Here's an interesting article from Ericsson on the business case of mobile broadband. Taking CAPEX, OPEX for both access and core network into account, the article comes to the conclusion that once an economy of scale is reached in terms of the number of broadband subscribers, the network can deliver 1GB of data for one Euro.
While this is the main outcome of the paper, there are a number of other pieces of information in there on which the calculation is based which are quite interesting. Here are some which I noted:
- 20% of the cells carry 50% of the traffic. I've heard of similar numbers before and I think it's a good thing because the network operator can focus on upgrading a subset of all cells rather than having to work on the whole network simultaneously.
- 3-5% of the cells carry very heavy load. The article doesn't say where such cells are usually located. It would be interesting if this load is mostly generated in-house, for example in shopping centers, train stations, airports, etc. and if femtos would provide a cheap future capacity extension for those places.
- The technical evolution of 3G networks is all about keeping pace with higher user demand for capacity. Fully agree to that.
- Going from 7.2 MBit/s to 21 MBit/s adds a cost of around 10-15% but increases capacity around 70%. An interesting statement because 7.2 -> 21 MBit/s is about a 3x theoretical speedup while from a practical point of view it is much less. The article says its 70% or 0.7x.
- 70% of overall CAPEX is spent on base stations.
- 50% of overall OPEX is spent on base stations.
- The €1 per GB seems to be a number over a 5 year period. At the end of the article it is stated that the networks that Ericsson looked at for the study are not quite there yet. However, the first network, after 2 years of operation, reported that they have reached €2 per GB.
- For the study, a base station price of €40k was assumed. Looks like they have gotten quite a bit cheaper than what was calculated with just a couple of years ago.
And just to get a bit more aggressive, this Ericsson presentation states that mobile broadband is even cheaper than DSL (cp slide 13 ff.). I assume that leaves IPTV delivery out of the equation, but still it's an interesting way of looking at things.
Granted I know you are talking about WiFi and 3G.
Considering that the Japanese went from 100MB/100MB at under $55 to 1Gb / 1GB for under $52 per month; I would not be surprised to see similar results with WiFi/3G as they experienced with Fiber.
I think they are delivering 2 GB for less than .50 cents.
However here in America, the land of Corporate Oligopoly~lobbyist control we will see our rates increase regardless of the technology utilized to make the connection. Without Gov’t intervention in the wireline market, the only Fiber you will see is FIOS. Except in Wilson, N.C. of course.
Too bad Greenlight (Wilson, N.C.) is not available in other locations in the US as it is more in line with what I want as a consumer. 100MB / 100MB for $100. (Funny FIOS charges $119 for 50MB / 5MB.)
Great paper.
3UK is selling 15GB /month for £15, (i.e. €1.1 /GB). More or less at cost then, assuming you use all that data, which you likely won’t
isn’t this useful for those companies selling data optimisation products too, such as bytemobile? I haven’t run the figures but surely it is normally cheaper to more efficiently use what you have than buy more? particularly if all you are adding is a single proxy, instead of upgrading your RAN?
Wow. This should promote some discussion.
Holes I can see are:
* Assumptions around MIMO and the costs of the site itself — deploying MIMO has significant non-equipment costs and there are tradeoffs with non-MIMO handsets (one of us should delve into that Martin).
* 1 Euro over the 5 year lifetime cost; shareholders quite like some profit before year 3 and this ignores the continuous network build (sites and/or technology) that will go on. This is a cost of doing business in a competitive market, so ignoring it is only helpful if you remember to add it back in before setting your retail price 🙂
* QoS (Traffic Handling Priority). Has anyone got this on yet? I can only see that it gives low ARPU users a great experience right up until the network fills up, then it drops them. This is the point they start badmouthing you on twitter because their movies are slow to download.
Food for thought, I know I want to kick this around with the operators I know for more feedback.
However if I was to design a MBB network to assure an excellent QoE to the typical end user, would the cost still be less than a € per GB? I doubt it..
E///should have asked the customers of the 18 Operators they have worked with how happy they are with the service.
Re: 21 MBit/s adds 0.7X
Keep in mind that bit rate distribution looks like an upside down funnel, because of path loss and other cell interference etc. The new higher rates are available mostly close to the cell center. So you get a big boost, but nowhere near 3X.
Hi Ali,
Thanks for the feedback on the 21 Mbit/s. There’s another Ericsson paper I blogged about some time ago that shows the ‘funnel’ quite nicely!
Kind regards,
Martin
This is also assuming wireless operators own the cooper. And what about the network management overhead…managing wireless networks should be more expensive than managing DSL shouldn’t it.
Very interesting post and Ericson’s article but I’m not sure I’m reading graph1 correctly?
Non-Network cost is 40% of Income which, as stated, includes terminal subsidies, marketing, customer care, and IS/IT. This dwarfs other costs :Network OPex at 5% and CAPex at 8%. This is very surprise to me. Is that correct? If so this seem like a good area for optimization.
Also, it states “Network OPex includes power consumption and support for related equipment” but only Radio 30%, Backhaul 54% and Core 16% are listed. Does that mean, for example, the power consumption and support for the Radio is 30%?
Also where is the missing 25% from the network CAPex? Spectrum? Software depreciation?