SON: Reducing Costs, Improving Service · 2016-05-17 · SON is expected to significantly reduce CapEx via automation of operational and network management costs associated with operations,

and

present:

SON: Reducing Costs, Improving Service

Whitepaper

Published: Second Quarter, 2012 Version 1.0

iGR Inc. 12400 W. Hwy 71 Suite 350 PMB 341 Austin TX 78738

Distribution of this report outside of your company or organization is strictly prohibited. Copyright © 2012 iGillottResearch Inc.

Table of Contents

Executive Summary..................................................................................................... 1

SON: An Overview ...................................................................................................... 3 Brief Introduction to SON Capabilities .................................................................................3

Figure 1: SON Capabilities ....................................................................................................... 3 Impact of SON Services on Expenditures .............................................................................4

SON Network Management .................................................................................................... 5 Legacy Networks versus SON .................................................................................................. 5 Table 1: SON Scenarios for OPEX Improvements .................................................................... 6

SON’s Network Management Benefits ................................................................................7 CapEx Reduction Benefits ...................................................................................................8 OpEx Reduction Benefits ....................................................................................................8

Network Operations Benefits .................................................................................................. 8

SON Financial Impact Forecast .................................................................................. 10 Table 2: Long-term OPEX, CAPEX and Revenue benefits to be realized by SON................... 10

LTE OpEx and CapEx Forecast ............................................................................................ 11 Table 3: SON’s Impact on LTE-related CapEx and OpEx, 2011-2016 (U.S. Only) ................... 12

Conclusion ................................................................................................................ 13

About iGR ................................................................................................................. 14 Disclaimer ........................................................................................................................ 14

This research is provided as a member benefit for the exclusive use of members of PCIA – The Wireless Infrastructure Association. It is made available by a partnership between PCIA and iGR.

Distribution of this report outside of your company or organization is strictly prohibited. Copyright © 2012 iGillottResearch Inc. 1

Executive Summary

Self-Organizing Network (SON) concepts are at the core of launching new, cost-effective 4G devices and applications. SONs greatly simplifies legacy standard operational tasks via automated triggers for self-configuration, self-optimization, and self-management functions. Because of these capabilities, SONs enable carriers to obtain significant savings both in operational and capital expenditures (OpEx and CapEx).

iGR forecasts that the LTE capital expenditure savings from SON deployments for 2011 to 2016 will be 9.9 percent. Operating expenditure savings over the same period is forecast to be 15.4 percent.

The rapid acceleration of network technology from 2G to 3G, and now to 4G, provides many challenges to wireless carriers. Prior to 4G, for example, management of network elements was centralized and involved a considerable degree of manual intervention. However, 4G brings new technological advancements, network elements, and business processes that will dramatically change the wireless infrastructure. SON is a key part of that network evolution.

As the transition to 4G unfolds in 2012, the existing legacy centralized approach to network management will soon be replaced by a hybrid core network configuration architecture. Ultimately, this evolved architecture will enhance robustness, scalability, and integration integrity with 2G, 3G, and 4G network elements across multiple carrier networks. One of SON’s key roles is to provide methods for operators to develop 4G networks while minimizing costs.

In short, SONs allow for the automated self-management, self-configuration, and self-optimization of 4G networks. SONs provide a new approach to network management that combines both centralized and de-centralized elements helping an operator better maintain and oversee their 4G network in conjunction with pre-existing network architecture (2G, 3GPP, etc.).

To quantify the potential results from SON on the new LTE networks being deployed in the U.S., iGR has prepared a detailed LTE CapEx and OpEx model based on the cost to deliver 1 Gigabyte of data over an LTE network. This model uses the estimated amount of data traffic sent across the network as its basis and not simply the number of base stations or cell sites used to support the LTE network. This model estimates that the depreciated CapEx for LTE in the U.S. to be just over $22.85 billion between 2011 and 2016. LTE OpEx during the same period is estimated at $29.19 billion.

In the initial years of the forecast, iGR expects that the savings associated with SON to be very low and therefore have a negligible impact on network costs. As the deployments increase and, more importantly, the number of eNode Bs significantly increases, the savings become much more sizeable.


As a result of full SON implementation between 2011 and 2016, iGR expects that total LTE CapEx savings will be $2.34 billion and that total LTE OpEx savings will be $4.5 billion. These savings end up reducing the overall CapEx required for LTE to $21.4 billion (from 2011 to 2016) and OpEx down to $24.7 billion.

The purpose of this whitepaper, then, is to not only provide a basic understanding of SON, but to pursue in more detail the beneficial impact of SON on wireless operators’ LTE transitions.


SON: An Overview

Brief Introduction to SON Capabilities

Although SON standards began to evolve with 3GPP R8, it was not until R9 and R10 were completed that large carriers began to deploy test LTE networks in the 2009 timeframe. The advent of R11, which is anticipated to be in late 2012, begins to more fully support and enable LTE technology. Figure 1 illustrates a high-level view of SON capabilities.

Figure 1: SON Capabilities

Source: Motorola and iGR, 2012

Refer to each of the steps below for high-level process information about Self-Optimizing, Self-Operation, and Self-Configuration capabilities enabled by SON. The numbered paragraphs pertain to elements in Figure 1:

1. Network planning must take into consideration the legacy network’s functionality and capabilities in order to best determine a migration timeline to deploy LTE with minimal disruption to subscriber services. Extensive Network Planning is the key to a successful deployment. When


properly executed, eNode Bs query the approved small cells to be part of the network.

2. Must take into consideration the new network components, e.g., macrocells, picocells, femtocells, WiFi, DAS, MME, SAE Gateway, and neighboring eNode Bs that need to be managed. When a component malfunctions, the system automatically cooperates with adjacent cells to minimize any degradation in end-user experience and adjusts coverage and handover related parameters to mitigate service problems.

3. Need to design and manage new network routing algorithms and finalize what will be automated, what legacy processes shall remain and what new processes need to be implemented. Minimally, the SON executes an authentication with various small cells before including a cell in the network.

4. Self-Configuration – New eNode Bs configure themselves in a plug and play manner and are automatically synchronized with existing neighboring eNode Bs. Neighbor lists are created and whenever there is a change of eNode B status, the network configures itself via predefined network parameters, based on time of day, day of week, etc. Security measures are automatically established via the control channel between the elements and servers to ensure that self-testing is executed and that the network functions as designed.

5. Self-Operating – eNode Bs are automated to the extent that they try to rectify metric gaps in real time via a series of predetermined triggers. In the event of a node outage or performance issue, neighboring nodes are notified that they must self-adjust their parameters to ameliorate any network operational issues.

6. Self-Optimizing – The network aggregates a series of measurable metrics related to power settings, antenna tilt, Radio Frequencies, network performance, and network interferences, particularly with macrocells, picocells, femtocells and DAS. These metrics serve as the foundation for automation and network tuning.

The processes outlined above are interrelated and not independent. These overlapping processes provide the capability that benefits both the carrier and the subscriber.

Impact of SON Services on Expenditures

SON is expected to significantly reduce CapEx via automation of operational and network management costs associated with operations, maintenance, training and support (OpEx). SON automated functions will reduce costs associated with daily operations, including power utilization costs. Most importantly, the customer experience will be greatly enhanced as a result of greatly improved network stability and integrity.


SON Network Management

In the new SON environment, it is likely that a hybrid network management model will be the norm. In the hybrid model, the configuration of plug and play devices is autonomous, as is negotiation of radio resources between eNode Bs. The key to the hybrid model is hierarchical architecture management by the Element Management System (EMS), which manages multiple eNode Bs. This EMS is important in supporting high-quality, inter-vendor operations.

As a consequence of the new flat network architecture, the carriers need to deploy many more eNode Bs to cover the same areas as the older 3G architecture. This means carriers will now have many more eNode B vendors to choose from, which should eventually drive down costs. Although the Evolved Packet Core (EPC) – a defining LTE network element – will expand the number of network elements to be managed, the tasks will be much simpler because of the inherent automation and self-management functionality of the SON.

Despite the fact that many of the network management functions are automated, deploying SON requires an extensive planning effort. For example, a SON network deployment requires definition of initial and anticipated network capacity, customized use cases, network acceptance, integration, and final test plan strategies.

Legacy Networks versus SON

This section provides a high-level view of four business scenarios (out of many such examples) in both the legacy network ‘AS IS’ and SON-based ‘TO BE’ Models. For purposes of this discussion, the four scenarios examined are: Base Station Configuration, Base Station Management, Load Balancing, and Handover Optimization.

Table 1 below depicts the very significant OPEX improvements that can be realized in the SON environment. As the SON standard evolves, it is likely that such benefits will grow as experience with the technology is gained. However, CapEx is likely to climb in the short-term, followed by a decline, as the 4G networks mature.

Note that relative to Scenario 2, eNode Bs are able to shut themselves down during non-busy traffic periods. eNode Bs can also be configured to automatically turn themselves back on at a specific time, or when a surge in network usage is detected. These capabilities can obviously help drive energy savings.


Table 1: SON Scenarios for OPEX Improvements

AS IS MODEL TO BE MODEL

Scenarios Legacy 2G/3G/Networks 4G SON

#1 Base Station

Configuration

Software Management

Software updates are manual

Human intervention often required

Multiple base station types means multiple software versions and increased complexity

Testing

Testing is manually intensive

Antennas manually adjusted and impact network integrity

Network Configuration

Huge undertaking to manage neighboring network relationships

Hand-off to other networks are varied and require significant time to manage

Base Station inventory is time intensive

Large staff required to perform base station configuration and manage nodes

Automatic Software Management

Automatically detect the transport link

Establish connection with 4G network

Download or upgrade eNode B software

Automatically modify eNode B status

Self-Testing

Perform self-tests at boot, auto detection of other eNode Bs and other network elements

Automatically verify and adjust antenna configurations based on network performance

Dynamically adjust antenna send/receive path based on weather or traffic conditions

Automatic Neighbor Configuration

ANR tracks all neighboring network relationships and hand-offs

ANR automatically tracks all base station inventory

ANR manages all network policies, cell data, and cell IDs

Reduced staff requirements due to automation

#2 Base Station Management

Managing inventory for multiple base station types is very time consuming and prone to error

Base station management is manual

Difficult to track base station status

eNode Bs can be automatically turned off or on to save power costs

eNode B inventory is very robust and managed dynamically

Report status of all nodes to EMS in real-time

Automatic inventory management of all base stations

#3 Load Balancing

Load balancing is predominantly manual in nature and time-consuming to design and manage in real-time

Mistakes in this space are very costly and they are frequent

Have little or no control of different policies germane to adjacent networks

Reporting is error prone and costly to manage

Intelligently spread traffic across all legacy radios and new 4G components like MMEs, SAE GWs, and eNode Bs

Immediately include new network elements to load balancing algorithm and test security

Report status of load balancing status to EMS

Have the control to govern the different policies of the SON system and adjust them


Scenarios Legacy 2G/3G/Networks 4G SON

#4 Handover

Optimization

Handover is very intense when multiple network technologies and devices are involved

No standard interface for managing call handover to other networks or network elements

Reporting on handover performance and coordination with neighboring networks is manual and error prone

Automatically manage handovers to macro/pico/femto cells, DAS and WiFi elements within 4G network

Automatically manage inter-carrier, intra-carrier, or inter-technology traffic via x2 interface standard and SAE for non-4G networks

Minimize dropped calls for subscribers

Automatically ID new small cells when added to network

Source: iGR, 2012

SON’s Network Management Benefits

Network management benefits from SON are expected to come from several different areas:

Significantly impact the management of new LTE networks

Eliminate or mitigate network configuration tasks as much as possible

Example – IP addressing, QoS setup, automatic assignment of physical cell IDs and RF parameters, etc.

Enable much quicker eNode B deployment

Introduces plug and play capacity, e.g., no provisioning of hardware resources needed, inventory info is automatically recorded and reported

Synchronizes with neighboring eNode B locations via cell IDs

Maintains a list of identifying characteristics of neighboring eNode Bs

Continually optimizes RF parameters, including antenna tilt, power fluctuations, and interference

Automatically establishes transport capabilities by establishing contact with the MME

Self-testing and verification operation of the eNode B is done automatically

Automatically authenticates itself into the network and updates the correct version.


CapEx Reduction Benefits

Capital expenditures associated with LTE are related to the cost of the eNode B deployment, implementation of the EPC and installation of the required backhaul and OSS/BSS.

Although network CapEx will likely rise the first year SON is deployed, iGR expects that it will rapidly decline as the benefits of self-configuring eNode Bs become apparent. In other words, as the number of eNode Bs with SON rises, so the efficiencies outweigh the additional cost of including SON initially.

Note that SON’s antenna tilt capability alone engenders significant OpEx reduction, CapEx reduction, and network performance and reliability improvement. All of these factors can help reduce churn, increase user satisfaction and enhance carrier revenue.

OpEx Reduction Benefits

Simply put, operating expenses for a wireless network are the costs associated with running and maintaining the network once its rolled out. Much of these costs traditionally have come from the time and expense necessary to visit the radio base station, climb the tower and make any adjustments necessary.

Deploying SON helps reduce a carrier’s OpEx by providing the following functions:

Automatic neighbor optimization and updating network lists

Coordination of sub-tones and power levels across eNode Bs

Automatic handoff optimization

Iteratively adjust QoS configuration

Automatic energy savings by examining service loading trends and powering down equipment when necessary.

Network Operations Benefits

iGR expects that SON will result in several improvements in the way a network is operated by the carriers:

SON will minimize the amount of monitoring and adjustment required by ops staff

Standardized inventory reporting of all components of network elements

Very robust cell outage capabilities for latent faults


Automatic reconfiguration of adjacent cells to compensate for failed cell, resulting is reduced truck-rolls

Robust root cause analysis and recovery from faults

Real time preventive maintenance to verify repair or reconfiguration

Multivendor subscriber and equipment trace to abet system troubleshooting.


SON Financial Impact Forecast

Table 2 shows iGR’s summary of the financial improvements expected as a result of SON. This summary, and the assumptions they embody or imply, are integral to iGR’s forecast model.

Table 2: Long-term OPEX, CAPEX and Revenue benefits to be realized by SON

SON LTE Financial Performance CAPEX OPEX Revenue

Preserve financial investments made in legacy networks

Transition legacy networks to 4G in a phased approach

Prevent Churn and network degradation during transition to LTE

Deploy interim Hybrid Network Management process to track network performance

Begin to offer new 4G IP-based products and services

Manage multiple networks during transition phase

Reengineer and automate business processes

Improve overall network management capabilities

Deploy new LTE hardware and software

Data services to surpass voice services

Source: iGR, 2012

To quantify the potential results from SON on the new LTE networks being deployed in the U.S., iGR first prepared a detailed LTE CapEx and OpEx model. Before reviewing the total opportunity for LTE equipment, several points should be made:

iGR does not know the true cost of the various LTE networks. VZW, Clearwire, LightSquared, Leap, MetroPCS, Sprint, US Cellular and AT&T were not directly involved in the preparation of this cost model. Furthermore, the other operators discussed in this brief were not involved in the preparation of this estimate. That said, the costs included in this model are derived from information from the major wireless infrastructure vendors.

LTE has only just been commercially deployed and so the costs of its deployment over the next few years are likely to change. However, at present, iGR believes


that the cost model presents the best estimate of the costs involved. iGR will update this model on a regular basis as more information becomes available.

Obviously, as LTE is deployed and the industry becomes more familiar with deployment and operation, costs will likely change. Similarly, costs will also change depending on how quickly the LTE ecosystem develops.

In order to estimate the costs involved in building the various LTE networks, iGR has used the cost per gigabyte (GB) model presented in its prior research. The model assumes a certain amount of data traffic sent across an LTE network and not simply the number of base stations or cell sites used to support the LTE network.

iGR first modeled the likely use of the various LTE networks. This forecasted usage level is based on assumed subscriber penetration and data usage per month. iGR then modeled various other factors including the penetration of new LTE services and devices into the U.S. subscriber base, usage per subscriber of LTE voice and data services and the cost of delivering those services.

The goal (and the methodology presented here is oversimplified for the sake of brevity) was to reach a total assumed LTE network usage figure. With this number, iGR was then able to estimate the CapEx for the 5 years of the model by applying the depreciated CapEx costs per gigabyte delivered over the network. OpEx was calculated in a similar way by assuming the cost to run the network per subscriber and then looking at the percentage of those costs associated with LTE.

LTE OpEx and CapEx Forecast

iGR’s forecast therefore shows a total estimated depreciated CapEx for LTE in the U.S. to be just over $23.85 billion between 2011 and 2016. LTE OpEx during the same period is estimated at $29.19 billion. Note that these numbers represent the estimated “total” cost of deploying and running an LTE network across all U.S. carriers (that are currently deploying LTE or have announced plans to do so) without considering any benefits imparted by SON. In other words, this estimate is the baseline to which SON benefits will be applied.

In 2011, iGR expects the CapEx benefit resulting from SON to be about 2.5 percent – that is, estimated is about 2.5 percent lower because of SON capabilities. By 2016, iGR’s model suggests that CapEx will be about 27 percent lower than the baseline shown above because of SON’s (cumulative) capabilities. Operational expenditures in 2016 are likely to be about 22 percent lower than the baseline (shown above) because of SON’s capabilities.

iGR expects that initial savings from SON (as compared to the baseline) will be very low and will therefore have a negligible impact on network costs. But, as the deployments increase and the number of eNode Bs significantly increases, the savings become much greater.


To summarize, iGR expects that LTE CapEx savings resulting from full SON implementation between 2011 and 2016 will be $2.34 billion; savings from LTE OpEx will be $4.5 billion. Table 3 illustrates this point – i.e., SON reduces carriers’ total depreciated CapEx and OpEx expenditures by a substantial amount. The savings do occur over the five years of the forecast, but they are real. And, note further, that iGR has only modeled the “hard” costs and not the “soft” costs associated with lower churn, etc.

Table 3: SON’s Impact on LTE-related CapEx and OpEx, 2011-2016 (U.S. Only)

2011 thru 2016 Total Depreciated Cost Savings due to SON Total Adjusted Cost

CapEx, $bn $23.85 $2.34 $21.51

OpEx, $bn $29.19 $4.50 $24.69

Source: iGR, 2012


Conclusion

As new 4G network technologies and new user devices begin to flourish in 2012, SON will enable a path for delivery of these new complex data services to subscribers. However, this significant increase in data traffic requires the deployment of new 4G network elements like the MME, the SAE Gateway, eNode B base stations and new interfaces that provide access to the EPC.

SON leverages network intelligence, automation and network management features in order to automate the configuration and optimization of wireless networks, thereby lowering costs and improving network performance and flexibility.

A key goal of LTE SON standardization is the support for multi-vendor network environments, which has resulted in the definition of standard messaging formats to convey information between network elements that can be used to implement a given SON algorithm. In addition, new small cell technology must now be integrated to the LTE network to improve network performance.

Strong carrier interest in SON continues to drive significant contributions coming from organizations such as the Next Generation Mobile Networks Alliance and 3GPP. These two standards bodies, among others, will play an integral role in defining the future beyond 4G.

SON will evolve from the initial hybrid architecture model to a more centralized management model of many new functions that have been automated and distributed throughout the SON environment. SON will greatly reduce OpEx over time while providing improved management of CapEx as the industry moves to the next generation of wireless technology.


About iGR

iGR is a market strategy consultancy focused on the wireless and mobile communications industry. Founded by Iain Gillott, one of the wireless industry’s leading analysts, we research and analyze the impact new wireless and mobile technologies will have on the industry, on vendors’ competitive positioning, and on our clients’ strategic business plans.

Our clients typically include service providers, equipment vendors, mobile Internet software providers, wireless ASPs, mobile commerce vendors, and billing, provisioning, and back office solution providers. We offer a range of services to help companies improve their position in the marketplace, clearly define their future direction, and, ultimately, improve their bottom line.

Note that Iain Gillott currently serves as an independent director for Wmode, Inc.

A more complete profile of the company can be found at http://www.igr-inc.com/.

Disclaimer

The opinions expressed in this white paper are those of iGR and do not reflect the opinions of the companies or organizations referenced in this paper. All research was conducted exclusively and independently by iGR.

http://www.igr-inc.com/

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Documents

SON: Reducing Costs, Improving Service · 2016-05-17 · SON is expected to significantly reduce CapEx via automation of operational and network management costs associated with operations,