Guide to Telecom

GLOBAL EQUITY RESEARCH

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P L E A S E S E E I M P O R T A N T D I S C L O S U R E S I N C L U D I N G F O R E I G N A F F I L I A T E D I S C L O S U R E S B E G I N N I N G O N P A G E 8 3

ASIA

Guide to Telecoms Telecoms Made Easy

This report provides a general reference guide for investors wishing to better understand telecom technology and the “alphabet soup” of acronyms used in the industry. We have produced this reference book for both telecom specialists as well as generalist investors who want an overview of the industry.

This guidebook is divided into different sectors including, telecommunications technology, including cellular, mobile handsets, broadband, fiber optics, radio, satellite, internet, fixed line, etc. In each section, we provide key terminology used as well as easy to understand explanations of the technology that supports these services. We also provide information about some of the key industry players for each technology, including some market-share data.

Some of the questions answered in this report include:

What is the difference between the various 3G technologies — WCDMA, CDMA2000, and TD-SCDMA? Why is CDMA better than GSM?

What is an Erlang and how does it help to measure traffic on a wireless network?

What is the difference between a ring tone and a color-ring tone?

What is the difference between a circuit-switched and packet-switched network?

What is spread-spectrum technology and how does it work?

How does DSL work and how does it differ from ADSL and ISDN technology? What is naked DSL?

What is OFDM technology and how is it related to WiFi and WiMAX? What is 802.11a, b, c, d, e, g, etc?

What is frame relay and why is it important?

SECTOR VIEW: 1-POSITIVE

Paul Wuh (LBAL, Hong Kong) 852.2252.6182

[email protected]

Stanley Yang (LBIE, Seoul)

822.317.5168 [email protected]

Sundeep Bihani (LBAL, Hong Kong) 852.2252.6181

[email protected]

Danny Chu, CFA (LBAL, Hong Kong) 852.2252.6209

[email protected]

Sachin Salgaonkar (LBAL, Hong Kong)


Jeff Kvaal

(LBI, New York) 1212.526.2216

[email protected]

Stuart Jeffrey (LBIE, London)


TELECOM SERVICES/EQUIPMENT

Analyst Certification We, Paul Wuh, Stanley Yang,

Sundeep Bihani, Danny Chu and Sachin Salgaonkar, hereby

certify (1) that the views expressed in this research report

accurately reflect our personal views about any or all of the

subject securities or issuers referred to in this report and (2)

that no part of our compensation was, is or will be directly or

indirectly related to the specific recommendations or views

contained in this report.

Erratum This report replaces the version published previously, which had incorrect page numbers in the appendix. We apologize for any inconvenience caused.

August 21, 2007

http://www.lehman.com

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Table of Contents

Cellular Technology.......................................................................................... 3 Mobile phone network terminology ................................................................... 10 Mobile Phone Network Components ................................................................. 14 Handset and Related Terms ............................................................................. 18 Spectrum and Auctioning................................................................................. 25 Wireless Software Terminology......................................................................... 28 Terminology for Other Wireless Technologies...................................................... 29 Broadband and Access Terminologies ............................................................... 37 Broadband and DSL Terminology...................................................................... 39 Cable TV & Video Terminology ........................................................................ 43 Fiber and Optical Component terminology ......................................................... 46 Radio & Satellite Communication Terminology ..................................................... 51 Wireline Enterprise Network Terminology ........................................................... 54 Enterprise Network Component Terminology ....................................................... 62 Carrier Network and Equipment Terminology ...................................................... 66 Internet-related Terminology.............................................................................. 69 Various Telecom Organization ......................................................................... 71 Appendix ..................................................................................................... 75

Sources for Data ......................................................................................... 75 Lehman Brothers Global Telecom Team ........................................................... 76

Index ........................................................................................................... 77

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Cellular Technology

Figure 1: Worldwide wireless subscribers Subscribers 2003A 2004A 2005A 2006A 2007E 2008E 2009E 2010E

Asia Pacific 551 702 887 1,122 1,377 1,619 1,848 2,062Europe 445 582 719 835 911 961 997 1,024South and Central America 124 174 241 303 362 396 425 446North America 172 192 218 251 275 294 309 322Middle East and Africa 90 115 188 272 357 442 530 635World 1,382 1,765 2,253 2,784 3,282 3,710 4,109 4,488Growth Rate 20% 28% 28% 24% 18% 13% 11% 9%

APAC % of total subs 40% 40% 39% 40% 42% 44% 45% 46%Growth Rate 27% 27% 26% 27% 23% 18% 14% 12%

Source: Lehman Brothers Research estimates

Figure 2: Wireless Penetration Penetration 2003A 2004A 2005A 2006A 2007E 2008E 2009E 2010E

Asia Pacific 15.1% 19.2% 24.1% 30.3% 37.1% 43.2% 45.2% 46.7%Europe 51.1% 66.8% 82.3% 95.6% 104.2% 109.7% 111.3% 112.6%South and Central America 22.9% 31.9% 43.8% 54.8% 65.0% 70.8% 70.2% 69.8%North America 53.3% 58.9% 66.5% 75.8% 82.2% 87.1% 89.5% 91.1%Middle East and Africa 9.7% 10.9% 17.7% 25.5% 33.3% 41.1% 42.8% 44.3%World 21.9% 27.7% 34.9% 42.7% 49.7% 55.6% 60.9% 65.7%Source: Lehman Brothers Research estimates

Advanced Mobile Phone Service (AMPS): AMPS is an analog mobile phone system that was used in U.S. from the 1980s to early 2000s. It was usually used in the frequency range 800 MHz and used FDMA technology. It is also known as first generation cellular technology. Total Access Communication System (TACS) is the European equivalent of AMPS. TACS used in Japan was named ‘Japanese Total Access Communication’ (JTAC). Personal Communications Service (PCS): The name given to digital cellular services that operate at 1900-MHz in the United States. PCS systems in use are D-AMPS, GSM and CDMA. Personal Access System (PAS): A limited mobility mobile network operating at 1900 MHz that is deployed in China. It is also known as Xiaolingtong in China. The number of PAS subscribers in China is trending down as GSM and CDMA mobile phone service pricing becomes more affordable. Personal Digital Cellular (PDC): A second-generation digital cellular standard developed in Japan that operates on the 800MHz and 1,500MHz frequency bands. It was developed by DoCoMo and is incompatible with wireless networks outside of Japan.

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This technology is in decline as Japan DoCoMo and Softbank are switching to WCDMA. Integrated Digital Enhanced Network (iDEN): A wireless technology, developed by Motorola, which has both two-way radio and mobile phone functionality. iDEN is more efficient than analog cellular and radio systems. It is based on TDMA and GSM architecture and can operate on 800 MHz, 900 MHz and 1500 MHz. Nextel (now merged with Sprint) started offering iDEN services in US. The combined Sprint-Nextel is transitioning to CDMA and WiMAX-based technologies. Sprint-Nextel plans to support the iDEN technology until 2010. IS (Interim Standard): An ANSI name for different industry protocols.

• IS-54: Digital (Second generation) TDMA technology standard in the U.S. • IS-136: It is also known as Digital AMPS. IS-136 is an upgraded version of

IS 54 that includes features like text messaging and improved compression techniques.

• IS-95: The first CDMA technology. It is also known as CDMA One. Global System for Mobile Communications (GSM): This is currently the most popular digital standard for mobile phones in the world. The GSM service is used by over 2 billion subscribers across more than 212 countries. General Packet Radio Service (GPRS): A 2.5G mobile data service that is available to users of GSM and D-AMPS. GPRS is a packet-switched technology and hence billed per MB of data transferred. GPRS is usually used for accessing the internet and downloading emails. GPRS provides a theoretical data download speed of 60-80 kbps but usually averages about 30 kbps in real-world conditions. Enhanced Data Rates for Global Evolution (EDGE): A packet switched mobile data service for GSM networks that provides theoretical data speed of 384 kbps (but usually averages about 80 to 160 kbps). EDGE is mainly used for data applications like multimedia (such as music downloads) and video services. The provisioning of EDGE and GPRS technology only requires software upgrades for GSM networks—which makes it relatively cost effective. Wideband Code Division Multiple Access (W-CDMA): W-CDMA is a 3G mobile technology. The technology supports a theoretical data transfer speed of up to 2Mbps (but is about 384 kbps in real world examples). Universal Mobile Telephony System (UMTS): Another name for the 3G technology. UMTS combines W-CDMA, TD-CDMA, or TD-SCDMA air interfaces and the GSM family of speech codecs.

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High-Speed Packet Access (HSPA): Protocols that improve data transmission speeds for existing WCDMA networks. The HSPA protocol is still under development with only HSDPA currently being deployed.

• High-speed Downlink Packet Access (HSDPA): A software upgrade for W-CDMA that increases data download speeds. HSDPA improves the downlink packet access speed. The theoretical maximum downlink data transmission speeds using HSDPA are from 3.6 to Mbps14.4 Mbps. Currently, there are 102 networks with HSDPA deployed in 55 countries. HSDPA is relatively new and the number of handsets and PC data cards using the service is still very limited.

• HSUPA (high-speed uplink packet access): A HSPA standard that improves the uplink data speed by up to a theoretical 5.76 Mbit/second. This standard has not been deployed.

• High Speed OFDM Packet Access (HSOPA): This is part of the proposed 3GPP's Long Term Evolution (LTE) upgrade path for UMTS systems. It is also known as Super 3G.

Long Term Evolution (LTE): This is a project within the Third Generation Partnership Project to improve UMTS mobile phone standards. The objectives of LTE are to improve efficiency, lower costs, improve services, make use of new spectrum opportunities, and provide better integration with other mobile phone standards. The proposed LTE upgrade path from UMTS is known as Super 3G or High Speed OFDM Packet Access (HSOPA). Code Division Multiple Access (CDMA): This 2G technology was pioneered by Qualcomm. CDMA usually operates at 800 MHz and 1900 MHz, therefore 2100 MHz. CDMA and GSM networks are not compatible. CDMA is a method of multiple access that divides up a radio channel by using different pseudo-random code sequences (unique code to each data) for each user. CDMA is a form of "spread-spectrum" technology, where each conversation is spread and transmitted over multiple frequencies. CDMA is considered to be a better technology than GSM:

• CDMA has superior network capacity since it is more efficient in using radio spectrum.

• CDMA requires fewer base stations compared to GSM to cover the same area.

• CDMA handsets consume less power compared to GSM handsets. However, GSM continues to be more popular than CDMA because:

• GSM offers a wider variety of handsets. Subscribers are also able to switch to new phones more easily because GSM phones have SIM cards. In general, CDMA handsets cost more than GSM phones with similar features (mainly because of a royalty paid to Qualcomm).

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• Since there are many more GSM networks in the world, GSM subscribers have more opportunities to roam when traveling.

• GSM network equipment is also more inexpensive compared to CDMA, given the economy of scale and number of vendors providing GSM equipment.

Figure 3: Technology Progression

Source: Lehman Brothers Research

CDMA2000- 1x RTT: This is an upgrade for CDMA that has more traffic channels and provides QoS control. CDMA 2000 1x RTT (1 times Radio Transmission Technology) provides a theoretical peak data download speed of 144 kbps (usually at 50 to 70 kpbs in actual usage). CDMA2000- EV-DO: A 3G standard for CDMA technology. It stands for Evolution-Data Optimized or Evolution-Data only. EV-DO provides data speeds of up to 2.4 Mbit/s with Rev. 0 and up to 3.1 Mbit/s with Revision-A. This CDMA upgrade to 3G is much more cost efficient than the upgrade to WCDMA for a GSM carrier. EV-DO Revision-A: A modified version of the EV-DO standard that increases peak data downlink speed up to a theoretical 3.1 Mbps and reduces latency. EV-DO Revision-A is best suited for IP-based services like voice over Internet Protocol (VoIP) and video telephony. This technology has been commercially deployed by KDDI in Japan, SK Telecom, KT Freetel and LG Telecom in Korea, and Sprint and Verizon Wireless in the United States. EV-DO Revision B: An evolution of the EV-DO Rev A standard that provides a theoretical peak downlink speed of 14.7 Mbit/second using better modulation schemes. However,

GSM(2G)

GPRS(2.5G)

EDGE(2.75G)

W-CDMA(3G)

HSDPA(3.5G)

TDMA(2G)

PDC(2G)

CDMA One(2G)

CDMA2000 EVDO (3G)

CDMA2000 1x RTT (2.5G)

2.5G 3G2G

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Rev B will require more spectrum than earlier technology upgrades. EV-DO Rev-B are expected to be commercially available in 2008. EV-DO Revision C: This next-generation CDMA2000 upgrade uses OFDMA technology and is expected to be commercially available by mid-2009. It is also known as Ultra Mobile Broadband (UMB). Time Division-Synchronous Code Division Multiple Access (TD-SCDMA): A 3G mobile telecommunications standard that is approved by the ITU and is currently being deployed in China. There will be ten cities with significant TD-SCDMA test networks in China by the end of 2007 (see Figure 8). The "S" in TD-SCDMA stands for "synchronous,” which means that uplink signals are synchronized at the base station receiver which should reduce interference between users.

Figure 4: China is Currently Conducting TD-SCDMA Trials in Select Cities


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Figure 5: The Food-chain for the TD-SCDMA Industry

Source: Company reports, Lehman Brothers Research

Short Messaging Service (SMS): SMS is a text messaging service that is available through a mobile phone. A SMS can have up to 160 characters. Multimedia Messaging Service (MMS): MMS is a messaging service for 2.5G and 3G mobile networks that enable the sending of multimedia attachments such images, audio, and video clips. A MMS gateway, relay and server are the main equipment needed to provide MMS service. Mobile handsets also need to be enabled to receive MMS.

Figure 6: Equipment Needed for MMS Functionality

Source: TEC, Lehman Brothers Research

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i-mode: i-mode is a wireless Internet service first introduced by NTT DoCoMo in Japan in February 1999. It provides data transmission speeds only up to 28.8 kbps. Unlike the WAP standard (that uses WML), i-mode uses format C-HTML, based on HTML and DoCoMo proprietary protocols ALP (HTTP) and TLP (TCP, UDP).

Figure 7: i-mode Network’s Access to ISP

Source: ITU, Lehman Brothers Research

Freedom of Mobile Multimedia Access (FOMA): FOMA is the name for the 3G mobile service offered by NTT DoCoMo in Japan. FOMA was the world’s first 3G service and was launched in October 2001. Fourth Generation (4G): 4G systems aim to provide an end-to-end IP solution where voice, data and streamed multimedia can be served to users on an "Anytime, Anywhere" basis at higher data rates than previous generation wireless networks. No formal definitions for 4G have been established, as the technology is still evolving. The technology is also expected to provide end-to-end quality of service and higher security. Assignment of spectrum for 4G is not clear at this time. International Mobile Telephony Advanced (IMT-A): ITU's official term for 4G mobile telephony. IMT-A as per ITU will provide throughout of up to 100 Mbps for a mobile unit and 1 Gbps for a fixed unit. International Mobile Telecommunications-2000 (IMT-2000): The global standard for third generation (3G) wireless communications as defined by the International Telecommunication Union. WCDMA and UMTS is the third generation evolution of GSM, while IMT 2000 means 3G evolution of second generation GSM and CDMA technologies.

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Mobile phone network terminology

Average Revenue per Unit (ARPU): The average revenue per connection per month. It is calculated by dividing the total service revenue per month by the average number of subscribers. ARPUs are often used to determine how valuable a subscriber is to the operator. ARPUs often decline as penetration rates increase. Average Selling Price (ASP): The average price for a particular good. Often used when discussing the price of a mobile phone. Since many mobile phone operators subsidize handsets for their customers, lower ASPs are better for the carriers. On the other hand, when discussing ASPs for mobile phone manufacturers, declining ASPs could have a negative impact on the company’s revenue growth. Average Wholesale Price (AWP): The sum of the factory price and shipment costs to the main distributor. Bundling: This is a term that is used when a service provider can provide two or more services to its customers. The service provider often offers the bundled product at a discount and might even have cross subsidies. Usually, a carrier uses bundling to reduce churn rates and to improve ARPUs. Calling Party Pays (CPP): The mobile subscriber does not pay for incoming calls. The person who calls pays for the call. Churn Rate: The rate at which subscribers disconnect from a network. This is usually expressed as either monthly or yearly churn rates. Generally, this rate is much higher for prepaid subscribers and is often “churn” imposed by the carrier when a prepaid customer does not “top up” his prepaid account after a certain period of time. Cost per Gross Add (CPGA): The cost of sales, marketing, advertising and handset subsidies divided by the gross number of subscribers added during a period. CPGA is often much higher for operators that offer handset subsidies in order to attract subscribers. CPGA is often quite low for operators with a large prepaid subscriber base that generally do not offer handset subsidies. Erlang: A unit to measure telecommunications traffic. An Erlang describes the total traffic volume during one hour. For example, if a group of users make 20 calls in one hour, and each call had average call duration of 5 minutes, then the number of Erlangs is calculated as shown below:

Minutes of traffic in the hour = number of calls x duration Minutes of traffic in the hour = 20 x 5 = 100 Hours of traffic in the hour = 100 / 60 = 1.7 Traffic figure = 1.7 Erlangs

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Facilities-based Operators: Network telecom operators that have their own network and offer services on it. F2M Substitution (fixed to mobile substitution): When a customer gives up his fixed-line telecom connection and substitutes it with a mobile connection, this is called as F2M substitution. Interconnection: Interconnection means connecting calls between two carriers or the connection between a carrier and a consumer. Interconnection Rate: The amount that carriers receive and pay to connect a call between two networks. Interconnection rates are usually different for calls made between two fixed-line networks, fixed-to-mobile calls and mobile-to-mobile calls. The highest rates are generally paid-for calls made between mobile and fixed-line networks. Minutes of Use (MOUs): A wireless user's total connection time—often expressed as MOU for a given month. Mobile Network Operator (MNO): A wireless carrier that owns and operates its own mobile network. Mobile Virtual Network Operator (MVNO): A company that does not own mobile spectrum but sells mobile services under its own brand name using the network of a licensed mobile operator. Net New Connections (a.k.a. Net adds): Gross new subscriber connections minus the number of disconnections from a network during a given period—also referred to as the “net adds” of a carrier. On Net (on network calls): Calls that originate and terminate on the same network. Off Net (off network calls): Calls that originate on the network of one carrier and terminate on another network. Refilling/Top-up: The process recharging a prepaid account with more money (value for usage) is called as refilling or a top-up. Mobile Number Portability (MNP): MNP allows a mobile telephone subscriber to retain his/her telephone numbers when changing from one network operator to another. Asia, Hong Kong, Korea and Singapore have already implemented MNP. Pakistan implemented MNP in March 2007.

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Termination Rate: The rate that one telecom carrier charges another carrier to complete (terminate) a call. Penetration Rate: The number of subscribers/connections divided by the population. For example, a mobile penetration rate of 23% indicates there are 23 subscribers in the market for every 100 people. Subscriber Acquisition Cost (SAC): The cost that an operator incurs to acquire a new subscriber. The typical costs come from sales and marketing, and handset subsidies. Also refer to cost per gross addition (CPGA). Spectrum/bandwidth: Spectrum or bandwidth is the width of the band of frequencies that an electronic signal uses on a given transmission medium. It is expressed in terms of the difference between the highest frequency signal component and the lowest frequency signal component. Handoff: A handoff is when a call is transferred from one base station to another (as user moves from one cell to another) without disconnecting the call. It is also known as Handover. There are two types of Handoffs-

• Hard Handoff: A handoff in which connection to the source base station is broken before the connection to the target base station is made. It is also called as “break-before-make” handover.

• Soft Handoff: A handoff in which the channel to the source cell is retained as the connection to the target cell is established. This handoff is also called “make-before-break.”

Preferential Roaming: In regular roaming, a mobile phone usually picks up a network that has the strongest signal. In preferential roaming, the SIM is programmed to choose a pre-determined network rather than the network with the strongest signal. Operators with a global footprint use this means to retain more calls on their own network. Cell Splitting: A means of creating more capacity on a wireless network by having more than one cell site cover a particular area. Each cell site covers a smaller area, with lower power MHz and is able to reuse frequencies more times over a larger geographic coverage area, such as a city or MTA. Frequency Reuse: The process of using the same frequencies repeatedly across a cellular system. Since each cell is designed to use radio frequencies only within its boundaries, the same frequencies can be reused in other cells not far away with little potential for interference. This process helps mobile network operators handle large numbers of calls with a limited number of channels.

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Push to-Talk (PTT): It is a technique of communicating on a half-duplex network by using a pushbutton to switch from voice reception mode to transmit mode. It is also known as “Press to Transmit.” Nextel has been very successful with this service in the United States. Value-added Service (VAS): An additional service that is offered by a telecom network apart from the core voice service. The name indicates that it adds services to the standard service offering. For example, SMS and MMS are considered value-added services for mobile phone operators, as are ring-tone downloads, voice mail service, etc.

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Mobile Phone Network Components

Figure 8: Key Equipment Needed for a 2G Wireless Network


Smart Antenna: This type of antenna uses algorithms to identify the direction of signal and to locate the signal beam from a mobile phone. They are usually used in more recent technologies like W-CDMA, TD-SCDMA and WiMAX. They are also known as adaptive antennas.

Cell Sites: An area where antenna is placed to provide wireless services to mobile phone users in that particular area (cell).

Picocell: The short-range area (approx. 100- 250-meter range) that is covered by a cell site. A picocell is usually used to boost the signal in a small area, usually where there is high density of users—such as within a skyscraper in a central business district.

Femtocells: These are very small mobile phone base stations (even smaller than Picocells). They are more inexpensive and easily scaleable—which help operators to increase coverage while reducing capex and opex.

Backhaul: Transportation of traffic to a centralized location. This is what is used to carry voice or data services from a mobile network base station back to the switch or exchange, to ultimately connect a call or to transfer data to another location. The most commonly used technologies for backhaul are:

• E1/T1 or T3 carriers • Fiber • Satellite (in microwave frequency) • LMDS, Wimax (in microwave frequency) • DSL (mostly ADSL)

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Transceiver (TRX): Equipment that transmits and receives signals to and from mobile phones. Transceivers are part of the base transceiver station system. Base Transceiver Station (BTS): A BTS contains the equipment for transmitting and receiving signals as well as the equipment for securing transmissions with the base station controller. A BTS handles traffic from several transceivers (TRXs). Base Station Controller (BSC): Equipment that manages a network of base stations and provides the interface between the cell sites and the mobile switching center (MSC). Base Station Subsystem (BSS): The part of a mobile network that handles the traffic and signaling between mobile phones and network switching sub-systems. Billing and Operational Support System (BOSS): Software systems that help manage the cellular network. Operations Support Systems (OSS): Software programs that manage the network by provisioning services, configuring network components, and managing faults. Business Support System (BSS): Software programs that focus on customer support. Major functions include managing order data, billing, and offering value-added services. Visitor Location Register (VLR): A database that stores information about roaming customers that are currently roaming a network. Home Location Register (HLR): A database that contains information of all the mobile users (not roaming) that are in a network.

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Figure 9: Key Equipment Needed for a 3G Wireless Network


SMS Gateway: A system that helps deliver and receive SMS messages to or from mobile devices. Messages are temporarily stored in the SMS center if they cannot be sent immediately. Active Telecom Infrastructure: Includes electronic infrastructure such as base tower stations, microwave radio equipment, switches, antennas, and transceivers for signal processing and transmission. Passive Telecom Infrastructure: Includes non-electronic infrastructure equipment. Major passive equipment includes towers, shelters, air-conditioning equipment, diesel electric generators, batteries, and the technical premises. We estimate that passive infrastructure accounts for approximately 55-60% of a network rollout cost. Telecom Infrastructure Sharing: This is mainly used to lower capital expenditures between one or more carriers. The various types of infrastructure sharing include:

• Passive Infrastructure Sharing: The sharing of passive equipment—usually means towers, etc. This is particularly helpful in a market with many mobile carriers. Often the towers of a mobile operator are sold to an independent tower company.

• Active Infrastructure Sharing: Sharing which includes electronic equipment. • Spectrum-sharing: One operator leases part of its spectrum to another

operator. This is also known as spectrum trading. E.g. MVNOs in Europe.

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Figure 10: Worldwide Wireless Equipment Market Size and Share

Alcatel-Lucent 47% Ericsson 40% Ericsson 39%Nortel 27% Nokia-Siemens 31% Nokia-Siemens 30%Motorola 18% Alcatel-Lucent 11% NEC 13%Samsung 4% Nortel 6% Fujitsu/ALU 8%Huawei 2% Motorola 6%

Huawei 4%$ 7.9 billion$ 25.6 billion

$ 6.1 billion

CDMA 1x Infra GSM/GPRS EDGE Infra W-CDMA Infra


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Handset and Related Terms

Figure 11: Handset Sales by region 2001A 2002A 2003A 2004A 2005A 2006A 2007E 2008E 2009E

APAC 136 146 181 210 249 348 423 493 546Europe 143 138 167 210 240 275 293 304 312Latin America 30 29 38 73 100 117 127 133 139North America 89 95 108 135 148 163 175 185 195MEA 15 20 26 47 77 88 101 116 133Total 413 431 520 674 814 991 1118 1230 1325

Source: Gartner, Lehman Brothers estimates

Figure 12: Handset Sales by Technology

2001A 2002A 2003A 2004A 2005A 2006A 2007E 2008E 2009E

GSM/GPRS/EDGE 250 263 342 484 603 720 735 658 550WCDMA 0 0 3 18 44 88 168 258 338CDMA(EVDORevA,IS,2000) 69 81 100 122 135 160 168 179 187TDMA 46 42 27 11 2 0 0 0 0PDC 34 32 37 24 14 5 1 0 0Other digital 8 12 11 15 16 18 45 134 250Analog 7 1 1 0 0 0 0 0 0Total 413 431 520 674 814 991 1118 1230 1325Source: Gartner, Lehman Brothers estimates

Dual-mode Phone/handsets: Denotes mobile phones that work on two different technologies, like GSM and WCDMA, or GSM and CDMA. Most 3G mobile phones are both dual-mode (WCDMA and GSM) and tri-band (operating on three frequency bands). This enables the mobile phone to roam onto 2G networks when outside the 3G coverage area. Dual-band Mobile Phones: Denotes mobile phones that work on two sets of frequencies. For example, a GSM phone that works on both 900MHz and 1,800MHz. Tri-band Mobile Phones: Denotes mobile phones that work on three different sets of frequencies. For example, a GSM phone that works on 900MHz, 1,800MHz and 1,900 MHz spectrums. Dual-band Network: A mobile phone network that operates in two different frequency bands. Subscriber Identity Module (SIM) Card: A removable smart card for mobile phones that stores subscriber/phone number information. A subscriber can change handsets by removing the SIM card from one phone and inserting it into another mobile phone and retain the same phone number and other information stored on the phone. All GSM mobile phones have SIM cards.

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Removable User Identity Module (R-UIM) or a CDMA Subscriber Identity Module (CSIM): A SIM card for CDMA handsets. This allows a CDMA subscriber to switch mobile phones, use the same number, and retain other stored data (such as phone numbers). Most CDMA handsets sold globally do not have this feature. However, China Unicom requires that all its CDMA handsets sold in China have an R-UIM. International Mobile Equipment Identifier (IMEI): A unique number assigned to a GSM/WCDMA phone. This number is found below the battery in a phone or can be obtained by dialing *#06# into a mobile phone. If the phone is stolen then access to the network is stopped by telling the operator to block the phone using its IMEI number. International Mobile Subscriber Identity (IMSI): A unique number up to 15 digits that is assigned to a GSM SIM card. The first three digits are the Country Code, and the following digits are the Mobile Network Code. The IMSI number is sent by the mobile phone to the network and is used to acquire details for the mobile phone in its Home Location Register (HLR) FeliCa: A brand name for the contactless IC card technology developed by Sony. The card includes an integrated non-volatile memory and wireless communication chip which facilitates data exchange when held adjacent to compatible reader/writers. The main applications include e-money, prepaid cards for mass public transit systems, employee ID cards, student ID cards and card-keys. Contactless Card: A chip that uses radio frequencies to transmit data and does not need any physical contact. It works on Near-Field Communication (NFC)—an example being Sony's FeLiCa chip-card technology. Blackberry: The Blackberry is a mobile device that supports corporate email (it uses push e-mail technology) apart from normal telephone features. It was developed by the Canadian company Research In Motion (RIM).

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Figure 13: A Blackberry Network

Source: RIMM, Lehman Brothers Research

Push Mail: An e-mail system that transfers new incoming email to a mail server then to a mobile phone. This provides "always on” email technology. Traditional e-mail is “pull based,” requiring users to logon to request for emails. Smartphones: A mobile phone with personal computer features like email, a personal organizer, and multi-media functionality (Nokia 5500, 6680; Sony Ericsson W950). Personal Digital Assistant (PDA): A handheld computer designed to provide computing capabilities and act as personal organizers. PDAs are also known as pocket computers or palmtop computers. Like a computer, a PDA has a calendar, address book features and offers internet access—examples include Nokia E61 and T-Mobile MDA.

Figure 14: Worldwide handset market size and shares

Nokia 36% Nokia 40% LG 24% RIMM 65%Sony-Ericsson 12% Motorola 21% MOT 20% PALM 25%Samsung 10% Samsung 11% Samsung 18%Sharp 9% Sony Ericsson 8% Nokia 11%MOT 8% Benq/Siemens 4%

QWERTY Phones

$ 4.0 billion

$ 7.9 billion$ 79 billion$ 25.8 billion

CDMA 1-x handsetsW-CDMA handsets GSM-GPRS handsets


Symbian OS: A proprietary operating system for mobile devices that was developed by Symbian Ltd. Symbian is owned by Nokia (47.9%), Ericsson (15.6%), Sony Ericsson (13.1%), Panasonic (10.5%), Siemens AG (8.4%) and Samsung (4.5%). The software provides customizable interfaces, along with Internet and PC connectivity software.

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August 21, 2007 21

EPOC 32: An operating system for mobile devices that was developed by Psion and is now supported by Symbian. Palm OS: An operating system for personal digital assistants (PDAs) developed by Palm Computing. Original Equipment Manufacturer (OEM): A company that assembles a particular product for a vendor who then sells the product under their own brand name. For the mobile phone industry, examples include Compal, Quanta, etc. Original Design Manufacturer (ODM): A company that designs, develops and manufactures a product. These devices are sold to end users under someone else’s brand. Some examples of ODM companies include Taiwan-based BenQ, HTC and GVC. Mobile TV: The function of viewing video content on a mobile phone. The content is usually streamed or broadcast over a network and is "real time". Mobile TV services, similar to conventional TV services, depend on a multicast architecture—broadcasting the same content to multiple subscribers through a simultaneous transmission. Mobile TV technologies include DVB-H, ISDB-T, FLO, DMB (both S-DMB, a satellite-based technology, and T-DMB, a terrestrial-based technology), and TDtv. Lehman Brothers’ global telecom equipment team estimates that the service provider opportunity may grow from less than $10 million in 2006 to $2.2 billion by 2009 in North America and Europe. From a handset perspective, we estimate that units with mobile TV functionality will grow from less than 100,000 units in 2006 to nearly 50 million units by 2009 in North America and Europe. Digital Video Broadcasting Handheld (DVB-H): The DVB-H technical specification is an open, nonproprietary standard developed as a derivative of the DVB-T (Digital Video Broadcasting for Terrestrial Television) standard. The standard is designed to lower battery power consumption and improve video quality in more difficult reception environments. Because the DVB-H is compatible with DVB-T networks, this standard could be adopted in regions that already have the DVB-T standard in place—such as Western Europe.

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Figure 15: Mobile TV Standards


Integrated Services Digital Broadcasting (ISDB-T): This technology was developed in Japan to provide audio, video, and multimedia services for the terrestrial television network. This broadcast standard also provides some modes that are suitable for reception by handheld mobile units. ISDB-T was part of the Japanese government’s original digital television strategy, the government has allocated one thirteenth of the digital television transmission network for mobile broadcasting to portable and handheld devices. This standard is limited to Japan. Forward Link Only (FLO): This technology was designed by QUALCOMM to provide TV services over dedicated mobile TV networks. FLO allows mobile operators to provide live video channels, in addition to 50–100 national and local channels, which includes up to 15 live channels, clip casts (short-format video cached on a mobile device), and audio channels. Owned by Qualcomm, MediaFLO USA’s business model is to program, procure, aggregate, and broadcast video/TV and other audio- and data-related content to various wireless devices for the US market. MediaFLO has announced plans to invest $800 million over the next three to four years to develop, launch, and support the network. Verizon Wireless is one of the first mobile operators to sign up for the MediaFLO service in the 700 MHz frequency band. Digital Multimedia Broadcast (DMB): A digital transmission system developed in Korea. The technology was derived from the DAB standard for radio broadcasting rolled out in Canada, most European Union countries, and parts of Asia. DMB provides CD-quality audio streaming and can support additional data services such as text and pictures. It is possible to roll out DMB using current DAB broadcast stations and frequencies. DMB has some technical similarities with DVB-H. There are a variety of DMB technologies, including S-DMB (utilizing a satellite network) and T-DMB (utilizing a terrestrial network). South Korea has been the primary supporter of the technology. SK Telecom began offering commercial S-DMB services in May 2005, while T-DMB was launched in December 2005.

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August 21, 2007 23

TDtv: Provided by IP Wireless, TDtv operates in the unpaired 3G spectrum bands that are available in Europe and Asia at 1900 MHz and 2010 MHz. The system is designed to allow W-CDMA operators to use existing spectrum to offer mobile TV and multimedia services. TDtv base stations can be co-sited on existing W-CDMA sites and integrates at the core network level in order to allow for integration of billing and other back-office functionalities. Digital Video Broadcasting Terrestrial (DVB-T): This technology is used in Europe to transmit digital television. Ringtones: The audio tone heard for an incoming call. Downloading ringtones is a form of value-added service. Ringtones can be classified as -

• Monophonic: A ringtone that has ability to only sound one note or voice, at a time.

• Polyphonic: A ringtone that makes use of polyphony (produces multiple notes at a time).

• Master tone or True tones: Actual songs or tones. Ring Back Tones: An audio tone or music that a caller hears after dialing and prior to the call being answered at the receiving end. The service is also known as color ring tone. A subscriber will pay to have different songs/melodies played while his caller waits for the phone to be answered.

Figure 16: Ringtones

Source: Frost and Sullivan

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24 August 21, 2007

Figure 17: Mobile Application and Billing Market Share and Size

Comverse Tech 24% IBM 25% Andrew 34%RIMM 11% Accenture 24% Powerwave 12%Alcatel-Lucent 10% Telcordia 12% Others 54%Ericsson 10%Openwave 8%

$ 6.5 billion

$ 5 billion

Mobile System Comp.Mobile Applications Telecom/OSS/Bill s-w

$ 7.1 billion


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August 21, 2007 25

Spectrum and Auctioning

Frequency Allocation for Cellular Technology Frequency allocation varies from country to country, and in a country, from state to state. Usually the entire spectrum in a particular band is not available as some frequencies may be used for different purposes. Shown below is the example of frequency allocation in the U.K. for cellular technology. UMTS specifies the bands 1900-2025 MHz and 2110-2200 MHz for 3G transmission. The satellite service uses the bands 1980-2010 MHz (uplink), and 2170-2200 MHz (downlink). This leaves the 1900-1980 MHz, 2010-2025 MHz, and 2110-2170 MHz bands for terrestrial UMTS.

Figure 18: Frequency Allocation in the U.K.

Source: Three-g.net, Lehman Brothers

UMTS FDD is designed to operate in paired frequency bands, with uplink in the 1920-1980 MHz band, and downlink in the 2110-2170 MHz band. UMTS TDD is left with the unpaired frequency bands 1900-1920 MHz, and 2010-2025 MHz. In most countries, a paired spectrum is given for each operator- one for uplink and one for downlink. The frequencies of two adjacent operators on uplink or downlink are separated by a small guard band to avoid interference.

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Figure 19: Frequency Allocation Between Different Carriers

Source: Source: Three-g.net, Lehman Brothers

3G License Process The 3G licensing process is usually classified as either an Auction or Beauty contest (also known as comparative selection). Auctions The types of auctions are

• Sealed-bid Auction or Dutch Auction: In a first-price sealed-bid auction every bidder makes a single “best-and-final” bid, and the winner pays the price he bid.

• Ascending auction or English Auction: The price starts low and competing

bidders raise the price until nobody is prepared to bid any higher, and the final bidder wins the prize at the final price he bid.

• Anglo-Dutch auction: Hybrid of the ascending and sealed-bid auction.

Advantages of an Auction

• Process is open, non-discriminatory and transparent and hence provides fair opportunity for new players.

• Spectrum goes to the operator that values it the most. Disadvantages of an Auction

• They are not appropriate if the number of bidders is less than the number of licenses.

• It requires a lot of planning. Beauty Contest In this process, licenses are awarded on the criteria set out in the invitation bid. Criteria might include, for example, speed of deployment, project viability, spectrum efficiency and the ability to stimulate competition. Advantages of a Beauty Contest

• It reduces the risk of a license going to an inexperienced operator.

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August 21, 2007 27

Disadvantages of a Beauty Contest

• Process is not transparent to a large extent. • Setting selection criteria and evaluating against them can both be difficult

processes. • A beauty contest tends to favor established companies over inexperienced

ones.

Figure 20: Spectrum in Asia Pacific Country Spectrum

Australia GSM-900, CDMA-800, TDMA-800, 3G- 850/2100

Bangladesh GSM-900, CDMA-800, TDMA-800, AMPS-800, 3G-TBD

Bhutan GSM-900, 3G-TBD

Brunei GSM-900, 3G-TBD

Cambodia GSM-900/1800, AMPS-800, 3G-TBD

China GSM-900/1800/1900, CDMA-800, 3G-TBD

Hong Kong GSM-900/1800, CDMA-800, TDMA-800, 3G-2100

India GSM-900/1800, CDMA-800, 3G-TBD

Indonesia GSM-900/1800, AMPS-800, CDMA-800, 3G-2100

Japan CDMA-800, PDC-800, AMPS-800, 3G-1700/2100

Korea GSM-900, CDMA-800/1700, 3G-2100

Laos GSM-900/1800, 3G-TBD

Macau GSM-900/1800, 3G-TBD

Malaysia GSM-900/1800, TDMA-800, TACS-800, NMT-450, 3G-2100

Maldives GSM-900, 3G-2100

Myanmar GSM-900, CDMA-800, TDMA-800, 3G-TBD

Nepal GSM-900

New Zealand GSM-900, CDMA-800, TDMA-800, AMPS-800, 3G 2100

Pakistan GSM-900, TDMA-800, AMPS-800, 3G-TBD

Philippines GSM-900/1800, AMPS-800, iDEN-800, 3G-2100

Singapore GSM-900/1800, 3G-2100

Sri Lanka GSM-900/1800, TDMA-800, TACS-800, AMPS-800, 3G-TBD

Taiwan GSM-900/1800, CDMA-800, 3G-2100

Thailand GSM-900/1800/1900, CDMA-800, AMPS-800, 3G-TBD

Vietnam GSM-900, CDMA-800, TDMA-800, AMPS-800, 3G-TBD

Source: CTIA, GSMA, Lehman Brothers Research

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Wireless Software Terminology

Wireless Application Protocol (WAP): An application that helps access the Internet from a mobile phone or PDA. It is an open-standard international protocol. Wireless Mark-up Language (WML): A language that manages the content format for mobile devices that implement Wireless Application Protocol (WAP) specifications. WML takes into account the limitations of mobile phones, such as more limited bandwidth and the small screen size. E-cash (electronic cash): Currency or value uploaded onto smart cards or handheld devices to enable transactions. E-wallet (electronic wallet): A program that stores and controls online shopping information, like logins, passwords, credit card details, digital signatures etc. M-commerce (mobile commerce): The ability to conduct e-commerce functionality over a mobile device. M-payment (mobile payment): Payments that are made through mobile phones or other wireless devices like a smart phone or PDA. Mobile Middleware: Software that helps to connect mobile and enterprise applications over wireless networks. More specifically, mobile middleware is a software layer that helps programs and databases on different networks work together. Mobile portal: A mobile Internet gateway that allows mobile phones to connect remotely with an enterprise intranet mainly via a Web browser interface. Mobile Java: Java software uploaded onto a mobile phone. Java-enabled handsets provide various applications for mobile phones that increase software content and reduce the risk of software viruses. J2ME (Java 2 Micro Edition): A version of Java that is used in mobile phones, PDAs, etc.

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Terminology for Other Wireless Technologies

802.11 (WiFi): An IEEE 802.11 standard for wireless local area networks (WLAN). This technology is more commonly used in laptops. Wi-Fi means Wireless fidelity. The 802.11 technology standard includes: 802.11a: This technology operates at the 5GHz frequency band and can offer speed up to 54 Mbps for a range up to 75 feet. 802.11a is incompatible with both 802.11b and 802.11g as it operates at a different frequency band. 802.11b: This technology operates on the 2.4GHz frequency band and can transmit data at speeds of up to 11Mbps within a range of up to 100-150 feet. Obstacles like walls can affect the signal strength and transmission speeds. Hybrid (802.11a + g): This wireless LAN technology operates in 2.4GHz and 5 GHz frequency bands simultaneously. Equipment vendors like Linksys offer dual-band products, in which routers and adapters are compatible with both standards. 802.11g: This technology is a higher version of 802.11b. 802.11g operates in the 2.4 GHz frequency band, but offers five times the data transmission speed of 802.11b (up to 54Mbps). The technology is compatible with 802.11b. 802.11n: This technology is the next generation high-speed wireless standard that can deliver data transmission speeds up to 540 Mbps. The technology operates in the 2.4 GHz frequency band and is backward compatible with the “a”, “b” and “g” standards. This technology will be used for applications like streaming high definition video, voice, and music. Estimated release date is September 2008.

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Figure 21: Comparison of Various 802.11 Standards

Source: Linksys, Lehman Brothers Research

Hot Spot: An area that is covered with a wireless LAN service. This is often a public place (such as an airport lounge, in a hotel lobby, in a coffee shop, etc.) or a business center. It is also known as a “WiFi Hotspot.” Worldwide Interoperability for Microwave Access (WiMAX): WiMAX is a wireless technology that provides wireless data over long distances, in a variety of different ways, from point-to-point links to full mobile cellular-type access. WiMAX is a further evolution of wireless connectivity that will extend wireless access beyond current personal area networks (PANs), such as Bluetooth, and local area networks (LANs), such as WiFi technology. There are two main categories of WiMAX: fixed and mobile WiMAX. Fixed WiMAX applications are point-to-multi-point and enable broadband access to homes and businesses, whereas mobile WiMAX offer full mobility (like a cellular network) at broadband speeds.

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August 21, 2007 31

Fixed WiMAX (802.16-2004): This technology also known as 802.16d. This version of WiMAX replaces the 802.16a specifications. Mobile WiMAX (802.16e-2005): This technology is also known as 16e and is expected to provide mobile data and voice applications. Sprint has chosen this technology for its 4G deployment in the US. Although the technology is still evolving, we expect some limited deployment during 2008.

Figure 22: WiMAX Network infrastructure

Source: WiMAX forum, Lehman Brothers Research

Key Strengths of the WiMAX Technology: Superior Technology: WiMAX is a native IP technology and uses orthogonal frequency-division multiplexing (OFDM). One of the leading benefits of OFDM is that it alleviates signal degradation between points that are not connected by line of sight. This was a significant hurdle for prior generations of broadband wireless technology. Lower-cost Technology: WiMAX is a data-only network that will not support circuit-switched voice services. Providing circuit-switched voice is a significant cost burden for both the CDMA2000 and W-CDMA technologies. We believe that a data-only network like WiMAX will be up to 10%–15% less expensive to construct and maintain than networks using both voice and data.

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Higher Data Rates: WiMAX can deliver higher data rates at lower prices than existing cellular or broadband wireless networks. The improved efficiencies generally derive from the more sophisticated air-interface standard, a streamlined data-only system, and improved standardization. Key Issues Hindering the Adoption of WiMAX: Standardization Issues: There are currently several wireless broadband solutions in the market such as WiBro in Korea, SmartBro in Philippines, as well as other proprietary wireless broadband technologies. Although these technologies are similar, they differ in terms of propagation characteristics and are not compatible. Economies of Scale Could Prove to be Difficult for Equipment Vendors: Although we believe that there is a viable business model for WiMAX (especially for fixed wireless broadband), WiMAX equipment vendors might find it difficult to take advantage of economy of scales in the near term, given the current limited deployment. In fact, IDC estimates that WiMAX equipment will only represent about 7% of total wireless equipment sold globally in 2010. Economy of scale also becomes an issue given the various radio frequencies where WiMAX can be deployed---implying different propagation characteristics, line of sight issues, etc. Frequency Bands Allocated for WiMAX Differ by Country: The radio frequency allocations for WiMAX vary by region. Although equipment vendors will provide equipment for the various WiMAX frequencies, the economics of the network could vary depending on the frequency band. The higher frequency bands (5.8 GHz) would most likely require line-of-sight equipment. On the other hand, 2.3 GHz to 2.5 GHz would be most optimal for non-line of sight products that require more robust in-building coverage. Wireless Broadband (WiBro): A mobile wireless broadband technology developed and deployed in South Korea. WiBro is now accepted by IEEE as part of the 802.16-2005 mobile WiMAX standard. KT and SKT launched WiBro services at the end of June 2006. So far, WiBro has very weak uptake due limited network coverage, a lack of differentiated features relative to 3.5G wireless services, and a limited selection of handsets/products for consumers. Smart Bro: Smart in the Philippines is offering a wireless broadband service named Smart Bro. Smart uses Canopy, a proprietary technology developed by Motorola. SmartBro operates on unlicensed 5.6 GHz spectrum and has gained traction after being launched in April 2006. Smart Bro targets areas in the country where DSL service is not available. So far, Smart Bro already has about 170k subscribers on the network. Around 40% of the Smart Bro subscribers are in Manila and the remaining 60% are in regions throughout the rest of the Philippines.

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Figure 23: Comparisons of Various Wireless Technologies

WCDMA HSDPA EVDO rev 0 EVDO rev A TD-CDMA TDS-CDMA 802.16d 802.16e

Industry 3GPP 3GPP 3GPP2 3GPP2 3GPP Chinese IEEE IEEEAcademy

Std Timeline Completed Completed Completed Completed Completed 2007 Completed 2007

Commercial 2003/04 2006/07 2002 2H 06 2004/05 2008 2005 2008/09Rollout

Peak speed 384 Kbps 1.8-7.2 Mbps 2.4 Mbps 3.1 Mbps 3 Mbps 2-4 Mbps 3 Mbps 20 Mbps

Channel size 5 MHz 5 MHz 1.25 MHz 1.25-20 MHz 1.25-10 MHz 1.25-10 MHz 1.25-20 MHz 1.25-20 MHz

Strength Increased S/w upgarde High data S/w upgarde Customised Political OFDM Cheapervoice capty for high BW rate for high BW for TDtv Support technology Efficient

Weakness Low data Uplink Uplink Uplink Vendor Proprietary Lack of Timingspeed capacity capacity capacity Support Only- China mobility Uncertain

GSM 3G CDMA - 3G TDS Standard Wimax

Source: Company data, Lehman Brothers Research

SON-Access: A proprietary IP-mobility solution developed by Malaysian operator Green Packet. The technology enables users to roam seamlessly between hybrid wireless networks and high-speed Wi-Fi hotspots. For example, using Green Packet’s service, a smart phone user can access the internet on a Wi-Fi network in a hotel and then hand-off to a mobile wireless network when he leaves the hotel. Green Packet is currently deploying its SONmetro wireless broadband network deployment in Klang Valley using unlicensed 2.4GHz spectrum band and is expected to be launched in late 2007 or early 2008. Mobile Broadband Wireless (802.20): This technology intends to provide high-speed wireless connectivity to mobile users who are traveling at speeds of up to 250 kilometers per hour. Lightweight Extensible Authentication Protocol (LEAP): A proprietary wireless LAN standard developed by Cisco Systems that has better authentication techniques while communicating. Near Field Communication Technology (NFC): A short-range wireless technology that enables secure transactions over a mobile phone. NFC only operates over a range of 10 centimeters (four inches). Radio-frequency Identification (RFID): A technology that incorporates the use of radio waves to identify a unique object or person.

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RFID Tag: A device that is attached to a person or merchandise as a form of identification by radio waves. Unlicensed Mobile Access (UMA): A telecommunication system that allows seamless connectivity between wireless local area networks like WiFi or Bluetooth and mobile networks using dual-mode handsets. It is also known as a Generic Access Network. Ultra Mobile Broadband (UMB): The name for a 3GPP2 project that is working on the evolution of next generation CDMA technology. This standard is expected to provide download speeds of up to 280 Mbps and will employ OFDMA technology. ZigBee: An IEEE 802.15.4 standard that uses low-power consumption for wireless personal area networks. The technology works in the 2.4GHz band and offers data rates of less than 220 Kbps over a 75 meter radius. ZigBee is used in applications that require a low data rates, long battery life, and secure networking. Cell-Fi: A dual-mode device that has cellular and WiFi capabilities and which enables seamless roaming between WiFi and mobile networks. So far, there are still very limited Cell-Fi handsets available, as few mobile operators would want to support their growth. Orthogonal Frequency-Division Multiplexing (OFDM): A spread-spectrum modulation technology that uses different carrier frequencies to carry data signals. OFDM uses the spectrum more efficiently than previous wireless technologies. Some OFDM technologies include WiFi and WiMAX. Orthogonal Frequency Division Multiple Access (OFDMA): A multi-user version of the OFDM. Multiple access is achieved using OFDMA by assigning subsets of sub carriers to individual users. Single Carrier Frequency Division Multiple Access (SC-FDMA): A multiplexing technique where sub carriers assigned to each user are contiguous. This technique results in lower battery consumption requirements. Spatial Division Multiple Access (SDMA): A multiple antenna system that optimizes the use of radio spectrum and minimizes system costs by taking advantage of the directional property of antennas. Unlike traditional antennas that radiate power in all directions, SDMA tracks the spatial location of mobile devices. This technology requires only one antenna at the receiver end--which reduces CPE costs. Multimedia Broadcast Multicast Service (MBMS): A point-to-multipoint broadcast technology for mobile TV services. This technology is expected to be commercially launched in 2009.

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Multiple Input/multiple Output (MIMO): A term that refers to the use of multiple antennas at the transmitter as well as receiver side. This technology increases throughput, improves capacity and spectral efficiency, and reduces fading. Two examples of MIMO are:

• Multiple-input Single-output (MISO): A single antenna at the receiver end. • Single-input Multiple-output (SIMO): Single antenna at the transmitter end.

Single-input Single-output (SISO): A system without multiple antennas at both the transmitter and receiver end. Bluetooth: A short range wireless technology used for personal area networks that maintain a high level of security. Several key features of Bluetooth are robustness, low power consumption, and low cost. Bluetooth operates in the 2.4 GHz and provides data transmission speeds up to 3 Mbps by consuming power as low as 2.5 mw. The technology transmits for a range of one to 20 meters. Bluetooth can be used to transfer data and exchange information between devices such as mobile phones, laptops, PCs, and printers.

Figure 24: Bluetooth Technology can Transmit Data Wirelessly to a Variety of Devices

Source: Althosbooks.com, Lehman Brothers Research

Binary Run-time Environment for Wireless (BREW): Qualcomm’s wireless application development platform for mobile devices that is meant to be an alternative to mobile Java. BREW software runs between the application and the wireless device's chip operating system. BREW is only used with CDMA handsets. Microwave: Radio waves with frequencies from 1 GHz to 300 GHz.

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Wireless Local Loop (WLL): Replaces the traditional copper wire in the last mile for normal telephony by wireless. Signals are sent over the wireless frequencies. WLL is also known as Broadband Wireless Access (BWA). Wireless Local Area Network (WLAN): Data speeds on wireless LANs range from 30 to 60Kbps. WLAN utilizes spread-spectrum and works in the 900 MHz to 2 GHz frequency band. Access Point (AP): A device that connects wireless devices to wireline networks.

WAP Gateway: Allows mobile handsets (using WAP protocol) to access the internet. Fixed Radio Access (FRA): Another name for WLL.

Figure 25: Wireless LAN Applications

Source: Flex watch, Lehman Brothers Research

Figure 26: Market Share and Sizes of Different Networks

Cisco 65% Cisco 33% Cisco 37%Aruba n/ws 8% Netgear 23% Nokia-CHKP 20%SBL 7% D-Link 16% Juniper 16%3 COM 2% Buffalo 5% Others 27%Nortel 2%

$ 1.4 billion

Security/VPNEnt/Carrier WLAN

$ 3.2 billion

SOHO/SMB Networking

$ 2.3 billion


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August 21, 2007 37

Broadband and Access Terminologies

Bit: A binary digit that takes a value of either 0 or 1. A bit carries digital information. Byte: A byte contains 8 bits and represents unit of information storage.

Figure 27: Bit and Byte powers

Symbol Value Symbol ValueKilo kb 10^3 kB 10^3Mega Mb 10^6 MB 10^6Giga Gb 10^9 GB 10^9Tera Tb 10^12 TB 10^12

Note: 8 bits = 1 Byte

Bit Byte


Baud: Baud is a measure for data transmission speed. One baud is one electronic state change per second. However, the preferred unit is bps (bits per second). A single state change can involve more than a single bit of data, the bps unit of measurement is a better unit for the measurement of data transmission speed. Access, Last mile, Local Loop: The final connection to an end user is called the “last mile access.” Access technology can either be wireless or wireline. Wireline access is usually through copper or fiber and wireless may be limited mobility or cellular. In the case of a wireline connection, the last mile tends to require more expenditure as wires or cables need to be rolled out. Customer-premises Equipment (CPE): Equipment in the consumer’s premises that is connected with a carrier's telecom network. Some more commonly known CPEs are telephones, DSL modems or cable modems, set-top boxes, etc.

Remote Access: Access to information/connection away from the home location.

Remote Termination Unit (RTU): A device installed at a remote location that collects and transmits data to a central or the main station.

Local Loop Unbundling (LLU) or Unbundled Access: Permitting competitors to access an incumbent carrier’s last mile connection to the end user. LLU was established to increase telecom market competition and lower costs to end users.

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Figure 28: Access Network

Source: IST-Bread, Lehman Brothers Research

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August 21, 2007 39

Broadband and DSL Terminology

Dial-Up Connection: Connecting to the internet through a traditional analog modem. Data speeds through a dial up connection are less than 56 kpbs.

Narrowband: An internet connection which has a data transmission speed of less than 56 kbps is usually considered narrowband.

Broadband: Broadband data transmission is usually defined as “always on” and provides minimum speeds faster than dial-up internet service. Using this definition, anything higher than 56 kpbs can be considered “broadband” internet connectivity. However, the data transmission speed for broadband is usually greater than 1 mbps in developed countries.

Broadband Wireless Local Loop (B-WLL) or Local multipoint distribution service (LMDS): A broadband wireless technology that operates around in the 28-31 GHz frequency band. This technology is used to provide broadband fixed wireless services to transmit voice, video, and data signals for last mile access. The technology is a point-to-multipoint technology and is governed by IEEE. LMDS usually transmits up to five miles but the ideal distance is a radius of about 1.5 miles.

Broadband Over Power Lines (BPL) or Power-line Internet or Powerband: A technology used to provide broadband Internet access through electric power lines. A user would plug a BPL "modem" into an electrical outlet in a building equipped with this service to access high-speed internet service. Unlike cable or DSL high-speed internet access, a separate network is not needed to implement BPL. The standard for the technology is in early stages of evolution, it will likely take time for this technology to emerge.

Figure 29: Various Broadband Technologies Technology Speed ARPU ($) Comments

DSL 2-10 Mbps $10-30 Most widely used technology for broadband

Cable 1-3 Mbps $15-35 Not widely deployed in Asia largely due tofragmented nature of industry

Fiber 40 Mbps- 1Gbps $40-50 Limited deployments

Satellite 500 Kbps $15-25 Used in rural areas; gets affected by heavy rains


xDSL: A digital subscriber line that provides digital data transmission over traditional telephone copper wires and is capable of providing speeds from 256 kbps to 24,000 Kbps, depending on the technology used, the quality of the copper infrastructure, and the distance from the telecom carrier’s exchange.

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How does DSL work? Using a traditional copper telephone line, human voices are carried in the frequency range of 0 to 3,400 Hertz in the form of analog signals. The remaining frequency bandwidth on the copper wire is unutilized. DSL uses this "extra capacity" to carry data information in digital format on the wire without disturbing the line's ability to carry analog voice traffic. The alphabet x in xDSL can be replaced by various letters like ‘A’, ‘H’, ‘S’, ‘V’ etc -denoting various types of DSL technologies.

Figure 30: A Typical DSL Network

Source: Howstuffworks, Lehman Brothers Research

Asymmetrical Digital Subscriber Line (ADSL): DSL technology is called “Asymmetrical” as it carries data transmissions faster in one direction than the other. Consumers typically use this technology, rather than corporate users, to connect to the internet as ADSL provides higher download speeds. ADSL provides up to 8 Mbps download speed and 1 Mbps upload speed. ADSL is used over short distances of about 5 km. Signals and repeaters cannot be used to boost the signal as they distort the original voice that is carried by the same telephone lines.

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ADSL2+: ADSL2+ is an upgraded version of ADSL. ADSL2+ doubles the number of downstream bits and hence provides higher data download speeds. The data transmission speeds of ADSL2+ can be up to 24 Mbit/s downstream and 1 Mbit/s upstream depending on the distance from the carrier’s DSLAM to the customer's home. Rate Adaptive Digital Subscriber Line (RADSL): A variation of ADSL in which the modem can adjust speed depending upon the length and quality of the line between the exchange and the modem. G.Lite: An ADSL version that provides lower speeds (1.5 Mbps downstream and 512 kbps upstream). It is also less expensive as it does not require phone splitters. ISDN Digital Subscriber Line (IDSL): A DSL technology that carries data on existing ISDN lines and provides data transmission speeds of 144 kbps, slightly higher than normal ISDN speed of 128 kbps. IDSL is not a switched technology like ISDN and is an “always on” service. High Bit Rate Digital Subscriber Line (HDSL): High bit rate DSL provides symmetric upstream and downstream data transmission speeds. This technology is used to connect local exchange carriers and is often used by corporations using T1 lines. This technology provides data transmission speeds of 1-2 Mbps over a distance of 12,000-15,000 feet. HDSL is one of the oldest DSL technologies. The two types of HDSL technologies are HDSL2 and SDSL.

• HDSL2: A modified version of HDSL that uses two wires instead of four to carry the same amount of data. It is less expensive than HDSL as it requires less wiring. This technology can work over copper of lower gauge or quality.

• Symmetrical Digital Subscriber Line (SDSL): A symmetric DSL technology that

uses a single copper wire and can work up to 10,000 feet. This technology offers speeds in the range of 192 kbps to 2.3 Mbps. Unlike ADSL, it cannot co-exist with conventional voice services as it requires the entire bandwidth. SDSL is relatively expensive and is mainly used by small- and medium-size enterprises.

Very High Data Rate DSL (VDSL): This is the fastest DSL technology and provides up to 26 Mbps data transmission speed in a symmetric functionality and 52 Mbps (downlink) and 12 Mbps (uplink) in asymmetric access. This technology will only operate in a range of up to 1000 feet from a central office. VDSL can support HDTV on copper and applications like video on demand.

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Digital Subscriber Line Access Multiplexer (DSLAM): A device that combines data signals from various DSL subscribers into one stronger signal. Consumers that originally could not be served by DSL can get access after the telephone company locates a DSLAM closer to the end users. Depending upon the technology used, DSLAMs connect DSL lines with Asynchronous Transfer Mode (ATM), frame relay, or Internet Protocol networks. Naked DSL or Dry Loop DSL: A standalone DSL service that provides broadband internet connection without requiring the end user to sign up for voice telephony service.

Figure 31: Comparison of Various DSL Technologies xDSL Max Lines

Uplink Downlink Distance needed

ADSL 1 Mbps 24 Mbps 18,000 ft 1IDSL 144 kbps 144 kbps 35,000 ft 1HDSL 2 Mbps 2 Mbps 15,000 ft 2SDSL 2.5 Mbps 2.5 Mbps 22,000 ft 1VDSL 12 Mbps 52 Mbps 1.000 ft 1

Speed


Figure 32: Market Share and Market size for DSL Equipment

Alcatel-Lucent 40% Thomson 21%Huawei 9% Siemens 12%Nokia-Siemens 8% Zyxel 12%Ericsson 6% 2-Wire 7%NEC 5% Cisco 6%Others 32% D-Link 6%

DSLAM xDSL Modem

$ 3.5 billion $ 2.5 billion


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August 21, 2007 43

Cable TV & Video Terminology

Figure 33: Cable System

Source: TechWeb

Community Antenna Television (CATV): Known as Cable TV, this service provides analog television service to consumers typically though a hybrid fiber-coaxial network. Recently, CATV systems are being upgraded to support broadband internet access and voice over IP through the cable infrastructure. Multi Service Operator (MSO): This is another name for companies that own large cable TV systems, such Comcast in the U.S. or Virgin Media in the U.K. Cable Modem Termination System (CMTS): This system provides high-speed data services like cable internet or Voice over IP to cable subscribers. It is located in a cable company's headend. Multichannel Multipoint Distributed Service (MMDS): Known as Wireless Cable, this technology delivers video content over microwave frequencies. Typical equipment required for MMDS are an antenna and cable headend. Conditional Access System (CAS): A system in which digital video signals are transmitted over satellite to subscribers. This service is called “conditional access” because it provides access only to subscribers, unlike free-to-the-air broadcast channels which are available to anyone with a television. A set-top box containing a “conditional access module” is required in the customer’s home to receive and to decrypt the signal.

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Hybrid Fiber Coax (HFC): A hybrid network of optical fiber and coaxial cable that is used by cable TV operators. The optical fiber usually forms the backbone and the coaxial cable is used between the backbone and the customers’ homes. Wavelength division multiplexing is used for the optical cable and frequency division multiplexing is used for the coaxial portion. The network is capable of providing analog TV, digital TV, video on demand as well as other high-speed services-.

Figure 34: HFC Network Architecture

Source: FCC Tutorial, Lehman Brothers Research

Video on Demand (VoD): An interactive service provided by cable or satellite companies where the customer downloads preprogrammed content which could include TV programs, movies, documentaries, etc. Digital Video Recorder (DVR)/ Personal Video Recorder (PVR): This equipment records programming (in a digital format) usually to a disk drive in the unit. One popular DVR is provided by Tivo in the US. Data Over Cable Service Interface Specifications (DOCSIS): An international standard developed by CableLabs that defines the communications and operation support interface requirements for data over cable systems. All two-way modem systems need to follow this standard.

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Figure 35: DOCSIS Speeds for Different Standards Standard Date of

Downstream Upstream issue

1x 42 Mbps 10 Mbps Mar-972x 42 Mbps 30 Mbps Dec-013x 480 Mbps 120 Mbps Aug-06

Speeds


Standard-definition Television (SDTV): Television systems that meet the required resolution requirements but are not considered high definition TVs. This technology requires less bandwidth than HDTV. SDTVs are superior to analog TVs (NTSC, PAL, PAL2, SECAM) as SDTVs do not suffer from ghosting effects, snowy images, or static noises. High-definition Television (HDTV): A digital television broadcasting system with significantly higher resolution than traditional TV formats. Three HDTV standards are currently defined by the ITU:

1. 1080i (1,080 actively interlaced lines); 2. 1080p (1,080 progressively scanned lines); 3. 720p (720 progressively scanned lines).

Videophone: A telephone that allows two-way real time video communications. Joint Photographic Experts Group (JPEG): A method of compression for photographic images that was standardized in 1992. Motion Picture Experts Group (MPEG): A standard used for encrypting and compressing videos. Various MPEG groups include:

• MPEG-2: Used for over-the-air digital television, satellite TV service and DVDs.

• MPEG-3: Originally used for HDTV but has since been replaced by MPEG-2.

• MPEG-4: used for interactive media.

Figure 36: Market Share and Market Size for Cable Technology Equipment

Motorola 34% Cisco 54% Cisco- SF Atlanta 36% Motorola 44%Arris 30% Arris 24% Motorola 27% Cisco- SF Atlanta 32%Cisco- SF Atlanta 22% Motorola 19% Others 37%Thomson 7% Bigband 3%

DVR/Set top box

$ 3.6 billion

Cable Modem

$ 1.3 billion

Cable Transmission

$ 2.3 billion

CMTS

$ 990 millionSource: Lehman Brothers Research

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46 August 21, 2007

Fiber and Optical Component terminology

Fiber: A glass-based medium that allows light signals to propagate through it. Fiber consists of a core (through which a signal is passed) and surrounding cladding layer to prevent loss of signal strength.

• Single-mode fiber: Fiber with a core diameter of less than 10 μm that allows only one signal to pass at a time.

• Multi-mode fiber: Fiber with a large (greater than 10 μm) core diameter that can carry multiple signals at a time.

Dark Fiber: Fiber that has been deployed but not utilized. This type of fiber-optic cable has not been connected to any active or passive component and has been laid to be used in the future. It is also known as “unlit fiber.” Lit Fiber: This is fiber optic cable that is already being used and is attached to electronic components. Optical Carrier (OC-x): This describes the range of digital signals that can be carried on a SONET network. It is generally denoted by OC-n, where OC is the optical signal and ‘n’ indicates increments of 51.8 Mbps.

• OC-1=51 Mbps • OC-3=155 Mbps • OC-12 = 622 Mbps • OC-48 = 2.5 Gbps

Optical Components: Denotes equipment used for transmission and reception through an optical fiber. Active Optical Components: Denotes components that transmit, amplify and receive signals in optical transmission.

Figure 37: Optical Network

Source: IEC.org, Lehman Brothers Research

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August 21, 2007 47

Light Amplification by Stimulated Emission of Radiation (Lasers): Denotes transmitters for optical signals. Optical Receiver: This equipment converts optical signals back into electrical signals. Passive Optical Components: These components do not generate or amplify the signal but route an optical signal without using any electronics. Passive components are attenuators (devices that reduce signal power), couplers (devices that combine/split the signal), optical add/drop multiplexers (optical multiplexers) and filters (devices that allow specific wavelength to pass through). Amplifier: An amplifier increases an optical signal without converting it into an electrical signal. FTTx: A generic term for fiber-based network architecture. Access networks can be divided into three main architectures:

• Fiber to the Node (FTTN); • Fiber to the Curb (FTTC); • Fiber to the Premise (FTTP) or Fiber to the Building (FTTB); • Fiber to the Home (FTTH).

Figure 38: FTTX Networks

Source: Wikipedia, Lehman Brothers Research

Fiber to the Premise is a pure fiber connection from a central office to the end user’s home. Fiber to the Node and Fiber to the Curb are hybrid fiber/copper connections, with the difference being that a “node” is roughly 5000 feet (1 mile) from the end user

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and a “curb” is roughly 500 feet. The closer a carrier builds out a fiber network to the end user, the faster the data connection speed. AT&T is a major supporter of the FTTN technology in the U.S., arguing that it can generate enough bandwidth (approximately 25 megabits per second) to support fast data, voice and video services; and FTTN is much more cost effective than FTTP. Many telecom carriers have a tendency to choose to leverage their copper networks, rather than deploy a new fiber connection, since their end users are more centrally located. We believe that the quality of a carrier’s copper plant is a key factor to enabling an easy migration to FTTN/FTTC. BellSouth in the US has been a major supporter of FTTC since the late 1990s and enjoys the economics of the solution based on the topography/geography of its users and the fast new line growth in the location it serves. BellSouth has used this technology to offer broadcast video services (basic cable) to some subscribers, as well as voice and DSL connection.

Figure 39: Verizon and AT&T Capital Expenditure Estimates for FTTx Verizon Year 1 Year 2 Year 3 Total

Incremental CapEx due FTTP ($B) 1.3 0.9 0.7 2.9FTTP Capex (% of Total CapEx) 13% 9% 7% 10%# of Homes Passed (M) 3 3 3 9Incremental CapEx/Home Passed ($K) 0.44 0.28 0.23 0.32

AT&T Year 1 Year 2 Year 3 TotalIncremental CapEx due LightSpeed ($B) 1.4 1.7 1.3 4.4LightSpeed Capex (% of Total CapEx) 17% 21% 16% 18%# of Homes Passed (M) 3 6 9 18Incremental CapEx/Home Passed ($K) 0.47 0.28 0.14 0.24

Source: Company reports, Lehman Brothers Research

Passive Optical network (PON): A fiber technology for premise and home networks. In this network architecture, un-powered optical splitters are used to enable a single optical fiber to serve multiple premises. Since the technology does not use active components, the costs required to build out a passive optical network is lower than for other networks. A PON requires Optical Line Termination (OLT) at the service provider's central office and a number of Optical Network Units (ONUs) near the end users.

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August 21, 2007 49

Optical Line Terminals (OLT): This equipment is located at a central office and interfaces with the metropolitan network. The main functionality of OLT is to adapt the incoming traffic from the metropolitan rings to the PON transport layer. Optical Network Termination (ONT) and Optical Network Unit (ONU): Both types of equipment have the same functionality. An ONT is located in a customer’s premise while an ONU is located outside the premise. These devices serve as an interface between the customer’s equipment and the PON.

Figure 40: PON Network

Source: Infocellular, Lehman Brothers research

Internet Protocol TV (IPTV): This technology refers to delivering video/television programming over a telecom operator’s managed IP network. Compared to traditional cable networks that push content from all TV channels to the end users, IPTV only delivers programs being requested, providing a much more efficient network. IPTV can either be unicast or multicast. The unicast method provides a private content stream to the viewer and enables on-demand services. However, the bandwidth requirements are higher. An IPTV network consists of a video headend, video storage and server equipment, an IP backbone network and consumer premises equipment (CPE) such as set-top boxes (STB).

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Figure 41: IP TV Components

Source: Broadband Services Forum

Asia Case Study: PCCW To deploy IPTV, most telecom operators need to further invest in their broadband network infrastructure. According to PCCW, the company’s total capex on its fixed-line business, including broadband infrastructure, has been around 10-11% of the revenue from the segment. PCCW’s additional expenditure on equipment and system upgrades, to support IPTV beyond spending for its existing broadband network, was not significant. PCCW’s fixed-line telecom capital expenditure increased to US$286mn in 2005, accounting for about 14% of its revenue. However, a majority of the IPTV related expenditure was on customer-related items, such as set-top boxes and broadband modems. With a 67% household broadband penetration, IPTV has been well received in Hong Kong. PCCW’s IPTV subscriber base is currently over 800K. This has become the largest IPTV commercial implementation in the world, and includes more than 20% of all households in Hong Kong.

Figure 42: IPTV network configuration diagram

Source: Converge Digest, Lehman Brothers Research

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Radio & Satellite Communication Terminology

Uplink: Sending a signal from a ground station to a satellite. Downlink: Sending signal from a satellite to a ground station. Signals use different frequencies for uplink and downlink. Digital Audio Broadcasting (DAB): A method of broadcasting audio using digital signals. DAB is expected to deliver better quality digital stereo sound. DAB systems are expected to be upgraded to DAB+ (which have superior error correction methods). DAB+ equipment is expected to become commercially available by the end of 2007. Global Mobile Personal Communications by Satellite (GMPCS): A personal communications system that provides transnational, regional or global coverage from a constellation of satellites. GMPCS satellite systems provide telecom services directly to end users. GMPCS services include two-way voice, fax, messaging, data and even broadband multimedia. Global Positioning System (GPS): This technology helps to determine location, speed and direction of a user with the help of constellation of at least 24 medium Earth-orbiting satellites. GPS is widely used for navigation worldwide and is a useful tool for map-making, land surveying, commerce, and scientific uses. Location-based Services (LBS): These information-based services and advertising are related to the current location where a mobile phone network operates. The location is usually tracked by sending radio waves or by using a GPS chip embedded in a mobile phone. Time Distance of Arrival (TDOA): A method of determining the location of a mobile transmitting device (such as a mobile phone) by using three-dimensional location coordinates to triangulate a particular location. Telematics: The science of sending, receiving and storing information via telecommunication devices. It is also used in navigation systems used for tracking applications such as OnStar (a telematics service of General Motors). Terrestrial Trunked Radio (TETRA): A digital mobile two-way transceiver (walkie-talkie). TETRA is an ETSI standard for digital radio technology. This technology works in 400 MHz frequency and is used by government agencies across Europe. Mobisode: Video content (usually broadcast television) that is designed for viewing on a mobile telephone. These mobisodes are usually short in duration given the cost of wireless data transmission.

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Streaming: A technique of one-way transmission of audio and/or video data on the internet or on a mobile network. Using this technique, a file can start playing almost immediately without the need to download the complete file first. Very Small Aperture Terminal (VSAT): A device that communicates by bouncing signals off a satellite in geosynchronous (stationary) orbit above the earth. "VSAT terminals" are the satellite modems/routers and are small (generally between .75 meter and 1.2 meters) dishes that operate at a customer's location. "VSAT hubs" are large (often 9 meters or larger) dishes with sophisticated network controls which send and receive transmissions to communicate with the VSAT terminals. VSAT terminals are used for internet access in rural areas where getting cable or telephone lines is too expensive. Download speeds using VSAT terminals can reach up to 500 kbps while upload speeds are only up to 50 kbps. Satellite networks are slower than cable and DSL but faster than narrowband. Data speeds can also be slowed by poor weather conditions such as heavy rain.

Figure 43: Satellite Broadband Connection

Source: Starband, Lehman Brothers Research

Attenuation: This refers to the loss of strength (amplitude and intensity) of a signal during the transmission through a medium. Amplifiers are used to strengthen a signal. Decibel: The unit to measure attenuation is decibels. This is represented as per unit length of medium. E.g. dB/cm, dB/km.

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August 21, 2007 53

Portable Navigation Device: Mobile equipment that has GPS and navigation functionality. Crosstalk: Unwanted interference (generally pieces of speech or tones leaking from other connection). Analog signals are more susceptible to crosstalk compared to digital signals. A twisted pair cable is often used to reduce crosstalk for analog signals.

Far-end Crosstalk: Interference at the distance end of a transmission system. Dispersion: The weakening of a signal that occurs in transmission through fiber optic cabling. Two main types of dispersion include material dispersion and waveguide dispersion. Material dispersion occurs due to the material of waves and wave guide dispersion occurs due to the speed of a wave.

Line-of-Sight: Wireless transmission that takes place in a straight-line is line of sight transmission. This type of transmission cannot travel if some obstruction blocks the signal.

Figure 44: Satellite Navigation Equipment Market Share and Size

Ericsson 28% TomTom 31%Nokia-Siemens 22% MiTAC 30%NEC 18% Garmin 20%Harris CP 14%Alcatel-Lucent 8%

$ 5 billion

Microwave

$ 15 million

Sat. Navign PND


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Wireline Enterprise Network Terminology

Circuit: A circuit can be defined as the entire path between two terminals where communication takes place. Circuit-Switched Network: This network establishes a dedicated physical circuit (or channel) temporarily on demand between two terminals. Each circuit that is dedicated cannot be used by other callers until the circuit is released and a new connection is established. Even if no communication is taking place in a dedicated circuit, that channel remains unavailable to other users. Traditional fixed-line telephony services are usually on a circuit-switched network. Packet-switched Network: In a packet switched network, data is split into pieces, called packets, which are routed over a shared network. Packet-switched networks do not require an established circuit—allowing many pairs of nodes to communicate almost simultaneously over the same channel. Each “packet” of data is individually addressed to help the data find its way to its final destination. Internet networks are packet switched as are voice-over-IP (VOIP) networks. Connection-oriented Network: A means of communicating data after the establishment of an end-to-end connection. A connection-oriented service is also called a "reliable" network service, as it guarantees that data will arrive at its destination in the proper sequence. For example, a Transmission Control Protocol (TCP) is a connection-oriented protocol Duplex: A duplex communication system has two connected devices that communicate with each another in both directions.

• Half-duplex: provides communication in both directions, but only one direction at a time (not simultaneously).

• Full-duplex: provides communication in both directions simultaneously Time Division Duplex (TDD): A modulation technique that uses time division multiplexing to separate outward and return signals with the same frequency band. TDD is a particularly useful technology when uplink and downlink data speeds are variable. As the amount of uplink data traffic increases, more bandwidth can be allocated and can be reduced when it declines. The primary two technologies that use TDD are TD-CDMA and TDS-CDMA.

Frequency-division duplex (FDD): A modulation technique that uses separate uplink and downlink frequencies, which allows users to transmit and receive data simultaneously. FDD is a more efficient technology for symmetric data traffic patterns. Radio frequency planning is easier and more efficient when using FDD.

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Ethernet: A computer networking technology that operates at speeds up to 10 Mbps for local area networks. This technology is used to connect computers within the same building or on a campus. Ethernet technology has been standardized as IEEE 802.3.

Figure 45: Ethernet Market Size and Market Shares

Cisco 54%Alcatel 15%Nortel 3%Nokia Siemens 3%Hitachi 3%Foundry 2%Extreme 2%

$ 2.1 billion

Carrier Ethernet (Metro)


10 Base-T: A technological standard that denotes 10 Mbits/s speed for Ethernet over a twisted pair. 10 Base-T was the first vendor-independent standard for the implementation of Ethernet using twisted-pair wiring. Other common standards are 100 BASE-T and 1000 BASE-T which are capable of handling speeds at 100 Mbits/s and 1000 Mbits/s, respectively. These standards have backward compatibility with 10 Base-T networks. DS1/T1: A carrier signaling mechanism devised by Bell Labs that is widely used for digital lines in North America, Canada and Japan to transmit voice and data. The technology operates at 1.544Mbps. In Europe, T-1 lines operate at 2.048Mbps and are known as E-Carriers. Higher speeds are mentioned below American Standards European Standards DS0: 64 Kbps DS0: 64 Kbps DS1: 24 DS0 channels = 1.54 Mbps E1: 32 DS0 channels = 2.04 Mbps DS2: 96 DS0 channels = 6.31 Mbps E2: 128 DS0 channels = 8.44 Mbps DS3: 672 DS0 channels = 44.73 Mbps E3: 512 DS0 channels = 34.36 Mbps Note: DS3 is also know as T3

Fast Ethernet: Ethernet that can provide speeds up to 100Mbps.

Fiber Data Distributed Interface (FDDI): This technology provides faster local area network access than Ethernet as it primarily uses fiber as its preferred medium. FDDI offers data transmissions that can extend up to 200 kilometers (124 miles). Typically, FDDI offers data transmission speeds up to 100Mbps. The technology can also be used as a high-speed backbone to connect a group of lower speed LANs.

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Integrated Services Digital Network (ISDN): A circuit-switched telephone network system, that allows digital transmission of voice and data over ordinary telephone copper wires, resulting in better quality and higher speeds than is available with a PSTN network. ISDN usage is declining with the growth of DSL deployment. ISDN is very similar to xDSL, but differs from xDSL in 2 ways:

• ISDN is a circuit-switched service while xDSL is a point-to-point access service.

• ISDN requires external power while, xDSL carries its own power on the line.

Broadband Integrated Services Digital Network (B-ISDN): A technology which transmits voice and data over fiber optic wires. This technology uses ATM for switching.

Frame Relay: A data transmission technique used to send digital information using a relay of frames to one or many destinations. The data is divided into variable-size units called a frame. The data is sent over an established circuit. The user of a frame relay network only pays for the amount of data transferred rather than a full-time leased line. Frame Relay originated as an extension of ISDN. Permanent Virtual Circuit (PVC): A term used for defining the establishment of a network connection between two points. Typically used in frame relay and ATM networking. Multiplexing: A process where multiple signals are combined into one signal. The main purpose of this technology is to share an expensive resource such as a carrier channel. Frequency Division Multiplexing (FDM): A type of multiplexing where signals at different frequencies are sent through a single channel. Frequency Division Multiple Access (FDMA): This technology allows multiple users to share a physical communications channel. FDMA is the traditional means of separating radio signals from different transmitters.

Time Division Multiplexing (TDM): A type of multiplexing where two or more signals are transferred simultaneously as sub-channels into one communication channel based on time slot assignment.

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Time Division Multiple Access (TDMA): This technology allows different users to share the same frequency channel by dividing the signal into different timeslots. TDMA is mainly used in various mobile phone technologies (such as GSM, PDC, iDEN) and in satellite systems. Wavelength Division Multiplexing (WDM): This technology multiplexes multiple optical carrier signals on a single optical fiber. Telecom carriers like WDM as this technology is able to expand the capacity of a network without having to lay more fiber. Dense Wave Division Multiplexing (DWDM): A technology where 40 or more separate wavelengths or channels of data are multiplexed into a single optical fiber. Code Division Multiple Access (CDMA): CDMA is a method of multiple access that divides a radio channel by using different pseudo-random code sequences (using a unique code for each piece of data). CDMA is a form of "spread-spectrum" technology, where each voice conversation is spread and transmitted over multiple frequencies. Intelligent Networking (IN): An architecture for both fixed and mobile telecom networks that allows operators to differentiate themselves by providing value-added services in addition to traditional telecom services. This is typically achieved through software upgrades. Local Area Network (LAN): A computer network covering a small geographical area like house or group of buildings. Most LANs are based on IEEE 802.3 Ethernet technology. Metropolitan Area Network (MAN): A data network that usually spans over a city area. These networks typically use wireless infrastructure or optical fiber connections to link network sites. This technology is an IEEE 802.6 standard. Wide Area Network (WAN): A computer network that covers a broad geographical area (i.e. regional or national boundaries) and typically uses routers and public communications links. The largest and most well-known example of a WAN is the internet. Long-haul Networks: These networks carry aggregated traffic across cities. These networks mainly have point-to-point transmission links. Multicast: A method of sending data to multiple recipients simultaneously.

Narrowcasting: Sending a message to a small group of people.

Open System Interconnection (OSI): An OSI Model is a seven-layer model in which each layer performs a set of functions to support the other layers. The seven layers, from top to

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bottom are: Application, Presentation, Session, Transport, Network, Data Link and Physical. This architecture is considered one of the main standards for data networking.

Packet: A packet is a block of data carried over a computer network. It has a header that contains information like the destination address. Public Data Network (PDN): A network that provides data transmission services for the public.

Point of Presence (POP): An interface point for communications devices. It is also termed as a service provider’s location for connecting its users.

Point-to-Point Protocol (PPP): A term used to define a direct connection between two nodes. Point-to-Point Tunneling Protocol: A technology to implement virtual private networks. This ensures secure transmission of messages from one VPN to another through a public network. Synchronous digital hierarchy (SDH): A method of transmitting digital information over optical fiber in a synchronized manner to ensure that no data is lost. The SDH standard was developed by the International Telecommunication Union (ITU). Synchronous Optical Networking (SONET): SONET is the US equivalent standard of SDH. SONET is used in the U.S. and Canada and SDH is used in the rest of the world. The two standards are not compatible.

Figure 46: SONET and WDM Market Size and Market Shares

Alcatel-Lucent 23% Nortel 19% Alcatel-Lucent 25%Nortel 10% Cisco 14% Huawei 12%Huawei 10% Alcatel-Lucent 13% Fujitsu 12%Siemens 9% ADVA Optical 12% Nortel 11%Ciena 9% Fujitsu 7% Nokia-Siemens 7%

$ 1.7 billion $ 5.3 billion

Metro WDM SONET/SDH

$ 1.8 billion

Long-Haul WDM


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Figure 47: Optical Speeds Optical BW Line rate

Signal rate SONET SDH (kbits/s) (kbits/s)

OC-1 STS-1 STM-0 48,960 51,840OC-3 STS-3 STM-1 150,336 155,520OC-12 STS-12 STM-4 601,344 622,080OC-24 STS-24 STM-8 1,202,688 1,244,160OC-48 STS-48 STM-16 2,405,376 2,488,320OC-96 STS-96 STM-32 4,810,752 4,976,640OC-192 STS-192 STM-64 9,621,504 9,953,280OC-768 STS-768 STM-256 38,486,016 39,813,120OC-1536 STS-1536 STM-512 76,972,032 79,626,120OC-3072 STS-3072 STM-1024 153,944,064 159,252,240

Frame Format


Spread-Spectrum Technology: A technique where discrete frequencies are spread in time or frequency domains to provide secure communication transmission. This technology increases resistance to natural interference and jamming, and prevents detection. Although spread-spectrum technology consumes more bandwidth, it provides reliable and secure transmissions. “Spread spectrum” implies that the carrier signals occupy the entire bandwidth. Two main types of spread-spectrum technology are frequency hopping and direct sequence.

Frequency-hopping Spread Spectrum (FHSS): A method of transmitting signals by continuously switching a carrier among numerous frequency channels, using a pseudo random sequence known to both transmitter and receiver. Direct-sequence Spread-spectrum Technology (DSSS): This technology generates a noise signal (in a pseudorandom sequence) for each bit of data that is transmitted. The noise-like signal can be used to reconstruct the original data at the receiving end, by multiplying it by the same pseudo-random sequence.

Protocol: A set of rules regarding signaling, authentication and error detection that are followed to send information over a communications channel. SS7 (Signaling System 7): Telephony signaling protocols that are used in public switched telephone network calls.

Mesh Network: A network with no centralized access point, but is connected to other adjacent nodes. Data is routed between nodes to be sent to the final destination. A mesh network where all nodes are connected is called a fully-connected network.

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Virtual Private Network (VPN): A private communication network used by corporate users to communicate securely over a public network. A VPN’s encrypted data is sent using a tunneling protocol. P2P (peer-to-peer): A type of networking where computers are directly connected to each other rather than communicating through intermittent nodes. Peer nodes simultaneously function as client and server.

Router Protocol: A program used by routers to determine an appropriate path for data to be moved toward its final destination. The path taken by the data is dynamically determined depending on the traffic load of various route options. Resource Reservation Protocol (RRP): A protocol that reserves and allocates bandwidth for real-time transmission. It is mainly used for video data traffic. Multiprotocol Label Switching (MPLS): A networking protocol that uses the properties of a circuit-switched network over a packet-switched network. This technology protocol uses labels that contain destination information attached to packets. MPLS is much faster than older technologies (ATM and Frame Relay) as the routers only examine the top-most data label and transfers it further.

Transmission Control Protocol (TCP): One of the core protocols used for the Internet. This is a connection-oriented protocol that guarantees reliable and orderly delivery of data from sender to receiver. Unsigned Datagram Protocol (UDP): An internet protocol used for delivering data. Unlike TCP, this protocol does not guarantee that the packets will be arriving in a particular order at a destination. This protocol is often used in videoconferencing and similar applications when it is necessary to get large amount of data through quickly and it does not matter if some data packets are dropped. IMS (IP Multimedia Subsystem): A framework used to deliver IP multimedia services to consumers. IMS was originally designed by 3GPP to promote the evolution of cellular networks beyond 2G. Modulation: The process of varying an electrical signal (e.g. voice) so that it can be transmitted over a particular channel in a required band. Modulation can be either analog or digital. Analog modulation techniques are Amplitude modulation (AM), Frequency modulation (FM) and Phase modulation (PM). Digital modulation techniques are Amplitude-shift keying (ASK), Frequency-shift keying (FSK) and Phase-shift keying (PSK). Carrier Wave: A signal that is modified to carry information. Carrier waves are usually at a higher frequency than the signal needed to be transmitted.

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Baseband: The original information carrying signal that is modified by carrier wave. Quadrature Amplitude Modulation (QAM): A modulation technique that modulates amplitude and the phase of a carrier simultaneously. QAM is used in DSL equipment.

Quadrature Phase-shift Keying (QPSK): A digital modulation scheme that conveys data by changing the phase of carrier wave. QPSK can carry twice as much data as other techniques since uses four phases for data transmission. ATM: A circuit-switched network that runs over SONET (Synchronous Optical Networking) and has fixed cells of 53 bytes (48 bytes for data and 5 bytes for header). ATM is a connection-oriented technology that is mainly used by corporate customers that require high-bandwidth for large data transfers. Virtual Circuit: A communication agreement established between two devices before a call is initiated. They are primarily used for Asynchronous Transfer Mode (ATM) and Frame Relay.

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Enterprise Network Component Terminology

Backbone: The main path for carrying traffic between a source and destination in a wireline network.

Switch: A networking device that connects Ethernet or other packet networks. One purpose of a switch is to reduce network costs. With a switch deployed in a network, all nodes do not need be connected to each other. Switches also transfer data packets through a network. However, a switch mechanically forward data without regard to data congestion (unlike routers). Hub/Repeater: A device that amplifies or broadcasts a signal. These devices do not manage traffic. Repeaters are available for both analog and digital signals. Router: A networking device that forwards data traffic towards a destination based on predetermined routing tables and protocols. 3 main types of routers are Enterprise, core and edge.

Figure 48: Router Market Size and Share

Cisco 86% Cisco 53% Cisco 61%Juniper 4% Alcatel 16% Juniper 31%Huawei 4% Juniper 14% Others 8%Nortel 2% Ericsson/RBAK 4%

Huawei 4%$ 5.4 billion

$ 4.1 billion$ 2.1 billion

Carrier Core RouterCarrier Edge RouterEnterprise Router


Gateway: A device that interconnects networks with different network protocol technologies by performing the required protocol conversions. Bridges: A means of connecting two networks at a physical level. They are very similar to hubs/repeaters, however, unlike Hub/repeater bridges they manage traffic. Hop: The transfer from one node to another node in a network Layer 2 Switch: These switch data packets to a destination based on the MAC (media access control) address. Layer 2 switches have high speed, low latency and low cost. They are also efficient as they require no modification to data packet.

Layer 3 Switch: Layer 3 switching is hardware-based routing with all packet forwarding handled by hardware ASICs. Layer 3 switches are similar to routers in terms of functionality except that routers use microprocessors to make forwarding decisions and switches use hardware-based packet switching.

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August 21, 2007 63

Layer 4 Switch: Layer 4 switching is considered to be hardware-based layer 3 switching technology that also considers the application used (for example, Telnet or FTP).

Figure 49: Market Share and Size for Different Switches

Alcatel 38% Cisco 74% F5 Networks 33%Nortel 12% HPQ 4% Cisco 32%Nokia-Siemens 12% Nortel 3% Nortel 8%Ericsson 10% 3 COM 2% Radware 7%NEC 2% Foundry 2% Foundry 7%Others 26% Extreme networks 2% Others 13%

Central Office Switch

$ 5 billion

Layer 2 & 3 Switch

$ 15.2 billion

Layer 4 - 7 Switch

$ 0.8 billionSource: Lehman Brothers Research

Add-drop Multiplexer (ADM): A multiplexer and a router for wavelength-division multiplexing systems. The device is capable to “Add” wavelength channels to existing signals or “Drop” off more channels. They are also known as optical add-drop multiplexers.

Digital Cross Connect: Circuit-switched equipment that allows DS0 data to be multiplexed into higher-level TDM signals like DS1. Cross-connect equipment is similar to add-drop multiplexers but do not perform add-drop functions. SONET/SDH cross-connects are digital cross-connect systems (DCS) and next generation products are optical cross-connects (OXC).

Digital Loop Carrier (DLC): This type of carrier digitizes and multiplexes signals carried on the local loops onto a single stream on a DLC segment. DLC is also known as pair-gain device.

Figure 50: DLC and OLT Market Size and Shares

Alcatel-Lucent 27%Tellabs 13%Huawei 12%Sumitomo 11%Eric- Marconi 6%

$ 2.7 billion

DLC/FTTP OLT


Concentrator: A device that consolidates low-speed circuits into a high-speed circuit with an intention of efficiently utilizing the limited network resources. Leased Line: A transmission line that is reserved for private use.

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Network Interface Card (NIC): A unit that acts as an interface between a computer and the network cable. It is also known as a LAN adaptor. PCMCIA: PCMCIA stands for "Personal Computer Memory Card International Association. It is a peripheral interface designed for laptops/computers. There are 3 main types of PCMCIA cards: Type I: 16 bit interface and used for memory devices like FLASH, RAM. Type II: 16 or 32 bit interface such as a modem or TV cards. Type III:16 or 32 bit interface such as a Hard disk drives. Node: An access point or a point on the network where there is a router or switching equipment. Converter: A device that coverts analog signals to digital signals. They are also called as A/D converters.

Digital Signal Processor (DSP): The main function of DSP is to remove any noise or compression of signals. DSPs ensure quality is maintained during transmission and allows proper recreation of a signal. Before signal processing, an analog signal is first converted to digital before passing through a DSP.

Figure 51: Transmission Process


Passive Components: A passive component is a component that cannot produce electrical energy but may consume electrical energy. Some passive components used in telecom equipments include:

• Connectors: Link devices together in a circuit. • Resistors: Regulate voltage and current levels in a circuit • Capacitors: Energy storage devices that can also do frequency variation

and filtering functions.

Twisted Pair: In this type of cabling, the two wires are wound together. This method helps in canceling out the electromagnetic interference (EMI) from external sources and also lowers the amount of crosstalk from neighboring wires. Twisted pair is mainly used in telephone networks.

AnalogSignal

A to D Converter

Digital Sig. Processor

D to A Converter

AnalogSignal

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August 21, 2007 65

Unshielded Twisted Pair (UTP): UTP cables are not shielded cabling. The lack of shielding provides a high degree of flexibility. Radiation generated during high speed transmission is released and reduces interference. UTP is mainly used in computer networking.

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Carrier Network and Equipment Terminology

Central Office: The main hub of a telecom carrier that includes telephone switches that terminate all the lines into an assigned area. Telephone Exchange: A switch known as wire-center in some developed markets.

Trunk: A circuit between telephone switchboards or other switching equipment that supports large amount of traffic.

Trunk lines: Telephone lines that link a PBX to the telephone provider. Public Switched Telephone Network (PSTN): The global network of circuit-switched telephone carriers. The PSTN has evolved from a fixed-line analog telephone network to a digital network that includes termination for mobile phones. Post Telephone and Telegraph Administrations (PTT): Government organizations that are responsible for postal mail, telegraph, and telephone services. In many countries, the former government-monopoly PTT has been partially or completely privatized. Plain Old Telephone Service (POTS): A term used to describe traditional voice telephony service. Some of the modern services that became available to basic wireline telephony subscribers are voicemail, caller ID, call waiting, and conference calling facility.

Figure 52: A typical Traditional Telephone Network

Source: Wikipedia, AT&T

Private Branch Exchange (PBX): A private telephone exchange that serves a particular office. This exchange is connected to a public-switched telephone network (PSTN) and can handle calls between extensions as well as connections to the PSTN. It is also called as Private Automatic Branch Exchange (PABX) or Electronic Private Automatic Branch Exchange (EPABX).

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August 21, 2007 67

Figure 53: PBX Equipment Market Shares and Size

Avaya 20%Siemens 17%Nortel 11%Cisco 9%Alcatel 8%NEC 7%

Total PBX

$ 7.2 billion Source: Lehman Brothers Research

Class 4 switch: A switch that connects long distance lines in the Public Switched Telephone Network (PSTN) to connect with telephone company offices. Class 5 switch: A switch that directly serves subscribers. Class 5 switches usually utilize hardware for the switching. Softswitch: A device in a telephone network which connects calls from one phone line to another through software. Older switches used hardware to carry out switching. Next Generation Networking (NGN): A single network that transports services (voice, data, and all sorts of media such as video) by putting all the data into packets. A NGN uses Internet Protocol.

Figure 54: Next Generation Network

Source: Telecordia, Lehman Brothers Research

Incumbent Local Exchange Carrier (ILEC): A LEC that is an incumbent and has a dominant position in the market.

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Competitive Local Exchange Carrier (CLEC): A new telecom operator that competes against the ILECs for customers. There are both facilities based CLECs that build out their own networks and non-facilities based CLECs that lease network access on a wholesale basis from the ILEC and resells telecom services to its customers. Data Local Exchange Carrier (DLEC): A CLEC that specializes in DSL services. A DLEC usually leases lines and resells them to Internet Service Providers (ISPs). Regional Bell Operating Company (RBOC): The seven regional telco companies formed to focus on a specific region after the splitting up of AT&T in US in 1984. The initial seven “Baby bells” were Ameritech, Bell Atlantic, BellSouth, NYNEX, Pacific Telesis, Southwestern Bell and US West. Over the past 10 years, these companies have merged again to form three remaining companies: AT&T, Verizon, and Qwest. Interexchange Carrier (IXC): A long-distance telephone company that carries voice traffic between telephone exchanges.

Figure 55: A Carrier and Enterprise Network Connected Together


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August 21, 2007 69

Internet-related Terminology

Internet: The worldwide publicly accessible network that uses the standard IP protocol for communications. Internet2: A high-speed internet network used by government, academic and research. It is also known as UCAID (University Corporation for Advanced Internet Development).

Intranet: A private computer network within an organization that uses internet protocol.

IP (Internet Protocol): A set of rules (protocol) regarding the transfer of packets over the internet ISP (Internet Service Provider): An Internet service provider gives its customers’ access to the Internet and related services. Initially, most ISPs were run by the existing wireline companies. Portal: A web-site that acts as an access point to other sites on the internet. Portals present information from diverse sources in a unified way. Some examples of internet portals include: Yahoo, MSN, and Google. Proxy Server: An intermediary server that requests other servers for required requests.

IP v4: The fourth iteration of the Internet Protocol (IP) and is the first version of internet protocol to be widely deployed. IPv4 uses 32-bit (4-byte) addresses which translates to 4,294,967,296 possible unique addresses. However, some of the addresses are reserved for special purposes such as private networks. With the increase in internet subscribers, the number of available new addresses is declining. IPv6 is expected to resolve the problem of limited number of internet addresses. IP v6: The successor for IPv4 which support almost an unlimited number of addresses. IP v6 is still in development. Voice-Over IP: VoIP is the routing of voice conversations over the Internet using internet protocol.

Internet Telephony: Using voice over IP to make telephone calls using the public internet.

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Figure 56: Carrier VOIP and IP Telephony Market Share and Size

Nortel 17% Avaya 19%Cisco 11% Siemens 14%Nokia-Siemens 9% Cisco 13%Huawei 8% Nortel 12%Sonus Networks 6% Alcatel 7%Ericsson 6% NEC 6%

Ent IP Telephony

$ 5.4 billion

Carrier VoIP

$ 3.4 billion Source: Lehman brothers Research

Skype: Skype is company that provides voice-over internet protocol (VOIP) service. Skype operates on a peer-to-peer model, rather than the more traditional central server model. In other words, a user directory is not stored at a centralized location but distributed among various points in the network. Skype was acquired by eBay in September 2005. MIME (Multi-Purpose Internet Mail Extensions): An internet email standard that allows attachments to be included with an email.

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August 21, 2007 71

Various Telecom Organization

Telecom Industry Organizations: International Telecommunications Union (ITU): An international organization that governs standardization and regulation for the radio and telecommunications industry. The ITU is composed of three main bureaus: Telecommunications Bureau (ITU-T) that coordinates standards Radio communications Bureau (ITU-R) that regulates allocation of radio frequencies Development Bureau (ITU-D) that creates policies, regulation and provides training programs in developing countries.

American National Standards Institute (ANSI): A private, nonprofit organization that sets standards for products, services, processes, systems, and personnel in the United States. The organization also coordinates US standards with international standards so that American products can be used worldwide. European Telecommunications Standards Institute (ETSI): An independent, non-profit organization that produces telecommunications standards. These standards have been adopted across the world (but exclude the U.S. and Japan). The ETSI also ensures interoperability between standards, such as Integrated Services Digital Network, GSM and UMTS. Institute of Electrical and Electronics Engineers (IEEE): A nonprofit association of scientists and engineers founded in 1963. A key function is to set global standards for computing and communications. It currently oversees about 900 active IEEE standards and has 400 more in development. CDMA Development Group (CDG): An international consortium of companies that are leading the adoption and evolution of 3G CDMA wireless systems around the world. The CDG is comprised of CDMA service providers and manufacturers, application developers and content providers. By working together, CDG’s members hope to ensure interoperability among systems, while expediting the availability of 3G CDMA technology to consumers. CDG was founded in December 1993.

WiMAX Forum: An organization formed to certify and promote the compatibility and interoperability of broadband wireless products based upon the harmonized IEEE 802.16 standard. One of the WiMAX Forum’s goals is to accelerate the introduction of the technology into the marketplace. The Forum was established in June 2001 and has more than 420 members comprising the majority of operators, component and equipment companies in the WiMAX ecosystem.

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72 August 21, 2007

Common Public Radio Interface (CPRI): An industry group aimed at defining publicly available specification for the key internal interface of radio base stations between the Radio Equipment Control (REC) and Radio Equipment (RE). Companies cooperating to define the CPRI Specification include Ericsson AB, Huawei Technologies Co., Ltd, NEC Corporation, Nortel Networks SA and Siemens AG Infrared Data Association (IrDA): An association that defines the physical specifications communications protocol standards for short-range exchange of data over infrared light. The IrDA maintains a standard for infrared data transmission (up to 4 Mbps). Location Interoperability Forum (LIF): Founded by Ericsson, Motorola and Nokia in October 2000 to achieve the goal of providing global location-based services on wireless networks and terminals. Regulators & other bodies in the Asia Pacific Region: Australia

• Australian Competition and Consumer Commission (ACCC): An independent authority in Australia that was formed in 1995 to administer the Trade Practices Act of 1974. The ACCC promotes competition and fair trade in the market place to benefit consumers, businesses and the community. The ACCC also regulates national infrastructure services such as the telecommunications industry.

• Australian Communications and Media Authority (ACMA): The regulator of

broadcasting, radio communications, telecommunications and online content in Australia. The ACMA was formed by merging two previous regulatory bodies--the Australian Communications Authority and the Australian Broadcasting Authority.

China

• Ministry of Information Industry (MII): The communications and IT regulator in the Peoples Republic of China. The MII handles telecom industry-specific issues and provides rulings on items such as calling party pays, 3G licensing terms, telecom tariffs, and VAS agreements, etc.

• National Development and Reform Commission (NDRC): The NDRC is the

controller of macroeconomic policy for the Chinese government and its policies impact the fundamentals of the telecommunication industry. More specifically, the NDRC is responsible for designing long-term economic development plans and has responsibility for large-scale capital investment projects including 3G deployment.

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August 21, 2007 73

• State Assets Supervision and Administration Commission (SASAC): A regulatory body in China that has regulatory power over all state-owned enterprises (SOEs). Since all the telecom operators in China are state-owned enterprises, they fall under the management of SASAC. Recently, SASAC reiterated its control over six key industries in China (including telecommunications) and its opinion will be crucial to any potential industry restructuring.

Hong Kong

• Office of the Telecommunications Authority (OFTA): The regulator and competition authority for telecommunications industry in the Hong Kong Special Administrative Region.

India

• Telecommunications Regulatory Authority of India (TRAI): The main telecommunications regulatory body in India. TRAI is an independent regulator that was established in 1997. The main functions of TRAI are to make recommendations on licensing issues, competition, spectrum, levy fees and charges on operators, and perform administrative and financial functions.

• The Department of Telecom (DOT): DOT is part of the Ministry of Communications and Information Technology in the executive branch of the Government of India. The DOT makes major policy decisions in India related to the telecom industry. More specifically, the DOT is responsible for the granting of licenses, managing spectrum allocation, and forming regulatory policies.

Indonesia

• Badan Regulasi Telekomunikasi Indonesia (BRTI): The telecommunications regulator in Indonesia.

Korea

• Ministry of Information and Communications (MIC): The communications and IT regulator in South Korea.

• Fair Trade Commission (FTC): It is South Korea's regulatory authority for economic competition. It was established in 1981 within the Economic Planning Board.

Malaysia

• Malaysian Communications and Multimedia Commission (MCMC): The regulator for the converging communications and multimedia industry in Malaysia. The minister in charge of telecom policies is the Energy, Water and Communications Minister.

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The Philippines • National Telecommunications Commission (NTC): The communications

regulator for information and communications technology in the Philippines. This agency is part of the Department of Transport and Communication.

Singapore

• Infocomm Development Authority of Singapore (iDA): iDA is a statutory board of the Singapore government, operating under the Ministry of Information, Communications and The Arts (MICA). The iDA is a single agency for integrated planning, policy formulation, regulation and industry development of the IT and telecommunications sectors in Singapore.

Taiwan

• National Communications Commission (NCC): It is the regulator for telecommunications, broadcast radio and TV in Taiwan. The NCC was established in Feb 2006 through the merging of DGT and the Department of Broadcasting Affairs of Government Information Office (GIO), which regulated broadcasting.

Thailand

• National Telecommunications Commission (NTC): The telecom regulator in Thailand. It is Thailand’s first independent regulator. The government is in process of forming a regulator National Broadcasting Commission (NBC) for the media sector in Thailand.

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August 21, 2007 75

Appendix

Sources for Data

For all the worldwide market share and size: Dataquest, Dell’Oro, Infonetics, RHK, Synergy and Lehman Brothers.

Althosbooks.com

Broadband services forum

Converge Digest

FCC

Flexwatch

Frost and Sullivan

Gartner

Howstuffworks

IEC.org

Infocellular

IST-Bread

ITU

Linksys

OFCOM

RIMM

Starband

TEC

Techhweb

Telecordia

Three-g.net

Wikipedia

WIMAX forum

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76 August 21, 2007

Lehman Brothers Global Telecom Team

Figure 57: Global Telecoms Team

Asian Telecom Services & Equipment Wireless EquipmentJeff Kvaal 1.212.526.2216

Paul Wuh 852.2252.6182 Tim Luke 1.212.526.4993Sundeep Bihani 852.2252.6181 Noelle Swatland 1.212.526.3370Danny Chu 852.2252.6209 Amir Rozwadowski 1.212.526.4043Sachin Salgaonkar 852.2252.1400Stanley Yang 822.317.5168 Data Networking & Wireline EquipmentSophia Yoon 822.317.5165 Inder Singh 1.212.526.9085Lei Tang 852.2252.6134 Tim Luke 1.212.526.4993Lydia Ho 852.2252.6204 Scott McCabe 1.212.526.0866

Lynn Um 1.212.526.8109U.S. Telecom ServicesTom Seitz 1.202.452.4717 Emerging Communications TechnologiesBrett Feldman 1.202.452.4735 Marcus Kupferschmidt 1.212.526.5499Nick Netchvolodoff 1.202.452.4748 Jack Monti 1.212.526.3063Patrick Rien 1.202.452.4708Francisco NavarroSertich 1.202.452.4737Roshan Raj 1.212.320.7869 European Telecom Equipment

Stuart Jeffrey 44.20.710.24709European Telecom Services Andrew Gardiner 44.20.710.28834Graeme Pearson 44.20.710.21602 Ajay Ahuja 44.20.710.24307Karen Egan 44.20.710.22438Christian Kern 44.20.7102.1993James Britton 44.20.7102.4571 Satellite NavigationHenrik Nyblom 44.20.7102.1871 Noelle Swatland 1.212.526.3370Hugh McCaffrey 44.20.7102.4272 Andrew Gardiner 44.20.7102.8834Roshan Ranjit 44.20.7102.2994 Stuart Jeffrey 44.20.7102.4709Source: Lehman Brothers

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Index

Figure 58: Index Topic Page No Topic Page No10 Base- T 55 Calling P arty P ays (CP P ) 103G license proces s 26 Capacitors 64802.11 (WiF i) 29 Carrier Wave 60802.11a 29 CDMA development group (CDG) 71802.11b 29 CDMA Subscriber Identity Module (CS IM) 19802.11g 29 CDMA2000- 1x R T T 6802.11n 29 CDMA2000- E V -DO 6ACCC 72 Cell S ites 14Acces s point (AP ) 36 Cell Split t ing 12Acces s , L as t m ile, L ocal L oop 37 Cell- F i 34ACMA 72 Central Office 66Active Infras tructure Sharing 16 Churn rate 10Active Optical Components 46 Circuit 54Active telecom infras tructure 16 Circuit - Switched Network 54Add-drop multiplexer (ADM) 63 Clas s 4 switch 67ADSL 2+ 41 Clas s 5 switch 67Advanced Mobile P hone Service (AMP S ) 3 Code Divis ion Multiple Acces s (CDMA) 5American National S tandards Ins titute (ANS I) 71 Code Divis ion Multiple Acces s (CDMA) 57Amplifier 47 Common P ublic R adio Interface (CP R I) 72Anglo-Dutch auction 26 Community Antenna T elevis ion (CATV ) 43Ascending auction 26 Competit ive L ocal E xchange Carrier (CL E C) 68Asymmetrical Digital Subscriber L ine (ADSL ) 40 Concentrator 63AT M 61 Conditional Acces s Sys tem (CAS ) 43Attenuation 52 Connection-Oriented network 54Average revenue per unit (AR P U) 10 Connectors 64Average selling price (ASP ) 10 Contactles s card 19Average wholesale price (AWP ) 10 Converter 64Backbone 62 Cos t per gros s add (CP GA) 10Backhaul 14 Cros s talk 53Badan R egulas i T elekomunikas i Indones ia (BR T I) 73 Cus tomer- prem ises equipment (CP E ) 37Base s tation controller (BSC) 15 Dark F iber 46Base s tation s ubsys tem (BSS ) 15 Data L ocal E xchange Carrier (DL E C) 68Base T ransceiver S tation (BT S ) 15 Decibel 52Baseband 61 Dense Wave Divis ion Multiplexing (DWDM) 57Baud 37 Dial-Up Connection 39Beauty Contes t 26 Digital Audio Broadcas ting (DAB) 51Billing and operational s upport s ys tem (BOSS ) 15 Digital Cros s Connect 63Binary R un- time E nvironment for Wireles s (BR E W) 35 Digital L oop Carrier (DL C) 63Bit 37 Digital Multimedia Broadcas t (DMB) 22Blackberry 19 Digital S ignal P roces sor (DSP ) 64Bluetooth 35 Digital Subscriber L ine Acces s Multiplexer (DS L AM) 42Bridges 62 Digital V ideo Broadcas ting Handheld (DVB-H) 21Broadband 39 Digital V ideo Broadcas ting T erres trial (DVB- T ) 23Broadband over power lines (BP L ) 39 Digital video recorder (DVR ) 44Broadband Wireles s L ocal L oop (B -WL L ) 39 Direct- s equence spread- spectrum tech (DSSS ) 59Broadband- ISDN 56 Dispers ion 53Bundling 10 DOCSIS 44Bus ines s s upport s ys tem (BSS ) 15 Downlink 51Byte 37 DS1/T 1 55Cable Modem T erm ination Sys tem (CMT S ) 43 Dual mode phone/handsets 18

Source: Lehman Brothers

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78 August 21, 2007

Figure 58: Index (Continued) Topic Page No Topic Page NoDual- band mobile phones 18 Handoff 12Dual- band network 18 Hard Handoff 12Duplex 54 HDSL 2 41Dutch Auction 26 High Bit R ate Digital Subscriber L ine (HDSL ) 41E - cash (electronic cash) 28 High speed downlink packet acces s (HSDP A) 5E nglis h Auction 26 High Speed OF DM P acket Acces s (HSOP A) 5E nhanced Data R ates for Global E volution (E DGE ) 4 High- definit ion televis ion (HDT V ) 45E P OC 32 21 High- Speed P acket Acces s (HSP A) 5E rlang 10 Home L ocation R egis ter (HL R ) 15E thernet 55 Hop 62E T S I 71 Hot spot 30E V -DO R evis ion B 7 HSUP A (high- speed uplink packet acces s ) 5E V -DO R evis ion C 7 Hub/R epeater 62E V -DO R evis ion-A 6 Hybrid (802.11a + g) 29E -wallet (electronic wallet) 28 Hybrid F iber Coax (HF C) 44F 2M subs titution ( fixed to mobile s ubs titution) 11 IE E E 71F acilit ies - based Operators 11 i-mode 9F air T rade Commis s ion (F T C) 73 IMS ( IP Multimedia Subsys tem ) 60F ar- end Cros s talk 53 IMT -2000 9F as t E thernet 55 IN ( Intelligent Networking) 57F DD ( frequency- divis ion duplex) 54 Incumbent L ocal E xchange Carrier ( IL E C) 67F eliCa 19 Infocomm Development Authority of S ingapore ( iDA) 74F em tocells 14 Infrared Data As sociation ( IrDA) 72F iber 46 Integrated Digital E nhanced Network ( iDE N) 4F iber Data Dis tributed Interface (F DDI) 55 Integrated Services Digital Broadcas ting ( ISDB- T ) 22F iber to the Building (F T T B) 47 Interconnection 11F iber to the Curb (F T T C) 47 Interconnection rate 11F iber to the Home (F T T H) 47 Interexchange Carrier ( IXC) 68F iber to the Node (F T T N) 47 International mobile equipment identifier ( IME I) 19F iber to the P rem ise (F T T P ) 47 International mobile s ubscriber identity ( IMS I) 19F ixed R adio Acces s (F R A) 36 International Mobile T elephony Advanced ( IMT -A) 9F ixed WiMAX (802.16-2004) 30 International T elecommunications Union ( IT U) 71F orward L ink Only (F L O) 22 Internet 69F ourth generation (4G) 9 Internet P rotocol T V ( IP T V ) 49F rame R elay 56 Internet T elephony 69F reedom of Mobile Multimedia Acces s (F OMA) 9 Internet2 69F requency Divis ion Multiple Acces s (F DMA) 56 Intranet 69F requency Divis ion Multiplexing (F DM) 56 IP ( Internet P rotocol) 69F requency reuse 12 IP v4/ IP v6 69F requency- hopping spread spectrum (F HSS ) 59 IS ( Interim S tandard) 4F T T x 47 ISDN ( Integrated Services Digital Network) 56F ull- duplex 54 ISDN Digital Subscriber L ine ( IDS L ) 41G.L ite 41 IS P ( Internet Service P rovider) 69Gateway 62 J 2ME ( J ava 2 Micro E dition) 28General P acket R adio Service (GP R S ) 4 J oint P hotographic E xperts Group ( J P E G) 45Global mobile personal comm (GMP CS ) 51 L asers 47Global P os itioning Sys tem (GP S ) 51 L ayer 2 Switch 62Global Sys tem for Mobile Communications (GSM) 4 L ayer 3 Switch 62Half- duplex 54 L ayer 4 Switch 63 Source: Lehman Brothers

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Figure 58: Index (Continued) Topic Page No Topic Page NoL E AP 33 Narrowcas ting 57L eased L ine 63 National Communications Commis s ion (NCC) 74L ine- of- S ight 53 National Development & R eform Commis s ion (NDR C) 72L it F iber 46 National T elecommunications Commis s ion (NT C) 74L ocal Area Network (L AN) 57 National T elecommunications Commis s ion (NT C) 74L ocal loop unbundling (L L U) or Unbundled Acces s 37 Near F ield Communication T echnology (NF C) 33L ocal multipoint dis tribution service (L MDS ) 39 Net new connections (a.k.a. Net adds ) 11L ocation Interoperability F orum (L IF ) 72 Network Interface Card (NIC) 64L ocation- based services (L BS ) 51 Next Generation Networking (NGN) 67L ong T erm E volution (L T E ) 5 Node 64L ong- haul Networks 57 OF DMA 34Malays ian Comm & Multimedia Commis s ion (MCMC) 73 Off net (off network calls ) 11Mas ter tone or T rue tones 23 Office of the T elecommunications Authority (OF T A) 73M-commerce (Mobile commerce) 28 On net (on network calls ) 11Mesh network 59 Open Sys tem Interconnection (OS I) 58Metropolitan Area Network (MAN) 57 Operations Support Sys tems (OSS ) 15Microwave 35 Optical Carrier (OC- x) 46MIME (Multi- P urpose Internet Mail E xtens ions ) 70 Optical Components 46Minis try of Information and Communications (MIC) 73 Optical L ine T erm inals (OL T ) 49Minis try of Information Indus try (MII) 72 Optical Network T erm ination (ONT ) 49Minutes of use (MOUs ) 11 Optical Network Unit (ONU) 49Mobile broadband wireles s (802.20) 33 Optical R eceiver 47Mobile J ava 28 Original des ign manufacturer (ODM) 21Mobile Middleware 28 Original equipment manufacturer (OE M) 21Mobile Network Operator (MNO) 11 Orthogonal F requency-Divis ion Multiplexing (OF DM) 34Mobile Number P ortability (MNP ) 11 P 2P (peer- to- peer) 60Mobile portal 28 P acket 58Mobile T V 21 P acket- switched network 54Mobile virtual network operator (MVNO) 11 P alm OS 21Mobile WiMAX (802.16e-2005) 31 P as s ive Components 64Mobisode 51 P as s ive Infras tructure Sharing 16Modulation 60 P as s ive Optical Components 47Monophonic 23 P as s ive Optical network (P ON) 48Motion P icture E xperts Group (MP E G) 45 P as s ive telecom infras tructure 16M-payment (mobile payment) 28 P CMCIA 64MP E G-2 45 P enetration R ate 12MP E G-3 45 P ermanent V irtual Circuit (P VC) 56MP E G-4 45 P ersonal acces s s ys tem (P AS ) 3Multi Service Operator (MSO) 43 P ersonal Communications Service (P CS ) 3Multicas t 57 P ersonal Digital As s is tant (P DA) 20Multichannel Multipoint Dis tributed Service (MMDS) 43 P ersonal Digital Cellular (P DC) 3Multimedia Broadcas t Multicas t Service (MBMS) 34 P ersonal video recorder (P VR ) 44Multimedia Mes saging Service (MMS) 8 P icocell 14Multi-mode fiber 46 P lain Old T elephone Service (P OT S ) 66Multiple input/multiple output (MIMO) 35 P oint of P resence (P OP ) 58Multiple- input s ingle- output (MISO) 35 P oint- to- P oint P rotocol (P P P ) 58Multiplexing 56 P oint- to- P oint T unneling P rotocol 58Multiprotocol label switching (MP L S ) 60 P olyphonic 23Naked DSL or Dry L oop DSL 42 P ortable navigation device 53Narrowband 39 P ortal 69 Source: Lehman Brothers

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Figure 58: Index (Continued) Topic Page No Topic Page NoP os t T elephone and T elegraph (P T T ) 66 Symbian OS 20P owerband 39 Symmetrical Digital Subscriber L ine (SDSL ) 41P ower- line internet 39 Synchronous digital hierarchy (SDH) 58P referential R oaming 12 Synchronous Optical Networking (SONE T ) 58P rivate Branch E xchange (P BX ) 66 T CP (T ransm is s ion Control P rotocol) 60P rotocol 59 T Dtv 23P roxy Server 69 T elecom Infras tructure Sharing 16P ublic Data Network (P DN) 58 T elecom regulatory authority of India (T R AI) 73P ublic Switched T elephone Network (P ST N) 66 T elematics 51P ush mail 20 T elephone exchange 66P ush to- T alk (P T T ) 13 T erm ination R ate 12Quadrature Amplitude Modulation (QAM) 61 T erres trial T runked R adio (T E T R A) 51Quadrature P hase- s hift keying (QP SK) 61 T he Department of T elecom (DOT ) 73R adio- frequency identification (R F ID) 33 T ime Dis tance of Arrival (T DOA) 51R ate Adaptive Digital Subscriber L ine (R ADSL ) 41 T ime divis ion duplex (T DD) 54R efilling/T op- up 11 T ime Divis ion Multiple Acces s (T DMA) 57R egional Bell Operating Company (R BOC) 68 T ime Divis ion Multiplexing (T DM) 56R emote Acces s 37 T ime Divis ion- Synchronous CDMA (T D- SCDMA) 7R emote T erm ination Unit (R T U) 37 T ransceiver (T R X ) 15R emovable User Identity Module (R -UIM) 19 T ri- band mobile phones 18R es is tors 64 T runk 66R esource reservation protocol (R R P ) 60 T runk lines 66R F ID tag 34 T wis ted P air 64R ing back tones 23 UDP (Uns igned Datagram P rotocol) 60R ingtones 23 Ultra Mobile Broadband (UMB) 34R outer 62 Universal Mobile T elephony Sys tem (UMT S ) 4R outer P rotocol 60 Unlicensed mobile acces s (UMA) 34SASAC 73 Unshielded T wis ted P air (UT P ) 65Sealed- bid Auction 26 Uplink 51Short Mes saging Service (SMS ) 8 Value- added service (VAS ) 13S ingle carrier F DMA (SC- F DMA) 34 Very High Data R ate DSL (VDSL ) 41S ingle- input multiple- output (S IMO) 35 Very Small Aperture T erm inal (VSAT ) 52S ingle- input s ingle- output (S ISO) 35 Video on demand (VoD) 44S ingle-mode fiber 46 Videophone 45Skype 70 Virtual Circuit 61Smart antenna 14 Virtual P rivate Network (VP N) 60Smart Bro 32 Vis itor L ocation R egis ter (V L R ) 15Smartphones 20 Voice-Over IP 69SMS gateway 16 WAP Gateway 36Soft Handoff 12 WDM (Wavelength Divis ion Multiplexing) 57Softswitch 67 Wide Area Network (WAN) 57SON-Acces s 33 Wideband Code Divis ion Multiple Acces s (W-CDMA) 4Spatial divis ion multiple acces s (SDMA) 34 WiMAX 30Spectrum/bandwidth 12 WiMAX F orum 71Spectrum - s haring 16 Wireles s Application P rotocol (WAP ) 28Spread- Spectrum T echnology 59 Wireles s broadband (WiBro) 32SS7 (S ignalling Sys tem 7) 59 Wireles s L ocal Area Network (WL AN) 36S tandard- definit ion televis ion (SDT V) 45 Wireles s local loop (WL L ) 36S treaming 52 Wireles s Mark- up L anguage (WML ) 28Subscriber acquis it ion cos t (SAC) 12 xDSL 39Subscriber identity module (S IM) Card 18 ZigBee 34Switch 62 Source: Lehman Brothers

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Guide to Telecom