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S T R A T E G I C W H I T E P A P E R
Optimal LTE deployment strategiesfor market success
Benefits of overlay for speed to market
In response to growing mobile broadband demand, mobile network operators face a major
technology investment decision: Go all in with the new generation, 4G/Long Term Evolution
(LTE), or spend more to densify the older generation 3G/High Speed Packet Access (HSPA).
While some trepidation is understandable given over investment in the past, clear market
evidence shows that end-user demand, network economics, and device availability have
created a successful 4G business proposition. Now the question is how to get there quickly.
Based on the success of many operators globally, the answer is with an LTE overlay. This
paper examines some of the major considerations in an LTE migration and the role played
by an overlay approach.
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Table of contents
Introduction / 1
What is overlay? / 2
LTE migration in real life / 3
Overlay for speed to market / 4
Better performance with overlay / 5
Global acceptance of overlay / 7
Overlay economic impact / 8
Acronyms / 11
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Introduction
Mobile network operators (MNOs) are at a critical decision point: Deploy LTE widely now, deploy
slowly, or not at all. The evidence from the field is that fortune has favored the bold. In the U.S. market,
JD Power and Associates found that the wireless bill among 4G LTE customers is six dollars more than
the average for smartphone customers.1 In South Korea, according to Strategy Analytics, LG U+ has
seen a striking improvement in performance since it began its transition to 4G LTE, both in terms of
growth in ARPU and market share gains (Figure 1).
Figure 1. Mobile ARPU at LG U+ - Source: Strategy Analytics, July 2013
It appears that fast and decisive LTE deployments are proving to be the right medicine for curing the
declining revenues that mobile operators in many markets have been experiencing.
Deploying LTE quickly and widely also saves operators from the trap of escalating investment in legacy
technologies. Studies have shown that slow migration to LTE results in having to invest in both 3G and
LTE, leading to higher overall capital expenditures (CapEx). By contrast, fast migration to LTE focuses
investments toward the future and on CapEx having “long life” depreciation (Figure 2).
The question then is not “when?”, but “how?”
Figure 2. Impact of escalating commitment to legacy
3% CAGR 2012-16
LTE
100%
S u b s c r i b e r s
( % )
201220112010 2013 2014 2015 2016 2017 2018
Accelerated migration
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
WCDMA
GSM Simple
GSM Smart
WCDMA
WCDMA Simple
LTE-FDD
LTE-FDD Simple
LTE-FDD Smart
LTE-FDD Large
WCDMA Smart
WCDMA Large
100%
S u b s c r i b e r s
( % )
201220112010 2013 2014 2015 2016 2017 2018
Slow migration
90%3% CAGR 2012-16
80%
70%
60%
50%
40%
30%
20%
10%
0%
WCDMA
1 http://www.jdpower.com/content/press-release/6ucNMG2/2012-u-s-wireless-network-quality-performance-study-volume-2.htm
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In many cases, the answer to “how” is with an overlay approach. To date, many of the large and
successful deployments have been LTE overlays. This paper explores some of the reasons why overlay
option is proving to be the optimal LTE migration strategy.
What is overlay?
An overlay introduces new technology independent of the existing infrastructure. It is particularlyeffective when the new technology is significantly ahead of the current generation. This is the case
with LTE. Not only is the air interface very different from 3G technologies, the entire end-to-end
network is also different.
The network is based on a flat, all-IP architecture. Using an overlay gives an operator more
flexibility to architect a next-generation network. Overlays have also been proven to be an effective
network evolution strategy for gaining market advantage by getting to market quickly with a broad
LTE deployment.
No single overlay scenario exists. In practice, operators reuse some components from the legacy
network. Generally, these components have been passive elements in the radio access network (RAN)
or systems, such as backhaul — outside the RAN and the core. In the case of backhaul, operators have
been using LTE migration as an excuse to upgrade backhaul to IP/Ethernet rather than squeeze LTE
capacity into existing legacy backhaul.
As Figure 3 shows, the overlay strategy allows operators to focus on the more strategic asset —
4G/LTE. From the point of view of the network, the operator can optimize the LTE RAN, core, as well
as transport to the demand expected from smartphone and tablet users without being constrained
by limitations in the 3G network. After LTE deployment, the operator can return to the 3G network
and re-evaluate the need to upgrade the legacy network. This is in alignment with the optimal market
strategy — to deploy LTE to access while retaining high-value customer segments that need and arewilling to pay for larger bundles of data.
Figure 3. LTE migration options
MS-BTS
LTE
3G
2G
LTE eNB
LTE
3G Ready
2GReady
MS-BTS
4G Ready???
3G
2G
Legacy2G and 3G
(single tech)
2G/3G2G & 3G
Significant investmentdue to older platform &
vendor lock-in
Enables deferral of2G/3G investment forquick entry to LTE
LTE Module
Vendor A Vendor B
LTE Module
Overlay
Cran
LTE Single vendor overlay
Multi-vendor overlay
Converged
2G 3G 4G
2G 3G 4G
2G 3G 4G Significant investmentfor 2G/3G renovation(high CapEx)
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LTE migration in real life
It would be ideal if existing infrastructure could be software upgraded to support 3G and LTE without
having to make major changes. In reality, however, the full benefits of LTE cannot be achieved without
significant change. Consumers are spending money on increasingly powerful phones and computers so
that they can benefit from the upgrade of the entire system, including processors, screen, and software.
This also applies to LTE.
In existing converged RAN solutions, significant changes are required to ensure that the full benefits of
LTE can be realized. This is so much the case that the difference in new hardware required between a
converged RAN and an overlay network becomes negligible.
As Figure 4 illustrates, upgrades are needed across the network to support LTE. In the radio access
network additional antennas and radio frequency (RF) units are required to support Multiple Input
Multiple Output (MIMO). In some cases, where spectrum is being refarmed, existing antennas and RF
can be reused. However, in most cases new spectrum will be used for LTE, such that new RF equipment
will be required.
Figure 4. LTE migration equipment requirements
In the core network, LTE introduces a new control element — the mobility management entity (MME)
— and new gateways — the serving gateway (SGW) and packet data node gateway (PGW). Vendors
take three approaches:
•
Repurpose legacy hardware, such as the Serving GPRS Support Node (SGSN) and Gateway GPRSSupport Node (GGSN), to support LTE functions
• Develop dedicated core (Evolved Packet Core [EPC]) hardware and software optimized for LTE
• Develop new core hardware optimized for LTE that is backward compatible with 3G
The recommendation is to select a vendor with core hardware and software that is optimized for LTE.
Devices Access Backhaul EPC Transport
31 52
4
LTE Overlay
End-to-end management
Converged RAN
IMS(VoLTE,video,RCS)
Motivecustomerexperience /smart plan
• New RF (new bands)• New RF (existing
bands)*
• New BBU ro LTE**
• Upgrade backhaul for LTE (All-IP BH)
• Add LTEEPC for LTE
capacity
• New LTESW
(separatefrom legacy)
• Upgradelegacy SWto introduceLTE
• Add IMS formultimedia
services & VoLTE
* Better RF coverage
with overlay due
to dedicated resources
** Better evolution path to virtualized RAN
*** Majority of LTE
deployments are
using new LTEbands
• Add IMS formultimedia
services & VoLTE
• Add LTEEPC for LTE
capacity
• Upgrade backhaul for LTE (All-IP BH)
• New RF (new bands)**• New RF (existing bands
-if upgrading to 4x4MIMO)
• New BBU board for LTE
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An overlay has minimal impact on typical operations systems and actual day-to-day network operations.
Generally, LTE and legacy operations, administration and management (OA&M) are kept separate
for simplicity even if they use the same hardware elements. Also, because the two technologies are
sufficiently different, it often makes sense to keep the element and network management systems
separate to a degree.
Figure 5. OA&M in LTE systems
Thus, it is clear that, in reality, the differences between the new hardware requirements for overlay
versus a converged RAN are minimal.
Overlay for speed to market
As noted, a fast and decisive LTE rollout is required to maximize the market impact of an LTE
deployment. One of the most ambitious (and most successful) LTE deployments in the world was
conducted by Verizon Wireless in the United States. In an interview in 2009, then CTO Tony Melone
said that their rollout “will be as close to all-at-once as possible. 2 To accomplish this goal, Verizon
Wireless decided to take an overlay approach.
An overlay accelerates rollout throughout the deployment lifecycle. With an independent approach, the
network can be designed based on requirements to satisfy the target LTE market rather than introducing
the added complication of finding sites that optimize both LTE and 3G requirements.
Deployment itself is simplified considerably and not constrained by windows of time where legacy
network downtime is to be avoided. Physical installation is generally simpler because engineers need
not determine how to retrofit existing generations of base station cabinets.
CRAN EMS CRAN EMSCRAN EMS
CRAN LTE Overlay
Upgradefor LTE
Notimpacted New
Upgradefor LTE Separate
managment forRAN, BH, ePC
Provisioningand configuration
costs greatlyreduced thanks
to SONimplementation
Consolidated,common management
Different RAN technologies oftenrequire specific tools and teams
New
ePC EMSBH EMS
Backhaul BackhaulEvolved PacketCore
Converged RAN Converged RAN LTE Overlay Packet Core
S O
N
2http://www.informationweek.com/mobility/business/verizon-wireless-plans-mass-lte-deploym/220200106
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Integration is also simplified because the only equipment impacted is the new LTE infrastructure. In a
converged RAN, LTE and legacy equipment have to be reprovisioned and integrated. This complicates
the process, making it more prone to error.
Figure 6. LTE Deployment Strategies Survey - Source: Informa
Interestingly, an Informa survey found that one of the biggest issues that operators face when migrating
to LTE is integration with the legacy network.
Finally, optimization and software upgrades are much faster if they are completed independently on
the LTE network. If the LTE and 3G systems are tightly coupled, any minor change on the LTE network
requires a slew of regression tests on the LTE, 3G and even 2G networks. This can make the process
very cumbersome.
Better performance with overlay
The experience of operators who have deployed LTE widely is that the LTE networks have not simply
absorbed mobile data demand; they have actually increased per-user data consumption resulting in
accelerated demand for capacity. Shared resources make good business sense because of the potential
for lower cost. However, they can also result in constrained capacity, which can impact the end-user
experience and operator revenue.
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Figure 7. Uncompromised performance with LTE overlay
Sharing RF resources, such as power amplifiers for legacy technologies and LTE, could result in
sub-optimal coverage for both. Further, LTE users will be unable to take advantage of some of the RF
enhancement from self-organizing network features. For example, the feature coverage and capacity
optimization (CCO) improves the coverage in a cell by automatically adjusting antenna tilt in responseto device feedback. If the antenna is shared with 3G or 2G, this would not be possible,
Research in different markets shows pent-up demand for the quality of experience that LTE offers.
This has been validated in markets worldwide by the rapid adoption of LTE. Using the same baseband
for 2G, 3G and LTE could result in constraining that demand and limiting the operator’s revenue gain.
In higher density environments, such as cities and public areas, even dedicated LTE baseband is under
strain, leading operators to consider small cells for additional capacity.
A converged approach will impact not only LTE revenue; it could also impact existing 2G and 3G
revenue streams. A large proportion of the operators in the Informa survey cited above stated that
minimizing 3G disruption was a driver in selecting the overlay approach.
Figure 8. LTE deployment strategies survey - Source: Informa
Better RF
coverage
Converged RAN
Tilt not optimized bytechology (shared antennas)
Baseband capacity sharedacross all technologieslimiting performance
Tilt not optimized pertechnology
Baseband capacitydedicated to LTE whereit matters the most
LTE overlay
Superior eNBBBU capacity
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Global acceptance of overlay
The pace of LTE network deployment is accelerating, as mobile operators are investing to keep pace
with competition and the dramatic growth in mobile data traffic. A May 2015 GSA report indicated that
almost 400 LTE networks were commercially launched in 138 countries and GSA forecasts that number
will grow to more than 460 LTE networks by the end of 2015.
The Heavy Reading white paper, LTE Deployment Strategy: Overlay vs. SRAN, (February 2013)
examined the trade-offs mobile operators must consider in choosing between LTE deployment
strategies. The assessment is based on an objective analysis of actual scenarios faced by operators.
Some major operators have opted for a Single RAN deployment strategy. This approach entails the
deployment of new multi-standard base stations. Some of these base stations have multi-mode radio,
which is used as a common platform to add LTE, while converging multiple generations of wireless
networks. Single RAN advantages include lower power consumption and a smaller cell-site size
footprint. Even so, complete modernization while introducing a new technology can be slow, costly,
and potentially disruptive to subscribers.
For this reason, many operators have adopted an alternative network overlay strategy — the
deployment of LTE base stations without a simultaneous 2G/3G upgrade. Among these operators are
some of the most successful operators in terms of LTE subscribers: Verizon Wireless in the U.S., NTT
Docomo in Japan and SK Telekom in South Korea. For these operators, an LTE overlay has enabled
faster time to market and lower capital investment, while minimizing the disruption of their commercial
2G and 3G networks.
As shown in the tables below, most leading operators who moved quickly to LTE adopted a network
overlay strategy.
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Overlay economic impact
To investigate the winning strategy for an operator given a choice between Single RAN, LTE overlay,
and small cell approaches to wireless network growth, we have employed the Stackelberg model.
The model offers a game-based theoretical framework for exploring the competition between a small
number of competing players in a market − in this case the wireless market.
In this model, the first mover, also known as the leader, leverages an inherent advantage (technology,
geography, regulation, incumbency, etc.) to set the quantity it can profitably supply to the market. The
competitors, also known as followers, then optimize their quantities based on the quantity set by the
leader. The followers have two clear choices: either adopt the same approach as the leader, or maintain
their current approach with the attendant economics based on this choice.
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From Figure 9, it is clear that the maximum cumulative profit is achieved by deploying LTE, as early as
possible (2015 in this example). In subsequent years, the cost advantage of LTE overlay allows the first
mover to steadily accumulate profits at the expense of the players deploying Single RAN. Furthermore,
if the leader reinvests these profits in additional network expansion, the advantage is perpetually
increased, with the followers increasingly unable to compete.
Figure 9. Game theory analysis of competing operators deploying different approaches to providing wireless
network capacity.
Another way to view the gain of the leader compared to the followers is to plot the differential profit
between the two. Figure 9 illustrates 2 scenarios: the leader deploys LTE or LTE small cells, and the
follower deploys a Single RAN strategy. A third scenario is also included in which the leader deploys a
Single RAN strategy but uses a unique advantage (e.g., in regulation or business arrangements) to offermore capacity. This, in turn, modifies overall market pricing, forcing the (Single RAN) competition to
compete at a new price point. This is called a disruptive Single RAN strategy.
From Figure 10, it is immediately apparent that by deploying LTE or LTE small cells an operator can
gain sustainable market advantage and increase profitability exponentially. Furthermore, the gain
realized by this strategy is larger than any gain resulting from simply maintaining a Single
RAN deployment.
Figure 10. Differential profit analysis of leader compared to followers
2015 2016 2017 2018 2019
-500
0
500
1000
1500
2000
Leader
C u m u l a t i v e p r o fi t
Follower
Leader deploysLTE overlay
Follower maintains
single RAN strategy
-2002015 2016 2017 2018 2019 2020 2021
0
200
400
600
800
1000
D i f f e r e n t i a l P r o fi t ( L e a d e r - F o l l o w e r )
Small cells
LTE overlay
Disruptive single RAN
KEY FINDING OF MODEL
Moving swiftly to LTE and deploying it as quickly as possible is a winning strategy compared to
single RAN-based players.
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www.alcatel-lucent.com Alcatel, Lucent, Alcatel-Lucent and the Alcatel-Lucent logo are
trademarks of Alcatel-Lucent. All other trademarks are the property of their respective owners.
The information presented is subject to change without notice. Alcatel-Lucent assumes noresponsibility for inaccuracies contained herein. Copyright © 2015 Alcatel-Lucent.
All rights reserved. PR1506011836EN (June)
It is instructive to map these scenarios to real-world examples, as follows:
• LTE overlay: This is the strategy employed by Verizon Wireless to gain market advantage from a
position of disadvantage in 3G. Notably, AT&T was forced to respond with a similar LTE Overlay
strategy to reduce the competitive disadvantage.
• LTE small cells: AT&T and Verizon Wireless have deployed small cells to provide cost-effective
capacity.
From the examples above, it is fair to conclude that the game-based theoretical analysis is being
confirmed in the marketplace.
We now examine another case of interest – a competitive Single RAN market where all players defer
investment in LTE for a prolonged period, and then one changes strategy by deploying LTE in order to
gain a sustainable competitive advantage.
As shown in Figure 11, the leader initially tries to gain market advantage by deploying more Single RAN
capacity than the competition but at the same cost. Therefore, no sustainable advantage is achievable
and the decision is made to move to an LTE overlay strategy after two years. Once again a market
advantage appears for the leader that drives a sustainable profitability difference.
Figure 11. Achievable market advantage even with delayed LTE overlay strategy
Acronyms
3G Third Generation
CapEx Capital Expenditure
CCO Coverage and Capacity Optimization
EPC Evolved Packet Core
GGSN Gateway GPRS Support Node
HSPA High Speed Packet Access
LTE Long Term Evolution
MIMO Multiple Input Multiple Output
MME Mobility Management Entity
MNO Mobile Network Operator
OA&M Operations, Administration and Management
PGW Packet Data Node Gateway
RAN Radio Access Network
RF Radio Frequency
SGSN Serving GPRS Support No de
SGW Serving Gateway
2015 2016 2017 2018 2019
-500
0
500
1000
1500
2000
Leader
C u m u l a t i v e p r o fi t
Follower
Leader initiallydeploys single RAN
Leader deploysLTE overlay in 2015
Follower maintainssingle RAM strategy