Você está na página 1de 12

S T R AT EG IC W HI T E PA P E R

Optimal LTE deployment strategies


for market success
Benefits of overlay for speed to market

In response to growing mobile broadband demand, mobile network operators face a major
technology investment decision: Go all in with the new generation, 4G/Long Term Evolution
(LTE), or spend more to densify the older generation 3G/High Speed Packet Access (HSPA).
While some trepidation is understandable given over investment in the past, clear market
evidence shows that end-user demand, network economics, and device availability have
created a successful 4G business proposition. Now the question is how to get there quickly.
Based on the success of many operators globally, the answer is with an LTE overlay. This
paper examines some of the major considerations in an LTE migration and the role played
by an overlay approach.

Table of contents
Introduction

What is overlay?

LTE migration in real life

Overlay for speed to market

Better performance with overlay


Global acceptance of overlay
Overlay economic impact
Acronyms

11

Introduction
Mobile network operators (MNOs) are at a critical decision point: Deploy LTE widely now, deploy
slowly, or not at all. The evidence from the field is that fortune has favored the bold. In the U.S. market,
JD Power and Associates found that the wireless bill among 4G LTE customers is six dollars more than
the average for smartphone customers.1 In South Korea, according to Strategy Analytics, LG U+ has
seen a striking improvement in performance since it began its transition to 4G LTE, both in terms of
growth in ARPU and market share gains (Figure 1).
Figure 1. Mobile ARPU at LG U+ - Source: Strategy Analytics, July 2013

It appears that fast and decisive LTE deployments are proving to be the right medicine for curing the
declining revenues that mobile operators in many markets have been experiencing.
Deploying LTE quickly and widely also saves operators from the trap of escalating investment in legacy
technologies. Studies have shown that slow migration to LTE results in having to invest in both 3G and
LTE, leading to higher overall capital expenditures (CapEx). By contrast, fast migration to LTE focuses
investments toward the future and on CapEx having long life depreciation (Figure 2).
The question then is not when?, but how?
Figure 2. Impact of escalating commitment to legacy
Slow migration

Accelerated migration

100%

90%

3% CAGR 2012-16

GSM Simple

Subscribers (%)

80%

GSM Smart

70%

WCDMA

60%

WCDMA Simple

50%

WCDMA Smart

WCDMA

40%

WCDMA Large

30%

LTE-FDD

20%

LTE-FDD Simple
LTE-FDD Smart

10%

LTE-FDD Large

0%
2010

2011

2012

2013

2014

2015

2016

2017

2018

3% CAGR 2012-16

80%

Subscribers (%)

90%

100%

70%
60%

WCDMA

50%
40%
30%

LTE

20%
10%
0%
2010

2011

2012

2013

http://www.jdpower.com/content/press-release/6ucNMG2/2012-u-s-wireless-network-quality-performance-study-volume-2.htm

1
Optimal LTE deployment strategies for market success
Alcatel-Lucent Strategic White Paper

2014

2015

2016

2017

2018

In many cases, the answer to how is with an overlay approach. To date, many of the large and
successful deployments have been LTE overlays. This paper explores some of the reasons why overlay
option is proving to be the optimal LTE migration strategy.

What is overlay?
An overlay introduces new technology independent of the existing infrastructure. It is particularly
effective when the new technology is significantly ahead of the current generation. This is the case
with LTE. Not only is the air interface very different from 3G technologies, the entire end-to-end
network is also different.
The network is based on a flat, all-IP architecture. Using an overlay gives an operator more
flexibility to architect a next-generation network. Overlays have also been proven to be an effective
network evolution strategy for gaining market advantage by getting to market quickly with a broad
LTE deployment.
No single overlay scenario exists. In practice, operators reuse some components from the legacy
network. Generally, these components have been passive elements in the radio access network (RAN)
or systems, such as backhaul outside the RAN and the core. In the case of backhaul, operators have
been using LTE migration as an excuse to upgrade backhaul to IP/Ethernet rather than squeeze LTE
capacity into existing legacy backhaul.
As Figure 3 shows, the overlay strategy allows operators to focus on the more strategic asset
4G/LTE. From the point of view of the network, the operator can optimize the LTE RAN, core, as well
as transport to the demand expected from smartphone and tablet users without being constrained
by limitations in the 3G network. After LTE deployment, the operator can return to the 3G network
and re-evaluate the need to upgrade the legacy network. This is in alignment with the optimal market
strategy to deploy LTE to access while retaining high-value customer segments that need and are
willing to pay for larger bundles of data.

Figure 3. LTE migration options

Overlay

2G & 3G

2G/3G

Legacy
2G and 3G
(single tech)

MS-BTS
4G Ready???
3G
2G

LTE

Single vendor overlay


2G

Significant investment
due to older platform &
vendor lock-in

Multi-vendor overlay
2G

LTE
3G Ready
2GReady
MS-BTS
LTE
3G
2G

2
Optimal LTE deployment strategies for market success
Alcatel-Lucent Strategic White Paper

4G

LTE
LTEModule
Module

LTE eNB

Cran

3G

3G

Vendor A
Converged
2G

3G

4G

Enables deferral of
2G/3G investment for
quick entry to LTE

Vendor B

4G

Significant investment
for 2G/3G renovation
(high CapEx)

LTE migration in real life


It would be ideal if existing infrastructure could be software upgraded to support 3G and LTE without
having to make major changes. In reality, however, the full benefits of LTE cannot be achieved without
significant change. Consumers are spending money on increasingly powerful phones and computers so
that they can benefit from the upgrade of the entire system, including processors, screen, and software.
This also applies to LTE.
In existing converged RAN solutions, significant changes are required to ensure that the full benefits of
LTE can be realized. This is so much the case that the difference in new hardware required between a
converged RAN and an overlay network becomes negligible.
As Figure 4 illustrates, upgrades are needed across the network to support LTE. In the radio access
network additional antennas and radio frequency (RF) units are required to support Multiple Input
Multiple Output (MIMO). In some cases, where spectrum is being refarmed, existing antennas and RF
can be reused. However, in most cases new spectrum will be used for LTE, such that new RF equipment
will be required.
Figure 4. LTE migration equipment requirements

Devices

Access

Backhaul

EPC

Transport

End-to-end management

LTE Overlay

New RF (new bands)


New RF (existing
bands)*

Upgrade
backhaul
for LTE
(All-IP BH)

Add LTE
EPC for LTE
capacity

Upgrade
backhaul
for LTE
(All-IP BH)

Add LTE
EPC for LTE
capacity

IMS
(VoLTE,
video,
RCS)
4

New LTE
SW
(separate
from legacy)

Add IMS for


multimedia
services &
VoLTE

Upgrade
legacy SW
to introduce
LTE

Add IMS for


multimedia
services &
VoLTE

New BBU ro LTE**

Converged RAN

New RF (new bands)**


New RF (existing bands
-if upgrading to 4x4
MIMO)

Motive
customer
experience /
smart plan

* Better RF coverage
with overlay due
to dedicated resources
** Better evolution
path to virtualized RAN

*** Majority of LTE


deployments are
using new LTE
bands

New BBU board for LTE

In the core network, LTE introduces a new control element the mobility management entity (MME)
and new gateways the serving gateway (SGW) and packet data node gateway (PGW). Vendors
take three approaches:
Repurpose legacy hardware, such as the Serving GPRS Support Node (SGSN) and Gateway GPRS
Support Node (GGSN), to support LTE functions
Develop dedicated core (Evolved Packet Core [EPC]) hardware and software optimized for LTE
Develop new core hardware optimized for LTE that is backward compatible with 3G
The recommendation is to select a vendor with core hardware and software that is optimized for LTE.

3
Optimal LTE deployment strategies for market success
Alcatel-Lucent Strategic White Paper

An overlay has minimal impact on typical operations systems and actual day-to-day network operations.
Generally, LTE and legacy operations, administration and management (OA&M) are kept separate
for simplicity even if they use the same hardware elements. Also, because the two technologies are
sufficiently different, it often makes sense to keep the element and network management systems
separate to a degree.
Figure 5. OA&M in LTE systems
CRAN

LTE Overlay
Upgrade
for LTE

New

CRAN EMS

SON

CRAN EMS

Provisioning
and configuration
costs greatly
reduced thanks
to SON
CRAN EMS
implementation

Not
impacted

Upgrade
New
Separate
for LTE
managment for
RAN, BH, ePC
BH EMS
ePC EMS

Converged RAN

Backhaul

Evolved Packet
Core

Converged RAN

Different RAN technologies often


require specific tools and teams

LTE Overlay Backhaul Packet Core


Consolidated,
common management

Thus, it is clear that, in reality, the differences between the new hardware requirements for overlay
versus a converged RAN are minimal.

Overlay for speed to market


As noted, a fast and decisive LTE rollout is required to maximize the market impact of an LTE
deployment. One of the most ambitious (and most successful) LTE deployments in the world was
conducted by Verizon Wireless in the United States. In an interview in 2009, then CTO Tony Melone
said that their rollout will be as close to all-at-once as possible.2 To accomplish this goal, Verizon
Wireless decided to take an overlay approach.
An overlay accelerates rollout throughout the deployment lifecycle. With an independent approach, the
network can be designed based on requirements to satisfy the target LTE market rather than introducing
the added complication of finding sites that optimize both LTE and 3G requirements.
Deployment itself is simplified considerably and not constrained by windows of time where legacy
network downtime is to be avoided. Physical installation is generally simpler because engineers need
not determine how to retrofit existing generations of base station cabinets.

http://www.informationweek.com/mobility/business/verizon-wireless-plans-mass-lte-deploym/220200106

4
Optimal LTE deployment strategies for market success
Alcatel-Lucent Strategic White Paper

Integration is also simplified because the only equipment impacted is the new LTE infrastructure. In a
converged RAN, LTE and legacy equipment have to be reprovisioned and integrated. This complicates
the process, making it more prone to error.
Figure 6. LTE Deployment Strategies Survey - Source: Informa

Interestingly, an Informa survey found that one of the biggest issues that operators face when migrating
to LTE is integration with the legacy network.
Finally, optimization and software upgrades are much faster if they are completed independently on
the LTE network. If the LTE and 3G systems are tightly coupled, any minor change on the LTE network
requires a slew of regression tests on the LTE, 3G and even 2G networks. This can make the process
very cumbersome.

Better performance with overlay


The experience of operators who have deployed LTE widely is that the LTE networks have not simply
absorbed mobile data demand; they have actually increased per-user data consumption resulting in
accelerated demand for capacity. Shared resources make good business sense because of the potential
for lower cost. However, they can also result in constrained capacity, which can impact the end-user
experience and operator revenue.

5
Optimal LTE deployment strategies for market success
Alcatel-Lucent Strategic White Paper

Figure 7. Uncompromised performance with LTE overlay

Converged RAN

LTE overlay

Better RF
coverage

Superior eNB
BBU capacity

Tilt not optimized by


techology (shared antennas)

Tilt not optimized per


technology

Baseband capacity shared


across all technologies
limiting performance

Baseband capacity
dedicated to LTE where
it matters the most

Sharing RF resources, such as power amplifiers for legacy technologies and LTE, could result in
sub-optimal coverage for both. Further, LTE users will be unable to take advantage of some of the RF
enhancement from self-organizing network features. For example, the feature coverage and capacity
optimization (CCO) improves the coverage in a cell by automatically adjusting antenna tilt in response
to device feedback. If the antenna is shared with 3G or 2G, this would not be possible,
Research in different markets shows pent-up demand for the quality of experience that LTE offers.
This has been validated in markets worldwide by the rapid adoption of LTE. Using the same baseband
for 2G, 3G and LTE could result in constraining that demand and limiting the operators revenue gain.
In higher density environments, such as cities and public areas, even dedicated LTE baseband is under
strain, leading operators to consider small cells for additional capacity.
A converged approach will impact not only LTE revenue; it could also impact existing 2G and 3G
revenue streams. A large proportion of the operators in the Informa survey cited above stated that
minimizing 3G disruption was a driver in selecting the overlay approach.
Figure 8. LTE deployment strategies survey - Source: Informa

6
Optimal LTE deployment strategies for market success
Alcatel-Lucent Strategic White Paper

Global acceptance of overlay


The pace of LTE network deployment is accelerating, as mobile operators are investing to keep pace
with competition and the dramatic growth in mobile data traffic. A May 2015 GSA report indicated that
almost 400 LTE networks were commercially launched in 138 countries and GSA forecasts that number
will grow to more than 460 LTE networks by the end of 2015.
The Heavy Reading white paper, LTE Deployment Strategy: Overlay vs. SRAN, (February 2013)
examined the trade-offs mobile operators must consider in choosing between LTE deployment
strategies. The assessment is based on an objective analysis of actual scenarios faced by operators.
Some major operators have opted for a Single RAN deployment strategy. This approach entails the
deployment of new multi-standard base stations. Some of these base stations have multi-mode radio,
which is used as a common platform to add LTE, while converging multiple generations of wireless
networks. Single RAN advantages include lower power consumption and a smaller cell-site size
footprint. Even so, complete modernization while introducing a new technology can be slow, costly,
and potentially disruptive to subscribers.
For this reason, many operators have adopted an alternative network overlay strategy
the
deployment of LTE base stations without a simultaneous 2G/3G upgrade. Among these operators are
some of the most successful operators in terms of LTE subscribers: Verizon Wireless in the U.S., NTT
Docomo in Japan and SK Telekom in South Korea. For these operators, an LTE overlay has enabled
faster time to market and lower capital investment, while minimizing the disruption of their commercial
2G and 3G networks.
As shown in the tables below, most leading operators who moved quickly to LTE adopted a network
overlay strategy.

7
Optimal LTE deployment strategies for market success
Alcatel-Lucent Strategic White Paper

Overlay economic impact


To investigate the winning strategy for an operator given a choice between Single RAN, LTE overlay,
and small cell approaches to wireless network growth, we have employed the Stackelberg model.
The model offers a game-based theoretical framework for exploring the competition between a small
number of competing players in a market in this case the wireless market.
In this model, the first mover, also known as the leader, leverages an inherent advantage (technology,
geography, regulation, incumbency, etc.) to set the quantity it can profitably supply to the market. The
competitors, also known as followers, then optimize their quantities based on the quantity set by the
leader. The followers have two clear choices: either adopt the same approach as the leader, or maintain
their current approach with the attendant economics based on this choice.

8
Optimal LTE deployment strategies for market success
Alcatel-Lucent Strategic White Paper

From Figure 9, it is clear that the maximum cumulative profit is achieved by deploying LTE, as early as
possible (2015 in this example). In subsequent years, the cost advantage of LTE overlay allows the first
mover to steadily accumulate profits at the expense of the players deploying Single RAN. Furthermore,
if the leader reinvests these profits in additional network expansion, the advantage is perpetually
increased, with the followers increasingly unable to compete.
Figure 9. Game theory analysis of competing operators deploying different approaches to providing wireless
network capacity.

2000

Cumulative profit

1500
1000

Follower maintains
single RAN strategy

Leader deploys
LTE overlay

500
0
-500
2015

2016
Leader

2017

2018

2019

Follower

KE Y FINDING OF MODEL
Moving swiftly to LTE and deploying it as quickly as possible is a winning strategy compared to
single RAN-based players.

Another way to view the gain of the leader compared to the followers is to plot the differential profit
between the two. Figure 9 illustrates 2 scenarios: the leader deploys LTE or LTE small cells, and the
follower deploys a Single RAN strategy. A third scenario is also included in which the leader deploys a
Single RAN strategy but uses a unique advantage (e.g., in regulation or business arrangements) to offer
more capacity. This, in turn, modifies overall market pricing, forcing the (Single RAN) competition to
compete at a new price point. This is called a disruptive Single RAN strategy.
From Figure 10, it is immediately apparent that by deploying LTE or LTE small cells an operator can
gain sustainable market advantage and increase profitability exponentially. Furthermore, the gain
realized by this strategy is larger than any gain resulting from simply maintaining a Single
RAN deployment.

Differential Profit (Leader - Follower)

Figure 10. Differential profit analysis of leader compared to followers


1000
Small cells

800
600

LTE overlay

400
200

Disruptive single RAN


0
-200

2015

2016

9
Optimal LTE deployment strategies for market success
Alcatel-Lucent Strategic White Paper

2017

2018

2019

2020

2021

It is instructive to map these scenarios to real-world examples, as follows:


LTE overlay: This is the strategy employed by Verizon Wireless to gain market advantage from a
position of disadvantage in 3G. Notably, AT&T was forced to respond with a similar LTE Overlay
strategy to reduce the competitive disadvantage.
LTE small cells: AT&T and Verizon Wireless have deployed small cells to provide cost-effective
capacity.
From the examples above, it is fair to conclude that the game-based theoretical analysis is being
confirmed in the marketplace.
We now examine another case of interest a competitive Single RAN market where all players defer
investment in LTE for a prolonged period, and then one changes strategy by deploying LTE in order to
gain a sustainable competitive advantage.
As shown in Figure 11, the leader initially tries to gain market advantage by deploying more Single RAN
capacity than the competition but at the same cost. Therefore, no sustainable advantage is achievable
and the decision is made to move to an LTE overlay strategy after two years. Once again a market
advantage appears for the leader that drives a sustainable profitability difference.
Figure 11. Achievable market advantage even with delayed LTE overlay strategy
2000

Cumulative profit

1500
1000
500

Leader initially
deploys single RAN

Follower maintains
single RAM strategy

-500
2015

Leader deploys
LTE overlay in 2015

2016
Leader

2017

2018

2019

Follower

Acronyms
3G

Third Generation

MNO

Mobile Network Operator

CapEx

Capital Expenditure

OA&M

Operations, Administration and Management

CCO

Coverage and Capacity Optimization

PGW

Packet Data Node Gateway

EPC

Evolved Packet Core

RAN

Radio Access Network

GGSN

Gateway GPRS Support Node

RF

Radio Frequency

HSPA

High Speed Packet Access

SGSN

Serving GPRS Support No de

LTE

Long Term Evolution

SGW

Serving Gateway

MIMO

Multiple Input Multiple Output

MME

Mobility Management Entity

www.alcatel-lucent.com Alcatel, Lucent, Alcatel-Lucent and the Alcatel-Lucent logo are


trademarks of Alcatel-Lucent. All other trademarks are the property of their respective owners.
The information presented is subject to change without notice. Alcatel-Lucent assumes no
responsibility for inaccuracies contained herein. Copyright 2015 Alcatel-Lucent.
All rights reserved. PR1506011836EN (June)