telco business analysis

1

Technical aspects of (public)

Telecommunications

markets &main network structures

Node (switching& transmission)Transmission media

(p2p-connection)

ConcentrationnetworkNetwork access

Amsterdam, March 2004Henk Doorenspleet

Sr. Industry analyst telecomRabobank International

2

Agenda• Sector inside

– Global view– Dutch view

• The main network structures (1)– The telephony network

• Technical overview• Local Loop

• Networks decomposed…

• PSTN tour

• The main network structures (con’d)– Cellular Networks– CATV Networks– The Internet

• When networks meet– Interconnection

3

1. Sector inside

Global viewDutch view

4

Telecommunications: significant for society

Teledensity CableW- Eu 95% 10,2%

3,3%25,1%62%

?4.1%

E-Eu 30%US 103%Japan 98%Row 13%World 25%

Sour

ces:

Siem

ens&

ITU

Tele

den

sity

= fix

ed=m

ob

Sector inside

• Over 1 bn fixed lines• About 1.3 bn mobile

subscribers• About 300m homes

connected to CATVnetworks

• Teleom has special attention:– ITU (UN): enabler for

economic and social development

–

Sub/lines growth

0

400

800

1200

1600

1900

1920

1940

1952

1956

1960

1964

1968

1972

1976

1980

1984

1988

1992

1996

2000

2004

Fixed telCellularInternet

Significant sector in the world economy>>

5

Sector inside

Years to reach 50m users WW

0 20 40 60 80

Telephone

Radio

PC

TV

WWW

GSM

You noticed the growth pace?

But:• Majority of the world population have NOT (≅ 75%)• More than 50% of world population never made a phone call…• Saturation levels might differ per technology

6

Industry sectors compared on revenueSector inside

Euro top sectors based on2001 revenues of

top 10 players

Ū 0 Ū 200 Ū 400 Ū 600 Ū 800

Banking &Insurance

Oil, GasPetrolefum

TMI

Automotive

Telecom +equip (est)

Retail

Telecom

Media

Pharmaceutical

Airline &Aerospace

Ūbn

7

1

10

Traditional way to express Telecom development

• Relation telephony penetration <>GDP

• Traditionally leaders– USA– Switzerland– Luxemburg

• Ranking didn’t changemuch y-o-y

• Became less relevant:– Changing landscape

through liberalization– Mobile uptake– Internet uptake

• Used until recently• New metrics to express

telecom awareness are developed

–

–

GDP/capita (USD)

Tel

epho

ne li

nes

Per

100

inha

bita

nts)

100

100 1,000 10,000 100,000

AboveAverage

BelowAverage

Source: ITS, Siemens 2001Figures Dec 2000

Sector inside

Overall infrastructure ranking>>Digital Access Indicator>>

8

Sector inside

Global Telecom ranking, revisited…Global Telecom Ranking (ITU)

1 Hong Kong 65.88 12 Finland 61.22Singapore 60.58

58.5857.7255.4052.4551.4450.9548.8037.2331.95

LuxemburgBelgiumGermanyJapanFranceCzechSpainUAEChina

13141517202124263647

2 Denmark 65.613 Sweden 65.424 Switzerland 65.105 United States 65.046 Norway 64.677 Korea 63.428 UK 63.009 Netherlands 62.25

10 Iceland 62.0311 Canada 61.97

Ranking compiled by ITU based on:

• Mobile telecom numbers

• Internet numbers• Infrastructure

development• Competition• Legislation

Putting more in the ranking equation shakes up traditional “winners”:

• 2 telephone lines per home (US)• Rich countries (Lux)

9

Sector inside

Ranking beyond infrastructures: DAIDigital Access Indicator• Part of ITU’s World

Telecommunication Development Report (WTDR)

• Supports the World Summit on the Information Society (WSIS)

• DAI goes beyond traditional focus on telecommunication infrastructure.

• DAI covers:– availability of infrastructure– affordability of access– educational level– quality of ICT services– Internet usage

• DAI movers>>

DA

I Top

12

0,72 0,74 0,76 0,78 0,80 0,82 0,84 0,86

United Kingdom

United States

Canada

Norway

Netherlands

Hong Kong, China

Finland

Taiwan, China

Iceland

Korea (Rep,)

Denmark

Sweden

10

Sector inside

DAI Top 5 movers • Published by ITU in 2003• Covers changes 1998-2002

Rank '98

Rank '02

Economy Change

Top 5 gains in ranking, 1998-2002

24 4 Korea (Rep.) 20

22 9 Taiwan, China 13

20 14 Singapore 6

13 7 Hong Kong, China 6

7 2 Denmark 5

Top 5 drops in ranking, 1998-2002

12 21 New Zealand -9

11 19 Australia -8

30 36 South Africa -6

17 23 France -6

5 11 United States -6

11

Sector inside

Sector Inside: financials

•Since 2ndH19th century the telecom service sector has grown:

– CAGR (1995-2001)11.8%•Telecom service sector revenue

2003:– over US$1.18tn (souce: iDate)– Just under €900bn (source: EITO)

•Telecom equipment sector size:– over $290bn revenues in 2002

declined in 2003 to $253bn•The global ICT industry 2003:

– EITO €2.07Tn

WW 2003 ICT market(total value Ū2.07Tn)

IT services20%

End user comm equip

9%

Computer HW16%

Carrier Services

44%

Software11%

12

Sector inside

Sector Revenue split

World Telecom Service Market by Region(iDate Digiworld 2003)

2001 2002 2003 2006North America 358,8 363,1 374 420,7

260,7 291,9448,1232,51393

355,7192,11183

Western-Eu 232,9 249,1Asia-Pacific 288,7 323,3

Rest of World 180,7 185,1total 1061 1121

18%

19%30%32%

22%

17%7%

54%

20031994World Telecom Service Market by Service (ITU)

253158Equipment

268128Other services

41450Mobile455386TelephonyBy

service/product:

By region:

13

Sector inside

However the industry have seen turmoil

0

20

40

60

80

100

120

m$

1992 1994 1996 1998 2000 2002 2004

Equipment spending US operators

Bear Stearnstrendline

• Impact from the move from a monopolistic to liberalised market environment

– Started in the 1980s in the US, Japan & Europe, leading to• Flood of newcomers (with an expected shake out)• Reduction of government involvement

– Change in regulation needed and searching regulators to cope with a 100y old situation

– Government as the incumbent’s shareholder…• The crazy late 90s: the amalgamation of events:

– Internet hype: hugeinvestment, no revenuegrowth acceleration

– Competition becamesettled (after 10-15y)

– In search of the rightbusiness model:

• Facility based/nonfacility based

• Wholesale/retail models

14

Sector inside

The after math

•Most incumbents (become) financially on track•AltNets show improvements•Shake out has taken place (too small too little?)•Many new players in the value chain•Continued price pressure•Continued technology changes

• The big bucket of the $1.18Tn Telecom service revenue:• Used to be the incumbent’s (state) party• Is now being shared with many more players and technologies

15

Sector inside

The ‘proof’ of the movement

Minutes in KPN's PSTN

0

20

40

60

1998 1999 2000 2001 2002 2003 est

bn

min

/yr

TotalminutesDomestic

Intenet

Mobile term.

Internationa

• Fixed telephony, used to be the mainstay of the sector

– Share declines since early 1990s

– Revenue decline started in 2001

• Losing minutes:– Competition– Substitution by mobile

• Mobile continues to grow• Emerging countries mobile

will be the means of telephony

• Growth of mobile, but no hyper growth in established markets

– Dial in Internet access migrates to broadband

– The Advent of Voice over Internet (VoIP) and the all IP future

Fixed & mobile as % of WW service revenue

5%

25%

45%

65%

85%

1994 2003

Fixedmobile

16

Sector inside

Sustainable fundamentals?• Growth can sustain due:

– Uptake of services in emerging markets

– In today’s society information plays a dominant role and holds significant economic value

– Transporting packaging and presenting of information is and will continue to be key

• Financial developments– Growth in volume is

not equal to growthin revenue

– Growth in revenueis not equal toprofitability

Telecom services revenue trends

$0

$400

$800

$1.200

$1.600

$2.000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Commodity lineLate 90s expecta

tionsline

Destroying value line

The uniform past oftelecommunicationsIs on the verge of being replaced by a futureof plurality

17

Dutch view

18

Sector inside: Dutch view

NL ICT spending comparisonY-o-Y growth of NL ICT & 2 subsectors

-5,0%

0,0%

5,0%

10,0%

15,0%

20,0%

2000 2001 2002 2003 est.

Total ICT

Carrier Services

Total IT

• Dutch ICT sector was slowed down dramatically 2001-2003

– Telecom service did fairly well driven by mobile and broadband growth.

– Telecom services kept the ICT growth just above the zero line

ICT expenditure per capita 99-03sourc: EITO

0

500

1.000

1.500

2.000

2.500

3.000

BE/LU FR DE NL SE UK US

19992000200120022003 est.

• ICT expenditure per capita (EITO)

– Includes business and consumer spending

– Sweden is ahead in EU, followed by UK & NL

19

PC penetration per 100 pop

0

10

20

30

40

50

60

70

80

90

100

BE/LU FR DE NL SE UK US

19992000200120022003 est.

Internet Indicators

0

1.000.000

2.000.000

3.000.000

4.000.000

5.000.000

6.000.000

7.000.000

Belgium France Germany Netherlands Sweden UK0,0%

5,0%

10,0%

15,0%

20,0%

25,0%Host countnov 2003ccTLDregistrationsccTLDas % of pop

Internet awareness is well developed

• PC penetration is strong– EITO stats show overall

penetration (business + home PCs)

– Home PC penetration is traditionally high, due to favorable tax plans

• Over 79% ~ 5.3m HH• Consequently Internet access

has developed above Eu-averages

– 74% of HH ~ 5m HH– 79% of business have Internet

access• Additional indicators show high

numbers of:– ccTLD(.nl) registrations– Real host counts


20


Dutch Telecom landscape

penetration

1999 2000 2001 2002 2003 HH pop

~90%

74%

47%

14%

14%

93%

8%

PSTN analogue (KPN) 7330 6915 6569 6316 61662

PSTN ISDN1 (KPN) 2280 2964 3420 3668 37682

ADSL - 10-15 145 340 9503

Cable modem access 650 9353

Mobile subs 5767 9678 12234 11983 120354

CATV connections 6120 6200 6159 6194 n.a.

Sat receivers/subs 320 330 418 535 n.a.

#PCs5 5700 6300 6900 n.a. 7500

• Like most western countries:– Several mature segments:

• Saturated telephone connections• Mobile high penetration with some room to grow• CATV is stable market• Stable market for corporate networking

– Rapidly growing• Broadband connections for Internet Access

Source: 1999-2002 TNO-STB (N&C 2003)1 ISDN is report in channels (not in connections)2 source KPN 3Q03 report

3 Year end 2003 (Telecom Paper)4 source telecom paper, 2003 est.5 Home & business PCs

21


Development of market players• Market players

As in most countries a dynamic environment– Dynamics started in the late 1980s after first steps of

formal liberalization of sub sectors– Heated up in the mid 90s: rapid growth of players

• 1993 liberalization of datacom service• 1996 liberalization of infrastructure• 1997 liberalization of voice

– Unavoidable consolidation started with the downturn– Overview of registrations of telecom providers at the

NRA: decline started in 2002

Registration category 1999 2000 2001 2002 ∆ 01-02

Facility based suppliers public network

101 138 148 127 -14,2%

Facility based suppliers leased linesPublic service providersFacility based CATV providers

Providers of conditional access systems

66 83 84 73 -13,1%186 263 280 264 -5,7%96 92 81 73 -9,9%

15 14 11 7 -36,4%

22


Players by category• Fixed telephony

– KPN dominant player• Connections (>90%)• Traffic

– Local >80% (85-95)– National <70%– International ~55%

– C(P)S operatorsTele2, Scarlet/Onetel….

• MS: 26% (2002)of which 74% CPS

– AltNetsUPC, Essent, BC-providers

• CATV3 largest CATV operators have 85% of subs

– UPC (2.3m)– Essent (1.7m)– Casema (1.3m)

• 5 Mobile players– KPN Mobile– Vodafone– T-Mobile (DT)– Orange (FT)– Telfort

• Top Internet access players– Cable companies,

integrated ISP & access providers

– KPN-brands– Wanadoo– Tiscali– Zon

KPN dominant player in all categories exception of video/radio distribution

Market share by Subscribers

Telfort12%

Orange8%

T-Mobile14%

KPN Mobile40%

Vodafone26%


Market share by revenue(2203)

Telfort8%Orange

8%

T-Mobile16%

Vodafone27%

KPN Mobile41%

23

Dutch dial in Internet Acces market shares (2002)

KPN brands34%

Other33%

Zon11%

Wanadoo8%

Tiscali14%


24

Dutch BB Internet Accessmarket shares (2003)

@home14%

Other18%

Zon6%

Tiscali6%

Wanadoo15%

KPN brands23%

Chello18%

25

Dutch Revenue 01-05 by product

0

4000

8000

12000

16000

20000

2001 2002 2003 2004 2005

mn € DataCom & Network

equipmentFixed telephony

Fixed data

Mobile telephony

CATV services

Carrier services total

Total Telecom

Telecom revenue 2003EU countries (Eito 2004)

Germany21%

France13%Sweden

3%

Belgium/Lux 3%

Other36%

Netherlands5%

UK19%

Dutch telecom servicesrevenue distribution 2003

Mobile telephony

40%

CATV services

7%Fixed

telephony31%

Fixed data22%


Dutch financials• European Telecom market

(services + equipment): €305bn• NL = 5% ~ €15bn• Mobile & Data do the growth

26

2. The main network structure

•Telephony network•local loop

27

The Mother of all networks: PSTN

•Successor of telegraph network•Unambiguous service: voice•Huge improvements after the first automated

circuit (electro mechanical) switch in 1896 to today’s high capacity/high density circuit switches

– Mainly ‘internal’ improvements– Lowering price levels and improving speech quality– Still ubiquitous, but less in emerging markets

•Today: analogue, ISDN and corporate connections

Sam

uel F

. B. M

orse

Network structures: Technical overview telephony networks

Antonio MeucciPSTN=Public Switched Telephone Network

28


PSTN, a hierarchy of circuit switches

Regional/transitexchanges

Transit/toll(Class4 switches)

Local exchanges(Class 5 switches)

Access network

Subscriber

To from other countries

Analogue, ISDN, corporate connections

International exchanges0800/0900 exchanges

Main equipment:•Digital circuit switches:

•Lucent’s 5ESS•Ericsson AXE•Nortel’s DMS•Alcatel’s Alcatel1000•…

•Transmission equipment:•Lucent•Cienna•Nortel•Alcatel•…

Transmissionmedia

Local Loop(transmission media)

29

•A.k.a. the last- or first mile network•(19th-century) design principals:

– Connecting analogue telephone sets to the nearest telephone exchange (circuit switch)

– Max distance 5km: due to physical limitations– Centralised power supply: current loop

•Still visible in today's structures– incumbents have lots of real estate– Fixed networks are still very voice centric

•The local loop is probably the largest investment in Telecoms networks

•(Future) bypass options:– Fibre in the Loop/Fibre to the

Home (FITL/FttH)– Wireless local loop


Fixed access network/local loop

30

Local loop structure•Twisted pair cabling under the pedestrians•Interconnection in small street cabinets•The local loop carries:

– Analogue & ISDN telephone– Leased line services– ADSL services

Point of Presence

Cabledistributionpoint

100pair

cable

MDF =main

distributionframe

To next level/Other PoPs

2 paircable900

pairs

f.o.-ringBusiness area

Street cabinet

Network structures: local loop

31


Local Loop access

•This local loop is the ubiquitous access to customers, not only for incumbents but also for new entrants

•Regulators force incumbents to give access to their competitors:

– Unbundled Local Loop (ULL) or MDF access•For ADSL service

– Co-Location facilities•Room to locate equipment

In the US this is called UNE (Unbundled Network Elements)•What does that look like>>

32

Network structures: local loopAccess: Unbundled local loop

MDF fleslas Cable

TelephoneExchange

DSLAMADSL

Equipment

Transmissionequipment

DSLAMDSLAM

F.O.-trunks

Building incumbent (PoP, CO)

Co-locationarea

Equipment roomIncumbent

CLEC 2/DSL-

operator 2

CLEC 1/ DSL-

operator-1

Accessnetwork

Basement

33


Dutch DSL - ISP chain• Large ISPs own (indirectly) DSL infrastructure• Cable facilities are closed for third party ISPs

(with the exception of Wanadoo Cable through Casema)

KPN

Versatel(~200)

BBNed(~325)

Tiscali(BabyXL)

~100

Nova-Xess(~85)

KPN(~750)

Het NetPlanetXS4all

Tiscali12Move

ZonnetWanadoo

Data ServiceProvidersFor SMEs

SmallISPs

Best dealseekers

Other DSLService providers

LargeISP

DSLfacilities

Lastmile

34

3. Networks decomposed

Network structures: Networks decomposed

The ingredients to brew a network

•Decomposing the cloud/the network is about distinguishing several layers

•The basic function of a network:connecting communicating partners

•Decomposed in 3 layers –Transmission media

•physically connects two elements•Cables & frequencies

–Transmission•Pumping digital information

(= bits) into the media•Error free delivery•Aggregation of bit streams

–Routing & switching•Collecting, addressing and delivering

through circuit or packet switching

The conceptual/modelled view

Switching/routingTransmission

Transmission-media

More reality view>>

35

36

Why a network?

•Point to point (p2p) /can-to-can (c2c) communications.

– Needs media & transmission– Not efficient, when more parties appear & random

communications patterns•n(n-1)/2 connections•n-1 interfaces

•A network is needed when point-to-point /can-to-can communications isn’t sufficient:

– Add routing & switching– N parties with random patterns

•1 interface for the user•The price: complexity in

“the cloud”

Node (switchin& transmissionTransmission media

(p2p-connection)

Concentration

network

Network access


g)

Most reality view>>


From concepts to realityFrom the Conceptual to the Geographical dimension• Access networks: to connect customer facilities to the

(nearest) Point of Presence of the operator• PoP of CO (Central Office) houses equipment, the nodes

handling transmission and routing/switching• PoP/CO houses also:

– Systems for value added services– System management systems and staff

In every geographical layer you find at least layer 1 and 2

AccessNetwork

Trunk or backbone

network

PoP/CO

37


A network is always more• Building & running a network is more than just the 3 layers• Building networks is also about (non commercial issues):

– Planning network architecture to meet demands– Equipment choice– Planning physical location (acquiring new or use existing)– Planning OSS/BSS

(Operation & Business Support Systems)• Configuration-, inventory-, accounting, performance, fault-

and security management• And accompanying staffing

– Roll out: putting in place the basic ingredients• locations, Nodes, transmission facilities

– Value Added Services development & deployment• Running a network is a 7*24 operation

• Value Added Services on top of the basic function (connection communicating partners)

38

39

4. The main network structures (2)

•Cellular•CATV•Internet

40

Network structures: cellar networks

Cellular access network: “mobile last mile”•The radio access network (RAN) is the

local loop for cellular networks– RAN connects mobile terminal with

mobile network– RAN is most visible part of a mobile

network– Number of antenna sites is determined

by:•Amount of traffic (driver in urban areas)•Coverage (driver in rural areas)

•Issues– Spatial planning issues in towns and

country– Perceived health risks

•The RAN is 80% of mobile network Capex

41


F G

E A B

D C

F G

E A B

D C F

F G

E A B

D C

Frequencyreusedistance

7-cell reuse pattern

Fictiouscellpattern

Idealcellpattern

Realcellpattern

Frequency(Hz)

0 time

1Mhz

200k

Hz

chan

nel

TS-1 TS-2 TS-8AB�

F�

Cellular coverage representation

Usage of frequency and

time: TDMA (GSM)

42


Cell characteristics

•Coverage:– Depends on technology(CDMA, TDMA)– Designparameter:

• In building, in car, outdoor coverage•Voice/data traffic to accommodate

– Voice traffic (Erlangs)– offered data speeds

(higher data speeds -> smaller cell sites -> more antennas needed

– Height of antenna– Transmission power (regulated)

•Cell radius indication 300m (indoor coverage) -30km (open area coverage)

43


Schematic overview of a mobile network

MSC

UTRAN

RNC

RNC

PSTN

Internet

Subscriberenvironment

B-nodes

R

CoreNetwork

Core transmissionnetwork

(UMTS terminology)

• The Radio network is ‘only’ the access network:“the mobile last mile/local loop”

• For mobile network more components are needed– Transmission (from base stations to core)– Core network– Interconnection with other networks– And all those other things that makes a network >>> 3 layers

TransmissionNetwork

44


BSC

BSC

MT

MT

MTTo otherMSCs

1 2 3

4 5 6

7 8 9

E 0 #

1 2 3

4 5 6

7 8 9

E 0 #

EIR AUC

VLR HLR

MSC

BTS

BTS

BTS

G-MSC

PSTNincumbent

Celco-2

Celco-3

Interconnectionto othernetworks

GSM networkRadio AccessNetwork(mobile local loop)

Core network

GSM terminology

MSC = mobile switching centreEIR = equipment identity registerAUC = authentication centreHLR = home location registerVLR = visitor location register

MT = mobile terminalBTS = base transceiver stationBSC = base station controllerBS = base station

45


A call from a mobile to a fixed phone

Basestation

Core Networkcomponents

(4-5000sites)

(100-140sites)

4-8sites

Base station

controller

Infrastructure Mobile operatore.g. Vodafone-NL

Phone@Home

PublicSwitchedTelephone Networke.g KPN-NL

Voiceswitch

House-keeping

Network Interconnection

LocalLoop

Radio network components

Telephoneexchange

WAN transportSystems, connecting geographical spread components

46


Roaming• Roaming is: using the RAN of another operator, when:

– Out of range from the home network– In reach of network with roaming agreement

• An Telefonica Moviles Spain customer visits the Netherlands and roams with KPN• KPN recognizes a vistor and it’s home network (Moviles, ES)• KPN inquires Telefonica Moviles database; Customer roaming granted• KPN registers user in its VLR, Moviles registers its customer in its VLR• Incoming calls switched from Moviles to KPN• Outgoing calls handled by BEN, account info (CDRs) send to Moviles• Tariffs determined by Moviles billing system according to customer’s contact• Clearig between KPN & Moviles according roaming agreement

F GE A B

D CF G

E A BD C

F GE A B

D C

F GE A B

D CF G

E A BD C

F GE A B

D C

F GE A B

D C

F GE A B

D C

EIR AUC

VLR HLR

MSC G-MSC

EIR AUC

VLR HLR

MSCG-MSCVoice Data(visitor mgnt)

The NetherlandsKPN

SpainTelefonica

Moviles

BilateralRoaming

agreement

Mobile networks: aplethora of standards

• Mobile telephony networks haveevolved since the 1980s in 3 generations

• First Gen (1G)– 1 G, analogue transmission, limited

to no security– Many different ‘standards’ per region

(almost no roaming)• US & Asia: AMPS• Europe: NMT & TACS• Limited quality and capacity:

• Second Gen (2G)– Improved almost any aspect of mobile telephony

• Improved quality, security, efficiency• Applying Intelligent Network techniques

– Leveraging digital technology– Introduced in the early 1990s– Focus on voice, limited data– Very successful, almost 1bn subscribers– Unfortunately many standards appeared…

1925: first mobile/car phone


47

Second Generation evolution(the alphabet soup)

• The main 2G standards– GSM: Europe & Asia– D-AMPS: US– PDC & PHS: Japan– CDMA evolved into cdmaOne (IS-95B): US & Asia– iDEN (USA)

• All based on TDMA technology (exception cdmaOne)• How to cope with data demand/promise?

– A new generation needed: 3G– Stakes are high: (topline mobile service revenue~> $350bn/yr)– intermediate solutions: 2.5 & 2.75G

• GSM > GPRS > EDGE• D-AMPS > GPRS >EDGE• PDC > 3G-UMTS• cdmaOne > migrating to 3G

first step CDMA20001x (a.k.a. CDMA1xRTT)


48

49

The main network structures: cellular networks

The upgrade implications• The step to 2.5/2.75 G leads to some technology

consolidation– D-AMPS will migrate to GSM/GPRS– PDC & cdmaOne jump directly to Third Generation (3G)

• Therefore 2.xG is largely GSM stuff– No new spectrum needed– Addition of kit in the core network (SSGN & GSGN)– Software upgrade BSC & BTS

• Upgrade to 2.75G has big implications– EDGE: Enhanced Data rate GSM Evolution– No new spectrum needed: enhances data rates in

existing TDMA structure– Upgrade of all BTS (new TRXs=30-50% of BS cost)– Only faster timeslots NOT more timeslots=just enhancing

data speeds, but smaller cell size….

50


GSM to 2.5G

BSC

BSC

EIR AUC

VLR HLR

MSC G-MSC

BTS

BTS

BTS SGSN GGSN IP NetworksInternet

Other voiceNetowrks

Radio AccessNetwork

Core network

• SGSN: Serving GPRS Support Node• GGSN: Gateway GPRS Support Node• Connection to existing Core Network for User Identification

and service allowance

51


Third Generation• Developed during the 90s• Part of the ITU IMT-2000 program• Aim to consolidate, to one homogeneous system

– Harmonized use of frequencies & technology = scale!– Global roaming– Multi Media traffic– Higher speeds 100s of kbps– Convergence with Internet transport protocol (IP)

• However, development diverged– 3G Partnership Program (3GPP)

• Responsible for development and maintenance • 3GPP: development of WCDMA, typical upgrade path for GSM

operators• 3GPP2: development of CDMA2000, evolution of IS95, hence the

upgrade path for cdmaOne– Chinese bodies, Siemens and others develop: TD-SCDMA

(rationale: industry policy?)– Local variants, e.g. ARIB Japan)

52


3G-WCDMA•A.K.A. UMTS•Most likely migration path from GSM/GPRS to

3GOpts for the new GSM in Europe and (parts of) Asia.

– Support of UMTS-GSM roaming and handover– Relies on the GSM/GPRS core network

• New spectrum needed and issued (as we al know…)

– Works in paired bands of 5Mhz allocated in several bands ( between (1.7GHz-2.6GHz)

– Most operators acquired 10-25MHz of spectrum•Evolving standard from 3GPP release99 (rel 3)

improvements to an all multi media and IP platform (rel 5 and 6 (tbd))

53


3G-CDMA2000• Evolving from cdmaOne and therefore the best migration

path to 3G– Relies on cdmaOne spectrum, therefore no new

spectrum needed (per se)– Backward compatibility (to some extend)

• 1x and DO available on the market– a.o. Korea, TNZ– DO, some carriers in the US

• Not all advantageous:– cdmaOne (IS-95) core network

had non standard interfaces– 3GPP2 improved

that issue, willvendors comply? CDMA2000

1XRTTor 1x

1xEV-DOData only

1xEV-DVData & voice

TowardsAll IPFuture

More voicecapacity

150-300kbps

Separate data carrier

2.4Mbps peakIntegrated DV3.1Mbps peak

cdm

aOne

(IS-9

5)

54


TD-SCDMA, the new branch on the tree

•Promoted by the Chinese government:– Actually TD-SCDMA is industry policy: no royalty fees

to Europe 7 US•Spectrum issues

– Better suite for asymmetrical traffic (TDD)– 1.6MHz of spectrum needed

•Cheaper terminals•Siemens heavy weight promoter with China•Other vendors picked up: huge market

55


Wireless is more than mobile telephony!

•Broadcast networks (terrestrial TV and radio)•Fixed Wireless•Microwave transmission•Free Space Optics (FSO)•Satellite>>•Small coverage technologies/networks

(WiFi, Bluetooth, DECT)

•Wireless replaces wires for transmissionof bits (‘transmission without wires’)

•Wireless fundamentals>>

56

Network structures: CATV networks

Cable Networks• Started as Community Access TV

Networks 1950s (100s of connected homes)

– Mainly US and EU– City planning driven: getting rid of

rooftop aerials• A wired broadcast network

– Designed for distribution of Radio and TV signal: putting the ether in a cable

– From head end to connected homes (Homes passed/-connected)

– Head end functions:• Receiving terrestrial and satellite

channels• Signal processing and re-transmission

on the cable network• 20-100 TV channels + FM-radio band• Value Added Services

Millions ofRooftop aerials vs head ends

Equipment Floor NTL, UK

57

The main network structures: CATV networks

Cable networks, broadcasting networks• CATV network are build for re-broadcasting of TV and radio

– From network to customer– This has determined the structure of the network

(like the 5km-limitation did in telephony networks)– This has lead to wide deployments of: Branch & Tree

topologies– Very One-Way

58


Cable network structure

HE = Head EndDC = Distribution CentreSC = Sub CentreGA = Group AmplifierFA = Final Amplifier

• Structure of traditional (telephony) local loop and the CATV-local loop are becoming more look a-likes

• Fibre pushed to the edges: very last mile stays different– Twisted pair– Coax

FA

mini-starGA

SC

SCSC

SC SC

DC

DC

DC

DC

DC

coaxHFC = Hybrid fibre copper network

“The other local loop”

(≅10-15 FAs)

(20-50users)

HE

(5-10GAs)

20-30SCs10s of

DCs


Network outline

59

HE rooftop

(Master)Headend

Fiber1-2 hops Coax

Group AmpDistributionCenter

Final Amp & Multitap

Fibre Node/Sub Center

HFC distribution networkSDH Backbone

(Fiber rings)

60


Beyond basic TV & radio broadcasting• Broadcasting on a higher quality level:

– Digital TV & Radio– Increases capacity– Commercial ability to package services

(the world of set top boxes and conditionalaccess)

– Is happening in countries with competitionfrom satellite: e.g. UK, US, FR

• Internet Access– Using the CATV network for broadband Internet access– Competitive edge in US, UK, NL: ~40m subs

• Competition CATV operators (a.k.a. MSO): – Video: Digital Satellite TV (DTH) and Digital Terrestrial

(DTT)– InternetADSL base Internet Access– Telephony competing against incumbent operators

61

Network structures: Internet

The internet, a network that happened• The Internet was hardly designed

it just happened–

– Grown from ARPA to an Academic network

– It went ‘public in the 90s– A bottom up growth path:

towards a world wide set of connected islands

• Traffic transported is enormous• International issues:

– IP numbering/addressingassignment and maintenance

– Domain names and domain name resolution

US &Can

LatinAm

Africa

EuAsia

Pacific

1,17Gbps

162,5 Gbps41,8 Gbps

14.1 Gbps0.7 Gbps

0.45 Gbps

600Mbps

• Internet backbone: capacity in placebetween major cities, carried by the fibre optic networks

• Access to the internet for users is relying on other networks

After the invention of packet switching

62


IN-IX

YOUR ISP.xx•Internet access•Mail•DNS

• To exchange (Swap) traffic betweenlocal/national ISPs and backboneproviders

OtherIX

telephoneDSL Cable

Internet b.b. carriers• Worldcom• Sprint• C&W• AT&T• Qwest• Global Crossing• Level3• NTT

ISP 1 ISP 2 ISP 3

OtherIX

Internet’s structure

International Internet-backbones

Internet Exchange>>

Internet Access• xDSL access• Cable access• Telephony access analogue/ISDN• Satellite access

EU-Internet Backbone and inter-continental connections


To/from US162,5 Gbps

To/from Asia/Pac1,17 Gbps

To/from Africa0.45 Gbps

To/from L-A600Mbps

=IX63

64

The Internet issue of today: Access

•– PSTN/ISDN, Dial in access– ADSL, based on the local loop– Docsis, based on the CATV network

• Niche technologies for uncovered (by DSL and Cable) areas

– Wireless access– Satellite access– (Power Line Communications (PLC)

• Future access means– FttH, Fiber to the Home– Broadband Wireless Access (BWA)– Better DSL

The uniform past oftelecommunications

Is on the verge of beingreplaced by a future

of plurality


Mainstream options today<<

Development of access speeds

0,1

1

10

100

1000

10000

100000

1960

1964

1964

1978

1984

1988

1991

1993

1995

1998

2000

2001

2002

2003

2007

2010

2020

spee

d in

kbp

s

Technology released

Trend Line

V.21

V.22

V.22bis

V.32

V.32bis

V.fastV.FCV.34

V.34bis

V.90

V.92

V.23

Bell103

Docsis1ADSL

Docsis2ADSL-2

VDSL

Using (milking)PSTN

Push existingnets to

the edges

Diggingthe

Streets

65

66

5. When networks meet

Interconnection

67

Network structures: Interconnection

Interconnection, how it works• Operators interconnect to service customers, mutual interest of

operators• Often regulatory obligation to Interconnect (telephony)• Example: two telephone operators

User A dials B(e.g. fixed-mobile)• Operator B offers terminating

access to operator A• Operator A invoices user A• Operator A pays terminating

access fees to B

Operator B services user A(e.g. carrier (pre-)select, flat rate internet access)• Operator A offers originating access to B• Operator B invoices user A for the

services• Fees for the access line by A or B (country

depended

a bNetwork of Operaator B

Network of Operator A

Network-interconnection

interfaceuser user

access point

(Mobile)Terminating fees

Originating fees

68


Interconnection issues• Legal battle ground: interconnect obligations

– Forcing incumbents to open their networks– Level playing field is now existing and it’s of interest of

most parties to interconnect• Current battle ground: controlling end users tariffs

– Cartel between operators to keep priced high– Mobile Terminating Access (MTA) in Eu– SMS > MMS tariffs– Measure, assign SMP

• Unregulated future?– Internet as the ubiquitous network– Everything is just on application on top of– Regulation on a higher level: spam, DMR etc.

69


Telephony interconnection examples• Originating services

– Carrier Select– Carrier Pre select (CPS)– FRIACO (Flat Rate Internet

Access Call Originating)– MIACO (Minute Internet Access

Call Originating)• Call terminating services (call

completion!)

Case:• Relation ship

– Customer A of CPS-operator– Customer B of CPS-operator– Customer C of Incumbent

• Scenario’s– A dials C– B dials A– C dial A

Subscribers, connected to Local exchanges of the

incumbentIncumbent’s PSTN

Area YSub network

Area XSub network

Transitnetwork

Local AccessPoint

Regional AccessPoint

CPS-operator

B AC

70

Thanks for your attention

Any (more) questions?

71

Branch-out-sheets

Ingredients: Switching & routing

Circuit & Packet characteristicsTwo main ways to connect (over a network) the source and a destination:

Circuit switching• The telephony network:

PSTN• Telephony, a 3 phase

process– Connection set up– Connected (to chat, to

the internet, to fax)– Connection tier down

• A connection supports 1:1 communications

• Service degradation: Blocking

Packet switching• Information transport in

packets: Internet• Each packet is labelled

– Source & dest. Address error and flow control information

• Concurrent connections– No additional interfaces

or transmission lines• Packets/frames/cells• Service degradation: Delay

72

73

Circuitswitch

•A circuit offers:– constant capacity = QoS– inefficiency

•Scalability needs more resources•Very well developed

(more than 100 years old, 1,8bn CS subscribers WW)

Switchingmatrix


Circuit switching

74

buffers

Packetswitch

Packet switchrouting table

AIvir.nlserver

Packet

C→A

Label

B→A

Data


Packet switching

•A packet offers:– No guarantees: first come

first serve– Efficiency

•Scalability easy/easier

Layering of communications: nothing new

3. Semantics

1. Transmission

2. Language

Ingredients: layering

Layer Protocol service3 The message

(did you understand what I mean?)The application, the (big) brain creates a messageWords to service the expression of an idea/ (deep) thoughtsMouth and ear service the language

2 Words, language, Syntaxes(what did you say, can you repeat yourself?)

1 Use of the air, transmission of signals (I can’t hear you, it’s too noisy

75

Ingredients

What’s a bit, BInary DigiT

01

11

11

11

01

01

01

01

01

00

10

10

00

01

00

01

11

1

76

•Smallest of digital data•A bit represents a binary value•A binary value is “0” or “1”•8 binary values = 8 bits = 1 byte•Transport of bits is expressed in a bit rate:

bits per second (bps)•Most information is analogue by nature:

– Voice, text, pictures– Conversion to bits by codecs (source coding):

•Voice (PCM)> 64kbps bit stream•Music (MP3)> 128kbps bit stream•Video (MPEG x)>30Mbps bit stream•Text (ASCII or Unicode) > 1 character = 1 or 2 bytes

00

11

00

01

10

10

01

10

10

10

01

11

10

01

00

10

011111001001110101011001100011101001000000

Ingredients: transmission media

Wireless transmission• Looks simpler: no wires needed?• The medium is the ether

– No digging!– Almost infinite capacity

But can only partly used• Regulation needed: frequency allocation

– The ether is just ‘1 cable’… so frequencies need to be assigned to avoid ‘the tower of Babel’

– Usage of the frequency bands and applied technology often regulated as well

– Some (or most) frequencies are perceived/positioned as scarce resources (also depending on the region)

– Based on National Frequency planning fitting in Regional and World Wide agreements, e.g.

• Satellite frequencies, due to large coverage• Harmonized mobile phone frequencies, for user convenience• Radio and television signals, producing one technology for the

world (not the case)– License exempt

77

Aeronautical and nautical applications, military communications, radio amateurs,

Fixed mobile services (Microwave, LMDS),radar, Space, inter-satelliteMicrowave connections, radarKa-/Ku-band satellitesc-band satellites

TV broadcasting, fixed & mobile services (GSM, UMTS, WLAN..),

TV broadcasting, FM-radio broadccasting, radio navigation

Radio braodcasting AM-radio and several mobile and fixed services

radio navigation, radio broadcasting

radio navigation

Cosmicradiation

gamma

röntgen

ultraviolet

visible light

infrared

infrared

0,00003 Å

100 km

VLFvery low freq.

10 km

LFlow freq.

MFmedium freq.

100 m

HFhigh freq.

VHFvery high freq.

UHFultra high freq.

100 mm

SHFsuper high freq.

10 mm

EHFextra high freq.

THFterribly high freq.

0,1 mm 3 THz

radiospectrum Applications, differs from country by country

Electro Magnetic (EM) spectrum

microwave

Radar

Radio

Researched radio spectrum


1 mm 300 GHz0,003 Å

0,03 Å 30 GHz

300 Å 3 GHz

4000 Å1 m 300 MHz

8000 Å10 m 30 MHz

30 µm

3 MHz300 µm

1 km 300 kHz0,03 m

30 kHz30 m

100 km 3 kHz

1 Å = 10 – 10 mWave length Wavelength Frequency78


Wireless brings radio-technology-issues• Using the airwave is applying radio

technology– Susceptible for distortion– Distance limitations determined by

• Used frequency• Allowed transmitting power• Quality of the receiver• Quality/type transmitter antenna

Omni directional/directional• Access control needed: the air is

a shared medium, avoid• GSM• Satellite uplink

• An assigned frequency band has limitedcapacity determined by the modulation method (medium adaptation)

– Ongoing technological improvements (OFDM, higher frequencies, better DSPs…)

79

35.767km

12.000 km

LEOMEOGEO

6371 km

Van Allen-belts

500-2.000 km

Satellite orbits

GEO = GeostationaryMEO = Medium altitudeLEO = Low altitude


earth orbit

80

telco business analysis

Documents