Cost-Effective Backhaul Alternatives

for WiMAX Networks:

Challenges & Solutions

By; Guy Nathanzon, Chief Financial Officer &

Ran Soffer, VP Marketing

June 2008

Table of Contents

Introduction ................................................................................3

Backhaul for WiMAX: The Final Frontier................................................4

Leased Copper Lines/T1 ..................................................................6

Built-in WiMAX backhaul ..................................................................6

Microwave-Based Wireless Backhaul Solutions ........................................6

ROI You Can See on the Horizon.........................................................8

The Market Speaks.........................................................................9

The Right Wireless Backhaul Solution for WiMAX ................................... 10

Maximizes Capacity...................................................................... 10

Adaptive Code & Modulation (ACM) ................................................... 10

XPIC ........................................................................................ 11

Reduces Costs ............................................................................ 12

Silicon integration ....................................................................... 14

Novel algorithms ......................................................................... 13

Spectrum efficiency ..................................................................... 14

Conclusion ................................................................................ 16

Introduction WiMAX (Worldwide Interoperability for Microwave Access) is a telecommunications technology that provides wireless data communication over long distances in a variety of ways. Based on the IEEE 802.16 standard, WiMAX promises a truly mobile data communication experience. Users equipped with WiMAX modems will be able to enjoy uninterrupted connectivity on the go that is truly mobile. Analogous to popular WiFi service that can be found in cafes, train stations and airports, WiMAX coverage offers wider coverage inside and outside designated areas, and delivers much higher bandwidth capacity for data services. Infonetics Research estimates that the WiMAX equipment market is expected to grow to $7.7 billion by 2011. In the fourth quarter of 2007, the WiMAX fixed and mobile equipment market grew 11% and 46% reaching $800 million for the entire year. Over 100 WiMAX networks have been deployed in more than 80 countries across the globe to date, and the numbers of deployments in progress and those planned continues to grow. Infonetics further estimates that the number of worldwide WiMAX subscribers topped 2.2 million in 2007, the majority of which were fixed WiMAX subscribers. Recent industry announcement confirm these estimates. Clearwire is considering plans to deploy a WiMAX network in the U.S. that promises to deliver services to upwards of 140 million Americans in 110 markets by the end of 2010. Deployment of this network is estimated to cost some $5.5 billion including backhaul. This is one example of the consolidation and investments that are expected. In addition, the issuance of new spectrum by governments seeking to increase broadband penetration is driving WiMAX deployment as well. Recent allocations of 2.5 GHz spectrum in Japan, the planned build-out by KDDI/UQ and auctions of the 2.6 GHz spectrum in the U.K. are examples of spectrum that is suitable for WiMAX that is becoming available. The ITU approval of WiMAX as an approved mobile wireless standard will also facilitate more widespread acceptance and deployment.

Backhaul for WiMAX: The Final Frontier While the promise of widespread WiMAX and/or 4G has received significant coverage, several operational obstacles have delayed more widespread deployment. They are most notably related to cost and capacity requirements, and remain open issues despite great advances in backhaul technologies. WiMAX networks require support for base stations that deliver device connectivity at capacities of up to 50 Mbps. In fact, WiMAX traffic at the base-station increases capacity requirements by a factor of 10. And this is just the beginning. Capacity requirements could easily grow to upwards of 1000 Mbps or higher over time to meet the needs of evolving next generation services.

Mobile technologies Rate Theoretical Typical 2.5G

GRPS (Kbps) 171.0 33.0 2.75G

EDGE (Kbps) 384.0 118.4 3.0G

1xEV-DO (Kbps) 2,400.0 384.0

UMTS (Kbps) 2,048.0 384.0

3.5G HSDPA (Kbps) 14,400.0 2,000.0

3.75G HSUPA (Kbps) 5,760.0 1,400.0

WiMAX (Kbps) 63,360.0 13,600.0

This means the reliance on T1 lines to connect cell sites back to their core networks will become economically and operationally unviable. Faster alternatives, such as microwave radio links, are needed to meet bandwidth demands – both today and tomorrow. Analysis shows that backhaul is probably the most expensive component in deploying a WiMAX network. A recent industry report estimates that for every dollar spent on building radio access networks, approximately $0.40 will be spent on backhaul, and that this will rise as the costs for WiMAX base stations declines. The bottom line: WiMAX deployment requires more backhaul capacity and will continue to be bandwidth hungry over time. More bandwidth means demand for higher capacity backhaul to the core network. Now we will explore several alternatives that serve to meet this capacity and evaluate their commercial viability.

“Anyone who wants to roll out a real wireless broadband network nationwide needs a cheaper [backhaul] solution than current models.” John Saw, CTO, Clearwire

Unstrung News Analysis, May 16, 2008

Alternatives for WiMAX Backhaul Leased Copper Lines/T1 A common method to handle backhaul traffic for WiMAX network is to rely on the “tried and true” copper lines (T1s). Industry sources estimate that leased T1 lines (at 1.5 Mbps each) are used to connect the majority of cellular base stations in the USA. In those markets where copper infrastructure is more common and reliable, carriers will rely on multiple T1s to meet backhaul needs and may continue do so in the near future. But as more and more bandwidth-hungry services are rolled out, this option creates serious bottlenecks. This has proven true especially in cellular 3G networks where carriers are offering multi-megabit services. Multiply this ten-fold for WiMAX and these capacity bottlenecks became real obstacles to deployment. Reliability is also an issue. Industry research reveals that as many as 50% of dropped calls are related to issues with T1 lines. Power outages caused by lightening strikes is also problematic, especially since operators must comply with stringent Service Level Agreements (SLA) relating to Quality of Service (QoS). In addition, the costs associated with these types of solutions are prohibitive. Operators are under constant pressure to lower operating expenses (OPEX). Leased line pricing varies by region. In the U.S., considered on of the least expensive markets, the average cost per T1 is roughly $400. In Western Europe it is upwards of $750 for E1 service, though this varies widely even within countries, and is often based on volume pricing models. In any case, as the number of T1s needed to meet traffic demands rises, the cost of using these leased lines can quickly spiral out of control as more and more lines are added to support the WiMAX network – easily doubling or tripling operator OPEX. For cellular operators, OPEX is a major concern, with industry estimates of backhaul-related expenses reaching up to between 35% and 50% of overall OPEX. As more base stations are required to meet the capacity needs of WiMAX networks, it is reasonable to believe that these expenses may increase. Built-in WiMAX backhaul The backhaul capabilities inherent in WiMAX networks may got the job done – but at a very heavy price. In addition to the high cost, it uses valuable bandwidth capacity for backhaul transport – which could be better utilized to generate reviews over the WiMAX network. Microwave-Based Wireless Backhaul Solutions The backhaul challenge is all about lowering controlling OPEX and maximizing capacity. Microwave solutions address both these issues, as microwave scales

up to the required ranges and capacities without a proportional increase in OPEX. Microwave also addresses many of the climactic conditions that can disrupt service over copper infrastructure, such as lightening strikes and heavy rainfall. Microwave backhaul offers uptime optimization mechanisms, such as redundant links, number of hops, frequency selection, adaptive modulation and more. Microwave links are easily installed and therefore the deployment is much faster and easier. In addition, the WiMAX operator, who considers himself a competitor of the local telephone company, can decrease its dependency, building its own self built network. The benefits of using microwave equipment are best illustrated in the cellular world. Globally almost 60% of the backhaul in cellular networks uses microwave links. Vodafone, the largest operator, has recently announced its backhauling strategy is moving to microwave self built networks, which will offer significant OPEX savings and more bandwidth.

Source: Vodafone Group Strategy UpdateSource: Vodafone Group Strategy Update

ROI You Can See on the Horizon As the graph below illustrates, in a typical carrier scenario of four to eight leased T1 lines, the microwave-based solution quickly becomes the economically sound choice.

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5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

1 2 3 4 5 6 7 8 9 10 11 12

4T1 8T1 Microwave system

Assumptions: - One T1 (leased line) $400 per month - One microwave-based system: $15,000 with annual maintenance costs of $1,000 - Leased T1 lines are charged against OPEX

With eight leased T1s, the breakeven point for microwave-based backhaul is just five months from deployment and ten months for four leased lines.

The Market Speaks Across the board, the use of microwave-based backhaul solution is on the rise. As the following chart illustrates, demand for microwave equipment, mainly for backhaul solutions, is steadily on the rise and industry research indicates that this trend will continue.

Skylight Research, 2007

Microwave-based wireless backhaul has quickly been recognized as the most cost-effective solution for delivering higher capacity in both the cellular and fixed line markets. For the burgeoning WiMAX market, the benefits of these solutions are even more pronounced.

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500,000

1,000,000

1,500,000

2,000,000

2,500,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Year

Rad

ios

$ 3,317M

$ 6,494M

$ 8,325M

Provigent’s benefits for WiMAX backhaul With increasing demand for high-capacity data and IP services, operators need the most efficient microwave-based wireless backhaul solutions that enable low-cost migration. Provigent’s products, powered by superior technology, go beyond solving the WiMAX backhaul bottleneck by offering technological innovations that have made them the choice of the industry’s top tier operators. Provigent products’ advanced features and performance help carriers win the intense battle for capacity at lower costs and facilitate the critical migration of backhaul traffic to wireless solutions. The underlying technology behind Provigent solutions allows for all types of backhaul and aggregates multiple types of traffic, such as 3G and LTE, in addition to WiMAX. By ensuring “service-aware” transport, which directly maps all traffic over the radio frame, operators can maximize utilization of radio frequency spectrum. Operators become unencumbered by transport constraints and increase the number of active broadband users they support. Maximizes Capacity For WiMAX networks, backhaul solutions enable wireless off-loading of HSPA. This means increased bandwidth and significantly reduced cost per bit per Hz. Provigent’s unique enabling technologies maximize capacity to meet the demands of WiMAX networks. Adaptive Code & Modulation (ACM) Enhanced services are based on the assumption of burst traffic and are subject to variations due to climactic conditions. As such WiMAX networks, and other networks, are built and developed using differential services to provide different classes of services according to characterization of traffic and per user service agreements. WiMAX networks with wireless backhaul will benefit from the ability to deliver an adaptive rate for different classes of service to further enable capacity optimization. Provigent technology automatically monitors the link conditions and provisions link bandwidth accordingly. It uses this unique ACM technique to make on-the-fly rate changes without interrupting the traffic.

Provigent technology takes advantage of IP traffic being able to tolerate variable bit rate, be mapped to different priority levels and provide new scaling classes (similar to class of service) based on link availability. This dramatically increases the link capacity with minimal capital and operating expenses.

Provigent pioneered use of ACM technology in the industry. In WiMAX networks, ACM is once again proving it power – increasing capacity tenfold over the same link. XPIC Provigent’s XPIC technology, an algorithmic innovation based on fundamental physics and math, supports co-channel dual-polarization (CCDP) operation, which allows the simultaneous transmission of two separate data streams on two polarizations of a single channel frequency. This technology doubles net channel capacity by transmitting on orthogonal antenna polarizations and using advanced digital signal processing techniques to cancel interference.

PVG610PVG610

Provigent is the world’s only chip company to unleash and patent XPIC. This technology enables tenfold higher data rates of up to 622 Mbps in a range of over 50 miles.

Reduces Costs The drive to reduce OPEX is felt by all network operators, especially WiMAX operators. This is driven by both the cost and maintenance of the equipment, as well as the spectrum costs. Microwave-based backhaul solutions enable wireless off-loading of HSPA which significantly reduced cost per bit per Hz. Provigent’s technological innovations in microwave-based backhaul equipment ensure maximum cost savings in both these areas.

Novel algorithms The increasing demand for high throughput in the already congested microwave bands make it a requirement for network designers to maximize spectral efficiency by transmitting as many bits per Hz as possible for a given signal to noise ratio (S/N). Provigent-powered wireless backhaul solutions are built on innovative and unique base-band processing, such as a proprietary Low-Density Parity-Check (LDPC) code algorithm that digitally improves system gain and increases link budget. Communication systems employing LDPC forward error correction codes can deliver a S/N ratio or signal to interference ratio (C/I) that is 2 to 4 times better than systems that do not have advanced forward error correction codes. Systems that use Provigent’s LDPC can also reduce transmitter power consumption, which in turn lowers band congestion – significantly lowering total system costs, antenna size and the adverse effects on the environment. Other patented advanced digital processing algorithms and advanced communication methods enable radio systems that can tolerate low cost, high phase noise oscillators. These unique algorithms put more power in the chip, so that streamlined, less costly RF equipment is necessary. In addition, RF units can yield improved performance without any changes in hardware.

System Management

Traffic Processor

PHY

Radio (IF)

Modem

A/D

D/A

RF

DataMultiplexer

and Framer

Overhead

Termination

ManagementInterface

AlarmIndicators

Processor

Power SupplyClock Source

UserData

Interface

Alarm

Wayside

Data/VoiceInterface

OverheadData

Host / Control Bus

NarrowbandModem ODU Control/Monitor

Line InterfaceOptions

Diplex

Filter

Frequency

Source

IF Up-conversion

IF Down-conversion

and AGC

E1/T1

E3/T3

STM1

10/100BT

Spectral efficiency A major component of operational costs is licensing fees, and it is vital to optimize the spectrum allocated. In 2007, Clearwire spent over $96 million on leased spectrum and forecast that spectrum lease expenses will continue to rise. Most wireless solutions available today utilize up to 4-5 bits/Hz. Provigent’s PVG610 system-on-chip solution reaches 13.5 bits/Hz – three times higher spectrum efficiency to significantly reduce OPEX.

PVG610PVG610

Silicon integration Provigent’s highly integrated system on a chip (SoC) technology packages all the functionality required for WiMAX solutions on a single chip to significantly shorten development time. Designed and built from the bottom up for microwave-based backhaul, the technology delivers the all functionality required from a single source. Overall, this silicon integration results in better efficiency, smaller footprint and reduced power consumption that can lower systems costs dramatically. Provigent’s PVG610 integrated system-on-chip provides all necessary terminal building blocks required for indoor or outdoor microwave radio systems used for WiMAX backhaul networks.

Provigent PVG610 block diagram

For equipment vendors, the use of merchant silicon, such as Provigent’s highly integrated solutions, deliver significant overall cost savings and can accelerate time-to-market dramatically versus in-house development. In addition, tower loading can be reduced enabling operators to address the recurring lease payments of tower space.

Conclusion The benefits of wireless backhaul over wireline are fast becoming more evident due to significant savings in OPEX, increased capacity and scalability that supports roll out of high speed networks. These issues have caused bottlenecks in the widespread deployment of emerging WiMAX networks. Provigent solutions empower the design and development of wireless transmission devices for WiMAX networks that bring down system costs significantly. Dozens of system vendors already rely on Provigent solutions and have adopted them in their networks. Today, Provigent technology powers most of the microwave wireless backhaul equipment in the market. Across the globe, all of the major operators are demanding this technology from their vendors, making it the de facto standard and solidifying Provigent’s market-proven solutions as the ideal backhaul choice for WiMAX networks. For more information: Guy Nathanzon, Chief Financial Officer, e-mail: guy.nathanzon@provigent.com Ran Soffer, VP Marketing, e-mail: ran.soffer@provigent.com Provigent Inc. 3333 Bowers Avenue, Santa Clara CA 95054 USA Phone: +1 408 701 2250 Fax: +1 408 715 0188 Web: www.provigent.com

“Ever since Clearwire started deploying pre-WiMax services in 2004, the company has focused on microwave as an effective backhaul transport mechanism. Ninety percent of the company's cell sites use "wireless Ethernet" backhaul links. The entire Clearwire pre-WiMax network currently supports 443,000 users.” John Saw., Clearwire CTO Unstrung News Analysis, May 16, 2008