Section Ten

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UMTS System Overview

Evolutionary Strategies

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1. CONTINUED STANDARDISATION HIGHLIGHTS 1.1 The Move to All-IP Networks 5

2. THE EVOLUTION OF THE UMTS ARCHITECTURE2.1 The Basic Release’99 UMTS Core Network 92.2 A Common Core Transport Network 112.3 SIP and Multimedia in the all-IP Core Network 132.4 Evolution of the UTRAN 152.5 IP to the Node B and to the User 172.6 A Conceptual Multi-access UMTS / IP Network 19

3. A SUMMARY OF IP QOS3.1 MPLS 213.2 DiffServ 213.3 IntServ 223.4 RSVP 223.5 IPv6 223.6 The Introduction of UMTS Terminals 233.7 Evolution Issues for UMTS Terminals 253.8 The Evolution of New UMTS Value Chains 293.9 UDeciding Factors for the success of UMTS? 31


1. CONTINUED STANDARDISATION HIGHLIGHTS

Release ’99 of the 3GPP specifications for UMTS are sufficient for operators to beginto plan and deploy UMTS networks which consist of the brand new W-CDMA, FDD-mode air interface added to the standardised GSM Phase 2+ and GPRS corenetwork. However the further evolution of UMTS will be strongly dependant on futurestandardisation work, in both 3GPP and in other relevant groups.

The speed of development and the eventual implementation of future specificationswill also be immensely dependent on market demands and conditions, since thesewill determine the support and resources for such development.

Amongst the key broad areas in which ongoing specification and standardisationwork is likely to impact the future of UMTS, are the following :

1. Upgrades to the core network, in particular beginning the move towards unifyingand integrating the packet and circuit-switched domains, and providing the basis formultimedia services, on the basis of IP transport protocols.

2. Further development of service-related architectures, interfaces and procedures,including the continued evolution of CAMEL, USIM, security and fraud protection andthe Open Services Architecture.

3. Further specification of the TDD mode of operation at the UMTS air interface.Since TDD spectrum is currently not applicable in Japan, TDD mode is not a priorityfor Japanese infrastructure and terminal vendors in the short term.

4. Investigation of possible commonalities and harmonisation of UMTS work in 3GPPwith cdma2000 development in progress by 3GPP2. This is in line with the ITUconcept of a family of 3G standards able to seamlessly interoperate easily. Otherimportant and ongoing harmonisation efforts also include those between the GSMand US TDMA communities.

5. Although not strictly part of “UMTS”, specification of GERAN (GSM/EDGE RadioAccess Network) is a development process which now falls under the auspices of3GPP. EDGE is by no means certain of wide market acceptance and is not arequirement in implementing UMTS.

Although there is a body of opinion which supports the use of EDGE as a technologyto fill the coverage gaps between initial islands of UMTS, the existence of EDGE-capable handsets and complete GERAN specifications from 3GPP will lag behind theintroduction of UMTS, and the first UMTS networks will therefore almost certainly stilluse GSM alone as the fill-in radio access technology.


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TDD Mode

GSM Phase 2 + Core+

UTRAN

ServiceArchitectures& Interfaces

IntegratedIP Core Network

ChineseTD-SCDMA

IETFIP

Standards

GSM/EDGERadio Access

Harmonisation withother IMT2000

Standards

Fig. 1 – Evolving a Basic UMTS Network

2©Informa Telecoms


6. The Chinese government and Siemens in particular are supporting developmentwork on TD-SCDMA. Although currently not widely discussed for use in other regionsin the world, the take-up of such a standard by such a potentially huge volumemobile market could of course require that the rest of the UMTS community worktowards including TD-SCDMA, at the very least in terms of interoperability androaming with W-CDMA enabled terminals.

7. The IETF, already one of the partners with input into the 3GPP specificationprocess, are in charge of developing the whole range of IP-related standards andrecommendations. As the mobile world looks increasingly towards an all-IParchitecture, the work of the IETF is likely to become more relevant, particularly onstandards such as RSVP, MPLS, DiffServ, IntServ, IPv6 and SIP. These all representways of introducing circuit-style carrier-grade QoS to IP-based communications.Indeed it has already been decided to incorporate SIP as the basis for IP Multimediaservice control in UMTS.


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TDD Mode

GSM Phase 2 + Core+

UTRAN

ServiceArchitectures& Interfaces

IntegratedIP Core Network

ChineseTD-SCDMA

IETFIP

Standards

GSM/EDGERadio Access

Harmonisation withother IMT2000

Standards

Fig. 1 – Evolving a basic UMTS Network

4©Informa Telecoms


1.1 The Move to All-IP Networks

The strongest evolutionary trend in UMTS is the move towards increasing the role ofIP in UMTS networks. Some observers are already looking towards “4G”, used inmost cases to refer to a network which is “all-IP” from user terminal through to corenetwork.

The reasons why “all-IP” is a desirable end-goal include the following :

1. CostThe use of standard, mass market IP routers rather than service and vendor-specificswitches resulting in lower costs, both in terms of initial purchase and ongoingmaintenance.

2. EfficiencyAn IP network offers a multitude of possible routes for traffic, as opposed to definedpoint-to-point links. This means that the network is much more flexible and efficientat coping with temporal or spatial variations in traffic types and volumes. If aparticular route is congested, another route can be taken.

3. Scaleability In parallel with increased efficiency, the fact that routing is inherent within an IPnetwork, and that alternative routes are available, means that longer term increases intraffic or in overall network capacity can be achieved simply by increasing thecapacity of the transport network. In UMTS this will lead to an increase in the use ofOptical networks, particularly in the core network domain.

By contrast, changes in traffic volume or mix in MSC and ATM-based networks bringmuch more complexity. They require constant updating of data tables withinswitches, and the re-balancing of traffic between the circuit and packet-switcheddomains.

4. Interworking IP represents an increasingly ubiquitous and de facto transport mechanism. As UMTSmoves more to IP, so seamless interworking between UMTS and other IP-basednetworks, such as the Internet or Intranets, will become much more straightforward.


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6©Informa Telecoms

Fig. 2 – The Move to All-IP Networks

Why move towards All-IP?

- Cost- Efficiency in Core Network- Scaleability- Interworking

Why not?

- Quality of Service- Poor Efficiency over Radio


There are some negatives in moving to an all-IP UMTS network, these include :

1. QoSFor real-time traffic, in particularly voice traffic (which is still accounting for themajority of operator revenues), IP does not currently provide sufficient reliability andconsistency to ensure carrier-grade, delay-free services.

2. Efficiency over RadioThe routing inherent in an IP packet brings with it a considerable overhead,something which is undesirable in a radio access link, where spectrum is a scarceand expensive resource.


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Fig. 2 – The Move to All-IP Networks

8©Informa Telecoms

Why move towards All-IP?

- Cost- Efficiency in Core Network- Scaleability- Interworking

Why not?

- Quality of Service- Poor Efficiency over Radio


2. THE EVOLUTION OF THE UMTS ARCHITECTURE

2.1 The Basic Release’99 UMTS Core Network

The most straightforward and earliest implementations of UMTS will involve very littlechange for operators who start from the basis of a GSM Phase 2+ circuit-switchednetwork, and a GPRS packet-switched network.

These two essentially separate networks define the circuit and packet switcheddomains of the UMTS core network, with added support for the IuCS and IuPSinterfaces respectively, connecting these core network domains to the new UTRAN.

While the two networks can share the central databases (HLR, AuC and so on) andsome of the same service control mechanisms and servers, the transport of user datais separated over 2 transport paths. This means that the operator has two transportnetworks to manage and maintain. In particular, the switching infrastructure of thecircuit-switched network is a costly overhead.

The advantage of such a situation however, is that for voice traffic the QoS is verywell managed, since this is precisely what the GSM network was originally intendedto support.


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USER

UTRAN

MSC

SGSN

GMSC

GGSN

Database & Services

PSTN

Internet

data & signallingsignalling only

luCS

IuPS

circuit switched domaintransport network

packet-switcheddomain transport network

Fig. 3 – Basic UMTS Core Network

10©Informa Telecoms


2.2 A Common Core Transport Network

An immediately desirable evolution of the core network is to move towards acommon packet transport network, which can be used to transport user data fromboth the circuit and packet switched domains. In order to achieve this, control(signalling) is separated from user data in the circuit-switched domain, with circuit-switched user data now travelling as packets through the same transport medium asthe packet switched domain.

In practical terms this means that the MSCs must be split into two entities, withcontrol of the circuit-switched domain handled by MSC servers. This control planecontains all the functions of databases & registers, mobility, security and other controlfunctions.

For user data, media gateways provide the interface between the common packetcore transport network and the circuit-switched domain connections at the edges ofthis core network (i.e. to the PSTN and radio access network).

The way that circuit-switched domain (most commonly voice) traffic is carried oversuch a common transport layer will evolve along with the transport mechanism of thatlayer.

In the first instance, compressed voice can be carried using virtual circuits over asimple ATM infrastructure. Further evolutions are likely to involve the introduction ofVoice over IP in this core transport network. IP may be carried over ATM or, ultimately,may sit directly above fiber.

The speed of such an evolution is dependent on developments in the ability toguarantee the necessary quality of service for voice traffic, with IP protocols evolvingto support much better, more predictable QoS.


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USER

UTRAN

MSCserver

SGSN

MGW

GGSN

MGW

GMSCserver

PSTN

Internet

data & signallingsignalling only

ControlFunctions

Applications

ATM &/or IPTransportNetwork

ControlPlane

Fig. 4 – A Common Core Transport Network



2.3 SIP and Multimedia in the all-IP Core Network

Ultimately, MSC servers may tend to become replaced by servers with more Internet-like call control. In particular SIP has been chosen for controlling real-time multimediain future 3GPP releases. Voice data is then tunnelled through the IP core networkinside IP packets. The advantage of such an architecture is that all services, be theyin the circuit-switched or packet-switched domain, are handled through a commoncontrol architecture, by means of SIP sessions.

In this case, the core network is all-IP, once again with a common transport network.A Media Gateway is only required for interworking with an external PSTN. The servingMSC server is replaced by a SIP proxy server, the CSCF, which can control SIPsessions between an IP-enabled terminal and any circuit-switched domain trafficcoming via the external PSTN via a media gateway control function. This SIP-supporting architecture is termed the "IP Multimedia Subsystem" within 3GPPspecifications.

Although the simple architecture shown represents the ultimate simplification of anall-IP transport and control scenario, the implementation of such an architecture isextremely dependent on the evolution of sufficient IP QoS mechanisms. It is alsoentirely possible for operators to deploy such an IP Multimedia subsystem in parallelwith retained MSC functionality. Indeed it seems highly unlikely that with theconsiderable investment operators have made in their GSM networks, with its highquality of service for voice, that these will be abruptly closed down.



UTRAN

CSCF

GGSN

MGW

MGCF

PSTN

Internet

SGSN

USER

SIP Client

IP

Fig. 5 – SIP and Multimedia: An all-IP Core Network



2.4 Evolution of the UTRAN

The same advantages of an all-IP approach to the core network also apply to theUTRAN, which itself incorporates a sizeable transport network connecting RNC’s andNode B’s. Scaleability and flexibility in particular are ultimately much easier within anUTRAN which is based on an IP transport network.

In the same way that incremental capacity increases are made more straightforwardin the core network, the introduction of IP into the UTRAN makes it easier to addfurther Node B’s, or to move capacity between Node B’s and RNC’s.

The most straightforward evolution within the UTRAN is likely to be the replacementof point-to-point ATM links by an IP network.

Since the UTRAN network is potentially an expensive and complex local loop networkto manage, local market conditions may make it favourable for operators to use a 3rd party to provide this underlying transport. For example, a cable operator ormetropolitan area network provider.



Node B

Node B

RNC CORE NETWORK

a) Current UTRAN

ATM

ATM

b) Evolved UTRAN

Node B

Node B

IP RNC CORE NETWORK

Fig. 6 – Evolution of the UTRAN



2.5 IP to the Node B and to the User

The final steps in creating an end-to-end UMTS IP network is in taking IP all the wayto the base station by adding an IP Interface to the Node B, and by transporting IPdirectly across the air interface to an IP-enabled terminal.

This latter step in particular will require further work to increase the efficiency withwhich such transport might be achieved. At the present time, the overhead of IPheader information means that IP is not necessarily an efficient way of cramming a lotof data into a small amount of bandwidth. This is a key requirement where a scarceresource such as radio spectrum is involved. A number of manufacturers haveproposed techniques for header compression which should alleviate this problem,and eventually it is probable that one of these approaches will be selected forinclusion in future specification releases.

The implication of taking IP transport straight to the Node B and even to the userterminal is that the functionality of the RNC will also be taken out into RNC and RadioResource Management Servers, which connect to this IP network. This is much thesame as the situation in the core network, where a control plane MSC server wasseparated out compared to the existing MSC.

Since no longer dependent on setting up new dedicated transport links, but simplyon routing through the IP "cloud", an IP UTRAN architecture will also make it mucheasier to enable direct communication between Node B’s. Although this would almostcertainly require definition of a new standardised interface, an advantage of this is theability to move some radio resource management handling functions away from theRNC and into the Node B’s. This may prove to be more efficient in response tospecific functional speed requirements.



CSCFRNC &RRM

MGW

MGCF

PSTNInternetIP Client

IP CoreNetwork

IP AccessNetwork

Node B

EdgeNodeNode B

BorderNode

Fig. 7 – IP to the User



2.6 A Conceptual Multi-access UMTS / IP Network

With an IP transport network at its core, and services and control functions moved tothe network edge in "server farms", it will become much more straightforward foroperators to offer the same UMTS services to customers through a variety of accessmethods, both fixed and wireless.

Even in early releases of UMTS, before all-IP is implemented, some vendors believethat operators will look to deploy multi-standard base station solutions, enabling themto offer both Node B (UMTS) and BTS (GSM or EDGE) functionality from the samesite. With governments and the public increasingly concerned over the potentialhealth issues in mobile, and hence the planning permission for radio masts, thiswould indeed seem to be a likely market need.

With all-IP transport in the Radio Access network, it is a logical step not only to sharethis resource between multiple radio access methods in future, but to also provide acommon radio resource management function. Such a function would integrate thecontrol of each of these radio access methods, providing much easier control ofprocesses such as inter-network handover.



Applications

MGW

Intelligence Mobility

Servers

IP

IP

Signalling+

Control

RadioResource

Management

UMTS/GSM/EDGE

FixedAccess

Other RadioInterfaces

LegacyNetwork

Fig. 8 – Multi-access UMTS/IP Network



3. A SUMMARY OF IP QoS

IP is a connectionless technology, and so does not guarantee bandwidth. Thus IP initself will not differentiate network traffic based on type, and so cater for the particularneeds of an application in terms of bandwidth and priority. By contrast, ATM doesincorporate service requirements into its specifications, and so is in much wider useat present.

Although one solution is of course to just add more and more bandwidth until trafficdelays are no longer a problem, in reality it is necessary to add particular options toIP in order to deal with the QoS limitations.

There a number of standards which are being developed within the IP community,and which may well be important for future releases of UMTS, because of theirinfluence on QoS. Below are listed just a few of the most prominent ones. Allpotentially enable IP QoS to be improved for traffic such as audio and video,eliminating any annoying skips and hesitations.

3.1 MPLS

“Layer 3” or the “network layer” refers to the communications protocol containing thelogical address of a route destination, for example the IP address which is inspectedby a router which forwards it through the network. Layer 3 also contains a type fieldso that traffic can be prioritized and forwarded based on message type as well asnetwork destination.

MultiProtocol Label SSwitching is a specification for layer 3 switching and uses labelsthat contain forwarding information, attached to IP packets by a router that sits at theedge of the network. Routers in the core of the network examine the label morequickly than if they had to look up destination addresses in a routing table. Theforwarding router does not look at the entire packet header, rather only at the labelwith the forwarding information. This allows packets to be forwarded more quickly,and also allows the paths to be set up in a variety of ways. For example, the pathcould represent the normal destination-based path, a policy-based explicit route, or areservation-based flow path.

In essence, MPLS enables more decision on the routing to be made at the peripheryof a “dumb” network, with the network handling this routing much more efficiently.

3.2 DiffServ

DIFFerentiated SERVices, like MPLS, operates at layer 3 only. It uses the IP type ofservice (TOS) field as the Diffserv byte (DS byte), to classify packets into smallnumber of service types. Diffserv does not provide traffic engineering or hard qualityof service similar to ATM, in that it does not involve explicit reservation of resourcesor control of admission. Instead it uses priority mechanisms to provide adequate QoSaccording to the service type. Network routers have to include intelligent queuingmechanisms in order to achieve this, allowing high priority traffic to move to the frontof a queue of packets.




It is possible that service providers will use Diffserv at the edges of the network, forclassification and assignment to the right connection, and MPLS within the network.

3.3 IntServ

The Integrated Services model differs from DiffServ in that it reserves resourcesexplicitly using a signalling protocol. This approach uses admission control, packetclassification, and intelligent scheduling to achieve the desired QoS. It is thus afundamentally new approach to IP, moving away from the “best effort” approach.

At present IntServ might be suitable for small networks and Intranets, however astraffic flows become larger, the signalling processing required becomes problematicfor larger networks.

3.4 RSVP

ReSerVation Protocol is a protocol that signals to a router that it should reservebandwidth for real-time transmission. It is designed to work with IntServ, although itcan also be applied to other service models. Information in the reservation requestcould include maximum transmission rates, maximum frame jitters and maximumend-to-end delay.

When an RSVP request is made, each router between it and the source makes a noteof it and attempts to honour it, with an error request sent back to the source if thiscan’t be done – the circuit-switched equivalent of a “busy” tone. Of course, thistechnique means a lot of router upgrades where big networks are involved, and soproblems of scaleability.

3.5 IPv6

Internet Protocol Version 6 was started as far back as 1991, and the specificationwas completed in 1997 by the IETF.

The key feature of IPv6 is that it increases the address space from 32 to 128 bits,providing for a number of networks and systems which is unlimited in a practicalsense. However also included in IPv6 is inherent support for quality of serviceparameters for real-time audio and video, and increased data security. For example,IPv6 enables applications to request different levels of service, and will guaranteethese levels even when the request goes over a wide area network.

The draft version of IPv6 was originally called “IP Next Generation” (IPng), and IPv6 isbackward compatible with IPv4.


3.6 The Introduction of UMTS Terminals

The evolution of terminals will be a crucial factor in the ultimate success or failure ofUMTS. The situation is neatly summed up by the following quote :

“The problem today is that we do not have a clear indication from manufacturers ofterminals about when these kind of terminals will be available for commercialdeployment. When I say commercial, I mean sufficient in volume, full type-approvedterminals, and at a competitive price – we cannot pass the technical problem to thecustomer. Until such terminals become available, we believe that the success ofUMTS will be limited”

Miguel Menchen Alumbreros, General Director of Wireless Internet, TelefonicaMoviles, speaking at the UMTS World Congress, October 2000

Terminal supply is something of a chicken and egg situation – manufacturers willrarely commit large resources until they are guaranteed a mass market of sales ;operators will rarely develop and market services to the market without being certainthat terminals will be available. The slow uptake of both WAP and GPRS serviceswere both blamed to a large extent on the lack of available terminals as operatorswent to market.

The first UMTS terminals will certainly offer multi-mode UMTS / GSM functionality,since operators will initially only offer UMTS coverage in the busiest areas where itcan be guaranteed that demand will allow cells to be efficiently loaded. Outside suchareas services are likely to remain reliant on GSM / GPRS and perhaps EDGE.

Although both EDGE and TDD-mode UMTS have support and business casesproposed by sectors of the industry, their introduction is likely to lag some waybehind that of the first UMTS deployments not just due to standardisation issues, butalso because of a lower priority for terminal manufacturers. Indeed for the Japanesemarket, home to some of the key consumer electronics vendors, neither technology iseven applicable.



"The problem today is that we do not have a clear indication from manufacturers of terminals

about when these kind of terminals will be available for commercial deployment. When I say commercial, I mean sufficient in volume, full type-approved terminals, and at a

competitive price - we cannot pass the technical problem to the customer. Until such terminals become available, we believe that

the success of UMTS will be limited."

Miguel Menchen Alumbreros, General Director of Wireless Internet, Telefonica Mobiles, speaking

at the UMTS World Congress, October 2000.

NoServices

Lack ofHandsets

UncertainTerminalNeeds

Fig. 10 – UMTS Terminals: Supply and Demand



3.7 Evolution Issues for UMTS Terminals

UMTS terminals are exceedingly complex electronic and radio devices, and need toexist in a world where small size and fashion-conscious design are increasinglyinfluential. Just a few of the key problems facing terminal manufacturers in developingand evolving UMTS terminals are :

1. PowerUMTS terminals will be much more power-hungry both from the radio and applicationperspectives. While the ability to pack enough processing power into a small device(and avoid overheating) is one issue, a lot of work is also in progress on techniquessuch as power control and power saving, in order to maximise what power isavailable. Fundamental battery technologies have changed little in recent years, yetthis is another area in which developers are looking to evolve smaller and moreefficient power solutions.

2. MemoryAs the PC, mobile and other computing industries expand, all of the new devices andnew applications tend to need increasing memory. The successful introduction ofUMTS terminals will depend not just on the continued decrease in the size of storagetechnologies, but also on the ability of manufacturers to supply memory at a rate fastenough to support the growth of computing in general.

3. Operating SystemIn an ideal world, all terminals would use a common operating system to ensure theinteroperability of applications, and an easier task for application developers who willbe vital in building the UMTS market. Success in balancing high functionality with lowpower and memory requirements are the evolutionary goal of any mobile O/S, and theO/S will be a major determinant of the power and design requirements of UMTSterminals.

However, as in the PC world, the O/S is proving to be a competitive battleground,with no clear winner likely to emerge. The most prominent competitors includeMicrosoft, who of course are keen to see mobile devices inter-operate with theWindows PC environment ; Symbian, a joint venture including Psion, the organisermanufacturer, and mobile phone leaders Nokia & Ericsson ; and Palm, whose PalmPilot PDA became a market leader particularly in the US.




Fig. 11 – Issues for UMTS Terminals

Issues for UMTS Terminals

• Power- processing power- power control- power saving

• Memory

• Operating System

• Form Factor- Bluetooth

• Standardisation


4. Form factorWith little real knowledge of what the "killer applications" for UMTS may be, it is ofcourse difficult to propose the most effective design for UMTS terminals. Differentmixes of voice, video and data are best supported by different types of design, and awhole range of concept phones have been proposed.

Most in the mobile industry originally believed that increasingly functional“smartphones” were the evolution path for terminals, combining voice, perhaps video,and a whole range of data services into a single “phone-like” device. However recenthandset trends have seen the increasing success of small-size and fashion value asfactors in consumer purchasing, while such terminals have remained essentiallyvoice-centric in terms of design.

The entrance of the computing industry into the competition for market share inhandheld devices has led to a much more data-centric approach, including largerscreens, pens and touch-screens rather than keypads, and with voice as anaccessory add-on.

Improvements in voice recognition may also change the way in which users caninteract with terminals, and hence the way the terminal is designed, and indeed awhole plethora of concept phone designs are proposed by handset vendors.Ultimately, suitability for whatever services emerge and consumer reaction will decide

5. Bluetooth could potentially have a big effect on form factor. Bluetooth is designedto provide wirefree communication between computing devices over a short range. Itraises the possibility that rather than try to cram more and more features into a singledevice, terminals could instead become disaggregated. A radio module could providethe interface between the UMTS network, and Bluetooth could provide the onwardlink to the most appropriate user interface device for the service in question. Forexample this might be a PDA for organiser functions, a laptop for viewing streamingvideo or large documents, a microphone and ear-piece for voice.

5. StandardisationSince standards are constantly evolving, particularly at the early stages indevelopment, it is usually impossible for terminal manufacturers to begin testing andtype approving terminals until these standards have stabilised. No manufacturer iswilling to release terminals to market only to have to ask customers to return for anupgrade just a few months later. In many cases, it is impossible to get aroundstandardisation changes through software upgrades, since efficient operation of theterminals requires that as many functions as possible be achieved trough hardware.



Fig. 11 – Issues for UMTS Terminals


Issues for UMTS Terminals

• Power- processing power- power control- power saving

• Memory

• Operating System

• Form Factor- Bluetooth

• Standardisation


3.8 The Evolution of New UMTS Value Chains

When operators offered 2G Voice, the value chain was quite straightforward, assimplistically illustrated opposite.

In a market where users have access to a range of multimedia services, potentiallyprovided by a number of different sources, the value chain becomes much morecomplex. UMTS has been designed to easily offer such service flexibility, and so thereis no reason to believe that such complex value-chains will not evolve.

What is less clear is how revenue will be split along such value chains, and whethersome players will occupy more than one position (for example a content providercould aim to become a virtual network operator, or a virtual network operator couldalso be the consumer retailer). Ultimately the consumer will pay for UMTS services bymeans of a bill. However there are a number of places from where this bill could begenerated.

The lower diagram opposite gives an illustrative evolution of a UMTS value chain, toshow the greater complexity which may arise, and hence the more points along thechain where billing & revenue generation may occur. A key challenge for operators isto pay for their investments in UMTS by keeping a controlling position in such achain. Ultimately this may depend on the success of persuading consumers to spendmore then previously on mobile services, compensating for a smaller slice of theoverall revenue pie, by growing a much bigger overall pie.



UserHandsetVendor

a) 2G Voice

b) 3G Multimedia

Retailer ServiceProvider

Operator

UserHandsetVendor

Retailer

Billing

Content aggregator/distributor

Virtual Operator

Service Provider

Operator

Billi

ng?

ContentOwner

ContentOwner

ContentOwner

Fig. 12 – Value Chains



3.9 Deciding Factors for the success of UMTS?

UMTS is the result of a complex and hugely detailed work effort, which has includeda wide range of opinions and interests from within the mobile community. The resultis a set of specifications which potentially provide a huge leap forward in terms of theefficiency, quality and flexibility with which services can be provided to mobile users.

However, ultimately the success of UMTS may depend not just on quality of thiswork, but on a number of external market factors which can be very difficult topredict, and which may not reflect any all-industry consensus. Just a few of these arehighlighted below.

1. Operator Interests. The competitive playing field is changing, most analysts predict the emergence of adecreasing number of large global operators, as a result of acquisitions andconsolidation. The bargaining power of these operators with infrastructure suppliers,and their need to harmonise operations worldwide, potentially from very differentstarting networks, is likely to have major influence.

2. Infrastructure Vendors.Much of the cost of developing UMTS has been borne by vendors, who musttherefore expect a return on this investment in terms of contracts and equipmentsales. Although UMTS has been designed to be much more a multi-vendorenvironment, the vendor market has already evolved into various alliances,particularly between traditional mobile suppliers and Internet suppliers, in order toprovide operators with a "one-stop shop" option.

3. Governments and RegulatorsThe licensing timetables and public policies of regulators and governments can affectanything from the broad timetables for UMTS introduction to the detailed processesof cell site planning and selection, or the emission and power constraints of terminals.In particular health concerns are coming more into the public agenda, at just the timewhen the roll-out of new base stations and more powerful terminals is required.

Regulators may also ultimately decide how value chains look from country to country,for example by enforcing particular rules and conditions concerning the access ofvirtual network operators and value added service providers to UMTS networks.



ConsumerElectronics

UMTS

Operators

Vendors

Regulators

ContentProviders

THE CONSUMER

Marketing

Fig. 13 – UMTS: The Unknowns



4. Terminals & Consumer Electronics MarketsAs traditionally "fixed" computing and consumer electronics vendors such asCompaq, Hewlett-Packard, Sony and Panasonic increase their influence on theterminals market, innovation and design are likely to evolve quickly. Since terminalsrepresent the consumers interface with UMTS, design and useability are likely tostrongly impact the success or failure of UMTS terminals.

5. The Content IndustryMost analysts agree that without sufficiently attractive content and applications, newmobile services will not appeal to users. The content industry, be it music, film, banksor information, is well aware of this, and certain to have an increasingly strong voicein UMTS service development, for example in much the same way that the Hollywoodultimately determined the multi-region development of DVD.

6. MarketingIt has been pointed out many times that Betamax was superior to VHS, but VHS wasmarketed much better. UMTS faces a similar challenge. Marketing covers a vast arrayof issues for the mobile industry to face, from branding to market education toattractive pricing. The latter in particular will also be influenced strongly by thedevelopment of appropriate Billing solutions.

And finally..

7. The ConsumerIt is the reaction of consumers which will ultimately decide the service mix and traffictypes whose support needs to be optimised in UMTS. It will be consumersdisposable income which will decide if pricing strategies have been formulatedcorrectly. It will be consumers’ fashion quirks that will decide which terminals sell thebest and it will be consumers convenience and confidence in matters of health, whichwill see them favour mobile over fixed access.



ConsumerElectronics

UMTS

Operators

Vendors

Regulators

ContentProviders

THE CONSUMER

Marketing

Fig. 13 – UMTS: The Unknowns


Documents

Section Ten