katsigiannis_techno-economics of radio access networks
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Techno-economics of radio access networks case of Finland
Michail Katsigiannis11 November 2016, Espoo
Techno-economics of radio access networks:
case of Finland
TE examines the economic feasibility of technology-based businesses
RAN connects devices to
mobile network wirelessly
Finland is an international leader in mobile data access and usage
Finland is one of the leading OECD countries in mobile broadband penetration in 2015
0
25
50
75
100
125
150
Penetration (1H/2016) Mobile subscription type Share
Mobile
172.41%
Mobile
internet
146.6%
Mobile
broadband
138.7%
Unlimited data (monthly) plan 54.2%
Limited data (monthly) plan 26.2%
Other data plan 4.6%
Voice and messaging services only 15%
More than half of mobile subscriptions have no data cap
Finland is an international leader in monthly mobile data usage per capita: 9.53 GB in 2015
Source: Rewheel Oy, Digital Fuel Monitor
http://dfmonitor.eu/data_usage/country/
0
1
2
3
4
5
6
2007 2009 2011 2013 2015
Su
bscri
ptio
ns
in m
illio
ns
Mobile broadband (unlimited)
Fixed broadband
0
40
80
120
160
200
240
280
320
360
400
440
480
1H/07 1H/08 1H/09 1H/10 1H/11 1H/12 1H/13 1H/14 1H/15 1H/16
Mo
bile
dat
a tr
affi
c (t
ho
usa
nd
te
rab
yte
s)
Mobile data traffic volume is among the highest in the world
627 thousand TB
5.4 million people
591 thousand TB
83 million people
Mobile data traffic in 2015:
Difficult to predict
Uncertain future earnings
Difficult to manage
High investment and operating costs
Energy consumption is a growing operating cost
Investment decision
Challenging to choose from a large variety of technological options
Pressure for fast and right decision to meet the traffic
requirements
Revenue Cost Profit
Mobile network operators need to continuously invest in RAN coverage and capacity
Regulatory recommendations and requirementsencourage additional investments for better networks
EU 2020:
• 30 Mbps access for all
• 50% of households with100 Mbps subscription
• Launch of 5G
EU 2025:
• 100 Mbps access for all households
• 5G coverage in all urban areas
Finland 2015:
• 100 Mbps for all by 2015 (no further than two kilometers)
Broadband plans
800 MHz:
• TeliaSonera: 95% of population by 2016 and 99% by 2018
• DNA and Elisa: 97% of population by 2018
700 MHz:
• 4G for 99% of population by 2019
• Reasonable indoor coverage
Coverage
Internet access of 2 Mbps for all (Long-term goal of 10 Mbps by 2021)
Universal service
How Finnish mobile network operators should develop their RAN to provide…
wider coverage higher capacity lower cost lower energy consumption
4G+
10 - 250 Mbps
3G & 4G
0.4 - 80 Mbps
Cost per GB decreases
Energy consumption decreases
Mobile broadband revenue increases
Macro RAN enhancements can profitably provide wider coverage and higher capacity in Finland by 2020
Cost model with a focus on energy consumption
Revenue model for forecasting broadband revenues
Investigating new RAN deployment scenarios
Small
cells
heterogeneous networks&
Mobile network offloading Macro network enhancements
Public local area networks Spectrum sharing
licensed
spectrum
LSA 2300
Licensed shared access
Macro RAN enhancements cause a drop in cost per gigabyte
RAN is characterized by very high fixed
and low variable costs
Economies of
scale
Diseconomies
of scale
Short-run cost
Long-run cost
licensed
spectrum
LSA 2300
Licensed shared access
Macro RAN enhancements reduce the energy consumption
Energy consumption is largely
independent of traffic
Low energy efficiency of radio equipment
and low site load
Short-run energy consumption
5.9% reduction
in macro
network energy
consumption
35% reduction
in macro
network energy
consumption
Long-run energy consumption
Small
cells
heterogeneous networks&
71.4% reduction in carbon footprint of GB
for 3.2-fold traffic growth
Site co-location (incl. replacement of
legacy network) and better energy-
efficiency of LTE-A radio equipment
Energy cost share: 6-7% of operating cost
Small cells
consume
more
Revenue does not increase proportionally to the traffic
Finnish MNOs can be profitable offering mobile broadband
service with flat-rate
Mobile broadband revenue increases
Market price of GB decreases in
competitive market
Marginal profit shrinks,
assuming constant
marginal cost
MNOs must decrease their
marginal cost to keep profitability
Marginal cost reduction is
achieved with right
investments
Marginal profit
increases
Macro RAN enhancements allow a drop
in the market price of GB, making MNOs
more competitive
Flat-rate pricing
policy dominates
as far as the
marginal cost
remains below
the market price.
Source: FICORA
Macro RAN enhancements can meet the regulatory recommendations and requirements
Example of
regulator’s target
Modeling -
Minimum investments
Modeling -
Additional actions to goal Reality
Coverage (800 MHz):
95% of population by
2016
84%
Increase in investments.
• Suburban:1.8-fold
• Rural: 1.45-fold
Finland 2015:
100 Mbps for all60%
• faster coverage requirements
with more advanced technology
• faster new low spectrum
allocation
76%
Investments which aim to handle
at least the traffic growth cannot
meet the regulator’s targets
Additional investments and
policy actions are needed
The speed of investments is driven by the traffic growth in
urban regions, while conversely, the speed of investments is
driven by regulator’s intervention in suburban and rural regions
Macro RAN enhancements can profitably provide wider coverage and higher capacity in Finland by 2020
Policymakers require
additional investments in
suburban and rural
regions
Mobile broadband
revenue increases, but not
as fast as traffic increases
Cost per GB decreases
Total RAN energy
consumption and carbon
footprint of GB decrease
MNOs invest to handle the
traffic growth and
regulatory requirements
Licensed Shared Access,
excessive indoor small cell
deployments
(beyond 2020)
Flat-rate pricing policy will
continue dominating
Michail Katsigianniswww.linkedin.com/in/michailkatsigiannis11 November 2016, Espoo
Thanks for your attention