Third-generation Cellular: Technical and Economic Challenges

Dr. Ray W. Nettleton

Telecommunications Consultant

Denver, CO

r_nettleton@msn.com

ISART Boulder CO March 2002 2

AgendaThird Generation Cellular

Technical Challenges: Range, Coverage, Capacity, & Spectrum

Economic Challenges: Market Share & 3G Spectrum Auctions

A Modest Proposal

ISART Boulder CO March 2002 3

3G in the “Big Picture”

ETSI has created a hierarchy of personal communications modalities that provide the maximum data rate possible given where the customer

is at a given time. In the US this is complemented by CDMA2000.

1 10 100 1,000 10,000 100,000Data rate kbit/s

Regional/Continental

Macrocell/Microcell

Macro/Micro/Picocell

Microcell/Picocell

Picocell/Indoor

Personal AreaIEEE802.11 /

Satellite

W-CDMA/FDD

CDMA2000

W-CDMA/TDD

Bluetooth

Hiperlan

Source: ETSI & ANSI Standards

ISART Boulder CO March 2002 4

IMTS – 2000: 5 Standards

UTRAN (W-CDMA, UMTS)

These are the terrestrial standards only. There will be satellite standards also.The GSM “camp” sponsors UTRAN; the CDMA camp sponsors IMT-MC (CDMA2000).The US TDMA camp sponsors EDGE (IMT-SC) and will migrate to W-CDMA.

EDGE

ISART Boulder CO March 2002 5

What’s Special About 3G?

It’s not just phones. It’s PDAs, videophones, Internet browsing, location-based services, interactive games, and a whole lot more.

Motorola

Nokia

Siemens

Ericsson Panasonic

Compaq

ISART Boulder CO March 2002 6

Evolution of 3G Systems

Eventual Target: One 4G Stanndard

20012001 20022002 20032003

Source: ITU

Phase-in periods only are shown. Each technology will continue in parallel with the

others for a time.

??

GPRS 114kbit/s

EDGE 384kbit/s

W-CDMA (UMTS) 2Mbit/s

200kHz

5MHz

GAITDual Standard GSM/TDMA

Phones

“Pre-Edge”2.5G

GSM

TDMA (IS136)

CDMA1XEV-DO 2Mbit/s

IS 95B 64kbit/s 64kbit/s

1XRTT 144kbit/s

1XRTT 384kbit/s 1XEV-DV 4Mbit/s1.25MHz

CDMA-2000

3X??

Timeline may be delayed due to economic technical and standards issues

ISART Boulder CO March 2002 7

3G StatusCDMA2000 is operating in Korea with about a million customers. World availability expected mid – late 2002.

W-CDMA is operating in Tokyo using Ericsson equipment. World availability expected late 2002 – first half 2003

Cingular is rolling out GPRS (precursor to EDGE) nationwide in the US – a $3B exercise

ISART Boulder CO March 2002 8

Range / Coverage

Standard Area

1XEV-DO 127.56 140.40 142.83 81% 65%

1xRTT 127.76 n/a 142.32 77% 59%

Base Case: IS-95 130.81 n/a 146.31

W-CDMA 129.06 150.36 146.02 99% 98%

EDGE-2 (384kbit/s) 124.80 148.50 n/a 75% 56%

EDGE-1 (144kbit/s) n/a n/a 143.30 87% 76%

Base Case: GSM 129.20 n/a 145.40

Coverage Cell Size Reduction from Base

Radius

Max free space path loss dB

In-Building

In-Vehicle

Outdoor low mob

CD

MA

on

e-

CD

MA

2000

GS

M-

W-C

DM

A

Base case

Base case

GSM operators are expected to build more base stations for EDGE – that they won’t need for W-CDMA!

CDMA2000 operators will need to build more, smaller coverage cells to make this work

Source: JMS WorldwideReproduced by permission

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Capacity

1

10

100

1000

10 100 1000 10000

Average data rate per user kbit/s

Nu

mb

er o

f si

mu

ltan

eou

s u

sers

Roughly 10:1 advantage to WCDMA(bandwidth ratio is 4:1)

Interference averaging breaks down when the number of users is small

W-CDMA achieves its high data rates with

QPSK – 2Mbit/s is not a stretch for a 5MHz signal

CDMA2000 achieves its high data rates by going to 16-QAM, losing link budget and capacity along the way

W-CDMA has 2.5 times the capacity of CDMA2000

ISART Boulder CO March 2002 10

CDMAone and half of PDC transition to CDMA2000

Market Share

W-CDMA 90%

CDMA2000 10%

GSM 76%

PDC10%

CDMA5%

TDMA9%

GSM, TDMA and half of PDC transition to W-CDMA

Source: www.cellular.co.za

ISART Boulder CO March 2002 11

Spectrum Confusion

US MDS

FCC: “Both!”

Once again the US is isolated by the FCC’s prior actions

Sources: ITU, ERO, FCC

US PCS/UL

ISART Boulder CO March 2002 12

Spectrum Auctions WorldwideHundreds of spectrum auctions have already been run. The proceeds so far - $182B - are shown as “current”. The “projected” numbers are based on demographics and announcements of future auctions.

0

50

100

150

200

250

300

350

Au

ctio

n p

roce

eds

US

$B

illio

n

Pacific Rim(Asia /

Oceania)

Europe LatinAmerica

US &Canada

Totals

Current Projected

$330B$330B

$182B$182B

ISART Boulder CO March 2002 13

The Big SpendersAuction

Proceeds $BProceeds per pop $

UK 38.50$ 594.20$

Germany 50.80$ 566.90$

Italy 10.18$ 174.20$

S. Korea 3.30$ 60.80$

Holland 2.68$ 158.90$

These “Top Five” 3G auctions, held in the last 18 months, account for more than 58% of the total $182B proceeds collected from auctions worldwide over the past 15 years.

Altogether 3G auctions alone have accounted for $142B of the total, or 78%

ISART Boulder CO March 2002 14

How Much is $330B?

It is the Gross Domestic Product of Switzerland.

It is the combined annual revenue of Exxon-Mobil and General Electric

It is $1,172 for every man, woman and child living in the United States

“If you can count your money, you don’t have a billion dollars”

… J Paul Getty

ISART Boulder CO March 2002 15

Air vs. Hardware

$330

B t

o th

e sa

me

scal

e

ISART Boulder CO March 2002 16

Air vs. Revenues

$330B46%

22%

ISART Boulder CO March 2002 17

Air vs. Cellular 10In

clu

din

g p

roje

cti

on

s

Cu

rre

nt

pro

ce

ed

s

The Auctions are already level with the top 10 cellcos combined. If the projections are correct, it would be much larger than the top 20!

Source: ITU

0

50

100

150

200

250

300

Auc

tions

tota

lA

uctio

ns n

owN

TT D

oCoM

o

Spr

int P

CS

Vod

afon

e (U

K)

Chi

na T

elec

om

AT&

T

TIM

DD

I (Ja

pan)

Om

nite

l (Ita

ly)

Man

nesm

ann

BT

Cel

lnet

(UK

)

$B

ISART Boulder CO March 2002 18

Mark Anderson’s “Modest Proposal”

The debt burden of 3G operators is as oppressive as that of some third world countries

The wireless industry cannot recover this outlay, which was due to “extortion bidding”

Governments should return the 3G money as an interest-free loan

The EU has started hearings on the question

The FCC has been forced to give up part of its anticipated revenue (NextWave case)

Source: http://www.tapsns.com/newsitem.shtml?7-25-2001

ISART Boulder CO March 2002 19

Conclusions

3G is late but provides a rich array of services that will likely stimulate the marketCDMA2000 will have the toughest time – small market share, licensees often not receiving new spectrumW-CDMA won’t be easy either – huge spectrum auction costs, later entry than CDMA2000

Thank You!