Network Technology Evolution

THIS DOCUMENT PRESENTS AN OVERVIEW OF MOBILE AND FIXED NETWORK TECHNOLOGIES,

HIGHLIGHTING DRIVERS AND TRENDS

Scope of the Document

Section I Section II Section III

Network
Network Architecture
Architecture Evolution
Evolution of
of Mobile
Mobile Evolution
Evolution of
of Fixed
Fixed
Hierarchy
Hierarchy Network Technologies
Network Technologies Network Technologies
Network Technologies

Adoption
Adoption of
of Mobile
Mobile NGN
NGN Migration
Migration
Technology
Technology Adoption
Adoption Technologies
Technologies by
by Requirements
Requirements and
and
Drivers
Drivers Operators
Operators Challenges
Challenges

-1-
Table Of Contents

General Overview

Mobile Technology Highlights

Fixed Technology Highlights

Table Of Contents

General Overview

Mobile Technology Highlights

Fixed Technology Highlights

AT A HIGH LEVEL, TELECOMMUNICATIONS NETWORKS ARE BASED ON THREE MAIN LAYERS,
NAMELY CORE, EDGE AND ACCESS …

Telecommunication Network Basic Hierarchy

Backbone or Core Layer
Characteristics:

(High Capacity Equipment) – High traffic carrying capacity
– Switches and transports aggregated traffic
100s to 1000s Km
Distance Scale
from lower layers of the network

Main challenges:
– Ensure necessary capacity availability
– Ensure high capacity utilization
– Ensure high level of network availability

Characteristics:
Edge Layer – Aggregate traffic from access network

Main challenges:
(Medium Capacity Equipment) – Ensure network capacity does not become a
10s to 100s Km traffic bottleneck
Distance Scale – Ensure high level of network availability

Characteristics:
Access Layer – Collect traffic from end users and pass on to
(Low Capacity Equipment) edge layer
1s to 10s Km
Main challenges:
Distance Scale – Invest extensively in infrastructure to provide
widest possible coverage
– Ensure capacity is available where demand is,
at a very detailed level
-4-
 … CONSISTING OF SWITCHES CONNECTED TOGETHER BY A TRANSPORT INFRASTRUCTURE …

Switching Function Transport Function

Network Elements

Routing of telecom traffic from Transportation of telecom traffic between

source to destination switches and end users as well as among
switches themselves

Packet Fixed
Fixed Mobile
Mobile
Circuit
Circuit Packet
(Data) (All
(All Layers)
Layers) (Access
(Access Layer)
Layer)
(Voice)
(Voice) (Data)

Cell switching (ATM) Fiber (SDH

Services and Technologies

POTS 2G (GSM/ CDMA)

and WDM)
ISDN Frame switching Copper
(Frame Relay) 2.5G (GPRS)
(Coax, DSL)

Routing (IP) Microwave/

3G (UMTS, WCDMA,
Wireless Broadband
CDMA 2000)
Satellite Satellite (GMPCS)
(VSAT)
WLAN

-5-
… AND ACCESSED VIA DIFFERENT TYPES OF TERMINAL EQUIPMENT

End-to-End Communication Path

Transmission
Transmission
Physical Link Equipment
Equipment Physical Link

Transmission
Transmission Switching
Switching Switching
Switching Transmission
Transmission
Equipment
Equipment Equipment
Equipment Equipment
Equipment Equipment
Equipment
Physical Link Physical Link

Physical Physical
Link Link

Terminal Terminal

User User

-6-
WHILE VENDORS HAVE HISTORICALLY INFLUENCED TECHNOLOGY ADOPTION DECISIONS, …

Historical Technology Adoption Decision Dynamics

Operationally
Operationally driven
driven state
state operators
operators
Monopoly
Monopoly


Demand
Demand exceeding
exceeding supply
supply
Environment
Environment


Political interference
Political interference



Inexistent
Inexistent marketing
marketing capabilities
capabilities

Mainly
Mainly need
need for
for basic
basic connectivity
connectivity
Basic
Basic Customer
Customer


Limited
Limited differentiation, one
differentiation, one size
size fits
fits all
all
Requirements
Requirements


Limited
Limited customization
customization and
and Business
Business conditions
conditions
personalization requirements
personalization requirements favored
favored vendors
vendors
heavy
heavy influence
influence on
on

Operators

Operators initiated
initiated large
large network
network operators
operators technology
technology
Large
Large Network
Network expansion projects
expansion projects adoption
adoption decisions
decisions
Expansion
Expansion Projects
Projects
Service

Service offering
offering limited
limited by
by
introduced technology capabilities
introduced technology capabilities

Operators

Operators dependency
dependency onon limited
limited
Limited
Limited Number
Number ofof number
number ofof vendors
vendors
Vendor
Vendor Alternatives
Alternatives
Limited

Limited competition
competition across
across the
the
telecom
telecom infrastructure
infrastructure segments
segments

-7-
… TELECOM OPERATORS TECHNOLOGY ADOPTION STRATEGIES ARE PRESENTLY DRIVEN BY
MARKET, REGULATORY AND COMPETITION REQUIREMENTS
Today’s Technology Adoption Decision Drivers

Customer
Customer Sophistication
Sophistication Regulatory
Regulatory Requirements
Requirements Competitive
Competitive Pressures
Pressures

Traditional

Traditional voice
voice services
services are
are more
more
Granting

Granting of
of technology-based
technology-based
Erosion

Erosion of
of telecom
telecom operators
operators
and more perceived as a commodity
and more perceived as a commodity operator
operator licenses imposing
licenses imposing newnew traditional
traditional voice
voice business
business revenues
revenues

The Internet

The Internet has
has made
made real-time
real-time adoption
adoption timelines
timelines on on incumbents
incumbents
Increased

Increased pressure
pressure on on revenue
revenue
multimedia
multimedia communication aa reality
communication reality
Emergence

Emergence of of aa large
large number
number ofof growth,
growth, profitability,
profitability, capitalization
capitalization

The concept of a “call” is changing operators
operators intervening
intervening at at on
on existing investments and
existing investments and cost
cost

The concept of a “call” is changing
to complementary
complementary parts of the
parts of the value
value efficiency
efficiency
to mean
mean real-time
real-time integrated
integrated
multimedia
multimedia communication
communication chain
chain and
and requiring
requiring efficient
efficient
Differentiation

Differentiation through
through value
value added
added
interconnection
interconnection services
services is
is needed
needed

Customers

Customers areare increasingly
increasingly
demanding:
demanding:
Sophisticated

Sophisticated quality
quality of
of service
service
Competitive

Competitive alliances
alliances between
between
–– Speed/Mobility requirements
requirements imposed by regulator
imposed by regulator multiple
multiple providers
providers requiring
requiring
Speed/Mobility
–– Personalization seamless
seamless network integration
network integration and
and
Personalization
rapid
rapid service
service development
development
–– Ubiquity/integration
Ubiquity/integration
–– Quality
Quality
Emergence

Emergence of of substitute
substitute
technologies
technologies such
such as
as VoIP
VoIP
–– Security
Security imposing a change in traditional
imposing a change in traditional
–– Self-management
Self-management business
business models
models

Market
Market requirements
requirements primarily
primarily drive
drive
operators
operators technology
technology requirements
requirements

-8-
IN THIS CONTEXT, COMMUNICATION NETWORKS ARE WITNESSING A MAJOR MARKET-DRIVEN
TRANSFORMATION
Communication Networks Anticipated Evolution
Gaming
Console
PDA Today
Home
Multiple networks
Computer

Simple devices
Business
Disparate services
Mobile Home Office
Phone

Office
Phone Office
Computer
TV / PVR Transition

Converged packet network
Simplify

Multimedia devices

Linked services

Transformed

Dynamic packet/
optical network

Secure multimedia services

Ubiquitous broadband

Integrated functionality

-9-
OPERATOR NETWORK STRATEGY WOULD BE CONTINUOUSLY REFINED TO ACCOMMODATE FOR
VARIOUS MARKET AND BUSINESS DRIVERS, ENSURING SOUND INVESTMENT DECISIONS

Network Planning Integrated Approach Network Investment Strategy

Demand Evolution Technology Development

Social structure
Lifecycle stage

Social behavior
Substitution options What
What

Demographics
Service support network
network technology
technology toto

Economics
Standardization invest
invest in
in and
and what
what

Penetration
Capex efficiency architectures
architectures toto adopt?
adopt?

Applications
Opex efficiency

Benchmarks
Business
Planning
Strategic Marketing When
When
Planning Planning to
to invest
invest and
and to
to stop
stop
investing?
investing?
Network
Planning Business Imperatives

Migration and
deployment
Regulatory Environment How

Liberalization stage challenges How

Level of much
much toto invest
invest and
and how
how

Licensing conditions to
capitalization on to spread
spread the
the

Competition investment?
past investments investment?
intensity

Forecasted returns
on investment
- 10 -
Table Of Contents

General Overview

Mobile Technology Highlights

Fixed Technology Highlights

THIS SECTION DESCRIBES THE EVOLUTION OF MOBILE NETWORK TECHNOLOGIES AND THEIR
ATTRACTIVENESS TO OPERATORS

Structure of the Section

The impact of advanced mobile technologies on the

telecommunications network topology
Evolution
Evolution of
of Mobile
Mobile
Network
Network Technologies
Technologies
The main characteristics of different mobile network technologies

Different network evolution paths

Worldwide adoption of different mobile technologies

Adoption
Adoption of
of Mobile
Mobile
Technologies
Technologies by
by
Drivers for operators in selecting mobile network technologies
Operators
Operators
The case of third-generation mobile networks

- 12 -
 BACKBONE, CORE AND ACCESS NETWORK ELEMENTS ARE EVOLVING INTO IP, TO SUPPORT
ADVANCED MOBILE NETWORK TECHNOLOGIES

Evolution of Mobile Network Elements

Multiple Technology Layers
Integrated Technology Layers
Single Layer

Backbone

Fixed Network

Mobile Network

Mobile Core

Circuit-switching
Packet-switching
Full IP-based
core elements elements co- switching
(MSC, HLR, located with circuit-
IP-based core
VLR) switching elements network
(GGSN, SGSN, connectivity
etc.)
Mobile

Voice channel
Packet controllers
New antennas
Access
BSC and BTS added to BSCs for and control
packet routing units to support

Modulation changes full IP air
sometimes required interface

2G 2.5G 3G
Mass deployment 1990’s 2000 - 2005 2005 and Beyond
Dates
- 13 -
 GSM 2G TECHNOLOGY IS CIRCUIT-SWITCHED WITH LIMITED CAPABILITIES FOR SUPPORTING
DATA SERVICES

2G Network Characteristics

Core backbone networks cater for

voice volume
Key
Key Characteristics
Characteristics
Backbone
E-1s and microwave links are typically
used to connect core-to-core or core-

The

The average
average cost
cost
to-radio network elements
(CapEx)
(CapEx) per
per line
line is
is
Fixed Network
estimated
estimated at around SR
at around SR
Mobile Network 1,000*
1,000*

Circuit switching at the switch level
Limited

Limited capacity
capacity and
and
Mobile Core capability
capability to
to handle
handle data
data

No presence of packet based transmission
transmission
elements at the core layer

Data

Data transmission
transmission isis
either handled over
either handled over
circuit-switched
circuit-switched air
air

Channel reservation for voice interface,
interface, or
or over
over
communications through air interface signaling
signaling channels
channels
Mobile Access using
using SMS
SMS

No packet or IP elements used

SMS data is carried over signaling
channel with limited bandwidth

Note: (*) Cost varies depending on network size, time of deployment and network design factors

- 14 -
 2.5G TECHNOLOGIES, GPRS AND EDGE, UTILIZE PACKET-SWITCHING ENTITIES OVER AN
EXISTING CIRCUIT-SWITCHED NETWORK

2.5G Network Characteristics

Similar to 2G networks, core backbone

networks cater for voice volume
Key
Key Characteristics
Characteristics
Backbone
E-1s and ATM links are typically used
to connect core-to-core or core-to-

The

The average
average costcost
radio network elements
(CapEx)
(CapEx) perper line
line for
for
Fixed Network
GSM to GPRS
GSM to GPRS upgradeupgrade
Mobile Network is
is estimated
estimated at at around
around

Circuit switching at the switch level SR 30 to SR
SR 30 to SR 50 50
Mobile Core
Addition of IP-based switching
GPRS

GPRS networks
networks operate
operate
elements, such as SGSN and GGSN over GSM networks,
over GSM networks,
in the case of GPRS and EDGE and
and allow
allow users
users to
to
transmit
transmit packet-
packet-
switched
switched data
data

Packet controllers are added at the
GPRS

GPRS occupies
occupies regular
regular
base station controller to support voice
voice channels for data
channels for data
Mobile Access packet routing, such as in GPRS transmission
transmission

Some networks further require a
change in the modulation, such as
EDGE

Note: (*) Cost varies depending on network size and time of deployment

- 15 -
 3G NETWORKS UTILIZE FULL IP TECHNOLOGY AND HAVE HIGH CAPACITY FOR INTEGRATED
VOICE AND DATA SERVICES

3G Network Characteristics

Transmission network needs to cater

for increase in data bandwidth Key
Key Characteristics
Characteristics
Backbone

Transmission network is usually
The

The average
average cost
cost (CapEx)
(CapEx)
migrated to ATM or full IP per
per line for GSM to 3G
line for GSM to 3G
upgrade
upgrade is is estimated
estimated at
at
around
around SR700*
SR700* to to SR800*
SR800*

Full packet-based switches / MSCs
For

For green
green field
field 3G
3G
network
network deployment,
deployment, the the

Full IP-based core network (CapEx) per line is still
Mobile Core (CapEx) per line is still
connectivity, such as IP-v6 high,
high, estimated
estimated at at around
around

Addition of IP-based core network SR
SR 1500*
1500*
elements
3G

3G allows
allows full
full integration
integration
of
of voice and data, over
voice and data, over aa
full IP core network
full IP core network

Antennas, and control units need to
3G

3G users
users may
may access
access
Mobile Access support 3G air interface Internet
Internet or
or data
data
applications
applications at
at high
high rates
rates

Smaller cell coverage leading to a
denser access network

Note: (*) Cost varies depending on network size, time of deployment and network design factors

- 16 -
EVOLVING MOBILE NETWORKS INCREASINGLY ALLOW ENHANCED ACCESS TO DATA AND
INTERNET

Evolution of Data Services Enablers

Content Access Internet Access Future High Speed Data

Content Portal
Portal Internet/ Intranet

Enabler SMS
SMS WAP
WAP Internet
Internet gateway
gateway

Bearer WLAN*
WLAN*
Technology GSM
GSM GPRS
GPRS EDGE/
EDGE/ 3G
3G

Low speed (WiFi/WiMax)
(WiFi/WiMax)

Low popularity Laptop/
PC

Terminal GSM GPRS

Handset Handset
3G Terminal
Application SIM Terminal-
Terminal-
SIM based
based browser
browser Terminal-specific
Terminal-specific Email,
Email, file
file transfer
transfer etc
etc specific
specific

Note: (*) Not considered to be a core technology, however may play an interim role in the period preceding the introduction of 3G

- 17 -
NEW HIGH END DATA SERVICES CAN BE OFFERED OVER NEW NETWORKS, BUT HYPE AND
INFRASTRUCTURE COSTS SHOULD NOT BE IGNORED

Technology GSM GPRS EDGE 3G

(Phase 2 and 2 +)

Widely used
Always on connection
New air
3rd generation
standard for for Packetized usage interface for system with
Description Mobile of existing GSM time GSM harmonized new
communications slots for data frequencies
worldwide

Hype: 170 Kbit/s
Hype: 384 Kbit/s
Hype: 2Mbit/s
Data speed
14.4 Kbit/s

Reality: 43 Kbit/s
Reality: 100Kbit/s
Reality:384 Kbit/s

Expansion of
New core elements
New BTS, BSC
Large

current
New software for and terminals investments in
Network investment terminals, BTS and totally new
footprint
BSC network

Interactive, high
Key data centric
SMS, WAP,
High speed data
High quality
services enabled Circuit Switched Internet access voice over IP, bandwidth
applications
data video etc.

Slow data speeds
Good content may
Not fully
Not fully
Potential issues for using WAP not be available to standardized standardized
generate usage
Applications not
Applications not
widely available widely available
Note: GSM: Global System for Mobile SMS: Short Messaging Service BSC: Base Station controller
GPRS: General Packed Radio Switching 3G: Third Generation Networks BTS: Base Tranceivers System
EDGE: Enhanced Data rate for GSM Evolution WAP: Wireless Access Protocol IP: Internet Protocol

- 18 -
A NUMBER OF STANDARDIZATION PATHS ARE FOLLOWED BY DIFFERENT COUNTRIES IN
DEVELOPING 3G MOBILE NETWORK CAPABILITIES

Evolution Paths towards 3G and Maximum Data Rates

2G 2.5G 3G (IMT-2000)
Japan

Theoretical: 2 Mbps
PDC WCDMA
Actual: 384 kbps
Theoretical: 28.8 kbps
Actual: 9.6 kbps Impacts
Impacts of
of Evolution
Evolution Paths
Paths
Theoretical: 384 kbps

Spectrum

Spectrum demand
Europe, ME & Africa

Actual: 128 kbps demand

EDGE
Data

Data rates
rates

Reusability

Reusability of
of network
network
investments
investments // network
network
3GPP WCDMA CAPEX
CAPEX
GSM GPRS
WCDMA HDSPA
Theoretical: 14.4 kbps Theoretical: 171.2 kbps Theoretical: 2 Mbps Theoretical: 14 Mbps
Handset

Handset andand infrastructure
infrastructure
Actual: 9.6 kbps Actual: 40 kbps Actual: 384 kbps Actual: 2-3 Mbps availability
availability

Service

Service development
development and
and
migration
migration
D-AMPS
Theoretical: 2.4 Mbps
USA & Asia

Economies

Economies of
of Scale
Scale
(Data only)
CDMA 2000 CDMA 2000 CDMA 2000
International

International Roaming
Roaming
CDMA One Opportunities
Opportunities
1x RTT 1x EV-DO 1x EV-DV

Theoretical: 64 kbps Theoretical: 307 kbps Theoretical:

Actual: 14.4 kbps Actual: 153 kbps 3.1 Mbps

Easy upgrade New Modulation New Radio Network

- 19 -
 GSM-BASED TECHNOLOGIES ARE EXPECTED TO REMAIN THE MOST POPULAR AMONG
MOBILE NETWORK TECHNOLOGIES, WITH 2.5G RETAINING ITS DOMINANCE UNTIL 2007

Mobile Subscribers by GSM and Non-GSM Technologies Mobile Subscribers by 2, 2.5 and 3G Technologies
(in Million Subscribers – Worldwide) (in Million Subscribers – Worldwide)
(2002 – 2008) CAGR (2002 – 2008) CAGR
(2002-2008) (2002-2008)

2,056 Total 10% 2,056 Total 10%

1,942 1,942
1,821 1,821
21% Non-GSM 3%
1,695 1,695 28% 3G 61%
22% 23%
1,540 1,540 19%
23% 14%
1,349 1,349 9%
26%
6%
1,145 27% 1,145 13%
79% GSM 13% 3% 13% 13% 13%
28% 5% 13%
78%
30% 77% 13% 2.5G 62%
74% 92%
73% 81%
72% 68%
70% 55%
41%
31%
23% 2G (12%)

2002 2003 2004 2005 2006 2007 2008 2002 2003 2004 2005 2006 2007 2008

Source: IMS Research 2003

- 20 -
GPRS HAS BEEN COMMERCIALLY LAUNCHED BY A LARGE NUMBER OF EUROPEAN
OPERATORS AND MOST REGIONAL PLAYERS

European Mobile Operators with Commercial GPRS, Regional

Regional Operator
Operator GPRS
GPRS EDGE
EDGE 3G
3G
EDGE and 3G Networks
(End of 2003) Aljawal
Aljawal √√ X
X X
X
420
Etisalat
Etisalat √√ X
X √√
MTC
MTC Vodafone
Vodafone –– Kuwait
Kuwait √√ √√ X
X
Wataniya*
Wataniya* √√ X
X X
X
MTC
MTC Vodafone
Vodafone –– Bahrain
Bahrain √√ X
X X
X
Batelco
Batelco √√ X
X X
X
Q-Tel*
Q-Tel* √√ X
X X
X
OmanTel
OmanTel √√ X
X X
X
134
Mobinil
Mobinil √√ X
X X
X
Vodafone
Vodafone Egypt
Egypt √√ X
X X
X
LibanCell
LibanCell √√ X
X X
X
17 18
Cellis
Cellis √√ X
X X
X
Networks with 2G Networks with Networks with Networks with 3G Fastlink
Fastlink √√ X
X X
X
GPRS EDGE

Note: (*) Operators currently testing EDGE

- 21 -
THE ATTRACTIVENESS OF 2.5G HAS BEEN LINKED TO ITS ABILITY TO SUPPORT THE LAUNCH
OF MOST MOBILE DATA SERVICES…
Mobile Data Applications
High

Music on demand

Traffic information

Tourist information
Games on demand

Electronic
wallet
Job dispatch
Unified messaging

Video

Directory listings
E-mail with technology
Degree of mobility

Stock quotes attachment

Mobile chat
Field Force automation

Lotteries/Gambling

General news
Mobile Office

Travel/Ticket bookings
Fleet Management

Event booking

Banking
Video on demand

Telemetry
Purchasing/shopping

Auction

Low
Low Required bandwidth High
per user per event

2G
2G 2.5G
2.5G 3G
3G
SMS
SMS GPRS
GPRS

- 22 -
… ITS LIMITED INFRASTRUCTURE INVESTMENT REQUIREMENTS…

Network Upgrades Imposed by GPRS

Drivers
Drivers for
for Services
Services over
over GPRS
GPRS
Internet & Other
content GGSN
GGSN
GPRS network upgrade investment is estimated at SR 30
- SR 50 per subscriber

GPRS provides features which make Internet access
GSM BS more acceptable
SGSN
SGSN − “Always-on” connection
Base
Base Station
Station ATM
Controller
Controller − Higher speeds than GSM
GSM BS
− Packet based (not circuit switched) billing

ATM
Basic Internet access with mobility are faster than

Handset GSM BS
traditional 9.6kbps and HSCSD connections
GSM BS Base
Base Station
Station
GPRS could enable new services previously not possible
Controller
Controller using SMS and HSCSD
ATM MSC

Radio access network requires no hardware upgrade but
GSM BS will need to be densified strongly to allow for acceptable
bitrates in already saturated areas
Upgraded

Core network needs complete hardware and software
revamp: a packet data switching system (GGSN+SGSN)
New needs to be built on top of the usual MSC/BSC
Radio Access Network Core Network architecture of GSM, and ATM upgraded links must be
added to connect the MSCs and BSCs

- 23 -
… AND THE WIDE AVAILABILITY OF GPRS-ENABLED HANDSETS

Device Functionality Current Status of GPRS Handset Availability

(Core and Specialized Functions of the Device)

Key
Key Device
Device Status
Status
Areas
Areas

Business Multimedia
High

High availability
availability of
of devices
devices in
in most
most markets
markets
Availability
Availability
All major device manufacturers have most

All major device manufacturers have most of
of their
their

PDA(2)
Audio new
new handset
handset releases
releases GPRS-enabled
GPRS-enabled

PIM(3)
Video
Pricing
Pricing
Acceptable

Acceptable pricing
pricing of
of handsets
handsets // devices
devices

Voice Core
Acceptable

Acceptable display
display size
size and
and resolution,
resolution, with
with
Business many having color screens
many having color screens
Features
Flexible

Flexible and
and user-friendly
user-friendly devices
devices with
with easy
easy
Life tool Gaming Features integration
integration with
with laptops
laptops

Identification
Gaming
Widespread

Widespread availability
availability of
of MMS-enabled
MMS-enabled devices
devices

Wallet Interface with cameras
with cameras

Other
Games
Acceptable

Acceptable battery
battery life
life
functions Quality
Memory size supports all

Memory size supports all common
common data
data services
services
Quality of
of
Service
Service
Improvement

Improvement in
in the
the maximum
maximum channels
channels of
of use
use for
for
GPRS
GPRS on
on handset,
handset, to to enable
enable access
access at
at higher
higher
speeds
speeds

Note: (1) CPU: Computer Processor Unit

(2) PDA: Personal Digital Assistance
(3) PIM: Personal Information Management
- 24 -
3G TECHNOLOGIES PROMISED TO TRANSFORM THE MOBILE INDUSTRY, WHICH WAS
REFLECTED IN THE EARLY 3G LICENSING FEES

3G Promised Performance and Impact on License Fees

The
The 3G
3G Promise
Promise
Network
Network Performance
Performance

Better

Better system
system capacity
capacity and
and higher
higher data
data
transmission speeds
transmission speeds
–– 144
144 kbps
kbps with
with high
high speed
speed movement
movement
–– 384
384 kbps
kbps with
with pedestrians
pedestrians Date
Date of
of License
License License
License Fee
Fee
Country
Country Operator
Operator Award
Award (in
(in USD
USD million)
million)
–– 22 Mbps
Mbps for
for stationary
stationary
Examples United
United Kingdom
Kingdom Vodafone
Vodafone April
April 2000
2000 9,400
9,400
Examples of
of Supported
Supported Applications
Applications

High

High quality
quality internet
internet access
access Germany
Germany T-Mobil
T-Mobil July
July 2000
2000 7,700
7,700

Multimedia

Multimedia services
services (Video,
(Video, audio
audio etc.)
etc.)
Germany
Germany VIAG
VIAG Interkom
Interkom July
July 2000
2000 7,670
7,670

High

High quality
quality voice
voice service
service (similar
(similar to
to
ISDN)
ISDN) Germany
Germany Quam
Quam July
July 2000
2000 7,630
7,630
Other
Other Benefits
Benefits Mannesmann
Mannesmann
Germany
Germany July
July 2000
2000 7,630
7,630
Mobilfunk
Mobilfunk GmbH
GmbH

Single,

Single, worldwide
worldwide homogeneous,
homogeneous,
ubiquitous
ubiquitous communications
communications network
network
once all countries introduce it
once all countries introduce it

Similar

Similar capabilities
capabilities to
to wire
wire line
line data
data
networks
networks

- 25 -
 MOBILE DATA SERVICES OFFERED ONLY ON 3G NETWORKS AND NOT POSSIBLE ON
PREDECESSOR TECHNOLOGIES ARE LIMITED…

Service Capabilities of Different Technologies

GSM
GSM GPRS
GPRS EDGE
EDGE WCDMA
WCDMA
Mobile
Network SMS
SMS WAP
WAP
Technology



Chat
Chat (limited)
(limited)


Ring
Ring tones
tones


TV
TV // Movies
Movies
E-mail

E-mail


Chat
Chat
Games

Games



Clubs
Clubs (limited)
(limited)


Logos
Logos


Restaurants
Restaurants
Chat

Chat


Unified
Unified messaging
messaging (advanced)
(advanced)



Forums
Forums (limited)
(limited)


Calendar
Calendar


Events
Events (impractical)
(impractical)


Instant
Instant messaging
messaging
Audio on

Audio on

Group SMS
Contacts
Health
E-cards

E-cards
MMS demand
demand

Group SMS
Contacts
Health
MMS



Instant
Instant


News
News


Flights
Flights &&
Advertising

Advertising


Mobile
Mobile emergency
emergency
Video

Video on
on
messaging headlines Hotels demand
demand
messaging headlines Hotels
Plain

Plain Internet
Internet services
services



E-cards
E-cards (limited)
(limited)


Breaking
Breaking news
news


Timetables
Timetables access
access


Advertising
Advertising
Services


Mobile
Mobile


Weather
Weather


Traffic
Traffic (advanced)
(advanced)
emergency
emergency


Financial
Financial serv.
serv.


Directions
Directions


Games
Games (moderate)
(moderate)
services
services (limited)
(limited)
Location
Shopping


Music
Music (basic)
(basic)

Location
Shopping

Advertising
Advertising based
based services

services


Auctions
Auctions
Other

PIM(*)(*)
Other PIM



Competitions
Competitions


Travel
Travel info.
info.
Banking
Auctions

Banking
Auctions



Quizzes
Quizzes
News Stock

News


Stock
Stock trading
trading


Stock trading
trading



Jokes
Jokes
Sports
Sports Bill Plain Internet




Bill payment
payment


Plain Internet



Games
Games (basic)
(basic)


Financial
Financial
M-Wallet access
access (higher
(higher

M-Wallet

Directory speed)
speed)

Directory


Credit
Credit card
card



Jobs
Jobs

- 26 -
 … WHILE THE IMPACT OF CONTENT AND APPLICATION ON MOBILE OPERATORS’ AVERAGE
REVENUE PER USER IS LOW

Impact of Mobile Data Services on Operator ARPU in Western Europe

(2002 – 2003)
Content Development Split by Type
(Western Europe)
Content SMS 1%
Total Mobile Data Monthly Mobile Data ARPU Share of Total ARPU
Gambling 1%
Revenue (Western Europe)
Current Content
Types
Customization 3%
23 22
New
New To content ~50%
14%
MMS 4% products
products // aggregator Content 17% Data
new
new value
value

Video 6% Voice
New Content Types
Audio 17% To mobile
~50%
Traffic operator
Games 17%
2002 2003
Information &
51%
Entertainment

0% 10% 20% 30% 40% 50% 60%

- 27 -
ADDITIONALLY, UPGRADING 2G NETWORKS TO 3G REQUIRES CONSIDERABLE CHANGES TO
NETWORK TOPOLOGY

GSM Network Evolution To 3G

Current - GSM Future - 3G

Legacy
PSTN networks

Operation
Operation Switch
Switch Circuit
Circuit
Center
Center Operation
Operation Gateway
Gateway
Center
Center
Base
Base Station
Station Migration
Controller Broadband UMTS
UMTS
Controller
Base
Base Station
Station network Server
Server
Controller
Controller

Base
Base Base
Base Base
Base
Station
Station Station
Station Base
Base Station
Station
Station
Station

- 28 -
 3G HANDSETS ARE NOT WIDELY AVAILABLE, AND STILL SUFFER FROM KEY PROBLEMS

Price
Price Availability
Availability
Sample 3G Handsets

The

The average
average price
price ofof 3G
3G
The

The availability
availability of
of 3G
3G
handsets is still relatively
handsets is still relatively handsets and
handsets and the the
high,
high, especially
especially forfor 2G
2G variability
variability of
of models
models are
are
users Kyocera A1401K Siemens U10
users who
who wish
wish to to upgrade
upgrade still low, with most
still low, with most
to 3G
to 3G 500 500 handsets
handsets sponsored
sponsored by by //
$$445 $$885
developed for a specific
developed for a specific
operator
operator

Sanyo V801SA

700
NEC N2102V $$447
800 Nokia 7600
$$448
500
$$445
Short
Short Battery
Battery Life
Life Functionality
Functionality

With

With the
the heavy
heavy use
use of
of
The

The benefit
benefit ofof 3G
3G users
users
high-speed
high-speed data
data from
from potential services is
potential services is
downloads
downloads and and color
color sometimes
sometimes limited
limited by
by the
the
screens,
screens, 3G3G handsets
handsets handset
handset size
size and
and
suffer
suffer from
from aa short
short battery
battery functionality
functionality
life
life

- 29 -
THE DIFFERENT CHALLENGES RESULTED IN A HIGH DROP IN LICENSE FEES, AND A LIMITED
NUMBER OF COMMERCIAL LAUNCHES, WITH DELAYS IN, BUT NOT CANCELLATIONS, OF
LAUNCH PLANS
3G License Evolution and Commercial Launches

2000
2000 2001
2001 2002
2002 2003
2003
Average
Average 3G
3G license
license 31$
31$ 14$
14$ 8$
8$ 2$
2$
cost per capita
cost per capita
Number
Number ofof licenses
licenses 55
55 41
41 16
16 11
awarded
awarded
Number
Number ofof networks
networks 00 11 22 10
10
launched
launched

Planned and Commercial 3G Networks

(March 2004)

44

18

Networks planned Networks launched

- 30 -
OPERATORS HINDERED BY THE LACK OF WCMDA MATURITY ARE CONTEMPLATING THE
INTRODUCTION OF EDGE DRIVEN BY SPECTRUM, COST, INVESTMENT AND HANDSET
AVAILABILITY CONSIDERATIONS
Drivers for Introducing EDGE
Spectrum
Spectrum and
and licensing
licensing Considerations
Considerations Network
Network Investments
Investments

More

More advanced
advanced modulation
modulation scheme
scheme using
using
Deployed

Deployed in
in existing
existing GSM
GSM (TDMA)
(TDMA) networks,
networks, no
no
existing GSM frequencies and license
existing GSM frequencies and license independent solution
independent solution

Enables

Enables 384
384 kbit/s
kbit/s circuit
circuit switched
switched service
service in
in
New

New air-interface
air-interface for
for GSM
GSM
existing
existing GSM
GSM networks
networks

New

New BTS,
BTS, BSC
BSC and
and terminals
terminals necessary
necessary to
to

Will

Will likely
likely be
be introduced
introduced by
by operators
operators without
without aa support the new air-interface
support the new air-interface
3G
3G (CDMA
(CDMA 20002000 oror WCDMA)
WCDMA) license
license or
or with
with
sufficient spectrum in GSM frequency bands
No

No need
need for
for full
full deployment
deployment of
of costly
costly new
new
sufficient spectrum in GSM frequency bands packetized air interface and core like 3G
packetized air interface and core like 3G

Quality
Quality of
of Service
Service Handset
Handset Availability*
Availability*

Enables

Enables 384
384 kbit/s
kbit/s circuit
circuit switched
switched service
service in
in
Sample

Sample ofof EDGE
EDGE handsets
handsets and
and network
network cards
cards
existing
existing GSM
GSM networks
networks offered
offered by
by major
major vendors:
vendors: Motorola
Motorola T725,
T725, Nokia
Nokia
3200,
3200, Nokia
Nokia 5140,
5140, Nokia
Nokia 6200,
6200, Nokia
Nokia 6220,
6220,

Similar

Similar QoS
QoS far
far data
data services
services possible
possible as
as with
with Nokia 6230, Nokia 6810, Nokia 6820, Nokia
WCDMA Nokia 6230, Nokia 6810, Nokia 6820, Nokia
WCDMA 7200,
7200, Nokia
Nokia 7700,
7700, Sony
Sony Ericsson
Ericsson GC82
GC82

Source: (*) GSM World Website. Non-exhaustive

- 31 -
HOWEVER, THERE IS A SET OF ISSUES THAT OUGHT TO BE CONSIDERED PRIOR TO
INTRODUCING EDGE

Consideration for the Introduction of EDGE

The current GPRS infrastructure may not yet be fully utilized and services offered may be sufficient to
the end-user

New radio equipment has to be installed within the existing GSM base stations

Cell sizes have to be much smaller than with pure GSM due to the reduced transmission range
– Additional sites may need to be installed in the network to reduce cell size

EDGE standards are still not fully defined

– Development of Phase-2 of the standards is still ongoing and scope has been extended to cover
the alignment with WCDMA and the provisioning of IP multimedia
– The current evolution of GSM/EDGE radio access networks covering the support of enhanced
packet services is still under standardization and different vendors may adopt their proprietary
solutions in the meantime

- 32 -
THE SUCCESSFUL ADOPTION OF ADVANCED MOBILE NETWORK TECHNOLOGIES IS
GOVERNED BY KEY OBSERVATIONS, AND SHOULD BE DRIVEN BY CUSTOMER AND INTERNAL
BENEFITS
Drivers for Adoption of Advanced Mobile Networks
Network
Network Key
Key Observations
Observations Benefit
Benefit to
to Operator
Operator Benefit
Benefit to
to Customer
Customer
Technology
Technology

Quality

Quality of
of service
service is
is of
of essence
essence to to the
the
Boost

Boost mobile
mobile ARPU
ARPU
Convenient

Convenient mobile
mobile Internet
Internet
success
success ofof GPRS
GPRS
Revive WAP as aa driver

Revive WAP as driver for
for access
access service
service

Shares

Shares network
network resources
resources withwith voice,
voice, content
content services
services
Mobile

Mobile access
access toto corporate
corporate
GPRS
GPRS hence network needs to be databases
hence network needs to be
AA platform

platform for
for the
the launch
launch of of databases and WAP content
and WAP content
dimensioned
dimensioned forfor both
both voice
voice and
and data
data MMS, an attractive messaging
MMS, an attractive messaging
traffic
traffic service
service

Many

Many operators
operators have
have chosen
chosen to
to move
move
Lower

Lower investment
investment compared
compared toto
High

High speed
speed access
access to
to mobile
mobile
directly
directly from
from GPRS
GPRS to to 3G,
3G, due
due to
to the
the 3G
3G for
for similar
similar performance
performance –– no
no Internet
Internet and
and corporate
corporate Intranets
Intranets
EDGE
EDGE significant cost of EDGE from
significant cost of EDGE from thethe need for new spectrum license
need for new spectrum license
Cheaper

Cheaper solution
solution
operator‘s
operator‘s and
and customer‘s
customer‘s ends
ends

Requires

Requires coupling
coupling with
with an
an attractive
attractive
Revenue

Revenue generator,
generator, provided
provided
Full

Full mobile
mobile multimedia
multimedia access
access
portfolio
portfolio of
of data
data applications
applications and
and market
market readiness
readiness to
to voice
voice and
and data
data services,
services, at
at
3G
3G (WCDMA)
(WCDMA) content
content
Better

Better optimization
optimization of
of network
network high speed
high speed

Data traffic

Data traffic is
is necessary
necessary to to gain
gain resources and spectrum
resources and spectrum
sufficient
sufficient revenues to offset network
revenues to offset network
costs
costs

Requires

Requires openopen systems,
systems, data
data
High

High positive
positive impact
impact on
on mobile
mobile
Customized

Customized services
services according
according
warehousing and data
warehousing and data accuracyaccuracy data services adoption
data services adoption to customer, preferences,
to customer, preferences,
Personalization
Personalization needs

Location-based technologies

Location-based technologies notnot yet
yet
High positive

High positive impact
impact on
on needs and
and status
status
Platforms
Platforms mature
mature customer
customer retention
retention and
and
satisfaction
satisfaction

- 33 -
DISRUPTIVE TECHNOLOGIES, SUCH AS WiFi AND WiMAX CAN COMPLEMENT IMT2000-BASED
NETWORKS ON THE ACCESS LAYERS AND

Overlap
Overlap Between
Between WLAN,
WLAN, WiMAX
WiMAX and
and 3G
3G
User
User Segments
Segments
Wireless Applications / Bearers Over Time
(Europe)
Wi-Fi

Wi-Fi and
and WiMAX
WiMAX complement
complement the
the ITU
ITU
adopted
adopted IMT2000 3G, which remains the
IMT2000 3G, which remains the
mainstream
mainstream technology
technology standard,
standard, by
by
addressing
addressing similar
similar user
user segments
segments inin the
the
access part of the network
access part of the network
High speed applications
WiMAX Full motion video
WiMAX

WiMAX builds
builds on
on Wi-Fi
Wi-Fi technology
technology and
and is
is
Full mobility expected
expected to
to offer
offer peak
peak bit
bit rates
rates reaching
reaching 100
100
Applications / Bearers

Personalized services Mbps

Mbps and
and ranges
ranges extending
extending to to 50
50 Km
Km
IMT 2000 Location-dependency
(3G) Optimised for specific terminals (e.g. games)
In

In the
the interim,
interim, 'On
'On the
the Move'
Move' users
users will
will be
be the
the
primary targets in hotspots
primary targets in hotspots

WIRELESS BANDWIDTH
While

While Wi-Fi
Wi-Fi targets
targets semi-stationary
semi-stationary wireless
wireless
Full motion video
Wi-Fi Limited mobility
users,
users, 3G
3G and
and WiMAX
WiMAX target
target both
both mobile
mobile and
and
AVAILABLE BEFORE 3G stationary
stationary wireless
wireless users
users
Corporate e-mail
AA possible

possible implication
implication of
of Wi-Fi
Wi-Fi introduction
introduction
GPRS Consumer fast prior
prior to IMT-2000 is that users that would
to IMT-2000 is that users that would
WAP / e-mail
otherwise
otherwise have
have adopted
adopted IMT2000
IMT2000 forfor faster
faster
data
data speeds
speeds possibly
possibly delay
delay adoption
adoption of of new
new
services in favor of Wi-Fi
services in favor of Wi-Fi
All voice traffic
GSM SMS

The

The success
success ofof WiMAX
WiMAX will
will be
be governed
governed byby aa
fast standardization of the service, and the
fast standardization of the service, and the
development
development of of access
access devices,
devices, neither
neither of
of
2000 01 02 03 04 05 06 07 08 09 10 which
which is
is currently
currently clear
clear

- 34 -
 THE IMPACT OF THESE DESRUPTIVE TECHNOLOGIES IS LIMITED TO THE ACCESS PART OF THE
NETWORK AND MAY ULTIMATELY CONVERGE IN THE FUTURE IF STANDARDS AND DEMAND EVOLVE

3G Networks Technology S-Curves for Mobile, Wi-Fi and WiMAX

Single IP-based layer Layer

Backbone
3G IMT2000
2.5G/EDGE
Converged Era
Mobile

Full IP-based
switching

Standardized services
Mobile Core supported (e.g. Handheld
roaming,
authentication,
location management
etc..)
Wi-Fi
WiMAX Notebook

Mobile Access
2004 2005 2006 2007 2008

IMT2000 3G
standards,
complemented by
WiFi and WiMax,
Other?
- 35 -
MOBILE OPERATORS ARE FACED WITH THREE STRATEGIC CHOICES FOR THE TECHNOLOGY
EVOLUTION COMPLEXITIES

3G introduction scenarios

Fast
Option- A Option-B
Strategic
Strategic Considerations
Considerations

Level

Level of
of maturity
maturity of
of technology
technology and
and standards
standards
Entry
Market Entry

“Fast Evolution” “Fast Revolution”

Level

Level of
of market
market readiness
readiness for
for new
new services
services
Market

Utilization

Utilization of
of current
current technology
technology and
and its
its growth
growth
potential
potential
Option-C

Forecasted

Forecasted revenue
revenue structure
structure from
from current
current and
and
future technologies
future technologies
“Slow and Flexible”

Slow

Operator’s
Operator’s Market
Market position
position
GSM -
GSM Upgrade Independent
Data Centric

- 36 -
 THE PUSH FOR 3G IN EUROPE IS ECONOMICALLY-DRIVEN, AND VALIDATED BY A SET OF
MARKET READINESS INDICATORS

Drivers of 3G Introduction in Europe and Market Readiness

Countries
Countries with
with Commercial
Commercial 3G
3G Services
Services

France

France
UK

UK
Italy

Italy

Germany

Germany
Spain

Spain
Sweden

Sweden

Netherlands

Netherlands
Norway

Norway
Austria

Austria

Slovenia

Slovenia
Denmark

Denmark
Switzerland

Switzerland

Ireland

Ireland
Portugal

Portugal

Economic
Economic Drivers
Drivers Market
Market Readiness
Readiness Factors
Factors

Near-saturation

Near-saturation of of the
the mobile
mobile markets
markets
Mobile

Mobile penetration
penetration in
in all
all countries
countries above
above
exceeds 65%
exceeds 65%

High

High level
level of
of competition,
competition, with with high
high
emphasis on differentiation
emphasis on differentiation
PC

PC penetration
penetration exceeds
exceeds 20% 20%

The

The average
average ARPUARPU for for the
the countries
countries with
with
Internet

Internet penetration
penetration exceeds
exceeds 20%
20%
3G has been stagnant over the
3G has been stagnant over the past fourpast four

High

High purchasing
purchasing power,
power, driven
driven by
by aa high
high
years
years at
at around
around USD
USD 31 31 // month
month GDP per capita (PPP) exceeding USD
GDP per capita (PPP) exceeding USD
18,000
18,000

Source: BAH analysis

- 37 -
Table Of Contents

General Overview

Mobile Technology Highlights

Fixed Technology Highlights

THIS SECTION DESCRIBES THE EVOLUTION OF FIXED NETWORK TECHNOLOGIES AND THEIR
MIGRATION REQUIREMENTS

Scope of the Section

The impact of market liberalization, competitive pressures and

evolving customer requirements on fixed networks technology
Evolution
Evolution of
of Fixed
Fixed
The development of next generation networks concept and its
Network
Network Technologies
Technologies implication on network layers

The development of supporting technologies and resulting benefits

Phasing requirements and migration option

NGN
NGN Migration
Migration
Requirements
Requirements and
and
Financial, technical, commercial and operational constraints
Challenges
Challenges
Revenue perspectives

- 39 -
TODAY, FIXED VOICE COMMUNICATION NETWORKS PRESENT LIMITATIONS THAT HAMPER
INCUMBENT OPERATORS ABILITY TO COMPETE

Limitations of Current Fixed Voice Communication Networks

in Meeting Future Demand

Large

Large investments
investments in in multiple
multiple voice
voice
and
and data
data networks
networks running
running inin
parallel
parallel with
with limited
limited integration
integration

High

High operations
operations and
and maintenance
maintenance
High costs
costs
High Costs
Costs

Large

Large space
space requirements
requirements at
at central
central
offices
offices

Limited

Limited ability
ability to
to support
support full
full IP-
IP- Limited
Limited ability
ability to
to
based
based business
business models
models
address
address new new market
market
requirements
requirements and and toto
compete effectively
compete effectively

Intelligence

Intelligence at
at the
the switch
switch level,
level, in
in aa liberalized
liberalized
inducing
inducing complex, lengthy and
complex, lengthy and environment
costly environment
costly new
new service
service introduction
introduction
process
process
Service
Service
Intelligent

Intelligent Network
Network services
services will
will
Limitations
Limitations become a commodity in the medium
become a commodity in the medium
term
term

Complex

Complex integration
integration and
and
interconnection
interconnection with
with third
third party
party and
and
value-added
value-added service
service providers
providers

- 40 -
AT THE SAME TIME, FIXED DATA COMMUNICATION NETWORKS PRESENT THE CHARACTERISTICS
THAT LAG IN FIXED VOICE NETWORKS
Rationale of Fixed Voice and Data Networks Complementarities
Public
Public Switched
Switched Telephone
Telephone Network
Network Public
Public Switched
Switched Data
Data Network
Network



Connection
Connection oriented
oriented


Connectionless
Connectionless oriented
oriented



Centralized
Centralized intelligence and
intelligence and control
control


Distributed
Distributed intelligence and
intelligence and control
control



HW
HW Fault
Fault tolerance
tolerance


SW
SW fault
fault tolerance
tolerance



Deterministic
Deterministic


Non-deterministic
Non-deterministic



Services
Services integrated
integrated with
with network,
network, limited
limited value-add
value-add


Decouple
Decouple services
services and
and network,
network, high
high service
service flexibility
flexibility



Low
Low latency
latency


High
High latency
latency



Tightly
Tightly coupled
coupled


Loosely
Loosely coupled
coupled



Mature
Mature security
security


Security
Security evolving
evolving

PSTN PSDN

Reliability

Reliability
Service

Service
richness
richness
Strengths
Deterministic

Deterministic

Flexibility

Flexibility

Security

Security

Openness

Openness
PSTN: Public Switched Telphone Network

Service

Service
Reliability

Reliability
richness
richness PSDN: Public Switched Data Network
Weaknesses
Deterministic

Deterministic

Flexibility

Flexibility

Security

Security

Openness

Openness

- 41 -
IN THIS CONTEXT, THE IDEA OF BLENDING FIXED VOICE AND DATA NETWORKS INTO A SINGLE
ARCHITECTURE WAS BORN, INITIATING THE CONCEPT OF NEXT GENERATION NETWORKS (NGN)
Next Generation Network Initial Concept

The
The next-generation
next-generation networknetwork seamlessly
seamlessly
PSTN
blends
blends thethe public
public switched
switched telephone
telephone
Central
Central network
network (PSTN)
(PSTN) and and the
the public
public switched
switched
Office
Office data
data network
network (PSDN),
(PSDN), creating
creating aa single
single
multiservice
multiservice network.
network. Rather
Rather than
than large,
large,
centralized,
centralized, proprietary
proprietary switch
switch
infrastructures,
infrastructures, this this next-generation
next-generation Public
Public Switched
Switched
architecture
architecture pushes
pushes central-office
central-office (CO)
(CO) Communication
Communication
Network
Network
functionality
functionality to to the
the edge
edge ofof the
the network.
network. (PSCN)
(PSCN)
The
The result
result isis aa distributed
distributed network
network
PSDN infrastructure
infrastructure thatthat leverages
leverages new,new, open
open
Network technologies
technologies to to reduce
reduce thethe cost
cost of
of
Network
POP
POP market
market entry
entry dramatically,
dramatically, increase
increase
flexibility,
flexibility, and
and accommodate
accommodate both both circuit-
circuit-
switched
switched voice
voice and
and packet-switched
packet-switched data data

- 42 -
AS USERS ARE PROGRESSIVELY BUILDING A NEW VISION OF COMMUNICATION SERVICES …

Customers Vision of Next Generation Networks

End-to-end

End-to-end Quality
Quality of
of Service
Service
Differentiation
Differentiation

Choose

Choose differentiated
differentiated class
class of
of services
services

Fixed

Fixed and
and mobile
mobile access
access services
services using
using single
single ID
ID
Transparent
Transparent Access
Access

Connect

Connect to
to any
any network
network through
through multi-function
multi-function terminal
terminal equipment
equipment

Seamless
Seamless Mobility
Mobility &
&
Seamless

Seamless services
services in
in heterogeneous
heterogeneous networks
networks
User
User awareness
awareness
Location

Location based
based service
service

Personalized

Personalized services
services with
with integrated
integrated fixed/mobile
fixed/mobile service
service profiles
profiles
Customized
Customized Services
Services

Unified

Unified subscription
subscription and
and integrated
integrated billing
billing

Diversity
Diversity and
and
Man-to-man,

Man-to-man, man-to-machine
man-to-machine
dynamic
dynamic way to
way to
communication
communication
One-to-one,

One-to-one, one-to-many,
one-to-many, many-to-many
many-to-many

Broadband
Broadband Multi-
Multi-
Voice,

Voice, data,
data, video
video
media
media
Very

Very high
high quality
quality multi-media
multi-media contents
contents

- 43 -
… THE CONCEPT OF NGN IS FURTHER DEVELOPED TO DESIGNATE IP-BASED INTEGRATED
NETWORK FOR HIGH QUALITY CONVERGENCE SERVICES THROUGH DYNAMIC ACCESSES
Next Generation Network Long-Term Concept

Broadband

Mobility

Advanced Home Network

Convergence Services
QoS

Dynamic Access Security

NGN
Open API
High Quality Service
IPv6

Integrated Integration of Voice/Data

Network Integration Fixed/Mobile

Converge Telecom/Broadcasting

Converge TE / Appliance
Source: Korea Telecom

- 44 -
NGN WOULD OPEN THE DOOR FOR A WHOLE SET OF NEW SERVICES AND APPLICATIONS

NGN Services and Features IIlllluust

strraattiiv
vee
Interactive
Interactive
IP

IP based
based multimedia
multimedia calling
calling involving
involving voice,
voice, text
text and
and video,
video, instant
instant messaging,
messaging, photos,
photos, movies
movies and
and games
games in
in aa
Multimedia
Multimedia Calling
Calling real
real time
time shared
shared environment
environment

Broadcast
Broadcast TV
TV
Broadcast

Broadcast TV
TV distribution
distribution service
service to
to aa multitude
multitude of
of devices
devices
Gaming
Gaming
Network

Network games
games in
in aa real-time
real-time shared
shared environment
environment
Electronic
Electronic Business
Send
Business
Send anan enriched
enriched electronic
electronic virtual
virtual business
business card
card (vCard)
(vCard) including
including photo
photo and
and audio
audio file
file automatically
automatically with
with every
every
Cards
Cards call
call as
as caller
caller ID
ID information
information (or
(or selectively
selectively during
during the
the middle
middle of
of call)
call)

Presence
Use

Use an
an instant
instant messenger
messenger service
service to
to determine
determine when
when geographically
geographically distributed
distributed colleagues
colleagues are
are available
available for
for aa
Presence and
and quick
quick conference
conference call
call with
with aa customer.
customer. Simply
Simply click
click or
or automatically
automatically “camp
“camp on”on” your
your “buddy
“buddy list”
list” to
to create
create the
the
Instant
Instant Messaging
Messaging conference
conference call
call

Call
Have

Have every
every call
call from
from that
that very
very important
important customer
customer ring
ring at
at every
every phone
phone –– business
business phone,
phone, cell
cell phone,
phone, home
home
Call Filters
Filters phone,
phone, vacation phone, etc. The call would get completed to the first device from where the user picks up
vacation phone, etc. The call would get completed to the first device from where the user picks up the
the call
call

Phone
Use

Use multiple
multiple phone
phone books
books –– corporate,
corporate, personal,
personal, Internet,
Internet, etc.,
etc., on
on the
the phone
phone and
and simply
simply point
point to
to an
an entry
entry to
to make
make
Phone Book
Book the call. The phone books can be synchronized with the data on a PC or any server
the call. The phone books can be synchronized with the data on a PC or any server
Voice
Voice Tag
Tag

Deliver

Deliver customized
customized messages
messages to
to people
people trying
trying to
to contact
contact busy
busy contacts
contacts and
and eliminate
eliminate phone
phone tag
tag
Elimination
Elimination
Automated
Automated
Create

Create conference
conference call
call appointments
appointments in
in Microsoft
Microsoft Outlook.
Outlook. The
The application
application would
would automatically
automatically set-up
set-up the
the
Conference
Conference Calling
Calling conference call at the specified time
conference call at the specified time

Virtual
Virtual Call
Call Center
Center
Support

Support the
the integrated
integrated voice
voice and
and data
data requirements
requirements of
of call
call center
center agents
agents working
working from
from their
their homes
homes

Source: Next-Gen VoIP Services and Applications Using SIP and Java, PingTel

- 45 -
MULTIPLE LAYERS IN THE CORE NETWORK WILL BE CONSOLIDATED IN THE NEXT GENERATION
NETWORK CONTEXT...
Likely Technology Migration of Core Network

Current Technology Future Technology

Network
Layer
SS7

SS7 and
and IPIP
multicast
multicast signaling
signaling
TDM
features
features
IP Routing incorporated
incorporated inin Network
routers
routers to
to support
support Data Link
Data Link multimedia
multimedia services
services and Physical
Layer and
and voice
voice Layer
ATM IP Router
Switching
ATM

ATM eventually
eventually
phased
phased out
out as
as IP
IP with MPLS
over
over DWDM
DWDM
Physical becomes
becomes possible
possible Physical
Layer Medium
SDH
SDH

SDH may
may be
be
removed
removed as
as IP
IP over
over DWDM (Fiber)
Transmission DWDM becomes a
DWDM becomes a Network
realistic
realistic backbone
backbone
Physical transport
transport
Medium technology
technology that
that
guarantees QoS
guarantees QoS
DWDM (Fiber)
Network

- 46 -
… AND MOST OF THE ROUTING INTELLIGENCE MOVED FROM THE CORE TO THE EDGE

Likely Technology Migration of Edge Network

Current Technology Future Technology

IP

IP routers
routers responsible
responsible
Network for
for establishing
establishing
Layer policies
policies and
and routing
routing Network
traffic
traffic from all
from all Layer
IP Routing application
application traffic
traffic onto
onto
backbone, e.g.,
backbone, e.g., IP IP IP Router
VPN
VPN with MPLS
Data Link
Layer
TDM

TDM traffic
traffic is
is Data Link
TDM encapsulated
encapsulated in in ATM
ATM and Physical
Switching circuit
circuit emulation
emulation for for Layers
interconnectivity
interconnectivity ATM Switch
throughout
throughout the the with MPLS - SDH
Physical network,
network, later
later this
this
Layer moves to IP/MPLS
moves to IP/MPLS Physical
SDH Medium

SDH
Transmission
SDH removed
removed as
as ATM
ATM
is
is more
more effective
effective due
due Fiber
to
to QoS
QoS capabilities
capabilities Network
Physical
Medium
ATM

ATM used
used to
to
Fiber aggregate
aggregate UMTS and
UMTS and
Network ADSL
ADSL uplink
uplink trunks
trunks

- 47 -
THE ENVISIONED DISTRIBUTED CONTROL ARCHITECTURE IN NEXT GENERATION NETWORKS WOULD
BRIDGE THE GAP BETWEEN TODAY’S PUBLIC SWITCHED TELEPHONE AND DATA NETWORKS

Distributed Control Architecture

Traditional Common Control Architecture Open Distributed Control Architecture

Network
Intelligence

Class-5
Switch

Network
Network IP
Intelligence
Intelligence DWDM
from
from thethe Core
Core MPLS
to
to the
the edge
edge

- 48 -
THE NGN ARCHITECTURAL TRANSFORMATION IS STRIKINGLY SIMILAR TO THE CHANGE THAT
OCCURRED IN CORPORATE INFORMATION PROCESSING DURING THE LAST DECADE

Analogy with Corporate Computing Transformation

Economics and breakthrough technology combined to alter the data networking architecture
completely
– Instead of networks based on large, centralized, expensive mainframes and dumb terminals,
today’s distributed networks are made up of low-cost, smart desktop computers linked together

This transformation has permitted applications to be pushed closer to the end-user, reducing overall
cost while greatly enhancing system flexibility and functionality

In other words, this new generation of low-cost, open switching platforms has the potential to
transform the telecommunications service market in the same way that the desktop personal
computer (PC) changed the corporate computing landscape

Large, centralized, Class-5 proprietary switches will continue to play a significant role in the network,
but distributed, open, and programmable class-5 access and enhanced services platforms will play a
dominate role in the network landscape

- 49 -
NEXT GENERATION NETWORK WOULD ALLOW SEAMLESS ACCESS THROUGH A MULTITUDE OF
TECHNOLOGIES …

Likely Technology Migration of Access Network

Current Technology Future Technology

Voice

Voice traffic
traffic remains
remains
Network connected
connected to to Network
Layer traditional
traditional voice
voice Layer
switch
switch unless
unless CPECPE
IP Routing supports
supports VoIP
VoIP IP Routing
encapsulation
encapsulation
xDSL
Data Link Data Link
TDM
Layer
Native

Native IP,
IP, Frame
Frame Layer
xDSL Relay GSM UMTS
Relay and
and ATM
ATM must
must
Dial-In all be supported
all be supported WLL
GSM, TDM BB Wireless

Physical
UMTS

UMTS needed
needed for
for 3G
3G
Layer
mobile
mobile access
access
Cable Cable
Physical
- SDH Layer
FTTC

xDSL

xDSL begins
begins to
to SDH
replace some
replace some
traditional WDM
Physical traditional leased
leased line
line
Medium and
and voice
voice access
access
Copper products
products
and Optical Physical
Networks Medium
Copper
and Optical
Networks
- 50 -
… BLENDING USER DEVICES FOR COMMUNICATION AND MESSAGING AND ENABLING
GREATER CONVENIENCE FOR CUSTOMERS

Likely
Likely Technology
Technology Migration
Migration of
of User
User Devices
Devices

The

The Operator
Operator becomes
becomes the the ultimate
ultimate single
single point
point of
of contact
contact for
for the
the user
user

Single

Single phone
phone number/address
number/address will will always
always be be used
used toto contact
contact aa person
person

Receiving party then decides where to answer

Receiving party then decides where to answer the call the call
–– Mobile
Mobile phone(s)
phone(s)
–– PDA
PDA
–– PC
PC
–– Wireline
Wireline phone
phone
Convergence

PCs,

PCs, phones
phones and
and PDAs
PDAs endend up
up being
being different
different user
user interfaces
interfaces of of the
the same
same
network-based
network-based application
application

Common, network-based directory

Common, network-based directory would
would bebe supported
supported forfor
–– Phone numbers
Phone numbers
–– Buddies
Buddies & & presence
presence
–– Email
Email address
address book
book
–– All
All applications
applications

Unified,

Unified, network-based,
network-based, useruser profile
profile would
would automatically
automatically apply
apply to to all
all terminals
terminals
–– e.g:
e.g: set presence location, (
call routing preferences), etc., on either of
set presence location, (
call routing preferences), etc., on either of the
the terminals
terminals and
and apply
apply to
to all
all
–– Phones (and PC) presence (
call routing preferences), automatically
Phones (and PC) presence (
call routing preferences), automatically updated updated
–– PC
PC presence
presence info
info automatically
automatically updated
updated based
based onon phone
phone location
location

- 51 -
THE ARCHITECTURAL EVOLUTION TOWARDS NEXT GENERATION NETWORKS IS FURTHERMORE
SUPPORTED BY FUNDAMENTAL TECHNOLOGY CHANGES

Selected Major Technology Trends

IP
IP Protocol
Protocol Differentiated
Differentiated Services
Services onon IP
IP Networks
Networks

IP is clearly the protocol of

IP is clearly the protocol of choice
choice in
in almost
almost all
all
computer
IP

IP networks
networks would
would carry
carry aa variety
variety of
of voice,
voice, video,
video,
computer && data
data terminals
terminals and data signals which have significantly different
and data signals which have significantly different

IP

IP would
would be
be the
the universal
universal interface
interface between
between performance
networks performance requirements
requirements
networks && customer
customer equipment
equipment

Dense
Dense Wavelength
Wavelength Division
Division Multiplexing
Multiplexing (DWDM)
(DWDM) xDSL
xDSL

Bandwidth requirements are increasing

Bandwidth requirements are increasing
The digital subscriber line

The digital subscriber line technology
technology is
is enabling
enabling
exponentially
exponentially and and can
can only
only be
be met
met by
by continued
continued the fast deployment of mass broadband
the fast deployment of mass broadband servicesservices
increases
increases inin fiber
fiber data
data rates
rates
With

With VDSL
VDSL enabling
enabling downlink
downlink speeds
speeds of
of up
up to
to

WDM

WDM isis clearly
clearly thethe best
best way
way of
of meeting
meeting the
the 52Mbps,
52Mbps, TV broadcasting, Video on demand and
TV broadcasting, Video on demand and
demand
demand forfor more
more bandwidth
bandwidth online
online gaming
gaming become
become aa reality
reality

Optical
Optical Network
Network Elements
Elements Wireless
Wireless Broadband
Broadband

Signal cross-connect & multiplexing functions

Signal cross-connect & multiplexing functions can
can
Wireless broadband is an access

Wireless broadband is an access technology
technology
be
be performed
performed much
much cheaper
cheaper inin the
the optical
optical layer
layer at
at enabling
enabling high
high speed
speed connectionless
connectionless internet
internet
data
data rates
rates of
of 2.5
2.5 Gbps
Gbps && higher
higher access
access in
in hot
hot spot
spot location
location (e.g.
(e.g. hotels,
hotels, airports)
airports)

- 52 -
TRANSMISSION TECHNOLOGY ADVANCES ARE BOOSTING BACKBONE CAPACITY AND REDUCING
COSTS

Evolution of Backbone Transport Capacity Reduction of Normalized Backbone Transport Costs

1 Pb/s 1 Pb/s

40Gbps x 176λ

Bandwidth (Log Scale)

DWDM
Bandwidth (Log Scale)

1 Tb/s 1 Tb/s
10Gbps x 32λ SDH/ATM
DWDM
STM-64
10Gb/s 10 Gb/s
STM-16
STM-1
SDH
100Mb/s 100Mb/s

PDH PDH

10
1999 2000 2001 .75 1 250 500 750 1,000

Year Cost in USD (per Mb/s/month)

- 53 -
IP-MPLS SWITCHING TECHNOLOGY IS ENABLING SIGNIFICANT SERVICE CREATION CAPABILITIES
AND BRINGING COST EFFICIENCY BENEFITS
Intelligent Switches Benefits

Subscribers increasingly will demand innovation services that add value to their personal
communications
– The ability to create and deploy customized services that satisfy subscribers’ needs is required to
compete profitability

Next-generation switches offer an advantage: flexible programmability, with enhanced service

applications integrated within the switch architecture
– This eliminates the need for a separate enhanced services platform in most situations, further
reducing up-front costs
– The open software architecture enables rapid development of new services and features and
allows for third-party application development

This flexibility, combined with the low cost and distributed nature of next-generation switches, enables
network operators to create service offerings tailored to discrete subscriber bases – even in the
smallest deployments
– As next-generation switches offer unprecedented network integration capabilities, they allow
unique service bundles, combining voice services, data services, Internet access, enhanced
services, and more
- 54 -
NEW HIGH-SPEED ACCESS TECHNOLOGIES ARE ENABLING A SUBSTANTIAL INCREASE IN ACCESS
BANDWIDTH AT A LOWER COST

Evolution of Low Cost Broadband Cost of Broadband Access Technologies

Access Technologies

4 VDSL
VDSL
FTTC
4
Bandwidth (Mb/s)

Bandwidth (Mb/s)
3

Cable
2 ADSL
Cable SDH/ATM
2 LMDS
ADSL
LMDS

1
1
ISDN
0.056 Analog
Analogue ISDN
Modem Modem

1970 1980 1990 2000 2010 35 50 100 300 500

Year Cost in Euros (per Mb/s/month)

- 55 -
OVERALL, NGNs ARE EXPECTED TO YIELD SIGNIFICANT CAPEX AND OPEX REDUCTIONS, WHILE
CREATING NEW REVENUE GROWTH OPPORTUNITIES

Benefits From Deploying Next Generation Network

CAPEX savings
– More efficient use of the transport network
– Lower overall cost of meeting growth requirements. NGN elements cost less than circuit switched
equipment

OPEX savings
– Reduced cost associated with operating and maintaining one network versus two
– Reduced cost associated with network planning, engineering and provisioning
– Simpler budget management. The distributed nature of NGN allows incremental upgrades to the
network versus large purchases of switching equipment

Revenue growth
– Extended ability for service creation and innovation
– Shorter time to market and provision
– Leasing freed up capacity to the new service providers

- 56 -
MIGRATION TO A NEW NETWORK ARCHITECTURE IS A COMPLEX, MULTI-STEP CHALLENGE THAT
COULD SPAN OVER A 6 TO 9-YEAR TIMEFRAME …

NGN Migration Roadmap IIlllluust

strraattiiv
vee
Today Stage 1 Stage 2 Stage 3
Core

Core
Core

Core
Core

Core
Core

Core

DWDM
DWDM
DWDM

IP-MPLS-
SDH

SDH

SDH

SDH
Edge

Edge

Edge

Edge
ATM

Fibre
Fibre
Fibre

Fibre
TDM
ATM
Edge

Edge

Edge

Edge
TDM
TDM

Fibre
Fibre
Fibre

Fibre

ATM
IP
IP
IP

ATM
Access
Access
Access

Access

Access
Access
Access

Access

Copper

Copper

Copper
Copper

ADSL
ADSL

xDSL

xDSL
TDM

2-3 years 2-3 years 2-3 years

Upgrade
Upgrade IPIP core
core
Migrate

Migrate voice
voice transport
transport to to
Migrate

Migrate voice
voice transport
transport to
to Roadmap
Main
Main


Deploy DWDM
Deploy DWDM ATM in the core
ATM in the core IP
IP depends on
Actions
Actions


Construct
Construct umbrella
umbrella NMS
NMS
Deploy

Deploy MPLS
MPLS in in core
core IP
IP
Reduce

Reduce ATM
ATM in in core
core and
and operators
network edge requirements
network edge

Integrate

Integrate intelligent
intelligent OSS
OSS

- 57 -
… AND RAISES A NUMBER OF FINANCIAL, SERVICE, TECHNICAL AND OPERATIONAL CHALLENGES TO
OVERCOME

Tactical Requirements

Financial
Financial Services
Services Technical
Technical Operational
Operational

Investment

Investment inin existing
existing
Existing

Existing services
services based
based onon
As

As long
long as
as the
the QoS
QoS
NGN

NGN migration
migration has
has to
to be
be
switched
switched voice and,
voice and, e.g.,
e.g., legacy technology (e.g.
legacy technology (e.g. capability
capability is not fully
is not fully performed without
performed without
new
new ATM
ATM networks
networks cannot
cannot Frame
Frame Relay)
Relay) have
have to
to be
be proven,
proven, IP/MPLS
IP/MPLS cannot
cannot disrupting
disrupting services
services
be
be written
written off
off immediately
immediately supported
supported inin the
the medium
medium fully
fully substitute
substitute ATM
ATM
term to stabilize revenues
term to stabilize revenues capabilities
capabilities
Staff

Staff would
would have
have to
to be
be

AA big-bang

big-bang cut-over
cut-over to
to new
new and
and support
support high-end
high-end trained
trained on
on new
new platforms
platforms
equipment
equipment is financially not
is financially not conservative
conservative business
business
Also,

Also, the
the functionality
functionality of of and
and management
management systems
systems
feasible,
feasible, yet
yet aa step-by-step,
step-by-step, customers
customers SDH
SDH would
would become
become
incremental
incremental approach
approach isis redundant
redundant onlyonly in
in the
the
ItIt took

took telecom
telecom operators
operators
required
required
TDM

TDM (e.g.,
(e.g., DLL)
DLL) services
services longer
longer term, starting from
term, starting from 20
20 years to complete their
years to complete their
would
would be
be required
required at
at the
the the
the core
core asas error
error protection
protection public
public telephone
telephone network
network
access level for at least
access level for at least capabilities
capabilities are
are required
required migration
migration to to digital
digital
another
another 10
10 years,
years, mainly
mainly technologies
technologies in in the
the 70s-80s
70s-80s
for residential
for residential

- 58 -
WHILE MANY OPERATORS HAVE ALREADY STARTED MIGRATING THEIR CORE NETWORKS, NONE
HAVE YET COMPLETED AN END-TO-END NGN MIGRATION
NGN Migration Status

Operator
Operator NGN
NGN Introduction
Introduction Strategy
Strategy Focus
Focus

In

In December
December 2003,
2003, BCE
BCE is
is aiming
aiming to
to transfer
transfer 100%
100% of
of its
its traffic
traffic to
to aa national
national IP
IP backbone
backbone

Bell

Bell Canada
Canada network
Core

Core
network within 3 years and offer 90% of its customers full access to all IP services by
within 3 years and offer 90% of its customers full access to all IP services by then
then

Telecom

Telecom Italia
Italia has
has completely
completely rebuilt
rebuilt the
the core
core of
of its
its nationwide
nationwide network
network around
around IP
IP

Telecom

Telecom Italia
Italia equipment,
Edge

Edge
equipment, between
between 2002
2002 and
and 2003.
2003. 60%
60% reduction
reduction inin opex
opex expected
expected

Telecom

Telecom Austria
Austria plans
plans to
to spend
spend 500
500 million
million euros
euros replacing
replacing its
its national
national fixed
fixed telephone
telephone

Telecom

Telecom network
network with
with an
an IP-based
IP-based next
next generation
generation network
network between
between 2004
2004 and
and 2009
2009
Austria
Core

Core
Austria

40%

40% OpEx
OpEx reductions
reductions are
are expected
expected after
after full
full deployment
deployment

China

China
Successful

Successful NGN
NGN experiments
experiments in
in 44 major
major cities
cities completed
completed in
in 2002.
2002. NGN
NGN would
would be
be aa
Telecom strategic development task over the next 10 to 15 years
Core

Core
Telecom strategic development task over the next 10 to 15 years

Sprint

Sprint is
is the
the first
first US
US carrier
carrier to
to complete
complete aa voice
voice over
over packet
packet migration
migration in
in the
the local
local loop.
loop.
Edge

Edge

Sprint

Sprint PSTN
PSTN infrastructure replaced in core and access. New convergent services and old
infrastructure replaced in core and access. New convergent services and old
service
service
Access

Access

AT&T

AT&T
PSTN

PSTN infrastructure
infrastructure unchanged.
unchanged. VoIP
VoIP over
over broadband
broadband internet
internet connection
connection launched
launched
Access

Access

Verizon

Verizon
PSTN

PSTN infrastructure
infrastructure replaced
replaced in
in the
the core.
core. PSTN
PSTN access
access service
service unchanged
unchanged
Core

Core

- 59 -