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The Bulls vs the Bears

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August 25, 2010

The Bulls vs the Bears

By Dr. Alan Solheim, VP of Marketing and Business Development, DragonWave Development , DragonWave Inc.

The news is full of panic and excitement, ups and downs – European debt crises drives down the markets and then the Chinese government decision to let the Yuan float drives them up again. The jobs report comes out and shows that too many people are still out of the job market. The long term effect of the stimulus funding is hotly debated in the press. So what does this have to do with the middle mile – simply this – it takes money to deploy new networks or upgrade existing ones. When there is turmoil in the financial markets people tend to get conservative with their money. This applies to investors, large companies and consumers alike, and the willingness to fund new ventures, invest in new network capacity or purchase new gadgets and services dries up.

There is little doubt that the demand side is still there. Apple (News - Alert) continues to roll out new devices and the other handset makers are not standing still. Projections on exponential data rate growth are available from every telecom analyst. Some (but not all) operators are being forced to institute caps on the data plans in an effort to stem the tide.

So what will happen between the uncertainty on the financial side and the desire on the consumer side for more and more bandwidth? As usual the answers in the real world are somewhat more complex than we would like. The more visionary players will recognize that these uncertain financial times are temporary and this represents an opportunity to get an advantage on their competitors. Some would like to move ahead but will be restricted in their plans since they need additional investment to expand and upgrade. And some will use delaying tactics such as bandwidth caps and band-aid fixes to delay the inevitable for as long as possible.

One thing that seems fairly certain is that this uncertainty will increase the drive for more efficient use of resources to deliver more with less. More bandwidth through less spectrum, more infrastructure sharing (especially in the areas of low tele-density), an increased motivation to adopt new technologies to lower costs and enable new revenue. Doing more of the same simply is not an option – not that it ever was -- but the current environment makes that even more abundantly clear.

So what exactly do we need to do to make the resources more efficient? When we look at the total cost of ownership (TCO) of a packet microwave backhaul network the first thing we see is that the capital cost of the microwave is only a small percentage of the overall cost. Thus, in order to make the network more efficient, we have to address all the contributors to the TCO, not just cheaper equipment. This is evident in the pie charts shown below, which depict the TCO for a jurisdiction such as Canada or Western Europe. Note that, in the United States, the spectrum costs would be somewhat lower; however the general argument remains the same.

With 2G networks the backhaul challenge was one of connectivity. Each base station did not generate a large quantity of traffic and the focus was on using the smallest channel sizes possible, coupled with low capacity-low cost radios. As we migrate to 4G, the capacity generated by each base station increases by several orders of magnitude, and the backhaul capacity requirement exceeds that which can be delivered with the existing backhaul channel allocations, forcing the operator to either obtain new channels in different spectrum bands, or increase the size of the existing channels.

This results in the spectrum leasing costs becoming the dominant cost in most backhaul networks. Furthermore, the required additional spectrum may not even be available in the conventional licensed microwave bands in some jurisdictions, forcing the operators to explore new higher frequency bands in 42 GHz, 60 GHz or 80 GHz. An alternative to the expensive and time-consuming task of acquiring new spectrum is to make the existing spectrum more efficient through the use of higher order modulation, base band optimization and compression as well as dual polarization operation (XPIC). Using these techniques, it is possible to deliver bandwidth suitable to an LTE (News - Alert) base station over the backhaul channel sizes that have been allocated to 2G base station deployments, significantly simplifying and lowering the cost of upgrading the backhaul network to enable 4G services.

Other aspects of the network TCO can also be impacted by the appropriate feature sets. All-outdoor designs can reduce co-location costs. Adaptive modulation coupled with ring and mesh designs increase the effective throughput and enable smaller antennas (thereby reducing the tower leasing costs for the antennas). Integrating radios and switching to minimize the number of boxes deployed in the network will result in higher availability and lower maintenance costs. Finally, adding intelligence to the network to optimally route, cache and distribute the content based on the service being delivered, the time of day and the distribution of demand will be required to further increase network efficiency and contain the total cost of ownership.

In an uncertain economic climate it is essential for every element of the business to perform at its maximum efficiency. Looking at the capital cost alone will not result in the most efficient network. Optimizing the total cost of ownership can deliver much larger savings and results in a business case that can withstand almost any inclement economic weather.

Dr. Alan Solheim, Vice President of Product Management at DragonWave, is author of TMCnet�s The Middle Mile column. To read more of Alan’s articles, please visit his columnist page.

Edited by Marisa Torrieri

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