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NLOS Wireless Backhaul for Small Cell Base Stations

Total Cost of Ownership Comparison with Optical Fiber

By Frank Rayal
VP, Product Management BLiNQ Networks Inc.


October 22, 2010

Table of Contents
Introduction .................................................................................................................................................. 3 Mobile Backhaul Options .............................................................................................................................. 3 BLiNQ Networks Solution Overview ............................................................................................................. 5 Cost of Spectrum........................................................................................................................................... 6 Comparative Analysis to Fiber Backhaul ....................................................................................................... 8 Conclusion ................................................................................................................................................... 11

NLOS Wireless Backhaul for Small Cell Base Stations: Total Cost of Ownership Comparison with Optical Fiber

Mobile network operators (MNOs) are increasingly focused on meeting the explosive demand for data services. Deploying next generation systems, acquiring additional spectrum and offloading data traffic from the mobile network are a few ways that MNOs have used to increase the offered capacity. Deploying small, below-the-clutter cells is another well tried technique that has been used repeatedly to solve the capacity hot spot problem as well as to provide service in coverage holes in mobile networks that were designed primarily to carry voice traffic. The mobile Internet, and corresponding data traffic, is expected to further increase the requirement for small cell deployment as no one solution can single-handedly meet the capacity demand forecast. However, there are technical and economic constraints that prevent network operators from deploying small cells: backhaul is one such constraint. BLiNQ Networks recognizes that eliminating the backhaul problem would provide MNOs a decisive tool in their quest to scale network performance to meet the demands of the mobile Internet. BLiNQs product portfolio comprises solutions specifically targeted at backhaul applications for small cells that are deployed below the building clutter as would be the case in urban areas where capacity demand is highest and coverage requirements are hardest to meet. The products provide high capacity point-to-multipoint links in a non-line-of-sight deployment configuration. Furthermore, the products implement interference detection and mitigation techniques to reduce interference in the backhaul network thereby gaining capacity and performance. This paper describes BLiNQs value proposition for wireless operators and compares the total cost of ownership of NLOS wireless backhaul to that of optical fiber.

Mobile Backhaul Options

Different backhaul options have been used for wireless base stations. Each option has its economic and technical advantages and disadvantages. These options can be summarized as follows: 1- Leased-lines: Provide a dedicated channel and symmetric data rate. A leased line, in the form of copper T1/E1 line, have data rate of 1.544/2.048 Mbps. Although leased lines have been widely used in mobile backhaul, they are increasingly becoming unsuitable for the following reasons: a. Multiple T1/E1s are required per cell site to support the capacity requirements of 3G (e.g. HSPA) and 4G (LTE) cell sites. Figure 1 shows the peak throughput for UMTS evolution. Although these are peak rates at the physical layer and highly unlikely to be reached in practice, the number of required leased lines will increase correspondingly. b. T1/E1 lines are leased at rates that can easily reach $1,000 per month per line (pricing depends on location and service provider). This makes the annual cost of backhaul for a single 3G/4G base station extremely high. c. Leased lines are fundamentally a TDM technology (Time Domain Multiplexing) while recent 3G and 4G base stations are based on Ethernet/IP technology. A special interface

NLOS Wireless Backhaul for Small Cell Base Stations: Total Cost of Ownership Comparison with Optical Fiber

(e.g. pseudowire) is required in this case which further adds cost to leased line backhaul deployments. The above reasons make leased lines an unattractive method to backhaul 3G/4G wireless base stations. Industry experts concur that leased lines will play a limited role in backhauling future wireless base stations.

Figure 1 UMTS Evolution Peak Data Rates. 2- Microwave Backhaul: Microwave backhaul typically operates at frequencies above 6 GHz (typically 11-42 GHz) and requires line-of-sight between the two backhaul nodes. It is also a point-to-point solution. Microwave backhaul can provide high data rates starting from a few hundreds of Mbps and functions over relatively long range. It has been used significantly for mobile backhaul applications particularly by non-incumbent operators and those in emerging markets as microwave backhaul is quick to deploy and offers a competitive business case. Unfortunately, traditional microwave is not suitable where a base station is mounted below the surrounding building clutter: in non-line-of-sight conditions obstacles between the two backhaul nodes (e.g. buildings, trees, etc.) attenuate the power received by the remote node and distort the signal such that communication is not possible. Traditional microwave is not an option in backhauling small cell sites where clearance of the first Fresnel zone is not possible. 3- Fiber Backhaul: Fiber, where present, offers ample bandwidth: it meets the capacity requirements of next-generation wireless base stations. However, fiber can be expensive to provide in areas where it is not already available. The cost of installing fiber (trenching, right-ofway) can be prohibitive in exactly the same areas where small base stations are required such as in the dense urban core, as shown in Table 1. The cost of leasing fiber is also high and can range from several hundred dollars to over $1,000 per month. Additionally, fiber deployment time can be lengthy resulting in delays in bringing a new cell site on air.

NLOS Wireless Backhaul for Small Cell Base Stations: Total Cost of Ownership Comparison with Optical Fiber

Table 1 Typical Cost of Fiber. Deployment Costs (per meter; Includes right of way and renovation construction works) Fiber Cost (per meter; includes cable, connector, & testing) Aerial Trenching Rural Suburban Urban $5-$12 $4.5-$11.5 $10-$30 $30-$100 $80-$230

In summary, fiber is the only feasible alternative to backhaul small cell sites as it has none of the technical issues of traditional microwave and offers higher capacity than leased lines. However, the business case for fiber is not always competitive, particularly in areas where fiber is not available. In addition to economics, the current lack of alternative solutions to fiber provides a significant competitive advantage to incumbent operators: they have the incentive to expand fiber networks at the expense of competing MNOs. Table 2 Applicability of Backhaul Options to Compact Base Stations. Leased Line LOS Microwave Fiber    Capacity  NLOS Operation Not Applicable Not Applicable Fiber is the only feasible alternative to backhaul next generation wireless base stations.

BLiNQ Networks Solution Overview

BLiNQs solution comprises a point-to-multipoint (PMP) backhaul solution that operates in non-line-ofsight conditions (NLOS). The solution operates in time domain duplex access mode (TDD) in licensed band frequencies below 6 GHz. Spectrum in bands such as 2.3 GHz, 2.5 GHz and 3.3-3.8 GHz is available at relatively low prices. The solution combines the latest innovations in physical and medium access layer techniques to provide high capacity backhaul links for compact base stations. Managed Adaptive Resource Allocation (MARA), a key BLiNQ intellectual property which comprises interference reduction to increase capacity, provides valuable contributions to the operators business case. Table 2Table 3 outlines some of the key features of BLiNQs solution and summarizes their impact on the operators business case. Table 3 BLiNQ Solution Features and Contribution to Operator's Business Case. Feature Description Impact on Business Case Interference Maps interference between backhaul Reduce operational expenditure by Detection clusters and provides RF and field shortening the design cycle and providing operation engineers with valuable tools for troubleshooting the network. tools for speedy deployment and network planning. Interference Eliminates co-channel interference Reduce capital expenditure requirements Mitigation between interfering links in different for spectrum acquisition. backhaul clusters. OFDMA/NLOS OFDMA physical layer provides a 1- Reduce opex by allowing deployment
NLOS Wireless Backhaul for Small Cell Base Stations: Total Cost of Ownership Comparison with Optical Fiber 5

Spatial Multiplexing / MIMO SON

Point-toMultipoint Sub 6 GHz Licensed Spectrum Small Form Factor

high-speed robust link in NLOS conditions by using narrow-band carriers to span a wide-bandwidth frequency channel. Doubles the link capacity over singleantenna systems and increases the robustness of the communication channel. Allows the backhaul network to reconfigure itself as the network of compact base stations grows. Backhaul multiple compact base stations to one central location. Operates in TDD mode in bands such as 2.3 GHz, 2.5 GHz and 3.3-3.8 GHz. Low-weight (< 3.5 kg), small footprint (20x30 cm) allows for a one-person install within 30 minutes on light poles and other small structures.

in hard to reach areas, particularly where fiber is not available. 2- Shorten time to air for new cell sites and provide faster revenue generation. Reduce capex by doubling the spectral efficiency: requires half the spectrum to backhaul the same amount of data without MIMO. Reduce opex requirements related to initial deployment, on-going maintenance and troubleshooting. Reduce capex and opex by reducing the number of hub sites to backhaul data into the core network. Reduce capital expenditure for spectrum acquisition. Reduce operational expenditure associated with installation, deployment and maintenance.

Cost of Spectrum
As stated, BLiNQ solutions operate in sub-6 GHz licensed bands which have several technical advantages which include: 1- Robust propagation channel that is not affected by environmental factors such as rain and fog, and less affected by physical obstacles such as buildings and trees. 2- Controlled interference environment given that all transmitters belong to the same wireless operator allowing frequency planning. Most importantly, in the last few years, several sub 6-GHz bands have become available for use by fixed access networks, primarily WiMAX. As such, there is an abundance of such bands available in areas where fixed access networks did not gain traction: dense urban cores of developed markets where todays 3G services are most utilized. On a worldwide basis, spectrum in the 2.3, 2.5 and 3.3-3.8 GHz bands have fetched very low valuations in recent years, especially when compared with prime access spectrum which is characteristically FDD in sub 2.1 GHz bands (700 MHz, 800/900 MHz, 1700 MHz, 1800/1900 MHz and 2.1 GHz). Table 4 samples the results of recent spectrum auctions and shows that prime spectrum bands for backhaul in 2.6 and 3.x GHz are typically priced at around $0.01-$0.03 per MHz-PoP, sharply lower than prime paired spectrum for access bands which typically fetch over $0.5 per MHz-PoP, or over 25 times the price. Table 4 lists some specific licenses and their corresponding prices.

NLOS Wireless Backhaul for Small Cell Base Stations: Total Cost of Ownership Comparison with Optical Fiber

Table 4 Results of Recent Spectrum Auctions. Country Year Band (MHz) Type Germany Germany Germany Germany Italy USA USA India India Greece Poland 2010 2010 2010 2008 2008 2008 2006 2010 2010 2500 2700 2600 800 3500 3500 700 1700 2300 1900 3500 3700 Paired Unpaired Paired Paired Paired Paired Paired Unpaired Paired Paired Paired

Average Cost (per MHz-PoP) 0.023 0.021 0.73 0.005 0.019 $0.7 $0.54 $0.17 $0.39 0.043 0.003

Comment Access band Prime backhaul band Prime access band Prime backhaul band Prime backhaul band Prime access band Prime access band Access or Backhaul Prime access band Prime backhaul band Prime backhaul band

Table 5 List of Selected Frequency Licenses. Country Operator Frequency Band Germany Germany Germany USA UK Netherlands Austria Greece Poland Canada Vodafone Vodafone Clearwire Verizon UK Broadband WorldMax WiMAX Telecom Cosmotel Clearwire Several 2.6 GHz 2.6 GHz 3.5 GHz 700 MHz 3.5 GHz 3.5 GHz 3.5 GHz 3.5 GHz 3.6 GHz 3.5 GHz

Channel Size 2x5 MHz 1x5 MHz 2x21 MHz 2x11 MHz 2x20 MHz 20 MHz 2x28 MHz 2x14 MHz 2x14 MHZ 2x25 MHz

Price 18,948,000 9,051,000 20,000,000 $4,741,807,000 7,000,000 4,000,000 40,700,000 20,475,000 PLN 1,400,000 $11,240,615

The cost of spectrum is an important factor in calculating the total cost of ownership. National or regional licenses can be obtained, depending on national regulations. Therefore, it is possible to purchase a license for regions with major cities (where mobile backhaul is desired) while foregoing licenses in regions where population is less dense (where fixed access networks can be more valuable for lack of Internet connectivity alternatives). Based on the prices above, licenses for 10 MHz of spectrum can cost as low as a few hundred thousand dollars or as high as twenty million dollars for a nation-wide license in a developed market. These licenses are typically issued for twenty years. The cost of spectrum must be included in the TCO calculations for a valid comparison with fiber backhaul. The cost of spectrum must then be spread over all the backhaul units deployed in a market. To simplify the calculations, we focus on determining the number of wireless backhaul nodes that lead to breakeven in total cost of ownership with fiber backhaul.

NLOS Wireless Backhaul for Small Cell Base Stations: Total Cost of Ownership Comparison with Optical Fiber

Comparative Analysis to Fiber Backhaul

We focus our analysis on comparing two fundamental cases: 1- Deployment of compact base stations with fiber backhaul (base case). 2- Deployment of compact base stations with NLOS wireless backhaul solution. For the purpose of this analysis, fiber is assumed to be available close to the desired site location, hence, only a nominal setup fee will be incurred by the wireless operator. The majority of expenses are operational expenses related to leasing the fiber cable as shown in Table 6. Table 6 Cost of Operating a Fiber Backhaul Connection. Setup Fee $1,500 One-time fee to setup a fiber connection. Average cost of leasing fiber for 10 Mbps capacity in urban Monthly Expense $1,000 area.

The assumptions for NLOS solution are outlined in Table 7. Table 7 Capital and Operational Expenditure Assumptions for NLOS Product. Capital Expenditure Backhaul $1,800 Includes backhaul module, antennas, cables and other ancillary Module elements. Installation $350 Used for Hub or Remote Backhaul Module installation. Accounts for field services to prepare and install the unit on a pole. RF Engineering $150 Per link charge for RF engineering design services to ensure proper deployment and configuration of NLOS wireless link. Implementation $250 Per link charge used to cover project management and other Services services related to implementing and deploying the product. Operational Expenditure Pole Lease $30 Monthly charge to lease space on a pole to mount the NLOS Hub and Remote Backhaul Modules. Support & 15% Annual percentage of solution price. Covers product software Software updates & support. Field Operations $50 Annual charge per node to cover expense of field operations personnel. This is a marginal cost as Field Operations are also required for compact base stations. Flat Rate Power $7 Monthly cost incurred to provide electrical power to the backhaul node. Backhaul Costs $1,500 Monthly cost to provide fiber backhaul service at the hub site. Assumes hub sites are selected where fiber is already available.

For all financial calculations, we assumed a 2% inflation rate and a 12% weighted average cost of capital (WACC). The cost of operating fiber backhaul to a single compact base station site is shown in Table 8 based on the assumptions presented in Table 6.
NLOS Wireless Backhaul for Small Cell Base Stations: Total Cost of Ownership Comparison with Optical Fiber 8

Table 8 Example of Total Cost of Ownership for Fiber Backhaul. Year 1 Year 2 Year 3 Year 4 Net Present Value 13,500 10,929 9,953 9,064

Year 5 8,255

Total 51,700

Figure 2 shows the number of nodes (compact base stations) where the NLOS wireless backhaul solution is deployed to achieve total cost of ownership breakeven with fiber backhaul. For instance, given 4:1 PMP ratio (four compact base stations backhauled to one NLOS hub module) and $20 million cost of spectrum license (20 years), it requires 172 compact base stations to achieve breakeven in the total cost of ownership. As expected, the number of breakeven nodes increases with lower PMP ratio. So, for the same parameters, it requires 472 nodes to achieve breakeven with fiber, while it requires only 144 nodes for breakeven in 6:1 configuration.

Figure 2 Number of Nodes to Achieve Breakeven in the 5-year TCO with Fiber Backhaul. Table 9 shows the 5-year total cost of ownership for the NLOS and the fiber backhaul option for different number of nodes assuming $20m cost of a spectrum license (over 20-year period). Table 9 Five-Year Total Cost of Ownership Comparison. 5 Year TCO ($m) Number of Nodes 2:1 3:1 4:1 6:1 Fiber 100 9.11 7.91 7.31 6.71 5.17 200 13.23 10.83 9.63 8.43 10.34 300 17.34 13.74 11.94 10.14 15.51 400 21.45 16.65 14.25 11.85 20.68 500 25.57 19.57 16.57 13.57 25.85 600 29.68 22.48 18.88 15.28 31.02 700 33.79 25.39 21.19 16.99 36.19
NLOS Wireless Backhaul for Small Cell Base Stations: Total Cost of Ownership Comparison with Optical Fiber

NLOS Wireless Backhaul vs. Fiber 2:1 3:1 4:1 6:1 -76% -53% -41% -30% -28% -5% 7% 19% -12% 11% 23% 35% -4% 19% 31% 43% 1% 24% 36% 48% 4% 28% 39% 51% 7% 30% 41% 53%

800 900 1000 1100 1200 1300 1400 1500

37.91 42.02 46.13 50.25 54.36 58.47 62.59 66.70

28.31 31.22 34.13 37.05 39.96 42.87 45.79 48.70

23.51 25.82 28.13 30.45 32.76 35.07 37.38 39.70

18.71 20.42 22.13 23.84 25.56 27.27 28.98 30.70

41.36 46.53 51.70 56.87 62.04 67.21 72.38 77.55

8% 10% 11% 12% 12% 13% 14% 14%

32% 33% 34% 35% 36% 36% 37% 37%

43% 45% 46% 46% 47% 48% 48% 49%

55% 56% 57% 58% 59% 59% 60% 60%

The cost allocation for the total cost of ownership is shown in Figure 3. The main expense related to the NLOS solution is the cost of spectrum. The second leading expense is the cost of backhauling traffic from the NLOS hub modules to the core network. In this comparative analysis, we conservatively assumed that fiber would have to be leased. However, this cost can be reduced substantially if fiber is already available at the hub site. For example, co-locating a hub site with an existing macro base station where backhaul is already available can result in significant reduction in the total cost of ownership. Alternatively, using LOS microwave backhaul may result in cost reduction over fiber in many instances.

Figure 3 Cost Allocation for BLiNQ Backhaul Solution at Breakeven with Fiber Backhaul. NLOS wireless backhaul solutions offer a competitive business case in comparison to fiber backhaul due to several considerations: 1- Use of low-priced spectrum assets for use in backhaul application results in a low breakeven number of nodes versus fiber backhaul. 2- High-capacity links allow backhaul of multiple base stations to a single hub. This provides two advantages: a. Lower capital expenditure and simpler network design, implementation and deployment effort.
NLOS Wireless Backhaul for Small Cell Base Stations: Total Cost of Ownership Comparison with Optical Fiber 10

b. High flexibility in placing hub modules in locations where fiber or LOS microwave backhaul is readily available to backhaul the aggregate traffic of multiple base stations to the core. 3- Quick and simple deployment and activation of compact base stations to address coverage holes and capacity hotspots leads to higher revenue generation and greater customer satisfaction. This upside measure was not factored into the business case. 4- Implementation of frequency detection mitigation techniques allow high spectrum utilization which leads to lower upfront capital expenditure to secure what is relatively low priced spectrum.

Compact base stations are a key element in the design of mobile data networks. Due to the high capacity of these base stations and since they are deployed below clutter, traditional wireless (LOS microwave) and wireline (e.g. leased line) backhaul techniques are no longer an option, leaving fiber as the only feasible method of backhaul. BLiNQs intelligent non-line-of-sight wireless systems provide an economically competitive solution to fiber backhaul: a relatively low number of wireless backhaul nodes are required to achieve cost breakeven with fiber backhaul (in the low hundreds). The savings in total cost of ownership can be significant, exceeding 30% for typical deployment scenarios. The financial model demonstrates that some of the main costs associated with backhaul include spectrum cost and the cost of backhaul to the core network. For this reason, BLiNQ solutions implement interference detection and mitigation techniques that minimize the amount of spectrum required for the backhaul network and make use of low-cost spectrum in sub-6 GHz band which has been deemed less desirable for access applications. Furthermore, BLiNQ products provide high-capacity point-to-multipoint links to maximize the aggregated data at the backhaul hub site and reduce the cost of transport to the core network.

NLOS Wireless Backhaul for Small Cell Base Stations: Total Cost of Ownership Comparison with Optical Fiber


CBTS FDD HSPA LOS LTE MARA MIMO MNO NLOS OFDMA PMP PoP TCO TDD TDM UMTS WACC Compact Base Transceiver Station Frequency Domain Duplex High Speed Packet Access Line of Sight Long Term Evolution Managed Adaptive Resource Allocation Multiple Input Multiple Output Mobile network operators Non Line of Sight Orthogonal Frequency Division Multiple Access Point to Multipoint Population Total Cost of Ownership Time Domain Duplex Time Domain Multiplex Universal Mobile Telecommunication Systems Weight Average Cost of Capital

BLiNQ Networks Inc. 400 March Road, Suite 240 Ottawa, ON K2K 3H4 Canada Main: 613-599-3388 info@blinqnetworks.com www.blinqnetworks.com

BLiNQ Networks was founded in June 2010 after the acquisition of intellectual property and wireless assets from Nortel Networks. BLiNQ is a pioneer of wireless backhaul solutions that fundamentally change the way mobile operators deliver mobile broadband services in urban areas. BLiNQ uses cost-effective sub-6 GHz spectrum and unique and patent-pending Managed Adaptive Resource Allocation (MARA) technology to provide network-level intelligence, self-organizing network capabilities, and eliminate interference challenges to maximize spectral efficiency. BLiNQ is headquartered in Plano, TX with research and development facilities in Ottawa, Canada. For more information, please visit www.blinqnetworks.com.

The information presented herein is to the best of our knowledge true and accurate and is subject to change without notice. No warranty or guarantee expressed or implied is made regarding the performance or suitability of any product. All product or service names are the property of their respective owners. BLiNQ Networks Inc. 2010. All Rights Reserved.

NLOS Wireless Backhaul for Small Cell Base Stations: Total Cost of Ownership Comparison with Optical Fiber