Cost-optimized Transport Evolution

Smarter solutions for mobile operators

White paper

Nokia white paper

Cost-optimized Transport Evolution Smarter solutions for mobile operators

Contents
Executive summary

Increasing competition drives transport decisions

How evolving technology will affect transport

Enhancing efciency in the transport network
Hybrid backhaul
Adaptive modulation
Point-to-Multipoint
Fixed WiMAX (802.16-2004) for cellular backhaul

5
5
6
6
7
7

Solutions for different operator cases

Cost optimized transport evolution
Alternative solutions for TDM leased line based transport networks
Segmented approach for microwave based transport networks

8
8
8
8

Conclusions

Abbreviations

10

Nokia white paper

Cost-optimized Transport Evolution Smarter solutions for mobile operators

Executive summary
Mobile operators today are facing great
unknowns as they try to plan transport for
their mobile networks.
There are many reasons for this
uncertainty. One is the challenge that new
services present, requiring high bandwidth
at low cost. Another is that radio access is
evolving to encompass a much broader
set of technologies, making new demands
on the transport network of the future.
Added to this is the fact that we are
moving away from a past where transport
needs could be predicted fairly accurately,
into a future that will change constantly in
unforeseeable ways. Operators no longer
have the rm foundation that they are
used to as a base for their timing, capacity
and technology plans.
All this means that the transport solution
must adapt to these future needs in a
way that is smarter than is common in
traditional approaches.
This smarter approach will include the
need to identify the key backhaul
segments, and focus on the areas that
need to be optimized within each network
segment. All phases need to take account
of these factors, everything from planning
and implementation to maintaining and
updating the network.
The increased uncertainty about what will
happen in the future can be dealt with by
using a solution offering great scalability,
which removes the risk of making wrong
choices. Synergy between mobile and
transport networks again brings the
benet of not having to do things twice.
By looking at transport in a smarter way,
we can nd the most cost-effective route
to evolve the mobile network.

Multi-Radio Access Options

...

3.9G
GSM/
EDGE

WCDMA/
HSPA
WiMax

I-HSPA

Optimized Network Architecture,

incl. Transport Network

Figure 1. Transport Network needs to support future Technology Evolution.

The new approach will not be about

maximizing capacity, but about achieving
the best efciency across the whole
transport network. This will be done by
choosing among the new transport
technologies now becoming available,
including Point-to-Multipoint, WiMAX and
Hybrid Backhaul.
Operators with an E1/T1 based leased line
transport network need to evaluate
alternative options carefully. Continuing
with the current model will not provide
the cost point needed to compete for
mobile data applications successfully.
Furthermore, only a small proportion of
links is expected to exceed 16E1/T1 in the
coming years, microwave links will
continue to dominate access transport
networks.

Nokia white paper

Cost-optimized Transport Evolution Smarter solutions for mobile operators

Increasing competition drives transport decisions

16%

Technical operations

4%

Interconnection

Site leases

3%

Marketing & Sales

(incl. COGS)

Other O&M
11%

Customer Care
1%

Office etc.

14%

Maintenance

12%

Technical
operations staff
Transport

10%

Other costs
Other staff costs

40%
8%

15%

6%
4%
30% of
Technical
operations

2%
26%

0%

Technical operations

Figure 2. Transport related costs are more than 30% of network related OPEX.

Traffic growing

ARPU declining

CAGR 16%

CAGR 4.1%

Data
Voice

2004

2005

2006

2007

2008

2009

2004

2005

2006

2007

2008

2009

CAGR = Compound Annual Growth Rate

Figure 3. Declining ARPU despite growing trafc. Source: Nokia.

Mobile operators have never been under

more pressure to reduce the cost of
transporting bits. Network transport costs
currently represent more than 30% of the
network related OPEX, with peaks of up to
40% in networks with a large share of
TDM E1/T1 leased lines. As voice tariffs
come under increasing pressure and

subscribers demand at rate data tariffs,

ARPU will continue to decrease or, at best,
remain at. At the same time, trafc is
expected to grow, yet estimates of when
this will occur vary widely.
All this means that operators need to
reduce the cost of transporting each bit

substantially, yet also offer broadband

data services. If they cannot achieve this,
the business case for new mobile data
applications will be difcult to justify.
One possibility, TDM leased line solutions,
does not add up, as this option is not
very exible and the solution cannot be
scaled up economically.

Nokia white paper

Cost-optimized Transport Evolution Smarter solutions for mobile operators

How evolving technology

will affect transport

On the technical side, new radio access

technologies such as HSPA, I-HSPA, 3.9G
or WiMax are developing rapidly.
I-HSPA, or Internet HSPA, uses a standard
HSPA air interface with a simplied
network architecture developed by Nokia.
The architecture channels all user data
trafc via a direct link from the Base
Station to the Intelligent Service Node,
which is the gateway to the Internet and
data services. Bypassing the Radio
Network Controller (RNC) and Serving GPRS
Support Node (SGSN) eradicates the costs
of delivery arising from these two network
elements. I-HSPA is based on open 3GPP
standards allowing other vendors to offer
solutions in a free and competitive market.
Depending on the competitive and
regulatory situation, mobile operators will
need to choose among these technologies
to complement their existing GSM/WCDMA
networks.
All these new technologies are optimized
for packet-switched services and a packetoptimized architecture for the transport
network would allow operators to benet
from the efciency gains that can be
achieved with the growing amount of
packet data in the network. However,
todays TDM transport networks, which
lack ATM/IP aggregation points, are unable
to benet from the gains offered by a
packet-based architecture. This calls for a
transport network designed to deal with
a large share of packet trafc.

cie

en

el

ev

kl

r
wo

ci
ffi

et

HSPA

tn

Network level optimization

ou

Capacity Requirements

Fiber access will take a larger role in many

networks, as ber networks are deployed
in many countries. However, deploying
ber to each single site will be very costly
and challenging, even in dense urban
areas where ber is most prevalent.

ith

Adaptive Modulation

Capacity
Savings

IP Ethernet
ncies

k level efficie

With networ

Tail Sites

Chain Sites

Small Hubs

Large Hubs

Figure 4. Enhanced efciencies in the transport network reduce the required transport capacity.

Developing technology is providing more

options for operators seeking to improve
the efciency of their transport network.
Hybrid Backhaul, Point-to-Multipoint,
xed WiMAX and adaptive modulation all
offer advantages for the cost conscious
operator.

Enhancing efciency in
the transport network
Continually growing data trafc means
that the transport capacity per site needs
to be increased. With todays TDM based
transport protocols, the link closest to the
network controller (BSC/RNC) needs the sum
of the capacity of all sites connected to it.

Huge savings can be achieved, particularly

in the early phases of HSPA. The capacity
for each single site needs to be
dimensioned according to peak demand,
but up to four-fold efciency improvements
can be achieved on a network level,
without compromising quality for the user.
Taking this into account, operators can
delay the upgrade of existing microwave
networks to a later stage and focus their
initial investment on a limited number
of high capacity links in the Metro or
Regional Access.

With future transport capacity per site

expected to be in the region of 4E1/T1 to
16E1/T1, there is an enormous demand
for transport capacity in the higher layers.
However, this doesnt take into account
the impact of improvements in transport
efciency on the network level. NodeB can
act as trafc concentration points by
applying ATM/IP aggregation, cutting the
need for transport capacity signicantly.

Nokia white paper

Cost-optimized Transport Evolution Smarter solutions for mobile operators

Hybrid backhaul
Ethernet leased lines are becoming more
widespread and less expensive than
traditional TDM leased lines, driven mainly
by the demands of corporate users.
Although the variation is quite large
between countries, it is fair to say that a
10Mbit/s Ethernet leased line is typically
available at the price of 1..2 x E1/T1, giving
cost reductions of up to 75% per bit.
The ability of WCDMA NodeB to separate
HSPA trafc from delay sensitive trafc
allows operators to benet from the costeffectiveness of Ethernet leased lines while
providing the quality of service of TDM
leased lines, needed for delay sensitive
trafc.
Mobile Operators with a microwave based
transport network can benet even more
from this architecture, as they can cut out
all leased line OPEX, be it TDM or Ethernet.
The ability to separate different trafc
types gives them a completely new way of
planning their transport network, without
the need for heavy investment in high
capacity solutions.

Adaptive modulation
Until now, microwave links have been
planned in terms of the static E1/T1
capacity needed. Recently, PDH microwave
radios with capacities up to 40E1/T1 have
become available even capacities above
64E1/T1 seem to be achievable before the
need to move to SDH.

Real-time

BTS

RNC

Non Real-time

Figure 5. Hybrid backhaul separates HSPA trafc from delay sensitive trafc.

Real-time
BTS

RNC
Non
Real-time

Non Real-time
Real-time

Non Real-time
Real-time

Figure 6. Adaptive modulation combines hybrid backhaul with microwave.

However, these capacities require high

order modulations with a low system gain.
Larger antennas are needed in order to use
these modulations with an acceptable hop
length, resulting in signicant additional
investments in civil works. Site owners will
also be reluctant to accept larger antennas.
In addition, a full 28MHz channel needs to be
allocated. This is a growing concern in highdensity microwave networks, as spectrum
is increasingly congested in urban areas.
Adaptive modulation offers a different
approach and can avoid the pitfalls of high
capacity PDH radios with static capacity.

To achieve the planned availability for

radios with static capacity, a fading margin
must be included in the dimensioning.
The full fading margin is needed only for
short periods to overcome severe weather
conditions, a characteristic that can be
used to allow for higher modulations.
This gives higher transport capacity most
of the time, including periods of light rain
or drizzle. This is the basic concept of
adaptive modulation.

Nokia white paper

Cost-optimized Transport Evolution Smarter solutions for mobile operators

The transmission characteristics of

adaptive modulation in combination with
hybrid backhaul are ideally suited for the
needs of HSPA trafc. Delay sensitive voice
trafc and synchronization is transmitted
over a highly reliable connection, while
the HSPA trafc, which can tolerate
variations in transmission capacity, is sent
over slightly less reliable but more costeffective links.

One of the key advantages of PMP can

unfortunately not be used in current
cellular networks the fact that PMP, as an
ATM based technology, can offer huge
savings in bandwidth due to its inherent
multiplexing gain. With backhaul being
based on PDH protocols with E1/T1
interfaces, no multiplexing gain can be
achieved. However, the growing share of
HSPA trafc will make PMP a more
attractive solution.

While building a high capacity microwave

network with static capacities will
quickly lead to spectrum limitations,
the combination of hybrid backhaul and
adaptive modulation in microwave
networks will allow operators to meet the
needs of a growing share of packet trafc.
At the same time, this solution can be
scaled up more cost-effectively than high
capacity transmission with static capacity.
Adaptive modulation is currently being
discussed in ETSI and national regulators
are expected to introduce the
requirements by the end of 2006.

Point-to-Multipoint
For some time, Point-to-Multipoint (PMP)
has been introduced alongside Point-toPoint technologies in mobile backhaul.
The main arguments in favour of PMP have
been a lower cost per link, if a particular
number of sites can be connected to the
hub, and a lower environmental impact.
The speed of rollout has also been an
important argument, as individual link
planning is obsolete with PMP. At the
same time, regulatory conditions have
prevented the use of PMP for mobile
backhaul in some countries, as the
spectrum has been reserved for xed
network applications. However, some
national regulators have indicated their
willingness to reconsider this restriction.

The benets of adaptive modulation also

apply to PMP. Due to the block allocation
of PMP spectrum, operators with PMP
infrastructure will not have to wait for
approval of adaptive modulation by the
national regulator and can start
deploying PMP with adaptive modulation
immediately.
In combination with hybrid backhaul
concepts, earlier evaluations might need
to be reconsidered and PMP could begin
taking a more signicant role in transport
networks.

Fixed WiMAX
(802.16-2004) for
cellular backhaul
The xed WiMAX 802.16-2004 technology
offers the rst standard air interface in the
microwave radio industry and chip sets
are being developed and launched that
promise growth in consumer Wireless DSL.
These exciting developments are leading
operators to look for additional benets
in other market segments, particularly in
the cellular backhaul of base stations.

Commercial WiMAX chip sets are aimed at

frequencies below 6GHz. The rst WiMAX
802.16-2004 products work on 3.5 GHz,
a common licensed broadband wireless
access band in Europe and Asia, and on
2.5 GHz, which is allocated as a licensed
band in the USA. There will be xed WiMAX
products operating in unlicensed bands,
for example 5.8 GHz. However, a question
mark remains regarding mobile operators
accepting unlicensed frequencies to carry
cellular BTS trafc.
Although it is accepted that the standard
air interface and lower frequency bands
will make xed WiMAX products costeffective, the trafc capacity of these
systems remains a concern as 3G trafc
and HSPA data solutions move forward.
This is due to the limited amount of
spectrum available in these bands.
Given that xed WIMAX is a Point-toMultiPoint system, frequency reuse needs
to be considered. For continuous or
near continuous xed WiMAX coverage,
the available bandwidth for a sector will
only be sufcient for a very small number
of E1/T1s.
If issues related to the required
synchronization accuracy and delay
variation of the transmitted signal can be
solved, xed WiMAX seems to be a
technically and commercially viable cellular
transmission solution for backhauling GSM
base stations in suburban and rural areas.
The application will however be limited
to areas where the required capacity per
BTS is reasonably low, that is, less than
one E1/T1 per site, while xed WiMAX does
not provide sufcient backhaul capacity
for high-density HSPA networks.

Nokia white paper

Cost-optimized Transport Evolution Smarter solutions for mobile operators

Solutions for different operator cases

Cost optimized
transport evolution
Deciding on the best transport strategy
needs a careful evaluation of the options
and advantages offered by leased lines
and operator owned microwave networks.
For operators with an E1/T1 based leased
line transport network, continuing with
the current model will not provide the cost
point needed to compete for mobile data
applications successfully, as transport is
expected to be the biggest single cost
element in the business case for these
applications. With increased transport
efciency reducing need for capacity in the
upper layers of the network, microwave
technologies are expected to maintain,
and even extend, their dominant role in
access transport.

Alternative solutions for TDM

leased line based transport
networks
Ethernet leased lines allow a signicant
reduction of OPEX for operators who want
to continue with a leased line model,
although using them will remove the
benet of the increased exibility of a
microwave network owned by the
operator. As well as other cost-benets in
comparison to Ethernet leased lines,
a microwave network allows the operator
to control the quality of the transport
network. At the same time, only a highly
integrated solution will allow the operator
to manage the transport network with
existing resources, without increasing the
network related OPEX.

Today

2008

Majority of installed links

caters for the traffic growth
related to HSPA

Small share of links require capacities

above 16E1 with flexibility to be
upgraded beyond STM-1

4E1

8E1

16E1

Lower Access
Focus on high operational efficiency

63E1/
STM-1

2xSTM-1

Metro/Regional Access
Focus on tailored solutions

Figure 7. Majority of links will continue at capacities below 16E1.

A combination of microwave links in the

lower layer and ber in the upper layer is
considered to be the most cost-effective
approach when moving from a leased
line model to an operator-owned model.
The largest savings can be achieved with
solutions that are integrated on a system
level and allow remote operations, with a
limited need for site visits. Treating the
transport solution as a separate entity
without paying attention to the overall
network performance and cost will lead
to results that are less than the best: GSM
transport networks were relatively simple
in planning and operations, whereas
HSPA and other packet optimized radio
technologies require a far higher level of
integration and remote management
capabilities.

Segmented approach for

microwave based transport
networks
For a cost-optimized evolution of
microwave networks, it is worth verifying
the current distribution of link capacities
in networks using microwave links.
This depends on the topology of each
operator, but in most mobile networks,

32E1

80% of the links currently operate at

capacities below 8E1/T1. These links have
sufcient spare capacity for the trafc
growth during the next two to three years
as the existing equipment will most often
scale up to 16E1/T1. This takes into
account the expected capacity demand
combined with efciency improvements
in the trafc handling capabilities of the
NodeB, which were outlined in the
previous section. Links in this category
can be grouped as Lower Access. In this
segment, the attention needs to be on
standardized solutions that offer high
operational efciency.
The largest savings can be achieved with
solutions that are integrated on a system
level and allow remote operations, which
reduce the need for site visits. Again,
the temptation to treat transport as if it
had nothing to do with the overall
network performance and costs will lead
to results that are far from ideal. While
GSM transport networks were relatively
simple to plan and operate, HSPA and
other packet optimized radio technologies
need much more in the way of integration
and remote management capabilities.

Nokia white paper

Cost-optimized Transport Evolution Smarter solutions for mobile operators

Conclusions
Due to the expected efciency gains in
the trafc handling capabilities of NodeB,
only a small proportion of links is expected
to exceed 16E1/T1 in the coming years.
These efciency gains are expected to
reduce the required capacity in the upper
layers signicantly. These links can be
grouped as Metro or Regional Access,
as they would typically connect medium
and large hub sites back to the network
controller, often over a ber connection.
Due to the relatively small number of links
in this category, only small savings can be
achieved with standardized solutions in
this segment. Solutions need to have the
exibility for site-specic requirements
and the scalability to meet growing
capacity demands. The focus in this
segment needs to be on solutions that
offer the exibility to grow to very high
capacities, including multiple STM-1/OC-3
capacities, but at low initial investment.
Thus, microwave technologies are
expected to maintain, and even extend,
their dominant role in access transport
networks in the years to come. The optimal
transport efciency combined with lowest
cost can be achieved by a segmented
approach to the needs of the network.
Transport networks for mobile operators
need to be scalable, at low initial
investment and optimized for a large
share of packet trafc. More dynamic
trafc handling capabilities in the base
stations as well as in the microwave
equipment will play a key role. Finally,
the management of these Transport
Solutions will be critical to the time to
market for new services, as well as the
exibility to customize such services to the
local environment.

A smarter approach to planning a

transport network will include the need
to identify the key backhaul segments,
and focus on the areas that need to be
optimized within each network segment,
in everything from planning and
implementation to maintaining and
updating the network. By looking at
transport in a smarter way, we can
accomplish the evolution of the mobile
network in the most cost-effective
manner.
The increased uncertainty about the
future can be dealt with by using a
solution offering great scalability, and new
approaches in microwave technology will
also need special consideration.
However, when evaluating different
options for the future evolution of their
microwave network, mobile operators
should not be dazzled by the frenzy of
megapixel solutions. As in digital
cameras, where the highest number of
pixels does not necessarily indicate the
best solution, standalone products with
high transmission capacities do not
necessarily match the needs of mobile
operators.

Successful operators will manage to get

the most out of their installed base by
improving the efciency of their transport
network. Taking this into account,
operators can delay the upgrade of
existing microwave networks to a later
stage and focus their investment initially
on a few high capacity links. Operational
efciency on a system level is the key to a
cost-optimized transport network in the
Lower Access area. Treating the transport
solution as a separate entity will lead to
less than optimal results. The focus in
Metro or Regional Access needs to be on
solutions that offer the exibility to grow
to very high capacities, including multiple
STM-1/OC-3 capacities, but at low initial
investment.
Mobile operators that successfully handle
the challenges of building a costoptimized transport network are in pole
position in the race to create a leading
business with advanced mobile data and
voice services.

Nokia white paper

Cost-optimized Transport Evolution Smarter solutions for mobile operators

Abbreviations
3.9 G
3.9G is the evolution path of GSM/WCDMA
in ETSI/3GPP standardization forum
utilizing latest radio technologies and
packet switched only network architecture.
HSPA
The WCDMA standard HSDPA (high-speed
downlink packet access) and its sister
standard HSUPA (high-speed uplink
packet access) are merged under the
acronym HSPA. HSPA enables high speed
data connections and increases packet
data throughput.
I-HSPA
Based on open 3GPP standards, Internet
HSPA, or I-HSPA, is an evolution of HSPA
developed by Nokia and which offers very
low delivery costs for high volume data
users.
PDH
The Plesiochronous Digital Hierarchy is a
technology used in telecommunications
networks to transport large quantities of
data over digital transport equipment
such as ber optic and microwave radio
systems.

10

SDH
Synchronous Digital Hierarchy (SDH) is a
standard primarily for communicating
digital information over optical ber.
Lower SDH capacities are also in use with
microwave radio transmission. SONET is
the ANSI equivalent of SDH. Both SDH and
SONET can be used to encapsulate earlier
digital transmission standards, such as the
PDH standard, or used directly to support
either ATM or so-called Packet over SONET
(PoS) networking.
STM-1/OC-3
The STM-1 (Synchronous Transmission
Module) is the basic rate of transmission of
SDH. It has a bit rate of 155.52 Mbit/s and
is the SDH equivalent of an OC-3 (SONET).
TDM
Time-division multiplexing is used for e.g.
the PDH and SDH network transmission
standards.
WiMAX
WiMAX is used as a common name for
802.16 technology standard. Broadband
wireless access standard IEEE802.16-2004
without mobility support and IEEE802.16e
for mobility.

Nokia white paper

Cost-optimized Transport Evolution Smarter solutions for mobile operators

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11

Copyright 2006 Nokia. All rights reserved. Nokia and Nokia Connecting People are registered trademarks of Nokia Corporation.
Other product and company names mentioned herein may be trademarks or trade names of their respective owners.
Products are subject to change without notice.
Nokia code: 11307 01/2006 Indivisual/F.G. Lnnberg

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