RELATION BETWEEN BASE STATION CHARACTERISTICS AND COST STRUCTURE IN CELLULAR SYSTEMS Klas Johansson 1 , Anders Furusk¨ ar 2 , Peter Karlsson 3 , and Jens Zander 1 1 Wireless@KTH, Electrum 418, S-164 40 Kista, Sweden, {klasj, jens.zander}@radio.kth.se 2 Ericsson AB, SE-164 80 Stockholm, Sweden, anders.furuskar@ericsson.com 3 TeliaSonera Sweden, Box 94, SE-201 20 Malm¨ o, Sweden, Peter.C.Karlsson@teliasonera.com Abstract - A simple method for estimating the costs of building and operating a cellular mobile network is pro- posed. Using empirical data from a third generation mobile system (WCDMA) it is shown that the cost is driven by different factors depending on the characteristics of the base stations deployed. When site density increase, operational and transmission costs tend to dominate rather than radio equipment and site costs. The results also show how, for different capacity requirements, the costs can be minimized by a proper selection of for example macro, micro and pico base stations. In many scenarios the macro base stations yield the lowest cost, indicating that coverage (cell range) is an important parameter when designing wireless systems. Keywords - Tele-economics, cost model, infrastructure cost, base station cost I. I NTRODUCTION The costs of providing wide-area coverage for high data rate wireless access have been discussed widely in the telecom industry over the last couple of years. While mobile operators have struggled with high license fees and roll- out costs due to regulatory requirements for third generation networks, technologies such as Wireless LAN have evolved as complementing and in specific scenarios even compet- itive alternatives [2]. This has evidently contributed to an increased cost awareness among both mobile operators and equipment vendors [4]. Mobile infrastructure cost was under study already during the development of GSM and other 2G systems, however it has been more focused only recently for 3G and beyond. In [6] the costs of providing mobile data services was analyzed in terms of economies of scale and scope. Furthermore, cost effective ways of configuring cellular networks was addressed in [1] and an empirically based cost model for cellular systems was proposed in [7]. It is commonly known that the capacity is proportionally to the base station density for a given cellular system. Unfortunately, also the infrastructure costs seems to increase almost linearly with the capacity required (indicating a low degree of economies of scale). This was discussed in [9], where the cost structure of wireless access infrastructure was analyzed. It was concluded that the network cost rises linearly with the data rate per user. This should hold for a given frequency allocation provided that the same coverage is required, and was identified in [10] as a key problem for providing wideband data services in wireless systems. A simple infrastructure cost model was also presented in [9] (and developed further in [10]), in which the total infrastructure cost of a wireless system is modeled as linearly proportional to the number of base stations: C system = cN bs , (1) where N bs is the number of base stations and c is a constant corresponding to the cost per base station. Note that in [9] c is assumed to be the same for all base stations and it is independent of the base station characteristics. However, in a practical system, a number of different base station types could be used for different deployment scenarios and the requirements on, e.g., cell range and relia- bility greatly affects the total cost per base station (including capital and operational expenditures). As a consequence the cost structure of a radio access network is dependent of the system configuration, i.e. the quantities and types of different access points employed to achieve various total network capacities and coverage. This topic will be treated further in the sequel of this paper, which is outlined as follows. The overall distribution of costs in current mobile networks is presented in Section II. This discussion justifies a simple infrastructure cost model which is described in Section III. Using this, the total cost and cost structure is calculated in Section IV for different demands and potential solutions for delivering affordable wireless services with high data rates is discussed briefly. The paper is concluded in Section V. II. OVERALL COST STRUCTURE FOR MOBILE OPERATORS Before going into a more detailed analysis, let us first look briefly at the overall cost structure of a mobile op- erator as of today. Typically, their investments relate to radio and transmission equipment, license fees, site build- outs and installation of equipment. The running costs, in turn, consider mainly transmission, site rentals, marketing, terminal subsidies, and operation and maintenance (O&M). The exact breakdown of those costs is of course case specific, and it may vary significantly between different