into play (Figure 1.1).
1.1 WIRELESS COMMUNICATION: ANY TIME,ANY PLACE
The main factor behind this tremendous growth has been the wirelessmedium’s ability to satisfy substantially any two components of thethree that comprise the ultimate goal of telecommunications: any
The Business of WiMAX Deepak Pareek
# 2006 John Wiley & Sons, Ltd
information, any time, any place. Wireless communications systemsprovide anytime, anywhere communications.
The future of wireless lies in faster, more reliable methods oftransferring data and, to a lesser extent, increased use of voice com-mands and audio improvements.
Some of the inherent characteristics of wireless communicationssystems which make it attractive for users, are discussed below in detail.
Mobility
Wireless systems enable better communication, enhanced productivityand better customer service. A wireless communications system allowsusers to access information beyond their desk and conduct business fromanywhere.
Reach
Wireless communications systems enable people to be better connectedand reachable wherever they are.
Simplicity
Wireless communications systems are faster and easier to deploy thancabled networks. Installation can take place simply, ensuring minimumdisruption.
Figure 1.1 Connectivity evolution
4 INTRODUCTION
Flexibility
Wireless communications systems provide flexibility, as a subscriber canhave full control of his/her communication.
Setup Cost
The initial costs of implementing a wireless communications systemcompare favourably with those for a traditional wireline or cablesystem. Communications can reach areas where wiring is infeasible orcostly, e.g. rural areas, old buildings, battlefields, vehicles.
Falling Services Cost
Wireless service pricing is rapidly approaching wireline service pricing.
Global Accessibility
Roaming makes the dream of global accessibility a reality, since todaymost parts of the globe are well covered by a wireless service provider.Roaming services also allow the flexibility to stay connected anywhere.
Smart
Wireless communications systems provide new smart services like SMSand MMS.
Cultural
Wireless communications systems comprise personal devices, whereaswireline is more connected to a place, e.g. the office. In today’s worldwireless communication is no longer just about cell phones; instead it isthe direction in which telecommunications seem to be heading toprovide all possible ways of keeping information place-independent toa greater or lesser extent (Figure 1.2).
WIRELESS COMMUNICATION: ANY TIME, ANY PLACE 5
1.2 WIRELESS NETWORKS
The tetherless nature of connectivity provides its users with almostunrestricted mobility and the facility to access the network from any-where. While in a wired network an address represents a physicallocation; in a wireless network the addressable unit is a station, whichis the destination for a message and is not (necessarily) at a fixedlocation. Although wireless networks have been around for sometime,they are gaining popularity rapidly with standardization and reductionsin the cost of hardware components.
What Does ‘Wireless’ Mean?
The world is going wireless, with an ever-increasing number of peoplereaping the rewards of wireless communications. From mobiles tolaptops and personal digital assistants (PDAs), the list of wirelesstechnological devices is endless.
‘Wireless’ means transmitting signals using radio waves as the med-ium instead of wires. Remote controls for television and other customerelectronic appliances were the first wireless devices to become part ofeveryday life. Now cordless keyboards and mice, PDAs, and digital andcellular phones are commonplace.
Figure 1.2 Wireless technologies
6 INTRODUCTION
Wireless technologies are used for tasks as simple as switching off thetelevision or as complex as supplying the sales force with informationfrom an automated enterprise application while in the field. Forbusinesses, wireless technologies mean new ways to stay in touch withcustomers, suppliers and employees (Figure 1.3).
Wireless Economics
The most notable factors that have contributed to this exponentialgrowth are the Internet boom, the need for mobility in an ever-changingenvironment, low costs (flat rate), increased data rates, increased batterylife, application friendliness and innovativeness. In many countries thereare now more wireless phone, lines than fixed lines. There are a numberof reasons for this unexpected boom in wireless networks, the foremostbeing the use of wireless or mobile phones, which is more convenientand requires less investment than a fixed infrastructure.
In addition, a wireless infrastructure has more ‘flexibility’ than a fixedinfrastructure, in which at least the part of the access network closest tothe user is dedicated to a specific locations and its profitability dependson the use made of this access by that household or business. Wirelessnetworks do not suffer from this limitation; their use can be shared andreassigned much more easily, and they can become profitable morerapidly.
Figure 1.3 Wireless network: coverage vs cost
WIRELESS NETWORKS 7
Some analysts of the telecommunications industry believe that, withina few years, most telephone calls in the residential market will be placedover wireless networks.
Drivers for wireless networks
It is by improving business processes that wireless access will find a placein many enterprises. Several internal and external factors are convergingto drive a sense of urgency among businesses to find these processefficiencies, for example increased customer expectations, need foreffective time utilization and employee empowerment, cost reductionand cost avoidance, advancing enterprise connectivity, legislation andgovernment requirements.
Issues for wireless networks
As with any relatively new technology, there are many issues that affectthe implementation and utilization of wireless networks. These are bothcommon and specific, depending on the type of wireless network. Someof the common factors include electromagnetic interference and physicalobstacles that limit coverage of wireless networks, while others are morespecific, such as standards, data security, throughput and ease of use,(Figure 1.4).
Network Topology
There are basically three ways to connect a wireless network.
Point-to-point bridge
A bridge connects two networks. A point-to-point bridge would inter-connect two buildings. Access points connect a network to multipleusers. For example, a wireless LAN bridge can interface with anEthernet network directly to a particular access point. This may benecessary if you have several devices in a distant part of the facility thatare interconnected using Ethernet.
8 INTRODUCTION
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Point-to-multipoint bridge
When connecting three or more LANs that may be located on differentfloors in a building or across buildings, the point-to-multipoint wirelessbridge is utilized. The multipoint wireless bridge configuration is similarto a point-to-point bridge in many ways.
Mesh or ad hoc network
An ad hoc (peer-to-peer) network is an independent local area network thatis not connected to a wired infrastructure and in which all stations areconnected directly to one another (called a mesh topology). Configurationof a WLAN in ad hoc mode is used to establish a network where wirelessinfrastructure does not exist or where services are not required, such as atrade show or collaboration by co-workers at a remote location (Figure 1.5).
1.3 WIRELESS TECHNOLOGIES
Wireless networking technologies range from global voice and datanetworks to infrared light and radio frequency technologies optimizedfor short-range wireless connections. Devices commonly used for wire-less networking include portable computers, desktop computers, hand-held computers, PDAs, cellular phones, pen-based computers and pagers.Wireless technologies have evolved substantially over the past few yearsand, depending on their range, can be classified in different ways.
Figure 1.5 Wireless network standards
10 INTRODUCTION
Wireless Wide Area Network
This network is designed to enable users to access the Internet via awireless wide area network (WWAN) access card and a PDA or laptop.Data speeds are very fast compared with the data rates of mobiletelecommunications technology, and their range is also extensive.Cellular and mobile networks based on CDMA and GSM are goodexamples of WWAN.
Wireless Local Area Network
This network is designed to enable users to access the Internet inlocalized hotspots via a wireless local area network (WLAN) accesscard and a PDA or laptop. While data speeds are relatively fastcompared with the data rates of mobile telecommunication technology,their range is limited. Among the various WLAN solutions, Wi-Fi is themost widespread and popular.
Wireless Personal Area Network
This network is designed to enable the users to access the Internet via awireless personal area network (WPAN) access card and a PDA orlaptop. While data speeds are very fast compared with the data rates ofmobile telecommunications technology, their range is very limited.
Wireless Region Area Network
This network is designed to enable the users to access the Internet andmultimedia streaming services via a wireless region area network(WRAN). Data speeds are very fast compared with the data rates ofmobile telecommunication technology as well as other wireless network,and their range is also extensive. The specific charter of the WRANworking group is to ‘develop a standard for a cognitive radio-based airinterface for use by license-exempt devices on a non-interfering basis inspectrum that is allocated to the TV Broadcast Service’. WRAN, whichis presently in its infant stage, is the most recent addition to a growinglist of wireless access network acronyms defined by coverage area.
WIRELESS TECHNOLOGIES 11
We will deal with two types of wireless networks, WLAN and WWAN(Figure 1.6).
1.4 THIRD-GENERATION MOBILE SYSTEMS
The remarkable growth of cellular mobile telephony as well as the needfor wireless data services promises an impressive potential for a marketthat combines high speed with the convenience of mobile technology.Universal Mobile Telecoms Service (UMTS) Generation 3 will offerusers an alternative with high-speed access, allowing connectivity fromany location on the planet (Table 1.1).
First-generation Mobile Systems
The first wireless generation introduced analogue systems transmittingover radio frequencies, used primarily for voice. The operation of first-generation mobile phones was based on analogue radio technology. Itwas composed of three elements – mobile telephone, cell sites andmobile switching centres (MSC). The system was designed using twodifferent radio channels. The first was the control channel, and thesecond was the voice channel.
Figure 1.6 Wireless technologies, bandwidth versus distance
12 INTRODUCTION
Table 1.1 Various cellular and mobile technologies
MaximumTechnology speed Launch Benefits Drawbacks Bottom-line
GPRS 171.2 kbps 2001 Packet datafor GSMworld
Data ratesmaydisappoint
Will be themost successfultechnologythrough 2005
HSCSD 115 kbps In use Dedicatedchannels
Lowdeployment,expensive
Will not bemainstream
EDGEClassic
384 kbps 2003 Higher datarates forboth packetand circuit
Expensive,littleterminalsupport
Will notbe able tocompete withW-CDMA
EDGECompact
250 kbps 2002 Higher datarates forboth packetand circuitTDMAnetworks
AT&T(mainproponent)has changeddirection
Unlikely tobe successful
CDMA/IS-95B
115 kbps In use Interimpackettechnologyfor CDMAnetworks,backwardcompatiblewith IS-95A
Only adoptedin Japan andSouth Korea
Most carrierswill preferto deployCdma20001�MC
Cdma20001�MC
307 kbps 2002 High datarates, smoothmigrationpath
Limitedglobalfootprint
Goodtechnologybut willnot survive.
PDC-P 9.6 kbps In use Used byNTTDoCoMo
Japan only,low datarate
Currently themostsuccessfulwireless packettechnologyin the world
W-CDMA 2 Mbps 2001–2003
Massiveindustrysupport
Highlicencefee
De factoglobalstandard
Cdma20003�MC
2 Mbps 2004 Backwardcompatiblewith 1�MCand IS-95A
Supporthas cooleddown
Goodtechnologybut unlikely tobe successful
CDMA 1EVDV
2.4 Mbps 2003 Smoothmigrationpath
Limitedglobalfootprint
Will not bemainstream
CDMA 1XTREME
5.2 Mbps 2004 Very highdata rates
Proprietary –Motorola,Nokia
No indicationof intentfrom carriers
THIRD-GENERATION MOBILE SYSTEMS 13
The control channel was responsible for carrying digital messages,which allowed the phone to retrieve system control informationand compete for access. It used frequency shift keying modulation(FSK) to complete this task. The responsibility of voice channels was totransmit voice data over an analogue signal using frequency modulation(FM) radio.
Second-generation Mobile Systems
Compared with first-generation systems, second-generation (2G) sys-tems use digital multiple access technology, such as time divisionmultiple access (TDMA) and code division multiple access (CDMA).The global system for mobile communications or GSM uses TDMAtechnology to support multiple users.
Examples of second-generation systems are GSM, cordless telephones(CT2), personal access communications systems (PACS) and digitalEuropean cordless telephones (DECT). A new design was introducedinto the mobile switching centre of second-generation systems. Inparticular, the use of base station controllers (BSCs) lightened the loadplaced on the MSC found in first-generation systems. This design allowsthe interface between the MSC and BSC to be standardized. Hence,considerable attention was devoted to interoperability and standardiza-tion in second-generation systems so that carrier could employ differentmanufacturers for the MSC and BSC.
In addition to enhancements in MSC design, the mobile-assistedhandoff mechanism was introduced. By sensing signals received fromadjacent base stations, a mobile unit can trigger a handoff by performingexplicit signalling with the network. Second-generation protocols usedigital encoding and include GSM, D-AMPS (TDMA) and CDMA(IS-95). The protocols behind 2G networks support voice and somelimited data communications, such as fax and short messaging service(SMS), and most 2G protocols offer different levels of encryption andsecurity. While first-generation systems support primarily voice traffic,second-generation systems support voice, paging, data and fax services(Figure 1.7).
2.5G Mobile Systems
The move into the 2.5G world began with the idea of providingdecent data connectivity without substantially changing the existing
14 INTRODUCTION
2G infrastructure. Some of the cellular technologies capable of achiev-ing this goal are discussed below.
High-speed circuit-switched data (HSCSD)
High-speed circuit-switched data (HSCSD) were designed to allow GSMnetworks transfer data at rates up to four times the original networkdata rates.
General packet radio service (GPRS)
General Packet radio service (GPRS) is a radio technology for GSMnetworks that provides packet-switching protocols, shorter setup timefor ISP connections, increased data rates as well as charging based on theamount of data transferred rather than the time spent in transferring thedata.
The next generation of data, heading towards third-generation andpersonal multimedia environments, is built on GPRS and is known asenhanced data rate for GSM evolution (EDGE).
Enhanced data GSM environment (EDGE)
EDGE allows GSM operators to use existing GSM radio bandsto offer wireless multimedia IP-based services and applications at
Figure 1.7 Standards – broadband wireless access
THIRD-GENERATION MOBILE SYSTEMS 15
theoretical maximum speeds of 384 kbps (up to a theoretical maxi-mum of 554 kbps) with a bit-rate of 48 kbps per time slot and up to69.2 kbps per time slot under good radio conditions. EDGE also allowsoperators to function without a 3G licence and competes with 3Gnetworks offering similar data services and, in some cases, challenging3G data rates.
Implementing EDGE is relatively painless and requires relatively smallchanges to network hardware and software as it uses the same TDMAframe structure, logic channel and 200 kHz carrier bandwidth as GSMnetworks. Designed to coexist with GSM networks and 3G WCDMA(Figure 1.8), EDGE offers data rates equivalent to ATM-like speeds ofup to 2 Mbps.
Third-generation Mobile Systems
Third-generation mobile systems are faced with several challengingtechnical issues, such as the provision of seamless services across bothwired and wireless networks. In Europe, there are two evolving net-works under investigation: UMTS (Universal Mobile Telecommunica-tions Systems) and MBS (Mobile Broadband Systems).
CDMA2000
Emerging out of the standard IS-95, CDMA2000 has already undergone aconsiderable amount of development, particularly in the area of multi-
Figure 1.8 Migration path from 2G to beyond 3G
16 INTRODUCTION