Dimensioning and Cost Structure Analysis of Wide Area Data Service Network - Report

Wireless Infrastructure Deployment & Economics
Homework 3 – Dimensioning and Cost Structure Analysis
of Wide Area Data Service Network

This document is public version of the submitted report.
Please contact the author for download / correspondent query.

Author : Laili Aidi

Introduction
This report contains discussion of the radio access network design and the cost structure
analysis of different deployment options of Radio Access Technologies (RATs). The objective is
to provide specific amount of user, with specific traffic demand and deployment scenario. The
requirements of the deployment are based on [1]:
1. The type of the area to be coverage is “Urban”, with population density of 2000 / km2 in total
area of 10,000 km2.
2. The usage / user is defined as “MBB Substitute”, starting from 5 GB/Month in year 0, and
predicted to increase 1 GB/Month each year.
3. The penetration is defined as “Substitute_1”, starting from 1 % of total population in year 0,
and predicted to increase 1% each year.
4. The analysis is designed for “Greenfield” operator case that has to deploy the network from
scratch.
5. The RATs that are discussed in this report are “UMTS
Macro,

“HSDPA
Macro”
and
“HSDPA

Micro”.

The approach that is used to fulfill those requirements is listed as several steps below:
1. Calculate the coverage demand (km2) for each year
2. Based on calculation Step 1, calculate the capacity demand (Mbps).
3. Calculate the total site needed in order to fulfil that coverage and capacity demand
4. Based on calculation Step 3, calculate the CAPEX and OPEX, and then get the Total Cost for
each year, including 5 % price erosion in all of the price
5. Based on the calculation Step 4, calculate the NPV of each of these 3 different solutions
6. Based on the trend in Step 4 and calculation Step 5, make the analysis and recommendation

The step 1 - 2 will be covered in section “Part A - Coverage & Capacity Demand”. The step
3 – 4 will be covered in section “Part B - Cost Structure & dimensioning”, where the discussion is
separated based on each RAT deployment. The step 5 is presented in “Part C – DCF Analysis”
and finally the last section “Part D - Summary & Recommendation” presents the discussion of
step 6.

Part A. Coverage & Capacity Demand
This section discusses the implementation of calculation in step 1 and 2. For example Year 0
calculation, the coverage area 20 % and User penetration 2 % from 10,000 km2 areas with density
2,000 means:
20 % x 10,000 km2 = 2000 km2 total required coverage
2 % x (2,000 x 10,000) = 400,000 total predicted user

1


Using the same formula, we can get the total coverage and user for the all 5 years, as below:
Table 1. Coverage & Total User
Total Required Total
Predicted

Year Coverage Demand (%) 2 User Penetration (%)
Coverage (km ) User

0 0% 0
1% 200,000
1 20 % 2,000 2% 400,000
2 40 % 4,000 3% 600,000
3 60 % 6,000 4% 800,000
4 80 % 8,000 5% 1,000,000
5 100 % 10,000 6% 1,200,000

As the usage per User in year 1 is 6 GB/month/user, thus the user demand on that year in
MB would be:
6 GB/month/user x 1,024 = 6144 MB/month/user
Using this number, we can calculate the user demand in second (Mbps), where that traffic is
assumed to be concentrated in 4 hours / day:
(6144 MB/month/user)/(30 days x 4 hours x 60 minutes x 60
seconds) x 8 = 0.113777778 Mbps/user
Then we can calculate the total capacity needed for this system according to the total
number of user in the specific coverage area requirement in the Table 1:
0.113777778 Mbps x 400000 users = 45511.1 Mbps

Using the same formula, we can get the total capacity demand for the all 5 years, as below:
Table 2. Capacity Demand
Year Usage per User (GB/Month/User) Total Capacity Demand (Mbps)
0 5 18,962.9
1 6 45,511.1
2 7 79,644.4
3 8 121,362.9
4 9 170,666.7
5 10 227,555.6

Part B. Cost Dimensioning
This section will cover the calculation in step 3 – 4, where the discussion will be separated
based on 3 different cost structures of RATs. According to the data in [1], we can present the cost
structure of those RATs in the Table 3 and Table 4 tables below:
Table 3. UMTS/HSDPA Macro Cost Structure
No. Cost Type Note
1. CAPEX Radio & UMTS/HSDPA Macro BTS, first cell at • UMTS Macro’s Max cell
Transmission site range 0.6 km, capacity 1
Equipment Mbps

• HSDPA
Macro’s
Max

cell range 0.4 km,

2


capacity 3 Mbps

UMTS/HSDPA Macro BTS, additional Maximum 6 cells in total in
cells (sectors or carriers) 1 BTS
Site Installation UMTS /HSDPA Macro BTS site -
and build out costs installation
UMTS/HSDPA Macro BTS site build -
out URBAN
Data line installation per -
UMTS/HSDPA site URBAN
2. OPEX Site lease, Macro BTS, URBAN -
Electricity UMTS/HSDPA site Macro – URBAN -
Leased line, E1 or Ethernet type URBAN (2 Mbps) -
Operation & Maintenance (OM) 10 % of current year’s
CAPEX

Table 4. HSDPA Micro Cost Structure
No. Cost Type Note
1. CAPEX Radio & HSDPA Micro BTS, one cell only (i.e. Max cell range 0.1 km,
Transmission no build out) capacity 3 Mbps
Equipment
Site UMTS/HSDPA Micro BTS site -
Installation installation
and build out UMTS/HSDPA Micro BTS site build -
costs out URBAN
Data line installation per -
UMTS/HSDPA site URBAN
2. OPEX Site lease, Micro BTS, URBAN -
Electricity UMTS/HSDPA site Micro -
Leased line, E1 or Ethernet type URBAN -
Operation & Maintenance (OM) 10 % of current year’s
CAPEX

Apart from the data mentioned in [1], there are several assumptions and equations that are
also used in the calculation, as mentioned below:
1. BTS
&
Additional
Cell
Demand
Calculation
The calculation of BTS demand is done by taking into account the coverage area and user
demand that have been presented in Table 1 and 2. The Coverage achieved by BTS deployment
(Cv) would be:
Cv =
Maximum cell range * Amount of BTS
Thus, total Coverage achieved on that year (CvTot) would be:
CvTot = Cv + CvTot last years

However, as the number of BTS is the function of coverage and capacity, thus the assumption

3


that is used regarding the coverage is: the inter-cell interference can reduce the coverage area of
each BTS if they have to be deployed very close each other, in order to fulfill the capacity demand
in that coverage area. Means that if the coverage demand has been fulfilled but the capacity
demand has not been fulfilled yet even by adding more cell into maximum, thus the addition of
new BTS will not increase the coverage, as it has to be deployed closer each other in that target
coverage area.
Moreover, the Capacity achieved by BTS deployment would be (Cp1):
Cp1 = Maximum capacity * Amount of BTS
Meanwhile, as the “UMTS/HSDPA Macro BTS, additional cells (sectors or carriers)” is only
increase the capacity, not the coverage, and as the maximum cells per BTS are 6, thus the
maximum amount of purchase for additional cells in UMTS/HSDPA Macro calculation (Cell)
would be:
Cell = Amount of BTS * (6-1)
Then, the Capacity achieved by additional cell deployment (Cp2) would be:
Cp2 = Maximum capacity * Cell
Thus, total Capacity achieved on that year (CpTot) would be:
CpTot = Cp1 + Cp2 + CpTot last years

Using these data, assumptions and equations, we can get the BTS and or Additional Cell
demand in each year (Qty) of every RAT option, both from coverage and capacity point of view,
as presented in Table 5, 6 and 7 below:
Table 5. UMTS Macro Radio & Transmission Equipment Demand
UMTS Macro BTS, first cell at site UMTS Macro BTS, additional Total Total
Y
cells Coverage Capacity
e
Price per Price per achieved achieved
a Qty. Coverage Capacity Qty. Capacity 2
Unit Unit (km ) (Mbps)
r (km2) (Mbps) (Mbps)
(k€) (k€)
0 20 3161 1000* 3161 10 15805 15805 1000 18966
1 19 4425 1000* 4425 9.5 22125 22125 2000 45516
2 18.05 5689 2000* 5689 9.03 28445 28445 4000 79650
3 17.2 6953 4000* 6953 8.6 34765 34765 6000 121368
4 16.3 10000 6000 10000 8.2 39500 39500 8000 170688
5 15.5 13400 8040 13400 7.8 43300 43300 10040 227568
* The BTS purchase is focused to add more capacity, not coverage, thus it is deployed closer than
its coverage distance, therefor the adding of coverage in not based on equation

Table 6. HSDPA Macro BTS & Additional Cell Demand
HSDPA Macro BTS, first cell at site HSDPA Macro BTS, Total Total
Y
additional cells Coverage Capacity
e
Price per Price achieved achieved
a Qty. Coverage Capacity Qty. Capacity
Unit 2 per Unit (km2) (Mbps)
r (km ) (Mbps) (Mbps)
(k€) (k€)
0 25 1054 421.6 3162 15 5270 15810 421.6 18972
1 23.75 3950 1580 11850 14.25 4897 14691 2001.6 45513
2 22.56 5000 2000 15000 7345 6378 19134 4001.6 79647
4


3 21.43 5000 2000 15000 12.86 8906 26718 6001.6 121365
4 20.36 5000 2000 15000 12.21 11434 34302 8001.6 170667
5 19.34 5000 2000 15000 11.6 13963 41889 10001.6 227556

Table 7. HSDPA Micro BTS Demand
HSDPA Micro BTS, one cell only (i.e. no build out) Total Total
Price per Unit Coverage achieved Capacity achieved
Year Qty. Coverage Capacity
(k€) (km2) (Mbps)
(km2) (Mbps)
0 15 6321 632,1 18963 632.1 18963
1 14.25 13700 1370 41100 2002.1 60063
2 13.54 20000 2000 60000 4002.1 120063
3 12.86 20000 2000 60000 6002.1 180063
4 12.22 20000 2000 60000 8002.1 240063
5 11.6 20000 2000 60000 10002.1 300063

2. Installation
&
Build
Out
and
Running
Cost
Demand
Calculation

The purchase amount of “Installation and Build out” elements would be calculated as below:
• “Data line installation per UMTS/HSDPA site URBAN” (DL):

DL = (Cp1 + Cp2) / Data line capacity
Where the Data Line capacity per UMTS/HSDPA site URBAN is 10 Mbps [1].
• The purchase amount of “EDGE/UMTS/HSDPA Macro BTS site installation”
(SI)
and
“UMTS/HSDPA Macro BTS site build out URBAN”
(SB)
are calculated as:
SI or SB = Amount of BTS purchased

The Running Costs in each year is assumed to has to include the cost to run the equipments
bought from previous years, as the equipment/lease/electricity/etc that are purchased in previous
year are still be used in the next following year. Thus:
• The purchase amount of “Site lease, Macro BTS, URBAN”
(SL)
and
“Electricity
UMTS
site

Macro
-‐
URBAN”
(EL)
are
calculated
as:
SL or EL =
Amount of BTS purchased +
Amount of BTS purchased last year
• The
purchase
amount
of
“Leased
line,
E1
or
Ethernet
type
URBAN”
(LL)
is
calculated
as:

LL = CpTot / Leased line capacity
Where the Leased line, E1 or Ethernet type URBAN is 2 Mbps [1].

Then finally, the Cost for each of that element would be calculated as below:
Cost = DL or SL or El or LL + Annual cost per unit

Thus, using these data, assumptions and equations, and after getting the total BTS &
Additional cell demand in each year (Qty), now we can get the amount for Installation & Build out
and Running demand elements, as presented in Table 8, 9 and 10 below:

5


Table 8. UMTS Macro Installation & Build out and Running Demand
Data line Electricity
UMTS Macro UMTS Macro Site lease, Leased line, E1
Y installation per UMTS site
BTS site BTS site build Macro BTS, or Ethernet
e UMTS site Macro -
installation out URBAN URBAN type URBAN
a URBAN URBAN
r Price Price Price Price Price Price
per Qty per Qty. per Qty. per Qty. per Qty. per Qty.
Unit Unit Unit Unit Unit Unit
(k€) (k€) (k€) (k€) (k€) (k€)
0 30 3161 40 3161 5 1897 8 3161 1 9483 2 3161
1 28.5 4425 38 4425 4.8 2655 7.6 7586 0.95 32241 1.9 7586
2 27.1 5689 36.1 5689 4.5 3413 7.2 13275 0.9 72066 1.8 13275
3 25.7 6953 34.3 6953 4.3 4172 6.9 20228 0.85 132750 1.7 20228
4 24.44 10000 32.58 10000 4.07 4950 6.52 30228 0.8 218184 1.63 30228
5 23.21 9480 30.95 9480 3.87 5688 6.19 37928 0.77 331878 1.55 37928

Table 9. HSDPA Macro Installation & Build out and Running Demand
HSDPA Macro HSDPA Macro Site lease, Leased line, E1
Y installation per HSDPA site
BTS site BTS site build Macro BTS, or Ethernet
e HSDPA site Macro -
installation out URBAN URBAN type URBAN
a URBAN URBAN
(k€) (k€) (k€) (k€) (k€) (k€)
0 30 1054 40 1054 5 1898 8 1054 1 9486 2 1054
1 28.5 3950 38 3950 4.8 2654 7.6 5004 0.95 32243 1.9 5004
2 27.1 5000 36.1 5000 4.5 3413 7.2 10004 0.9 72066 1.8 10004
3 25.7 5000 34.3 5000 4.3 4930 6.9 15004 0.85 132749 1.7 15004
4 24.44 5000 32.58 5000 4.07 4929 6.52 20004 0.8 218082 1.63 20004
5 23.21 5000 30.95 5000 3.87 5689 6.19 25004 0.77 331860 1.55 25004

Table 10. HSDPA Micro Installation & Build out and Running Demand
HSDPA Micro Site lease, Leased line, E1
Y HSDPA BTS installation per UMTS site
BTS site build Micro BTS, or Ethernet
e site installation HSDPA site Macro -
out URBAN URBAN type URBAN
a URBAN URBAN
(k€) (k€) (k€) (k€) (k€) (k€)
0 20 6321 20 6321 5 1896.3 4 6321 1 9482 0.2 6321
1 19 13700 19 13700 4.8 4110 3.8 20021 0.95 39513 0.19 20021

6


2 18.05 20000 18.05 20000 4.5 6000 3.61 40021 0.9 99545 0.18 40021
3 17.15 20000 17.15 20000 4.3 6000 3.43 60021 0.85 189576 0.17 60021
4 16.29 20000 16.29 20000 4.07 6000 3.26 80021 0.8 309608 0.16 80021
5 15.48 20000 15.48 20000 3.87 6000 3.09 100021 0.77 459639 0.15 100021

3. CAPEX
and
OPEX
Calculation

The Step 4 (CAPEX, OPEX, Total Cost) in Introduction section is calculated as below:
CAPEX = (Radio & Transmission Equipment Cost) + Installation & Build
out Cost

OPEX = Running Cost + (10 % x CAPEX)

Total Cost = CAPEX + OPEX

Using these equations and result of previous calculations, now we can summarize the Cost
modeling for all of these 3 RAT options, as presented in table 11, 12, and 13 below:
Table 11. UMTS Macro Scenario – Cost Modeling
Y CAPEX OPEX Total Cost
e (k€)
Radio & Transmission Installation and Running Cost (k€) Operation &
a
Equipment Cost (k€) build out Cost (k€) Maintenance (k€)
r
0 221270 230753 86295.3 45202.3 538318.3
1 294262.5 306873.8 102695.9 60113.6 763945.8
2 359402.6 374805.5 184846.4 73420.8 992475.4
3 417292.9 435176.9 287246.3 85246.9 1224963.3
4 484631.2 590313.4 423921.2 107494.5 1606360.3
5 542420.4 747743.2 594455.7 129016.4 2013635.7

Table 12. HSDPA Macro Scenario – Cost Modeling
Y CAPEX OPEX Total Cost (k€)
e
Radio & Transmission Installation and Running Cost (k€) Operation &
a
Equipment Cost (k€) build out Cost (k€) Maintenance (k€)
r
0 105400 83266 38892,6 18866,6 227558.6
1 163594.8 275281.9 78168.4 43887.7 560932.8
2 199154.7 331277.9 155325.6 53043.3 738801.6
3 221708.6 317965.2 242455.8 53967.4 836097
4 241509.2 305155.6 340562.9 54666.5 941894.3
5 258787.2 292833.1 450263.1 55162 1057045.5

Table 13. HSDPA Macro Micro – Cost Modeling
Year CAPEX OPEX Total Cost
(k€)
Radio & Transmission Installation and Running Cost Operation &
Equipment Cost build out Cost (k€) Maintenance
(k€) (k€) (k€)

7


0 94815 262321.5 71743.4 35713.65 428879.9
1 195225 540122.5 117421.1 73534.75 926303.4
2 270750 749075 241538.5 101982.5 1363346
3 257212.5 711621.3 378671.8 96883.37 1444388.9
4 244351.9 676040.2 525923.2 92039.21 1538354.5
5 232134.3 642238.2 680716.1 87437.25 1642525.8

Part C. DFC Analysis
Discounted Cash Flow (DFC) also can be used to analyze these 3 RAT deployment options,
as it is actually a method to valuing the project. As we have the Discount rate information from
[1], we can use the Net Present Value (NPV) as the tool to do DFC analysis. This value can give
more insight into the financial viability of the investment that can be calculated using this equation
[2]:
PV = CF / (1 + r)^n
Where:
PV = Present value, means the value now of a stream of future cash flows, can be negative or
positive.
CF = Cash Flow, represented by the Total Cost in each year that we calculated in Section B. In
this case, this is always negative (investment), and there is no positive cash flow (profit, etc) that
is taken into account.
r = Discount Rate, which based on [1] is 10 %.
n = The period we are examining, in this case, the year value (0-5).
For example, the Present Value of Year 1 in UMTS Macro deployment would be:
PV umts_macro_year1 = - 992475.4 / (1 + 0.1)^1 = - 820227.6

Then we calculate the NPV as below:
NPV = PV0 + PV1 + .. + PV5

The result of the PV and NPV of each of the RAT deployment option in Table 14. From
this, it can clearly be seen that HSDPA macro shows the best financial viability compare to the
other 2 RAT deployment options, as it has the highest NPV value.
Table 14. Net Present Value of UMTS Macro, HSDPA Macro, HSDPA Micro
(1 + r)^n UMTS Macro HSDPA Macro HSDPA Micro
Year
Cash Flow Present Value Cash Flow Present Value Cash Flow Present Value

0 1 -538318.3 -694496.2 -227558.6 -227558.6 -428879.9 -428879.9

1 1,1 -763945.8 -820227.6 -560932.8 -509938.9 -926303.4 -842093.9

2 1,21 -992475.4 -921025 -738801.6 -610579.8 -1363346 -1126732.2

3 1,33 -1224963.3 -1100246.7 -836097 -628644.4 -1444388.9 -1086006.7

4 1,46 -1606360.3 -1250705.4 -941894.3 -645133.1 -1538354.5 -1053667.4

8


5 1,61 -2013635.7 -694496.2 -1057045.5 -656549.9 -1642525.8 -1020202.4
NPV -5325019.3 -3278404.7 -5557582.6

Part D. Summary & Recommendation
UMTS
Macro,
HSDPA
Macro
&
HSDPA
Micro
Deployment

CAPEX
and
OPEX
Comparison

900000

800000

700000

600000

500000
Year
0

400000

300000
Year
1

200000

100000
Year
2

0

Year
3

UMTS
HSDPA
HSDPA
UMTS
HSDPA
HSDPA
UMTS
HSDPA
HSDPA

Macro
Macro
Micro
Macro
Macro
Micro
Macro
Macro
Micro
Year
4

Year
5

CAPEX
Radio
&
CAPEX
Installation
OPEX

Transmission
and
buildout

Equipment

Figure 1. Cost Structure Comparison

As what can be seen in the graph in Figure 1 above, the network deployment using UMTS
Macro RAT would cause operator highest CAPEX in Radio & Transmission Equipment, while the
other 2 RATs (HSDPA Macro and Micro) does not show striking difference. Even the CAPEX
using HSDPA Micro shows decreasing trend in the last couple years of deployment. However, the
deployment using UMTS Macro and HSDPA Micro impacts on much higher cost for Installation
& builds out (CAPEX), as well as they tend to have sharply increasing in OPEX. This is because,
they need much more BTS and or additional cell to build the network with the same requirement
(coverage and capacity), as shown in Figure 2, thus result on higher cost on OPEX as well. On the
contrary, HSDPA Macro deployment result on smallest amount of BTS as well as additional cell
needs, thus result in lower OPEX.

9


Figure 2. Number of BTS and Additional Cell Demand

Meanwhile, using that cost structure, we also can see how it gives impact to the capacity
performance of each RAT in each year of deployment. As we can see in Figure 2 and 3, the
deployment using HSDPA Micro would cause much higher need of BTS installation in order to
cover the same amount of coverage area, but it also result on higher capacity.

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Figure 3. Capacity Required vs Achieved

Indeed, HSDPA Macro deployment clearly shows stable performance that fulfills
promotionally the coverage and capacity requirement in each year. It also give relative increasing
trend, that is not much extreme both in the CAPEX and OPEX, and the amount of investment
HSDPA Macro itself also lower compare to the other 2 RATs. Another aspect that makes HSDPA
Macro as a better RAT deployment option is the NPV value, where it shows the highest value,
which means, it has the best financial viability of investment. Thus, it can be concluded that,

10


among these 3 RATs, HSDPA Macro is the most visible and best solution to be implemented in
this scenario.

Appendix - Reference(s)
[1] Markendahl,
Jan. 2011. “Course IK2514, Wireless Infrastructure Deployment and
Economics. Description of Home Work 3” https://www.kth.se/social/course/IK2514/ [Dec. 07,
2011]
[2] “Evaluation Cash Flow Result”. http://www.money-zine.com/Investing/Investing/Evaluating-
Cash-Flow-Results/ [Dec. 08, 2011]

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Dimensioning and Cost Structure Analysis of Wide Area Data Service Network - Report

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Dimensioning and Cost Structure Analysis of Wide Area Data Service Network - Report