SenzaFili_WFACarrier

White paper Carrier Wi-Fi® for mobile operators

Carrier Wi-Fi® for mobile operators A TCO model assessing the cost benefits of Wi-Fi and cellular small-cell joint deployments By Monica Paolini

Commissioned by


© 2013 Senza Fili Consulting • www.senzafiliconsulting.com |2|

0. Executive summary

Carrier Wi-Fi® gives mobile operators a powerful tool to increase capacity in their networks by

leveraging the ubiquity of Wi-Fi in mobile devices. Unlike residential and enterprise offload or

Wi-Fi access in public hotspots, carrier Wi-Fi allows mobile operators and other service

providers to directly manage and retain control over the Wi-Fi infrastructure, and to share it

with roaming partners.

The specific value proposition of carrier Wi-Fi to mobile operators includes:

Mobile operators or their partners own and operate the network.

Advanced Wi-Fi functionality provides ease of access, security, QoS, and roaming

support. In particular, Wi-Fi CERTIFIED PasspointTM enables seamless SIM-based

authentication, network selection, and service consistency across access technologies.

Wi-Fi access can be tightly integrated with the cellular network using the framework

established by 3GPP standards to offer a common service platform across cellular and

Wi-Fi and to optimize network resource utilization.

While both small cells and Wi-Fi are effective in providing the additional capacity needed, we

expect mobile operators to deploy both, because they have distinct complementary roles.

Our TCO analysis explores the costs of deploying carrier Wi-Fi and cellular small cells, either in

separate deployments or jointly, sharing the same physical enclosure. We show that carrier

Wi-Fi has a lower TCO than cellular (62% of 4G’s) and that the addition of Wi-Fi to 3G and 4G

small cells only marginally affects the TCO (a 2% increase when adding Wi-Fi to 4G).

The per-bit TCO shows that Wi-Fi provides an even bigger cost advantage over 3G and 4G. A

combination of Wi-Fi and cellular provides the most cost-effective solution to increase

capacity in high-traffic areas. Operators may deploy small cells with Wi-Fi from the beginning,

or deploy carrier Wi-Fi initially and then add 4G to their Wi-Fi network when capacity

requirements dictate it.

Table of contents 0. Executive summary 2 1. Introduction 3 2. Why carrier Wi-Fi? An growth opportunity for mobile operators 4 3. Carrier Wi-Fi for mobile operators. Increasing mobile data capacity 6 4. Cellular and Wi-Fi small cells. A mutually reinforcing approach 8 5. The cost of adding capacity. Wi-Fi and cellular in the small-cell layer 9 6. Per-bit TCO. Relating cost savings to capacity 12 7. Implications for mobile operators 15 8. References 16 9. Acronyms 16

Source: Senza Fili



1. Introduction

The increase in adoption and use of mobile wireless data over recent years has been stunning. While mobile data still accounts for a small percentage of overall IP traffic, there is a clear trend

toward a shift from fixed and wireless broadband access, to mobile devices and wireless connectivity. Initially driven by developed regions, mobile wireless data is now growing at a faster

pace in emerging regions, where for many people their first and only connected devices are wireless.

In retrospect, neither cellular nor Wi-Fi alone enabled the growth of mobile wireless data; rather it was the side-by-side evolution of these two technologies that created the foundation on

which mobile wireless data flourished. Although developed independently from each other, with cellular standards driven by mobile operators and vendors, and Wi-Fi standards driven

initially by enterprise and consumer vendors, these two technologies are now joined at the hip, and they will continue to be complementary in the growth of mobile wireless data.

The cooperation between cellular and Wi-Fi networks to date has been mostly informal. Where Wi-Fi is available, mobile users switch to it to get a faster or free connection, and they revert

to cellular when they go outside an area covered by Wi-Fi. It is as if mobile devices have two personalities, with the user switching from one to the other depending on a mix of factors, such

as performance, cost and coverage.

With the emergence of carrier Wi-Fi networks run by mobile operators, the ties between cellular and Wi-Fi become tighter, as operators deploy their own Wi-Fi infrastructure and have the

opportunity to deeply integrate it with their cellular networks.

Mobile operators lack visibility into Wi-Fi access from mobile devices in the home, enterprise, and third-party hotspots. Carrier Wi-Fi enables mobile operators to keep track of Wi-Fi traffic;

offer the same services, content and applications over Wi-Fi and cellular; and manage network traffic to optimize capacity and coverage across radio access technologies (RATs). At the same

time, the integration of cellular and Wi-Fi increases the complexity of mobile networks, and mobile operators have to assess the benefits of Wi-Fi and cellular integration against this increase

in complexity.

In this paper, we look at the benefits and cost savings that carrier Wi-Fi, with its lower per-bit cost, brings to mobile operators at a time when they need to increase capacity in order to keep

up with growing demand from subscribers. We present the results from a TCO model that compares the per-bit costs of Wi-Fi and small-cell deployments in which combinations of Wi-Fi, 3G

and 4G are considered. We show that carrier Wi-Fi is conducive to lower per-bit costs than cellular, and that a combination of interfaces (Wi-Fi, 3G and 4G) further increases the cost savings.

Preface

This white paper was commissioned by Wi-Fi Alliance. The views and statements expressed in this document are those of Senza Fili Consulting LLC, and they should not be inferred to reflect

the position of Wi-Fi Alliance. All historical and forecast information on cost and pricing data found within this white paper is provided from the research of Senza Fili Consulting LLC.



2. Why carrier Wi-Fi? A growth opportunity for mobile operators

Wi-Fi as a major component of the mobile data experience. Wi-Fi has played an essential

role in shaping mobile data usage models, and it is expected to continue to do so even as

mobile networks increase throughput and capacity with the introduction of 4G networks.

Wi-Fi is ubiquitous among mobile data devices such as smartphones, and it is more commonly

supported than cellular interfaces in devices such as laptops and tablets.

Almost all subscribers who have both cellular and Wi-Fi in their devices use Wi-Fi. According

to Cisco’s VNI estimates, Wi-Fi accounted for 33% of mobile traffic from cellular devices in

2012. Wi-Fi traffic from mobile devices continues to provide mobile operators valuable relief

from congestion. China Mobile has an aggressive Wi-Fi strategy that has led to the installation

of 2.83 million APs in its hotspot footprint. In the first quarter of 2013, Wi-Fi traffic on China

Mobile’s network accounted for 73% of overall traffic, up from 50% in 2010 (Figure 1).

Wi-Fi, mobile and fixed traffic. To put these data in perspective, we need to keep in mind that

Wi-Fi traffic on cellular devices represents still only a small part of global Wi-Fi traffic.

According to Cisco’s VNI, Wi-Fi accounted for 42% of IP traffic in 2011; mobile traffic was 3%;

the rest was wireline (Figure 2). Wi-Fi traffic from mobile devices represents 1% to 2% of

global IP traffic, if we assume offload to be 33% of mobile traffic, in line with Cisco’s data.

However, Cisco’s forecast predicts that the role of Wi-Fi traffic in cellular devices will expand:

mobile data traffic is expected to account for 10% of IP traffic, and Wi-Fi for 51% by 2015. A

growing percentage of devices have cellular connectivity, so we expect Wi-Fi traffic in cellular

devices to grow faster than the overall Wi-Fi traffic, as users continue to shift more and more

of their traffic to mobile devices.

Figure 1. Cellular and Wi-Fi traffic. Source: China Mobile

Figure 2. Global IP traffic. Source: Cisco



Wi-Fi traffic in cellular devices. We distinguish among four different types of Wi-Fi traffic for

devices with cellular connectivity (Figure 3). Residential and enterprise are by far the

prevalent forms of Wi-Fi access for mobile devices. Wi-Fi traffic on mobile devices – often

referred to as Wi-Fi offload – is very valuable to mobile operators because, although they do

not gain revenue from it, neither does it add any cost, because Wi-Fi access relies on access

and backhaul infrastructure that the mobile operators do not own or operate. The subscriber

and the enterprise pay for the offload, while mobile operators may see, and benefit from,

lower traffic levels in their cellular networks.

Of course, only a part of mobile users’ data traffic is shifted from cellular to Wi-Fi networks,

because the amount of traffic that subscribers generate is affected by the availability of Wi-Fi.

Mobile users who cannot access Wi-Fi on their devices or in their home/office generate less

mobile traffic on average, and instead shift their traffic away from mobile altogether: they rely

more on fixed networks and devices. For this reason, in this report we do not refer to Wi-Fi

traffic from mobile devices as offload, because only a portion of it can be defined as offload –

i.e., data traffic shifted from cellular networks to Wi-Fi because of cost or performance

advantages – and because it is difficult to estimate how big this portion is from the subscriber

perspective.

Public Wi-Fi hotspots are typically operated by cities, public or transportation agencies, coffee

shops, hotels and airports, and provide access for free or for a fee. These hotspots are highly

valuable to mobile subscribers and operators alike, because they provide fast, cost-effective

connectivity in areas with a high density of subscribers. However, they account for a much

smaller percentage of traffic than residential and enterprise Wi-Fi traffic.

Defining carrier Wi-Fi. Carrier Wi-Fi is rapidly expanding as a new category of Wi-Fi access for

mobile devices. In carrier Wi-Fi, a mobile operator or a service provider, such as a cable

operator or an ISP, owns and operates the Wi-Fi infrastructure, manages access from users,

and shares the infrastructure with roaming partners. Mobile operators may choose to

integrate Wi-Fi within the cellular network, both within the RAN by co-locating cellular and

Wi-Fi small cells, and in the core network by integrating authentication, subscriber

management, billing, policy, and traffic management.

Figure 3. Cellular and Wi-Fi traffic from mobile devices. Source: Senza Fili



3. Carrier Wi-Fi for mobile operators. Increasing mobile data capacity

More than a free hotspot. Many of the networks currently operated by mobile operators fit

more appropriately into the public hotspot category than the carrier Wi-Fi category (Figure 3),

because they provide a blind offload – they simply divert traffic to a Wi-Fi AP and, in the

process, the mobile operator loses control of the subscriber experience and even of the usage

pattern. As a result, most mobile operators today do not know how much subscriber traffic is

transported over Wi-Fi, and they find it difficult to manage or monetize the Wi-Fi traffic.

A special class of carrier Wi-Fi. Within a cellular network, carrier Wi-Fi can be more than just a

Wi-Fi network owned and operated by a mobile operator. When integrated within the cellular

network, Wi-Fi is complementary to 3G and 4G.

Integration within the cellular network. New technologies, standardization efforts, and

certification programs make it possible for operators to integrate Wi-Fi within the cellular RAN

and core, and enable them to:

Benefit from the synergies between Wi-Fi and cellular

Make network selection and connection transparent to the user

Support consistent services between interfaces

In an integrated Wi-Fi and cellular network, subscribers do not need to know whether they

use cellular or Wi-Fi (unless they want to): devices will select the appropriate wireless

interface with no action required from the subscriber.

The operator tool box. Mobile operators that want to roll out or transition to carrier Wi-Fi to

extract more value from the Wi-Fi network can choose among many solutions in their tool

box:

Authentication. PasspointTM, based on the Hotspot 2.0 specification and spearheaded by

Wi-Fi Alliance®, enables password-free, seamless access, with EAP-SIM authentication

Drivers for growth in Wi-Fi traffic from mobile devices

Increased adoption of mobile devices

Smartphone penetration of more than 50% of cellular devices in some markets

A higher number of devices per subscriber

Emergence of a thriving tablet market

Widening range of devices with cellular and Wi-Fi capabilities

Increased traffic load when a subscriber uses Wi-Fi

Better coverage in indoor locations

Higher data rates

Increased adoption of tethering

Shift of usage from wireline to wireless devices

Higher data rates and/or lower cost of Wi-Fi

Faster growth in Wi-Fi traffic than in cellular traffic. Cisco’s VNI predicts that Wi-Fi traffic from mobile devices will grow from 33% in 2012 to 46% in 2017 as a percentage of mobile traffic



Roaming. The Wireless Broadband Alliance’s Next Generation Hotspot (NGH) initiative

has been launched to establish Wi-Fi roaming best practices and to facilitate the creation

of roaming partnerships among mobile operators.

Security and QoS. Operators need to go beyond Passpoint to have flexibility in managing

Wi-Fi traffic and to adopt complementary functionality such as WMM® for QoS and

WPA2TM for air-link security.

Capacity. Adoption of Wi-Fi CERTIFIED TM n and Wi-Fi CERTIFIED ac gives operators more

capacity based on those technologies’ use of wider spectrum channels and more

advanced antenna technologies.

Spectrum. To maximize capacity, carrier Wi-Fi may use wider spectrum channels than

other types of Wi-Fi offload, leveraging the spectrum in the 5 GHz band, which is less

heavily used than the 2.4 GHz one.

Equipment. While the radio is the same, carrier Wi-Fi equipment has to meet

requirements for public outdoor and indoor locations, and may rely on more advanced

antenna configurations (e.g., MIMO and beamforming) than residential networks do. If

Wi-Fi APs are co-located with small cells, the small-cell enclosure has to accommodate

Wi-Fi, and sufficient backhaul capacity has to be planned.

Devices. Smartphones and tablets consistently support Wi-Fi, but to maximize Wi-Fi

performance in a carrier Wi-Fi network, they need to provide client-side support for

some of the functionality (e.g., WMM, WPA2, or n or ac).

What’s different

Carrier Wi-Fi Cellular

Uses unlicensed spectrum, which has contended access; performance depends on competing, overlapping Wi-Fi networks

Uses licensed spectrum, which is difficult and expensive to obtain, but under complete control of operator

Wide channels available (80 MHz) Limited spectrum allocations, but higher transmit power

Interference from other Wi-Fi networks Interference from macro cellular layer (if same spectrum is used)

Limited interference mitigation tools Interference mitigation requires transmission to be coordinated with macro layers, resulting in increased overhead and complexity and in requirements for lower latency

Lower power, shorter range Higher power, longer range

Higher capacity Better coverage

Mostly deployed indoors to date Most operators plan for outdoor locations

What’s similar

Ubiquitous in mobile devices

New approach to RF network planning: equipment is closer to subscribers, an advantage in a cluttered and changing environment

Siting requirements, installation costs, operational complexity due to a large variety of characteristics across locations

Backhaul requirements



4. Cellular and Wi-Fi small cells. A mutually reinforcing approach

Mobile operators today face huge pressure to increase network capacity in order to meet

subscriber demand for more mobile data, and to do so in a tightly controlled, cost-effective

way because higher data consumption does not linearly translate into higher revenue – in

fact, to date revenues are falling at a time when traffic is growing at an extraordinary pace.

When debating the choices that mobile operators have for increasing capacity, Wi-Fi, 3G and

4G small cells invariably come up as alternatives or – increasingly – as complementary

elements is a multi-RAT strategy. Both Wi-Fi and cellular small cells act as an under-layer to

the macro network and bring the mobile network closer to the subscribers – down to street

level or indoors. Yet Wi-Fi and cellular small cells address the need for additional capacity in

subtly different ways, and this makes them complementary, not mutually exclusive. In some

environments – e.g., indoor locations with high traffic loads – Wi-Fi may be better suited. In

others – e.g., a park or open urban space – 4G small cells may work better.

In most cases, however, the two solutions work even better when co-located in the same

enclosure, because the marginal cost (capex and opex) of adding the second air interface is

low, and this increases the overall cost effectiveness of the capacity underlay.

When planning for a 3G and/or 4G small-cell deployment with integrated Wi-Fi, the

differences between cellular and Wi-Fi interfaces are crucial. Small cells can provide a more

uniform and reliable capacity layer, while Wi-Fi typically delivers a more powerful – although

not guaranteed – capacity boost.

The combination of 3G/4G with Wi-Fi gives the mobile operator a good comfort zone. At all

times the operator can count on a capacity level from the cellular network that is

manageable. Typically the additional capacity from Wi-Fi ensures a higher QoE and hence

subscriber satisfaction, but this cannot be guaranteed because the operator does not control

the spectrum.

Integrating Wi-Fi in cellular networks: The role of 3GPP standards

To integrate Wi-Fi in the cellular network, trusted (i.e., run by the operator or its partners) Wi-Fi APs connect to a Wi-Fi gateway that interfaces the mobile core. 3GPP efforts in defining such interfaces and additional functionality to support Wi-Fi integration are crucial to provide a framework that integrates cellular and Wi-Fi access in the mobile core.

3GPP standardization efforts include:

Access network discovery and selection function (ANDSF):

Mobile devices discover and select non-3GPP networks on the

basis of PCRF-defined rules. ANDSF enables real-time traffic

management and policy enforcement for network selection, and

it improves power-saving management on the mobile device.

Dual-stack mobile IP (DSMIP): Seamless handover between

cellular and Wi-Fi, based on the preservation of the IP address

throughout the session; support for simultaneous cellular and

Wi-Fi sessions, with flow-based traffic allocation (e.g., voice can

be kept on cellular, and video on Wi-Fi).

Selected IP Traffic Offload (SIPTO): Wi-Fi traffic can be offloaded

directly to the internet, without having to traverse the core

mobile network, on the basis of policy set by the operator.

Local IP access (LIPA): Local traffic is not forwarded to the core

and instead routed locally. Like SIPTO, LIPA reduces capacity

requirements on the core network.



5. The cost of adding capacity. Wi-Fi and cellular in the small-cell layer

Adding capacity in cellular networks. To address the growth in wireless data traffic,

mobile operators have to increase capacity. The traditional approach of adding more macro

cell sites is no longer sufficient, due to spectrum and site limitations and to costs. Wi-Fi offload

at home and in the workplace provides relief, but largely it is not available in areas with high

subscriber density (e.g., stadiums, airports, downtown areas). Mobile operators’ efforts to

increase capacity on their network are centered on these dense areas. The emerging

approach likely to prevail is to add a small-cell layer that includes cellular, Wi-Fi or, more likely,

a mix of the two. Our TCO model looks at the cost implications of choosing among these

options.

Wi-Fi, cellular or both? In our analysis, we assume that a mobile operator with a mature 3G

macro network and possibly a 4G network wants to increase capacity with Wi-Fi or cellular

small cells. To investigate the cost implications of these options we look at the TCO of a single

cell (Wi-Fi, 3G/4G, or any combination of them) over a period of five years, and then compute

the per-bit TCO on the basis of the capacity of these technologies. This approach allows us to

compare both the cost to deploy and operate a single-cell unit, and the cost to add capacity.

Main assumptions. We assume our mobile operator expects to have equally reliable and

robust small-cell layers for both Wi-Fi and cellular infrastructure (Figure 4). For a fair

comparison among options, we assume a mix of 20% indoor sites and 80% outdoor sites,

even though to date Wi-Fi is more frequently deployed indoors and small cells outdoors. No

costs for cellular spectrum are included in the analysis, as we expect the operator to reuse the

spectrum allocated to the macro cell layer. In this context, spectrum is considered to be a

sunk cost incurred for the initial network deployment.

Figure 4. Capex and opex for small cells. Source: Senza Fili



Comparing Wi-Fi and 4G. As a result, while the capex for a Wi-Fi AP is 72% of that for a 4G

small cell, the carrier Wi-Fi infrastructure is substantially more expensive than for a free,

independently operated, coffee shop hotspot that requires only a consumer AP and a

broadband connection. Because the target locations, the equipment size, and the reliability

requirements of 4G and carrier Wi-Fi are largely the same, the cost base for each technology

is similar. The differences are due to higher hardware costs for 3G and 4G, and more stringent

backhaul requirements for 4G (due to the need to coordinate transmission with the macro

layer). Similarly, Wi-Fi opex is 59% of the 4G opex. Opex is comparatively cheaper for Wi-Fi

because we expect mobile operators to use less-expensive unlicensed-spectrum backhaul

more frequently for Wi-Fi than 4G.The lower cost of Wi-Fi equipment is mostly responsible for

the lower Wi-Fi capex.

Five-year TCO. The TCO over five years for a carrier Wi-Fi AP installed in Year 1 is $36,000, or

62% of the $57,000 TCO for 4G, in line with the differences in opex and capex (Figure 5). At

$48,000, the TCO for a 3G small cell is clearly less cost effective, as the cost is 83% of the 4G

TCO and the capacity is lower. The lower backhaul costs reduce the relative costs of 3G to 4G,

but most of the capex and opex items are comparable for the two technologies.

Combining technologies. Co-locating Wi-Fi with 3G small cell during the initial deployment

has no impact on opex, and only a minor impact on capex (7%) and on overall TCO (2%).

Adding 4G to a planned Wi-Fi AP is more expensive, as the initial cost to deploy Wi-Fi is lower

and it translates into a 48% increase in capex, 70% in opex, and 64% in overall five-year TCO

over Wi-Fi. Combining multiple wireless interfaces in the same location results in large cost

savings over deploying the same infrastructure at two different locations (e.g., a 4G small cell

with Wi-Fi, versus a 4G small cell and a Wi-Fi AP on two different lampposts) because the

operator avoids duplicating costs. For instance, leasing costs are not affected by the presence

of a Wi-Fi module inside the small cell, and the backhaul link can be shared.

Adding cellular to a carrier Wi-Fi deployment. A similar analysis shows that adding a 4G

small cell at a later stage (Year 3 in our analysis) is a more cost-effective approach than

deploying a 4G small cell in a separate installation. In delayed co-location, we expect the

mobile operator to swap out the Wi-Fi AP equipment in favor of a 4G and Wi-Fi small cell, at a

cost that is substantially lower than a new installation. The addition of a cellular interface in

Year 3 causes a spike in both capex and opex that results in an overall increase in TCO of 32%

Figure 5.Five-year TCO for Wi-Fi and cellular small cells. Source: Senza Fili



for 3G, 52% for 4G, and 58% for a combination of 3G and 4G. But the five-year TCO is

marginally lower if 4G is added in Year 3 ($54,000) than if added in during Year 1 ($58,000),

because of the lower opex in Year 1 and Year 2. This may encourage mobile operators to

deploy carrier Wi-Fi ahead of 4G small cells, especially as many operators are not ready for 4G

small cells, because they either do not have a 4G network, are still deploying the macro layer,

or do not yet have congestion in their 4G networks. In this scenario, mobile operators can

cost-effectively deploy carrier Wi-Fi today to address the requirement for additional capacity

in their 3G networks, then add 4G small cells when the 4G networks become overloaded.

Variations across markets. Cost assumptions are benchmarked against data from

operators and vendors in a developed market, but we are aware that there will be substantial

differences across markets and even across operators in the same market. However, we

expect that the relative cost difference among the options considered will remain stable, as

the cost items for the different options will largely vary uniformly (e.g., high labor costs

comparably increase the installation costs for both Wi-Fi and cellular infrastructure).

Carrier Wi-Fi cost savings. The TCO analysis demonstrates that at the single-cell basis,

carrier Wi-Fi can lower costs for mobile operators following different approaches:

Deploy carrier Wi-Fi as a complement to a small-cell layer, but keep it separate (e.g.,

Wi-Fi in indoor locations, and small cells outdoors; or in an overlapping footprint but in

separate locations).

Co-locate Wi-Fi and cellular technologies at the same location, sharing the equipment

enclosure and backhaul.

Roll out carrier Wi-Fi initially, and subsequently swap the equipment to add 4G small cells

when the traffic load reaches the available capacity. In our analysis, the 4G small-cell

addition is planned for Year 3, but if planned for a later stage, the cost savings increase as

the 4G-driven additional capex and opex are added later. This approach also gives the

mobile operator additional flexibility in planning for the 4G addition in response to

increases in traffic load, which are difficult to predict accurately.



6. Per-bit TCO. Relating cost savings to capacity

Moving beyond the TCO analysis. The TCO analysis shows that carrier Wi-Fi costs less than

cellular small-cells. But to justify the adoption of carrier Wi-Fi, we also need to demonstrate

that the cost savings is in transporting traffic – i.e., in meeting subscriber demand. The per-bit

TCO analysis allows us to do so, by combining cost and performance in a single metric.

A difficult comparison. Comparing per-bit costs for cellular and Wi-Fi is more complex than

doing the same analysis across cellular technologies (or versions of Wi-Fi, such as b/g, n, or

ac), because the bits are not the same. In a cellular network, the operator controls the

spectrum and hence can mitigate and control interference more effectively than when using

Wi-Fi unlicensed spectrum that anybody can use.

In 3G and 4G small-cells, however, most operators plan to use the same spectrum that they

use for the macro-cell network. To keep interference under control, they need to coordinate

transmission between the small-cell and macro-cell layers. While several tools have been

developed to address this challenge in 4G networks, it is too early to quantify the impact on

performance in fully loaded, commercial networks.

As a result, it is difficult to predict what the throughput will be for Wi-Fi and cellular on

average across the network footprint. Furthermore, the relative difference in throughput is

going to be highly variable across locations, because the impact of other Wi-Fi networks and

of the macro network heavily depends on highly-variable characteristics of the environment.

To further complicate the comparison, deployment options (e.g., MIMO configurations,

channel widths) impact both costs and performance.

Per-bit TCO assumptions. For the per-bit TCO analysis presented in this paper, we adopted an

approach that minimizes assumptions that are dependent on the deployment environment,

and that at the same time keeps the analysis transparent and amenable to a sensitivity

analysis. To do so, we adopted as a reference point the peak data rates for all technologies

Wireless technology Peak rate assumptions

3G – HSPA 5 MHz

4G – LTE (base case) 10 MHz, 2x2 MIMO

4G – LTE-Advanced 10 MHz, 4x4 MIMO

Wi-Fi CERTIFIED n (base case) 40 MHz, single stream

Wi-Fi CERTIFIED ac 80 MHz, single stream

Figure 6. Peak data rates for Wi-Fi and LTE. Sources: Equipment vendors, IEEE, 4G Americas, 3GPP, Senza Fili



included, and cast them as a percentage of 4G (LTE) peak data rate (Figure 6). We do not

expect that mobile operators will see peak rate throughput in any deployment – and in fact

we expect average throughput to be substantially lower than peak rates. But we make the

assumption that throughput for all technologies will equally depend on the peak rate. As the

peak rate for Wi-Fi n (40 MHz channel, one spatial stream) is 43% higher than for 4G (10 MHz

channel, 2x2 MIMO), we expect the Wi-Fi average throughput to be 43% higher than 4G. The

per-bit TCO is calculated on the basis of the five-year capex and opex assumptions presented

earlier in the paper (Figure 7).

3G. Not surprisingly, 3G is the most expensive technology, with a per-bit TCO more than four

times as high as that of 4G – and ten times as high as Wi-Fi. The difference is only in part due

to the lower spectral efficiency of HSPA compared to LTE. To a larger extent, the higher costs

are due to the fact that we assume a deployment in 5 MHz channels without MIMO, which is

a typical configuration for 3G small cells.

Wi-Fi. The per-bit cost for carrier Wi-Fi is less than half (43%) that for 4G. As in the 3G case, it

is not spectral efficiency that accounts for the lower cost (the spectral efficiency for 4G is

higher), but the fact that Wi-Fi can typically use more spectrum. Although 4G can use wider

channels, 10 MHz channels are commonly used, because of the limitations in spectrum

availability that most operators face. On the other hand, a Wi-Fi AP can use both the 2.4 GHz

and 5 GHz bands, and multiple channels. (However, in our analysis we assume that the Wi-Fi

AP uses only one channel.) If we were to use the same channel width for both Wi-Fi and 4G,

the ratio of the per-bit costs would be reversed, but 4G small-cell deployments in 40 GHz are

not likely to happen in the short term.

Adding 3G to Wi-Fi. The addition of 3G to Wi-Fi increases the TCO more than it increases

capacity, so the per-bit costs are higher (52% of 4G’s, versus 43% of 4G costs for Wi-Fi only).

But the combination makes the case for 3G small cells much more compelling, because that

52% for 3G and Wi-Fi is much lower than the per-bit cost of 3G only (435% of 4G).

Adding 4G to Wi-Fi. Wi-Fi and 4G is the winning combination, because the increase in per-bit

TCO is less than the increase in capacity – although the savings over using Wi-Fi alone is small

when measured against our benchmark of 4G-only per-bit TCO (42% for the Wi-Fi and 4G

combination, versus 43% for Wi-Fi only). More notably, that 42% means operators can have

4G plus Wi-Fi for less than half the per-bit TCO of 4G alone. The TCO analysis predicts that

adding 4G to Wi-Fi in Year 5 reduces the per-bit costs even further, to 39%.

Figure 7. Per-bit TCO over a five-year period. Source: Senza Fili



Looking at the future. In our analysis we assume that HSPA, LTE and Wi-Fi n are deployed,

which we expect to be the case in today’s deployments. Will the introduction of

LTE-Advanced and Wi-Fi ac change our results? The answer is that the new versions of LTE

and Wi-Fi will not alter the relationship, because both LTE-Advanced and Wi-Fi ac are

expected to double capacity. If LTE-Advanced and Wi-Fi ac are rolled out at the same time, the

per-bit costs will be cut in half, but the ratio of TCO for LTE-Advanced to Wi-Fi ac will remain

the same (Figure 8).

Sensitivity analysis. The per-bit TCO results rely on the assumption that Wi-Fi and cellular

capacity are comparably linked to peak data rates. We can further explore the results of our

analysis if we change this assumption in two ways (Figure 8).

First, what would the per-bit TCO be if the capacity across technologies were the same?

Figure 8 shows that, in this case, the per-bit TCO for Wi-Fi is still 62% of 4G’s, making it the

most cost effective of the three technologies if capacities were equal. 3G would also be

slightly cheaper than 4G (83% of 4G TCO), because capex and opex for 3G are lower than for

4G. (It is difficult to foresee a situation in which 3G has the same capacity as 4G, but a scenario

in which 3G and 4G use the same channel width and the same MIMO configuration may

approximate this per-bit TCO ratio.)

Second, we can ask what capacity should Wi-Fi and 3G have to support the same per-bit TCO

across technologies, keeping 4G’s capacity fixed at 105 mbps. Those capacities, we

determined, are 65 mbps for Wi-Fi and 87 mbps for 3G. If Wi-Fi capacity goes below 65 mbps,

4G is more cost effective. For any capacity above 65 mbps, Wi-Fi offers a cost advantage.

Learning points. The per-bit TCO analysis strengthens the conclusions of the earlier TCO

analysis. Not only are Wi-Fi APs and small cells with Wi-Fi modules cost effective on a single-

cell basis, they also lower the overall cost of delivering data to subscribers. In particular:

Combining Wi-Fi and 4G provides the most cost-effective solution, regardless of whether

4G is part of the deployment in Year 1 or is added in a subsequent stage.

Wi-Fi supports a substantially lower per-bit cost than 4G and 3G, assuming that their

capacity scales comparably with their peak rates. Wi-Fi remains cost effective even in the

case that the capacity as a percentage of peak rate is half that of 4G’s.

As networks evolve toward LTE-Advanced and Wi-Fi ac, the per-bit TCO will decrease, but the

relative estimates for LTE and 3G remain the same.

Figure 8. Per-bit TCO for LTE-Advanced and Wi-Fi ac; sensitivity analysis. Source: Senza Fili



7. Implications for mobile operators

Carrier Wi-Fi offers mobile operators a cost-effective solution to expand the scope for Wi-Fi traffic from mobile devices, which today is mostly contained within the home and enterprise, to

dense urban areas, stadiums, airports, and generally all public places where mobile operators need additional capacity more urgently. With carrier Wi-Fi, mobile operators retain control of

the user experience and of the allocation of network resources across RATs. Ownership and control over the Wi-Fi infrastructure, coupled with the adoption of solutions such as Passpoint and

the option of a tight integration of Wi-Fi and the cellular network, enable them to offer a consistent service platform across Wi-Fi and cellular, to share the Wi-Fi network with roaming

partners, and to select the interface best suited to each device without requiring any active participation of the subscriber.

Deploying carrier Wi-Fi requires a deeper commitment from mobile operators than most of today’s Wi-Fi hotspots. The performance and functionality requirements are more stringent –

closer to those for 3G or 4G small cells than to a coffee-shop hotspot. Our TCO analysis shows that this commitment to carrier Wi-Fi is fully justified, because Wi-Fi is a technology that is

ubiquitously embedded in mobile devices and that provides a powerful capacity boost, thanks to the availability of large spectrum channels and a spectrally efficient wireless interface. Wide

availability of Wi-Fi in mobile devices makes carrier Wi-Fi easy to deploy, because mobile operators do not have to worry about adding a new interface to the devices in their networks. The

capacity injection from Wi-Fi makes Wi-Fi cheaper than 3G and 4G small cells to deploy on a per-location basis and, even more so, on a per-bit basis.

In most cases, however, we do not expect mobile operators to choose between Wi-Fi and cellular small cells, but to treat them as two complementary components. 3G and 4G small cells

provide a consistent layer of capacity and coverage, thanks to their reliance on licensed spectrum. Wi-Fi injects the additional capacity that mobile operators need to meet the demand and

expectations from subscribers. Together Wi-Fi and cellular small cells more effectively leverage the spectrum available to deliver higher capacity and a lower per-bit cost. Carrier Wi-Fi and

cellular small-cell strategies will vary among operators, depending on market demand, spectrum assets and competitive pressure. Our results demonstrate the following:

For operators with a 4G network and ready to deploy small cells, the addition of Wi-Fi has a low marginal cost and delivers substantial per-bit cost savings.

Operators without a 4G network or still in the early deployment stages can initially deploy carrier Wi-Fi today, and transition to 4G small cells when the traffic load on 4G requires it. In this

case, the deployment of carrier Wi-Fi is initially targeted at relieving congestion on the 3G network, while avoiding large deployments of 3G small cells, which have a difficult business case

because of the low data rates of 3G compared to Wi-Fi and 4G.

Operators without a 4G network that intend to deploy 3G small cells stand to benefit by adding Wi-Fi to their small cells, as this leads to an increase in capacity. The marginal cost of adding

Wi-Fi is low, and the reduction in per-bit costs steep.

Operators that do not want to commit yet to a small-cell deployment strategy can address their increasing capacity requirements with carrier Wi-Fi in the short term and continue to rely

exclusively on Wi-Fi in the under-layer until they can add cellular. This approach is well suited for operators that find data traffic evolution difficult to predict.



8. References

4G Americas (2011) Mobile broadband explosion

4G Americas (2012) 4G mobile broadband evolution

AirMagnet (2008) 802.11n primer

Cisco (2012) Cisco Visual Networking Index: Forecast and Methodology, 2011–2016

Cisco (2013) Cisco Visual Networking Index: Global Mobile Data. Traffic Forecast Update,

2012–2017

ETSI (2012) Digital cellular telecommunications system (Phase 2+); Universal Mobile

Telecommunications System (UMTS); LTE; Mobility between 3GPP-Wireless Local Area

Network (WLAN) interworking and 3GPP systems (3GPP TS 23.327 version 11.0.0 Release

11)

ETSI (2012) Universal Mobile Telecommunications System (UMTS); LTE; 3GPP system to

Wireless Local Area Network (WLAN) interworking; system description (3GPP TS 23.234

version 11.0.0 Release 11)

Informa (2012) Understanding today’s smartphone user. Demystifying data usage trends

on cellular and Wi-Fi networks. Part 2: An expanded view by data plan size, OS, device

type and LTE.

Interdigital (2010) Cellular–Wi-Fi integration

Mehdi Bennis et al. (2013) When cellular meets Wi-Fi in wireless small cell networks.

IEEE Communications Magazine

Ruckus Wireless (2013) Delivering the 802.11n promise with smart Wi-Fi

Senza Fili (2012) The economics of small cells and Wi-Fi offload

Wi-Fi Alliance (2009) Wi-Fi CERTIFIED™ n: Longer-range, faster-throughput, multimedia-

grade Wi-Fi networks

Wi-Fi Alliance (2012) Wi-Fi CERTIFIED Passpoint: A program from the Wi-Fi Alliance to

enable seamless Wi-Fi access in hotspots

9. Acronyms

3G Third generation

3GPP Third Generation Partnership Project

4G Fourth generation

ANDSF Access network discovery and selection function

AP Access point

DSMIP Dual-stack mobile IP

EAP Extensible authentication protocol

ETSI European Telecommunications Standards Institute

HSPA High-speed packet access

IEEE Institute of Electrical and Electronics Engineers

IP Internet Protocol

ISP Internet service provider

LIPA Local IP access

LTE Long term evolution

MIMO Multiple input, multiple output

NGH Next Generation Hotspot

PCRF Policy and charging rules function

QoE Quality of experience

QoS Quality of service

RAN Radio access network

RAT Radio access technology

SIM Subscriber identity module

SIPTO Selected IP Traffic Offload

TCO Total cost of ownership

VNI Visual Networking Index

WMM® Wi-Fi MultimediaTM

WPA2TM Wi-Fi Protected Access® 2

http://en.wikipedia.org/wiki/LTE_(telecommunication)http:/en.wikipedia.org/wiki/LTE_(telecommunication)


© 2013 Senza Fili Consulting, LLC. All rights reserved. This white paper was commissioned by Wi-Fi Alliance. The views and statements expressed in this document are those of Senza Fili Consulting LLC, and they should not be inferred to reflect the position of Wi-Fi Alliance. The document can be distributed only in its integral form and acknowledging the source. No selection of this material may be copied, photocopied, or duplicated in any form or by any means, or redistributed without express written permission from Senza Fili Consulting. While the document is based upon information that we consider accurate and reliable, Senza Fili Consulting makes no warranty, express or implied, as to the accuracy of the information in this document. Senza Fili Consulting assumes no liability for any damage or loss arising from reliance on this information. Trademarks mentioned in this document are property of their respective owners. Icons by thenounproject/George Agpoon. Front page graphics by Meder Lorant/Shutterstock.

About Wi-Fi Alliance Wi-Fi Alliance® is a global non-profit industry association of hundreds of leading companies devoted to seamless connectivity. With technology development,

market building, and regulatory programs, Wi-Fi Alliance has enabled widespread adoption of Wi-Fi® worldwide. The Wi-Fi CERTIFIED™ program was launched in

March 2000. It provides a widely-recognized designation of interoperability and quality, and it helps to ensure that Wi-Fi-enabled products deliver the best user

experience. Wi-Fi Alliance has certified more than 15,000 products, encouraging the expanded use of Wi-Fi products and services in new and established

markets.

Wi-Fi®, Wi-Fi Alliance®, WMM®, Wi-Fi Protected Access® (WPA), the Wi-Fi CERTIFIED logo, the Wi-Fi logo, the Wi-Fi ZONE logo and the Wi-Fi Protected Setup logo

are registered trademarks of Wi-Fi Alliance. Wi-Fi CERTIFIED™, Wi-Fi Direct™, Wi-Fi Protected Setup™, Wi-Fi Multimedia™, WPA2™, Wi-Fi CERTIFIED Passpoint™,

Passpoint™, Wi-Fi CERTIFIED Miracast™, Miracast™, Wi-Fi ZONE™ and the Wi-Fi Alliance logo are trademarks of Wi-Fi Alliance. WiGig® is a registered trademark

of the WiGig Alliance.

About Senza Fili Senza Fili provides advisory support on wireless data technologies and services. At Senza Fili we have in-depth expertise in financial modelling, market forecasts

and research, white paper preparation, business plan support, RFP preparation and management, due diligence, and training. Our client base is international and

spans the entire value chain: clients include wireline, fixed wireless, and mobile operators, enterprises and other vertical players, vendors, system integrators,

investors, regulators, and industry associations. We provide a bridge between technologies and services, helping our clients assess established and emerging

technologies, leverage these technologies to support new or existing services, and build solid, profitable business models. Independent advice, a strong

quantitative orientation, and an international perspective are the hallmarks of our work. For additional information, visit www.senzafiliconsulting.com or contact

us at [email protected] or +1 425 657 4991.

About the author Monica Paolini, PhD, is the founder and president of Senza Fili. She is an expert in wireless technologies and has helped clients worldwide to understand

technology and customer requirements, evaluate business plan opportunities, market their services and products, and estimate the market size and revenue

opportunity of new and established wireless technologies. She has frequently been invited to give presentations at conferences and has written several reports

and articles on wireless broadband technologies. She has a PhD in cognitive science from the University of California, San Diego (US), an MBA from the University

of Oxford (UK), and a BA/MA in philosophy from the University of Bologna (Italy). She can be contacted at [email protected].

http://www.senzafiliconsulting.com/

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