1. 4G World -
Meeting the Challenges of Mobile
Backhaul – Financial Justification
This document is confidential and is intended solely for the use and
information of the client to whom it is addressed.
2. Financial Justification for Upgrading Networks
What you already know
Everyone has or is getting an IPhone, Android, etc
The existing infrastructure doesn’t exist at the scale we need
Significant upfront investment
While we don’t know how big this upgrade cycle will be, we know it is
far from finished….
Last week – IPad channel expands to Verizon, AT&T stores and Walmart
Bandwidth intensive mobile and wireless applications growth
Will the upgrade investment get paid back…. We think so….
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3. Is this a good investment?
…. Or “what is the chance this is a repeat of the CLEC
industry in 1998 (and the crash in 2001…)”
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4. Is this a good investment?
…. Or “what is the chance this is a repeat of the CLEC
industry in 1998 (and the crash in 2001…)
Much of the investment is by the big competitors which lends credibility
ILECs & MSOs
Minimal Regulatory uncertainty
CLEC regulatory environment shifted to favoring the incumbents
Demand is leading the investment
Less instances of “build it and they will come…”
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5. Rapid shift in the infrastructure mix
North America Europe WorldWide
100%
80%
60%
40%
20%
0%
2008 2010 2008 2010 2008 2010
Copper Fiber Microwave
Source: Yankee Group - 2010
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6. State of the Mobile Environment
1,500,000
Active Connections
1,000,000 Double the number of
connections in 2 yrs -1B
mobile broadband
connections by 2012
500,000
0
2005A 2006A 2007A 2008A 2009E 2010E 2011E 2012E 2013E 2014E
EVDO HSPA Mobile WiMAX LTE
Source: Pyramid Research
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7. How do we invest to keep ahead of the infrastructure demand curve?
Old Design Paradigm – had less variables
1. Planned the RF
2. Initiated Site Acquisition
3. Iterated around the variables
4. Contacted the ILEC to install a T1 or 2
This document is proprietary and is intended solely for the use and information of the client to whom it is addressed. 7
8. How do we invest to keep ahead of the demand curve?
Old Design Paradigm – had less variables
1. Planned the RF
2. Initiated Site Acquisition
3. Iterated around the variables
4. Contacted the ILEC to install a T1 or 2
New Design Paradigm –
How do you plan to upgrade the network when a critical supply chain
element – Backhaul - may be in place, may not be in place …. And
what is the effect of that uncertainty on your design process?
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9. How do we invest to keep ahead of the demand curve?
New Paradigm –
upgrade the network when a critical supply chain element may be in place or may
not be in place….
Fiber Penetration Estimates
• Dense Urban Areas: 70% - 100% Penetration
• Suburban Areas: 50% - 70% Penetration
• Rural Areas: 0% - 50% Penetration
• Widely varying availability depending on location & ILEC, MSO, Alt Access Vendor, Utility
And if not:
How will you get it there and how much will it cost?
And how fast can you do it?
If you iterate in the old paradigm, it will take even longer…because of additional variables
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10. Automation - Proper Ecosystem Drives a Success- Based Approach
Fast Track Processes Quality Assurance Processes
• Speed to market • Design accuracy
• Highly iterative • Targeted service areas, “fill-in”
• Volume - centric • Performance - centric
Network Knowledge Preliminary RF Design Site Acceptance &
Model Tuning
Optimization
Backhaul Design Site Acquisition Fill in Sites
FiberSource ®
• Existing structures • RF Design • Site Level Tracker • Morphology • Search Rings • Antenna Azimuth
• MLA sites • Propagation Plots • Site Configurations Classification • Site Visits and tilts
• Wireless Carriers • Link budget • Leasing, Zoning • Drive Testing • Alternate Site • Cell parameter
• Fiber Infrastructure assessments • Mapping and data • Post-processing Studies settings
• On-Net facilities • Site acquisition collateral • Model Calibration • Network redesign • Frequency Plans
• Carrier-Neutral target list • Testimonials • Model Database analysis • Network C/I and
facilities • Site Justification • Network Prelim. • Network Prelim. Ecio plots
• Target “anchor” Design Assessment Design Assessment
site candidate list
This document is proprietary and is intended solely for the use and information of the client to whom it is addressed. 10
11. Plan the RAN and Backhaul simultaneously
• Planning the RAN and
Backhaul together
reduces lifecycle costs
• Use Fibersource
to identify the
potential sites
• Planning the
RAN sites with a
view towards fiber
availability is critical
• Failure to plan
appropriately leads
to high fiber and
thus backhaul
costs
This document is proprietary and is intended solely for the use and information of the client to whom it is addressed. 11
12. Use Fibersource to quickly identify the backhaul options
This document is proprietary and is intended solely for the use and information of the client to whom it is addressed. 12
13. This document is proprietary and is intended solely for the use and information of the client to whom it is addressed. 13
14. This document is proprietary and is intended solely for the use and information of the client to whom it is addressed. 14
15. This document is proprietary and is intended solely for the use and information of the client to whom it is addressed. 15
16. Financial Analysis
Actual Customer completed in 2010 with CIC, a microwave partner
Key Assumptions:
Fiber sites / Hub sites
50 mg IP MRR at $1100/ 100 mg at approx $1350
< $2k per site NRC for fixed network
Microwave Sites
$34k - $35k microwave cost per site
$1,150/mo cost for lease and maintenance per microwave site
This document is proprietary and is intended solely for the use and information of the client to whom it is addressed. 16
17. 3 Models tested – Sensitivity Analysis
This document is proprietary and is intended solely for the use and information of the client to whom it is addressed. 17
18. Cumulative Cashflows Analysis
Cumulative Cash Flow & Payback
2,000,000
-
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
(2,000,000)
Backhaul Design #1
(4,000,000) Backhaul Design #2
Backhaul Design #3
(6,000,000)
(8,000,000)
(10,000,000)
(12,000,000)
This document is proprietary and is intended solely for the use and information of the client to whom it is addressed. 18
19. Sensitivity Analysis
• Fiber provided by ILECs:
• Traditional pricing model compared to alternative access providers
• Alternate providers can’t price irrationally – they have a business case to make and a
different investment model to meet
• Sensitivity in the prior business case?
• Remember at original rates, Backhaul Design #1 had the best NPV at $256k
• If monthly recurring fixed network costs dropped by 10%:
Backhaul design # 1- 105 fiber sites $256k grows to $1.6M NPV
Backhaul design # 3 - 356 fiber sites - $ ($316k) grows to $ 2.3M NPV
• Therefore:
Each market and each design needs to have payback calculations at the
tower level
Regional differences and negotiated contracts have a significant impact
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20. Mobile backhaul moving forward….
There is still a lot of headroom in building mobile backhaul networks:
Of 250,000 towers, less than 100,000 have been built to
Many “built” towers were built for a single provider – but the average tower
has > 1 provider on it.
New Design Paradigm requires a new approach
Fiber / Microwave mix will change as the solution
Current solution will change depending on the rate of bandwidth growth/
user
But as bandwidth requirements explode, another round of investment to
upgrade lower bandwidth microwave towers?
This document is proprietary and is intended solely for the use and information of the client to whom it is addressed. 20
21. CFN Services – Managed Backhaul Solutions
Experience
Participation in all the major 3G and 4G
planning
Unified, proactive management
Managed Service Solution History
Solution Flexibility Building the foundation
Customized Solutions of tomorrow’s
Hybrid solutions: Copper, Ethernet and networks today
Microwave
Turn-Key Solutions
Planning, Design, and Implementation
Full Service management, monitoring and
notifications
Owner’s Economics