Upgrade to LTE Credit: Motorola

1. WHITE PAPER
Upgrade Strategies
For Mass Market Mobile Broadband

2. Key Findings
• The “perfect storm” of widespread 3.5G deployment, flat rate data tariffs, and availability of mobiles
with internet friendly features will result in a virtual explosion of wireless broadband demand leading
to spectrum exhaustion, perhaps by 2010.
• The technology advances incorporated in LTE lead to increased network capacity and economic
competitive advantage.
• The economic advantages of high capacity LTE will be instrumental in delivering affordable, wireless
broadband to the mass market, and is determined by the mass market total average capacity by
minimizing the need for additional cell sites and fewer radios per cell site.
• With LTE nearing commercial deployment in 2010, the window of opportunity for a legacy technology
upgrade is somewhat limited.
• An operator choosing an early deployment of LTE can exercise a considerable competitive advantage
with the economic benefits of LTE rather than investing in interim upgrades.
Introduction
In 2006, many cellular operators began 3.5G network deployments (HSPA & EV-DO) and subsequently
introduced very popular flat rate data tariffs. These operators now enjoy a growing subscriber data services
penetration and the resulting growth in data traffic. In addition most of the devices available today feature
the ability to play rich media content, access email and a number of mobile friendly sites such as Google,
Yahoo, New York Times, etc. Application vendors are creating content, portals and new web browsing
adapted to the mobile phone market.
These market forces combine to create an explosion of data demand on their networks, with many
operators reporting triple digit year-on-year growth in network data traffic
The deployment of 3.5G HSPA networks were critical for the adoption of mobile broadband but faced with
the mobile broadband market success, operators must now consider the upgrade paths to support the
continued growth with well performing network that provides sufficient capacity to offer subscriber a great
mobile broadband user experience whatever the conditions.
The necessary upgrades to 3.5G networks often require increasing the backhaul capacity between the Radio
Network Controller and Cell sites, UTRAN software and hardware upgrades to support higher speed HSPA,
deploying a second and third carrier, additional NCs, and additional Packet Data Core capacity. Eventually,
costly cell splitting will be needed in markets where the available spectrum is exhausted.
The growth in data traffic continues to increase at unprecedented rates (triple digit percentage increase has
been observed in many instances)1 , and many operators are already considering their options for near and
long term growth. This paper studies various aspects of choosing an evolution path, with the particular focus
on HSPA+ and LTE as the most common choices facing 3GPP operators.
Wireless Data Boom – the Perfect Storm
In the next five years wireless data service (HSPA) penetration in some markets will increase to nearly
85%, leading to massive increase in packet data traffic in the 2.1 GHz UMTS band. As shown in Figure 1,
subscriber acceptance of high speed data capability will move well into the mainstream. This uptake will be
enabled with feature-rich phones and smart-phones that will achieve mainstream mass-market acceptance.
1
Informa, 2008, 3G Wireless Broadband, “The Future is flat for network architecture…”
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3. 750
10x Penetration
Subs (million)
3.5G
500 UMTS 4G
GPRS EDGE
250
GSM
-
2007 2008 2009 2010 2011 2012
Figure 1. European subscriber migration to wireless broadband. Source: Informa
Competitive pressures will lead to widespread use of simplified and flat rate tariffs, further encouraging
consumer utilization. In many developed markets, feature-rich media handsets now represent over 50%
of new handset sales. As shown in Figure 2, the worldwide Average Selling Price for feature-rich media
phones will soon cross under the widely accepted mass market threshold of $150, with smart phones
following closely. As new entrants into the ultra-premium handset market inevitably begin to migrate
toward the mainstream, increasing pressure will move today’s high end smart phones into the mainstream
as well.
Figure 2. Mass market adoption of feature rich and smart phones.
As these market forces (tariffs, phones, and networks) converge for mobile broadband, operators will
increasingly experience congestion on broadband networks, with early adoption technologies such as HSPA
(or EV-DO Rev. A) are faced with ever increasing demands. Operators with 5 or 10 MHz of HSPA spectrum
may experience this as early as 2009 - 2010, depending on the size of their subscriber base and how the
rapidly subscriber base and traffic grows.
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4. 3GPP LTE Technology Advances
The 3GPP Release 8, layer 1 specification was finalized in January 2008, while the upper layers’
specifications are anticipated to be completed later in 2008. The high performance LTE air interface
extends the technological innovation for the 3GPP operator with the most advanced features built-in from
the start, rather than added on to an existing radio technology. This avoids the performance dilution that
results from legacy mobiles unable to accommodate the new performance features.
Some of the distinguishing characteristics of LTE include
• Orthogonal Frequency Division Multiple Access : Spectral Efficiency and improved coverage
• Advanced Antenna Technology : MIMO and Beam Forming
• Higher Order Modulation : up to 64-QAM for higher data rates
• Scalable Bandwidth : 1.4 MHz – 20 MHz, scale for growth and incremental migration of existing
spectrum use to LTE
• Frequency Selective Scheduling : increases efficiency
• All IP to the mobile : uncompromised by legacy support
• Semi-Flat architecture : simplifies network and allows for easier, most cost effective scaling
• Lower overhead burden : increases effective efficiency
• Quality of Service : built in from the start
• Low Latency : Improve user satisfaction and enables latency sensitive applications to function better
(e.g. gaming)
• Multimedia Broadcast Multicast Service (MBMS) : designed for dramatically improved and efficient
video distribution with a Single Frequency Network
Peak data rate performance comparison
The performance enhancing features of 64-QAM, MIMO, and broadband spectrum deliver exceedingly
high peak data rates. In any cellular network, actually achieving the peak data rate requires a particularly
beneficial signal environment to deliver on their perspective performance gains. Typically, a small
percentage of subscribers are in locations suitable for the peak rates, while the remainder can achieve
receive something less.
A typical measure of the cellular environment is a Signal to Noise Ratio called C/I. 2x2-MIMO and 64-QAM
typically require an environment which exhibits a 10 dB C/I ratio in order to deliver best results. A more
important measurement for the remaining 95% of subscribers is the average sector throughput for a typical
cell site.
Figure 3 depicts actual measurement of C/I in 4 major urban and suburban markets, with populations
ranging from 1.5 to 10.5 million. Here we observe only a few percent of mobiles report such “C/I” sufficient
for either 64-QAM or 2x2 MIMO.
As a result, the high performance features of HSPA+ will benefit only few subscribers (typically 2-5% per
cell) hence provide little cell capacity improvement.
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5. Figure 3. 2x2 MIMO and 64-QAM limited by environmental conditions..
UMTS Release Antenna Technology Bandwidth
Type Qty 5 MHz 10 MHz 20 MHz
R6 HSPA SIMO 1x1, 1x2 14.4 -- --
R7 HSPA+ MIMO 2x2 28.8 -- --
R7 HSPA+ 64-QAM SIMO 1x1, 1x2 21.6 -- --
R8 LTE MIMO 2x2 43 86 173(1)
R8 LTE MIMO 4x4 82 163 326(1)
Table 1. DL Peak Data Rates, Mbps (1) 3GPP TR 25.912 V7.2.0
For the best MIMO performance, a rich multi-path signal environment is required, and varies widely with location.
A typical location would be when the mobile device has a direct line of sight path to the transmitter and a nearby
reflecting building. When conditions suitable for MIMO exist, then two non-correlating data streams can be
effectively delivered to the mobile, with data rates approximately doubling.
The economic value of these sustaining innovations is determined by the effect on total average capacity for an
entire mass market, and not just the benefits delivered to the fortunate few. The average sector throughput is
the metric to assess economic potential and the one that operators should be concerned about as it has a direct
impact on their network CAPEX and OPEX.
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6. Cell Shrinkage
Unlike shared carrier technologies (like CDMA and WCDMA), LTE is effectively immune to cell shrinkage or
“breathing” as normally observed as traffic increases spread spectrum technologies. This can lead to larger
footprint and fewer cell sites, as well as increase the likelihood of existing cell site reuse.
The Importance of Down Link Sector Throughput
The total sector throughput is simply the total number of bits delivered to all users in a sector. The somewhat
clover-shape of a cell site coverage has relatively few subscribers close to cell tower that can get the highest
data rates, while most subscribers are dispersed further from the tower and achieve lower data rates.
Although the advanced technologies of 64-QAM and 2x2 MIMO with LTE are not yet deployed, we can
gain much insight by examining the simulation of typical conditions. Using a typical reference scenario2 ,
LTE is expected to deliver nearly twice the sector throughput that operators currently expect. As wireless
broadband reaches the mass market, the LTE solution will require significantly less radio resource than
legacy technologies to meet the demand. Expensive cell splitting more likely to be avoided and thus giving a
sustainable competitive advantage to an LTE operator.
Figure 4. DL Average Sector Throughput2, Mbps. Source: Motorola
LTE Improvements to Downlink Throughput and Capacity
While also utilizing MIMO and 64QAM, LTE brings a number of improvements that have a direct impact on the
user experience of all users in a cell:
• Better multi-path signal handling capability than CDMA technologies.
• No intra-cell interference, as each sub-carrier is uniquely assigned.
• Interference cancellation is better for reduced inter-cell interference.
• Mitigates the cell shrinkage vs. loading phenomena of CDMA technologies.
• More efficient Multicast, Broadcast.
• Lower control overhead than CDMA.
• Frequency Selective scheduling for additional flexibility and efficiency.
Performance results based on 2GHz, full buffer data, 1.732km intersite distance, 3km/hr, MMSE receivers,
2
2x2 MIMO (HSPA 1x2), and 20 dB penetration loss
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7. The Importance of Uplink Performance
3.5G and 4G cellular networks are frequently uplink limited, either by the maximum range of a handset for
coverage limited cells or by the uplink radio interface in capacity limited cells. These are just two factors that
determine the effective cell size, number of carriers, and number of cell sites deployed.
As network loading increases, that is number of subscribers in the cell, the shared carrier of spread
spectrum CDMA technologies will undergo cell shrinkage (or breathing) from which LTE is largely immune.
The cause of the shrinkage is simply more subscribers on the same carrier introduces more RF noise in the
cell, reducing Signal-to-Noise ratio. This means a stronger signal is required to get the same data rate as
when fewer subscribers are active. Since this is usually accomplished by a shorter range from the tower,
the cell effectively shrinks.
With LTE, each subscriber has unique use of the assigned individual tones during a time slot. There is no
cell shrinkage phenomenon because of shared carriers as with spread spectrum CDMA technologies.
Also, LTE will launch with sophisticated uplink interference cancellation methods built into the air interface,
further increasing the uplink spectral efficiency and capacity by reducing the apparent noise levels.
As subscribers and operators become more sophisticated in the use of wireless broadband, usage patterns
change accordingly. In historical voice dominated networks, a roughly balanced uplink and downlink were
desirable.
With the rise of peer-to-peer communication, social networking, and user generated content, the uplink and
downlink traffic profiles become more balanced, and this is readily supported with the 3.5G technologies.
The uplink performance will increase in importance as these social networking activity moves to the mobile
realm. Recent handset introductions make shooting, editing and sharing videos directly from your mobile
easier than ever before 3.
Economic Competitive Advantage
Total Cost of Ownership
As wireless broadband reaches the mass market, the impact of average throughput or capacity becomes
apparent. As subscriber penetration and usage transitions from early adopter stage to mass market
penetration, the additional capacity delivered by LTE will yield significant competitive advantage. The early
adopter stage is characterized as a predominantly laptop, data card and USB dongle subscriber. The data
demands may be high, but the subscriber penetration in the low single digits. Mass market inevitably
means handset oriented, with subscriber penetration by wireless broadband approaching 85% , early in the
next decade 4.
When the average data traffic for mass market subscribers is low, a much of the network remains coverage
limited, that is cell sites are not operating near the capacity of the radio interface. As traffic builds, then a
significant portion of the network becomes capacity limited, with additional radio carriers deployed to handle
the traffic load. After spectrum limits are reached, additional cell sites are deployed.
The inflection point from coverage limited to capacity limited will of course vary by market, spectrum, radio
technology, tariff plans, etc. Legacy CDMA based technologies may exhibit this inflection at 1 – 2 GBytes
/ month for an average subscriber, while 4G OFDM technologies may exhibit some signs with at 4 GBytes
/ month. A significant economic advantage delivered by LTE capacity is the ability to meet the growing
wireless broadband demand.
3
Motorola Z10, http://www.motorola.com/mediacenter/news
4
Informa, Future Mobile Broadband, 2nd Edition
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8. Figure 5. Total Cost of Ownership Inflection Source : Motorola
Window of Opportunity
The pending launch of LTE will cause operators to consider their CapEx spend cycle, and how that can
determine their position when a competitor deploys LTE. The window of opportunity to capitalize on interim
upgrades may be limited by availability and subscriber mix of suitable devices in the near term, and the
inevitable launch of LTE in the longer term.
Upgrade cost
Operators with significant legacy equipment may discover a significant Capital Expenditure is needed for an
interim upgrade. This may be due to legacy hardware unable to handle the MIMO or 64-QAM high speed
data rate features. New ancillaries (possibly additional duplexers and cabling for MIMO, for example) may
also complicate the value proposition, especially if a competitor adopts LTE sooner rather than later.
There are also core network upgrade implications to consider. Most core networks will continue to require
upgrade to handle the capacity with advancing 3.5G and 4G traffic demands. The Evolved Packet Core
network is much more efficient and scalable to deploy than the 2G/3G derived GPRS core elements (RNCs,
SGSNs, GGSNs, etc.). This is because the EPC is optimized around broadband data network technologies
(vs. ATM, etc.). The increase in backhaul requirements are compounded once spectrum is exhausted and
operators resort to cell-splitting.
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9. The LTE upgrade CapEx cycle appears to have complexities and considerations comparable to most
network technology upgrades, but it provides much better forward looking prospects as we move into the
mass market wireless broadband era.
Spectrum for LTE
Licensed Spectrum acquisition presents a serious barrier to entry for many potential competitors, hence
the fierce competition for available allocations. Currently, many 3GPP operators world wide have 5 MHz to
15 MHz allocations of Full Duplex spectrum in the 2.1 GHz band. The rising demand for wireless broadband
may very well fill this spectrum just as LTE becomes available. A spectrum crunch in 2009 – 2011 will
increase the urgency for LTE in new spectrum (2.5 – 2.6 GHz, AWS, 700 MHz) or of LTE refarming existing
GSM/CDMA spectrums, further extending wireless broadband into the mass market. As shown in Figure
5, operators with a relatively rapid migration of subscribers from GSM to HSPA may be the first to exhaust
their 2.1 GHz capacity
Figure 7. Operators with rapid HSPA penetration and limited spectrum are early candidates for LTE.
Figure 5. Operators in the upper left with the most subscribers, least spectrum, and rapid upgrade from
GSM will be highly motivated for LTE sooner rather than later
Eventually, GSM will be replaced by more capable 3GPP technologies, and LTE presents a unique
opportunity for in-band migration made possible by the scalable bandwidth of LTE. If as little as 1.4 MHz
of GSM can be refarmed, a baseline LTE system can be deployed. Multimode GSM/LTE mobiles can then
facilitate the migration of voice traffic to the all-IP LTE with each incremental transition providing an increase
in both capacity and performance. Initial mobile devices will likely be multi-mode, multi-band data cards
and USB devices subject to operator demand. Based on mobile chipset availability, Data devices should
be available in 2010. Multi-band, Multi-mode mobiles supporting LTE are also subject to operator demand.
Migrating voice services from 2G to LTE is dependent on VoIP / IMS uptake by operators.
Other spectrum suitable for LTE includes the world wide roaming possibility afforded by 700 MHz spectrum
in the U.S. and later in Europe, plus the refarmed 900MHz / 1800MHz spectrum in Europe.
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10. Upgrade Strategy and Benefits of Early LTE Deployment
LTE Business modeling
The choices an operator makes in managing the evolution to mass market wireless broadband will have a
profound impact on their future prospects, especially given the highly competitive nature of wireless. As an
example, we suggest a model based on London demographics for an operator with approximately 2 Million
subscribers, with most at a 2G or 2.5G genre of application sophistication, that is, namely voice. Over a
period of a few years, the wireless broadband penetration will rise to 85%. For modeling purposes, consider
the average subscriber data demands along 3 scenarios: reaching either 1Gbyte, 3 GByte, and 5 GByte per
month in 2011, 10% of that traffic happening in any busy hour. Fifteen MHz of 2.1 GHz spectrum is allocated.
Figure 8. Example operator model with demographics and broadband data growth.
Consider four possible strategies for the evolution of this network.
1. Stay with full speed HSPA and deploy 3 carriers, adding cell sites as needed
2. Deploy HSPA and mobiles with Receive Diversity
3. Deploy HSPA followed with upgrade to HSPA+ (mobiles in 2010).
4. 5 MHz of HSPA (Rx.Div) + 10 MHz LTE for in-band migration.
The results have significant implications, and summarized in a four chart illustration showing cell site
proliferation. The vertical scale indicates the number of cells sites required over time as subscriber penetration
increases and data traffic per user also increases. The initial conditions are a single carrier already deployed at
2.1 GHz providing basic coverage across the market.
The first case illustrates a simple deployment of up to 15 MHz spectrum. 3.5G technologies alone are unable
to support average user traffic of 3 or more GByte per month.
The second case shows a definite reduction in cell site proliferation with the widespread deployment of
mobiles with receive diversity. The introduction of mobiles with receive diversity early in the broadband ramp-
up increases the average sector throughput to 3.4 Mbps. Deferring the introduction of mobiles with receive
diversity would reduce network capacity, as legacy mobiles still require service. The improvement to capacity
reduces cell site proliferation of capacity limited cell sites, and assumes that receive diversity handsets (in
addition to data cards) are deployed early in the subscriber uptake of 3.5G.
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11. The third case illustrates the effect of filling the subscriber base during the growth phase with legacy
mobiles. While HSPA+ mobiles are introduced in 2010, the legacy devices dilute overall network
performance and results in the unwanted proliferation of cell sites. The presence of the low data rate legacy
mobiles diluting network capacity results in the odd curve. The full benefits of HSPA+ are realized as those
devices are replaced with newer mobiles.
The final case represents an in-band migration strategy that minimizes investment in the legacy technology,
with the forward looking investment focused on LTE. LTE is then introduced in 10 MHz of spectrum, and
working in tandem with the 3.5G assets, meets the traffic demand while minimizing cell sites proliferation.
Figure 9. Cell Sites vs time for 4 network evolution scenarios.
With the cost of site (both OPEX/CAPEX) in large urban area being sometimes as high as 10x the cost of
the equipment deployed, one can easily imagine, even on the most pessimistic data growth scenario, how
the cost of cell splitting will impact operators on 3.5G technology compared to operators that would have
upgraded to 4G LTE. Modeling the market forecasts of data uptake suggests that in many markets the 2.1
GHz spectrum may be exhausted just as LTE arrives in 2010 5 . The deployment of LTE in newly acquired
spectrum will largely eliminate the cell site proliferation shown above.
Motorola recommendations
The convergence of compelling mobiles suitable for wireless broadband and internet access, widespread
acceptance of competitive tariffs, and the inevitable consumer demand for mobile broadband sets the stage
for unprecedented uptake in wireless data traffic, and the expected spectrum capacity crunch
in 2009 – 2011.
Operators can best position themselves by
1. Maximizing the capacity of their 3.5G assets by upgrading to full speed infrastructure and mobiles,
`utilize available 2.1 GHz spectrum, and deploy mobiles with Receive Diversity early in the 3.5G
uptake phase. This will reap most of the capacity improvements and minimize capital
expenditure during the mass market development.
5
Informa WCIS, Motorola modeling, and private discussions with operators
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12. 2. Operators that exhaust their 2.1GHz spectrum should consider supporting their mass market
wireless broadband demand with early adoption of LTE in the 2.6 GHz UMTS expansions
band and other bands (700 MHz or AWS bands).
3. Operators with large 2.1 GHz spectrum assets could consider in band deployment of LTE.
Competitive advantage favors an early move to LTE
While some operators may not consider LTE until after 2012, a significant competitive advantage can
accrue to the operator that pursues an early migration to LTE. In addition to high broadband data rates that
subscribers always chase, and the enormous capacity, the first moving early adopter of LTE will benefit by
have a significant portion of subscriber data delivered via LTE, thus avoiding spectrum exhaustion and the
resulting cell splitting to handle capacity needs.
This is illustrated with a large urban and suburban market example, a theoretical operator with 10 MHz
of FDD spectrum at 1.9 GHz. Investigations comparing various technologies are examined. All external
inputs are held constant (that is, subscriber price sensitivity, traffic demand, subscriber penetration, cell site
acquisition and development costs, spectrum allocation, etc).
The principle observations :
• Reflects consumer price sensitivity – existing subscriber penetration with wireless
broadband increases with lower tariffs.
• Networks based on legacy technologies resort to cell splitting to manage total
traffic demand.
• The LTE operator has an incentive to decrease wireless broadband tariffs to maximize
the discounted cash flow – up to the point of cell splitting.
In practice, the LTE operator would pick up considerable market share by exercising the economic advantage
of LTE. This increased market share would change the discounted cash flow proposition to a different and
optimum price point.
Figure 10.. LTE Competitive Advantage. Source : Motorola modeling
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13. In this figure, the Net Present Value (discounted cash flow, vertical scale, in $Millions) vs. Tariff (horizontal
scale, in $/Month) in the upper left chart illustrates the incentive and competitive advantage for the
LTE operator. The sweet spot here is a $30 for a flat rate tariff. Under these conditions, legacy CDMA
technologies are not competitive with 4G OFDMA LTE.
Conclusions
A number of key observations now appear obvious.
1) Wireless Broadband adoption is booming due to the convergence of widespread 3.5G Networks
and attractive tariffs.
2) Wireless Broadband will penetrate the mass market coinciding with the deployment of main stream
feature rich phones and smart phones.
3) Legacy technology upgrades will offer incremental capacity improvements, most of which can be
achieved with the deployment of mobile receive diversity.
4) LTE offers a much stronger technology base (radio and network architecture) for a wireless
broadband data environment that can grow much more efficiently (TCO) as broadband
adoption climbs
5) Several strategies are available for operators to evolve their networks. Early adoption of the LTE
scenario seems to offer the best forward looking opportunity.
6) The economic advantages of an early move to LTE for meeting the mass market demand will give
significant competitive advantage.
For more information on Motorola LTE and how LTE can help you gain a competitive advantage, please talk
to your Motorola representative.
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