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Total Lifecycle Cost for Backhaul

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July 22, 2008

Total Lifecycle Cost for Backhaul

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


The objective of the supply chain management group at an operator in any negotiation with a vendor is always to achieve the lowest cost per box. While this is a laudable goal and has driven technological innovation that has achieved some truly remarkable reductions in capital cost, it is approaching a point of diminishing returns. When one considers the total lifecycle cost of operating a network (and this cost is paid by the operator whether they own the network or lease the service) we see that the capital cost of the backhaul becomes insignificant when compared to other factors.


Figure 1: 10-Year Total Cost of Ownership - Typical Microwave Backhaul Network; U.S.
Figure 1 shows an example of the total cost of ownership (TCO) calculated over a 10-year period for a typical microwave backhaul network in the USA. Clearly, lease costs make up the majority of the lifecycle expenditure. In other jurisdictions the contribution of the components may change (i.e., in Europe backhaul point-to-point link spectrum costs are higher but the operators tend to own more of their towers so the antenna lease costs may be lower), but the overall message does not change. By only focusing on the purchase cost of the backhaul equipment the operator is only addressing a small portion of his total costs. So what can be done about the costs “outside the box?” First, for the antenna lease costs, these are proportional to the total real estate consumed on the tower or building. Techniques such as adaptive modulation, coupled with ring/mesh architectures can reduce real estate footprint by reducing antenna size. By enabling the operator to leverage the fact that rain fades and equipment failures are not correlated, and therefore can effectively use both the working and protection bandwidth, relying on adaptive modulation to provide additional bandwidth on the surviving path in the case of a failure. Since base-station spacing is fixed due to the Radio Access Network’s RF engineering considerations, this allows the operator to reduce the antenna size for a given network traffic demand while still maintaining the same network availability. This can effectively cut the average antenna size in half, resulting in a corresponding reduction in the antenna lease costs.
Site lease costs are again driven by the space required for co-location applications, and by construction/installation costs for greenfield applications. By adopting an all outdoor solution the impact on space, power and air conditioning can be minimized and, in many cases, infrastructure upgrade costs can be avoided. Integrated all outdoor radios can also address installation costs by simply reducing the number of items that need to be installed. In the greenfield situation, solutions that have pole- or wall-mounted cabinets and do not require air conditioning avoid the need for concrete pads and power runs.
Maintenance costs are reduced when there is no confusion as to what needs to be replaced when a unit fails. Integrated loopback and improved fault isolation techniques can help to address this.

Figure 2: TCO – Impact of high modulation indices in narrow channel widths; Europe
The TCO is driven by much more than the price of the box. In fact, it would even make sense to add cost to the box if it could reduce the other factors. The good news is that the solutions described above either are cost-neutral to the capital cost, or in fact even reduce the capital cost. When backhaul equipment vendors focus on more than dBs and Mhz, they can affect the business case of their customers (thus encouraging those customers to buy more equipment) much more effectively by addressing operations cost of the backhaul solution. Paying attention to TCO is essential for the operator to have a successful business case, and for the vendor to provide maximum value to their customers.
Dr. Alan Solheim is vice president of Product Management at DragonWave, Inc. For more articles by this author, please visit his columnist page.
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