Optimal LTE Deployment Strategies for Market Success StraWhitePaper

7/17/2019 Optimal LTE Deployment Strategies for Market Success StraWhitePaper

http://slidepdf.com/reader/full/optimal-lte-deployment-strategies-for-market-success-strawhitepaper 1/12

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.



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



Optimal LTE deployment strategies for market success

1

Alcatel-Lucent Strategic White Paper

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




2


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)




3


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




4


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




5


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.




6


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




7


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.




8


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.




9


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.



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

Documents

Optimal LTE Deployment Strategies for Market Success StraWhitePaper