Evolutionary Strategies

UMTS System Overview

Sec10
Informa

Telecoms

Evolutionary Strategies
1. 2. CONTINUED STANDARDISATION HIGHLIGHTS 1.1 The Move to All-IP Networks THE 2.1 2.2 2.3 2.4 2.5 2.6 EVOLUTION OF THE UMTS ARCHITECTURE The Basic Release99 UMTS Core Network A Common Core Transport Network SIP and Multimedia in the all-IP Core Network Evolution of the UTRAN IP to the Node B and to the User A Conceptual Multi-access UMTS / IP Network 5 9 11 13 15 17 19 21 21 22 22 22 23 25 29 31

3.

A SUMMARY OF IP QOS 3.1 MPLS 3.2 DiffServ 3.3 IntServ 3.4 RSVP 3.5 IPv6 3.6 The Introduction of UMTS Terminals 3.7 Evolution Issues for UMTS Terminals 3.8 The Evolution of New UMTS Value Chains 3.9 UDeciding Factors for the success of UMTS?

UMTS System Overview

Informa

Telecoms

Evolutionary Strategies

1. CONTINUED STANDARDISATION HIGHLIGHTS

Release 99 of the 3GPP specifications for UMTS are sufficient for operators to begin to plan and deploy UMTS networks which consist of the brand new W-CDMA, FDDmode air interface added to the standardised GSM Phase 2+ and GPRS core network. However the further evolution of UMTS will be strongly dependant on future standardisation work, in both 3GPP and in other relevant groups. The speed of development and the eventual implementation of future specifications will also be immensely dependent on market demands and conditions, since these will determine the support and resources for such development. Amongst the key broad areas in which ongoing specification and standardisation work is likely to impact the future of UMTS, are the following : 1. Upgrades to the core network, in particular beginning the move towards unifying and integrating the packet and circuit-switched domains, and providing the basis for multimedia services, on the basis of IP transport protocols. 2. Further development of service-related architectures, interfaces and procedures, including the continued evolution of CAMEL, USIM, security and fraud protection and the Open Services Architecture. 3. Further specification of the TDD mode of operation at the UMTS air interface. Since TDD spectrum is currently not applicable in Japan, TDD mode is not a priority for Japanese infrastructure and terminal vendors in the short term. 4. Investigation of possible commonalities and harmonisation of UMTS work in 3GPP with cdma2000 development in progress by 3GPP2. This is in line with the ITU concept of a family of 3G standards able to seamlessly interoperate easily. Other important and ongoing harmonisation efforts also include those between the GSM and US TDMA communities. 5. Although not strictly part of UMTS, specification of GERAN (GSM/EDGE Radio Access Network) is a development process which now falls under the auspices of 3GPP. EDGE is by no means certain of wide market acceptance and is not a requirement in implementing UMTS. Although there is a body of opinion which supports the use of EDGE as a technology to fill the coverage gaps between initial islands of UMTS, the existence of EDGEcapable handsets and complete GERAN specifications from 3GPP will lag behind the introduction of UMTS, and the first UMTS networks will therefore almost certainly still use GSM alone as the fill-in radio access technology.

UMTS System Overview

1
Informa

Telecoms

Integrated IP Core Network Service Architectures & Interfaces Chinese TD-SCDMA

GSM Phase 2 + Core + UTRAN

TDD Mode

IETF IP Standards Harmonisation with other IMT2000 Standards GSM/EDGE Radio Access

Fig. 1 Evolving a Basic UMTS Network

Informa

Telecoms

Evolutionary Strategies

6. The Chinese government and Siemens in particular are supporting development work on TD-SCDMA. Although currently not widely discussed for use in other regions in the world, the take-up of such a standard by such a potentially huge volume mobile market could of course require that the rest of the UMTS community work towards including TD-SCDMA, at the very least in terms of interoperability and roaming with W-CDMA enabled terminals. 7. The IETF, already one of the partners with input into the 3GPP specification process, are in charge of developing the whole range of IP-related standards and recommendations. As the mobile world looks increasingly towards an all-IP architecture, the work of the IETF is likely to become more relevant, particularly on standards such as RSVP, MPLS, DiffServ, IntServ, IPv6 and SIP. These all represent ways of introducing circuit-style carrier-grade QoS to IP-based communications. Indeed it has already been decided to incorporate SIP as the basis for IP Multimedia service control in UMTS.

UMTS System Overview

3
Informa

Telecoms

Integrated IP Core Network Service Architectures & Interfaces Chinese TD-SCDMA

GSM Phase 2 + Core + UTRAN

TDD Mode

IETF IP Standards Harmonisation with other IMT2000 Standards GSM/EDGE Radio Access

Fig. 1 Evolving a basic UMTS Network

Informa

Telecoms

Evolutionary Strategies

1.1 The Move to All-IP Networks

The strongest evolutionary trend in UMTS is the move towards increasing the role of IP in UMTS networks. Some observers are already looking towards 4G, used in most cases to refer to a network which is all-IP from user terminal through to core network. The reasons why all-IP is a desirable end-goal include the following :

1. Cost
The use of standard, mass market IP routers rather than service and vendor-specific switches resulting in lower costs, both in terms of initial purchase and ongoing maintenance.

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

3. Scaleability
In parallel with increased efficiency, the fact that routing is inherent within an IP network, and that alternative routes are available, means that longer term increases in traffic or in overall network capacity can be achieved simply by increasing the capacity of the transport network. In UMTS this will lead to an increase in the use of Optical networks, particularly in the core network domain. By contrast, changes in traffic volume or mix in MSC and ATM-based networks bring much more complexity. They require constant updating of data tables within switches, and the re-balancing of traffic between the circuit and packet-switched domains.

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

UMTS System Overview

5
Informa

Telecoms

Why move towards All-IP?

Cost Efficiency in Core Network Scaleability Interworking

Why not?
- Quality of Service - Poor Efficiency over Radio

Fig. 2 The Move to All-IP Networks

Informa

Telecoms

Evolutionary Strategies

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

1. QoS
For real-time traffic, in particularly voice traffic (which is still accounting for the majority of operator revenues), IP does not currently provide sufficient reliability and consistency to ensure carrier-grade, delay-free services.

2. Efficiency over Radio

The routing inherent in an IP packet brings with it a considerable overhead, something which is undesirable in a radio access link, where spectrum is a scarce and expensive resource.

UMTS System Overview

7
Informa

Telecoms

Why move towards All-IP?

Cost Efficiency in Core Network Scaleability Interworking

Why not?
- Quality of Service - Poor Efficiency over Radio

Fig. 2 The Move to All-IP Networks

Informa

Telecoms

Evolutionary Strategies

2. THE EVOLUTION OF THE UMTS ARCHITECTURE

2.1 The Basic Release99 UMTS Core Network
The most straightforward and earliest implementations of UMTS will involve very little change for operators who start from the basis of a GSM Phase 2+ circuit-switched network, and a GPRS packet-switched network. These two essentially separate networks define the circuit and packet switched domains of the UMTS core network, with added support for the IuCS and IuPS interfaces respectively, connecting these core network domains to the new UTRAN. While the two networks can share the central databases (HLR, AuC and so on) and some of the same service control mechanisms and servers, the transport of user data is separated over 2 transport paths. This means that the operator has two transport networks to manage and maintain. In particular, the switching infrastructure of the circuit-switched network is a costly overhead. The advantage of such a situation however, is that for voice traffic the QoS is very well managed, since this is precisely what the GSM network was originally intended to support.

UMTS System Overview

9
Informa

Telecoms

circuit switched domain transport network

MSC luCS

GMSC

PSTN

UTRAN USER IuPS SGSN

Database & Services

GGSN

Internet

packet-switched domain transport network data & signalling signalling only

Fig. 3 Basic UMTS Core Network

Informa

Telecoms

10

Evolutionary Strategies

2.2 A Common Core Transport Network

An immediately desirable evolution of the core network is to move towards a common packet transport network, which can be used to transport user data from both the circuit and packet switched domains. In order to achieve this, control (signalling) is separated from user data in the circuit-switched domain, with circuitswitched user data now travelling as packets through the same transport medium as the packet switched domain. In practical terms this means that the MSCs must be split into two entities, with control of the circuit-switched domain handled by MSC servers. This control plane contains all the functions of databases & registers, mobility, security and other control functions. For user data, media gateways provide the interface between the common packet core transport network and the circuit-switched domain connections at the edges of this core network (i.e. to the PSTN and radio access network). The way that circuit-switched domain (most commonly voice) traffic is carried over such a common transport layer will evolve along with the transport mechanism of that layer. In the first instance, compressed voice can be carried using virtual circuits over a simple ATM infrastructure. Further evolutions are likely to involve the introduction of Voice over IP in this core transport network. IP may be carried over ATM or, ultimately, may sit directly above fiber. The speed of such an evolution is dependent on developments in the ability to guarantee the necessary quality of service for voice traffic, with IP protocols evolving to support much better, more predictable QoS.

UMTS System Overview

11
Informa

Telecoms

Applications Control Plane Control Functions

MSC server

GMSC server

UTRAN USER PSTN MGW SGSN MGW GGSN Internet ATM &/or IP Transport Network data & signalling signalling only

Fig. 4 A Common Core Transport Network

Informa

Telecoms

12

Evolutionary Strategies

2.3 SIP and Multimedia in the all-IP Core Network

Ultimately, MSC servers may tend to become replaced by servers with more Internetlike call control. In particular SIP has been chosen for controlling real-time multimedia in future 3GPP releases. Voice data is then tunnelled through the IP core network inside IP packets. The advantage of such an architecture is that all services, be they in the circuit-switched or packet-switched domain, are handled through a common control architecture, by means of SIP sessions. In this case, the core network is all-IP, once again with a common transport network. A Media Gateway is only required for interworking with an external PSTN. The serving MSC server is replaced by a SIP proxy server, the CSCF, which can control SIP sessions between an IP-enabled terminal and any circuit-switched domain traffic coming via the external PSTN via a media gateway control function. This SIPsupporting architecture is termed the "IP Multimedia Subsystem" within 3GPP specifications. Although the simple architecture shown represents the ultimate simplification of an all-IP transport and control scenario, the implementation of such an architecture is extremely dependent on the evolution of sufficient IP QoS mechanisms. It is also entirely possible for operators to deploy such an IP Multimedia subsystem in parallel with retained MSC functionality. Indeed it seems highly unlikely that with the considerable investment operators have made in their GSM networks, with its high quality of service for voice, that these will be abruptly closed down.

UMTS System Overview

13
Informa

Telecoms

CSCF

MGCF

SIP Client UTRAN SGSN

PSTN

IP

MGW GGSN Internet

USER

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

Informa

Telecoms

14

Evolutionary Strategies

2.4 Evolution of the UTRAN

The same advantages of an all-IP approach to the core network also apply to the UTRAN, which itself incorporates a sizeable transport network connecting RNCs and Node Bs. Scaleability and flexibility in particular are ultimately much easier within an UTRAN which is based on an IP transport network. In the same way that incremental capacity increases are made more straightforward in the core network, the introduction of IP into the UTRAN makes it easier to add further Node Bs, or to move capacity between Node Bs and RNCs. The most straightforward evolution within the UTRAN is likely to be the replacement of point-to-point ATM links by an IP network. Since the UTRAN network is potentially an expensive and complex local loop network to manage, local market conditions may make it favourable for operators to use a 3rd party to provide this underlying transport. For example, a cable operator or metropolitan area network provider.

UMTS System Overview

15
Informa

Telecoms

a) Current UTRAN

Node B

ATM RNC CORE NETWORK

Node B

ATM

b) Evolved UTRAN

Node B IP Node B RNC CORE NETWORK

Fig. 6 Evolution of the UTRAN

Informa

Telecoms

16

Evolutionary Strategies

2.5 IP to the Node B and to the User

The final steps in creating an end-to-end UMTS IP network is in taking IP all the way to the base station by adding an IP Interface to the Node B, and by transporting IP directly across the air interface to an IP-enabled terminal. This latter step in particular will require further work to increase the efficiency with which such transport might be achieved. At the present time, the overhead of IP header information means that IP is not necessarily an efficient way of cramming a lot of data into a small amount of bandwidth. This is a key requirement where a scarce resource such as radio spectrum is involved. A number of manufacturers have proposed techniques for header compression which should alleviate this problem, and eventually it is probable that one of these approaches will be selected for inclusion in future specification releases. The implication of taking IP transport straight to the Node B and even to the user terminal is that the functionality of the RNC will also be taken out into RNC and Radio Resource Management Servers, which connect to this IP network. This is much the same as the situation in the core network, where a control plane MSC server was separated out compared to the existing MSC. Since no longer dependent on setting up new dedicated transport links, but simply on routing through the IP "cloud", an IP UTRAN architecture will also make it much easier to enable direct communication between Node Bs. Although this would almost certainly require definition of a new standardised interface, an advantage of this is the ability to move some radio resource management handling functions away from the RNC and into the Node Bs. This may prove to be more efficient in response to specific functional speed requirements.

UMTS System Overview

17
Informa

Telecoms

RNC & RRM

CSCF

MGCF

Node B

IP Access Network

Edge Node

IP Core Network

MGW

Border Node IP Client Node B Internet PSTN

Fig. 7 IP to the User

Informa

Telecoms

18

Evolutionary Strategies

2.6 A Conceptual Multi-access UMTS / IP Network

With an IP transport network at its core, and services and control functions moved to the network edge in "server farms", it will become much more straightforward for operators to offer the same UMTS services to customers through a variety of access methods, both fixed and wireless. Even in early releases of UMTS, before all-IP is implemented, some vendors believe that operators will look to deploy multi-standard base station solutions, enabling them to offer both Node B (UMTS) and BTS (GSM or EDGE) functionality from the same site. With governments and the public increasingly concerned over the potential health issues in mobile, and hence the planning permission for radio masts, this would indeed seem to be a likely market need. With all-IP transport in the Radio Access network, it is a logical step not only to share this resource between multiple radio access methods in future, but to also provide a common radio resource management function. Such a function would integrate the control of each of these radio access methods, providing much easier control of processes such as inter-network handover.

UMTS System Overview

19
Informa

Telecoms

Servers Applications Signalling + Control Intelligence Mobility

IP

MGW

Legacy Network

Fixed Access IP Radio Resource Management

UMTS/GSM/ EDGE

Other Radio Interfaces

Fig. 8 Multi-access UMTS/IP Network

Informa

Telecoms

20

Evolutionary Strategies

3. A SUMMARY OF IP QoS
IP is a connectionless technology, and so does not guarantee bandwidth. Thus IP in itself will not differentiate network traffic based on type, and so cater for the particular needs of an application in terms of bandwidth and priority. By contrast, ATM does incorporate service requirements into its specifications, and so is in much wider use at present. Although one solution is of course to just add more and more bandwidth until traffic delays are no longer a problem, in reality it is necessary to add particular options to IP in order to deal with the QoS limitations. There a number of standards which are being developed within the IP community, and which may well be important for future releases of UMTS, because of their influence on QoS. Below are listed just a few of the most prominent ones. All potentially enable IP QoS to be improved for traffic such as audio and video, eliminating any annoying skips and hesitations.

3.1 MPLS
Layer 3 or the network layer refers to the communications protocol containing the logical address of a route destination, for example the IP address which is inspected by a router which forwards it through the network. Layer 3 also contains a type field so that traffic can be prioritized and forwarded based on message type as well as network destination. MultiProtocol Label S witching is a specification for layer 3 switching and uses labels that contain forwarding information, attached to IP packets by a router that sits at the edge of the network. Routers in the core of the network examine the label more quickly than if they had to look up destination addresses in a routing table. The forwarding router does not look at the entire packet header, rather only at the label with the forwarding information. This allows packets to be forwarded more quickly, and also allows the paths to be set up in a variety of ways. For example, the path could represent the normal destination-based path, a policy-based explicit route, or a reservation-based flow path. In essence, MPLS enables more decision on the routing to be made at the periphery of a dumb network, with the network handling this routing much more efficiently.

3.2 DiffServ
DIFFerentiated SERVices, like MPLS, operates at layer 3 only. It uses the IP type of service (TOS) field as the Diffserv byte (DS byte), to classify packets into small number of service types. Diffserv does not provide traffic engineering or hard quality of service similar to ATM, in that it does not involve explicit reservation of resources or control of admission. Instead it uses priority mechanisms to provide adequate QoS according to the service type. Network routers have to include intelligent queuing mechanisms in order to achieve this, allowing high priority traffic to move to the front of a queue of packets.

UMTS System Overview

21
Informa

Telecoms

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

3.3 IntServ
The Integrated Services model differs from DiffServ in that it reserves resources explicitly using a signalling protocol. This approach uses admission control, packet classification, and intelligent scheduling to achieve the desired QoS. It is thus a fundamentally new approach to IP, moving away from the best effort approach. At present IntServ might be suitable for small networks and Intranets, however as traffic flows become larger, the signalling processing required becomes problematic for larger networks.

3.4 RSVP
ReSerVation Protocol is a protocol that signals to a router that it should reserve bandwidth for real-time transmission. It is designed to work with IntServ, although it can also be applied to other service models. Information in the reservation request could include maximum transmission rates, maximum frame jitters and maximum end-to-end delay. When an RSVP request is made, each router between it and the source makes a note of it and attempts to honour it, with an error request sent back to the source if this cant be done the circuit-switched equivalent of a busy tone. Of course, this technique means a lot of router upgrades where big networks are involved, and so problems of scaleability.

3.5 IPv6
Internet Protocol Version 6 was started as far back as 1991, and the specification was completed in 1997 by the IETF. The key feature of IPv6 is that it increases the address space from 32 to 128 bits, providing for a number of networks and systems which is unlimited in a practical sense. However also included in IPv6 is inherent support for quality of service parameters for real-time audio and video, and increased data security. For example, IPv6 enables applications to request different levels of service, and will guarantee these levels even when the request goes over a wide area network. The draft version of IPv6 was originally called IP Next Generation (IPng), and IPv6 is backward compatible with IPv4.

Informa

Telecoms

22

Evolutionary Strategies

3.6 The Introduction of UMTS Terminals

The evolution of terminals will be a crucial factor in the ultimate success or failure of UMTS. The situation is neatly summed up by the following quote : The problem today is that we do not have a clear indication from manufacturers of terminals about when these kind of terminals will be available for commercial deployment. When I say commercial, I mean sufficient in volume, full type-approved terminals, and at a competitive price we cannot pass the technical problem to the customer. Until such terminals become available, we believe that the success of UMTS will be limited Miguel Menchen Alumbreros, General Director of Wireless Internet, Telefonica Moviles, speaking at the UMTS World Congress, October 2000 Terminal supply is something of a chicken and egg situation manufacturers will rarely commit large resources until they are guaranteed a mass market of sales ; operators will rarely develop and market services to the market without being certain that terminals will be available. The slow uptake of both WAP and GPRS services were both blamed to a large extent on the lack of available terminals as operators went to market. The first UMTS terminals will certainly offer multi-mode UMTS / GSM functionality, since operators will initially only offer UMTS coverage in the busiest areas where it can be guaranteed that demand will allow cells to be efficiently loaded. Outside such areas services are likely to remain reliant on GSM / GPRS and perhaps EDGE. Although both EDGE and TDD-mode UMTS have support and business cases proposed by sectors of the industry, their introduction is likely to lag some way behind that of the first UMTS deployments not just due to standardisation issues, but also because of a lower priority for terminal manufacturers. Indeed for the Japanese market, home to some of the key consumer electronics vendors, neither technology is even applicable.

UMTS System Overview

23
Informa

Telecoms

Lack of Handsets

No Services

"The problem today is that we do not have a clear indication from manufacturers of terminals about when these kind of terminals will be available for commercial deployment. When I say commercial, I mean sufficient in volume, full type-approved terminals, and at a competitive price - we cannot pass the technical problem to the customer. Until such terminals become available, we believe that the success of UMTS will be limited." Miguel Menchen Alumbreros, General Director of Wireless Internet, Telefonica Mobiles, speaking at the UMTS World Congress, October 2000.

Uncertain Terminal Needs

Fig. 10 UMTS Terminals: Supply and Demand

Informa

Telecoms

24

Evolutionary Strategies

3.7 Evolution Issues for UMTS Terminals

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

1. Power
UMTS terminals will be much more power-hungry both from the radio and application perspectives. While the ability to pack enough processing power into a small device (and avoid overheating) is one issue, a lot of work is also in progress on techniques such as power control and power saving, in order to maximise what power is available. Fundamental battery technologies have changed little in recent years, yet this is another area in which developers are looking to evolve smaller and more efficient power solutions.

2. Memory
As the PC, mobile and other computing industries expand, all of the new devices and new applications tend to need increasing memory. The successful introduction of UMTS terminals will depend not just on the continued decrease in the size of storage technologies, but also on the ability of manufacturers to supply memory at a rate fast enough to support the growth of computing in general.

3. Operating System
In an ideal world, all terminals would use a common operating system to ensure the interoperability of applications, and an easier task for application developers who will be vital in building the UMTS market. Success in balancing high functionality with low power and memory requirements are the evolutionary goal of any mobile O/S, and the O/S will be a major determinant of the power and design requirements of UMTS terminals. However, as in the PC world, the O/S is proving to be a competitive battleground, with no clear winner likely to emerge. The most prominent competitors include Microsoft, who of course are keen to see mobile devices inter-operate with the Windows PC environment ; Symbian, a joint venture including Psion, the organiser manufacturer, and mobile phone leaders Nokia & Ericsson ; and Palm, whose Palm Pilot PDA became a market leader particularly in the US.

UMTS System Overview

25
Informa

Telecoms

Issues for UMTS Terminals

Power - processing power - power control - power saving Memory Operating System Form Factor - Bluetooth Standardisation

Fig. 11 Issues for UMTS Terminals

Informa

Telecoms

26

Evolutionary Strategies

4. Form factor
With little real knowledge of what the "killer applications" for UMTS may be, it is of course difficult to propose the most effective design for UMTS terminals. Different mixes of voice, video and data are best supported by different types of design, and a whole range of concept phones have been proposed. Most in the mobile industry originally believed that increasingly functional smartphones were the evolution path for terminals, combining voice, perhaps video, and a whole range of data services into a single phone-like device. However recent handset trends have seen the increasing success of small-size and fashion value as factors in consumer purchasing, while such terminals have remained essentially voice-centric in terms of design. The entrance of the computing industry into the competition for market share in handheld devices has led to a much more data-centric approach, including larger screens, pens and touch-screens rather than keypads, and with voice as an accessory add-on. Improvements in voice recognition may also change the way in which users can interact with terminals, and hence the way the terminal is designed, and indeed a whole plethora of concept phone designs are proposed by handset vendors. Ultimately, suitability for whatever services emerge and consumer reaction will decide 5. Bluetooth could potentially have a big effect on form factor. Bluetooth is designed to provide wirefree communication between computing devices over a short range. It raises the possibility that rather than try to cram more and more features into a single device, terminals could instead become disaggregated. A radio module could provide the interface between the UMTS network, and Bluetooth could provide the onward link to the most appropriate user interface device for the service in question. For example this might be a PDA for organiser functions, a laptop for viewing streaming video or large documents, a microphone and ear-piece for voice.

5. Standardisation
Since standards are constantly evolving, particularly at the early stages in development, it is usually impossible for terminal manufacturers to begin testing and type approving terminals until these standards have stabilised. No manufacturer is willing to release terminals to market only to have to ask customers to return for an upgrade just a few months later. In many cases, it is impossible to get around standardisation changes through software upgrades, since efficient operation of the terminals requires that as many functions as possible be achieved trough hardware.

UMTS System Overview

27
Informa

Telecoms

Issues for UMTS Terminals

Power - processing power - power control - power saving Memory Operating System Form Factor - Bluetooth Standardisation

Fig. 11 Issues for UMTS Terminals

Informa

Telecoms

28

Evolutionary Strategies

3.8 The Evolution of New UMTS Value Chains

When operators offered 2G Voice, the value chain was quite straightforward, as simplistically illustrated opposite. In a market where users have access to a range of multimedia services, potentially provided by a number of different sources, the value chain becomes much more complex. UMTS has been designed to easily offer such service flexibility, and so there is no reason to believe that such complex value-chains will not evolve. What is less clear is how revenue will be split along such value chains, and whether some players will occupy more than one position (for example a content provider could aim to become a virtual network operator, or a virtual network operator could also be the consumer retailer). Ultimately the consumer will pay for UMTS services by means of a bill. However there are a number of places from where this bill could be generated. The lower diagram opposite gives an illustrative evolution of a UMTS value chain, to show the greater complexity which may arise, and hence the more points along the chain where billing & revenue generation may occur. A key challenge for operators is to pay for their investments in UMTS by keeping a controlling position in such a chain. Ultimately this may depend on the success of persuading consumers to spend more then previously on mobile services, compensating for a smaller slice of the overall revenue pie, by growing a much bigger overall pie.

UMTS System Overview

29
Informa

Telecoms

a) 2G Voice Billing

User

Handset Vendor

Retailer

Service Provider

Operator

b) 3G Multimedia

Virtual Operator Handset Vendor Retailer Service Provider Billing?

30

User

Operator

Content aggregator/distributor

Content Owner

Content Owner

Content Owner

Fig. 12 Value Chains

Informa

Telecoms

Evolutionary Strategies

3.9 Deciding Factors for the success of UMTS?

UMTS is the result of a complex and hugely detailed work effort, which has included a wide range of opinions and interests from within the mobile community. The result is a set of specifications which potentially provide a huge leap forward in terms of the efficiency, quality and flexibility with which services can be provided to mobile users. However, ultimately the success of UMTS may depend not just on quality of this work, but on a number of external market factors which can be very difficult to predict, and which may not reflect any all-industry consensus. Just a few of these are highlighted below.

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

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

3. Governments and Regulators

The licensing timetables and public policies of regulators and governments can affect anything from the broad timetables for UMTS introduction to the detailed processes of cell site planning and selection, or the emission and power constraints of terminals. In particular health concerns are coming more into the public agenda, at just the time when the roll-out of new base stations and more powerful terminals is required. Regulators may also ultimately decide how value chains look from country to country, for example by enforcing particular rules and conditions concerning the access of virtual network operators and value added service providers to UMTS networks.

UMTS System Overview

31
Informa

Telecoms

Vendors

Operators

Regulators

UMTS

Consumer Electronics

Content Providers

Marketing

THE CONSUMER

Fig. 13 UMTS: The Unknowns

Informa

Telecoms

32

Evolutionary Strategies

4. Terminals & Consumer Electronics Markets

As traditionally "fixed" computing and consumer electronics vendors such as Compaq, Hewlett-Packard, Sony and Panasonic increase their influence on the terminals market, innovation and design are likely to evolve quickly. Since terminals represent the consumers interface with UMTS, design and useability are likely to strongly impact the success or failure of UMTS terminals.

5. The Content Industry

Most analysts agree that without sufficiently attractive content and applications, new mobile services will not appeal to users. The content industry, be it music, film, banks or information, is well aware of this, and certain to have an increasingly strong voice in UMTS service development, for example in much the same way that the Hollywood ultimately determined the multi-region development of DVD.

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

7. The Consumer
It is the reaction of consumers which will ultimately decide the service mix and traffic types whose support needs to be optimised in UMTS. It will be consumers disposable income which will decide if pricing strategies have been formulated correctly. It will be consumers fashion quirks that will decide which terminals sell the best and it will be consumers convenience and confidence in matters of health, which will see them favour mobile over fixed access.

UMTS System Overview

33
Informa

Telecoms

Vendors

Operators

Regulators

UMTS

Consumer Electronics

Content Providers

Marketing

THE CONSUMER

Fig. 13 UMTS: The Unknowns

Informa

Telecoms

34