Editor’s Note: Welcome to our weekly feature, Analyst Angle. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry.
Conventional wisdom suggests that the spectral efficiency of a wireless technology has a meaningful impact on an operator’s network economics. The argument first reared its head with the heated debate between the two competing 2G standards and it has been carried forward with the introduction of OFDMA-based 3G technologies. Anyone who has ever made or heard the argument that one technology is “1/10th the cost” of another technology is inevitably very familiar with the supposed importance of spectral efficiency.
Unfortunately, in the big scheme of things improvements in spectral efficiency have very little impact on network economics and the “1/10th the cost” argument has more holes in it than an aged block of Swiss cheese. This is not to suggest that the industry should abandon its efforts to drive a few more bytes through a radio channel, but if the ultimate goal is to reduce network delivery costs then their efforts are better focused elsewhere.
For starters, spectral efficiency only matters when networks are capacity-constrained. Thus, when an operator first deploys its network, as is the case with Sprint Nextel’s Xohm network today, and each cell site has little or no traffic, the underlying spectral efficiency of the technology has absolutely no impact on network economics. Other factors, such as the link budget, which ultimately determines the number of cell sites required for coverage purposes, play a much greater role in determining the network economics.
Obviously an operator needs to plan for the future growth of data traffic, but even once [if] this amount of traffic is realized it is not necessarily the case that the entire network becomes capacity-constrained. In fact, most mature nationwide cellular networks today remain largely coverage-constrained with only certain morphologies (e.g., dense urban and urban areas) where capacity constraints are a concern.
Closer to home
In the case of Sprint Nextel [Clearwire], the operator is deploying mobile WiMAX at 2.5 GHz where it reportedly has well north of 100 MHz in all of the major markets where it plans to deploy the technology. And given that it wants to achieve reasonable in-building coverage and support full mobility – the goal of most operators – there will need to be a commensurate high density of cell sites. The use of in-building solutions, such as Distributed Antenna Systems, picocells and femtocells, will mitigate the number of coverage cell sites but at the same time they will be used to offload network traffic that would have otherwise been carried on the macro network.
In other words, even with a conservative assumption for spectral efficiency there will need to be a tremendous amount of mobile data traffic on the network before the network becomes capacity constrained. We refer readers to our Analyst Angle article from September 1, 2008.
For operators deploying a broadband wireless technology – most likely LTE – at 700 MHz and/or 1.7 GHz it is fair to assume that for a given amount of network traffic their networks will become capacity constrained before the Sprint Nextel [Clearwire] network. Then again, operators, such as Verizon Wireless and AT&T Mobility typically own multiple 700 MHz licenses in most markets and/or they have spectrum at 1.7 GHz to use for capacity purposes.
Proving the point
More to the point, it is possible to demonstrate that even in a fully capacity-constrained network, the impact of improving the spectral efficiency is, at best, modest.
Figure 1: Data Capacity Improvements – Impact on Network Economics
Source: “The Dollars and Sense of Broadband Wireless,” March 2008; Signals Research Group L.L.C.
This figure shows the results of a sensitivity study that looked specifically at the impact of varying the spectral efficiency while leaving all other assumptions unchanged. Although it is not possible to provide the laundry list of assumptions that we used in this article, at a summary level we assumed an OFDMA-based Greenfield radio access network with an all-IP core network that is deployed at 2.5 GHz and with 30 MHz of available spectrum. The network(s) covers the top 70% of the population in each of the sixty-five countries around the world that we modeled with the results reflecting an average across all countries.
The left-hand portion of the graph illustrates the obvious conclusion that spectral efficiency has no impact in a coverage-constrained network. The right-hand portion of the graph is more interesting since it shows that even an appreciable improvement in spectral efficiency (e.g., a 100% improvement relative to the base case) only reduces the cost per bit by 15%. Keep in mind, in this scenario we are assuming that every single cell site is capacity-constrained – a rarity in the real world. In other words, for most operators the real economic impact of a rather dramatic improvement in spectral efficiency would be even lower.
While counter-intuitive relative to mainstream beliefs, the underlying reasons are somewhat “obvious.” First and foremost, backhaul and transmission costs, even with next-generation architectures and delivery mechanisms, typically account for at least 50% of the network delivery cost. Thus, these costs overshadow the economic benefit of improvements and efficiencies introduced elsewhere in the network (e.g., improving the spectral efficiency of the air interface).
For operators with limited amounts of spectrum and/or for operators that are facing capacity-constrained networks, it is important to squeeze every last byte through their network. However, if the operator’s main objective is to dramatically reduce its network expenses, its efforts are better served addressing other aspects of their network, starting with the backhaul and transmission networks.
Michael Thelander is the Founder and CEO of Signals Research Group L.L.C. and co-author of “The Dollars and Sense of Broadband Wireless – from 700MHz in America to 3500MHz in Vietnam.” He may be reached at mike@signalsresearch.com. RCR Wireless News may be reached at rcrwebhelp@crain.com.
