Strategic Network Planning
Elliott H. Drucker
Around the world, CDMA-450 is rapidly emerging as one of the most exciting new categories of wireless enterprise. Combining the proven efficiency and performance of CDMA-2000 air interface technology with the coverage advantages of the 450 MHz frequency band, this new mobile telecommunications initiative has opened opportunities in regions as diverse as Eastern Europe, Central Asia, and South America.
In many cases, CDMA-450 licenses are being awarded to relatively new companies with limited financial resources, and with little or no experience in developing the large-scale technical and business structures that will be needed to fully exploit their commercial opportunities. Two key challenges are definition of a general business plan and development of a strategic approach to network engineering that will support that strategy in a capital-efficient manner. To successfully meet both of these challenges, a new operator will need the expertise to understand both the capabilities and limitations of CDMA-450 technology.
Business Strategy: What is the CDMA-450 Product?
Most CDMA-450 networks will be deployed in countries that are already served, at least in urban areas, by mature wireless systems operating in the 800-900 and 1800-2000 MHz bands. In keeping with the traditional application of wireless telecommunications, operators of the 450 MHz networks may feel that their logical business is to compete head-on for mobile telephone customers. This strategy usually includes exploiting the advantages inherent to the 450 MHz band to surpass the competition in the area of rural coverage. But his rather simplistic approach leaves CDMA-450 operators vulnerable to their substantial capacity disadvantage in urban and suburban areas where most traditional wireless service is used. As a result, a wide-area (typically nationwide) CDMA 450 enterprise aimed strictly at conventional mobile telephone users may be attractive only to those who reside in areas where higher frequency service is inadequate or who regularly travel to such areas. Unfortunately, in many developing countries most rural residents are of limited financial means, so this logical target market for mobile CDMA-450 service tends to be either of poor revenue potential (rural residents) or of limited number (frequent travelers to rural areas).
As suggested by this analysis, CDMA-450 operators hoping for opportunities beyond being a niche service provider may need to consider more than simply going head-to-head with established competitors. This does not mean, however, that CDMA-450 cannot be effective as a competitive mobile services offering. In some small, mainly rural countries, capacity density will not be of overriding importance. In other situations, an operator might advantageously look into the possibility of integrating CDMA-450 for rural coverage with a higher frequency CDMA system limited to urban areas. But the most successful enterprises will likely be those that consider a broader range of business opportunities.
The most rewarding business strategy for an operator will be to find ways to apply the capabilities of CDMA-450 to cost-effectively meet telecommunications needs of the people and institutions of the country served. One example is the provision of basic Universal Access (fixed wireless) telephony in rural areas that lack adequate (or any) wireline services. CDMA-450 is ideally suited for such service because its broad reach provides wide area rural coverage at relatively low cost, while the CDMA air interface technology offers high spectrum efficiency for maximum capacity. Fixed wireless, as opposed to mobile service, can be structured in a way that keeps per-user cost quite low, making it affordable to a much broader cross-section of rural populations. CDMA-450 can also provide Internet access, through fixed wireless service, to areas where going “on-line” is today merely a dream.
Strategies for Network Engineering
By far the biggest component of capitalization for a new wireless operator is initial network deployment. This includes not only the cost of infrastructure equipment but also site acquisition costs (purchase or net present lease value), construction costs, and deployment of power and backhaul facilities. Long-term success of the wireless enterprise is obviously very much dependent upon keeping total initial and ongoing capital investment as low as possible. What is less obvious is that required capital outlay for wireless systems is extremely sensitive to the quality of network design engineering. For a given level of coverage and capacity, the difference in cost between well designed and poorly designed networks can easily dwarf all other enterprise cost variables combined.
Unfortunately new wireless operators, faced with having to rapidly deploy a complex network to provide coverage over a large area, often do not pay sufficient attention to quality of network design. Many rely upon their main infrastructure equipment vendors for network engineering, which is often provided at attractive (or even zero) cost when bundled into a general procurement contract. But having the equipment vendor design the network rarely ends up saving the operator money in the long run. There is simply no incentive to engineer for maximum capital efficiency. Quite the contrary; the vendor makes more money by selling more equipment. For this reason, among others, it is critical that network engineering performed by equipment vendors be vetted and strategically guided by an independent expert. In fact, expert oversight is a good idea regardless of who performs initial and ongoing network engineering. The cost of capital inefficiency is simply too great a risk, particularly for new and vulnerable wireless enterprises.
To put the value of strategic technical expertise into perspective, consider the case of an initial network deployment involving around 50 base stations. A thorough expert review of the design for such a network might identify ways to reduce initial deployment by several base stations, but would cost the operator just a fraction of the deployment cost of a single base station. Clearly, expert oversight and review of network engineering is one of the most important things that a new CDMA-450 operator must do to enhance prospects for long-term success. And such review and strategic guidance should continue as the network grows and evolves.
Formulation of business strategy and network engineering are two critical – and risky – components of building a wireless enterprise. This is particularly the case for new CDMA-450 operators because the most advantageous business opportunities may not be obvious and because they will often need to rely on others, commonly their infrastructure equipment vendor, for network design. To maximize prospects for success, new operators should seek out top-level technical expertise for strategic guidance in both areas. With properly focused business plans and capital-efficient infrastructure deployments, CDMA-450 operators could very well be the next big success stories in wireless.
About the Author: Elliott Drucker is president of Drucker Associates (www.drucker-associates.com), a consulting firm that provides strategic technical guidance to operators and manufacturers in the wireless industry. He is a widely recognized expert in CDMA network engineering and optimization, and writes a monthly column on wireless technology for Wireless Week.