Tero/ Any truth to these W-CDMA technical problems?
JohnG
americasnetwork.com
3G?s financial & technical booby
traps
Britain?s recent spectrum auction will add a $35 billion up-front
cost to the delivery of 3G services. What?s more, it?s becoming
clear that the technical challenges of 3G will make network
deployment a very expensive proposition.
By Grahame Lynch & Tony Chan
hirty-five billion dollars for a technology that doesn?t
exist yet. That?s what five mobile telephony companies will
be paying the UK government ? half now, the remainder in
2006 ? for access to Britain?s third-generation (3G) 2-GHz
radio spectrum. The number is huge, some 10 times what the
UK Government had budgeted for. Many are wondering if
Britain?s cellular companies have taken on too huge a debt.
The Times described the auction results as "the most
extraordinary poker game in British business history." The
Financial Times was blunter, describing the results as
"folly."
Financial markets were also far from approving, with credit
agencies Moody?s and Standards & Poor?s both moving to
rate Hutchison Whampoa, a successful bidder, with a
negative outlook. The British have recent memories of the
CT-2 debacle, where entire national networks were trashed
as they were overtaken by GSM technology.
What?s more, the $35 billion spectrum bill is just the first
cost of deploying 3G networks. Still to come are the costs of
new backbone infrastructure, new base station sites, handset
subsidies and employee retraining. The costs will at least
match those of 2G networks, and could end up costing more.
The auction madness doesn?t just end with Britain. Germany
is about to embark on its own spectrum auction, which some
predict may result in $50 billion of successful bids, given
that Germany?s economy is a good third larger than Great
Britain?s. What might a US 3G spectrum auction raise in this
circumstance? $200 billion?
A W-CDMA network may
require up to 30% more base
stations than a 2G network.
The obvious concern is that cellular companies ? and along
with them, their financially codependent vendors ? will
struggle with such a cost load. Some will default, while
others will struggle to get their infrastructure built out
quickly. Consumer prices for 3G services will be priced so
high that their very viability as a mass-market offering will
be arrested. A new industry will be stillborn.
But such a scary scenario may not come to pass. Not all
countries are going down the highest-bid auction path.
France, Japan and Hong Kong have all elected to use a more
conventional beauty contest approach to licensing. This
should hasten the viability of 3G services in those markets,
creating economies-of-scale for global manufacturing that
can be leveraged in higher cost countries.
Small chunks
What?s more, the $35 billion number is less formidable than
it might look at first glance. Spread between five licensees
across the 20-year duration of the concession, it will
actually come to an annual outlay of $350 million per
operator ? or $6 a year for each Briton. With well over a
third of the British population already using cellular phones,
the economics may actually result in an equitable outcome
for both the public purse and private interests.
But $35 billion is a tremendous gamble for a technology that
doesn?t really exist yet. The five UK licensees will use the
emerging wireless code division multiple access
(W-CDMA) standard, which combines a CDMA air
interface with the back-end platforms of global system for
mobiles (GSM). W-CDMA exists now, but in an extremely
immobile form. Ericsson can demonstrate a system that
weighs 240 lb and is so big that it is housed in a minivan.
The company concedes that its test system is so power
hungry that it would chew up a standard cellular battery in
about one second.
Leading proponents of the technology say that big advances
are imminent. Japan?s NTT DoCoMo still predicts that it
will rollout a W-CDMA system next year, albeit using a
local Japanese FDD interface rather than the TDD interface
specified internationally. It has been testing W-CDMA since
1998. Motorola says that the first W-CDMA system to
incorporate both a physical and signaling layer could be
ready as soon as this month.
Interestingly, the immediate driver for W-CDMA, and the
cdmaOne rival standard ? CDMA 2000 ? is not so much
wireless Internet and video, but the desire for increased
voice capacity.
NTT DoCoMo supports well over 30 million customers on
its time division multiple access (TDMA)-interfaced
network. With the success of its 9.6 kbps i-Mode service, it
is running out of capacity and has even halted new
subscriptions in some locations.
W-CDMA offers an immediate attraction ? the ability to
support 207 voice channels per sector, versus 100 for a
typical TDMA or GSM network. NTT DoCoMo will also be
building its W-CDMA network separately from its personal
digital cellular (PDC) network, ensuring that there are no
tricky accommodations of both 2G and 3G users on the one
set of infrastructure.
Similar capacity improvements are in store for cdmaOne
networks. Ericsson says that a CDMA 1X upgrade should
double voice capacity in each 1.25-MHz carrier. Use of
wider spectrum bands will expand this capacity further.
More base stations
But in W-CDMA?s greater capacity lies its trap ? its
maximum data throughput of 2 Mbps per cell is highly
theoretical and unlikely to be replicated in a real-world
environment.
W-CDMA operates between 1.8 and 2.1 GHz. In theory,
W-CDMA should be an easy fit for existing cellular
networks in the 1.7- to 1.9-GHz band. 3G cells could be
deployed at existing 2G sites with little trouble. But Nokia
3G Marketing Director Timo Poikolainen says that Nokia
tests show that a W-CDMA network based on a GSM-1800
deployment can only support maximum cell hand-off rates of
144 kbps. Faster performance will require more base
stations.
A 3G packetized network
should cut backhaul and
trunking costs.
A W-CDMA network that seeks to leverage off a 900-MHz
network will fare worse, since networks in lower bands
typically use fewer base stations. The trade-off will be
either lower capacity or the need for more cell sites.
The coverage range of a W-CDMA cell theoretically
compares well with that of a TDMA or GSM 1800 cell. But
using a typical 3G spectrum allocation of 2 x 15 MHz, a
W-CDMA network may require up to 30% more base
stations than a 2G network.
Lower data rates
Another problem affecting data rates is the limitations of
handset technology. According to Nokia, handset power
limits restrict uplink data speeds to 144 kbps for all but the
smallest distances. To achieve rates of 384 kbps, a
W-CDMA network would require 80% more base station
sites than a 2G network.
What?s more, the bandwidth capabilities of a W-CDMA cell
are shared among all users. In an optimal situation, a user
should be able to achieve 384 kbps in a mobile environment
or 2 Mbps in a localized environment. The use of a 5-MHz
carrier on a 15-MHz allocation means that each user should,
ideally, be able to access three cell sites. The downside? If
there are more than three simultaneous users, the data rates
fall from their optimal levels.
Such sharing allows for greater network efficiencies than the
circuit-switched alternative. Says Motorola?s Ching Chuang,
"In today?s 2G network, once a channel is taken, it is
occupied and no one else can get on it. But with 3G,
bandwidth will be shared, so the network will be able to
support many more users at the same time."
However, this doesn?t necessarily enhance the user
experience. If initial user experiences with 3G data speeds
are underwhelming, it will be difficult for operators to price
services at a premium to existing offerings. Ironically,
circuit-switched data offerings may become premium
services if W-CDMA really takes off ? simply because they
can provide guaranteed quality.
3G?s savings
But there?s one aspect to a 3G network that should have
operators cheering. The move to a completely packetized
network should cut backhaul and trunking costs, which
currently account for up to 25% of the total cost of a cellular
network. Several vendors have made an attempt to quantify
these savings. Nortel suggests that the cost of transferring a
megabit over a network could fall from 20 cents currently, to
11 cents in 2002 and 4 cents in 2004 through using a
packetized platform.
Operators may also find that they can leverage off existing
2G networks through 2G/3G dual-mode handsets. 3G
W-CDMA nets can be deployed in high-usage areas, with
customers roaming onto 2G networks elsewhere that support
technologies such as general packet radio service (GPRS) or
cellular digital packet data (CDPD).
But these may be small mercies in a difficult market. 2G
operators, especially those with no experience of CDMA
deployments, may find themselves struggling to make the
technical transition to 3G.
It?s worth remembering that 2G CDMA operators have
experienced their own fair share of difficulties implementing
a complex technology. Sprint PCS CEO Andrew Sukawaty
says that the CDMA standard had "many teething issues" as
recently as three years ago, while in 1998, Hong Kong?s
only cdmaOne network came dead last in a independent
network quality study against some 10 other GSM and
TDMA networks.
Not only will 3G operators be overlaying a radically
different air interface in networks optimized for a TDMA
system, but they will also have to deal with the unknown
quantity of shifting usage patterns. They will need more base
station sites. They will need to subsidize 3G-enabled
handsets, which may have an early real cost of as much as
$700 to $800 per unit. They will also need to manage
consumer expectations, which have been built up so high that
they will inevitably be let down.
The biggest problem may be one out of the individual
operators? control. If one of the early bidders for 3G defaults
on a payment, then the reaction of the finance community will
condemn the entire 3G push. Too many people have big
memories of another recent billion-dollar mobile industry
debacle ? Iridium. |
