BUSINESS MODELS AND BUSINESS ROLES FOR USE OF LOW COST

INFRASTRUCTURE SOLUTIONS
Jan Markendahl, Wireless@KTH, Royal Institute of Technology, Stockholm,
Bertil Thorngren, Stockholm School of Economics, Centre for Information & Communication research
ABSTRACT. In this paper low cost concepts for future
wireless access are presented and discussed from the
business perspective. Instead of extending todays cellular
technology or to focus on the bandwidth efficiency of the
radio equipment, the chosen approach focus on reduction
of costs for network deployment and operation. Adaptive
antennas (MIMO), multihop schemes and local access
points are combined with user deployed infrastructure
and reuse of existing network assets.
Business models candidates are analysed, showing that
all proposed low cost solutions can be used either by local
network operators (LNOs) in close cooperation with
mobile operators (network franchising) or to be user
deployed using a traditional subscriber model. MIMO
and multihop relays require close integration into the
cellular network implying that these solutions would be
less suitable for an independent LNO.

I.

INTRODUCTION

Todays cellular communication systems are primarily

designed to provide cost-effective wide-area coverage for
users with moderate bandwidth demands (voice and low rate
data). By contrast communication costs per month must be
similar or even lower than in second and third generation
cellular systems. The challenge of upgrading cellular
networks to capacities and speed comparable to those
available by the use of fixed networks is therefore not only a
matter of technological achievements.
However, there is a business reality test to face for any
new technology (e.g. HSDPA) and service. The costs for any
additional infrastructure, and hence the cost for any service
to be delivered over cellular networks, cannot be radically
higher in comparison to the price tag for other options, like
using a Wireless LAN at an airport or hotel, or simply a
wired high-speed connection at the office or at home.
On this count todays cellular operators and vendors are
bound to face an uphill battle. The basic dilemma is the
conflict between provisioning of more geographical coverage
versus more capacity as a response to customer demand.
Another restriction is the lack of bandwidth needed to
provide Mbps transmission over cellular networks. To simply
build denser forests of masts will increase cost and price to
levels which are too high in comparison with other options.
In addition the Regulators often require wider and faster
network roll-out compared to what operators see as realistic.
The rush into unlicensed parts of the spectrum is bound to
radically change the playground for the wireless industry.
There is an opportunity to access and share new revenue
streams outside what was previously within reach for telecom
operators. The downside, from an operators perspective, is
that this new turf is highly competitive, and has to be shared
with new potentially powerful market players with sometimes
a large customer base derived from non- telecom business.

In this paper we will focus on system and business model

aspects of proposed wireless solutions for low cost
infrastructure (LCI). Low cost means significantly lower
cost than what can be achieved by extrapolating todays
cellular technology [1][2].
The outline of the paper is as follows: Section 2 contains
notes on related work and trends, in the next section cost
structure and scalability aspects of current cellular solutions
are discussed leading to the proposed low cost concepts
presented in section 4. In section 5 business models and roles
for the proposed LCI concepts are presented, including
aspects as ownership and evolution paths.

II.

RELATED WORK AND TRENDS

In the autumn 2004 a group from industry and telecom

operators finalized specification for Unlicensed Mobile
Access (UMA) [3]. UMA is a suggested standard for
extension of GSM/GPRS mobile services using an unlicensed
radio link in the customers premises, where the standard
WLAN and software are added to standard mobile terminals.
The EU integrated project Ambient Networks (AN) focus
at always best connected solutions using multi-operator
multi-radio access architectures that works across business
boundaries[4]. The AN project also includes research on Low
Cost and Non-conventional wireless access and evaluation of
the economic feasibility of the proposed solutions.
In addition to (pre) standardisation research there are also
activities initiated by individual companies. Intel and Toshiba
are engaged in the build-out and provisioning of base-stations
for Hot Spots in business districts. The US company
Boingo with the concept WISP in the Box (Wireless ISP)
is convincing owners of hotels and restaurants etc. of the
merit of installing cheap base stations on a franchising basis
Cellular operators might even not need to invest in any own
WiFi networks. E.g. Vodafone cooperates with the fixed line
operator British Telecom to get access to WiFi capacity and
France-based Orange combines its own WiFi Hot Spots with
those provided by independent actors.
Currently many networks are deployed in parallel in the
same geographical area although seamless mobility between
inter-working networks would offer a substantial potential for
cost savings [4][5]. Inter-working between WLAN and
cellular systems has been a work item for many years in
3GPP and most vendors of cellular systems offer solutions.
Ongoing activities on seamless mobility includes both
research in many areas; e.g. radio resource management [4],
security and connectivity for integration of WLAN-3G [6],
optimisation of packet flows at handovers [7], market
aspects of merging the telecom and datacom worlds [7],
device flexibility and user experience [8], as well as joint
efforts by the industry; e.g. by Motorola and Skype on mobile
Voice over IP and by Vodafone, Ericsson and HP on
solutions for mobile offices.

III.

COST STRUCTURE AND SCALABILITY

OF CURRENT CELLULAR SOLUTIONS

A breakdown of the cost structure of a mobile operator

shows that the direct equipment cost only are a smaller part
of the total costs. Three major parts of the total cost structure
pie can be identified: Marketing and handset subsidies is one
part, operational costs (OPEX) and capital investment costs
(CAPEX) are the two other parts. Hence, reducing equipment
costs is only part of an overall Low-Cost solution [5][11][12].
Large cost components are related to the maintenance of
the infrastructure (OPEX) and to the physical deployment of
the infrastructure, such as planning, installation of antennas
& towers, cabling and other site costs. As shown in [12] the
cost structure characteristics differ for different types of base
station deployment. The major cost component for macro
base station systems is the sites, whereas the transmission
dominates for Pico base station deployment
Another important factor in the search for a low cost
solution is the scalability problem of the traditional cellular
networks [5] In a future with radically increasing traffic and
bandwidth demands, there will be a trade-off between
coverage and provided capacity. The operators can either
build a dense forest with base station sites to provide
broadband everywhere; or accept that high capacity coverage
will only be in the vicinity of the base-stations (see figure 1).

MIMO relays

Local Access Points

Multihop terminals
and/or relay nodes

Figure 2. Three proposed LCI concepts for low cost infrastructure,

example where coverage of existing base station sites are extended

Different re-use strategies are used for low cost solutions in

specific deployment and business scenarios.

User deployed Local Access Points (LAPs) make use of

existing broadband connection in homes and offices

Fixed multi-hop relays deployed by Mobile Network

Operators (MNO) is a strategy to extend the capacity
and/or coverage of existing base station sites [13]

User owned mobile relays based on MIMO technology

(both in the relay and in the base stations) is another
strategy to make the best use of existing sites

User terminals with multi-hop capability require other

terminals to be available in order to extend the capacity
or coverage of existing cellular systems.
B. The New Network Element (NNE)
Local access points, multihop terminals and different types
of relay nodes are functionally located between the terminal
and the infrastructure. In [14] this proposed intermediate
relaying access point is called the New Network Element
(NNE). The NNE can be mobile or stationary and provides
local coverage for user equipment in its close vicinity.
The NNE can be connected to the fixed-part of the network
via either wired or wireless interfaces (figure 3). The local
coverage would typically be based on evolved WLAN
technology. The NNE supports multiple standards both in the
communication with the mobile stations and the fixed
network. By employing multi-radio technology in the NNE,
the mobile stations can be kept as simple as possible.
NNE

Figure 1.Deployment of base station sites and coverage for different

data rates; the upper part illustrates a full coverage system for voice
services and low data rates, in the middle the sites are re-used for
higher data rates (spotty coverage), the lower part shows the site
forest needed in order to achieve full coverage for high data rates

IV.

MS

Internet

Fixed Network

Relay Air
Interface

NNE
controller

NNE

MS

Cellular Radio
Access Network

MS

LOW COST SOLUTIONS

Cellular
Core Network

MS

A. LCI Solutions by re-use strategies

The solutions proposed within the LCI project all focus on
the reduction of costs for network deployment and operation.
The common LCI strategy in order to avoid the dense base
station site situation could be called involve users and reuse infrastructure assets, see figure 2.

Local Air
Interface

NNE

Network
Interface

Base
station

Network
control

Figure 3. The proposed infrastructure with NNE and mobile stations

(MS), and with the proposed Network Interface (NI), the Local Air
Interface (LAI) and the Relay Air Interface (RAI) ( From[14])

V.

BUSINESS MODELS AND ROLES

A. Use cases and business model candidates

In addition to cost savings for deployment and operation
other benefits include aspects as reduced risk and increased
flexibility for both investments and for network planning and
deployment. Applicable use cases for LCI solutions would be
Low cost capacity or coverage extensions for any
network operator
Fast roll out for Greenfield operators
Short term or temporary hot-spot deployment
Low cost and flexible private access ensuring own
communication needs
Three main business model candidates are considered for
the analysis of the LCI solutions:

Traditional MNO which offers all services and capacity

Local operators or users offer capacity for public use in

close cooperation with a MNO (Network franchising)

Independent local network operators (LNOs) offering

network capacity and services
B. Ownership and operation of the NNE
Mobile operators, local operators as well as private users
and companies can own and deploy the NNE, see figure 4.
Subscriptions for private users could e.g. include 4 terminals
and 6 NNEs, where these can be deployed at homes, in
summerhouses or in cars. The NNEs are supposed to have
built-in functionality for self-configuration and test. Since the
NNE is small and portable, maintenance can be handled as
for any consumer product, i.e. no need for field support.
When it comes to the network control and operation, the
MIMO relays and the multihop relay nodes require very close
integration into the cellular network e.g. for cell planning,
channel allocation, admission control etc. This means that it
is less likely that an independent market player could operate
networks with MIMO and multihop NNEs. However, for the
local access points the situation is believed to be different,
see subsection D.
Operator

Operator

Operator

Operator
network

Operator
network

Operator
network

C. Network franchising
Most large and medium sized companies have internal
communication networks and services. The usage of these
company networks are characterised by fully known internal
users (no public users) and focus on internal services &
needs. These companies can act as Local network operators
(LNOs) where the company network and infrastructure is
re-used for local public wireless access. All types of
presented NNEs are candidates to be a local base or relay
station that can be deployed in homes, offices, and hot spots
in order to provide extended local access. Internetworking
can be established using fixed or mobile wireless links or
fixed broadband connections [14][15][16].
The network reuse for provisioning low cost high-speed
wireless access can be supported by a business model called
network franchising [15]. The LNOs can offer different
company assets to a MNO including
Site space, power & stable environment,
Transmission & fixed line infrastructure
Local network operation & maintenance.
For the proposed concept, the traffic in the area covered by
the local access provider can be split between the local
provider and the wide area system operated by a Mobile
Network Operator (MNO), see figure 5.
Results on the technical feasibility have been presented on
coverage and capacity of user-deployed wireless networks
[17], an on the possible gains when more than one local
network can be accessed [18].
In the proposed business model both parties will benefit
from the arrangement. The MNO can use this kind of cheap,
high-capacity wireless access, as an alternative to a more
costly network build out of the network using the traditional
base station site approach, whereas the user gets a wireless
access point and some form of compensation by the operator.
As argued in [20], another potential benefit for the MNO
can be identified when the agreement between the parties also
includes access to all traffic, both internal and public. In a
sense the MNO will experience lowered costs for customer
acquisition. Since the traffic in this case usually can be
considered to be stable and established the costs for network
franchising would represent a low risk investment for MNOs.
Mobile operator wide area coverage

LNO

NNE

NNE

NNE
Local access provider

Terminal

Terminal

Terminal

User

User

User

Figure 4 Traditional operator (MNO), Local operator (LNO) or

private user as owner of the NNE

Public users
User group
Figure 5 Wide area coverage mobile operator (MNO) co-operating
with a local network provider (LNO) using local access points.

D. Evolution path for the local access point NNE

User deployed
local access points
with PUBLIC access
for ALL users
User deployed
local access points
with PUBLIC access
users of OWN
MNO only
User deployed
local access points
OWN access only

VII.

ACKNOWLEDGEMENT

The contributions from our colleagues in the Low Cost

Infrastructure project are greatly appreciated, special thanks
to MSc Klas Johansson (KTH), MSc Johan Hultell (KTH),
PhD Per Zetterberg (KTH), PhD Miguel Berg (KTH) and
Econ Lic Jonas Lind (Stockholm School of Economics) .
This work has been supported by the Swedish Strategic
Research Foundation as part of the funding of the Affordable
Wireless Services and Infrastructures program.

VIII.

Figure 6 Possible Evolution paths for local access point NNE.

A possible evolution path for the use of local access points

(LAPs) can be envisaged within a traditional MNO business
model. The first step includes user or MNO owned LAPs that
are deployed in offices and homes for the access of the own
user group only; this is the case for the current UMA
solution. In the second phase, the LAPs will provide access
for customers of the own MNO. This will put additional
requirements on the LAP to include security features, access
and mobility control. In the next phase, true public access, i.e.
access for all users, can be provided. Hence, the LAPs must
have some form of support for local and national roaming.
Access and services can also be provided by independent
LNOs [19][20]. To provide a full value proposition the LNOs
need to cooperate with other types of market players like
access brokers, trust managers and clearing houses
[21][21][22]. Research is ongoing to ensure support for
multi-radio access and mobility that works across
administrative boundaries also in highly competitive markets
for mobile services [23].

VI.

SUMMARY

Future wideband wireless networks with potentially lower

cost than what can be achieved by extrapolating todays
cellular technology are investigated. The solutions focus on
the reduction of costs for deployment and operation by userdeployment and reuse of existing infrastructure.
Technologies and solutions include adaptive antennas in
base stations and mobile relays (MIMO), multihop relays and
local access points (LAPs) that use existing broad band
connections. In a unified approach the relays and LAPs are
located between terminals and the operator network; hence
we introduce the term New Network Element (NNE).
User owned (and deployed) NNEs on a subscription basis
can be used for all proposed solutions. MIMO relays and
multihop relay nodes require very close integration into the
cellular network, i.e. it is less likely that they would be used
by an independent LNO.
All low cost solutions can be used by local operators
(LNOs) to offer capacity for public use in close cooperation
with a MNO (Network franchising). LAPs can also be used
by an independent LNO, which in this case need to cooperate
with access brokers, trust managers and clearing houses.

[1]
[2]

[3]
[4]
[5]

[6]

[7]

[8]
[9]
[10]
[11]

[12]

[13]
[14]

[15]

[16]
[17]
[18]
[19]

[20]
[21]
[22]
[23]

REFERENCES

Markendahl J, Zander J, Low Cost Broadband Wireless Access

Key Research Problems & Business Scenarios, Proc ISART04
Giles et al, Cost Drivers and Deployment Scenarios for Future
Broadband Wireless Networks Key research problems and
directions for research, Proc. IEEE VTC Spring 2004
http://www.umatechnology.org/specifications/index.htm
N. Niebert et al, Ambient Networks: An Architecture for Comm.
Networks Beyond 3G, IEEE Wireless Comm., April 2004.
F. Loizillon et al., "Final results on seamless mobile IP service
provision economics", IST-2000-25172 TONIC Deliverable
number 11, Oct. 2002.
M. Buddhikot et al, Design and Implementation of a WLAN
CDMA2000 Interworking Architecture, IEEE Com munications
Magazine, November 2003.
J. Kristiansson, P. Barnes, Providing seamless mobility with
competition based soft handover management, 7th IFIP/IEEE
Int. Conf. on Mgmt of multimedia networks & services, 2004
B.Thorngren, P. Andersson, P. Bohlin, M. Boman,Seamless
mobility: More than it seams, INFO, vol 6 (2004) , No. 3
M. Bylund, Z Segal, Seamless mobility with personal servers,
Stockholm Mobility Round Table 2003
Zander, J, On the cost structure of Future Wireless networks,
Proc IEEE VTC 97
A. Furuskr, M. Almgren, and K. Johansson, "An Infrastructure
Cost Evaluation of Single- and Multi-Access Networks with
Heterogeneous User Behaviour", Proc. IEEE VTC Spring 2005
K. Johansson, A. Furuskr, P. Karlsson, and J. Zander, "Relation
between base station characteristics and cost structure in cellular
networks", Proc. PIMRC 2004.
B Timus. Cost analysis issues in a wireless multihop architecture
with fixed relays. Proc.IEEE VTC Spring 2005
K.Johansson, J.Markendahl, P.Zetterberg, Relaying access
points and related business models; Austin Mobility Round
Table, 2004
K. Johansson, J. Lind, M. Berg, J. Hultell, N. Kviselius, J.
Markendahl, and M. Prytz, Integrating User Deployed Access
Points in a Mobile Operators Network, ProcWWRF12, 2004 .
M. Berg, J. Markendahl, A concept for public access to privately
operated cooperating access points, Proc.IEEE VTC Spring 2005
K. Johansson Coverage and capacity of user-deployed wireless
infrastructure, to appear at RVK05
J. Hultell, M. Berg , Generalized roaming and access selection
in multi-operator environments, to appear at RVK05
J.Hultell, K. Johansson, and J. Markendahl, Business models and
resource management for shared wireless networks, Proc. IEEE
VTC fall 2004.
J. Markendahl, . Mkitalo, J. Werding Company asset analysis
of candidates for novel access provisioning, to appear at RVK05
CN.Chuah et al, "QoS Provisioning using a clearing House
architecture", Proc IWQoS, June 2000
S. Wolters et al, Resource Brokerage in future wired & wireless
networks-whyless.com http://www.whyless.org/public/wp3.htm
C. Cedervall et al, Initial findings on business models and
business roles enabled by Ambient Networking, to appear at the
Hong Kong Mobility Round Table, 2005