A million dollars of spectrum with every femtocell
Published on03 September 2009
Vodafone is more fortunate than many 3G network operators because it bought more 3G spectrum than most. It paid 5,964,000,000 pounds (about $10 Billion) for 15Mhz of spectrum, of which perhaps $3Billion remains unused today. Femtocells are making use of it, but with a few thousands femtocells being shipped, each $250 effectively comes with $1million of spectrum.
How was this extra spectrum used? Is this really necessary for femtocell deployment and would this be an issue for other network operators?
Vodafone paid 5,964,000,000 pounds (about $10Billion) for its 3G spectrum
Back in the heady days of the internet boom when many mobile network operators were growing quickly and cash rich, the UK goverment sold off blocks of spectrum at around 2100MHz for exclusive use of the new 3G UMTS standard. The auction was designed by a professor of gaming theory, who setup rules and procedures in order to maximise the price paid. He was extremely successful. With an expectation of perhaps £5,000,000,000 (approx $8Billion), the amount raised exceeded £20Billion ($32Billion) from five "winners". The Ofcom auction website provides details of the terms, procedure and results of each bidding round.
With a population of around 60 million in the UK, this equates to £100 per citizen. This is also expressed as £100/pop or $160/pop. With something like 25% market share, Vodafone would need to make back more like £500 from each customer over the 25 year license period just to pay for the 3G spectrum - that's ignoring the much greater costs of rolling out the 3G network, subsidising the handsets, providing upgrades and running the business.
The 3G UMTS system uses Wideband carriers which use a paired 5MHz spectrum - one carrier in each direction.
The minimum allocation was for 10MHz (i.e. two paired carriers), but two winners got 15MHz (i.e. 3 carriers). One of these 15MHz blocks was reserved for a new entrant, the other was bought by the highest bidder - Vodafone. This additional spectrum caused the auction to raise significantly more money.
In addition to this paired spectrum, there was also a small allocation of about 2MHz of unpaired spectrum (also known as TDD) which to my knowledge has never been used.
The final results and payments (in GB Pounds) from the auction website results page
Current Owner Brand Bandwidth Price (UK Pounds)
Hutchison 3 15MHz 4,348,700,000
Vodafone Vodafone 15Mhz 5,964,000,000
France Telecom Orange 10MHz 4,095,000,000
Telefonica O2 10MHz 4,030,100,000
Deutsche Telecom T-Mobile 10MHz 4,003,600,000
Fortunately, sanity returned to the telecoms business shortly after these auctions and 3G licenses in other countries have been sold at much more sensible prices. The upcoming 4G spectrum license sales in the UK next year are not expected to raise nearly as much.
How 3G networks were rolled out
Each license came with criteria to provide 3G service to a percentage of the population within a specified timeframe. Operators rolled out their 3G basestations, often buying them from different vendors than used for 2G (it was a very competitive market). Coverage was the primary goal at the start - there weren't many users or 3G capable phones then. One practice was to build or reuse a small number of high mast/towers which gave long distance, covering wide areas with relatively few sites. This could be achieved using just a single 5MHz carrier, giving some of the benefits of 3G such as soft handover.
As usage of 3G has increased, thousands of smaller cellsites have been installed and many of the high towers decommissioned. Most operators have been installing extra equipment to use their second carrier, particularly in hotspot areas with very high demand (e.g. transport hubs).
Although I don't have direct insights into Vodafone UK's radio planning practice, I would guess that they have used their third carrier in only a few very high capacity locations. I think it is very unlikely to be used outside major city centres, and I'm pretty confident that my residential area would not be covered in this way (especially given how poor my 3G signal is when not using my femtocell).
3G capacity is being overwhelmed in many operators today
I've spoken with one or two network planners at other networks around the world where they are struggling to keep up with data demand. Their 10MHz carriers are fully deployed in many places and they have been adding extra cards into their macrocell networks to increase capacity. This would use additional CDMA spreading codes and also require substantial backhaul transmission upgrades to carry the traffic back to their central switching centres, typically using fibre and/or microwave ethernet.
In many cases, the mobile broadband service being delivered on 3G does not match the advertising hype. Here in the UK last year, T-Mobile adverts were banned for suggesting that its mobile broadband was interchangeable with a wireline service.
Recent news stories confirm this, such as Ofcom (the UK regulator) publishing a "satisfaction survey" indicating that about 50% of USB data dongle customers were dissatisfied with the service (perhaps their expectations were too high).
Vodafone can use a spare carrier for their femtocells
Vodafone's femtocells almost certainly use their 3rd 5MHz carrier (why wouldn't it?). Currently, it's targeted for customers with poor indoor coverage so will mainly be deployed where there isn't much (or any) 3G coverage and rarely in places where the 3rd carrier is already in use. That's a bonus for the central radio planners, who shouldn't see much impact at all (presumably this was what they determined during their test and trial period). But surely this wouldn't make any practical difference for an operator with only 10MHz spectrum - in both cases there isn't any significant 3G outdoor coverage affected.
But an extra carrier isn't required for femtocells
A major impact of femtocells would be in those areas with high capacity needs. By offloading traffic from the outdoor macrocells, it benefits both the femtocell users (who get much greater speed and performance) and those left on the outdoor macro network (who can now use more of the freed up capacity). This is one the key business cases made by the Femto Forum who argue its cheaper to roll out femtocells than macro network to solve the mobile broadband capacity crunch.
And femtocells would benefit networks with less spectrum more quickly
There are many techniques to increase the performance and capacity of macro network equipment. For example, many operators are actively increasing the speed using HSPA+ to achieve 7.2Mbit/s, 14.4Mbit/s and even 21Mbit/s. Vodafone themselves are actively rolling out 14.4Mbit/s . These higher speeds also mean higher capacity, but do require customer devices to match these speeds - something that won't be upgraded overnight.
Femtocells continue to work with the existing handsets and data devices, so offload all the traffic as soon as they are installed. Small cells are the only realistic means to achieve the very high traffic capacity being demanded by today's "always on/always connected" users.
CTOs within large networks around the world must now ponder and decide which of the various options they should invest in to meet the capacity demand.
My conclusion is that rather than making it easier to rollout femtocells, Vodafone's extra spectrum in their macro network has meant they have more choice and more time to deploy them.
For those operators who only have 10MHz allocation, there is a greater pressing need to offload traffic before it overwhelms the technical options in the macro network. They need to move more quickly to use femtocells for traffic offload and increase customer satisfaction, both for those with femtocells and those who will gain from additional freed up capacity in the macro network.
...and of course that $1M headline figure will quickly reduce as the numbers of femtocells shipped continues to grow. It just seems nice to think that I've got $1M of value for $250 ;)