3G offers a total cost of ownership advantage

August 7, 2006

The Signals Research Group, announced the availability of its report on the total cost of ownership (TCO) for 3G networks. Entitled "CA-CHING or KER-PLUNK: The Dollars and Sense of 3G," the 150-page report presents several case studies which compare the TCO for the migration from 2G to the two dominant 3G technologies: CDMA2000 and WCDMA (UMTS). The study concludes that both 3G technologies can help reduce an operator's TCO over a multi-year period.

As operators migrate to 3G, and as technology vendors develop their products, understanding the total costs of running CDMA2000 and UMTS networks are of vital importance. Because the impact on an operator's legacy network infrastructure is sometimes misunderstood, this report examines all aspects of the wireless ecosystem to evaluate the total cost of ownership. Also, as 2G network traffic increases due to a larger subscriber base and increased usage patterns, the economics switch in favor of 3G. Taking into consideration various important factors, such as voice capacity, data throughput capabilities, network traffic, handset subsidies, and in particular, the ability to reuse existing hardware, the relative cost difference between the two migration paths is as much a function of the participating vendors as it is the 3G technology itself. Still, given that the CDMA2000 migration places a large emphasis on hardware reuse, the CDMA2000 migration generally provides the lowest total cost of ownership over a multi-year period. At the same time, results suggest that the UMTS migration offers GSM operators a compelling option, in particular if they are able to quickly converge to a single radio access and/or core network.

According to the report's author, Michael Thelander, "3G is cost competitive with 2G today, and further economies of scale will continue to strengthen the 3G business case. Since operators, including those in developing countries, will eventually have to migrate their networks to 3G, the results of our economic modeling indicate that it makes more economic sense to deploy 3G today instead of deploying 2G and later upgrading to a 3G technology."

The report includes a number of case studies and sensitivity analyses, along with detailed assumptions that provide a comprehensive assessment of the capital (CapEx) and operating (OpEx) expenditures required to procure, install, maintain and operate a mobility network over a ten-year period. Additionally, the report provides readers with the engineering and pricing assumptions, as well as the quantity of radio access, core network and transmission network elements that are deployed for coverage and to increase network capacity.

Some of the key findings from the report include:

-- No single technology is inherently superior from a TCO perspective. Instead, factors, such as the spectral efficiency, network topography, choice of frequency, choice of vendor, site acquisition costs, core network technology, voice and data traffic patterns, and backward compatibility impact the economics and play a large role in determining the most appropriate technology for a given operator.

-- The deployment of "in-band" solutions, such as CDMA2000 at 850MHz or UMTS at 900MHz, can reduce the operator's initial 3G CapEx for coverage purposes by up to 70% when compared with deployments at 2100MHz.

-- The ability to reuse existing hardware and utilize a single radio access and core network offers significant economic advantages that cannot be underestimated since it impacts initial CapEx as well as ongoing OpEx. Over a ten-year period, this advantage can equate to a relative savings of 20% or more.

-- Declining 3G handset ASP trends and increased revenue opportunities strengthen the 3G business case.

-- New site acquisition costs can easily exceed the cost of the hardware deployed on the site. When GSM network capacity is reached, not having to acquire more sites helps strengthen the UMTS business case, including in developing markets. New site acquisition is not a significant economic factor when migrating to CDMA2000.

-- The incremental cost of deploying 1xEV-DO and HSxPA is justified with only moderate data usage.