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Service providers have a critical choice to make in determining which technology to deploy within a market in which only 600 million phones exist for the 5.6 billion people who inhabit the earth. Traditional wireline, fiber-based wireline and wireless local loop technologies like code division multiple access and digital enhanced cordless telephone are some of the alternatives. The choice is critical because it affects service quality, capital expense, operating expense and, ultimately, business valuation and success.

Until recently, wireline loop technologies dominated both existing and planned fixed access networks. Technological advancements have made wireless technologies a cost-effective alternative for areas where fixed access service is either insufficient or nonexistent.

The local loop has traditionally been defined as a dedicated pair of copper wires connecting the subscriber phone to the central office switch, forming a loop. Modern wireline networks often use concentration to reduce the number of pairs to be deployed, but the basic architecture has not changed substantially since Alexander Graham Bell was making calls.

In the wireline local loop network architecture, the CO switch acts as the network hub where high-capacity feeders connect to begin the call-routing process (Figure 1). Calls are carried from the switch through the feeder to a distribution point where they are redirected through a distributor. Distributors carry call traffic to another hub, called a pillar, where each call is separated and routed individually through the drop. The drop then carries the call to the subscriber's business or residence. Wireless local loop technologies allow telephone service providers to use radio spectrum and radio-based equipment instead of wires. Wireless local loop is different from other wireless technologies such as cellular, satellite and microwave because it is specifically designed and optimized for local loop access. By concentrating resources on fixed rather than mobile service, wireless local loop can provide greater capacity at a lower cost than mobile services (Figure 2).

A number of technologies are available for service providers looking for a wireless local loop option, but DECT and CDMA technologies are the most common choices.

DECT is a picocellular wireless system that provides a radio interface between the subscriber and the fixed network to support wireless digital services in high density fixed access applications. The DECT system employs a concentration of small-radius base stations, each linked to a base station controller, which is linked to the switching network.

Typical applications include office buildings and other very dense subscriber environments where demand per kilometer is high and cell coverage area is not a critical requirement. The small cell radii and relatively low-cost base stations and controllers also make DECT appropriate for filling small coverage holes in an existing fixed network.

The DECT radio interface is based on time division multiple access technology. It operates over 10 radio carriers in the 1880 to 1900 MHz band. DECT uses dynamic channel selection, an automated frequency-planning mechanism, to select the channel with the least interference from neighboring cells or sectors.

Because of frequency reuse limitations, the maximum number of voice channels available for a single cell site in a multicell environment is 60. To provide high capacity per unit area, the DECT system transmits at low power using low antenna heights, enabling small cell sites to use all 60 channels and reduce interference from all but the neighboring cell sites.

CDMA is a digital wideband, spread spectrum technology that transmits multiple independent conversations across single or multiple 1.25 MHz bands of radio spectrum. Each voice, data or fax transmission is assigned a unique digital code that distinguishes it from other calls that share the same spectrum. The CDMA system features large cell radii and the highest capacity of any wireless technology. This combination makes CDMA wireless local loop ideal for large roll-outs covering urban, suburban and rural morphologies.

In the CDMA system, each base station contains one or more RF carriers that provide up to 45 voice channels per sector within 1.25 MHz of spectrum (1.25 MHz for sending + 1.25 MHz for receiving = 2.5 MHz total for each carrier). Each RF carrier can be split into sectors that concentrate capacity in a particular direction.

For a three-sector cell site, one RF carrier can provide up to 135 voice channels. In a market where a 20 MHz spectrum allocation enables seven frequency bands to operate, a three-sector cell provides as many as 945 voice channels in one cell site. Increasing sectorization to six or nine sectors will further increase cell site capacity. This extremely high capacity per cell is one of the biggest advantages of CDMA technology.

Simple Economics These technological and architectural differences result in a number of key advantages for wireless local loop systems, including faster deployment, better coverage flexibility, lower operating expense and lower capital expense. Deployment speed is important to service providers because time to market and time to revenue are critical in gaining market share and reducing financing requirements.

Wireline networks take more time to deploy than wireless local loop networks because they require government right-of-way authorization to dig trenches through public streets. The process of routing cable to individual households is also much more time-consuming than deploying wireless base stations, which are shared by many subscribers.

Wireless local loop networks also enable service providers to adjust coverage and capacity to match subscribers' location and demand at any time. Wireline networks, which need to be built far in advance of anticipated demand, are much less flexible.

Operating expenses are lower for wireless local loop networks because centralized facilities provide fewer points of potential failure and make it easier to resolve troubleshooting problems. In contrast, wireline networks have widely dispersed equipment that is more susceptible to accidental damage, vandalism and severe weather—increasing maintenance requirements and network operating expenses.

To effectively evaluate and compare different network technologies, a telecommunications operator must understand how the strengths and weaknesses of each technology contribute to the overall cost and performance of a network. The economic model used in this analysis was developed by Pittiglio, Rabin, Todd and McGrath to analyze fixed access networks from a service provider's perspective.

Figure 3 shows the capital cost per subscriber for each technology option during a 10-year network rollout. The analysis is based on a newly deployed "greenfield" network requiring full local loop coverage as well as switching and switch interconnect equipment.

The model region, Gujarat, India, is typical of many areas in the world that are in the process of issuing fixed access licenses to service providers. The results indicate that the capital requirements for DECT and wireline networks are substantially higher than those for CDMA networks. The extensive coverage area in this scenario, which includes suburban and rural morphologies, creates a costly network for the DECT operator that has to deploy many small-radius cells in the area.

Even in India, which has one of the lowest wireline cost structures in the world, the wireline network is more expensive than a wireless local loop network. The high costs associated with burying and modifying traditional wireline networks make it necessary for service providers to anticipate capacity requirements four to six years into the future. This advanced buildout creates high costs per subscriber, especially in the early years of deployment, and increases peak financing requirements.

Subscriber usage and density can be measured using a sensitivity analysis. Perhaps the most useful application of an economic model, the sensitivity analysis allows users to understand how changing key variables affects business outcomes. It also helps to optimize the final network solution by allowing ideas to be tested before investing in and deploying a network.

Because wireline subscribers have a dedicated line to their residence or business, the level of use has no effect on the capital cost per subscriber for the loop portion of the network. Wireless technologies are more modular because subscribers share base station channel resources. Channel capacity at a base station is easily expanded, allowing the wireless service provider to match system capacity with subscriber demand. This is especially significant in low-usage scenarios because the wireless service provider can minimize the capital outlay. Figure 4 demonstrates these subscriber usage dynamics.

Telephone market penetration and market share are difficult to predict and require the evaluation of a range of potential subscriber densities and average loop lengths. Wireline networks are very sensitive to subscriber density and loop length because longer loops require longer fiber and copper lines, longer trenches and more telephone poles. As a result, wireline technologies are cost-competitive in urban areas where densities are high and loop lengths are short.

In contrast, CDMA technology is insensitive to loop length because no physical link is required, and the large cell radii allow the base station to operate efficiently even in situations with low subscriber density. The DECT network is more sensitive to low-density scenarios than the CDMA network because the small cell radii prevent each base station from covering enough subscribers to efficiently use the capacity.

Capital per subscriber as a function of subscriber density and loop length are shown in Figure 5 for the urban morphology only. In this analysis, the CDMA network has the lowest capital cost per subscriber for all densities below 880 subscribers per square kilometer and above an average loop length of 1.58 km. Above this subscriber density and for shorter loop lengths, wireline has the lowest capital cost per subscriber.

In suburban and rural morphologies, the larger cell radii for the CDMA network makes it the most cost-effective technology. Longer loop lengths and lower densities in these regions make wireline and DECT technologies inefficient, driving up the capital cost per subscriber.

Wireless local loop technologies provide significant advantages over their wireline competitors—including faster deployment, better coverage flexibility, lower operating expenses and lower capital expenses—which ultimately lead to improved business valuation and success.

The CDMA wireless local loop technology is optimal for wide area coverage. In scenarios with smaller coverage areas, fewer subscribers and a denser environment than the scenarios modeled in this analysis, DECT may be more cost-effective.

Telecommunications and other information technologies are essential to helping people of all regions improve productivity and create wealth. A local loop service provider searches for a system that is easy to deploy, flexible and cost-efficient to procure and maintain. It is evident that wireless local loop technologies are quickly becoming a viable alternative to satisfy these needs.

Nate Palmer is an Associate at Pittiglio, Rabin, Todd and McGrath, Mountain View, Calif.