NITA’s mobile LRAIC model
Summary of the draft demand and network model for all parties
Copenhagen, 30 and 31 August 2007
2
Agenda
Activities and timetable
Draft demand and network model – industry summary
Operator-specific models
Next steps
3
Current activities
� Analysys has produced the first version of the LRAIC model
w to be distributed to industry parties as the first of three consultations on the model
� NITA will release the model to the industry parties on 3 September, at the start of the hearing process
� NITA has also published accompanying conclusions on the model specification consultation
� Analysys will commence work on the next phase of data review (top-down data and/or top-down models)
5
The timetable has been revised to accommodate additional industry interaction
Operators have eightweeks with the draft demand and network
model
6
The timetable has been revised to accommodate additional industry interaction
Top-down cost data is due next week, top-
down models by 1 October 2007
7
The timetable has been revised to accommodate additional industry interaction
We are due back in Copenhagen in six weeks’ time to:
(1) Review top-down submissions (2) Discuss the model consultation with each operator
8
The timetable has been revised to accommodate additional industry interaction
We will bring together:
(1) Draft demand and network model(2) Operator responses(3) Cost data submissions(4) A possible further visit to Copenhagen
… and respond with a revised draft (the ‘draft cost model’) by Christmas
9
Activities and timetable
Draft demand and network model – industry summary
Operator-specific models
Next steps
10
Summary of the draft demand and network model for all industry parties
� We are presenting this summary and discussion to all of the mobile operators
w it may also be made public by NITA, distributed to MVNOs, etc.
� An operator-specific annex containing confidential parameters and model outputs will follow for each of the four mobile network operators
w we have not developed an MVNO version yet, although will be working on one in the coming few weeks. This version is likely to utilise only a few network assets
11
Sequence of model components
1. Subscribers
2. Voice traffic
3. Data traffic
4. Operator share
5. Voice demand drivers
6. Data demand drivers
7. Element interactions
8. Coverage drivers
9. Network roll-out
10. Radio network
11. Backhaul network
12. BSC and BSC-MSC
13. MSC, TSC, HLR
14. Backbone network
15. SMSC, GSNs
16. Expenditure rules
17. Unit costs
18. Incremental costs
12
We forecast mobile penetration based on the level at the end of 2006
� Registered plus hosted subscribers amount to 6.2 million subscribers – 115% penetration
� Long-term penetration is accordingly forecast at 120%
� In addition, a number of ‘non-personal’ SIMs are:
w included in the model for HLR dimensioning
w excluded from the traffic-per-subscriber calculations 0%
20%
40%
60%
80%
100%
120%
140%
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
SIM
pen
etra
tion
1. Subscribers
Personal mobile penetration
Source: NITA, operator data, Analysys
13
The total number of SIMs increases to over 7 million in the long term
� The forecast of SIM penetration is relatively static given recent growth in subscriber numbers
� The eventual penetration level is highly debatable, and depends upon:
w definition of ‘active’ subscribers
w the number of dual-SIM and dual-operator individuals
w non-personal SIMs (cabin control and industrial)
0
1
2
3
4
5
6
7
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
Yea
r end
sub
scrib
ers
(mill
ions
)
Registered/hosted Non-personal SIMsNational population
1. Subscribers
Subscription levels
Source: NITA, operator data, Analysys
14
The model includes the option to migrate from 2G to 3G, and from 3G
� Established operators exhibit approximately 1% migration to 3G at end 2006
� A migration profile is defined in the model – applicable to both 2G and 3G
� The profile results in a 2G shut-down date of 2012 (2013 for Telia)
� There is also the option of a 3G shut-down date of 2023
1. Subscribers
Migration profile
Source: Analysys
0
10
20
30
40
50
60
70
80
90
100
1 2 3 4 5 6 7 8
Year
Mig
ratio
n pr
ofile
(%)
15
Voice traffic is calculated on a usage-per-subscriber basis, forecast for each operator
� The model contains an indicative medium-usage growth forecast
w projected from actual 2006 values for each operator
� The rapid growth in usage from 2004 to 2006 stands out as a recent phenomenon
� Additional scenarios can easily be added to the model by duplicating the scenario sheet and referencing the sheet name (in the control panel)
2. Voice traffic
0
5
10
15
20
25
1992
1995
1998
2001
2004
2007
2010
2013
2016
2019
2022
Min
utes
(bill
ions
)2G outgoing, on-net, VMS minutes3G outgoing, on-net, VMS minutes2G incoming minutes3G incoming minutes
Total ‘medium-growth’ voice usage, including migration
Source: model input data, Analysys
16
Data usage is forecast in a similar way: per-subscriber, operator-specific, medium-growth
� Data traffic statistics are:
� Year 2006
w SMS 17 billion
w PS data 40 000 GB
w Video 5 million mins
� Year 2018 peak
w SMS 41 billion
w PS data 460 000 GB
w Video 70 million mins
0
50
100
150
200
250
300
350
400
450
500
1992
1995
1998
2001
2004
2007
2010
2013
2016
2019
2022
Vid
eo, p
acke
t dat
a
0
5
10
15
20
25
30
35
40
45
SM
S m
essa
ges
2G packet data (terabytes)3G packet data (Release 99) (terabytes)3G video (million minutes)2G SMS messages (billion)3G SMS messages (billion)
3. Data traffic
Total ‘medium-growth’ data usage, including migration
Source: model input data, Analysys
17
Actual market share is modelled to evolve from 2007 onwards
� The draft model contains an indicative forecast of market share in which four operators evolve slowly to 25% share each
w Tele2 is included with Sonofon to total 25%
� The model also contains a static forecast market share where end-2006 proportions persist in the long run
� Forecast market share is a major factor in the level of cost over the long run, especially for Hi3G
4. Operator share
Market share by operator
Source: NITA, Analysys
0%
10%
20%
30%
40%
50%
60%
70%
1992
1997
2002
2007
2012
2017
2022
2027
2032
2037
Mar
ket s
hare
of s
ubsc
riber
s
TDC Sonofon Telia Hi3G Tele2
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The voice volume is converted to busy-hour load, according to operator characteristics
� The following parameters are inputs to the model, by operator
w proportion of traffic in weekdays (250 busy days per year)
w proportion of weekday traffic in busy hour
w average call duration
w call attempts per call
� Used to calculate busy-hour Erlang (BHE) and busy-hourcall attempts (BHCA) by service
5. Voice demand drivers
1.15Call attempts per call
30 secondsCall duration (to VMS)
1 ¾ minutesCall duration (to end user)
8%Busy-hour percentage
80%Weekday traffic proportion
Approximate average
Parameter
Source: operator data, Analysys estimates
19
Additional parameters and inputs are used to determine the peak data traffic drivers
� Busy days per year either weekdays (250) or weekends (115)
� SMS-specific busy-day and busy-hour percentages
� Cost allocation considers equivalence of 1150 SMS per minute, based on:
w 8×SDCCH channel per TCH
w 40 bytes per SMS
� Same busy-hour profile as voice
� 64kbit/s symmetric and guaranteed service
w equivalent to 4 CE
6. Data demand drivers
� Same busy-hour profile as voice
� Uplink/downlink proportion is assumed to be symmetric on average, e.g. MMS messaging is highly asymmetric per leg, but symmetric on average
� +12% IP overheads
� Cost allocation considers effective channel rate:
� GPRS 13.4kbit/s CS2
� Rel-99 3G 16kbit/s
SMS Packet data Video
20
The demand drivers are combined with routeing factors to determine network load
7. Element interactions
Source: Analysys estimates
21
The demand drivers are combined with routeing factors to determine network load
7. Element interactions
1:1:2 rule for in:out:on-net traffic
zero when the VMS answers the call
one for on-network national roaming legs (carried by TDC and Sonofon)
2G SMS and 2G packet data assumed to be carried in dedicated channel reservations
3G SMS assumed to be carried in signalling reservation
3G packet data has a scenario for adding to 3G radio load
Source: Analysys estimates
22
The demand drivers are combined with routeing factors to determine network load
7. Element interactions
All traffic on the radio network must travel from the BSC/RNC to the main switching
centres on transmission capacity
Source: Analysys estimates
23
The demand drivers are combined with routeing factors to determine network load
7. Element interactions
Interconnected traffic:incoming, outgoing off-net,
national roaming voice
Inter-switch traffic: an estimated/measured proportion of incoming,
outgoing and on-net voice
VMS traffic:deposits and retrievals
Same for 2G and 3G
Source: Analysys estimates
24
The demand drivers are combined with routeing factors to determine network load
7. Element interactions
Switch processing (BHms per CA):
Incoming = 10, Outgoing = 4, On-net = 4+10
SMS message = 2 per leg
Answered by VMS = -2
Location updates = 2 per handset
National roaming traffic also switched by both parties (off-network like VMS diverted)
Same for 2G and 3G
Outgoing/on-net SMS also handled by SMSCSource: Analysys estimates
25
NITA’s mast database, with operator data, has been used to specify details of coverage
� All operators recognise approximately 95% of Denmark as ‘rural’
w the main differences occur in the number and size of urban geotypes
� We have averaged across operator data and used the mast database to identify sites by geotype for each operator
8. Coverage drivers
Dense urban
Urban
Suburban
Rural
Dense urban
Urban
Suburban
Rural
4094495.75%Rural
14303.34%Suburban
3500.82%Urban
400.09%Dense urban
Size (sq. km)AreaGeotype
Source: operator data, Analysys
26
The mast database has some limitations, but is invaluable for coverage modelling
� Limitations include missing data points (which we have managed to resolve through post-processing of the database) and BTS start dates (which is inconsistent with the spectrum allocation)
� However, we have calibrated the theoretical radius of outdoor coverage using the mast database and operator data, and hexagonal modelling in MapInfo
8. Coverage drivers
MapInfo model of hexagonal outdoor coverage at each BTS
Source: operator data, NITA, Analysys
27
Theoretical coverage cell radii
� The hexagonal model of coverage used in MapInfo defines the theoretical outdoor coverage that can be achieved from each site, by geotype
� Operators provided outdoor coverage data (over time) to calibrate the hexagonal mapping model
� Cell radii:
w decrease with clutter
w decrease with frequency
8. Coverage drivers
Calibrated cell radii for outdoor coverage
Source: Analysys
0
1
2
3
4
5
6
7
8
9
10
Denseurban
Urban Suburban Rural
Theo
retic
al ra
dius
(km
)
900MHz 1800MHz 2100MHz
28
We have captured the difference between optimal and scorched-node radio coverage
� In an optimal, greenfield network, coverage would be achieved with the theoretical cell radius
� In reality, operators are constrained in the potential locations for BTSs, and must take a strategic decision about how well they fill the resulting gaps (by frequency)
� The ratio of the effective to theoretical coverage per site is the ‘scorched-node coverage coefficient’ and is always less than 1.00
8. Coverage drivers
Optimal locations of BTS
Sub-optimal locations of BTS
occurring in reality
Coverage models
Source: Analysys
29
The model rolls out separate 900MHz, 1800MHz and 3G-2100MHz networks
� The relevant model input is by three dimensions:
w by geotype
w by frequency
w by time (history + forecast)
� Historical coverage by operator is estimated or calculated from the mast database and operator data, using MapInfo
� Special site (indoor, tunnel) roll-out is also specified
� Coverage profiles are provided in the confidential annexes
9. Network roll-out
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Site deployments for coverage
� The primary spectrum used for coverage is defined for each operator (900MHz for TDC and Sonofon, 1800MHz for Telia, 2100MHz for Hi3G)
� Secondary spectrum coverage BTSs are deployed mainly on existing primary spectrum sites
w although some variation exists by operator/geotype
� 3G coverage deployed mainly on existing 2G sites
w although some variation exists by operator/geotype
� Deployment is predominantly tri-sectored to maximise coverage (some 1- and 2-sector deployments in rural areas with 900MHz)
10. Radio network
31
The number of radio-network BHE is applied to the coverage network, by geotype …� Capacity of 2G coverage
sectors is calculated, taking into account:
w amount of spectrum
w maximum reuse factor (12)
w cell-blocking probability (1–2%)
w BTS capacity (4 TRXs)
– subject to max. utilisation
w TRX capacity (8*n, less CCH and GPRS allocations)
– subject to max. utilisation
� Capacity of the 3G coverage sectors is calculated, taking into account:
w number of carriers (1–3)
w cell-blocking probability (1%)
w soft-handover margin (40%)
w NodeB capacity (15 kits)
– subject to max. utilisation
w channel-kit capacity (16 channel elements)
– subject to max. utilisation
10. Radio network
� BTS and TRX utilisation factors vary by operator, depending on the (strategic) trade-off between more TRXs or more sites
32
…and BHEs that cannot be supported by coverage sites require additional BTSs� The additional BTS deployed:
w are always tri-sectored
w utilise primary and/or secondary spectrum in a certain (average) proportion by geotype
– these proportions vary by operator
10. Radio network
33
Other radio network elements are dimensioned more straightforwardly
� A proportion of traffic (approx. 1%) is carried on special sites (indoor and tunnel sites). These are deployed with a fixed number of TRXs or CKs per site
w i.e. capacity elements not driven explicitly by traffic
� Site types are deployed according to a percentage input
10. Radio network
Own tower site Third-party tower site Third-party rooftop site
(blue shading denotes own equipment; grey shading denotes third-party assets)
Own monopole site
Source: Analysys
34
Separate 2G and 3G backhaul transmission is modelled using the same logical structure
� The backhaul requirement per site is calculated as n E1 units per site, based on channels at the BTS, plus a maximum utilisation factor
� A proportion of sites therefore use n E1 leased lines per site
� Remaining sites use part-filled 8Mbit/s microwave
� A proportion of (rural) sites are connected to an access node on the fibre backbone (ratio of 9 sites per node)
� Special sites just use 1×E1
11. Backhaul network
Backhaul network elements
BSC
8Mbit/s microwave (nE1 part-
filled)
AN
Special sites
n E1 leased lines per site on average
E1
E1 E1
Up to 9 BTS per
AN
Fibre backbone
1××××E1
Source: Analysys
35
BSC and RNC switches are dimensioned using radio network parameters
� BSC switches are dimensioned on the basis of:
w TRX capacity
w maximum utilisation
� A proportion of BSCs are modelled to be remote from MSCs
� The average traffic passing through these BSCs is carried on E1 links, provisioned on the fibre backbone
� RNC switches are dimensioned on the basis of:
w NodeB capacity
w Mbit/s throughput
w maximum utilisation
� Again, a proportion can be remote from the MSC layer
� Again, the average traffic passing through these RNCsis carried on E1 links, provisioned on the fibre backbone
12. BSC and BSC–MSC
36
In the 2G network, we model a single type of MSC switch – driven by processing load� The 2G MSC has a processing capacity (in BHCA),
subject to maximum utilisation
� The number of MSCs calculated by this method is used to drive the topology of the switching network
13. MSC, TSC and HLR
37
In the 3G network, the MSC layer is modelled with two types of switch: server and gateway
13. MSC, TSC and HLR
Mobile switching server (MSS) Media gateway (MGW)
3G BHCAsMSS processor maximum utilisation
MSS processor capacity Number of MSSs
Switching topologySwitching topology look-up table
Traffic per route
E1 ports
BHE on inter-switch, interconnect, VMS
MGW port maximum utilisation
MGW port capacity
Number of MGWs
Source: Analysys
38
HLR units are driven by registered personal and non-personal SIMs
� The capacity per HLR unit, plus maximum utilisation is used to calculate HLR units over time
� 2G and 3G subscribers are combined in the HLR
13. MSC, TSC and HLR
39
Up to 12 MSC or 6 locations, a fully-meshed inter-MSC network is modelled
� Mature GSM networks are typically beyond 3 sites, however evolving 3G networks have yet to reach the same extent ( denotes a switching location)
1
2
1
2
3
1
2
3
45
6
6 logical routes
10 logical routes
15 logical routes
0 logical routes
2 logical routes
3 logical routes
14. Backbone network
Source: Analysys
40
For 12 MSCs and 7 locations, a two-mesh transit layer is deployed
� As the number of MSC locations increases, it becomes more efficient to deploy transit nodes
� Transit switches are assumed to not be necessary in the 3G network
w 3G switches are much larger in capacity than historical 2G switches
MSC locationTSC
6 logical routes 10 logical routes
7 locationsm
esh 1
mesh 2
Transit topology
14. Backbone network
Source: Analysys
41
These logical links are deployed on a national fibre backbone network
� A proportion of incoming, outgoing and on-net voice traffic travels between switching sites
w depending on location callers and interconnect points
� The average traffic per logical route is used to dimension the total E1 links between switching sites
14. Backbone network
Fyn fibre ring
Fyn fibre ring
National fibre backbone
Jutland fibre ring
Fyn fibre ring
Sjaelland fibre ring
Jutland fibre ring
Fyn fibre ring
Sealand fibre ring
Source: Analysys
42
Backbone E1 links are distributed across the fibre rings
� We have estimated the proportion of transmission which occurs in the various parts of the country
� The total number of logical E1 links in each ring is calculated according to these proportions
� The number of E1 links per physical route is calculated
� Physical E1 links are then provisioned on STM-1 links (subject to max. utilisation), with length depending on the ring
14. Backbone network
400km600km50kmRing length
50%50%0%Backhaul access node links
34%33%33%Remote BSC–MSC links
25%25%50%Inter-switch E1s
JutlandFunenZeeland
Backbone E1 distribution
Source: Analysys
43
Data servers are deployed using straightforward rules
� Peak SMS throughput is calculated
� SMSC has a peak throughput capacity, subject to max. utilisation
� SGSN load in terms of simultaneously connected (2G+3G) subscribers is calculated
� GGSN load in terms of (2G+3G) active PDP contexts is calculated
� SGSNs and GGSNs have a defined capacity, subject to max. utilisation
15. SMSC, GSNs
SMSC SGSN and GGSN
44
Asset purchase is according to 1. deployment lead times, and 2. replacement lifetimes� Model calculates active
network assets at mid-year
� Capital expenditures on assets occurs 1–18 months in advance of activation
w depending on lead times and size of network assets
� Operating expenditures incurred once activated
� Replacement lifetime (5–25 years) determines when asset is replaced at current cost
16. Expenditure rules
Time
Demand requirement (t)subject to max.
utilisationLook-ahead
period
Ord
erin
gP
urch
asin
gD
eplo
ymen
tTe
stin
gA
ctiv
atio
n
Dep
loym
ent
Purchase requirement
subject to look-ahead
Lead time expenditure profile
Source: Analysys
45
Network elements are removed from the network when no longer required
� Due to migration off the networks, traffic-driven assets may become unnecessary, although coverage rules still apply
� The rate at which assets are removed from the network is an input to the model
� Removal saves:
w asset replacement costs
w operating expenditures
� Investment costs are still fully recovered; but removal is considered cost-less with zero scrap value
16. Expenditure rules
Time
Dep
loym
ent
Actual requirement according to
demand
t=1 t=2 t=100
Retirement options
Source: Analysys
46
The draft demand and network model contains indicative unit costs
� A schedule of capital and operating expenditures per network element is provided in the draft demand and network model
w along with annual price trends for these expenditures to drive the series of unit prices over time, and control the shape of the economic depreciation curve
� These unit cost inputs are indicative, based on previous LRIC models
� These unit costs allow the action of the purchasing and depreciation algorithms to be examined
17. Unit costs
47
The model contains a four-part mark-up , without any defined common costs (yet)
18. Incremental costs
Dedicated 2G assets
Incremental
Applicable to 2G-only services
Dedicated 2G assets –common
Dedicated 3G assets
Incremental
Applicable to 3G-only services
Dedicated 3G assets –common
Shared assets
Incremental
Applicable to 2G and 3G services
Shared assets – common
Retail incremental and common costs
Business overhead common costs
2G 3G
shared
overheads
Mark-up sequenceIncremental and common cost components
Source: Analysys
48
Agenda
Activities and timetable
Draft demand and network model – industry summary
Operator-specific models
Next steps
49
Agenda
Activities and timetable
Draft demand and network model – industry summary
Operator-specific models
Next steps
50
Next steps
� Operator progress on top-down data and/or models?
� NITA to distribute model and documents to mobile operators on Monday
� Analysys to receive top-down cost data in the coming week, top-down models in four weeks’ time
� Analysys to develop Tele2 version of this model
� Questions or clarifications on the model during the consultationperiod to NITA (cc Analysys if preferred)
� Possibility of next visit according to timetable
� Responses due 29 October 2007
51
Concluding remarks on the model – some calculations which could be improved� Dimensioning of 3G R99 packet data in radio
network: no effort, best efforts, or guaranteed effort?
� Tele2’s 3G traffic (carried as national roaming by Sonofon) does not have a ‘ON NR 3G service’ yet
� The cost allocation of the national backbone fibre network is not divided between all of backhaul, BSC-MSC and inter-switch services
w which could be done on an E1 basis
52
Contact details
� For NITA:
Michael Bøgh
3435 0261
� For Analysys:
Ian Streule
+44 1223 460600