Telecoms For Beginners

Global Equity Research
Global Telecommunications
14 January 2004
Primer
Deutsche Bank's 'early learning' tool for the telecoms industry. This guide looks at the big picture for the industry before delving into the basic technology and how it fits together to create networks. It also touches on regulatory issues and concludes with a glossary of terms
Telecoms for Beginners

Industry Focus
Technology & Industry Primer
Martin Mabbutt
(+44) 20 7545 0625 martin.mabbutt@db.com
James Dougall
(+44) 20 7545 1191 james.dougall@db.com
Audrey Wiggin
(+44) 20 7545 0707 audrey.wiggin@db.com
Deutsche Bank AG Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED AT THE END OF THE BODY OF THIS RESEARCH
Global Telecommunications
14 January 2004
Telecoms for Beginners Technology & Industry Primer

Martin Mabbutt
(+44) 20 7545 0625 martin.mabbutt@db.com
Primer
James Dougall
(+44) 20 7545 1191 james.dougall@db.com
Audrey Wiggin
(+44) 20 7545 0707 audrey.wiggin@db.com
Deutsche Bank's 'early learning' tool for the telecoms industry. This guide looks at the big picture for the industry before delving into the basic technology and how it fits together to create networks. It also touches on regulatory issues and concludes with a glossary of terms Getting started While perhaps not in the same league as pharmaceuticals, telecoms nevertheless has its fair share of incomprehensible terminology and technical issues which affect the investment case but may not be obvious to the layman. This report is aimed at helping the investor who needs to know a little about the telecommunications industry, with a particular orientation towards the technology. It merely scratches the surface of the many topics covered but we hope it provides some basic knowledge for newcomers to the industry and a degree of linkage between the technical and financial worlds of the telcos. Focusing on technology ad networks We have chosen to focus on the technology within this piece, both in order to make it of a manageable length but also to avoid dating the piece through referring to company specific issues. We have found that whilst there is a mass of information available on the technology it is often either far too detailed or too simple, and is seldom put into any financial context. We hope the contents will not offend the purist too much who no doubt will find much to argue with in our simplified discussion of the technology and network issues. Despite its many shortcomings we hope this guide will provide you with a one-stop shop for a quick and dirty guide to getting a basic grip on what your colleagues are actually talking about.
Deutsche Bank AG Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED AT THE END OF THE BODY OF THIS RESEARCH
14 January 2004
Telecommunications Telecoms for Beginners
Table of Contents
The beginners guide.......................................................................... 3

Outlook ........................................................................................................................3 Risks ............................................................................................................................3
Telecom industry overview .............................................................. 4

The Bluffers/Duffers guide to the Telecommunications Industry ...............................4 Overview......................................................................................................................4 Getting serious...........................................................................................................14 Key Trends .................................................................................................................15
Telecom Services and Business Models........................................ 19

Fixed Line Services ....................................................................................................23 Wireless Services ......................................................................................................28 Integrated Services ....................................................................................................34 Issues for the Industry...............................................................................................34
Communication Media.................................................................... 41
Wired Media (Guided media / physical media) ..........................................................41 Wireless Media / Air / Unguided Media .....................................................................54 Techniques / Technologies ........................................................................................64 Powerline technology ................................................................................................70
Communication Networks.............................................................. 72
Communication Systems...........................................................................................73 Basic Components of a Communication System ....................................................104 Types of Networks ..................................................................................................113
The Regulatory Environment........................................................ 124

Telecom Regulators.................................................................................................124 Regulatory Bodies....................................................................................................132 Technology - Special Interest Groups (SIGs) ...........................................................135 Technology Debates ................................................................................................139
Glossary.......................................................................................... 144
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The beginners guide

Outlook
As far as an investment proposition is concerned telcos have varied from being the hottest thing in town to being very unloved. Given that this document is designed to have a long shelf life we make no predictions on where valuations are heading. But many critical issues facing the industry now are likely to be of a sufficient longevity to be touched upon within what is principally intended to be a reference document. This report is aimed at helping the investor who needs to know a little about the telecommunications industry, with a particular orientation towards the technology. It merely scratches the surface of the many topics covered but we hope provides some basic knowledge for newcomers to the industry and a degree of linkage between the technical and financial worlds of the telcos. The report is divided into six sections. The first, Telecoms Industry Overview, takes a birds eye view of the industry and the factors that have driven its development, principally over the last twenty years. It touches on the key growth drivers, regulatory issues, and structural issues related to returns and competition. The second section Telecoms Services and Business Models goes into more detail on industry structure and services provided by telco operators, together with a look at some of the topical issues facing the industry. The section on Communications Media gets into the detail surrounding the basic elements used in communications right from copper wires to modulation techniques. The fourth section is entitled Communications Networks and looks at how the elements discussed in the previous section are pieced together to form networks, ranging from fixed through satellite and computer networks to mobile systems. Then we look at The Regulatory Environment, why it is important, what regulators do and how they do it, and take a glance at important topical issues. The report finishes with a Glossary of frequently used telecoms terms.
Risks
Please note that we have worked in conjunction with an outside agency to produce parts of this publication. We hope we have spotted obvious errors but we will not have captured all of them, and will certainly have made mistakes of our own. Hopefully a few errors will not render the entire publication useless!.
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Telecom industry overview

The bluffers/duffers guide to the Telecommunications Industry
This report is aimed at helping the investor who needs to know a little about the telecommunications industry. It is specifically written to help buy- and sell-side analysts alike get through the first few months of covering the sector. It does not intend to make anybody an expert so apologies for those looking for the answers to intractable problems such as how the technology really works or how to pick a good investment idea. Purists, and/or experts will no doubt wince at much of what we have written. Readers will find it possible to gather an abundance of both technical information and financial information. But finding any sort of coherent framework that links the pieces together for the lay person, particularly somebody who has no technical background is not easy. Many of the topics we cover in a short paragraph have numerous long textbooks and technical manuals dedicated to them. What we hope to do is give some insight into how the industry evolved into its current shape and we make a few guesses as to some of the factors which will influence what may happen going forward. Despite its many shortcomings we hope this guide will provide you with a one-stop shop for a quick and dirty guide to getting a basic grip on what your colleagues are actually talking about.
Overview
Before we look at the sector in detail we thought it useful to present a birds eye view for those without the time to delve more deeply into this report. It provides an overview of some of the basics of the industry structure, how we got to where we are today and some of the factors influencing the future shape of the industry.
Telco sector represents 3-4% of global GDP
By way of introduction, the telco sector represents about 3-4% of global GDP in terms of telecommunications services revenues. As a percentage of household spending we estimate telecoms spending at around 2-3%, so well below spending on tobacco and alcohol. Over many decades it has outpaced GDP growth, sometimes by a substantial margin, as the following chart shows. Figure 1: Telecoms as % of household spending
3.40% 3.20% 3.00% 2.80% 2.60% 2.40% 2.20% 2.00% 1.80% 1990 1991 1992 US
Source: Deutsche Bank estimates and company data
1993
1994
1995 UK
1996
1997
1998
1999 Japan
2000
2001
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Growth rates not expected to exceed GDP over the next decade
One of the biggest issues facing the industry at present is whether the growth rates going forward will be substantially lower than hitherto. Our view is that there was a unique combination of events that fed rapid growth throughout the 1990s which will not be repeated. As Figure 2 shows we expect growth rates for the sector to trend back to more normal levels over the next decade, i.e grow in line with household expenditure as opposed to rates of around 1.5x that were evident in the 1990s. Figure 2: Communications expenditure multiplier
1.6 1.4 1.2 1 0.8 0.6 0.4 1950s
Source: Deutsche Bank estimates; BEA
1960s
1970s
1980s
1990s - 2001
2001-11 F
Note that we use US data for much of our discussion because consistent data tends to be available over long time periods. More recently, extremely detailed information is available on regulatory web sites in other parts of the world but invariably this is limited in terms of its historical perspective. We make no apologies either for drawing heavily on the UK to illustrate points of detail, it being one of the earliest markets to deregulate and one with detailed regulatory information available. The industry has historically been highly capital intensive with the result that it tends to return high operating margins. As a consequence, its importance to the global economy and its weight in terms of equity markets is higher than the simple analysis of revenues would suggest. At a global level telcos makes up around 6.5% of the MSCI Global Sector Index. Telecommunications is a key industry. The ability to communicate over wide distances is a basic key to economic growth and industry competitiveness. As a result the telecommunications industry has historically been an agent of government and owned by the state. We refer to these companies as the incumbents.
Steady progress in achieving liberalisation
Over the last twenty-five years there has been a concerted effort to loosen the shackles of state control. This has taken two forms. The first is straightforward privatisation of the state telecommunications company. The second is to provide licences to new entities to bring competition to the existing incumbent operator in certain parts, or all, of the market. In areas of new technology in particular it has been possible to introduce more players to the market. The best example would be the mobile segment where every market has at least two operators, almost invariably one of which is, or at least was, the incumbent. As in so many other
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industries, deregulation started in the US and was followed at varying rates by Europe and Asian markets. China is the largest market where state control remains significant. Evolution not revolution Figure 3 below looks at the market shares of a typical incumbent, in this case BT. In this chart we refer to the fixed line market because that is the traditional business of the incumbent. Note the first element of the market to be deregulated was international calls in the early 1980s. Other elements have been progressively deregulated since that time. The picture in mobile is somewhat different because here the market has been more recently developed and in many cases was designed to be competitive from the outset. Figure 3: Market share of typical incumbent BT (deregulated early 1980s)
100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 1997 1998 1999 2000 2001 2002 2003 2004E 2005E 2006E Int calls Total call traffic 2007E
Local calls Calls to mobiles

Source: Deutsche Bank estimates and Oftel
National calls Other calls
In this case, despite nearly 20 years of liberalisation the incumbent operator still controls the bulk of the fixed line market. Why? The emergence of competition Key to understanding the emergence of competition is a basic knowledge of the economics of the industry. There are two major factors affecting the economics. The first is technology and the second regulation. Without at this stage going into any detail, the pace of advances in terms of technology far outweigh any ability of a state-run industry to respond to the implications. This creates a situation where the price of a service can very quickly get out of step with the cost of providing that service.
The slow pace of competitive inroads into existing telco markets frustrates many
Secondly, incumbent monopolies owned by the state are run with political goals to the fore. These may include a desire for profits but not necessarily. This has an impact on the pricing structure. Assuming the government wants to generate some sort of economic return from its asset it will need to decide on a pricing structure. In general it is fair to say that a critical determinant for creating value from a network is to get as many people to use it as possible (there is well-established formula for showing just this, known as Metcalfes Law). As a direct result prices in most
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markets controlled by state-owned incumbents in the past were geared towards creating as many connections to the system as could reasonably be engineered. Charging for the vast bulk of telecoms services is via a fee for having a connection to the system and a usage based fee. This would seem to be intuitively right although, as we shall see, recent pricing models and changes in technology have begun to overturn even this basic rule. Under the old monopoly model and old technology the cost of providing connections to the network was far higher than the monthly rental fee but that was all part of the social engineering. The low price for the monthly connection was recouped by charging a high price to those subscribers who actually made calls, effectively subsidising those who had the phone mainly to receive calls.
Cross subsidy endemic in telecoms
In terms of variations within prices for calls, the price of international calls reflected the limited capacity that once existed between countries and the luxury value associated with these calls at a time when international trade was limited. At the other end of the spectrum local calls have sometimes been provided for free. So, put crudely, international calls have subsidised long distance calls which, in turn, have subsidised local calls. And call charges have invariably subsidised rental charges. Figure 4 below illustrates the degree of this cross subsidy in the UK market. The same points hold true for all markets. Bear in mind too that this relates to recent data, so even where there is theoretically a highly competitive market over many years these cross subsidies persist. Figure 4: BTs Financial Returns ROCE (%)
FY 1999/00 analogue access ISDN2 ISDN30 Local calls National calls International calls (return on sales for international) Calls to mobiles Inland operator assistance International outgoing operator assistance
Source: Oftel
FY 2000/01 1.8 49.6 49.1 98.2 102.2 -623.7 45.3 25.1 64.1 22.4
FY 2001/2 3.2 20.9 34.6 108.6 104.6 326.9 52.2 6 27.4 34.7
0.1 9.6 18.7 83.1 92 3023.4 43.8 68.1 40.5 52.2
This cross subsidy is endemic in telecommunications and stems from three factors:
n
the difficult job of allocating costs to elements of a network, all of which rely on each other to allow successful communication to occur the deliberate cross subsidies created as part of the social engineering process a generally universal requirement to charge the same price for the same service regardless of who the customer is.
n n
When the industry comprised one company per country it did not much matter where the money was earned as long as, overall, the industry made a return acceptable to the government. But where competition is being introduced the degree of cross subsidy, or the degree to which prices exceed costs in that particular part of the business, is critical because the size of the differential is directly related to the perceived opportunity. We could spend a long time on this issue arguing the technical complexities but maybe the easiest way to see the impact of cross subsidy is to look at Figure 5
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which shows BTs market share across various products. This is typical of any European incumbent. Figure 5: Market share of access vs international calls vs total calls
100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 1997 1998 1999 2000 2001 2002 2003 2004E 2005E 2006E 2007E
Int calls
Source: Deutsche Bank estimates and Oftel
Total call traffic
Exchange lines
This clearly shows the widespread erosion in the international call market at one end of the spectrum and the high market share in access at the other. This has occurred despite widespread differences in the regulatory regimes and the overall competitive environment.
International calls have generally commanded highest returns
The international call market has presented easy pickings thanks to its high returns. In recent years prices have been driven down rapidly as new entrants have entered the market and undercut the incumbent. The fact that this cycle has repeated itself numerous times bears testimony to just how high returns were. For reasons we shall touch on later the actual cost of technology in the pure international long distance market has fallen rapidly, and continues to fall so quickly that the element of cost which is related to the network has become so small that other costs are becoming more significant. Moreover the international market value continues to fall. A number of years ago The Death of Distance was a popular theme, highlighting that premiums for long distance and international calls would erode. Some markets have since introduced flat rate domestic pricing but most operators continue to extract premium prices for international calls and most still price long distance at a premium to local. Understandably existing operators will try to maximise revenues and thus it is up to the new operators to drive down prices. Given that these new operators are by definition small, the incumbent operators will not have to react that speedily. Hence tariff changes due to competition are normally slow. More dramatic tariff changes occur primarily as a result of regulatory edicts.
Competition comes in many shapes and sizes
Competition takes many forms. But in its broadest sense it can be divided into two groups. The first group comprises those whose raison dtre is to exploit the imbalances mentioned above. These business models tend to be characterised by a lack of alternative infrastructure. In its purest sense these are the virtual network operators which resell an existing operators capacity on a wholesale basis. By virtue of the fact that the operator is dependent on the incumbents network the
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suite of services offered is invariably a subset of that offered by the network owner. The catch is normally price based, be it just cheaper than the incumbent or packaged in a different way. The business model works because invariably these VNOs have a brand strength, and maybe existing distribution and billing capabilities which allows them to make money despite a relatively thin margin on reselling capacity. At the other end of the scale we have the full alternative network operator who will build extensively. The most dramatic exponent of this is the cable operator. Where a fresh build occurred, as in the UK, the economics of this can be very challenging due to the high cost of construction. In this particular case the hook for investors to finance the venture was the so-called triple play, that is offering a combination of telephony, internet, and cable TV services across the platform. Of course, in between these two extremes there is an array of different models, which we discuss more fully in the main document. To summarise, there is the light-infrastructure model that uses large chunks of other operators networks for carriage of traffic but its own switches to allow it to offer differentiated services to customers. There are operators who mainly focus on the international traffic market and a raft of different solutions where the prime rationale is to compete in the access area. These are operators whose networks are predominantly city based (CLECs) and can be further divided depending on the access technology such as fibre, DSL or wireless, and the amount of information they can transmit, of which more later. And of course there is a different technology altogether, perhaps the most significant here being mobile. Satellite technologies are also of passing interest in this respect. Technology and regulation guide the interplay between these different types of operator. Technology we get into in more detail later but now we take a glance at regulation, or as the regulators would like to call it, deregulation. Deregulation The telecommunications industry has been in the throes of deregulation for over twenty years in some markets like the US, to six or so years in a number of European markets. Some other countries have seen minimal deregulation while others have striven for a market that is open to all comers. In practice, many factors have affected how successful a new entrant has been. The most critical factor of all has been the regulatory environment. Depending on the market there can be several layers of regulation. In the US for instance there is local, state and national regulation. In Europe there is country specific and EU wide regulation. The balance of power between these bodies is in a constant state of flux but, whatever the details, together they control how the market regime works. They recommend to the government concerned what should be done and then it is up to the government to enact the necessary legislation. For the moment we will keep it simple and assume the regulators and the governments are all one and the same body. The purpose of the regulator is to ensure a fair deal for customers. This can either be achieved through encouraging competition or by ensuring that a monopoly operator does not abuse its market position. In the latter case the regulator is in effect trying to replicate the pricing and service conditions the market would see if it were competitive. This is a tall order. Where competition is being introduced the general idea is that regulation will gradually fade away as competition becomes established.
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How the regulator regulates
Incentive or prescriptive? The most high profile issue for the regulator is whether to adopt a price control scheme of regulation or one based on a rate of return. Under the price control scheme the regulator will generally seek to prescribe the price changes permitted to the incumbent operator. These controls are normally set in relation to a local measure of inflation. So we see a price control such as RPI+2%, meaning that prices can rise by no more than 2% above inflation. These price controls may be applied in a number of ways. They may be imposed individually on a number of services or alternatively an overall price control may be applied to a basket of services. This allows the operator flexibility to change prices within that basket as long as the overall basket meets the price control. Sometimes sub caps are set within the basket to control the degree of rebalancing which an operator can undergo. For instance, as we mentioned earlier, incumbent operators have historically earned high returns on international and negative returns on local access. If these two services alone were controlled by a single price cap an operator not subject to competition would probably seek to raise prices rapidly for access and reduce them for international. But this would disproportionately hurt low users of the phone, whose telephone bill is dominated by the access charge, while benefiting business users where there is a large proportion of revenue driven by international calls. Given the social engineering aspects to regulation and the need to have as many people connected to the network as possible (Metcalfes Law) regulators will generally restrict the rate at which prices can rise for access. The whole system of price control can get pretty complicated depending on what the regulator is trying to achieve, with numerous sub caps involved. Price cap control is often described as incentive regulation because it does not attempt to directly control returns for an incumbent operator. The price control normally runs for a period of years with a tacit undertaking on the part of the regulator not to change the control in the event that the regulated entity makes either supernormal or subnormal profits In contrast, the rate of return method prescribes the return the operator is allowed to make on a carefully stipulated (by the regulator) asset base. This does not encourage efficiency because the higher the capital base the more profit is achievable. As a result there are many rules about what the qualifying asset base is. Even in markets that originally adopted this method such as the US, price control regulation is now the norm. In practice the two methods are more closely linked than they might seem at first glance. In setting the price control the regulator is making a judgement about what a reasonable rate of return might be. There is invariably a period of information sharing between regulator and regulated during the period in which the price control is set. During this period the regulated pleads why efficiency improvements that the regulator is factoring into his calculations can never be achieved and the regulator goes through the motions of not believing it. The period over which the controls will be in place is also important. Too long and the operator may make returns which are unacceptably high or alternatively may suffer losses. Too short and it might as well be a straight rate of return control. Where competition is developing, the pace of that development will often mean that a regulator must stage a gradual withdrawal in terms of imposing price controls. We have seen this happen in the international market, which is an area where there is generally an abundance of competition and the incumbent has generally lost an
Price control schemes dominate regulatory landscape
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appreciable share of the market (>50%). In most markets this is no longer an area subject to control. Interconnection and regulation Retail prices are not the only area subject to price control. Vital to the development of competition is the price paid by competitors to use the incumbents network. Given that the incumbent provides connection to virtually all customers, interconnection between networks is unavoidable. Other operators, as opposed to customers, will require different types of service to buying a local call or an international minute of traffic. Quite apart from the thorny issue of price there is a mass of issues to consider such as how and where the two networks link together, whether the facilities are dedicated or shared, what sort of traffic will be accommodated, and the type of technical standards. A variety of techniques is used to assess the correct basis for these price decisions. The arcane world of accounting gives us historic cost accounting (HCA), current cost accounting (CCA), and long run incremental cost (LRIC), all of which can produce startlingly different answers. At the end of the day a network by definition relies on other components of the network to operate. How these interactions are looked at will decide the answer to the cost price equation. So the regulators real job is to identify the major bottlenecks to allowing successful competition to develop and then deciding which method will produce the best outcome - bearing in mind this will also be affected by how strong the regulatory position is from a political perspective. In extreme cases where the operators take issue with the decisions, the regulator may be forced to justify the analysis to politicians. So where are we heading? At the risk of dating the piece we thought it worthwhile to provide a brief snapshot of the current market structure and a mile-high look at the big issues. Without any doubt, mobile is the revolutionary driver of change in the industry. On a global basis there are more mobile subscribers than traditional telephone access lines. The functionality of a mobile handset is infinitely higher than that of a fixed phone and the gap is widening all the time. Substantial amounts of traffic are now carried by mobile as opposed to fixed networks, we would hazard a guess at 25% of total voice traffic volumes, while there are some telephone users who only use mobile (although less than 10% globally). We have no doubt that both of these percentages will increase.
Interconnection terms the key to the development of competitive markets
Mobile moves into the ascendancy
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Figure 6: Ratio of mobile subs versus fixed access lines

2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 1995 Europe Japan
Source: Teleglobe
1996
1997
1998
1999
2000
2001
2002
2003E 2004E 2005E Asia Pacific
North America Australasia
Latin America Global total
It would be foolish to write off the fixed network operators quite yet. They still connect most subscribers. Their capability to provide high bandwidth services is likely to substantially exceed that of mobile operators for some time. Their challenge is to exploit this advantage by rapidly building usage of internet-based services.
Where does this leave fixed networks?
Moreover it is worth remembering that a mobile network is really just a fixed network with radio at the end of it rather than wires and some clever devices that allow people to communicate whilst moving about. The fixed networks are not totally helpless when it comes to fighting back. The key will be to create devices that can access a wide variety of differing types of networks on an intelligent basis. Most fixed line operators also own mobile networks. However market shares of above 50% are rare, while in the fixed-line area market shares of under 50% are very rare. We would expect incumbents to try to address the market with products that seek to exploit the segment where they enjoy the highest market shares. We are already seeing signs of a blurring of distinction between the mobile and fixed pricing packages occurring in the US markets and we would expect the fixed line operators to seek to bundle an increasing mix of services into the packages. Figure 7: Product maturity
Data solutions Wireless ATM Optical DSL Transport IP Frame Relay Directories Equipment ISDN Leased Line Voice Pay Phones
Growth %/GDP
Development Stage
Growth Stage
Mature Stage
Late Stage
Product Life Cycle Stage

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Nothing radically new on the technology horizon
In terms of the overall industry we see little in the way of new services which are so radically different that they change the way people communicate. The arrival of mobility in the early 1980s achieved this, and the result was a premium period of growth for the overall industry. Broadband is still in its infancy, both in the fixed and mobile arenas, and ultimately may produce a period of revenue growth going forward. However the market is currently of the view that broadband will not command a high enough premium to regenerate growth and that a byproduct will be lower revenues from the conventional mainstay of the industry, voice traffic. The other technology to have come of age with the capacity to provide a further upset to traditional business models is WiFi. This needs to be watched closely. Our current thinking is that the deployment of this technology will lead to a further blurring of the lines between fixed and mobile networks. The niche providers will also continue to pick away at the incumbents. Whatever the regulators say about withdrawing from the industry, the fact is that the definition of significant market power is typically a market share of 25%. No incumbent is anywhere close to this nor likely to be for the foreseeable future. As a result regulators are likely to continue to press their case to get lower cost access to network for the newer players and fight hard for the proverbial level playing field. Longer term there are more racy technologies that could eliminate the need for much of the network that exists today, and ultimately bring down the 100-year old edifice which is todays incumbent. Parasitic, or symbiotic, networks would be such an example and indeed are under active development in the US, the UK and Israel. It is not beyond the bounds of possibility that many goods sold in the future, including jewellery, cars, white and brown goods, will contain devices which will allow communications with other such devices all without any local fixed network. In the meantime the burgeoning spread of wireless LANs, or WiFi hotspots, will offer a slightly less flexible version of the same thing. If these really work effectively then some of the business models surrounding 3G mobile technology could be severely dented. Machine to machine communication is growing very fast and by the end of the decade we think could account for the vast bulk of communications. A recent speech by Dr Peter Cochrane, a renowned technology expert, suggested that transponders can currently be printed onto paper for about $0.05. This allows boxes to attain a degree of intelligence that offers some interesting possibilities. The message is that telecomms will require much higher bandwidth and with much larger swings between peak and off-peak traffic. This will place intolerable pressure on the traditional switched network. The answer for the existing operators is either to embrace the new technology offered by parasitic networks or face extinction. However, this is getting into the area of specialism, which extends beyond the scope of this note. For now lets get back to the basics of what telecomms actually is.
But lots of technologies still to be fully implemented
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Getting serious
The word telecommunication is derived from Greek word tele meaning far off and Latin word communio meaning mutual participation.
Most people think of telecommunications as sending messages over distances further than one can shout. But even this basic point needs to be redefined in order to understand todays telecoms environment. Wireless technology has applicability to very short distance communications. There is huge potential associated with Bluetooth technology, more of which later, and machine to machine applications will certainly prove material, although not necessarily of any help to the telcos directly. In this report we will concentrate principally on the networks dealing with communications of 10m and above.
Figure 8: Classification of networks based on distance

Communication Distance (order of magnitude) Processors located in same Example Circuit board System Data flow Multimachine e.g. computer handset or PC Room Building Campus City Country Continent Planet 0.1m 1m 10m 100m 1km 10km 100km 1,000km 10,000km
Local Area Network (LAN) e.g. wireless LAN (WLAN)
Metropolitan Wide Area Network (WAN) The Internet Area Network e.g. Cellular telephone network (MAN) e.g. Wireless in Local Loop (WLL)
Source: Computer Networks by Andrew S. Tanenbaum, 3rd Edition
This report focuses on various types of end-user services and their providers. These include:
n n n n n
Fixed voice services landline (or wired) telephony Fixed data services Internet access through DSL, cable etc. Wireless voice services cellular telephony Wireless data services WLAN, Short Messaging Services (SMS) Converged services Voice over Internet Protocol (also called VoIP or Net Telephony), text messaging from fixed to mobile phones, Internet access over mixed cellular-WLAN networks etc.
Just as a train service uses a network of railtracks to carry passengers from one point to another, voice or data traffic is carried over a communication network. The media for carrying communication traffic can be categorised into wireless or wired. Communication services provided include radio or TV broadcast, telephony, Internet access, Location Based Services, messaging services, Voice over IP (VoIP), Virtual Private Networks (VPNs) etc. In later sections of this report, the focus is on two-way communication services and their applications, i.e., fixed and wireless services providing two-way voice and data communication. The services and applications that are likely to drive growth in overall telecom services revenue in the near future are: Internet access: The following access methods would drive telecom services revenue growth:
n n n n
Wired broadband using Cable and DSL technologies Wireless broadband using wireless LAN, 2.5G and 3G cellular networks Converged networks e.g. cellular networks and wireless LAN combined VoIP
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Messaging services: SMS and MMS services would drive telecom growth both directly and indirectly:
n n
Directly: Consumer and business communications Indirectly: By enabling other applications such as location based services, banking, news alerts etc.
Key trends
Figure 9: Worldwide telecom services revenue 2002-2007 (in USD billion)
Independent estimates suggest that globally, the total revenues for fixed and wireless services (voice as well as data) are expected to grow at a Compounded Annual Growth Rate (CAGR) of about 5% from US$1,066.4m in 2002 to US$ 1,357.9m in 2007. These rates would imply growth of just above GDP. Growth trends vary for service types, such as fixed telephony, mobile services, Internet etc. Further, the trends also vary with geography because of the technological history and environmental factors specific to the regions.
CAGR (2002-07) = 4.95%
2 1.36 1.07 1
0 2002 2007F
Source: 2002: featuring a clear slowdown in growth and a sector undergoing change by Idate, June 2003 (Link: http://www.idate.org/an/qdn/an-03/IF261/index_a.htm) 1 ibid
Asia Pacific is likely to drive growth in the telecom services sector.
External observers suggest the growth in revenue from voice services is expected to be low. Therefore, the overall telecom services revenue will be driven by growth in data services, i.e., through wired as well as wireless broadband. Among various geographies, Asia Pacific is likely to drive growth in the telecom services sector given the low penetration rates of telephony in some of the most populous markets, notably China. Service trends Telecom services can be broadly categorised into fixed telephony, mobile services (voice and data), Internet (through dial-up and high-speed access) and data services, such as VPNs. Among these services, the share of fixed line in worldwide telecom services revenue is likely to decrease from 43% in 2002 to about 37% in 2007 as high-speed Internet and mobile services increase their dominance (see Figure 10 below).
High-speed Internet and mobile services are likely to increase their dominance and the share of fixed line services in the worldwide telecom services revenue is expected to decline.
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Figure 10: Split of worldwide telecom services revenue by service categories

100% = USD 1.07 bn in 2002 and USD 1.36 bn in 2007
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 7% 11% 2002 10% 11% 2007 43% 37% 39% 42% Mobile Services Fixed Telephony Internet & High-speed Data
Source: iDATE1
The share of long-distance fixed telephony in telecom services revenue has declined due to substitution by mobile communication, e-mail, VoIP etc.
Such erosion in fixed telephonys market share can be explained by the slow growth in the fixed telephony services that is expected to continue due to:
n
Penetration reaching saturation levels in certain geographies, such as North America and Western Europe Increased competition from competing fixed telephony service providers leading to pressures on prices and margins Substitution by mobile services and other forms of communication such as email and Voice over IP. These have particularly dented the shares of longdistance fixed telephony service providers.
Mobile services are expected to gain share, and probably overtake fixed telephony services, because:
There is an increasing push by the handset vendors, service providers as well as content providers to promote new ways, such as 3G and WLAN, to provide mobile voice and data services.
n n n
In many areas, the penetration of wireless technologies is low. Further there are some areas, especially developing or underdeveloped ones, with low fixed telephony penetration. These present opportunities for growth of mobile services. Regions in Asia-Pacific, such as India and China, are examples of developing areas. There is an increasing push by the service as well as content providers2 to promote new ways to provide these services, such as 3G and wireless LAN. For the provision of fixed line services, laying the last mile is expensive to build and maintain.
The growth in wired data services is likely to be driven by the proliferation of broadband. Cable and DSL are likely to be the preferred technologies for broadband access in the near and medium term. Moreover, the growth in these technologies is likely to be spurred by an increase in demand, especially in the Asia Pacific region (see Figure 11 below).
Source: 2002: featuring a clear slowdown in growth and a sector undergoing change by Idate, June 2003 (Link: http://www.idate.org/an/qdn/an-03/IF261/index_a.htm) 2 Source: North America Remains a Wasteland for Mobile Content by Michael Pastore, Internet.com, April 2001 (Link: http://cyberatlas.internet.com/markets/wireless/article/0,1323,10094_731141,00.html) Page 16 Deutsche Bank AG
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Figure 11: Cable and DSL broadband subscribers (in million) by region
80 70 60
Voice services are becoming commoditised and there is an increasing trend towards bundling various services
50 40 30 20 10 0 1999 2000 2001 2002 2003 2004 2005 2006 2007
Asia Pacific DSL EMEA Cable

Source: RHK *EMEA stands for Europe, Middle-East & Africa
3
Asia Pacific Cable North America Cable
EMEA DSL North America DSL
As voice services are becoming commoditised, there is an increasing trend towards bundling various services with fixed as well as mobile voice services. Such bundling of services helps in the differentiation of services and, consequently, to gain and retain customers. Geographical Trends Over the next few years, revenue shares of regions with developed telecom services markets, such as North America and Western Europe, are expected to stagnate or decline, while emerging markets take the lead (see Figure 12 below). Figure 12: Split of worldwide telecom services revenue by geographic region
100% = USD 1.07 bn in 2002 & USD 1.36 bn in 2007
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2002 2007 16% 18% 23% 23% 30% 32% 31% 27% North America Asia Pacific Western Europe Rest of the World
Source: iDATE4
Source: Telecom Economics Capex Forecast: Europe Annual & North America 1Q03 Update by Kate Horricks and Stephane Terral, RHK, May 2003 (Link: http://www.rhk.com/pdfs/RHK-TECapex_Forecast_EuroAn_1Q03NA-2003-05-35000.pdf) Deutsche Bank AG Page 17
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Asia Pacific is providing the impetus for growth in subscriber numbers worldwide, especially through an increase in the number of mobile services subscribers and Internet users
Telecom services technologies have reached high penetration levels in North America and Western Europe. Therefore these markets can be termed mature or developed, especially in the case of fixed and mobile data services. The regulatory environment and market structure are also reasonably stable in these regions. Competition among service providers is often intense. These highly competitive conditions have led to price wars and increased pressure on the margins earned by service providers. Update of mobile data services, such as MMS and high-speed Internet, through Cable and DSL, are likely to drive growth in these markets in the near future. Other service categories, such as fixed telephony, are likely to witness sluggish growth, at best, or more probably a decline in revenues in these regions. In contrast, regions such as Asia Pacific and Latin America do not have high levels of penetration of telecom service technologies. Of course, there are a few exceptions to this. For instance, South Korea is the leading country in the world in terms of broadband penetration. The telecom services markets in most of the countries in Asia Pacific are either still developing or are under-developed as is evident by the low penetration of telecom technologies in these regions. Thus, a few emerging countries, such as China and India, are driving growth in revenue as well as in number of subscribers in Asia Pacific. In turn, the Asia Pacific region is providing the impetus for growth in subscriber numbers worldwide, especially through the increase in the number of mobile services subscribers and Internet users (see figures below).
Figure 13: Worldwide mobile services subscribers by region

100% = 1.15 Bn in 2002 & 1.97 Bn in 2007
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
Figure 14: Worldwide internet users by region

100% = 590 Mn in 2002 & 949 Mn in 2007
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 11% 31% 25% 21% 34% 2002
Source: iDATE5
22%
21% Rest of World
14% 40% Rest of World Asia Pacific W. Europe North America
36%
48%
Asia Pacific W. Europe North America
29% 13% 2002
20% 10% 2007
26% 2007
Source: CommNOW DataBanks, Cellular News and Deutsche Bank Analysis
Therefore Asia Pacific is likely to be the growth engine for telecom services revenue as well as for the number of subscribers in the near future.
Source: 2002: featuring a clear slowdown in growth and a sector undergoing change by Idate, June 2003 (Link: http://www.idate.org/an/qdn/an-03/IF261/index_a.htm) 5 The World Atlas of the Internet by Idate (Link: http://www.idate.org/an/qdn/an-03/IF244/index_a.htm) Page 18 Deutsche Bank AG
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Telecom services and business Models

The telecom services sector comprises players from many allied and supporting industries. Industries such as equipment providers furnish offerings primarily for the telecom sector. Supporting industries include software and hardware developers and implementers. They provide services ranging from the development of basic technology platforms for device communication to building the whole network. The telecom service industry can be classified by mode of service offerings, i.e., fixed and wireless, and further on the basis of the type of services offered such as voice and data. A basic value chain for the telecom services industry is given below. Figure 15: Telecom Services Value Chain
Implementers Equipment Providers
n
Application Providers
Content Providers
Network Operators
Service Providers
Network Component Providers End-User & Distribution Equipment Providers Test Equipment Providers
Software and hardware integrators Also provide consulting, network maintenance support, optimisation and upgrade services
Basic application platform providers User application providers
Provide content to be viewed or used while communicating using various applications
Owners of the basic network on which the voice or data traffic is carried May provide services to end consumers themselves
They include: n Content creators

n
Use their own or another network operators network to provide services to customers in a particular region
Content aggregators Content distributors
Source: Deutsche Bank
In the telecom services industry, equipment or technical services and products are provided to the network operators, who own the network. The players providing equipment are called equipment providers. The providers of technical services and products are network implementers and application providers. Lucent, for example, is a network integrator and Microsoft an application provider. The service providers supply the final services to the customers with whom they have a direct billing relationship. The network operators can directly offer services to customers, in which case they are themselves known as service providers. Alternatively, they can lease the network to service providers. Content providers add value to the telecom services by providing content useful to the customer. This content may be games, stock market updates, news, event updates or location-based services useful for the customer. The content providers can directly charge the customers for their services or can have a billing relationship with the service providers. Figure 16 describes the business relationships that these players share with each other.
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Figure 16: Telecom Services Relationship Chart

Application Providers Set of rules or protocols for communication of devices Apps or platforms for content development such as web page development using HTML etc. Network Operators Content Providers Content providers could have two business models: 1. Selling the content by having a tie-up with the service providers. 2. By selling content directly to the customer. Service providers could also offer exclusive content.
Routers, switches, cables, towers and other network hardware and test equipment
Implementers
Equipment Providers
Service applications for various services.
Service Providers
Service providers could sell their offerings through a distributor or directly to customers Equipments used in services distribution Service Distributor
End User
Mobile phones, PDA, wired telephone sets, DSL Transceivers, Dialup modems or Cable modems depending upon the technology used
Player characteristics
The generic roles of players in telecom services are described below. Equipment providers The telecom services industry requires network equipment and end-user equipment. Network equipment includes that which is necessary for laying down the network such as cables, routers, switches, test and distribution equipment etc. End-user equipment includes devices for the user to access the network such as mobile phones, wired telephones, modems etc. Equipment providers can be further sub-divided into the following major types:
n n n
Network component providers End-user equipment providers Network Component Providers
These provide the essential components required for building and maintaining the networks and include components such as transmitters, cables, routers, testing
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equipment etc. Some of the main components, their functions and key suppliers are outlined in Figure 17 below. Figure 17: Network Components
Network component function Key suppliers
Transmitters and Receivers Cables Routers and Switches
Transmitting and receiving signals in the network Fibre or copper cables for transport of voice or data Connecting various networks and managing traffic
Motorola, Agere, Harmonic, C-Cor, Scientific-Atlanta, Bookham Technology, NEC, Sumitomo Electric and JDS Uniphase Alcatel, 3M, Commscope, Corning, Pirelli, Leviton Voice & Data, General Cable Alcatel, Cisco, Ericsson, Hitachi, Fujitsu-Siemens, Lucent, Marconi, NEC and Nortel
Repeaters, Amplifiers and Regenerators Strengthening or regenerating the signals in a network ADC, Agere, Alcatel Optronics, Corning, Ericsson Microelectronics, JDS Uniphase, Lucent and Nortel as the signals tend to weaken after travelling some distance Multiplexers & De-multiplexers Allow multiple logical signals to be transmitted Gould Fiber Optics, Ipitek, Excelight, ADVA, ADC, Versitron, simultaneously across a single physical channel (e.g. Elcommtech Corporation, Telebyte Inc., Lascomm fibre cable). De-multiplexer performs a function exactly opposite to that of a multiplexer. Passively involved in the networks (i.e. do not carry signals) Various players are there as this is highly fragmented market
Other network components connectors, panels, equipment casing etc. Distribution equipment such as CMTS, DSLAM Testing equipment (LAN/WAN analyser etc)
Retransmit the signals and used in services distribution Cisco, Arris, Motorola are some players who manufacture cable modems. Monitors the signal performance of the overall network Agilent, Lucent, Ericsson and Agere are some key providers
End-user equipment providers These provide the equipment to be used by the end-consumer of the telecom services. Equipment includes handsets, modems and other accessories. These are provided to the end-users through service providers or distributors (via the bundling of services). Retailers Key players include Alcatel, Nokia, Ericsson, Motorola, Samsung, IBM, Toshiba, Palm, LG, Sony etc. Implementers Implementers use the hardware components provided by the equipment manufacturers to build the complete network. The implementers may source this hardware from various vendors. They also source software relevant to the technologies to be used in the network to be deployed. They integrate the hardware and software to ensure complete build and rollout of the network. Therefore they are also known as network integrators or turnkey solution providers. Most of the implementers also provide consulting, network maintenance support, optimisation and upgrade services. Implementers provide their services to network operators, who own the network. Network implementation services are provided by some of the major equipment vendors including Cisco, Ciena, Tellabs, Lucent, Nortel and Ericsson. Application providers As depicted in the relationship chart, application providers are present at various steps of the value chain. They provide their services to the implementers, content providers and service providers and supply the basic technology platform for various applications such as device communications, network protocols etc.
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Application providers for telecom services can be divided into two types - basic platform providers and user application providers. Basic platform providers: These provide the basic platforms (or languages) from which various applications for device communication can be developed. For instance, Qualcomm provides BREW, Sun provides Java. Various software or application developers use these platforms to develop applications for network implementers and content providers. Key players include Qualcomm, Microsoft, Apple, Sun, and IBM. User application providers: These provide applications that run on various devices or networks. For instance, Microsoft provides Windows and Microsoft Office; Apple provides Mac OS; Palm provides its own Palm operating system that runs on various handheld devices. Billing and messaging are examples of applications that are run on the network level. Some applications need to be centrally hosted such as mobile staff-management software, e-mail or games. These are run from a central server and can be accessed by the end-user devices. There is a trend towards outsourcing the hosting of some of these applications. The players who provide outsourced hosting are called ASPs (Application Service Providers). They are also known as WASPs (Wireless Application Service Providers) in the case of outsourced hosting of wireless applications. Key players include Microsoft, IBM, Apple, Palm, Openwave, Aether etc. Content providers To add value to their services and products service providers offer information and value added services such as news, entertainment games, stock market updates etc to the customer. They provide these services by tying up with various content providers such as news channels, websites etc. The content providers can charge the consumer directly for their services or can have a billing relationship with the service providers. The content providers can be further sub-divided into:
n
Content creators these create gaming software or programmes for broadcast, e.g., Namco a leading gaming content creator. Content aggregators these compile content from various sources (e.g. Reuters). Content distributors distribute content to the end-user. This distribution can be done through various channels such as tie-ups with service providers, through portals (e.g. Yahoo! News).
Network operators The network operators (or carriers) own the basic network on which the voice or data traffic is carried. They can decide to provide services to end consumers themselves in which case they are termed as incumbent operators. Alternatively, they may decide to lease out parts or whole of the network to some other service provider. These are the principal focus of this document.
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Service providers These players use their own or an incumbents network to provide services to customers in a particular region. They will normally have a direct billing relationship with their customers.
Fixed Line Services

Fixed line voice services are also known as landline telephony services or basic telephony services or plain old telephone service (POTS). In most of the regions, PSTN6 lines were owned by government-regulated agencies. However, after liberalisation of telecoms markets ownership of the networks has for the most part passed into private hands. Network operators The network operators, who own the network and manage the traffic on it, are known by a number of terms. PTO (public telephone operator is a common term, PTT (public telephone and telegraph), PSTN (public switched telephone network). In the US the term Incumbent Local Exchange Carriers (ILECs) is used to denote the peculiarity of the US market where historically the local operator has had to hand over traffic to a separate group of long distance operators. Most countries start with only incumbent government-controlled players. Subsequently, as the telecom market is liberalised, competitors enter the market and the government may also decide to reduce its stake in the incumbent. Players competing in the local market are also known as Competing Local Exchange Carriers (CLECs). Competitors may also enter the long distance and international call markets, where returns were originally the highest. Usually, the ILECs use only a portion of the network they deploy. The CLECs lease a portion of the ILECs network to provide competing services in the incumbents area of operation. The telecom regulatory bodies lay down rules for ensuring that ILECs share a portion of their networks. The regulators also provide guidelines for the amount that ILECs can charge CLECs for such sharing or, as it is more normally termed, interconnection. Content providers Content providers do not play a significant role in basic telephony. There are some offerings, such as dating and friendship lines, that could be termed as content using voice services. Providers of these services usually buy specific numbers from the service providers. The consumer generally has to pay higher rates for using these content services. This revenue is shared between the service provider and by the content services provider. Service providers Regardless of who owns the network, the service provider has billing relationships with the end-users of these services. Apart from the basic services the providers may also charge the customers for value-added services such as voice mail, specialised directory services etc. The key services are outlined below. Domestic calls: The distinction between local and long distance is somewhat arbitrary and increasingly the cost dynamics of the network suggest that there should be no appreciable price differential between the two. In some markets
PSTN stands for public switched telephone networks. They are the landline networks used for landline telephony. Deutsche Bank AG Page 23
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pricing already reflects this. Traditionally local calls have been those that are only routed via the local exchange while long distance calls utilise both the local and main exchanges. Charges for local calls are the lowest of all voice services and in a number of regions, in particular the US, are bundled into the fixed monthly fee. Long distance calling charges are generally higher than the local call charges. The charge depends upon the terms of agreement between the service providers involved and the distance of the circuit used in making a long-distance call. Voice mail: This is one of the value-added services offered by the service providers and can be accessed in the following two ways:
n n
By storing and retrieving voice mails on the phone used by the user By storing and retrieving voice mails on the service providers server. In this case, the subscriber is usually charged a fixed amount for maintenance of the service and a variable amount proportional to the number of messages retrieved.
Phone book and directory services: Directory services enable the subscribers of a service provider to list their number in a phone book, often termed Yellow Pages for obvious reasons. The service provider maintains this phone book. There are many pricing models ranging from a free service funded by advertising right through to a cost per enquiry. Managing these directories is seen as one of the growth opportunities owing to the increasingly sophisticated database services that are available. Freephone or special rate numbers (0800, 0345 etc.): Toll free/ freephone numbers are special numbers which subscribers can access for free or only pay a local rate wherever they are calling from. Such numbers are used to promote services and products. The promoter of such services or products buys or leases the number from the provider and pays for calls made to it. As the volume of calls to such numbers is usually high, the rate per call charged to the promoter is usually lower than the normal rate. These numbers offer value to all involved parties because of:
n
Better utilisation of the operators network due to the high volume of calls per number Higher revenue per number for the service provider and volumes business Increased recall for the promoter in the minds of customers Convenience for users as little or no charges and easy recall
n n n
Emergency services: Calls to emergency service numbers are offered free of charge to the subscribers. In this service, the provider determines the location of the caller7 and arranges for appropriate help. Premium content services: In contrast to toll-free services, premium content services charge the callers extra for accessing special voice content. This premium content relies heavily on pornographic content, dating services etc. The bulk of the
The location may be determined automatically through some software or the caller may be asked to provide information about his/her own location. Page 24 Deutsche Bank AG
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fee goes to the content provider rather than the network operator. The revenue generated from such services drives traffic and hence revenue for the network operator. Moreover, the premium charged may also be shared between the content provider and the service provider. Leased voice lines: Leased lines for voice services are dedicated, point-to-point circuits with their own predetermined routes. Voice grade leased lines include all dedicated point-to-point services in a particular frequency range to separate circuits that carry data or non-voice from those which carry voice. Leased lines are invariably dedicated digital circuits connecting two fixed points across a private network. Different rates apply depending on the distance and the bandwidth provided. Others: Service providers also offer other value-added services to the residential or business subscribers. These include:
n
Conferencing: A facility to speak with multiple people, i.e., hold a meeting over the phone Call waiting: A facility to swap calls or put a caller on hold Call forwarding: Ability to forward incoming calls to some other phone number Conference bridges: A service that allows multiple users to dial into a single number (also known as conference bridge) by using a number and a password. This is an enhanced version of the conferencing service as there is usually a limit to the number of people that can join in a conferencing service. In contrast, many more people can join and leave a conference bridge easily. For instance, companies often use conference bridge services to hold meetings or to discuss financial results with analysts.
n n n
For the services mentioned above, the provider may generate additional revenue by charging for activation and maintenance of such services. All of these services, and many more, are embedded in the software provided by the switch manufacturers. All the telco operator has to do is enable and market them. Fixed line data services Data services offered through PSTN lines include Internet services and fax. Consumers do not pay any extra charge for fax services. They are billed just as they are for any normal call. Internet services can be provided through the following technologies, which we discuss in more detail later. Figure 18: Fixed line data services technologies
Technology brief description
Dial-up Cable
Low speed internet access (narrowband) using telephone line and a dial-up modem High-speed Internet access using a cable modem at subscribers end and CMTS8 at the distributors end. This can also be provided over the same cable as the one used for carrying cable TV channel signals. High-speed Internet access using DSL modems. High-speed Internet access using satellite instead of the telephony backbone infrastructure.
XDSL Satellite
The value chain for fixed line data services is essentially the same as that for telecoms in general (see Figure 19 below). Details about the relationships typical to fixed line data access are explained below.
CMTS stands for Cable Modem Termination System. Page 25
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Figure 19: Fixed line data services business relationships

Application Providers Device or protocol applications Content Providers Content providers could have 2 business models: 1. Tie-up with service provider. E.g. Internet service MSN signed a $150 million, 5-year deal in 2003 to use CareerBuilder.com as its exclusive provider of information for job seekers 2. Selling content directly to customers. E.g. Wall Street Journals site charges for access to content.
Routers, switches, cables, other network hardware and test equipment
Apps or platforms for content development e.g. Java, .NET
Implementers
Network Operators
Equipment Providers
Service applications such as CRM, VPN
Service Providers
CMTS, DSLAM or other equipment depending upon the technology used
ISPs could sell connections through a distributor or directly to customers
Service Distributor
End User
DSL Transceivers, Dial-up modems or Cable modems depending upon the technology used
Equipment Providers In fixed line data services, the end-user and distribution equipment provided by the equipment vendors varies with the technology used, be it DSL, cable or modem. We look at these devices in more detail later on. Application Providers Unlike fixed line voice services, application providers have a significant role to play in fixed line data services. This is because data services are more technology or software intensive than voice services. In data services, application providers offer the following:
n
Device or protocol applications to the network implementers. These applications are software specific to the network technology being used, i.e., devices and protocols9. Cisco, for instance, has a software application (CSR server10) that provides rules-based logic for routing in a network.
Refer to glossary for further information on protocol. For more details on the example of this software please visit http://www.cisco.com/warp/public/cc/pd/unco/ps4371/index.shtml
10
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Applications or platforms for content development and browsing, e.g., Java by Sun, .NET by Microsoft. These basic applications help content developers to build up other user applications and content. Service applications such as those for billing, Customer Relationship Management (CRM) and Virtual Private Network (VPN)11. Service providers use these applications for managing customers and for providing specialised services such as VPNs.
The application providers do not have a billing relationship with the end users of fixed line data services. These providers have B2B relationships with the implementers, content developers or service providers.
n n
Content providers could have the following business models: Selling the content via a tie-up with the service providers. The tie-up could provide fixed (flat fees) or variable revenue (through revenue sharing) or both to the content provider. Internet service MSN, for example, signed a $150 million, five-year deal in 2003 to use CareerBuilder.com as its exclusive provider of information for job-seekers12. Selling/re-selling content directly to the customer e.g. the Wall Street Journal charges for access to its website. In some cases the content could be provided for free to the customer and revenue generated through advertising or through deep-access or value-added features. For example, New York Times, and Bloomberg News do not charge for basic services but do so for value-added services and deep access to their sites. On the other hand, some sites such as Yahoo rely primarily on advertising revenue to sustain their services.
Recently there has been a trend towards integration of some components of the value chain such as a tie up between content and service providers. An example of this is the AOL / Time Warner merger. However, the success of such ventures is still open to question. Service Providers Providers for fixed line data services are called Internet Service Providers (ISPs). They have a direct billing relationship with the subscribers to their Internet or other data services, e.g., VPNs. They offer fixed line data access using one or more of the available technologies such as DSL, Cable etc. to residential as well as enterprise customers. They also manage the customer relationships themselves or through a network of distributors. The service provider and the customers mutually decide the billing method. These methods include:
n
Usage based billing: The amount charged depends on the time spent online or on the amount of data accessed (usually during a month). In some cases, this charge is over and above a subscription fee.
Refer to glossary for further information on VPN. Source: Microsoft Press Release, August 2003 (Link: http://www.microsoft.com/presspass/press/2003/aug03/08-05RecruitmentServicesPR.asp)
12
11
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Fixed billing: The amount is fixed irrespective of the usage (usually during a month). In both the above methods the bandwidth13 to a user is not dedicated but shared by various users. Therefore, these are more suited to residential subscribers and Small Offices Home Offices (SOHOs). Leased line based: Most Small and Medium Enterprises (SMEs) and large enterprises have higher usage and require more reliable services. Therefore, they lease a dedicated bandwidth from the ISP. The monthly charges for this dedicated bandwidth are fixed irrespective of the usage.
During the Internet boom of late 1990s and 2000, many ISPs were offering free Internet access to subscribers. Their business model was to generate revenue through e-commerce or advertisements. However, this business model was found to be unsustainable and most such ISPs either closed down or revised their business model. Distributors The service providers may have their own distribution network or they may sell their services through third-party distributors to reach the local consumers. These distributors could have direct billing relationships with the subscribers and are also responsible for customer relationship management in some cases. For instance, local cable operators providing and maintaining the cable TV connections to various households in a locality could also distribute and manage cable internet connections after getting a certain amount of bandwidth (usually 128kbps or higher) from the ISP. Local distributors may also offer financing or subsidies on modems or transceivers to the local subscribers. These are offered as a part of a service contract.
Wireless Services
The basic value chain for wireless services is the same as that for fixed line services. The value chain and business models for wireless services vary according to the type of services. The business relationships in voice services can be considered as a subset of package of voice and data services offered nowadays by various wireless service providers. These relationships are explained in the following sub-sections. Wireless Voice and Data Services The business relationships in wireless services are mostly similar to those in fixed line services as shown in Figure 20 below. The backbone infrastructure is fixed and the same as that for fixed line services. The main difference is that radio frequencies are the medium used (service provider onwards) for transmission14. Moreover, the networks may be configured to handle the different wireless technologies such as GSM, CDMA, W-CDMA, Wi-Fi15 etc. The network implementers deploy the hardware and software accordingly.
Refer to glossary for further information on bandwidth. The technologies used in wireless transmission are explained in the chapters on Communication Media and Communication Networks
14 13
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Figure 20: Wireless Services Business Relationships

Application Providers Device or protocol applications Content Providers Content providers could have two business models: 1. Tie-up with service provider. E.g. Yahoo has an agreement with FT to provide WAP services on mobiles. 2. Direct selling of content e.g. Phonetunes.com offers ring tones and MMS for direct download by customers.
Routers, switches, cables, towers, other network hardware and test equipment
Apps or platforms for content development e.g. Java, .NET
Implementers
Network Operators
Service applications such as CRM, mobileVPN Equipment Providers Service Providers 1. Cellular/WLL/ PCS connections could be sold through distributors or directly to customers 2. WLAN could be: (a) enterprise owned e.g. in an office for its employees (b) service provider owned e.g. at an airport (c) deployed in coffee shops, hotels, malls etc. as a value-added service for customers
The service distributor often sells end-user equipment along with the service
Service Distributor
End User
Mobile phones, PDAs, Laptops, Network Interface Cards (NICs), Access Points (APs), Bridges etc.
Details about the relationships typical to wireless services are explained in the subsections below.
Equipment Providers Apart from the usual telecom network equipment the equipment vendors provide the following equipment for wireless networks: Network equipment: They provide cell-site and base-station related equipment, such as towers, to the network operator. The equipment also includes access points and bridges for deploying WLANs etc. The equipment for data services is provided to service providers e.g. messaging centre equipment and solutions provided by Logica-CMG.
Refer to Chapter 4 on Communication Networks for further information on GSM, 'CDMA', w-CDMA and Wi-Fi. Deutsche Bank AG Page 29
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End-user equipment: For voice services a handset also known as mobile phone (or cellular phone in case of cell-based services) is provided.
n n
For data services more advanced equipment is provided. These include: Smart Phones Similar to mobile phones but can be used for both voice and data communication (e.g. Nokia Communicator). Advanced Handsets colour phones, GPRS enabled or 3G enabled phones PDAs / Palm Top small data devices, typically of the size of the palm of a hand. Usually, a stylus is used to browse on these. HP-Compaq, Palm and Sony are leading providers of this equipment. Handhelds data devices primarily used in enterprises. They are larger than PDAs and usually have a keyboard for data input. Laptops / Notebook PCs portable computers typically of the size of an A4 size notebook after folding. IBM, Dell and Toshiba are leading providers of these. Tablet PCs PDA-like devices in which a light pen can be used for input in ones own handwriting Network Interface Cards (NICs) a card for inserting in a laptop to be able to access a wireless LAN
n n
Application Providers For wireless voice and data services, application providers offer the following:
n n
Software applications for various network devices to the network implementers The applications or platforms for content development and browsing
In wireless services, these are different from those for fixed data services. This is also due to the small and mobile nature of the devices. Therefore specific applications are provided, e.g., Windows CE by Microsoft, Palm OS by Palm, BREW by Qualcomm etc.
Content Providers The business relationships for wireless content providers are similar to those for fixed line data content providers:
n n
They can directly sell the content to the end user. They can have tie-ups for a flat fee, or revenue sharing, or both, with service providers.
In some cases, the content also has to be specifically designed or re-engineered for access on some wireless devices such as mobile phones - e.g. ring tones and logos are specifically designed for mobile phones. Moreover, various websites are also redesigned from languages such as HTML to languages such as XHTML, cHTML and WML16 usable with varying levels of success on the wireless devices. Location based content is also specifically designed and delivered for the mobile devices.
Service Providers Most of the voice-based services offered over fixed line telephones are also offered through wireless telephones. These include local calls, long distance calls, voice
HyperText Markup Language (HTML) is a form of representing Internet text documents. XHTML, cHTML and WML are extensions of HTML that can support a wider range of documents and media and can be viewed on a wide range of access devices including PDAs and mobile phones. Page 30 Deutsche Bank AG
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mail, phone book and directory services, toll free numbers, conferencing, call waiting etc. In addition to these, there are other significantly different services in wireless telephones. These include:
n
Enhanced emergency services, which provide emergency assistance to the caller at the location of the caller. They are likely to be offered free to the subscriber, e.g., E911 services in the US. Roaming allows a subscriber to access the services even outside the local coverage area of its provider. For this, the subscriber is charged a fixed amount and variable amount. The fixed amount is for service activation and maintenance and the variable amount is proportional to the number of calls made or received while roaming.
Types of Wireless Data Services Apart from these voice services, data services can also be accessed wirelessly. Wireless data services are mostly analogous to the services offered by wired data service providers. Examples are Wireless Internet access and Network Services, such as mobile VPN.
Further, there are services specific to the wireless market. These include:
n n n n
Messaging based services: SMS, MMS, Paging Location based services: Enhanced 911 Enterprise applications: Voice-enabled services
Wireless Internet Access Wireless Internet access enables customers to access information on the World Wide Web through their wireless devices, such as smartphones, PDAs, Laptops etc. Further, it also enables other applications such as email, video streaming, mobile commerce etc. Messaging Based Services Messaging services offered over mobile devices can be categorised as follows:
n n
Text messaging SMS Short text messages, typically less than 160 characters, which are sent over mobile devices Paging Messages sent over paging devices, such as Blackberry. Picture and video messaging (also known as MMS multimedia messaging service)
n n
The service provider collects all messages and routes them through a Messaging Centre. The service provider charges the customer for the number of messages sent during a fixed period. Some service providers bundle a certain number of messages free or at a discount to differentiate their service and to increase customer stickiness. Apart from acting as a communication medium, SMS also acts as a medium for information alerts, mass advertising, communicating instructions for downloading information such as ring tones. Due to its recent success, SMS is being touted as a killer application in wireless data services. SMS is also widely replacing paging,
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which is another messaging service that requires special paging devices and also different operator than a cellular service provider. MMS is a relatively new offering enabled by 2.5G and 3G networks. It allows multimedia (still photos, voice and video) to be sent in a way similar to SMS. MMS is also charged in a way similar to SMS but at a higher price. The growth of the MMS market faces many obstacles including high priced handsets and sometimes interoperability issues, i.e., subscribers having different service providers (offering MMS) or different MMS-enabled phones may not be able to exchange MMS. Nevertheless this is expected to be a significant growth area over the next five years as MMS enabled handsets become near ubiquitous and 3G networks are rolled out.
Location Based Services Location-Based Services (LBS) are defined as mobile services that identify a user's location (either using pinpoint levels of accuracy or Cell-ID) in order to provide a service to that user. These include:
n n
Emergency Services: e.g. E911 in North America. Enterprise Applications: These are the mobile operated applications that help enterprises to improve efficiency or productivity levels. Examples are fleet management, mobile-CRM. Presence management and location-based advertising: Presence management is defined as the maintenance of information about users profiles, so that location information can be better customised. Location based advertising is defined as the advertising and promotional activities carried out based upon the targets location.
Similar to messaging services, these are typically charged on a per use basis. The service providers may also include a fixed charge for the infrastructure and maintenance of these services. However, these services are not widespread and therefore a firm business and pricing model for them is yet to evolve.
Voice-enabled services Voice-enabled services are value-added and can be initiated by human voice. For the purpose of this report, these services include only those voice-enabled offerings that drive network usage revenues. Such services include:
n n
Speech to text that enables the conversion of human speech to text. Voice recognition: also known as Voice Command services, these enable dialling, browsing of voice portals, information requests, etc.
Voice-enabled services are yet to take off in the global wireless market.
Modes of offering wireless data services

For ease of understanding, the wireless data services can be divided into two categories (a) WAN data services (over wide area networks e.g. 2.5G, 3G); (b) Wireless LAN data services (WLAN). We cover these in more detail later in the report.
Licences The service providers obtain the licence(s) to provide wireless services to subscribers in a particular geographical area using a particular frequency. The
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bandwidth remains the property of the government in the region. In the US spectrum has been auctioned for mobile since the industry started, whereas in Europe only 3G licences were auctioned. A number of markets still award licences on the so-called beauty contest basis. The provider may have a revenue sharing agreement with the government, either as an alternative to the licence fee or in addition to it. For regions where the providers do not have a licence, they can enter into roaming agreements with the service providers in those regions. The service providers involved in the roaming agreement share the revenue generated through the user in that particular region. The service provider, who has a contract with the subscriber, usually passes on the costs of roaming access to the subscriber.
Billing The billing for wireless voice services is usually by Minutes of Usage (MoU) but increasingly the market is seeing a trend towards fixed monthly charges for large bundles of minutes, led by the US.
For data services, billing is by amount of data downloaded. Some operators also offer a certain amount of free data download as a part of the billing plan. Given that data is still in its early stages of development we see the revenue model being particularly fluid for some time to come. The total Average Revenue Per User is also known as ARPU, normally collated on a monthly basis. The actual definition of ARPU can vary significantly and care needs to be taken when comparing figures between different operators and even the same operator over time may change the method of calculation. Two broad areas of billing can be categorised:
n
Post paid: The customer pays after receiving an invoice for the services already used. A certain amount is kept as security against default. Pre paid: The customer buys a certain amount of usage time valid for a certain period. To avoid expiry of connection, the customer has to top up the earlier amount with further credits.
Typically, post-paid subscribers are more loyal and generate higher ARPU. Therefore service providers offer incentives for customers to shift to post-paid billing plans17. Appetite for these different plans varies significantly by region and is being driven by a number of factors including cultural issues. The pricing structure of who pays for incoming calls does make a radical difference to the attractiveness or otherwise of the pre-pay offering. In the US the lack of incoming call revenue to mobile operators from calls which terminate on the mobile network serves to undermine the economics of prepay. In contrast, high termination rates in Europe make prepay an interesting proposition. The bulk of growth in the last few years in Europe has been due to the growth in prepay.
Wireless LAN Services Wireless LAN is primarily a last mile wireless access technology. It can be deployed at premises at which high-speed data access is already available through other technologies such as DSL.
17
Post-paid Vs. pre-paid is discussed in greater detail later in this chapter. Page 33
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Licences WLAN services are offered over the unlicensed spectrum18.
In comparison to the cellular industry, physical locations can be considered as equivalent to spectrum licences the right to deploy a wireless service in a given area. Property owners make money in WLAN in the following two ways:
n
By vertically integrating and operating their own hot spots (e.g. in various enterprises) By licensing the right to deploy hot spots to a hot spot operator (e.g. in various hotels)
In general the hotspot19 operator paying for 100 percent of the cost of deploying and managing the hotspot infrastructure will share very little or none of the revenue with the venue owner, at least until the operators costs are recouped. The greater the component of up-front costs paid by the venue owners, the higher their revenue participation. The roll out of hotspots is proceeding very quickly at present.
Billing WLANs allow for various kinds of billing as mentioned below:
n n
Subscriptions Monthly charge A fixed monthly charge for unlimited usage is offered (for instance US$ 64 /month) Pay-as-you-use In the US, the rates are at a per day or per hour basis (US$ 7 to US$ 10 per day). In Europe, however, the rates are on a per minute basis (US$ 0.29-0.58 per minute). Moreover, there is a fixed monthly charge such as US$ 38 in pay-per-use models. One-Time Use / Single Usage Charge Here the user pays a one-off charge for unlimited / limited usage over the next 24 hours. In Europe, this typically costs around US$ 11.
Integrated Services
Integrated services imply both fixed line and wireless services bundled into one package. These are offered by service providers who have expertise or close tieups to offer both fixed and wireless services.
As wireless voice and data services are expected to take off in the near future, players are likely to move towards offering integrated services. Integrated services imply both fixed line and wireless services bundled into one package. The customer would also pay one bill for these services. These players are mostly the service providers who have expertise or close tie-ups so as to offer both fixed and wireless services. We expect these services to proliferate as incumbent operators seek to reduce subscriber churn and fend off competition.
Issues for the industry

The telecom industry faces several business and technological issues. Below we list some of these that are dealt with in the following sub-sections:
n n n
Long gestation periods Consolidation Pricing/ billing

Refer to Chapter 4 on Communication Networks for further information on WLANs. Refer to glossary for further information on hotspot. Deutsche Bank AG
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n n
Revenue and infrastructure sharing Customer loyalty
Long gestation periods Providing telecom services usually involves getting a licence, laying infrastructure and service provisioning. This can take a significant time (from two to five years). The issues that such long periods lead to are:
n
Technology obsolescence: The technology may change or become obsolete over that period e.g. WLAN technologies are challenging 3G for high-speed wireless Internet access. WLAN has a shorter gestation period and hence is being deployed at a quick rate. Premature investments: A pre-mature investment in a technology may not pay off. For instance, both service providers and equipment providers are being hurt by the failure of 3G services to take off. Various service providers invested huge sums in buying 3G service licences. Consequently, the service providers were left with little money to buy equipment. Keeping faith with 3G technology, equipment providers wanted to sell the equipment that they had built. Therefore they financed service providers to sell their equipment. This was known as vendor financing. However, 3G services did not take off as well as expected. This led to service providers being encumbered with large interest burdens on the licence costs. The equipment providers, such as Lucent, were unable to recover the price of equipment provided to the service providers.
Similarly, an abundance of fibre cables was laid in expectation of huge demand for data services. The overall cabling market (copper + fibre shipments) experienced phenomenal growth in the 1990s as the larger enterprises installed their initial LANs. Growth rates during this period were in the double-digits with a 30% to 50%20 range not uncommon. However, the bursting of the Internet and telecom bubble led to a capacity glut with much of this fibre unused (known as dark fibre or unlit fibre). This capacity glut led to price pressures21 on the companies who had laid these networks to lease them out. Many failed.
Regulatory pressures: The service licences come with a time stipulation. Pressure from the regulators to provide services within a specified time frame also builds up. Fines can be levied or licences revoked if the services are not provided within a certain period. Regulators have proven to be generally inflexible on these issues.
Consolidation The starting point for the industry structure was one telephone company per country. In terms of the original services supplied by the companies it is fair to say that not a lot has changed. There is competition in most areas of the market but incumbents still control much of the original fixed voice communications market. From time to time it has been fashionable to create arguments for large-scale mergers between incumbents. The US market, which has an unusual structure created by the original decision to break up AT&T into a long-distance operator and seven regional operators, is one area where there have been mergers between the local telephone companies, known as the RBOCs. At one stage there was serious consideration given to consolidation among some of the European incumbents. But to date deals have been minimal, the only one of note, the merger between Telia in
Source: Report on U.S. Building Fiber & Copper: 2003 by FTM Consulting, Inc. (Link: http://www.gii.co.jp/sample/pdf/ftm14373.pdf) 21 Source: Telephony online, December 18, 2002 (Link: http://telephonyonline.com/ar/telecom_dark_fiber_future/) Deutsche Bank AG Page 35
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Sweden and Sonera in Finland. Political issues continue to loom large in terms of these major cross border mergers. Ultimately a true European Union could well see mergers between incumbents. The development of the mobile industry has provided an opportunity to introduce more operators and there are at least two in every market. In some cases the numbers can be as much as seven. As in every new industry there is normally a period of consolidation once a stage of maturity is reached. In mobile we are close to reaching that point now as subscriber growth grinds to a halt. As a general rule mergers within a market offer much more scope for cost cutting and integration benefits than would cross-border mergers. Many small players entered the telecoms market at the time of Internet and telecom boom (late 1990s to 2000). Such players include free ISPs and software providers that thrived due to the eye ball model for Internet prevalent at that time. There has been a huge shakeout of these small players.
Pricing / Billing Pricing for fixed line data services has been evolving over the past decade. Free services based on the eye-ball model (i.e., advertising revenue model) have not generally been successful.
Integrated billing for various wireless voice and data services and including micropayments in a phone bill are some billing related issues that wireless service and content providers are struggling with. Small payments for content such as logos, ring tones etc. are soon expected to be a part of one unified bill.
Revenue and infrastructure sharing

Revenue sharing with content providers: Revenue sharing between players in a value chain has always been an issue especially the sharing with content providers. For instance, game developers, wireless application service providers (WASPs) and carriers can share revenue from mobile gaming in several ways, depending upon who owns the customer.
n
The carrier could pay a licence fee to the WASP and retain the customers. Unless there is an arrangement to share revenue, incremental gains would go to the carrier. The WASP could provide access to its applications to the carriers customers for a usage-linked charge. In effect, the carrier would act only as a re-distributor of the application for a share of revenue.
In both situations, the application developer is not the direct beneficiary. The developer is not only insulated against the applications (e.g. games) failure, but is also unaffected by its success. The absence of percolation of the upside from their works success reduces their incentive to develop consumer-friendly, marketoriented applications. In such a situation, the chances for development of applications that are also successful in the market are greatly reduced. Carriers must address this issue as it directly affects their own revenue streams, ARPU and subscriber growth. This is expected to grow as an issue as mobile devices continue to increase in functionality.
Infrastructure sharing between service providers: There has been an increasing trend towards sharing of infrastructure in both wireless and fixed line services. This would appear to make better economic sense than building multiple networks.
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Infrastructure sharing in wireless services: Usually various service providers share the same network infrastructure to minimise costs and other overheads. Further, a recent trend has been to offer wireless services on a leased or rented spectrum as well.
Mobile Virtual Network Operators (MVNOs) are mobile service operators that do not own the rights to any radio frequency spectrum. Instead, they rent capacity from established licence-holding network operators. These service providers issue their own SIM-cards and are likely to operate their own mobile switching centre. Further, their pricing plans are fully independent from that of the host operators network. They also have their own unique network code with a distinct number series e.g. Virgin Mobile is an example of an MVNO22.
MVNO value proposition: Regulators want to see more competition in all markets and have been keen to provide opportunities for more operators to enter the mobile markets without having to resort to building more networks. For the existing network owners the ability to load a network more fully is an interesting value proposition.
An arrangement with an MVNO has benefits for all parties involved. While the MVNO brings in a brand and skills in marketing and customer relationship management, the incumbent can concentrate on service provisioning and maintaining the shared network infrastructure. These benefits are discussed below:
Value to the incumbent: By entering into revenue-sharing arrangements with MVNOs, carriers with surplus spectrum or infrastructure assets can acquire an additional revenue stream.
The strength of the carrier might not lie in marketing to specific customer segments but in maintaining a robust network and servicing the market as a whole. With this, the carrier is able to concentrate on network management, while the MVNO exploits its competence in acquiring and managing customers. In addition, this could be a good way for network operators to target hard-to-reach consumer segments, without having to address every sector of the market themselves. The greatly reduced cost of an MVNO in becoming a next-generation service provider makes it feasible to offer services to many more segments. Indeed, MVNOs could take over the costly and time-consuming tasks of devising, marketing and developing targeted services for the licensed operator.
Value to the MVNO: An MVNO receives access to spectrum and an installed network without bearing significant initial expenses. Consequently, the barriers to entry into (as well as exit from) the wireless business are significantly lowered.
Therefore, operating as an MVNO is a distinct opportunity for companies that already have existing customer relationships, own a strong brand and want to expand their operations into other geographical or consumer segments. It provides an opportunity to them for leveraging their competence in marketing to address the segments of most interest to them. It also enables them to compete effectively, as the relatively lower initial outlay eliminates any upward pressure on prices. It is also likely to prove to be a useful alternative to those companies that have not been successful in buying, or could not afford to bid for, a next-generation licence.
22
Please read http://www.speechtechmag.com/pub/industry/889-1.html for more details on Virgin Mobile Page 37
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Further, network operators themselves could operate as MVNOs in markets where they do not have a presence. Nation-wide operators could use this tactic to bridge any gaps in their service offering.
Benefits for the market Arrangements with MVNOs can be expected to enhance competition levels in the market, bringing with them lower prices and better service to consumers as a whole. In addition, given the lower-cost models of MVNOs, niche market segments that have so far been underserved are also likely to receive an enhanced service offering. In fact, as customisation levels rise, the needs of many segments in particular and the market as a whole are likely to be served better. Infrastructure sharing between fixed line players The issue: The incumbents own the largest fixed line networks. Regulators are understandably keen to ensure this position of dominance is not exploited at the customers expense. Possible solution: To ensure higher competition and reasonable prices for the customer, the regulators in the region can liberalise the market. They can also control the prices at which the incumbent has to share a part of its network with competing carriers who do not have their own network in that region. These shared elements are called Unbundled Network Elements (UNEs)23. In practice there can be literally hundreds of these UNEs on a carrier price list.
The debate around the charges for UNEs and the prices that competing carriers can charge due to lower cost of ownership is a permanent source of friction between incumbent, regulator and competitor. Each has a different vested interest. And there are a number of methods for arriving at what is a fair price for the UNEs.
Customer loyalty While the regulators in a particular region are striving to increase competition in the markets, the service providers are worried that such steps would decrease customer loyalty and increase churn. Some of the issues affecting customer loyalty are discussed below: Bundling of services The basic voice services in both fixed and wireless services are facing the following issues:
n n n
low differentiation in voice services resulting in commoditisation customer choice of voice services is increasingly driven by price plans contracting margins and ARPUs due to high price pressures
To tackle these issues more service providers are trying to bundle more value-added and differentiating data services together with the basic voice plans. Furthermore, they are trying to bundle fixed and wireless services into one offering and one bill to increase customer retention.
End-user equipment subsidisation Another method adopted by service providers to minimise churn is to offer free to very cheap handsets with a long-term service contract. Using this, the service providers not only increase customer loyalty but also attempt to recover the cost of
For more details on UNE please visit: http://www.carrieraccessbilling.com/une-p-unbundled-networkelement.asp. Page 38 Deutsche Bank AG
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the handset via the high monthly rentals paid by the customer. Similarly, modems may be subsidised by high-speed Internet providers. The key drivers for such subsidisation are:
n
the lowering of subscriber churn though long-term contracts that go along with the subsidised equipment reducing entry barriers for the subscribers by providing equipment at low or no cost (e.g. expensive 3G phones or colour phones are being subsidised to enhance take-up of 3G services)
Number portability One of the major reasons for subscribers not switching operators is that their phone number is likely to change. Many markets are adopting Number Portability which allows customers transferring between operators to retain their telephone numbers. This has already been implemented in some countries, such as the UK, Australia and Hong Kong, with mixed effects on churn rates depending upon the situation of the particular market. UK Mobile Number Portability (MNP) was introduced in the UK in 1999. In the first year of its introduction, only 1.5% of mobile users ported their numbers24. This low churn rate may be attributed to the following factors:
n n n n n n
the lengthy and cumbersome process of porting the average time to process a request for a change of network is about 25 days high porting charges all mobile carriers levy a porting charge of 30 release of misleading information by telecom operators to prevent porting an increasing number of mobile users in the UK are pre-paid and hence less prone to retain their mobile number than higher-value contracted customers25
Australia MNP was not a significant success. Two months after the introduction of MNP in September 2001, only 90,000 of the nations 11 million mobile subscriber population switched carriers due to MNP. This translated to approximately a 0.4% incremental churn rate. The key reasons restricting the marginal increase in churn rates were:
n
the majority of the users were restricted by long-term contracts. Of the users, 80% were tied to long-term contracts with high early-termination fees. low consumer awareness levels. Despite intensive marketing campaigns by mobile carriers, only 50% of consumers are aware of MNP.
Hong Kong MNP was introduced in Hong Kong on 1 March 1999. This was followed by a declaration from the Telecommunications Authority in 2000 making most existing contracts null and void. As a result most subscribers were forced to renew their contracts. The increased competition led to a price war with mobile carriers slashing their prices and introducing attractive packages to retain customers.
Source: Economic Evaluation of Number Portability in the UK Mobile Telephony Market , an Oftel commissioned study by Ovum (Link: http://www.oftel.gov.uk/ind_info/numbering/ovtitle.htm) 25 Source: Figures don't look good from overseas by Anne Hyland, Financial Review, September 2002 (Link: http://afr.com/specialreports/report1/2001/09/19/FFXK0K5QNRC.html) Deutsche Bank AG Page 39
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The churn rate in Hong Kong for mobile subscribers before MNP was approximately 2.5% per month, which doubled to 5% on MNPs introduction. A price war in Hong Kong saw attractive offers such as 500 minutes airtime for US$ 9.5 (HKD 38). On average, mobile tariffs declined by 60% in 1999, following the introduction of MNP. Competition was further heightened with mobile carriers offering a zero-switching fee and a three-day porting process to encourage porting amongst the consumers. As a result, 100,000 of Hong Kongs 3 million mobile subscribers ported within the first month of the introduction. Churn rates increased again in 2000, following the expiry of all 12-month agreements signed in 1999. As a result 120,000 additional subscribers switched to alternative carriers in 2000. Switching rates continued to grow through 2001, with over 1.84 million, or 32%, of all subscribers porting their numbers, contributing to a 70% total churn rate. The increased churn rates and lowered tariffs have contributed to a sharp decline in the profitability of mobile carriers in Hong Kong over the period 1999-2002. In the United States, number portability was implemented in late 2003. The impact of this on churn has yet to be documented.
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Communication Media
Wired media (guided media / physical media)
In this section we will discuss the two main wired media used for telecommunications today, namely copper wires and optic fibres.
Copper The use of copper for telephony dates back to 1877, when Thomas Doolittle invented a process to obtain hard drawn copper wire which could be strung between poles without sagging or breaking. Up to then, telephone and telegraph lines used iron and steel wires for transmission. While iron wires could be used for low frequency telegraph signals, the conductivity of copper allowed the transmission of weak, high frequency voice signals over distances of 50 miles without significant signal attenuation (weakening).
Copper is the most widely used physical medium for telecommunications (primarily telephone lines) today
Early copper telephone lines were single, grounded wires. However, these suffered from heavy signal loss and interference over medium-to-long range transmissions. In 1881, Alexander Graham Bell developed and patented the two-wire circuit (metallic circuit) that eliminated a lot of noise and interference in the lines. Two independently insulated copper wires were twisted around one another. One wire carried the signal, while the other was grounded and absorbed signal interference (see Figure 21 below). About the same time, it became necessary to bunch wires into cables to lay them underground in urban areas.
Figure 21: Twisted Pair Cable
Source: Evolution of the Technology, Australian Photonics CRC, 1999
The main disadvantage of early twisted pair lines was that each pair could carry only one conversation at a time. The development of vacuum tube electronics in 1915 led to the development of carrier systems (also called multiplexing), which allowed the transmission of multiple conversations on the same pair of lines. Current multiplexing techniques allow up to 12 simultaneous telephone conversations on the same pair of lines. Twisted-pair cables are still used by older telephone networks and remain the cheapest option for telephone lines.
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Development of coaxial cables allowed a quantum jump in telecommunications from about 12 conversations per twisted pair to over 600 per coaxial cable pair
Evolution from twisted pair to co-axial The development of coaxial cables during World War II led to a revolution in telecommunications. From about 600 conversations per cable pair in 1945, the capacity of coaxial cables has grown to over 10,800 conversations today. The coaxial cable (see Figure 21 below) consists of a solid wire at the centre surrounded by an insulating material (to minimise electrical and radio-frequency interference) and an outer conductor. Figure 22: Coaxial Cable
Source: Evolution of the Technology, Australian Photonics CRC, 1999
Coaxial cable is primarily used by the cable television industry and in computer networks today. The advantages of copper cables are their:
n n n
Low cost Ubiquitous presence as telephone lines High capacity-to-cost ratio
The disadvantages of copper cables are their:

n n
High cost to reach remote locations Limited capacity for broadband applications (as compared to optic fibres).
Techniques / Technology In the following sections, we look at with four technologies that use copper wires (particularly those in existing telephone lines) for data access:
n n n n n
Dial-up DSL Cable modem ISDN Dial-up
A dial-up connection uses the same infrastructure and frequency bands as a normal telephone connection to access the Internet
This technology uses basic telephone infrastructure to access the Internet (see Figure 23 below).
Figure 23: Working of dial-up
Source: Howstuffworks.com
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The device (usually a computer terminal) for accessing the Internet is connected to the phone line through a modem. The word modem is a contraction of the words modulator-demodulator. The sending modem modulates the data into a signal that is compatible with the phone line. This signal then travels over the telephone network to reach the receiving end. The receiving modem demodulates the signal back into digital data. In the early days of the Internet (1960s), modems offered speeds of around 300bps. Present day modems are available for a range of speeds 28.8kbps to 56kbps. Due to the low speed dial-up, connections are also known as narrowband connections. The physical characteristics of the copper connection ultimately act as a brake on data rates. The increases in speeds have been achieved through using more sophisticated data compression techniques in the modems themselves For higher connection speeds, more recent technologies (broadband technologies) such as xDSL, Cable modems or satellite Internet are used.
DSL DSL technology exploits the fact that copper wires used in telephone networks have a much higher bandwidth (several million Hertz) than that required for normal voice conversation (0-3,400 Hertz). DSL exploits the extra bandwidth for broadband (high bandwidth) Internet connections. A device called the Low Pass Filter (LP filter) is then installed on the users existing telephone devices (e.g. telephone sets, fax machines) to prevent interference with DSL signals. Hence, a DSL user can browse the Internet and have a telephone conversation or send a fax at the same time.
DSL (Digital Subscriber Line) is a high-speed connection that uses the same lines as normal telephones
The most commonly used variant of DSL is ADSL (Asynchronous Digital Subscriber Line). ADSL assumes that Internet users would normally receive or download much more information than they would send or upload. Hence, ADSL connections normally have three to four times more bandwidth for downloading data than uploading.
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Figure 24: DSL Network Mechanism
Source: How DSL Works, Howstuffworks.com
DSL requires two pieces of specialised equipment (see Figure 24). One, called the DSL Transceiver (also called the DSL Modem) is installed at the user-end while the other, called the DSL Access Multiplexer (DSLAM) is installed at the DSL service provider end (usually an ISP or telephone company). The DSL modem sends Internet data over the high frequency bands of telephone wires. The DSLAM aggregates multiple DSL user connections to a single, high capacity Internet connection. The main advantages of DSL are that:
n
the DSL user can download data off the Internet and make voice calls or send faxes at the same time. DSL connections offer higher Internet speeds (1.5Mbps) than normal modems (56Kbps).
The main disadvantages of DSL are that:

n
DSL is distance-sensitive. The achievable data rate drops as distance increases. Different network configurations will affect that data rate and the distance over which the service operates. The practical limit for ADSL service is around 6kms, although many telcos restrict the distance to offer a more uniform quality of service. This limit is due to the use of small amplifiers called loading coils over long-distance telephone lines. Telephone companies install loading coils to amplify voice signals. However, these loading coils disrupt ADSL signals. - ADSL gives lower bandwidth for uploading data than downloading.
In addition to ADSL, there are other variants of DSL collectively called xDSL. A comparison of these xDSL technologies is provided in the table below:
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Figure 25: xDSL Technologies

DSL Type Description Maximum Sending Speed Maximum Maximum Lines Phone Distance Required Support26 Receiving Speed
ADSL
Asynchronous DSL Assigns higher download speeds than upload speeds. High bit-rate DSL Receives and sends data at the same rate, but uses two lines. ISDN DSL Adapts existing ISDN connections for DSL. Multi-rate Symmetric DSL Assigns the same transfer rate to both uploading and downloading data; but the transfer rate itself is variable and set by the service provider. Rate-Adaptive DSL The cable modem adjusts connection speed based on length and quality of line. Symmetric DSL Similar to MSDSL and HDSL, but the transfer rate is fixed and only one telephone line is used. Very high bit-rate DSL Similar to ADSL but is compatible with optical fibre connections
800Kbps
8Mbps
18,000ft
Yes
HDSL
1.54Mbps
1.54Mbps
12,000ft
No
IDSL MSDSL
144Kbps 2Mbps
144Kbps 2Mbps
35,000ft 29,000ft
1 1
No No
RADSL
1Mbps
7Mbps
18,000ft
Yes
SDSL
2.3Mbps
2.3Mbps
22,000ft
No
VDSL
16Mbps
52Mbps
4,000ft
Yea
Source: HowStuffWorks.com27
There are about 41.3 million DSL subscribers worldwide
The worldwide DSL subscriber base had reached 41.3 million by 31 March 2003 and is expected to have grown to 60 million by end 200328. With about 7 million connections each, Japan and the US are the biggest DSL markets, while Europe and the Asia-Pacific represent the fastest growing regions29.
Cable Modems While existing CATV coaxial cables have the capacity to carry hundreds of channels (each channel is typically assigned a 6MHz band on the cable), most users view a far lesser number. Cable modems exploit the extra bandwidth for Internet access.
Cable Modems allow cable TV (CATV) users to access the Internet through their local cable operator
Cable providers normally place downstream information (data downloaded by the user) on a separate 6MHz channel the same space as any single channel of programming. Since users normally upload far less information than they download, the upstream channel requires even less bandwidth about 2MHz (see Figure 26 below).
Whether simultaneous voice conversations and data downloads are possible Source: How DSL Works by Howstuffworks.com (Link: http://computer.howstuffworks.com/vdsl3.htm) 28 Source: Worldwide DSL Subscribers Up 15% to 41 Million by Converge Network Digest, June 2003. Figures by The DSL Forum and Point Topic (Link: http://www.convergedigest.com/DSL/lastmilearticle.asp?ID=7662) 29 Source: The DSL Forum press release (Link: http://www.dslforum.org/PressRoom/news_newsubscribers_IntlPR_6.04.2003.html)
27
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Figure 26: Frequency Chart for Cable Modems
Source: Howstuffworks.com30
Networks using cable modems require two pieces of installed equipment. One, called the cable modem, is installed at the user end while the other, called the Cable Modem Termination System (CMTS) is installed at the provider end. The cable modem (see Figure 27 below) can be internal or external to the computer; or even provided as part of the set-top box (STB) installed by the cable provider.
Figure 27: Cable Modems at the Subscriber-End
Key:
n
RF Tuner: Blocks out frequencies used for regular TV channels. Demodulator: Converts radio frequency (RF) signals to digital signals that can be processed by the computer. Modulator: Converts the digital computer network data into RF signals for upstream transmission. MAC (Media Access Control): Interfaces the hardware and software components of the cable Internet network.
Source: Howstuffworks.com31, Deutsche Bank
The CMTS aggregates Internet traffic from a group of customers and routes it to an ISP. It allows up to 1,000 users to connect to the Internet through a single 6-MHz channel (which is capable of 30-40Mbps). Hence, users normally experience better throughput than from conventional dial-up connections. Advantage of Cable Modems:
n
The performance of cable modems for Internet access does not depend on distance from the service provider.
Disadvantage of cable modems:

n
As the number of users of cable modems increases, the individual bandwidth available to each user decreases as the total available bandwidth (30-40Mbps) is distributed between them. However, the cable provider can rectify this problem by adding a new 6MHz channel for Internet use.
Source: How Cable Modems Work by Howstuffworks.com (Link: http://computer.howstuffworks.com/cable-modem.htm) 31 Source: How Cable Modems Work by Howstuffworks.com (Link: http://computer.howstuffworks.com/cable-modem.htm) Page 46 Deutsche Bank AG
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There are about 27 million cable modem subscribers worldwide
The worldwide subscriber base for cable modems reached 27 million in mid-2003 and was expected to grow to 34 million by the end of the year32. With 14.6 million subscriptions, North America remains the largest market for this service.
ISDN ISDN (Integrated Services Digital Network) is a design for a completely digital network that can carry data, voice, images and video; as well as provide a single interface for connecting communications devices telephones, fax machines, computer systems, videophones, video-on-demand systems etc.
ISDN is a design for a completely digital telecom network
Although ISDN was originally envisaged for an all-optic-fibre network, the high cost of optic fibre installation led to an ISDN design that would work on normal copper telephone wires. This design is usually called Narrowband ISDN (sometimes called N-ISDN). A design for a high-speed ISDN network (called Broadband ISDN or BISDN) is still under development. The building blocks for N-ISDN are 64Kbps channels. This channel width is based on the sampling rate used by phone companies for converting analogue voice signals to digital signals (8000 samples/second, 8 bits/sample). There are two kinds of channels in ISDN:
n n
B-Channels or Bearer Channels (64Kbps) used for data/voice transmissions. D-Channels or Delta Channels (16Kbps) used by the phone company for setting up and controlling the B-Channels.
There are two main interfaces used in ISDN:

n
Basic Rate Interface (BRI) - mainly for home use, the BRI uses the capacity of existing copper telephone lines (160Kbps). Hence, the BRI normally consists of two B-channels, one D-channel and an extra 16Kbps for overheads (data framing, maintenance and control). Primary Rate Interface (PRI) mainly for business use, the PRI consists of several B-channels provided to companies with large data needs or the need to set up their own local phone system. A PRI also allows the combination of several B-channels into a single large channel called the H-channel.
Optic Fibres use light as the carrier of information
Optic Fibre Interest in the use of light as a carrier for information grew in the 1960s with the advent of the laser as a source of coherent light. In 1970, it became feasible to use light as a practical communication medium. This was only possible through use of fibre optic cables as a transmitting medium.
A raw, unconnected optic fibre is popularly termed as dark or unlit. A dark fibre usually has no assigned function. On the other hand a fibre in use is called a lit fibre. A lit fibre has some information in the form of light flowing through it. In optical fibres, light pulses are shot into one end of the fibre. The pulses travel the length of the fibre via internal reflections. In other words, the light bounces off inside the fibre until it reaches the other end. The speed of light is about 300,000
Source: Worldwide Cable Modem Subs Expected to Double By 2007 by internetnews.com (Link: http://www.internetnews.com/stats/article.php/2239451) Deutsche Bank AG Page 47
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kilometres per second. This makes information transmission through optical fibres extremely fast.33
Figure 28: Fibre Optic Cable Construction
Source: ARC Electronics, website
The most significant difference between conventional copper wires and optical fibres is in bandwidth, which in optical fibres is much greater. A fibre optic cable has a bandwidth over 100 times larger than a copper cable of the same thickness. Greater bandwidth means optical fibres can transmit information over longer distances and in less time than copper cables. A single fibre optic cable can manage data rates exceeding 1,000Mbps compared to copper cables, which have a maximum capacity of around 50Mbps2. A single mode fibre optic cable can transmit information over distances up to 50km without the need for a device to boost the signals in between.3 A twisted pair copper cable, however, is capable of transmitting a signal only up to 5-10km without regeneration. Large bandwidth also allows fibre optics to send multiple channels of information over the same line. The fastest fibre optics circuits are able to transmit 250 television channels or thousands of telephone conversations together. Below we outline the advantages and disadvantages of optic fibre over conventional information transmission media: Advantages of optical fibre:
n
Capacity Optical fibres carry signals with lesser energy loss than copper cables. Moreover, optic fibres have almost 100-times greater bandwidth than conventional copper wires. This means that fibres can carry more channels of information over longer distances. Size and weight Optical fibre cables are much lighter and thinner than copper cables with the same bandwidth. Also for optic fibre much less space is required in underground cabling ducts. Security Optical fibres are much more difficult to tap information from. Optic fibre cables are therefore of great use for banks and security installations. Immunity Stray electromagnetic impulses do not affect glass as they affect copper wires. So optical fibres are immune to errors in data caused by electrical
Source: What is Fibre Optics? by Owen Wood, CBC News Online, April 2002 (Link: http://www.cbc.ca/news/indepth/nortel/nfibreoptics.html) 2 Source: BPB Online (Link: http://www.bpbonline.com/Chapters/datacommumnication/Bdatach3.pdf) 3 Source: School of Science and Technology, Bell College of Technology (Link: http://floti.bell.ac.uk/MathsPhysics/introduction.htm#What%20are%20Optical%20Fibres) Page 48 Deutsche Bank AG
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interference. Thus they are ideally suited for use in places such as machine shops and factories, where conventional wires often require shielding.
n
Digital Transmission Unlike copper cables, optic fibre cables can transmit information digitally rather than analogically. This makes optic fibres popular for computer communication.
Disadvantages of optical fibre:

n
Price The most significant disadvantage of optic fibre remains cost. The initial cost of switching to a fibre optic system is high because of installation cost, which includes the cost of hardware such as transmitters, fibre bundle, etc. Special skills Optical fibres cannot be joined (spliced) together as easily as copper cables. Optical fibres also require additional training of personnel and expensive precision splicing and measurement equipment.
Fibre optic cables are constructed to operate in either single or multi mode and the difference between the two is described in Figure 29 below.
Figure 29: Comparison of Single mode and Multi mode fibres
Single mode Multi mode
Description
Single mode fibres accept only one light ray at a time. They concentrate the passage of light to the centre of the fibre core. The fibre core in case of single mode is very narrow, about 2 to 10 micrometers in diameter. The ray concentrated at the centre moves the quickest through the cable with the least distortion and attenuation.
Multimode fibres allow more than one ray of the light at a moment. Each ray at a slightly different angle from the other in a wider core. Light rays travelling straight through the core arrive sooner than refracted rays that have taken longer paths. This causes a smearing of the digital signal.
Characteristics Applications
Through a single-mode fibre, 30 times the number of pulses Multi mode fibres have lower capacity as compared to single per second can be transmitted as compared to a multimode. mode, both in terms of speed and distance. Since the signal distortion and attenuation is very low in single mode transmissions, they can travel tens of kilometers. They are used for long distance data transmission. Single mode fibres use expensive laser transmitters. Due to the use of expensive transmitters and electronics, single mode is normally used in large and complicated sites. Multi mode transmission systems use cost effective LED transmitters. Multi mode is ideal for small fibre optic systems because of its low cost. The multi-mode transmission system is limited to distances of 4 km
Figure 30: Single Mode
Figure 31: Multi Mode
Manufacturers of single and multi mode optic fibre cables are Alcatel, Corning and Pirelli.
Techniques / Technology
The following sections deal with multiplexing techniques and protocols involved in optic fibre communications.
Optical networking techniques This section deals with WDM and DWDM, two multiplexing techniques used in optic fibre networks:
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Wavelength division multiplexing transmits data from different sources together on an optical fibre with each signal carried at the same time on its own separate light wavelength
WDM The developments in WDM technologies are closely linked with identification of specific windows of wavelengths in optical spectrum, where optical attenuation is low. Early WDM began with only two widely spaced wavelength windows in the optical spectrum. These WDM are sometimes called wideband WDM.
In the early 1990s, WDM technology evolved and two to eight windows or channels were used for communication instead of only two. These were called the narrowband WDM. In the mid 1990s, WDM with 16 to 40 channels emerged, which were called dense WDM or DWDM.1
DWDM By the late 1990s, DWDM systems had evolved to a point where they were capable of transmitting through 64 to 160 channels. The difference between WDM and DWDM is that DWDM spaces the wavelengths more closely than does WDM. DWDM therefore has a greater overall capacity.
DWDM performs the following functions in order to transmit data:

n
Generating the signals The system contains a source providing stable light rays within the specific narrow wavelength window. Typically, the sources used by DWDM systems are solid-state lasers. Combining the signals DWDM systems employ multiplexes to combine the signals from various sources. Transmitting the signals DWDM systems use optic fibre cables to transmit the signals. Over long-distance transmission, the signal may need to be optically amplified. Separating the signals At the receiving end, DWDM systems use demultiplexers to separate out the multiplexed signals. Receiving the signals The de-multiplexed signals are received by a photodetector.
Figure 32: Functioning of a DWDM system
Source: Cisco
The market for DWDM systems nearly doubled in both 1999 and 2000, from US$ 2.3bn in 1998 to US$ 4.2bn in 1999 and US$ 8.3bn in 2000.2 The DWDM market
Source: Cisco Documentation (Link: http://www.cisco.com/univercd/cc/td/doc/product/mels/cm1500/dwdm/dwdm_ovr.htm#xtocid153581) 2 Source: KMI Research, October 2001 (Link: http://www.kmiresearch.com/fiberoptics_market_studies/dwdm_update.htm) Page 50 Deutsche Bank AG
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has grown steadily since then. Some leading DWDM systems manufacturers around the world are Alcatel, Cisco Systems, Fujitsu, Marconi and Tellabs.
Multiplexing Having introduced the term multiplexing it seems an opportune time to explain what it is. Voice conversations and communications between computers are rarely continuous, at least not in the sense of filling the available capacity all of the time. Telecommunications networks rely on scale for their cost effectiveness and this means providing large channels of information, such as fibre optic cables, and then squeezing as much information down the transmission link as possible. In order to utilise the capacity more efficiently a technique called multiplexing is used, which squeezes a number of streams of information onto a piece of transmission infrastructure. There are two distinct methods. The first is frequency division multiplexing with each signal assigned a distinct frequency and time division multiplexing where each signal has its own time slot. In a typical 2mbit (actually 2.048mbit) transmission system there will be 32 time slots each of 64 kbps (32x 64) with 30 channels carrying content and two channels left to be used by the system for control and information purposes.
Mutliplexing works like a fast rotary switch. As the switch rotates it connects each circuit to the transmission link for a short period so that the information is carried in chunks down the link. At the other end of the link is another rotary switch which then links the relevant packet of data to the required recipient device. TDM (time division multiplexing) is the basis for most basic transmission systems in telecommunications networks today. The essential component of multiplexers is the voice channel of 64kbps and may be aggregated to speeds of 2mbps and higher. Variations to this basic system have been developed such as statistical multiplexing, which make better use of available time slots by only allocating system resources to units that have information to send.
Wave division multiplexing As already mentioned, wave division multiplexing is used for higher speed transmission circuits along fibre optic cables. This is simply another name for frequency division multiplexing. A bit stream, which given the speed involved may actually be thousands of channels which have already been multiplexed together, will be used to modulate a light source. A number of light sources, each of slightly different frequency, will be combined onto a fibre using what is in effect a prism. At the terminating end the signals will be demultiplexed, again using a prism. These systems run at high speed. Speeds of 2.5 and 10Gbps are common. If many channels of light are combined onto one fibre the technique is called DWDM or dense wave division multiplexing. These require very stable lasers to produce light at a very precise frequency in order to avoid interference with many other light sources. For all practical purposes these systems will provide near infinite information carrying capacity.
One advantage of DWDM based networks is that they can carry different types of traffic at different speeds over the optical channel. Moreover, DWDM allows transmission of data in various protocols through one cable. These protocols may include SDH, SONET, ATM and Frame relay, among others. These protocols are explained in detail in the next section.
Protocols Before getting into the specifics of individual protocols it might be worth touching on what protocols are. Protocols govern the way in which information gets from one place to another. They stipulate the rules that the systems require in order for one
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device to be able to send and receive information in a comprehensible format. In telecoms parlance you will often hear talk of the OSI Protocol stack, also known as the seven-layer model. In principle the idea is simple. Each layer of the stack is expert at dealing with one particular part of the communications process. Its a bit like posting a letter. You know that if you put a letter in the post correctly stamped and addressed it will probably end up where it should do. At every part of the process each component only has to worry about getting it to the next stage, i.e the person that collects it from the post box just has to get it to the local sorting office. His job is unaffected by who wrote the letter, what is in it, or indeed whether it be a letter or a parcel. Neither does he care where it is going beyond getting it to the local post office. The local sorting office just gets it to the main office. The main office pushes it off in the general direction of the region or country on the bottom of the address. And so on. Use of the OSI protocol stack means that manufacturers and operators can develop products and services that they know will work with other product without having to agree a particular standard peculiar to the device.
Transmission protocols In optical transmission information is often encoded or multiplexed before it is transmitted. This encoded or multiplexed information has to be decoded or demultiplexed. Protocols define rules, which are treated as standards. Some of the popularly used protocols have been discussed below. Note that discussion of protocols and the differences between one and the other is pretty arcane stuff. While we introduce the principal names we do not attempt to go further. Anybody wishing to do so should make sure they have a mathematically oriented degree before getting out a textbook on the subject! Synchronous protocols - SONET The development of optical fibre transmission and large-scale integrated circuits made a new generation of networking standards necessary. There were demands for improved and increasingly sophisticated services that required large bandwidth, better performance monitoring facilities, and greater network flexibility. SONET allows different types of formats, such as different multiplexing formats, to be transmitted on one line. SONET is the name for the U.S. standard for Synchronous Optical NETworking. The major advantage of SONET is that it provides a set of generic standards that enable products from different vendors to be connected. Another advantage of SONET is that it enables reduction in equipment requirements and an increase in network reliability. SONET has a flexible architecture and is capable of accommodating different transmission rates in a single cable.1
n
Transmission protocols are special sets of rules that end-points in a telecommunication connection use when they communicate
SONET or synchronous optical network is the American National Standards Institute (ANSI) standard for synchronous data transmission on optical media.
SDH
SDH or Synchronous Digital Hierarchy is the international equivalent of SONET.
SDH is the European equivalent of SONET (well not quite equivalent but similar). The core data rate is different to SONET but interfaces can be made at higher data speeds. Together SDH and SONET ensure common standards such that digital networks can interconnect internationally. Furthermore, they ensure that existing conventional transmission systems can take advantage of optical media2.
Source: SONET Tutorial, International Engineering Consortium (Link: http://www.iec.org/online/tutorials/sonet/) 2 Source: SDH Tutorial, International Engineering Consortium (Link: http://www.iec.org/online/tutorials/sdh/topic01.html?Next.x=36&Next.y=14) Page 52 Deutsche Bank AG
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Asynchronous protocols
n
ATM
Asynchronous Transfer Mode (ATM) is a highperformance switching and multiplexing technology
ATM allocates specific amounts of bandwidth for specific amounts of time. ATM has the ability to transport voice, video, data and multimedia over the same virtual circuit. This is made possible by the use of small fixed-size "cells" of data, which can be switched at speeds of 155 Mbps and greater. ATM was designed to work in conjunction with SDH and SONET.
Other protocols
n
Frame Relay
Frame Relay is a high-performance wide area network protocol. It is used over a variety of interfaces including optical networks. Frame Relay is often used for telecommunication services designed for cost-efficient data transmission. Frame relay puts data in a variable-size unit called a frame and transmits frames. This speeds up overall data transmission. Frame relay complements and provides a midrange service between ISDN, which offers bandwidth at 128 Kbps, and Asynchronous Transfer Mode (ATM), which operates in a somewhat similar fashion to frame relay but at speeds of about 155Mbps and more.34
MPLS The current core networks may be classified under the following three types:
n n n
Data-centric like those of ISPs35 Voice-centric like those of traditional telecommunications companies Converged network that combines voice and data
All these networks are increasingly converging on a model that uses the Internet Protocol36 (IP) to transport information packets. Certain issues arise in respect of the quality of transmission across the networks, a major one being management of speed and traffic so as to deliver the promised quality of service (QoS). Multi-Protocol Label Switching (MPLS) is a set of protocols for provisioning and managing these core networks. MPLS overlays a packet switched37 IP network to manage traffic flow. It provides virtual links or tunnels through the network to connect nodes that lie at the edge of the network. The switch is referred to as an edge of a network where the boundary of one network ends and another starts. MPLS uses a technique known as label switching to forward data through the network. A small, fixed-format label is inserted in front of each data packet on entry into the MPLS network. MPLS facilitates very high-speed data forwarding. Moreover, the bandwidth is reserved for traffic flow with differring QoS requirements. MPLS works with the Internet Protocol (IP), Asynchronous Transport Mode (ATM), and frame relay network protocols. Therefore, MPLS is also called multiprotocol.
Source: searchNetworking.com Definition (Link: http://searchnetworking.techtarget.com/sDefinition/0,,sid7_gci212153,00.html) 35 Internet Service Providers (ISPs). Refer to glossary for further information on ISPs. 36 Refer to glossary for further information on IP. 37 Refer to glossary for further information on packet switching. Deutsche Bank AG Page 53
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A label switched packet crosses multiple transport media such as ATM, Frame Relay or Ethernet. Thus MPLS creates end-to-end circuits, with specific performance characteristics across any type of transport medium.
Wireless Media / Air / Unguided Media

This section introduces electromagnetic spectrum and its uses in radio, television, microwave and free space optics; evolution of communication technology from analogue to digital; various techniques and technologies used in the communication; and the evolution of mobile communication systems.
EM Spectrum Electromagnetic38 (EM) waves are created by the movement of electrons, which can then be propagated through free space. By attaching an antenna of appropriate size to an electrical circuit, the EM waves can be broadcast efficiently and received some distance away. All wireless communication is based on this principle.
All the EM waves in a continuum arranged according to their frequency and wavelength form an EM spectrum
All the EM waves in a continuum are arranged according to their frequency and wavelength to form an EM spectrum. The Electromagnetic Spectrum covers the range of frequencies right from below mains power (50-60Hz) up to cosmic rays. The EM spectrum includes:
n n
Visible light - These waveforms39 are visible to the naked human eye. Ultraviolet waves These waveforms are not visible to the naked eye. They have a shorter wavelength40 than visible light and are used for fibre optic communication. X-rays These waveforms have shorter wavelength than ultraviolet waves. They are not used for telecommunication purposes. Infrared waves These have wavelengths longer than those of visible light, but shorter than radio waves and are used for short distance line-of-sight41 communication. Microwave These waveforms have longer wavelength than infrared, but shorter than radio waves. They are used for long distance line-of-sight and satellite communication. Radio waves These waveforms have wavelength longer than microwave. They are used for radio communication. Gamma waves - These waveforms have wavelength less than X-rays. They are not used for telecommunication purposes.
Figure 33 below shows the EM spectrum and the technologies that utilise various frequency bands for wireless communication.
Source: Computer Networks by Andrews S. Tanenbaum, 3rd Edition; Electro-Optical Industries Inc. (Link: http://www.electro-optical.com/bb_rad/emspect.htm) 39 A waveform is a representation of alternating current (AC) varying with time. Refer to glossary for further information on AC. 40 Wavelength is the distance between identical points in the adjacent cycles of a waveform signal propagated in a medium. 41 In line-of-sight (LOS) communication transmitter and receiver antennas are in visual contact with each other. Page 54 Deutsche Bank AG
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Figure 33: EM Spectrum for Wireless Communication
Source: California State University42
Now is perhaps a good time to introduce some basic information about frequency and wavelength, terms that are sometimes interchanged. Frequency is measured in Hertz or Hz for short. 1 cycle (one oscillation) /second = 1Hz.
Figure 34: Frequencies
Common units are kHz (kilo) 1,000 MHz (mega) 1,000,000 GHz (giga) 1,000,000,000 THz (tera) - 1,000,000,000,000
Frequency and wavelength
Visible light 100THz, Human voice 100Hz 10kHz The relationship between frequency and wavelength of an electromagnetic wave is given by the formula wavelength x frequency = 3x10^8 metres/sec (the velocity of light). It is important to understand this relationship because optical engineers tend to talk in units of wavelength while electronic engineers use frequency. As the above formula shows the two are firmly related but to the uninitiated it can be confusing. Figure 35: Wavelengths
So wave length units are typically milli(m) 1x 10^-3 micro (u) 1x10^-6 nano (n) 1x10^-9 pico (p) 1x10^-12
Propagation Propagation describes the way a signal travels through a medium, be it air, copper or fibre. The way that electromagnetic waves travel through the air, and indeed through other mediums, depends on the frequency of the wave. The higher the frequency the greater the attenuation, i.e. high frequency signals travel shorter distances than low frequency signals for a given power input. High frequency signals tend to travel in straight lines while lower frequency signals can bend or refract around solid objects. In a practical sense this has a material influence on the
42
Source: California State University (Link: www.csun.edu/~vcact008/course/ 457/wireless-cellular.ppt) Page 55
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way cellular networks are designed depending on the frequency band allocated. Networks operating at 900MHz relative to those at 1800 or 1900 Mhz can cover an area of land with significantly fewer base stations and there are fewer problems with shadows created by buildings or hills because the signals can bend more readily around these obstacles. In radio technology very low frequency signals can travel great distances and because of their bendability qualities can hug the earths surface. This is why certain radio stations can be picked up thousands of miles from their broadcasting location. As we will see, there is a downside. Low frequency signals cannot carry very much information for a given unit of capacity relative to high frequency signals.
Bandwidth The range of frequencies in a signal is known as the bandwidth. For example voice signals spread between 100Hz and 10,000 Hz so the bandwidth is 9,900 Hz. The amount of information that a channel can carry is limited by the bandwidth and the frequencies in the spectrum. The higher the bandwidth the greater the information carrying capability of the channel. In telecommunications it is conventional to talk about three classes of bandwidth. Figure 36: Bandwidth
Narrowband up to 64 kbps Wideband 64 kbps up to 2Mbps Broadband 2Mbps upwards
In practice these are crude definitions and one users broadband may be narrowband to someone dealing with optical systems. But hold on - where did bps come in and what are they? We will look at this when we get on to the difference between analogue and digital signals.
Analogue and digital Analogue means continuously variable. Analogue signals therefore are wave shaped signals whose amplitude constantly changes. Their frequency is the number of waves per second. In a telephone network the local part of the network was built with analogue service in mind. Voice grade telephone lines have a limited bandwidth capability and are designed to operate in the frequency range 300Hz to 3400Hz. This compares with the human ear that can deal with frequency ranges from 200Hz to 20,000Hz and this is why a conventional telephone call does not provide perfect sound quality.
Digital signals are represented by a series of either 1s or 0s, i.e. a binary system. There are only these two states. In telecommunications systems these can either be represented by voltages or lights. Increasingly the world is becoming digital because this is the language of computers. Digital signals have many advantages over analogue but one of the fundamental differentiators is that errors or distortions can be far more easily minimised than would be the case in an analogue system. This is because there are only 1s and 0s or on/off, so hard to get wrong. Of course bits can go missing but there are ways of dealing with that. For computers of course accuracy of information is vital whereas in a voice conversation a few distortions do not necessarily mean the listener cannot understand the message. With digital there is no accumulation of noise in the signal. Digital also offers greater capacity and higher transmission rates than analogue and is far easier to manipulate. However, many things we deal with in the real world are analogue in nature. Sound, movement etc all vary infinitely so in order for the digital system to deal with an
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analogue signal we have to turn it into a digital format. To do this we have to sample the amplitude of the analogue signal at various points, measure it and convert this into a binary number. How often do we have to sample the signal to make sure we have enough information to replicate it accurately? In a traditional voice telephony system where the maximum allowable frequency is 4,000Hz or cycles per second, if we sample the wave twice every wavelength we will take 8,000 samples per second. If we use 8 bits to encode each amplitude then the total number of bits will be 8x8,000 per second or 64,000 bits per second. This is the building block for telecommunications systems. Commonly used higher capacity multiples such as 2 Mbits (30x64kbps) are all built up from this basic component. In practice other systems, in particular mobile systems where capacity is at a premium, can use fewer bits to represent the signal but at the expense of some quality and/or more sophisticated electronics to do the encoding/decoding.
Modulation/demodulation On the local network, signals are transmitted in analogue form (because that is how the system was originally designed), while signals from computers are in digital form, i.e. a binary stream of 1s and 0s. To get the digital signal transmitted over the analogue telephone network we use a process called modulation. At the other end of the network to extract the digital signal we use a process called demodulation. The devices used to perform this operation are called modems (modulator/demodulator). Traditionally these devices have worked at speeds of up to 56kbps, a limitation imposed by the nature of the local telephone lines which were only originally designed for voice. Evolution from Analogue to Digital There are two principal options for communication systems, analogue and digital communication system. The essential difference between the two is that analogue is something which has an infinite number of variations whereas digital is a stream of 1s and 0s. Most systems are now digital because of advances in processing technology at the chip level. Key issues are described in the table below:
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Figure 37: Analogue and Digital Communication

Analogue Digital
Definition
An analogue communication system uses an analogue signal in which medium's alternating current frequency is modified in some way, such as by varying its amplitude or its frequency. AMPS44, NMT45, TACS46 and ETACS47 Voice Depends upon the analogue signal Signals are sent as continuously varying electromagnetic waves. Transmission of data is through uninterrupted signals
Digital communication system uses a digital signal that generates, stores, and processes data in terms of two states: positive and non-positive. Positive is expressed or represented by the number 1 and non-positive by the number 0. Thus, data transmitted or stored with digital technology is expressed as a string of 0's and 1's (also known as binary code43) GSM48, TDMA49, CDMA50, WCDMA51 Voice and Data 9.6 Kbps to 2 Mbps Signals are sent as sequence of voltage pulses Transmission of data is through interrupted signals.
Technologies Used Applications Speed Properties .
The system is sensitive to noise52, as it amplifies/repeats the The system is not sensitive to noise, as it regenerates the error signal to error message. reduce attenuation. Encryption of the message can be done to increase system security. It allows multiple messages to be sent in a particular time or frequency range or by assigning different codes. This process is commonly known as multiplexing. It allows packets the data to be sent over a channel.
Source: Helsinki University of Technology53; Govt. of Hong Kong54
Figure 38: Digital and AnalogUE Wave forms
Time
1 cycle
Source: Helsinki University of Technology55; Govt. of Hong Kong56
Binary describes a numbering scheme in which there are only two possible values for each digit: 0 and 1. Binary code is developed by any digital encoding method in which there are exactly two possible states. 44 Advances Mobile Phone Service (AMPS) is an analogue cellular radio standard. 45 Nordic Mobile Telephony (NMT) is a common Nordic standard for analog mobile telephony as established in the early 1980s. 46 Total Access Communication System (TACS) is a mobile telephone standard originally used in Britain for the 900 MHz frequency band. 47 Extended Total Access Communications System (ETACS) is an analog mobile phone network developed in the UK and available in Europe and Asia. 48 Global System for Mobile Communications (GSM) was originally developed as a pan-European standard for digital mobile telephony. It is used on the 900 MHz and 1800 MHz frequencies in Europe, Asia and Australia, and the MHz 1900 frequency in North America and Latin America. 49 Time Division Multiple Access (TDMA) is explained in the Techniques / Technology section below. 50 Code Division Multiple Access (CDMA) is explained in the Techniques / Technology section below. 51 Wideband Code Division Multiple Access (WCDMA) is a technology used for wideband digital radio communications of Internet, multimedia, video and other capacity-demanding applications. 52 Noise is unwanted electrical or electromagnetic energy that degrades the quality of signals and data. 53 Source: Analog vs. Digital Wireless Technology by Jarrod Creado, Helsinki University of Technology, October 1999 (Link: http://www.tml.hut.fi/Studies/Tik-110.300/1999/Wireless/analog_3.html) 54 Source: Analog vs. Digital Wireless Technology by Jarrod Creado, Helsinki University of Technology, October 1999 (Link: http://www.tml.hut.fi/Studies/Tik-110.300/1999/Wireless/analog_3.html) Page 58 Deutsche Bank AG
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Robustness of a communication system A communication systems robustness is determined by its performance in the presence of the transmission impairments such as transmission loss and noise. Transmission loss attenuates the signal, and noise adds unwanted components to the desired signal.
In an analogue system, an amplifier that boosts the desired signal strength also boosts the noise level. As a result, the signal-to-noise ratio at the output of the repeater remains the same. This means that once the noise is introduced into the desired signal it is physically impossible to make the signal faultless again at the output of the amplifier. Because of this, analogue systems are sensitive to noise and their performance degrades continuously as the noise level increases. In a digital system, regenerators are used instead of repeaters. Instead of mainly boosting the signal strength, the regenerator determines whether the information carrying bits is 1- or 0-based on the received signal at the input. Once the decision of 1 or 0 is made, a fresh uncorrupted signal representing that bit is transmitted at the output of the regenerator. Assuming that the 1/0 decision is correct, the quality of the output signal at the regenerator is made as perfect as that at the source. Because of this the performance of a digital system can remain relatively constant up to a certain threshold of the bit error rate. In a digital system, therefore, performance is less sensitive to noise. It is physically possible to maintain a very high level of steady performance over a certain range of transmission impairments.
Use of EM spectrum in communication This section covers various applications of the EM spectrum for telecommunication purposes. These include radio, television, microwave communication and free space optics. Radio Radio57 waves transmit music, conversations, pictures and data invisibly through the air, often over millions of miles. Radios use continuous sine waves to transmit information (audio, video, data). Different groups and devices use radio waves at the same time, for example, TV broadcasts, AM and FM radio broadcasts, police and fire radios, satellite TV transmissions, cell phone conversations, GPS signals, and so on. Each different radio signal uses a different sine wave frequency, which is how they are all able to be accessed distinctly.
Radio is a device used for transmission or reception of electromagnetic radiation in the radio frequency range.
Any radio set-up has two parts:

n n
the transmitter the receiver.
The transmitter takes the message, encodes it onto a sine wave and transmits it with radio waves. The receiver receives the radio waves and decodes the message from the sine wave it receives. Both the transmitter and receiver use antennas to radiate and capture the radio signal.
Source: Analog vs. Digital Wireless Technology by Jarrod Creado, Helsinki University of Technology, October 1999 (Link: http://www.tml.hut.fi/Studies/Tik-110.300/1999/Wireless/analog_3.html) 56 Source: Analog vs. Digital Wireless Technology by Jarrod Creado, Helsinki University of Technology, October 1999 (Link: http://www.tml.hut.fi/Studies/Tik-110.300/1999/Wireless/analog_3.html) 57 Source: Computer Networks by Andrews S. Tanenbaum, 3rd Edition Deutsche Bank AG Page 59
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Two popular modulation methods used by radio to transmit the message are:
n n
Amplitude modulation (AM) Frequency modulation (FM)
Radio communication can be of three types:

n
One-way radio - This form of communication is used for broadcasting information. Two-way radio This form of radio communication is for one to one purposes.
Half Duplex When two persons cannot communicate simultaneously over the radio communication channel it is called a half-duplex radio communication. Full Duplex - When two persons can communicate simultaneously over the radio communication channel it is called a full duplex radio communication.
Television is a medium for broadcasting information, a form of one-way communication.
Television Television is a medium for broadcasting information, a form of one-way communication. A typical TV signal requires 4 MHz of bandwidth. After adding sound, called a vestigial sideband and a little buffer space, a TV signal requires 6MHz of bandwidth.
The composite video signal is amplitude-modulated into the appropriate frequency, and then the sound is frequency-modulated as a separate signal (see Figure 39).
Figure 39: Composite Video Signal
(A) Vestigial picture sideband (B) Video carrier (C) Fully transmitted picture sideband (D) Sound carrier Source: Howstuffworks.com
Microwave is a line-of-sight technology that operates typically in the frequency range of 1 - 58 GHz
Microwave Microwave is a line-of-sight technology (i.e., a microwave transmission cannot penetrate the earth's surface, therefore will not extend beyond the horizon). Microwave communication products typically operate in the frequency range of 158GHz. Such products have higher bandwidth and can be operated at lower cost than wired communication links. Above 100MHz, the waves travel in a straight line and can therefore be narrowly focused. Parabolic antennae are used to concentrate all the energy into a small beam, which increases the signal to noise ratio. The directionality of these beams allows multiple transmitters lined up in a row to communicate with multiple receivers in a row without interference. This made long distance telephony possible before the fibre optics came into existence. In fact, the long distance carrier MCIs name first stood for Microwave Communication Inc., because its entire network was originally built on microwave towers.
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Advantages over optic fibre are that it is:

n n
Easy to install Relatively inexpensive
Disadvantages are mainly due to it being a line-of-sight technology. They are that:
n
Even though the beam is well focused at the transmitter, there is still some divergence in space. Some waves may be refracted off low-lying atmospheric layers and may take slightly longer to arrive than direct waves. The delayed waves may arrive out of phase with the direct wave and thus cancel the signal. It is weather and frequency dependent. For example, the microwave communication connection is disturbed by rainfall, smog snowfall etc.
Types of microwave systems:

n
Terrestrial Microwave58: As microwave is a line-of-sight technology, longdistance terrestrial transmission of messages is accomplished via a series of relay points known as hops. Each hop consists of a tower (often atop a mountain) with one antenna (typically a parabolic antenna) for receiving and another for re-transmitting. Hops typically are spaced at 25-mile intervals. Satellite Microwave: Satellite communication is used for a variety of purposes, for example, long-distance communications, direct broadcasting, weather monitoring and navigation. Microwaves can penetrate through the earth's atmosphere. Therefore they are used to send signals to satellites, and receive signals from them. A large number of signals are sent daily, making it difficult for a single satellite to carry them all. To transfer them efficiently, several satellites are needed. They can be used on different frequencies to avoid interference, but it is possible to distinguish different satellites if the same range of frequencies is used. The transmitted microwaves cover a small area. As a result, it prevents interference if the satellites are separated by a small degree. Figure 40 below shows the application of microwaves in satellite communication.
Source: The Museum of Broadcast Communications (Link: http://www.museum.tv/archives/etv/M/htmlM/microwave/microwave.htm) Deutsche Bank AG Page 61
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Figure 40: Microwaves For Satellite Communication
Source: http://ihome.cuhk.edu.hk/~s016969/physproj/Spectrum/Micro/comm.htm
The table below differentiates the two types of microwave applications in wireless communication:
Figure 41: Difference between terrestrial & satellite microwave communication
Terrestrial Satellite
Uses
Long haul telecommunication Closed circuit television (CCTV)59 Digital data transmission in small regions (< 10km)
Television Long distance telecommunication Private business networking
Transmission Characteristics
Supports data rates from 12 Mbps to 274Mbps Typically 1-10GHz frequency Operates in bandwidth of 7MHz to 220MHz < 1GHz too much interference >10GHz atmospheric absorption Common pairs of uplink and downlink frequencies At higher frequencies need stronger signals to beat attenuation
Source: University of Idaho
60
Free Space Optics61 (FSO), also called Optical Wireless, is a line-of-sight technology that uses laser or infrared beam to provide optical bandwidth connections. Currently, Free Space Optics is capable of up to 2.5Gbps of data, voice and video communications through the air, allowing optical connectivity without requiring fibreoptic cable or securing spectrum licences. Free Space Optics requires light, which can be focused by using either light emitting diodes (LEDs) or lasers. Laser Laser, an acronym for light amplification by stimulated emission of radiation, produces an intense monochromatic beam of coherent light. This beam of light is used to carry data at speeds ranging from 10Mbps to 622Mbps, varying upon the
CCTV (closed circuit television) is a television system, which is commonly used in surveillance systems Source: Course Notes, Department of Computer Sciences, University of Idaho (Link: http://www.cs.uidaho.edu/~krings/CS420/Notes.F02/02-420-05.pdf) 61 Source: LightPointe (Link: http://www.freespaceoptics.org)
60 59
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distance between two communication points. Laser systems use infrared wavelength of 780nm and 850nm. Laser systems provide an alternative form of optical video, voice, and data transfer when fibre is too costly or logistically impossible to install. Laser communication involves two systems, each comprising an optical transceiver which consists of a laser transmitter and a receiver to provide full duplex (bidirectional) capability. Each system uses a high-power optical source (laser) plus a telescope that transmits light through the atmosphere to another telescope that receives the information. At that point, the receiving telescope connects to a highsensitivity receiver through an optical fibre.
n
- Lasers systems can be used to solve logistical problems, such as crossing difficult terrain, expressways, waterways, and international borders. - For private corporate networks, laser systems provide a very high bandwidth link between sites without the recurring costs of leased lines. - For high bandwidth applications such as Tele-medicine or videoconferencing, the laser provides alternatives to installing fibre optic cable between sites where it is very expensive or impossible to lay. For temporary network connectivity needs, such as at exhibitions, conventions, sporting events, or disaster scenes, high bandwidth links can be easily and quickly provided using portable laser systems. In addition, laser systems are also used as high-speed wireless backup for fibre optic cable and as last-mile solutions, connecting customer sites to fibre backbones.
Advantages of laser based communication system are that:

n
It can be used to set up high-speed data communication links in areas where it is prohibitively expensive or logistically unfeasible to install fibre optic cables. Laser communication systems are cheaper and quickly installed as compared to fibre optics. Laser communication systems provide higher data transfer speeds as compared to the microwave based communication systems.
Disadvantages of laser based communication system:

n
They are weather and temperature dependent and are absorbed or scattered by rainfall, snow and fog. They are also disturbed by any physical obstruction in their path. Building sway or seismic activities upset the alignment of the transmitter and the receiver. Heated air rising from the earth or man-made devices such as heating ducts create temperature variations among different air pockets, which causes fluctuations in signal amplitude, leading to "image dancing" at the receiver end. Safety concerns due to exposure of human eyes to laser, and the high voltage used in laser systems.
n n
Infrared Infrared is used as a medium for short-range, indoor communication. The working of infrared systems is similar to that of the laser systems. It is also a line of sight based
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system. Differences between the infrared and laser transmission systems are given in the table below:
Figure 42: Difference between Infrared and Laser Transmission Systems
Transmission System Advantages Disadvantages
Infrared
Cost effective Medium speeds Good where cables cannot be used Immune to eaves-dropping
Short distances only Reflective sources problematic Atmospheric conditions and obstacles may cause attenuation
Laser
High speeds of data transmission possible Immune to EMI and eaves-dropping
Short distances Atmospheric conditions and alignment cause attenuation Radiation Cannot reflect off surfaces like infrared
Source: University of Capetown62
Techniques / Technologies
The techniques used to transmit data over a channel are known as access techniques.
n
Access Techniques The techniques used to transmit data over a channel are known as access techniques. Three types of access techniques are used in wireless communication: FDMA (Frequency Division Multiple Access): FDMA is the division of the frequency band allocated for wireless cellular telephone communication into distinct channels, each of which can carry a voice conversation or, with digital service, carry digital data. TDMA (Time Division Multiple Access): TDMA is a technology used in digital cellular telephone communication that divides each cellular channel into distinct time slots in order to increase the amount of data that can be carried. CDMA (Code-Division Multiple Access): CDMA is a digital wireless technology and cellular telephone standard developed by Qualcomm. It is a form of multiplexing, which allows numerous signals to occupy a single transmission channel. CDMA employs spread spectrum technology. The frequency of the transmitted signal is then made to vary according to a defined pattern (code), so only a receiver whose frequency response is programmed with the same code can intercept it. An oft-used analogy is that of a crowded room where everybody is shouting at the same time but in different languages. The receiver simply tunes into the language he understands. All the people who speak languages other than your own will be a source of disturbance (noise).
The table below gives more details about the access technologies.
Source: Department of Computer Science, University of Cape Town (Link: http://people.cs.uct.ac.za/~dgruijte/DataComm.ppt) Page 64 Deutsche Bank AG
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Figure 43: Access Technologies

FDMA TDMA CDMA
Diagram
US Service Providers using AT&T Wireless the technique Features Suitable for analogue systems Provides continuous transmission of data Continuous transmission of data makes handoff63 difficult Does not require framing64 or synchronization of bits of data or no synchronization overheads Requires tight filtering to minimize interference
AT&T Wireless, Cingular, T-Mobile Suitable for digital systems
Sprint PCS, Verizon Wireless, NextWave Suitable for digital systems
Provides non -continuous transmission Provides non -continuous transmission of data of data Non - continuous transmission of data Non - continuous transmission of data makes makes handoff simpler handoff simpler Requires framing or synchronization of Require framing or synchronization of bits of bits of data or higher synchronization data overheads Does not require tight filtering to minimize interference Does not require tight filtering to minimize interference Power control necessary for mitigating nearfar65 problem Soft Handover66 increases capacity Complex network support required for implementing soft handoff Soft capacity67 limit
Requires stringent power control to prevent Less stringent power control to inter-user interference prevent inter-user interference Higher synchronization overheads
Modulation is the addition of information (or the signal) to an electronic or optical signal carrier
Modulation Techniques Modulation is the addition of information (or the signal) to an electronic or optical signal carrier.
When information is transmitted by radio or microwaves there has to be a carrier wave. The sound information is combined with the carrier wave during modulation at the radio transmitter. The signal is then demodulated by the radio on the other end so that the sound information can be sent to the speaker and the sounds emitted into the air. Figure 44 shows the difference between the various modulation technologies.
Each time a mobile cellular subscriber passes from one cell into another, the network automatically switches coverage responsibility from one base station to another. This switching process is called handoff. Refer to glossary for further information on handoff. 64 A protocol that separates incoming bits into identifiable groups so that the receiving multiplexer recognizes the grouping. 65 Refer to glossary for further information on the near-far problem. 66 Refer to glossary for further information on soft handoff. 67 System performance decreases as the number of users increase. Deutsche Bank AG Page 65
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Figure 44: Difference between the Various Modulation Technologies

Amplitude Modulation (AM) Frequency Modulation (FM) Pulse Code Modulation (PCM)
Definition
AM is the superposition of the sound information onto a high frequency carrier wave. This creates a wave with varying amplitude. The radio subtracts the high frequency carrier wave (demodulates) and then feeds the sound signal to the output (loudspeaker).
FM also requires a high frequency carrier wave but its frequency is altered - the high voltage period of the information wave increases the frequency of the carrier wave and vice versa.
PCM requires a high frequency carrier wave. However, the sound is encoded as a series of numbers. The sound wave is sampled at regular intervals and the amplitude is measured. The value of the amplitude is converted into binary (base 2); so 2 is 0010, 4 is 0100, 6 is 0110 and 8 is 1000 etc. The 1s and 0s are now combined with the carrier wave as 'ONs' and 'OFFs' The advantage of PCM is that it suffers much less from interference (noise). Using error correction codes can rectify distortions caused by interference. Also, the signal can be checked and 'boosted' if it is beginning to fade.
Advantages & Disadvantages
The drawback of AM is its susceptibility to FM is preferred as noise or interference is noise or interference. The electromagnetic much less of a problem than AM. waves from a nearby electrical machine can be picked up by the radio which then outputs them as sound (hissing or buzzing as it's a continuous low frequency wave), which masks the program being transmitted.
Diagram
The wireless industry has seen the growth of wireless services from voice based to multimedia mobile-based services.
Evolution68 of Mobile Communication Systems The wireless industry has grown fast in the past two decades. Although cellular technology is not new it was the advances in chip technology that made it operationally feasible. This has seen the growth of wireless services from voice based to multimedia mobile-based services. The various generations of wireless technology are:
n n n n n
1G (First Generation) 2G (Second Generation) 2.5 (Intermediate Generation) 3G (Third Generation) 4G (Fourth Generation)
Over time there have been progressive moves to try to standardise across increasingly wide markets to improve the cost efficiency of developing the technologies.
Sources: 'A 3G Convergence Strategy for Mobile Business Middleware Solutions' by Fredrik Hacklin, Master's Thesis, Royal Institute of Technology, Stockholm, Sweden, September 2001 (Link: http://www.d.kth.se/~d98-fah/hacklin/thesis/latex2html/output/node20.html); Wireless Glossary, DevX.com (Link; http://www.devx.com/wireless/Door/11264); Source: Wireless Communications Beyond 3G by V. Kumar, Alcatel Telecommunications Review, 1Q 2001 (Link: http://www.cs.umn.edu/research/mobile/seminar/SUMMER02/WNfiles/beyond3G.pdf); '4G - Beyond 2.5G and 3G Wireless Networks'by MobileInfo.com (Link: http://www.mobileinfo.com/3G/4GVision&Technologies.htm) Page 66 Deutsche Bank AG
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The first generation of systems for mobile telephony was analogue, circuit switched, and it only carried voice traffic.
1G The first generation of systems for mobile telephony was analogue, circuit switched, and only designed to carry voice traffic. The analogue phones used in 1G were less secure and prone to interference where the signal is weak. Given the unproven nature of the market, the degree of standardisation was low. Analogue systems include:
n
AMPS (Advanced Mobile Phone System): The original standard specification for analogue systems. Used primarily in North America, Latin America, Australia and parts of Russia and Asia. NMT (Nordic Mobile Telephone): The common Nordic standard for analogue mobile telephony as established by the telecommunications administrations in Sweden, Norway, Finland and Denmark in the early 1980s. NMT systems have also been installed in some European countries, including parts of Russia, and in the Middle East and Asia. TACS (Total Access Communications System): A mobile telephone standard originally used in Britain within the 900 MHz frequency band. ETACS (Extended Total Access Communications System): An analogue mobile phone network developed in the UK and available in Europe and Asia.
The second generation of mobile telephony systems uses digital encoding. 2G networks support high bit rate voice, limited data communications and different levels of encryption
2G The second generation of mobile telephony systems use digital encoding. 2G networks support high bit rate voice, limited data communications and include encryption to enhance security. 2G networks include:
n
GSM (Global System for Mobile Communications): Originally developed as a pan-European standard for digital mobile telephony, GSM has become the worlds most widely used mobile system. It is used on the 900 MHz and 1800 MHz frequencies in Europe, Asia and Australia, and the 1900 MHz frequency in North America and Latin America. D-AMPS (Digital Advanced Mobile Phone System): Earlier designation of American standard for digital mobile telephony used primarily in North America, Latin America, Australia and parts of Russia and Asia. Now known as TDMA. CDMA (Code Division Multiple Access): A technology for digital transmission of radio signals between, for example, a mobile telephone and a radio base station. In CDMA, a frequency is identified by a number of codes.
2G networks can support SMS applications. Various transmission technologies were used in different geographies, for example, Global System for Mobile Communication (GSM) in Europe and Asia, Digital AMPS (D-AMPS) in the USA, Code Division Multiple Access (CDMA) in USA and Japan, and Personal Digital Cellular (PDC) in Japan.
2.5G 2.5G extends 2G systems, adding features such as packet-switched connection and enhanced data rates. 2.5G variants include:
n
2.5G extends 2G systems, adding features such as packet-switched connection and enhanced data rates.
EDGE (Enhanced Data for GSM Evolution): EDGE was developed to enable the transmission of large amounts of data at high speed, i.e., 384kbps. It is an upgraded version of GSM. GPRS (General Packet Radio Service): A packet-linked technology that enables high-speed (115Kbps) wireless Internet and other data communications.
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HSCSD (High-Speed Circuit Switched Data): A circuit-linked technology for higher transmission speeds up to 57Kbps, primarily in GSM systems.
Note that the data speeds given above are, in practice, widely variable. They are affected by traffic patterns and numbers quoted are normally the maximum theoretical limit. The extent of the degradation from this maximum will vary widely depending on the technology and usage patterns. These networks support WAP, MMS, SMS mobile games, and search and directory. 2.5G is considered to be as an interim generation built as it was on 2G networks. GSM networks were upgraded with High-Speed Circuit Switched Data (HSCSD) and General Packet Radio System (GPRS) in Europe and Asia, while PDC networks were upgraded to i-Mode in Japan. In practice the technology has been more widely deployed than expected because of the slow introduction of 3G services.
3G The third generation of mobile systems provides high-speed data transmissions of 144Kbps and higher (up to 2Mbps). 3G will provide enhanced multimedia (voice, data and video). 3G initiatives have largely been driven by device manufacturers, not from operators as in the case of previous technologies and this goes some way to explaining why the pace of implementation has been disappointingly slow. 3G networks include:
n
W-CDMA (Wideband Code Division Multiple Access): A technology for wideband digital radio communications of Internet, multimedia, video and other capacity-demanding applications. WCDMA, developed by Ericsson and others, has been selected for the third generation of mobile telephone systems in Europe, Japan and the United States. The technology is also the principal alternative being discussed in other parts of the world, notably Asia. CDMA2000: Cdma2000 is a radio transmission technology for the evolution of narrowband cdmaOne/IS-95 to 3rd-generation adding up multiple carriers. It is a natural evolutionary step from CDMA. TD-SCDMA (Time Division Synchronous Code Division Multiple Access): TD-SCDMA is a third generation mobile telephony standard developed by CATT (China Academy of Telecommunications Technology) in collaboration with Datang and Siemens. TD-SCDMA enables the surfing the Internet at a speed of up to 2 Mbps. This is the least well known of the 3G technologies but the scale of the Chinese market may yet provide it with a critical mass of customers.
The detailed description of the generations of mobile communication is given in the table below:
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Figure 45: Mobile Communication Generations

1G 2G 2.5G 3G
System some of the Transmission Technology used in systems
Analogue AMPS NMT TACS
Digital GSM CDMA TDMA
Digital Enhancements to: TDMA GSM CDMA
Digital CDMA2000 WCDMA TD-SCDMA
Applications
Voice
Voice Little Circuit Switch Data
Voice
Voice
High Speed Circuit Switch Data Packet Switch Data Packet Switch Data
Speed Properties
Depends on Analogue Signals Incomplete coverage Poor sound quality
9.6Kbps - 14.4Kbps More secure Data services available Broader coverage Allow more users to communicate at same time Better sound quality
14.4Kbps 384Kbps Web browsing Positioning capability E-mailing Voice mailing
384Kbps - 2Mbps Multimedia data Positioning capability Connection to Internet Global roaming
Various mobile wireless technologies have undergone transitions from second generation to third generation. The table below shows overview of the roadmap of these technologies to third generation.
Figure 46: 3G Roadmap An Overview
Geographies Second generation 2.5 Generation Third Generation
Africa, Asia, Europe, South America, USA USA Asia, USA
GSM 9.614.4Kbps TDMA 14.4Kbps
HSCSD 28.657.6Kbps
GPRS 28-171Kbps
EDGE 384Kbps EDGE 384Kbps
W-CDMA W-CDMA 1XEV 1XTREME 3XRTT
cdma2000 9.614.4Kbps IS-9.5 B 14.4-64Kbps
cdma2000 1XRTT
Japan
PDC 9.614.4Kbps
IS-9.5 B 14.4-64Kbps PDC-P 9.614.4Kbps
cdma2000 1XRTT 144Kbps
LAS CDMA W-CDMA For all 3G technologies 144Kbps (full mobility) 384Kbps (limited mobility) 2Mbps (fixed location)
4G is the short term for fourth-generation wireless, the stage of broadband mobile communications.
4G 4G is the short term for fourth-generation wireless, the stage of broadband mobile communications that will follow the still to be implemented 3G. Only the Japanese operators have given any publicity to this technology, not surprising given that they were the first to implement 3G. The fourth wireless generation will be characterised by:
n n n n n
- Converged data and VoIP-driven architecture - Hybrid network architecture between wireless LAN and WAN - Higher frequency bands of 2-8 GHz - Higher bandwidth of 100 GHz or more - OFDM (Orthogonal Frequency Division Multiplexing) and MC-CDMA (Multi Carrier CDMA) access technologies
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Access technologies for 4G include:

OFDM (Orthogonal Frequency Division Multiplexing) - this divides high-rate data stream into multiple parallel low-rate streams. It uses these sub-streams to carry multiple signals. First used in the ETSI Digital Audio Broadcasting (DAB) standard, it is also employed in ADSL systems, and in IEEE 802.11a and 802.11g Wireless LANs.
n
MC-CDMA (Multi-Carrier Code Division Multiple Access)
Combines OFDM and CDMA More spectrum efficient than CDMA due to overlapping carriers Ultra-wideband (UWB) technology based systems will enable 4G wireless communication. UWB transmits very low-power (several hundred W average power) radio signals with very short pulses (several hundred pico seconds). This results in very large bandwidths (several GHz). UWB systems will operate in frequency bands that are already occupied by traditional services so UWB can potentially interfere with them. Of particular concern is interference with safety and emergency services and the Global Positioning System (GPS). UWB is loosely defined as any wireless transmission scheme that occupies a bandwidth of more than 25 percent of a centre frequency, or more than 1.5 GHz.
Powerline technology
n
This section describes a medium for communication over power line.
Power Line Communication is transfer of voice and data via a combination of power network within house or office and metropolitan power grid distribution.
Power Line Communication Power Line Communication69 (PLC) is transfer of voice and data via a combination of power network within house or office and metropolitan power grid distribution. It is based on the concept of no new wires. It is capable of transmitting data at a rate of 1Mbps over the existing electricity infrastructure.
The initial attraction of this technology was the fact that the transmission medium was already in place in the shape of the electrical wiring in homes and buildings, thus obviating the need for expensive last mile technology. Communications devices could be simply plugged into existing electrical sockets making connection painless. Electricity utilities thought this a great idea because they had a low cost entry point into a fast growing market and they already had all the necessary infrastructure in the shape of billing and customer care facilities in place. However, the actual implementation has been plagued by a variety of technical and commercial factors with the result that this is still a niche technology despite the apparent technical advantages and low cost of implementation.
Sources: The Power Line Communications Association (Link: http://www.plca.net) , Plexeon Logistics Inc. (Link: http://www.plexeon.com/power.html); Powerline World (Link: http://www.ipcf.org/powerlineintro.html); HomePlug Powerline Alliance (Link: http://www.homeplug.org/powerline/) Page 70 Deutsche Bank AG
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Figure 47: Comparison with Competing Technologies

Technology System cost Cable Installations Advantages Disadvantages
Fibre Optics
High
Needed
Highest quality Stable Networking Widest Bandwidth
Extremely expansive Intensive cabling required Sub-networking difficult Developed infra required Highly depend on line quality Sub-networking difficult
xDSL
High
No
Wide bandwidth Fairly stable Cabling may not be needed
Cable Modems
Medium
Needed
Fairly stable Wide bandwidth
Quality highly depends on the number of subscribers Sub-networking difficult
LMDS
High
No
Easy access Sub-networking possible No cabling required
Still under-development High equipment cost
PLC
Low
No
Easy access
Not proven yet
Simple plug-in sub-network Depends on the number of subscribers connected to No cabling required the transformer
Source: Xeline70
How Does PLC Work? n Power grids transmit electricity in three typical voltages high, medium and low.
PLC technology companies are currently introducing their products in the medium and low voltage grid domains (high voltage is currently under research). Medium voltage is the power line coming from the utility substation, where voltages range in the tens of thousands, to the low voltage step-down transformer. The transformer "steps-down" the medium voltage to the three-wire (one ground, two voltage wires) low voltage output lines that enter the home or business. The delivery of electricity from generation through distribution utilises alternating current (AC) at a frequency of 50/60Hz. When entering an end-premise site, the 50/60Hz AC is reduced to the low voltage direct current that is required for most electronic devices.
PLC takes advantage of the medium voltage power grid and the last mile primary and secondary distribution network that extends to the customer premise sites
PLC takes advantage of the medium voltage power grid and the last mile primary and secondary distribution network that extends to the customer premise sites. Through conditioning of the existing electricity infrastructure, electrical utilities transmit regular low frequency signals at 50 to 60Hz and much higher frequency signals above 1MHz without affecting either signal. The lower frequency signals carry power, while the higher frequency signals can transmit data.
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Source: Xeline (Link: http://www.xeline.com/english/contents/technology/index.php?file) Page 71
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Communication Networks
An overview The network is the system that links your phone to somebody elses or your computer to another. Networks can operate within a building or across the globe. They can have varying degrees of intelligence. At one end of the scale you could design a network where every bit of information was carried to every subscriber. Intelligence at the end of the network in the terminal equipment could decide which bit of information was relevant and suck it out, discarding everything else. At the other end you have the more traditional network where the end user equipment is dumb and the network sorts out how the information makes its way across it and who gets access to what.
n
Public networks
For the moment we will stick to describing a traditional telephone network for carrying voice and data traffic. This basically consists of lines and switches. The telephone handset inputs a series of digits, the telephone number, and the switch connected to that line then uses the information contained in that number to route the call through the network. The term switch came from the original telephone exchanges that literally consisted of a vast number of interconnected switches. Each digit in the telephone number effectively corresponded with one layer of switches. Today the switches do the same thing but the switch is now a computer. The computer is faster and much cheaper to maintain and offers the chance to do much more than just route the call. Hence we now have a host of features embedded within the traditional telephone network such as answering machines, dial back when free, caller identification etc, all of which operators classify as value added services. In the sense that they can charge something for these services they are value added but in practice they are a simple software implementation normally provided by the equipment vendors.
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Private networks
These are basically streamlined versions of the public network. Private networks can be small-scale affairs, perhaps just in one building or complex global networks, and in many cases they are far more extensive than the networks of many incumbent operators. Equant is a good case of a private system used by the worlds airlines, which turned itself into a public company and sought to provide traffic management services to outside companies. Because private networks handle traffic within a company they can be designed with many additional features not found in the public network. Despite the emergence of supposedly global carriers who take away the hassle of running networks, many large corporations continue to run their own internal networks.
n
The access network
A natural monopoly?
The access network is also referred to as the local loop. Effectively that is what it comprises, a loop of (invariably copper, although sometimes in part aluminium) wire linking the customer to the local exchange. Nowadays there are other options but the copper loop still dominates the access network in all markets. It also represents the biggest long-term investment of operators because of the heavy element of labour costs associated with digging trenches and running cables to all premises. It is also generally heavily cross subsidised by other parts of the business which means incumbents generally still control the vast majority of the local loop globally.
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There are technologies which are sufficiently cheap in certain environments to present viable competition to the incumbents local loop but only cable has the potential to be a pervasive competitor, rather than a niche competitor using co-axial cable. Of course mobile technologies can attack the market of the incumbents from a different direction but more of that later. As we have said, copper loops dominate the residential and small business market but fibre is the technology of choice for serving larger business customers. As a result fibre is creeping further and further into the access network. Certain operators are also using fixed wireless technology to deliver local loop service, a technology discussed later. Co-axial cable used by cable TV operators can also be used to carry telephony or data signals but this requires a special access terminal to allow separation of data/voice services from TV transmission. In certain countries, like the UK, the cable TV operators have built out to homes and buildings laying both co-axial cable and copper twisted pairs to allow simple implementation of telephony services. In most other markets cable-TV networks were deployed before competition to the incumbent telephone operators was considered and thus only a single co-axial cable was laid. Many cable TV networks were owned and constructed by the incumbent during their days of government ownership and a number of telco operators still run the cable TV business. Connected to the access layer are access devices. These will be devices like telephones, modems, cable modems, terminal adapters, mobile phones, PDAs, routers etc. Terminal adapters or network terminating units are the digital equivalent of a modem. Rather than convert digital signals to analogue to be transmitted over the local loop, only then to be converted back into digital, these devices keep everything digital. Cable modems allow high-speed connection to the internet over cable networks. Linking the access layers together are the network and transport layers. The physical components are cables, copper and fibre, or microwave and satellite transmission systems, undersea cables etc. The transport network will nowadays be managed using SDH (Synchronous Digital Hierarchy) or SONET (Synchronous Optical Network), while ATM (asynchronous transfer mode) is used to transport and route information across these facilities. The old copper based local loop may seem archaic today, providing just POTS (plain old telephone service), but the sheer scale of the undertaking to upgrade it means that operators need to be very sure that whatever they introduce into the local system will have longevity, i.e. support future requirements. Given these legacy networks and the very fast pace of technological development it is little surprise that during the 1990s a plethora of new competitors arrived focused on capitalising on the opportunity created by dozy telco giants with decrepit equipment. The amazing thing is that these new competitors have had so little success. This chapter gives some information on these communication networks their evolution, basic components used and various kinds of networks.
Communication Systems
Communication systems have evolved from telegraph to wireless systems. For the major part of the network, landline telephone networks have changed from the
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analogue mode of transmission to the digital mode71. Wireless systems have evolved from 1G to 3G, offering greater speeds for data transmission and higher capacity transmission. This section provides a chronological view of how various technologies, such as GSM and CDMA, have evolved. Computer network systems such as LAN, Internet and VPNs are explained later. Converged communication networks such as VoIP are also covered.
Telegraph Telegraph was the first electrical means of long distance communication. Around 1840, Samuel F.B. Morse invented the first telegraph. His system could convert words into a code consisting of dots and dashes. This code, called the Morse Code, could be transmitted by simple electric pulses. Some years later, a duplex telegraph was invented, which could send more than one message in one direction at the same time. This means of communication soon became popular and was used widely.
Telegraphy is a mode of long distance communications that sends signals composed of dots and dashes.
In 1847, the first telegraph company, Montreal Telegraph, was founded. Telegraph cables were laid out and telegraph offices were set up. The technology was soon commercialised and many large companies such as New York Telegraph, Newfoundland Telegraph, London Telegraph, Atlantic Telegraph came into being. After the invention of radio waves in 1890, the first wireless communication system was developed in 1901. Morse Code was transmitted in the form of radio waves. This was called Wireless Telegraphy and paved the way for todays complex wireless communication systems.
Telegraph system phasing out Graham Bell invented the telephone in 1876, and it became commercially deployed in the 1930s. The advantages of telephone over telegraph pretty obvious. They are:
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Telephone is a full duplex medium. Full duplex medium means that two people can talk at the same time. The Morse Code is complex and requires an interpreter at the receiving as well as the transmitting station. In Telephone, the voice of the person at the other end can be heard. This makes the communication more interactive. Various other forms of data can be transferred via telephone lines.
Telephone Telephones are the oldest means of communication still used today. The basic components and working mechanism of the POTS (Plain Old Telephone System) has remained largely unchanged.
Refer to Chapter 3 on 'Communication Media' for further information on analogue and digital modes of transmission. Page 74 Deutsche Bank AG
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Public Switched Telephone Network

PSTN (public switched telephone network) is the world's collection of interconnected voiceoriented public telephone networks, both commercial and government-owned.
This subsection explains the basic network of landline telephones. Then we discuss various transmission modes such as analogue and digital. Data services such as FAX, Internet dial-up offered through Public Switched Telephone Networks (PSTN) are also covered. Finally, a brief description of private telephone networks used in offices is given. Fixed line telephone networks, also referred to as Public Switched Telephone Networks (PSTN), are used extensively today. A simple telephone consists of three separate components: the network for carrying the signal, the dialling mechanism and the ringer or bell. The speech network helps in carrying the voice. The dialling mechanism dials the numbers in terms of electric signals. The ringer creates sound to inform about incoming calls. Additional machines such as modems, diallers and answering machines can be attached to the phone line. Two copper wires connect the telephone to the nearest local exchange. The local exchange connects to the main exchange and the main exchanges transmit signals via optic fibre network or satellites. The working of a telephone system can be explained as follows:
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On dialling a number, a request is sent through the copper wires and telephone poles to the nearest local exchange. The local exchange is connected to all the phones in a small geographic area. The numbers are dependent on how densely populated the area is but a typical radius of coverage would be of the order of 5kms. The local exchange routes the request further to a main exchange. The main exchange routes the request to an international exchange or another main exchange depending upon the intended destination of the call. In the case of overseas calls, the call may go from one main exchange to another via a satellite or through undersea fibre cable. For the duration of a call, a permanent circuit is formed to transmit the voice. This circuit connects the caller to the exchange, the exchange to the destination and from the destination back via same route to the caller. This is called circuitswitched transmission. To allow more long-distance calls to be transmitted, the frequencies transmitted are limited to a bandwidth of about 3,000 hertz. All of the frequencies below 400 hertz and above 3,400 hertz are eliminated72.
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A pair of copper wires called the loop carries the signal from the telephone handset to the nearest exchange. Voice services were traditionally provided over a network of copper cables. Fibre cables are being increasingly deployed for these services due to their various advantages such as reliability and better quality of service. However, the cables reaching the consumers homes are still copper as it is not economically feasible to cover the last mile of a network by fibre. Normally fibre cables are used to connect between main exchanges and international exchanges, reflecting the high volume of traffic carried on these routes. Standard voice signals become weak (i.e., attenuate) when the copper portion of the wire is longer than 6kms. Load Coils73 are used to extend the range of the local loop. These coils are added at specific intervals along the loop. Load coils do not
The elimination of these frequencies causes someones voice on a phone to have a sound different from that in a face-to-face conversation. 73 Refer to glossary for further information on Load Coils. Deutsche Bank AG Page 75
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allow transmission of high frequency signals. Thus, modern broadband services such as ADSL and ISDN74 cannot be transmitted on lines with load coils. New digital telephone services also require unloaded copper pairs.
Modes of Transmission in PSTN lines The signal in PSTN lines can be transmitted in two ways:
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Analogue: In analogue mode voice waveform is transmitted as electrical signals. Digital: In digital mode of transmission the voice waveform is converted to a digital form, by using analogue to digital converters, and is then transmitted.
The figure below explains the difference between analogue and digital.
Figure 48: Analogue vs Digital
1 Cycle
1 Cycle
Amplitude
Until recently most telephone networks were analogue. However, the telephone industry has moved rapidly to the digital mode of transmission. Digital has many advantages, which are too numerous to mention here, but key is the ability to utilise infrastructure more efficiently, reduced errors in transmission, and the ability to manipulate and add intelligence to data. The telephone industry has rapidly moved to install fibre and digital networks due to the ability to offer a broader, more flexible range of services compared to analogue. Most major components of the telephone network these days run in digital mode. However, the last few miles of nearly all networks are still copper wires carrying analogue signals. These analogue lines are not expected to be replaced in the near future. Fax machines and modems still use analogue lines even in buildings with ISDN and digital PBXs.
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Data Services Offered through PSTN Lines
Forms of data other than voice are also transferred through the PSTN network. These other forms of data include images (received by a FAX machine), Internet data etc.
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FAX machines: FAX is an abbreviated form of Facsimile (Derived from Latin words 'factum' and 'simile' meaning 'made like'). FAX machines transfer images as data through PSTN lines. Images can be sent and received anywhere in the world by connecting a Fax machine to the telephone. FAX machines began to be used widely when image data compression techniques were introduced in the 1970s. These techniques drastically reduced transmission time. In recent years fax traffic has declined precipitously as a combination of better PCs and eRefer to glossary for further information on these technologies. Deutsche Bank AG
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mail applications have rendered it all but redundant. The reduction of fax traffic has been one of the driving forces behind reductions in call volumes noted by most operators in recent years.
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Internet dial up services: Modems convert the digital data from PC into analogue, and this analogue signal is transferred through the PSTN lines to the final server. The server decodes the signal back into a digital form.
Figure 49: Simplified Representation of Internet Dial-Up through PSTN Lines
Modem
Telephone Network
Modem Computer Terminal
Transmission Mechanism through PSTN Lines
In conventional telephone lines, the signal line is also the power supply line. The power is supplied by batteries, thus assuring complete independence from the electricity outages. At the telephone exchange, the DC voltage and audio signal are separated. This resilence, archaic as it is, is one of the main strengths of the copper based system. Fibre based access systems clearly cannot carry power and thus a totally fibre based access network would require locally delivered non-stop power in order to guarantee continuous operation. Increasingly the issue of network resilience is being bypassed thanks to the majority of people having access to mobile phones. The telephone line is a full duplex medium. This means that both people can talk at the same time. The hybrid circuit makes it possible to transmit two channels of information in opposite directions simultaneously on a single pair of wires. Telephone standards around the world are fragmented. Each country has its own standards because of the historical domestic roots of the phone. The major differences are: wiring practices and connectors, loop currents, signalling tones and electrical safety regulations. For example, to ring the telephone, a telephone company might momentarily apply a 90 VRMS75 20 Hz AC signal to the line. The frequency and voltage of this signal varies from one country to another.
VRMS refers to the Root Mean Square average of the AC voltage. It is a measure of the average voltage of AC current. Deutsche Bank AG Page 77
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Private Telephone Networks

Private Branch Exchange (PBX) is a private telephone network, by which several telephones could be connected to a certain number of external lines (also called trunk lines).
Private Branch Exchange (PBX) is a private telephone network, via which several telephones can be connected to a certain number of external lines (also called trunk lines). In a PBX environment a phone is called a line, extension or station. An external line is called a trunk. Station-to-station76 calls as well as station-to-trunk calls are possible in a PBX network. PBX telephones have an identity of their own, in the form of a unique extension number. The PBX has trunks to the phone company. The PBX switches calls through itself based on user demands. There are different kinds of PBX systems in use:
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EPABX (Electronic Public Automatic Branch Exchange): EPABX is a PBX system built using electronic controlling and signal switching. PNX (Packet Network Exchange): A communication-switching platform that combines PBX and VoIP77 functionalities. PMBX (Private Manual Branch Exchange): Some old companies might still use PMBX, where company-employed operators manually switch each call through a switchboard. KTS (Key Telephone System): KTSs are generally smaller versions of a PBX that provide direct access to the central telephone lines.
There are many customised PBX systems available to businesses to cater for their particular needs.
Paging Pagers were the first mobile communication devices. They are simple mobile devices used for sending and receiving text messages. They use simple radio devices that communicate with one station all the time. The radio transmitter inside a pager sends and receives signals over a specific frequency only.
Pagers are simple mobile devices used for sending and receiving text messages.
There are five types of pager:

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Beepers: Beepers provide an alert signal to the user. This could be a beeping noise, a light flash or a vibration. Voice / Tone: These pagers provide the ability to listen to a recorded voice message, when there is a page alert. Numeric: These pagers provide the ability to send numeric messages. Alphanumeric: These pagers provide the ability to send text messages along with a page alert. Two-way: These pagers provide the ability to send as well as receive messages.
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Paging networks set up towers just like cell phone networks to cover large areas. The operation of pagers requires a master transmitter. This master transmitter is like a radio station or base station of a cell phone network. The master transmitter sends out signals that the pagers receive. Pagers are still widely used in the US but face an inexorable decline as cellular penetration rises and prices fall.
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Station is an internal line. VoIP means Voice over Internet Protocol. For details refer to the section on VoIP in this chapter. Deutsche Bank AG
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Cellular Networks
Cellular Networks are mobile telephony networks where the geographical area of coverage is divided into adjacent hexagonal areas called cells.
Wireless networks allow a communication device, be it a phone, PC or PDA etc, to be linked without wires to a network. Wireless implies greater freedom. Historically this has come at a price of high caller costs, but the differentials between fixed and mobile prices are narrowing . Over the last twenty years many have predicted that mobile will take over from fixed. What they really mean by this is that mobile will attract a greater part of the revenue generation in the industry. There are now more mobile users around the world than there are fixed phones. Elements of the fixed networks will remain even if nobody ever uses a fixed terminal. Fundamentally the mobile network is nothing more than a fixed network but with radio at the ends rather than copper wires. There are several manifestations of wireless but the one we will give most attention to is cellular because this is the most significant market from a value perspective. Cellular was invented by Bell Laboratories (part of AT&T) in the 1960s but had to await until the 1980s for commercial implementation while semiconductor technology caught up. The clever thing about cellular is that it makes efficient use of a scarce resource, frequency spectrum. In a cellular network the same chunk of frequency can be used repeatedly. If, for instance, we have 14 units of frequency to work with we could divide our frequency into seven lots of 2. Each cell would be allocated two unique units of frequency. The diagram below shows how the seven cells would be located, each with its own unique set of frequencies on which to operate. Because no two adjacent cells share the same frequencies there is no interference. In the middle of each cell stands a transmitter/receiver combined into one unit called a base station. Assuming for a moment that there is only one mobile user in any one cell then each user would be able to communicate with the base station using the first of the two unique frequencies and the base station would be able to talk back using the second. Let us now see what happens when we go outside the coverage of the first seven cells of the network. We build another seven-cell cluster, and another and another. Each cluster uses all the same set of frequencies as the first cluster but because no two adjacent cells share the same frequencies there is no interference. In this diagram we have used different colours to represent the individual frequency ranges used in each cell. As the user travels from cell to cell they go through what is termed handover. This means the handset starts to pick up two signals, one from the base station with which it was communicating and one from the adjacent cell to which it is moving. At the point when the signal from the new base station is sufficiently strong the network completes a handover.
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Figure 50: The Cell Approach
Source: Howstuffworks
Each carrier in a city has a number of base stations and one central office called a Mobile Telephone Switching Office (MSO) or in Europe a Mobile Switching Centre (MSC). This office handles all the calls to the land-based phone system and controls all the base stations. The working of a cell phone network is described in the following steps:
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When a cell phone is switched on, it connects to a base station. Each carrier has a unique number known as the Serial Identification Number (SID). The base station communicates the SID to the phone via a Control Channel. The phone matches this SID with the SID programmed in the phone. If it matches, the phone is connected to its home cell. Along with the SID, the phone transmits a registration request and the MSC keeps track of the mobile phones location in a database. When the MSO gets a call, it locates the mobile phone in its database. The MSC picks up a frequency pair that the phone will use in the cell in which the phone is located to take the call. The MSC communicates this frequency pair to the phone and the tower through a control channel. Once the phone and the tower switch to that frequency pair, the phone gets connected. The tower or base station connects the call to the desired receiver by communicating with the base station of the receiver. In the case of a landline call, the call is diverted to the MSC and sends a request to the telephone exchange.
When a cell phone moves towards the edge of a cell, it notices that the signal strength is diminishing. Each cell measures the signal strength on all frequencies and not just its own. At the same time, the base station of the nearest cell notices that the phones signal strength is increasing. The two base stations coordinate with each other and through the MSC. Soon a signal is sent through a control channel to the cell phone and the base station, to change frequencies. Thus, the cell phone gets connected to the cell with the best combination of signal strength and available capacity. If the SID on the Control channel does not match with the SID programmed into the cell phone, the cell phone knows that it is Roaming78. The MSC of the cell in which
When a Cell phone is outside the range of its home calling area, it is said to be roaming. To connect to the Cell phone in roaming, the MTSO of the home calling area connects with the MSC of the area the Cell phone is in. Page 80 Deutsche Bank AG
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the cell phone is roaming contacts the MSC of the home system. Details of the subscriber are stored in a home location register (HLR). In practice life there are complications. A network that looked like that shown in Figure 50 would work well over an area which was completely flat, and where the usage was uniform at all times of day. The reality is that hills, valleys and buildings all serve to confuse the issue. So network planners are constantly battling to provide a reasonable quality of service for subscribers while demand growth is rapid and the expectations of users are growing fast. The capacity of a cellular network is a function of how much frequency the operator has to work with, what frequency is being used, how many cells have been constructed, the traffic patterns of users, the topography and the type of technology chosen. The biggest problem any operator faces is that the rapid growth in subscribers means that traffic is growing rapidly. The more users the greater the capacity requirement. But there is only a finite amount of spectrum available, dictated by the operators licence. So what do you do? The options available are to:
n n n n
Put in more cells Improve the way in which you use the cells already there Obtain more frequency spectrum Squeeze in more subscribers by making their conversations use up less bandwidth Change your technology
Put in more cells this directly affects how much capital you spend. Not only is hardware required but new cellsites require a place to put up a mast. This is getting steadily more difficult thanks to environmental considerations. Also the management of small cells can in themselves create problems. A subscriber in a car moving through an area of cells of only a few hundred metres in diameter would create havoc because of the number of handovers required in a short time period. Network planners have ways of dealing with this by creating overlay networks where cells are layered on top of normal cells to handle different types of traffic. Obtaining more frequency is easier said than done. And governments are no longer as likely to hand it out for free as once they did. If they do, invariably there are conditions attached to its use. Frequency trading may or may not be allowed. Even where licences have been bought frequencies may not be traded, as in Germany for instance. In the US trading is permitted. The market has experienced years of consolidation as smaller operators have been absorbed by the national carriers in order to obtain their frequencies.
The device in the mobile handset which turns the speech into a digital signal is called a vocoder. This uses clever techniques to minimise the amount of bits of information that need to be sent to allow replication of the signal at the receiving end. As compression techniques have got smarter so it is possible to squeeze more voice signals into a given unit of frequency.
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Cellular technologies are classified by their mode of transmission and the access technology they use. The important cellular technologies used to date are:
n n
AMPS The GSM family

n n n n n
GSM GPRS HSCSD EDGE CDMA
CDMA technologies
n n n n n
cdmaOne CDMA2000 LAS-CDMA PDC PHC
Advanced Mobile Phone Systems (AMPS)
AMPS are the first generation of mobile networks. AMPS network is analogue, circuit switched79, and can carry only voice traffic. AMPS uses a range of frequencies between 824MHz and 894MHz. Since analogue signals require more space for transmission, only one signal can be transmitted through one channel.
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Global System for Mobile Communications (GSM)
GSM is a second-generation wireless technology. It differs from the first generation in that it uses digital technology and TDMA80 transmission methods. In this system voice is digitally encoded81 via a unique coder, which emulates the characteristics of human speech. Eight signals can be transmitted on a single frequency by the GSM system. GSM can be implemented in any frequency band. The frequency band on which a GSM system operates varies from one country to another. The following table explains the frequency bands that are already used or will be in the near future in various countries.
Circuit switched networks provide a dedicated communication line from sender to receiver. Refer to the section on Basic components/functions of a communication system and their evolution in this chapter for further information. 80 TDMA stands for Time Division Multiple Access. Refer to Chapter 3 on 'Communication Media' for further information on TDMA. 81 Analogue to Digital converters are used to convert the waveform into digital signals. Page 82 Deutsche Bank AG
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Figure 51: Frequency Bands Used In Various Geographies

Frequency Range Player, Country
GSM 450
450.4 457.6MHz paired with 460.4 - 467.6MHz or 478.8 - 486MHz paired with 488.8 496MHz
Germany France Brazil Peru
GSM 850
824 - 849MHz paired with 869 - 894MHz
AT&T WirelessUSA Sprint PCS,USA
GSM 900
880 - 915MHz paired with 925 960MHz
Orange, France TIM, Italy Vodafone, UK
GSM 1800
Orange, France TIM, Italy Vodafone, UK
GSM 1900
Source: Ericsson Website
AT&T WirelessUSA Sprint PCS,USA
High bandwidth services are available through second-generation (2G) technologies. The GSM family has evolved to form advanced technology platforms i.e. GPRS, HSCSD, EDGE and WCDMA. The figure below depicts the evolution path of GSM.
Figure 52: GSM Family Evolution and Applications Enabled
2001-2002 WCDMA (2Mbps) Voice Video on demand n Broadband internet while moving n Voice n Video, Music internet n Full multimedia streaming clip download applications 2000 n High speed GPRS (171Kbps) n Video, Music n Voice n InternetBrowsing 1999 HSCSD (28Kbps) n Transfer ofimages n Voice n File transfer n Internet Browsing 1994-1998 GSM (9.6Kbps) n Voice
n n
2001 EDGE (384Kbps)
SPEED
PERIOD OF EVOLUTION
Source: ITU
High Speed Circuit Switched Data (HSCSD)
HSCSD is a 2G mobile technology. High Speed Circuit Switched Data (HSCSD) is an enhancement of data services (Circuit Switched Data) of all current GSM networks. It allows the transfer of data from portable computers and handsets at a speed of up to 28.8kbps. The HSCSD solution enables higher rates than the basic 9.6kbps offered by GSM by using multiple voice channels, enabling faster rates for Internet, e-mail, calendar and file transfer services. HSCSD allows the user to access the company LAN, send and receive e-mails, and access the Internet while on the move. HSCSD is offered using either voice terminals that support the feature, or a
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special PCMCIA82 portable computer card, with a built in GSM phone that turns notebook computers and other portable devices into a complete high-speed mobile office with the ability to make voice calls hands free, as well as data transfer.
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General Packet Radio Services (GPRS)
GPRS83 is a 2.5G mobile technology. Many cell phone networks use GPRS for data services and GSM for voice services. The GPRS network is packet switched. It enables new non-voice value added services that allow information to be sent and received across a mobile telephone network. GPRS provides actual packet radio access for mobile GSM and TDMA users. The main benefits of GPRS are that it uses radio resources only when the network actually send or receive data and it reduces reliance on traditional circuit-switched network elements. The increased functionality of GPRS decreases the incremental cost to provide data services. In addition, GPRS allows improved quality of data services as measured in terms of reliability, response time, and features supported. GPRS supports a broad base of mobile subscribers and allows operators to differentiate their services. GPRS alleviates the network capacity by sharing the same radio resource among all mobile stations in a cell, providing effective use of the scarce resources. GPRS is important as a migration step toward 3G networks, as it allows network operators to implement IP-based core architecture for data applications, which would continue to be used and expanded upon for 3G services for integrated voice and data applications.
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Enhanced Data rates for GSM Evolution (EDGE)
EDGE is a 2.5G mobile technology. EDGE gives incumbent GSM operators the opportunity to offer data services at speeds that are approaching those available on UMTS networks84. The EDGE technology enables GSM and TDMA operators to deliver third-generation mobile multimedia services using existing network frequencies, bandwidth, carrier structure and cell planning process. The mobile multimedia services include downloading of video and music clips, full multimedia messaging (messages sent with graphics and images), high speed colour Internet access, video conferencing and e-mail on the move. By using a more efficient air-modulation technology optimised for data communications, EDGE increases end-user data rates up to 384kbps and potentially higher in good quality radio environments.
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Wideband Code Division Multiple Access (WCDMA)
WCDMA, also known as UMTS85 in Europe, is 3G standard for GSM in Europe, Japan and the United States. It's also the principal alternative being discussed in Asia. WCDMA is a spread-spectrum technology, which means that it will spread its transmissions over a wide, 5MHz carrier, hence the name W (wideband) CDMA. It
PCMCIA is a computer card used to support added features like HSCSD. For further details on GRPS networks, please visit: http://www.ee.oulu.fi/~fiat/gprs.html, http://www.ee.oulu.fi/~fiat/gprs.html (section Free White Papers, subsection An Introduction to the General Packet Radio Service) 84 Source: http://ebmx.com/edge.htm 85 UMTS stands for Universal Mobile Telecommunications System. Refer to glossary for further information on UMTS.
83
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provides higher capacities for voice and data transmission than provided by GPRS or EDGE. It supports very high-speed multimedia services such as full-motion video, Internet access and video conferencing. It uses one 5MHz channel for both voice and data, offering data speeds up to 2Mbps. The speed of transfer depends on whether the device is stationary or moving. WCDMA offers operators a number of significant advantages over alternative technologies, including increased network capacity, longer battery life for terminals and enhanced privacy for users. The following table provides an overview of the GSM family.
Figure 53: GSM Family Overview
2G GSM 2.5G GPRS EDGE 3G WCDMA
Features
Uses TDMA as a carrier technology
Information split in packets and Triples the data transmission then transmitted. rate as compared to GPRS by using a new modulation Eight signals can be transmitted Supports TDMA and CDMA scheme on the same channel. based systems The routing network is packet Can be implemented on any GPRS has an advantage over switched frequency band. circuit switched network. 9.6 14.4kbps 28 171kbps 384kbps
Bridge the gap between wireless world and the computing / Internet world
Data speeds
144Kbps (full mobility) 384Kbps (limited mobility) 2Mbps (fixed location)
Applications
Provide secure mobile voice and data services (such as SMS) Most widely used technology for Cell Phones
Browse Internet Transfer still images, moving images. File transfer Home automation
Full multimedia messaging Downloading video and music clips High Speed internet access
Video on demand High speed multimedia Mobile Internet access
Code Division Multiple Access System (CDMA)
CDMA, of which WCDMA discussed above is a variant, is based on Qualcomm proprietary technology. As previously mentioned it employs a fundamentally different approach to coding and decoding signals. The debate about whether CDMA is better than alternative technologies like TDMA is well beyond the scope of this document and so here we will provide the briefest of overviews. Figure 54 below shows the evolution of CDMA based system.
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Figure 54: CDMA Evolution

T E C H N O L O G Y E V O L U T I O N
307kbps-3.1Mbps
CDMA2000 1X EV-DV 153-307kbps CDMA2000 1X 64kbps IS-95B 14.4kbp s IS-95A

n n n n n n n n n n n n
Voice SMS MMS E-mails StreamingMultimedia
Voice SMS MMS E-mails
Voice SMS
n n
9.6kbps cdmaOne
Voice SMS
Other Text services APPLICATIONS
Voice
1993
1995
1998
1999
2002
cdmaOne
cdmaOne describes a complete wireless system based on the TIA / EIA IS-95 (Telecommunications Industry Association / Electronic Industries Association Interim Standard - 95) CDMA standard86, including IS-95A and IS-95B revisions. It represents the second generation of wireless systems, which were first deployed in the USA and Asia. cdmaOne provides a family of related services including cellular, PCS and fixed wireless (wireless local loop). It can support transmission speeds of 9.6kbps.
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IS-95A
The IS-95 CDMA standard was first published in July 1993. The IS-95A revision was published in May 1995 and is the basis for many of the commercial 2G CDMA systems around the world. IS-95A describes the structure of the wideband 1.25MHz CDMA channels, power control, call processing, hand-offs, and registration techniques for system operation. In addition to voice services, the IS-95A system provides circuit-switched data connections at 14.4kbps. IS-95A was first deployed in September 1996 by Hutchison in Hong Kong.
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IS-95B
The IS-95B is categorised as a 2.5G technology. IS-95B system provides circuitswitched data connections at 64kbps. cdmaOne IS-95B was first deployed in September 1999 in Korea and has since been adopted by operators in Japan and Peru.
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CDMA2000
CDMA2000 is a third generation solution based on IS-95 standards. CDMA2000 networks are backward compatible to cdmaOne deployments. The CDMA2000 standard is evolving to continually support new services. The first phase of CDMA2000 (CDMA2000 1X) delivers average data rates of 144kbps. Phase two, labelled CDMA2000 1xEV, provides for data rates greater than 2Mbps.
For further details on TIA/EIA IS-95 standards please visit: http://www.tiaonline.org/standards/search_results2.cfm?document_no=TIA%2FEIA%2FIS%2D95%2DA Page 86 Deutsche Bank AG
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CDMA2000 1X
CDMA2000 1X is the first phase of CDMA2000. The term was originally 1xRTT, which just meant radio transmission technology. Then, as the difference between CDMA2000 and WCDMA was being defined, the term 1xMC appeared. The MC stood for multi-carrier87 to differentiate from the direct spread88 (DS) used in WCDMA. CDMA2000, on the other hand, uses from one to three 1.25MHz carriers89 to accomplish its high-speed interface; hence, the name MC (multi-carrier). In actual fact, 1X means one carrier, and the later version, 3X uses three carriers. CDMA2000 1X technology supports both voice and data services over a standard CDMA channel, and provides many performance advantages over other technologies. It provides up to twice the capacity of earlier CDMA systems. It provides peak data rates of up to 153kbps. It is backward compatible with earlier CDMA technology.
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CDMA2000 1XEV
The EV stands for evolution. This is an enhancement to CDMA2000 1X that includes High Data Rate (HDR)90. The 1XEV standard provides for two phases. Phase 1 dedicates one carrier (1.25MHz) for high-speed packet data, while one or more additional carriers are used in the normal manner for voice. Phase 2 combines packet data and voice in the same carrier, but retains the ability to maintain packet services on a separate carrier if desired. It provides data rates ranging from 307kbps to 3.1Mbps
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CDMA2000 3XMC
When CDMA2000 uses three carriers of 1.25MHz each, it is called CDMA2000 3XMC. While WCDMA uses nearly 5MHz for each channel, 3X uses three 1.25MHz channels, which provides much more flexibility, since the three channels can be used independently (multi-carrier), or together as a single 3.75MHz channel (direct spread). The most obvious advantage to the 3X approach is that it can be implemented in existing CDMA frequency allocations, which also use 1.25MHz carriers. This also ensures backward compatibility to 1X and cdmaOne deployments. The extra bandwidth enhances service for multimedia applications, and provides data rates up to 2Mbps.
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CDMA2000 1XTREME
Developed jointly by Nokia and Motorola, 1XTREME is marketed as a rival to both CDMA2000 1XEV and CDMA2000 3XMC. It employs the same modulation techniques as 1XEV, but uses them for voice as well as data. According to Motorola, 1XTREME does not require additional antennas as 1XEV, and it also keeps data on the same spectrum as the voice services. This means that
Multi-carrier modulation (MCM) is a method of transmitting data by splitting it into several components, and sending each of these components over separate carrier signals. The individual carriers have narrow bandwidth, but the composite signal can have broad bandwidth. 88 Direct spread means that WCDMA will spread its transmissions over a wide, 5MHz carrier. It will use this wide bandwidth to accomplish high data rates. Hence the name W (wideband) CDMA. 89 A carrier (or carrier signal) is a transmitted electromagnetic pulse or wave at a steady base frequency. 90 Refer to glossary for further information on HDR. Deutsche Bank AG Page 87
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carriers do not have to devote any spectrum specifically to data services. 1XTREME is proposed to deliver the same voice capacity enhancements as standard 1X, and provide data rates approaching 1.4Mbps. The second iteration of this technology is expected to deliver data rates as high as 5.2Mbps.
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LAS-CDMA
Large area synchronous code-division multiple access (LAS-CDMA) is a proposed fourth generation cellular standard being developed by LinkAir. Similar to CDMA2000, the distinguishing feature of LAS-CDMA is the new set of spreading codes used to separate signals from users in the wireless channel. According to LinkAir, LAS-CDMA uses codes different from other CDMA systems, which help it optimise spectrum usage and increases efficiency. These codes also allow voice to be strongly separated from data during transmission, which allows for low-power voice transmission and high-power data transmission. Data throughput peaks are expected to be 5.5Mbps using LAS-CDMA. The figure below gives a brief overview of the CDMA family.
Figure 55: CDMA Family
CDMA Technologies Attributes Data Speeds
cdmaOne
2G wireless systems First deployed in the USA and Asia Provides cellular, PCS and fixed wireless services
9.6kbps
CDMA2000 1X
2.5G wireless system First phase of CDMA2000 Supports both voice and data services
153kbps
CDMA2000 1XEV
3G wireless system Enhancement to CDMA2000 1X Uses two phases for voice and data transmission
307kbps - 3.1Mbps
CDMA2000 3XMC
3G wireless system Uses three carriers for data transmission Provides flexibility, as the three channels can be used independently
2Mbps
CDMA2000 1XTREME
3G wireless system Developed jointly by Nokia and Motorola Transmits data and voice on the same spectrum
1.4Mbps - 5.2Mbps
LAS-CDMA
3G wireless system Developed by LinkAir Uses codes different from other CDMA systems Has higher spectral efficiency91
5.5Mbps
PDC
PDC (Personal Digital Cellular) is a second-generation technology used in digital cellular telephone communication in Japan. It uses a variation of TDMA, which divides each cellular channel into individual time slots in order to increase the amount of data that can be carried. It operates in the 800MHz and 1,500MHz bands, making very efficient use of the available bandwidth. It can support peak speeds of
Spectral efficiency measures the amount of data that can be transferred through the system per unit of given frequency (i.e. how many kbps data per kHz of frequency). Page 88 Deutsche Bank AG
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9.6kbps. PDC is the most spectrally efficient92 of TDMA technologies, with utilization of 8.3kHz of frequency space per channel93, 25kHz per channel for GSM and 9.5kHz per channel for CDMA. The PDC network supports many advanced features in-line with the other secondgeneration technologies, such as text messaging and caller identification. PDC also supports pre-paid calling, personal numbers, universal access numbers, advanced charging schemes and wireless virtual private networks (VPNs94). To achieve higher data rates of 28.8kbps using PDC systems, mobile Packet Data Communication Systems (PDC-P) were introduced. As the name suggests, this system uses packet switching approach for voice and data applications. Here individual packets of data are routed to the required user and there is no dedicated channel. This makes far more efficient use of the channels available. By adopting this approach users can be charged for the data transferred rather than the connection time.
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PHS
Personal Handyphone System (PHS) was developed by the Nippon Telegraph and Telephone Corporation (NTT). It is a TDMA based second-generation cordless telephone system, which is a successor to the conventional analogue cordless telephones. It uses handover95 and location registration features96 for handling the incoming and outgoing calls during travelling. These features enable PHS to provide services equivalent to present cellular telephone system. It works on a frequency band of 1895.15 1917.95MHz with 77 channels. It can support high-speed data communication with data speeds ranging from 9.8kbps - 32kbps. PHS employs micro-cell architecture to enable communication. Existing radio communications system cover large areas with a radius generally falling between 1km - 3km using high power (5W - 6W). In rural areas cells may be significantly larger. PHS stations cover small zones (also called 'microcells') of 100m - 500m radii using 10mW power, similar to those of home-use cordless phones. Lower power consumption allows more efficient use of radio waves, thus making it possible for a larger number of people to use the system. However, there is one limitation. PHS is made up of multiple microcells and does not function when the user is moving at high speeds such as when travelling in a car. As the user moves from one microcell to another at high speed, it becomes impossible for the system to register the terminal and so hand off calls.
Satellite Network
A satellite network is a communication network that uses satellites as base stations.
Satellites are used for long distance communication. In satellite communication networks, satellites act as a base station. A device on earth transmits the signal to a satellite in space and the satellite retransmits it to its destination. Each satellite system comprises a group of satellites, which communicate with each other to relay the signal to its final destination. Two types of satellites used are Geostationary and Orbiting earth satellites.
Spectral efficiency measures the amount of data that can be transferred through the system per unit of given frequency (i.e. how many kbps data per kHz of frequency). 93 A channel is a separate path through which signals can flow. 94 VPNs are closed user groups that allow colleagues working in different locations to communicate through the mobile phone network as though they were using a conventional office phone system. 95 Refer to glossary for further information on handover. 96 Refer to glossary for further information on location registration features.
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Figure 56: A Typical Geostationary Satellite System
Satellites Relaying signal to other satellites
Earth
Satellites
Satellites Relaying signal to earth

This subsection provides an overview of satellite systems used for voice and data communication. It includes a discussion on the types of satellites used, along with a description of the satellite systems deployed. Satellite phones have historically found their principal use in remote locations as yet not reached by conventional wireless communication (and probably unlikely to). All satellite phones rely on a series of satellites to relay signals almost anywhere in the world. Satellite phones generally require line-of-site with the satellite. The satellites have inbuilt base stations. Signals are transmitted from satellite phones on earth to these base stations. From these base stations they are transmitted to other base stations or to a receiver in the same base stations range. Data transfer rates tend to be low compared to other systems. Iridiums service currently only offers a data rate of 10Kbps, which is a little better than the WAP97 access on a standard second-generation mobile phone. However, various systems are in development to offer near-broadband capability.
97
Refer to glossary for further information on WAP. Deutsche Bank AG
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The satellite used for communication can be geostationary or orbiting round the earth.
Geostationary A geostationary satellite follows a circular orbit in the plane of the Equator at a height of 35,600km. From a viewers perspective, it appears to hover over a chosen point on the Earth's surface. Three such satellites are enough to cover most of the globe, and mobile users rarely have to switch from one satellite to another.
A call from a mobile terminal goes directly to the satellite overhead, which routes it back down to a gateway on the ground called a land earth station (LES). From there the call is passed into the public phone network.
n n
Limitations of Geostationary base stations

Power of transmitters and large antennas: Geostationary satellites are located at a large distance from earth. So they require powerful transmitters to reach the base station. Direction of antenna: The direction of the antenna has to be adjusted to aim it accurately at the satellites position in the sky. Call cost: Satellites phones use a single channel in a very expensive system. So the cost of calls to and from a satellite phones is of the order of USD 7.5 per minute.
Major satellite systems using geostationary satellites are:

n
Inmarsat: Inmarsat's primary satellite constellation consists of four Inmarsat-3 satellites in geostationary orbit. A call from an Inmarsat mobile terminal goes directly to the satellite overhead, which routes it back down to a gateway on the ground called a land earth station (LES). From there the call is passed into the public phone network. The Inmarsat-3 satellites are backed up by a fifth Inmarsat-3 and four previous-generation Inmarsat-2s, also in geostationary orbit. A key advantage of the Inmarsat-3s over the predecessor systems is its ability to generate a number of spot-beams as well as single large global beams. Spotbeams concentrate extra power in areas of high demand as well as making it possible to supply standard services to smaller, simpler terminals. Thuraya: Thuraya mobile satellite system is a key project built by Boeing Satellite Systems, formerly Hughes Space and Communications International, Inc. The operating consortium was founded in the UAE in 1997. Thurayas satellites geo-synchronous orbit is at 44 East. Thurayas satellites have been specially designed to achieve network capacity of about 13,750 telephone channels. Thurayas hand held mobile terminals are comparable to GSM handsets in terms of size and appearance, as well as in voice quality. Coverage is Europe, the Middle East, North and Central Africa Central and South Asia. ACeS system: The ACeS system uses a Garuda geostationary satellite. The Garuda satellite provides 11,000 simultaneous telephone channels and is capable of supporting up to 2 million subscribers. The communications payload will feature two 12-meter antennas, which will provide links with the user terminals via 140 satellite spot beams. The ACeS gateways provide the primary interface between ACeS and other telecommunication networks. They provide the interface with public landline and mobile networks, allowing users to call anyone anywhere in the world. Each gateway provides an individual satelliteGSM network over the entire service area with its home subscribers registered at the gateway. Visitor subscribers are able to roam to the gateway from other
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ACeS gateways or GSM networks. ACeS coverage area is 11 million square miles extending from Pakistan in the east to the Philippines in the west. It also ranges from China in the north to Indonesia in the south.
Orbiting base stations Orbiting satellite systems use larger numbers of satellites in lower, nongeostationary orbits. From the user's point of view, they move across the sky at a comparatively high speed. They often require a switch from one satellite to another in long distance communication.
The major satellite systems using orbiting base stations are:

n
Iridium System: The Iridium system is a satellite based Personal Communication Services (PCS). Iridium provides voice, messaging and data services to mobile subscribers using handheld user terminals.
The Iridium Satellite system provides complete coverage of the Earth (including oceans, airways and polar regions). Iridium delivers communications services through a constellation of 66 low-earth orbiting (LEO) satellites operated by Boeing. Iridium currently provides services to the United States Department of Defense and launched commercial service in March 2001.
n
Globalstar system: The Globalstar satellite network is a constellation of 48 LEO98 (Low Earth Orbit) satellites offering virtually global coverage at all times. Globalstar T550 is a high tech and user-friendly satellite terminal as it looks and acts like a mobile or fixed phone. The difference is that Globalstar systems can operate virtually anywhere, carrying the call over a clear and secure CDMA satellite signal. The dual mode terminal on the ground can talk with up to three satellites simultaneously. The risk of dropped calls is virtually zero. Teledesic: While Iridium and Globalstar are the equivalent of cellular phone service, Teledesic was the first proposed broadband LEO, providing the satellite equivalent to optical fibre. It was designed with the needs of the internet in mind rather than traditional voice and data requirements. However the collapse of the capital markets for telecoms projects led to the plans being mothballed in September 2002.
Virtual Small Aperture Terminals (VSATs) VSATs utilise a network of satellites to provide a communication network for terminals at far away places. VSATs technology is used extensively for connecting remote offices.
The VSAT system functions by connecting a number of remote terminals to a central hub or earth station via satellite. Remote VSATs receive and send data, voice and video through a central satellite hub. This central hub also directs the satellite traffic to the rest of the stations in the network. Some VSATs function in a one-way communication link, while other systems utilise two-way communication. The central hub acts as a traffic Manager for VSAT activity. It utilises a much larger antenna in order to receive the weaker signal from the remote VSAT. VSATs are relatively cheap, costing around US$ 5,000 per terminal, and can be easily installed and maintained. They allow for expansion within the network fairly inexpensively. VSATs afford greater bandwidth than terrestrial copper systems. Thus VSATs have greater capabilities for exchanging information with their remote locations.
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Low Earth Orbit satellites hover close to the earth and do not remain at the same altitude. Deutsche Bank AG
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Typical applications of VSATs are:

n
VSAT Intranets in the Developed World: VSAT technology is used extensively to create networks that connect remote offices. Local-area networks (LANs) and wide-area networks (WANs) have both been created and enhanced by the use of VSATs. VSATs for educational purposes: Distance learning is a common feature in some counties. Lectures are sent via VSATs to remote locations where students interact with a centrally located professor. VSATs for medical purposes: In China, doctors in remote locations are able to send patients' X-rays via VSAT to better equipped hospitals in urban centres. The remote doctors can thus receive back information pertinent to the medical procedure immediately. VSATs used in tracking moving objects: In the US market, VSATs are being utilised in traffic management systems.
The VSAT industry is expected to grow as countries deregulate their telecommunications infrastructure and prices come down. Business-related intranets should continue to expand in world markets. Governments and private industry can also be expected to pay some attention to VSAT-linked intranets in order to enhance development.
Direct Broadband Satellite (DBS) Internet access can also be provided by means of a satellite. Direct broadband satellite, refers to transmitting and receiving signals directly from a satellite. Internet access with speeds in hundreds of kilobytes can be provided via direct broadband satellite.
The signals are transmitted from a station on earth to the central hub. The central hub is where the satellite operator and the ISP are located with a very high-speed Internet backbone for worldwide networking connectivity. The request for web pages goes to the satellite network hub dish and is then routed via the terrestrial Internet network to the appropriate web server. The web server responds by sending back the requested web page (html file) and associated pictures. The requested files go back to the hub dish where they are interleaved with other traffic and put onto a large high speed outlink carrier (e.g. 36Mbps). The customers terminal equipment extracts only the data destined for it using an encoding system similar to digital satellite TV. The equipment at the user end consists of a small antenna dish, similar to satellite TV. This dish antenna is used together with an indoor box unit modem. The dish antenna consists of a reflector to receive the outlink (signals from the satellite) and transmits the return link (or uplink) data using an outdoor transmit block upconverter (BUC). Direct broadband satellite can also be provided via VSATs connecting the remote terminals to a central hub via satellites. These VSATs are generally used for forming VPNs (Virtual Private Networks). Major providers of Direct Broadband satellite are StarBand and DirecWay.
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Fixed radio access

The local loop controlled by the incumbent presents an enormous obstacle to the successful development of broad-based competition. In many cases it also presents problems for the incumbents themselves because the cost of running new copper cables to premises can be prohibitive depending on the location. Fixed radio access essentially replaces the traditional copper loop with a radio link. On a per subscriber basis the cost of provisioning a new FRA link is generally significantly less costly than via new copper plant and the base station unit can be readily re-deployed in the event that the customer no longer requires service. The radio link is a much simpler proposition than cellular given that both the transmitter and receiving location are stationary. On the other hand, consumers expect this type of service to offer quality comparable with the traditional fixed line network. This typical 99.999% quality can be difficult to deliver given the possibilities for problems with radio links. Problems range from adverse weather interfering with transmission to trees growing up unexpectedly to obscure the beam. The exact problems are partly dependent on the frequency of the transmission. As we mentioned under the frequency section the exact frequency will determine the prorogation characteristics, i.e. how far the signal travels for a given power, how far it spreads and how much information the signal can carry. Infrared systems can operate with very high bandwidth capabilities, effectively equivalent to offering fibre to the home or business while a 2GHz system can offer an equivalent service to ISDN. In theory the business proposition offered by FRA is strong, as demonstrated by the number of companies that have managed to raise large chunks of equity on the back of a business plan but there are few commercially successful new entrants. While new entrants generally have not been a roaring success, those companies pursuing this technology have been unusually disaster prone. Ionica, Atlantic, Winstar, Teligent have all been high profile failures.
Microwave Wireless Technologies Microwave communication systems operate in the frequency range of 1- 58 GHz. Microwaves travel in a straight line and so require line of sight between transmitter and receiver. Two widely used microwave technologies are Local Multipoint Distribution System (LMDS) and Multichannel Multipoint Distribution System (MMDS).
This section provides an overview of LMDS and MMDS network and technology along with their applications.
n
Local Multipoint Distribution System (LMDS)
Local Multipoint Distribution system (LMDS) is a wireless technology able to transmit a large amount of data and information at a very high rate of speed.
The basic network consists of a base station situated on a high-rise building and various client stations. LMDS can be used to transmit voice, data and Internet services at the same time. Even broadband services can be provided through the LMDS network. However, the microwave signals used by LMDS cannot travel distances greater than 5 miles. The base station responds to various client radios. Microwave radio is installed onto a building at the client site and another microwave radio is installed at the LMDS base station. The base station can respond to many client radios through one radio itself. The base station uses a special type of radio, which allows it to have a 90degree field of view.
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The hub or station is located at a key position to interface directly with landline fibre optic network as well as standard telephony. Video conferencing, Voice, Data, Internet access, and TV signals can all be provided even at the same time through this wireless service. LMDS uses microwave signals to transmit voice, video, and data signals using low power. As a result the signal generally does not reach greater than a five-mile range. It is a wireless broadband service that relies on microwave radios to send large amounts of information between each of the radios at very high speeds. Broadly LMDS operates between the 28Ghz & 29Ghz bands. The specific frequency bands are: 27.50Ghz - 28.35Ghz & 29.10Ghz - 29.25Ghz & 30.00Ghz & 31.075Ghz 31.225Ghz. LMDS provides an effective last mile solution for incumbent service providers and can be used by competitive service providers to provide services directly to the end users. Benefits of LMDS can be summarised as follows:
n n n n
Lower entry and deployment costs Ease and speed of deployment Fast realisation of revenue Demand based build-out - LMDS has a scalable architecture. This allows the system to expand its network and add new customers in new areas easily. Costs shift from fixed to variable - In traditional systems, the major capital investment is in the infrastructure. In LMDS, capital costs are involved in setting up new radios on customer sites. No stranded capital when customers churn
Limitations of LMDS
n
Signals cannot be transmitted to large distances. Thus LMDS provides only a last mile solution of service providers. The transmitter at the clients end has to be in line of sight with the antenna at the base station. Transmission of microwave signals is weather dependant. Multipoint Multichannel Distribution System (MMDS)
n n
Multichannel Multipoint Distribution System is a wireless technology used to provide TV signal transmission. The wireless system consists of head-end equipment and reception equipment at each subscriber location. A typical set-up of an MMDS system is shown in the figure below.
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Figure 57: A Typical MMDS System

Receive Antenna Satellite Antenna Down converter
Transmit Antenna
Baseband Audio and video Signals
Helix or waveguide
Converter / Decoder
Satellie Receiver Baseband Encryption
Decoders
Decoders
RF Encryption
Modulators
Source: Wireless Communications Association (WCA) Intl
Up converter
Television
The head-end equipment consists of satellite signal reception equipment, radio transmitter, other broadcast equipment and transmission antenna. Microwaves transmit all signals, so modulators are used to convert to the desired frequency. The reception equipment consists of an antenna, frequency conversion device, and settop device. At the receiver end, the signal is converted to the desired frequency and through a set-top box the channels can be viewed on the television. Signals for MMDS broadcast at the transmitter site originate from a variety of sources, just like at cable head-ends. Satellite, terrestrial, cable delivered programmes and local broadband services are the material to be delivered over MMDS. All these signals are converted to the desired microwave frequencies. MMDS networks have a limited number of channels available in the low RF spectrum. Only 200MHz of the spectrum (Between 2.5 GHz and 2.7 GHz) is allocated for MMDS use. This constraint reduces the effective number of channels in a single MMDS system. For TV signals with 6MHz bandwidth, merely 33 channels can fit into the spectrum. MMDS channels are transmitted from an omni-directional or directional antenna having extensive line of sight in all directions. Repeater stations can be used to redirect MMDS signals to screened areas.
Computer Networks
A computer network is an interconnected collection of autonomous computers.
Since we are on the subject of networks it is appropriate to touch on computer networks. There has always been a linkage between telecoms and computer networks, if only because any form of computer network required terminals to be linked. But as telecoms networks have become digitalised and more of telecoms traffic is originated via computers so the differences between the networks is becoming indistinguishable.
Companies
n
Resource sharing: All programmes, equipment (e.g. printers) and data are available to every employee/partner on the network.
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Reliability: Networks allow for duplication of data and resources, ensuring that the workflow is not affected if, for instance, a computer crashes or a printer is not working. Communication and collaboration: Employees located at different parts of the office, or different offices (sometimes in different countries) can collaborate on projects using networks.
Home Users
n
Access to remote information: Users can access bank statements, train schedules, news headlines over computer networks. Person-to-person communication: Email, chat and bulletin boards can be used to communicate cheaply with other users who are otherwise inaccessible. Interactive entertainment: Users can obtain video-on-demand or participate in online gaming for entertainment.
Computer Networks can be classified based on geographical scale as follows:

n
Local Area Networks (LANs): These are privately owned networks within a building or campus. Metropolitan Area Networks (MANs): These are private or public networks that cover a group of nearby corporate offices or a city. Wide Area Networks (WANs): These span a large geographical area such as a country or a continent.
These networks will be covered in greater detail in a subsequent section. The following section deals with the Internet the largest global collection of networks.
Internet The Internet (also sometimes mistakenly called the World Wide Web or WWW) is a global network of networks (also called an internetwork). An internetwork is formed when distinct networks (e.g. a LAN and a WAN, or a LAN and another LAN) are connected together.
The Internet is a global network of networks.
The Internet evolved from the combination of two US networks the ARPANET and the NSFNET. ARPA (Advanced Research Projects Agency) was formed by the US Department of Defense in the 1960s to develop a command-and-control network capable of withstanding a nuclear war. Fixed telecoms networks are generally highly reliable. Five nines or 99.999% is often quoted as the up time The problem is that for the 0.001% of the time they are not operating at all and this would create real problems in the event of a national emergency. In this case better to have a system which always allows communications to take place under any circumstances even if the quality may not be as good in other respects. Hence the internet was created. The ARPANET connected the DoD with licensed research agencies and universities. Seeing the success of the ARPANET, the US National Science Foundation (NSF) created its own network in the 1970s that would be open to all universities. After the two networks were interconnected in the 1980s and TCP / IP (Transmission Control Protocol / Internet Protocol a set of rules that allow computers on different
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networks to communicate and send data to each other99) was adopted as the official protocol, users started referring to it as the Internet. Internet users connect to the Internet through their local Internet Service Provider (ISP) either directly (through a dialup or DSL connection) or indirectly (through the LAN). Users connect to their ISPs local facility (called a Point of Presence or POP). The various ISPs are linked to each other through very high-speed lines (usually optic fibre trunk lines) called backbone networks forming the Internet. The point of connection between the ISP and the backbone is called a Network Access Point (NAP). Specialised pieces of equipment (generically called routers) are required whenever two networks are inter-connected. Routers ensure that data packets are directed to the correct computer on either network. For this, routers use a unique identifier for each computer called an IP address. A typical IP address looks as follows: 192.168.8.221 Since IP addresses can be quite cumbersome to remember, a way to map IP addresses to text was devised the Domain Name System (DNS). E.g. db.com is a domain name. Domain names can be used in emails (e.g. johnsmith@db.com) or as part of a URL (Uniform Resource Locator a standard for specifying hypertext or other files on the WWW) e.g. http://www.db.com. An extension of the Internet Protocol, called IPv6100, has the potential to assign IP addresses to every telecom device on Earth. The clever thing about the internet is that it is not really very clever at all. When a packet gets to a router the IP address it is carrying helps the router decide where the packet should be sent next. The router only really cares about the other routers it talks to directly. It uses its experience with sending data out to its fellow routers to build up a picture of which ones are busy and which ones are not. It is programmed to send the data out in the right general direction based on the IP address but there is no fixed route. It will send the information out towards the path of least resistance. Thus if one router is subject to catastrophic failure as it might for instance if it was blown up, the network simply bypasses it. Given the enormous number of different routes traffic can take to get to the final destination it is a highly resilient system. The pace of technological advance is such that routers over time have become rather smarter, and the protocols being developed, such as MPLS, allow the routers to prioritise different types of data in different ways. But the fundamental operation is unchanged.
The main applications of the Internet are: the WWW (which makes accessing web-pages possible), email, remote login and file transfer.
n n
The four traditional applications of the Internet are as follows:

Email: Originally text messages sent between computers, modern email programs can handle multimedia (audio-video) messages as well. News: Newsgroups are specialised forums in which users with a common interest can exchange messages101. These include technical topics such as networking and UNIX and non-technical topics such as recreation and politics.
99
Refer to glossary for further information on Internet Protocol (IP). Refer to glossary for further information on IPv6. 101 Computer Networks by A.S. Tanenbaum, Prentice-Hall India, 1996
100
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Remote Login: Remote login programmes (such as telnet and login) enable authorised users to access their accounts (usually containing emails, data etc) on another computer on the Internet. File Transfer: The FTP (File Transfer Protocol) programme can be used to transfer files from a remote computer to the local one or vice versa.
In addition to these, the WWW (which is actually an Internet application) allows users to make accessible to other Internet users a variety of text, hypertext, multimedia and other information.
What makes the Internet interesting? There is much confusion about the internet business model. Many articles suggest that the internet is going to kill the telcos, presumably because of the apparent disconnect between pricing of what appear similar services on the two systems. First the facts. The internet is made up of components almost entirely provided by traditional telcos. Local access, local switching and long distance connections are all the basic building blocks required to create the internet. The only real difference is that the connections are made using routers rather than traditional switches. So whatever happens the telcos are providing most of the crucial elements.
What the internet has done is to present an entirely different pricing model for using these assets. We mentioned earlier that prices and costs in most conventional telecoms networks bear little relationship to each other. The business continues to run with huge cross subsidies. At its heart, calls subsidise access. Voice based switches are expensive to run and are dedicated to voice requirements. The internet model on the other hand is more closely aligned to costs, fundamentally because all the agents involved in the chain are striking commercial relationships with each other rather than being subject to some overall central price control. Running a telecoms network is basically a fixed cost exercise, regardless of traffic volumes. The internet pricing model reflects this with users paying for access but generally not on a usage sensitive basis. The internet is good at carrying data. Traditional voice networks are not. It is still the case that in the local access network, data has to be made to look like voice in order to transit the local loop. That is what modems do. But there is a fundamental shift afoot. The internet is getting to the point where it is good enough to start dealing with voice. We cover this in more detail under the Voice over IP section. So the question can be raised, why do we not turn voice into data and make the whole network run just data. Ultimately this will happen because it makes good economic sense. A single network, rather than todays multiple networks, would be much cheaper to run. But it will not happen overnight or indeed over years. Most telcos we are aware of are rebuilding their backbone networks to be data only and based on internet protocols. This will bring about significant reductions in operating costs. In order for voice and data to happily live together in the local network broadband access needs to be pervasive, something which is many years away. In the meantime services like VoiP will become increasingly widely available.
Converged Networks Converged Networks represent the intersection of traditional telecom applications (such as voice telephony) and computer network architectures. Converged networks can take the form of existing applications provided over a completely different but existing architecture (as in the case of VoIP or Internet Telephony) or a completely
Converged Networks mark the intersection of traditional telecom applications and computer networks
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new architecture formed by the combination of two or more existing architectures (as in the case of WLAN-Cellular convergence). The key drivers behind the emergence of converged networks are:
n
The need to provide a common framework for dealing with different types of signals (e.g. voice and data) so that network architectures can be simplified The need to provide low-cost, high-quality services to users (e.g. VoIP is much cheaper than International Long Distance telephony over PSTN lines) The need to reduce the number of telecom devices that the average user will need to own and carry on his / her person (e.g. a converged WLAN-Cellular laptop reduces the need to carry two separate devices)
In this section, we deal with two key converged network technologies:

n n
VoIP WLAN-Cellular Networks
VoIP Internet Protocol (IP) telephony, known in the industry as Voice-over IP (VoIP), is the transmission of telephone calls over a data network such as the Internet. VoIP is also known as telephony over Internet or net telephony. This technology is considered as a major step towards convergence of voice and data.
The consolidation of separate voice and data networks offers an opportunity for a significant reduction in communication costs. Since data traffic is growing faster than telephone traffic, then transport voice over data networks rather than the transmission of data over voice networks makes sense, as described earlier. This has brought about the rise in Voice over IP (VoIP). It has become especially attractive given the low-cost, flat rate pricing of the public Internet. Bear in mind that low call prices are no more than an arbitrage and do not rely on some technological miracle, but merely reflect that the internet is subject to flat rate charging for access and maybe some local access charges, depending on the pricing model. Thus international and long distance call charges can appear very low compared to current voice rates. But the crucial point is that ultimately, if all traffic switched to the internet, the overall costs of providing the services would need to be recovered some way or another. As we have said before, most of these assets are already in place.
n
Calling Process
There are numerous different forms of VoIP. But the basics are simple. Voice is turned into packets of data and then transmitted over the internet just like any other data until it gets to the recipient. It is then turned back into voice. The complexities are introduced by the needs of voice customers, which are different to those of the data user. In simple terms an e-mail or data download will not be affected if there is some delay to the transmission. Neither will it be affected if the packets that make up the whole message arrive at the receiving end in the wrong order because the system can re-assemble them. (Bear in mind that the critical characteristic of the internet is that the packets to form a message may each travel on a different route to their final destination.) But for a voice call, delay in receiving and potentially voice quality are major issues. We will look at how these issues are gradually being overcome. In a traditional telephone call, a user dials the number of the person he or she wishes to talk to. The call reaches the local carrier network that forwards the call to
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the desired number. When the call is answered at the other end, the connection is said to be complete. That virtual connection remains in place for the duration of the call. In a VoIP call, the Internet replaces the long distance elements of the network. The VoIP system converts the continuous voice signals into packets of data so that they can be transmitted over the Internet just like any other data packet. The virtual connection in the normal telephone system helps explain why the traditional voice system is thought of as costly and inefficient versus the internet. The traditional voice call uses up a whole channel even if little is being said for the duration of the call (in reality this is not entirely true but it will do for now!). The internet on the other hand makes much more efficient use of the available infrastructure by squeezing packets onto whatever capacity there is. The exact efficiency advantage will depend on the nature of the traffic. In a VoIP system, on the transmit side, voice signals are gathered together to form a set of voice data. That data set is run through the compression mechanism embedded in a VoIP gateway102 and reduced for transmission. The resultant data are packed inside an IP packet103 with a header containing the details about the place of delivery. This packetised data is finally transmitted over the Internet. A protocol is run for end-to-end delivery of this packetised data over the Internet. The protocol provides services such as data type identification, time stamping, and delivery monitoring. Two commonly used protocols in VoIP system are:
n
H.323 Protocol Suite104 - A Telecommunications Union (ITU).
standard
created
by
the
International
Session Initiation Protocol (SIP) - a standard created by Internet Engineering Task Force (IETF).
The figure below represents a typical VoIP system.

Figure 58: VoIP System
Signal Sender Data Compression and Packet Forming Machine
Signal Receiver Data Decompression and Signal Forming Machine
Internet Used for Transmission of the Data

Signal Sender Signal Receiver
Internet Protocol Applied

There are four ways to make call over a VoIP Network. They are:
102 103
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Computer-to-Computer: In this type of communication one requires software from a VoIP service provider, a microphone, speakers, a sound card and an Internet connection. Except for the normal monthly ISP fee, there is usually no charge for computer-to-computer calls, irrespective of the distance. Computer-to-Telephone: This method allows calls to anyone (who has a phone) from a computer. Like computer-to-computer calling, it requires a software client. The software is typically free, but the calls may be charged a small amount per-minute. Telephone-to-Computer: This method allows a standard telephone user to initiate a call to a computer user. The requirement is that the computer user must have the software of the vendor providing this service installed and running on his or her computer. The cost of the call is usually cheaper than a traditional long-distance call. Telephone-to-Telephone: This method allows the user to connect directly with any other standard telephone in the world. To use this method one needs a connection from the service provider. First, the user needs to dial a special identification code to access the service providers network and then dial the number he or she wishes to call. Thereafter, the service provider connects the user through their IP-based network. The cost for the call is typically lower than standard long distance calls. There also now options to just dial the normal telephone number and the system does the rest. Most VoiP implementations use broadband connections.
Benefits of VoIP
n
It reduces the cost of communication as compared to the standard long distance telephony. The savings are possible as it avoids telephony access charges and settlement fees among the various standard long distance telephony providers. An integrated infrastructure for voice and data networks that supports all forms of communication allows more standardization and reduces the total equipment cost. The combined infrastructure for voice and data services supports bandwidth optimisation. Consolidation of the voice and data networks reduces the overhead costs incurred on maintenance of these networks. Transmitting VoIP is also beneficial as Internet is a packet switched or "connectionless" network, the individual packets of each voice signal travel over separate network paths for reassembly in the proper sequence at their ultimate destinations. This makes for a more efficient use of network resources. Sound Quality of VoIP
The major factors affecting the quality of voice over the VoIP network are given below:
n
Delay in data packet transmission
Two problems that result from end-to-end delay in a voice network are:
n
Echo It is caused by signal reflections of the speakers voice from the far end telephone equipment back into the speakers ear.
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Talk over lap It is the problem of one caller stepping on the other talkers speech. Jitter It is also known as delay variability. It is the variation in inter-packet arrival time as introduced by the variable transmission delay over the network. Packet Loss IP networks cannot provide a guarantee that packets will be delivered at all, much less in order. Packets may be dropped under peak loads and during periods of network congestion. In voice communications, packet loss shows up in the form of gaps or periods of silence in the conversation, thus leading to a "clipped speech" effect that is unacceptable in business communications.
n n
We should say at this point that VoiP presents very different challenges depending on whether it takes place across a private network or the public switched telephone network (PSTN). In a private network the quality can be tightly controlled. As a result corporate users have whole-heartedly embraced VoiP because of the substantial cost savings that can be made. In a public environment no one company can control all elements of the infrastructure and so quality can be variable. However, as the internet builds resilience globally so we are beginning to get to the point that the worst may be good enough for voice.
WLAN-Cellular Networks WLAN105 services offer high data speeds over laptops and PCs, while cellular networks such as GSM and GPRS provide universal coverage for voice services. Thus handsets / laptops that are capable of switching between the WLAN and cellular modes have great potential for business applications. The debate on WLAN vs. 3G in the chapter on Regulatory Environment deals with this issue in greater detail. This subsection deals with the architecture of WLAN-Cellular networks.
WLAN-Cellular Networks offer high-speed WLAN connections near hotspots, and regular cellular services elsewhere.
WLAN-Cellular services are provided through a multi-band106, multi-standard107 chip supporting cellular telephony. This chip incorporates the WLAN technology with an enhanced capability to operate in the cellular telephone spectrum. The chip uses the RFIC108 transceiver technology. This technology enables wireless convergence of cellular and WLAN networks. It gives the mobile users a single platform for cellular voice services as well as high-speed data communication near WLAN access points. Many architectures and protocols are available for integrating the WLAN and cellular networks. However, the core cellular network is separate from WLAN in all architectures. Authentication occurs through the SIM card and existing GSM authentication procedures. The key issues facing the integration of the two networks are:
n n n
Handovers between WLAN and Cellular networks Common authentication, authorisation and accounting procedures Common billing for both the services
Wireless Local Area Network. For details on WLAN, please refer the chapter on Communication Networks. 106 Multi-band refers to a technology that can work on different frequencies. 107 Multi-standard refers to a technology that can operate on two different network architectures. 108 RFIC stands for Radio frequency integrated circuit. Essentially, it is a chip used for communicating radio signals. Deutsche Bank AG Page 103
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The Remote Authentication Dial-In User Service (RADIUS) protocol is commonly used to provide centralized authentication, authorization, and accounting between the two network types109. Some companies such as Nextel (in partnership with RadioFrame Networks)110 and T-Mobile (in partnership with Lucent)111 have already commercialised converged WLAN-cellular networks.
Basic components of a communication system

Now for some real basics. The three essential components of a communication system are access devices, switching systems and the transmission media. Access devices are used for transmitting and receiving signals. The switching systems manage the network traffic and route to these signals to reach the desired destination. Transmission media such as air and wires carry these signals. This section explains the function of each of these systems and the technologies they use.
Figure 59: Basic Components of a Communication System
Satellites as transmission media
Fibre optic network at transmission medium
Switching Station
Transmission media such as copper cables
Access devices Access devices contain the equipment necessary for receiving the signal and converting the signal in a form that humans can recognise. Landline telephones or
For more details on the Radius Protocol, refer to the Microsoft white paper RADIUS Protocol Security and Best Practices (http://www.microsoft.com/windows2000/techinfo/administration/radius.asp) 110 Nextel and RadioFrame Networks Introduce First In-Building Wireless Platform with Cellular and WLAN capability, Lycos, 19th August 2003 (http://finance.lycos.com/home/news/story.asp?story=35330810) 111 T-Mobile and Lucent test 3G/WLAN roaming, ComputerWeekly.com, 22nd January 2003 (http://www.computerweekly.com/Article118837.htm) Page 104 Deutsche Bank AG
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mobile networks convert analogue or digital signals into voice form. The access devices can be categorised on the basis of the technologies they use. This subsection looks at the basic components of the commonly used access devices and how they connect to their network.
Wired devices Wired devices receive signal from a wire. This wire could be copper or fibre optic depending on the communication network. Wired devices used commonly include telephone, computers, laptops etc. Given below is a brief description of their basic components and the access devices they use to communicate with the network.
n
Telephone
A telephone receives an analogue signal through a pair of wires called the local loop112. It converts this analogue signal into voice form and transfers it to the receiver through a speaker. A telephone consists of three separate assemblies
n
Speech network The speech network consists of a speaker and a microphone to transmit and receive voice. Dialling mechanism The dialling mechanism consists of a switch to connect and disconnect the phone and a dialling circuit. Ringer or bell It consists of a bell and an amplifier circuit.
Additional machines such as modems, diallers and answering machines can be added to the phone line.
Figure 60: A Telephone Assembly
Source: Howstuffworks
Laptops and Computers
These devices connect to the Internet through a dial-up connection, Digital Service Line (DSL) or WLAN.
n
Dial-up connection A computer connects to a PSTN line through a modem. A user dials the number of an Internet Service Provider (ISP) and a connection is established. Modems convert digital signals into analogue and transfer this through the PSTN lines. This analogue signal is again converted to digital form at the ISPs end. Please refer to the chapter on Communication Media for further details.
Local loop refers to the pair of copper wires from the telephone box outside the house to the telephone. Page 105
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DSL DSL uses the existing telephones networks only. A device called low pass filter is installed on the users telephone devices. This prevents interference of telephones signals with DSL signals. Thus a DSL user can browse the Internet and have a telephone conversation at the same time. DSL systems have been explained in detail in the chapter Communication Media. Please refer it for further details. WLAN A computer connects to the local area network through a LAN card. Copper wires carry the signal from a switch to the computer. WLANs have been explained in greater detail in the section Computer Networks. Please refer it for further details.
Wireless Devices Wireless devices transmit and receive signals in the form of radio or microwaves. Commonly used wireless devices are Mobile Phones, Pagers, Satellite Phones etc. Below is a brief description of each of these devices.
n
Mobile Phones
Mobile phones contain the basic radio equipment needed for transmitting and receiving signals. The cell phones have to transmit the signal to a nearby base station, within 15kms. The basic components of mobile phone are:
n
Circuit Board The circuit board consists of a Microprocessor, and various chips to convert analogue signal to digital and vice versa. Antenna It transmits and receives radio signals Liquid Crystal Display (LCD) A screen to display the contents. Microphone and Speaker To send and receive voice. Battery Battery powers the circuit and all the components of a Cell Phone.
n n n n
The Microprocessor inside the Mobile phone is like a mini computer and can perform millions of calculations per second. Mobile phone devices can be categorized on the basis of technologies and operation frequencies. Cell phones are frequency specific. So the same phone cannot be used for communicating at two different frequency bands. Different countries communicate radio signals at different frequencies. However, cell phones, which can communicate on different frequencies, are also available. These phones are called Multi-band Cell phones. These Multi-band Cell phones can be used in more than one country. A CDMA cell phone is different from a GSM one. For instance, a normal GSM handset used in Europe cannot be used on CDMA networks in USA. Cell phones, which can communicate with both GSM and CDMA networks, are also available. These phones are called Multi-mode cell phones.
n
Satellite Phones
Satellite phones carry the equipment necessary for transmission of micro signals. Satellite technology is also known as Line-of-sight technology. Thus the antenna of the Satellite phones has to point in the direction of the satellite. The main components of a Satellite phone are:
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Radio Antenna Unit (RAU): RAU acts as a receiver and a transmitter. It connects the phone to the orbiting satellites. Junction Box: It provides the user equipment with protection against nearby lightning strikes when properly grounded. Power supply: Fixed satellite phones can use power from mains or have a back up battery. Two-wired telephone set: Two wired telephone sets, like the sets used with PSTN lines, are used in fixed wireless units. Mounting equipment: Mounting equipment ensures that the antenna faces the satellite.
Figure 61: A Typical Satellite Phone
Source: Globalstar
Pagers
The basic components of a pager are

n n n
Batteries: Charge the pager Speakers: Provide the voice waveform to be heard by the user. Light-emitting Diodes (LEDs): LEDs provide a light flash when a message is sent. Motor: DC motor provides a small vibration that acts as a signal. Radio Antenna coil: The antenna coil picks up the signal and sends it to the microprocessor. Microprocessor: Microprocessor is the brain of the circuit. It identifies the signal and performs all the calculations.
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Figure 62: Typical Pager
Source: 2waygadgets.com
PDA
Personal Digital Assistants (PDAs) are small palm-type computers used for storing data for mobile customers. These devices are designed to complement but not replace a desktop or a laptop. PDAs have evolved into machines for crunching numbers, playing games or music and downloading information from the Internet. A PDA communicates with a PC to download and save data. The communication between a PDC and a PC is called as Data Synchronization or syncing. A PDA requires a modem to connect to the Internet. The basic parts of a PDA are similar to a computer. It contains the following parts. n Microprocessor
n n n n n
Operating System Memory Battery Input and Output devices Desktop PC software.
Figure 63 below shows a typical PDA.

Figure 63: A Typical PDA
Source: Pdabuzz.com
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The phenomenon of forming a communication link between the dialler and the destination, using various communication media like radio channels and fibre optic network is called Switching.
Switching Two basic technologies are used for building high-capacity networks:
n n
Circuit Switching Packet Switching
Circuit Switching In circuit-switched networks, resources are dedicated all the way from sender to receiver before the start of the transfer, thereby creating a circuit. The dedicated resources could be a physical circuit, as in a fixed line network or a radio channel as in GSM networks.
Conventional cellular radio and landline telephones use circuit switching. In circuit switching, physical switches are set in the telephone network to create a physical circuit. Such switches are set up at the beginning of the connection and maintained throughout the connection. Thus network resources are reserved and dedicated from sender to receiver.
Figure 64: Circuit Switching in PSTN Lines
Source: University of California Santa Cruz Website
Network resources set up calls over the most efficient route. Once a route is dedicated for a cell, no matter how convoluted the route, the path or circuit for a connection stays the same throughout the call. It's like having a dedicated railroad track with only one train. With circuit switching, all packets go directly to the receiver in an orderly fashion, one after another on a single track. Like the train mentioned above, hauling one boxcar after another.
Packet Switching In packet switching, voice or data is transmitted as packets of information. Wireless services such as GPRS, Bluetooth, CDMA, and 3G use packet switching technology. In packet switching, the voice or data to be transferred is divided into packets at the senders end. These packets are sent as such to the destination and reassembled there.
The network can be compared to a conveyer belt in a warehouse. Items are picked from the storage room and placed on the conveyer belt every time the customer makes an order. Different customers may order for different items. Different user
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items may be interspersed on the conveyer belt. At the receiver end, the items of a single customer are sorted. Each packet is composed of:
n n
Payload: Payload contains the data that is to be transmitted. Header: The header contains information such as
Senders address Destination address Packet size Sequence number Error checking information. In general all packets need not be of the same size. These packets are sent through various communication lines such as cable or radio channels. Unlike circuit switched networks, all the data does not go serially on a single track. These packets are retransmitted through various routers113. Routers determine a path for each packet or boxcar on the fly, dynamically, ordering it to use any rail track available. Other packets from other calls race upon these circuits as well, making the most use of each track or path, quite unlike the circuit switched calls that occupy a single path, exclusive to itself. Upon getting to their destination, the individual packets get put back into order by a packet assembler. The different routes practically ensure that packets arrive at different times. This causes delays at the receiver end. One notices even the tiniest delay with voice. Thus delays in packet switching for voice causes voice quality to degrade. Circuit switching guarantees the best-sounding call because all packets go in order and there is no delay. The following table compares circuit switching and packet switching networks.
Figure 65: Comparison of Circuit switching and Packet switching networks
Attribute Circuit Switching Packet Switching
Utilization of resources Initial set up Reliability Capacity

Network resources are dedicated from sender to receiver. Not a Resources are shared. Many signals are transmitted on one very efficient strategy channel. It utilizes the available resources to maximum extent. Initial delay in setting up a connection Connection is reliable Resources are dedicated, so capacity of network is limited Very small set-up delay Possible congestion can cause consequent packet drop Capacity of the network is significantly enhanced due to sharing of resources
Transmission Transmission media carry signals from sender to its recipient. Transmission media depend on the technology used for generating the signal. In this section we explain the various transmission media used for wired and wireless technologies. We also give an overview of various multiplexing technologies used for both wired and wireless systems. Finally, we discuss the various transmission technologies or protocols used for transmitting the signal.
113
Refer to glossary for further information on Routers. Deutsche Bank AG
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Transmission media have been explained in detail in the chapter on Communication Media. This section shall provide a comprehensive summary of various transmission media and technologies used for wired and wireless communication. Transmission media can be categorized as wired or wireless.
Wired media Wired communication systems carry signal in the form of a current in a wire. This signal can be analogue or digital. The cables can carry both voice and data information as signal. The cables used can be copper or fibre optic.
n
Copper Cables
Copper cables carry analogue signal. Details of Copper cables have been provided in the chapter on Communication Media. Copper cables have evolved from twisted pair of copper wires to co-axial cable. Multiplexing technologies have increased the information capacity of copper cables. Copper cables normally cover the last mile of many networks such as PSTN, Internet cable etc. Computer networks like LAN etc. also deploy copper cables for the last mile delivery. Access devices added at the user and the transmission end, enable digital signals to be transmitted through copper cables. These access devices, such as modems, convert this digital signal to analogue and then transmit it through the copper wires.
n
Optic Fibre Cables
Fibre optic networks carry signal in a digital form. Details of Optic fibres are provided in the chapter on Communication Media. The most significant difference between copper and optic fibres is the difference in bandwidth. Optical fibres have much larger bandwidth. Optic fibres use light as the carrier of information. A single fibre optic cable can manage data rates exceeding 1,000Mbps. Fibre optic networks are used for long distance communication in any network. Fibre cables have a greater capacity and it is much more difficult to tap information from these cables, than from conventional copper cables. Thus, fibre optic cables are used for transmission of secured and precious information. Since these cables carry signals in a digital form they are used for ISDN, computer networks such as LAN, PAN, WAN etc. Fibre optic networks also cover a major part of the PSTN network.
n
Power Line Communication (PLC)
PLC is the transfer of voice and data via a combination of power networks within house and metropolitan grid distribution. The major advantage of these systems is that no new wires have to be installed for the last mile connection. This technology has still to find widespread acceptance.
Wireless Media Wireless media utilises the electromagnetic spectrum in radio, television, microwave and free space optics. Cellular networks such as CDMA, GSM, PDC, PHC etc, use radio waves. Microwaves have shorter wavelength than Radio waves.
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Figure 66: Uses of various EM waves in Telecom

EM Waves Application in Telecom
Radio waves Microwaves Infrared

Cellular networks Satellite communication Short distance line-of-sight communication
Radio waves
Radio waves are most efficient for wireless transmission. However, the frequency bands or channels available for transmission are limited. Thus the regulating authority in any country, allots particular frequency bands to each cell phone carrier. Multiplexing techniques have enabled many signals to be transmitted on the same radio channel. Radio waves are used for transmission in many wireless networks such as cell phones etc. Radio waves also carry radio and TV signals.
n
Microwaves
Microwaves have shorter wavelength than radio waves. Microwave communication systems have larger bandwidth than radio systems. Microwaves travel in a straight line and cannot be narrowly focused. They can travel larger distances than radio waves because they travel in a straight line. Parabolic antenna are used to concentrate all the energy into a small beam, which increases the signal strength. Microwaves are used in communication networks like LMDS, MMDS, satellite systems etc.
n
Free Space Optics
Free space optics is a line-of-sight technology114 that uses laser or infrared beams for transmission. Data, voice and video communications are possible through free space optics. Free Space Optics are used for temporary network connectivity, such as exhibitions, conventions, sporting events etc.
Multiplexing Technologies Multiplexing means combining different communication streams into just one communication line. Many multiplexing techniques are used in wired and wireless systems. This subsection provides a brief overview of such technologies.
n
Wired
WDM and DWDM115 are the commonly used multiplexing technologies in fibre optic communications. DWDM systems are capable of transmitting 64 to 160 radio channels. The basic difference between WDM and DWDM is that DWDM spaces the wavelengths more closely than does WDM. DWDM based networks can carry different types of signals at different speeds over an optical channel.
n
Wireless
Wireless systems use the following access technologies to transmit many signals onto a single radio channel.
In Line-of-sight communication transmitter and receiver antennas are in visual contact with each other. Disruption of the visual contact by any means leads to a communication breakdown.
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n n n
FDMA TDMA CDMA
A detailed description of all these technologies is given in the chapter on Communication Media.
Transmission Protocols In optical transmission and in transmission of radio waves, information is encoded or multiplexed before it is transmitted. This encoded or multiplexed information has to be decoded or de-multiplexed. Protocols define the rules, which are treated as standards. Some popularly used protocols are:
n n n n
SONET SDH ATM MPLS
These protocols are discussed in detail in the chapter on Communication Media.
Types of Networks
Networks are primarily classified on the basis of their geographic scope or area of coverage:
n
Personal Area Networks (PANs): These cover distances of just a few metres and usually refer to wireless networks formed by devices communicating with each other. Local Area Networks (LANs): These are privately owned networks within a building or campus. Metropolitan Area Networks (MANs): These are private or public networks that cover a group of nearby corporate offices or a city. Wide Area Networks (WANs): These span a large geographical area such as a country or a continent.
In addition, we will also deal with an emerging type of network, the Virtual Private Network (VPN), which functions like a private LAN on a public network backbone.
PAN A personal area network (PAN) is the interconnection of information technology devices within a range of around 10 metres116. Thus a person carrying a laptop, a PDA (Personal Digital Assistant) and a portable printer could connect them together using a PAN via some wireless technology. This PAN can also be connected to other networks or the Internet. PAN works by sending weak, low frequency signals to devices in contact with, or in the immediate vicinity of, the body.
A Personal Area Network (PAN) connects devices within a range of 10 metres
Source: SearchNetworking.com Definitions (Link: http://searchnetworking.techtarget.com/sDefinition/0,,sid7_gci546288,00.html) Deutsche Bank AG Page 113
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The difference between PAN and Bluetooth is that, while the former uses the body as the medium for communication, the latter uses radio waves.
With PAN the body is used as the medium to create an electric field that can be used to send data to various devices in the immediate vicinity. This is different from Bluetooth a short-range radio technology that allows devices to communicate via the ISM117 radio band. PAN technology has several potential applications in business, medicine, retail etc:
n n
Business associates can exchange electronic business cards with a handshake. Corporate security devices can automatically log people on and off computer systems. Subway commuters can pay for their tickets by walking through a turnstile. People can carry digital versions of their medical profiles for emergency access by paramedics. ATMs (Automatic Teller Machines) can identify and authenticate customers even as they approach.
n n
LANs are networks within a single building or campus and operate within distances of a few kilometres.
LAN LANs are usually privately owned by universities or companies, who use them to connect personal computers and workstations for resource sharing (e.g. printers) and to exchange information.
LANs have three properties that distinguish them from other networks:
n
Limited Size: Since LANs operate within a few kilometres; a worst-case transmission time can be computed. Knowing this boundary simplifies network management and allows custom network applications to be designed. Transmission Technology: Most LANs use a single cable to connect all machines together. By using high-speed optic or T1 cables, LANs can operate up to speeds of several hundred Mbps. They have very low delays (less than 100 micro-seconds) and low error-rates. Simple Topology: Most LANs adhere to one of two topologies Bus and Ring (see Figure below). In the Bus topology, all computers on the network connect to a single common cable, called the bus. In the ring topology, each computer is connected to two other computers the adjacent links in the chain.
The ISM (Industrial, Scientific and Medical) radio bands are reserved internationally for noncommercial use of RF electromagnetic fields for industrial, scientific and medical purposes (Link: http://www.wikipedia.org/wiki/ISM_band). Refer to glossary for further information. Page 114 Deutsche Bank AG
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Figure 67: LAN Network Topologies - Bus Topology
Figure 68: LAN Network Topologies - Ring Topology
Source: Computer Networks by A.S. Tanenbaum, Prentice-Hall India, 1996
The IEEE LAN / MAN Standards Committee has developed several standards, collectively called the IEEE 802118, for LANs and MANs. The next two sections deal with two IEEE LAN standards (parts119 802.3 and 802.5):
n n
Ethernet (802.3) Token Ring (802.5)
The Ethernet standard describes a LAN where all devices are connected to a single cable.
Ethernet Ethernet was developed by researcher Bob Metcalfe at Xeroxs PARC (Palo Alto Research Centre) in 1973. All Ethernet devices are connected to a common medium along which electrical signals are transmitted (see figure below). Figure 69: A Small Ethernet Network
Source: HowStuffWorks.com
Ethernet devices transmit data in the form of frames (variable-sized chunks of data). The Ethernet standard specifies maximum and minimum sizes for frames, as well as certain mandatory information that each frame must contain (e.g. source and destination addresses). Every device connected to the Ethernet has a unique address. Devices process only those frames intended for their use and ignore
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others. The Ethernet standard also allows for the implementation of a broadcast address an address that indicates that the data transmitted is intended for every device connected to the system. Ethernet regulates communication between devices using the CSMA / CD (Carrier Sense Multiple Access with Collision Detect) protocol. Under Carrier Sense devices first listen to ensure that no other device is transmitting on the medium before it transmits. With Multiple Access all devices can access the medium both for sending and receiving data. A collision is a situation that occurs when two devices try to transmit data at the same time. Collision Detect indicates that all devices are listening to the medium at the same time as transmitting, to prevent collisions. When two devices begin transmitting simultaneously, they both stop and wait for a random interval of time before re-transmitting. An analogy to the Ethernet would be a group of people seated around a dinner table. Each person would listen (carrier sense) before speaking so that he or she does not interrupt an ongoing conversation. All persons seated at the table have the right to speak as long as no one else is speaking (multiple access). If two people start speaking at the same time, they both stop and wait a random interval of time before trying again (collision detect and resolution). Although Ethernet is the most common standard for LANs, it has a few limitations:
n
An electrical signal propagated along a physical medium weakens as it travels, and is affected by nearby electric disturbances (e.g. fluorescent lights). This places an upper bound on the length of the medium used for the Ethernet. Since, in CSMA / CD, only one device can transmit on the medium at a time, it places a limitation on the number of devices that can be connected to the medium. Else, some devices may have to wait arbitrarily long before they can transmit. This scenario is also known as congestion.
Ethernet LAN speeds range from 1-1000Mbps.

Token Ring The Token Ring design was proposed by IBM as an alternative to the Ethernet design for networks. In this design, all devices are connected together in a logical, unidirectional ring (see figure below). In physical implementation, this means that each device is connected to two others using point-to-point links. A special frame, called the token, is created at the time of initialising the network. The token circles the ring until it encounters a device that wishes to transmit.
Token Ring is a ring topology network design where a unique frame, called the token, determines which device can transmit data at any given time.
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Figure 70: Token Ring Network
Token
A device wishing to transmit on the medium captures the token; i.e. replaces the token with a data frame that goes round the network. Once the data frame returns to the transmitting device, it replaces it with a new token and forwards this to the next device in the ring. The presence of the token frame assures a device wishing to transmit data that there will be no collisions. Further, because each transmitting device can put only one data frame on the network before relinquishing control of the token, each station gets a chance to transmit in a fair and deterministic manner. However, the point-to-point nature of the network indicates that data rates would be lower than for Ethernet LANs. Token ring networks typically operate between 4-16Mbps.
WLANs A WLAN is a LAN where part or all of the communications between devices occurs through the wireless medium, i.e. using electromagnetic waves (radio and infra-red). WLANs are most commonly used to provide the final few metres of connectivity between users and the backbone network.
A wireless LAN (WLAN) is a wireless extension of, or alternative to traditional LANs.
A typical WLAN configuration is shown in the figure below. Transmitter / receivers (transceivers) called access points connect to the wired network from fixed locations using standard Ethernet cable. The access point receives, buffers and transmits data between the wired network and the wireless device. Access points typically cover a range of a few hundred feet.
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Figure 71: Typical WLAN Configuration

Wired Server
Ethernet Backbone Mobile Computer with WLAN PC Card Access Point

Source: Deutsche Bank, WLANA
End users access the WLAN through WLAN adapters usually implemented as PC cards for mobile computers or fully integrated devices in handheld computers. There are two configurations for WLANs:
Independent WLANs: This is a peer-to-peer WLAN where computers with WLAN adapters connect directly to each other whenever they are within range (see figure below). Figure 72: Independent WLAN Configuration
Source: Deutsche Bank, WLANA
Infrastructure WLANs: These WLANs use multiple access points to connect users to the wired network. Access points here acts both as an intermediary between the device and the backbone, as well as a regulator for wireless traffic in the immediate vicinity. Using microcells120, WLANs can provide roaming for a device within a building or campus (see figure below).
120
A microcell is the immediate area within which an access point can receive and transmit data. Deutsche Bank AG
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Figure 73: Infrastructure WLAN with Microcells
Access Device
Server Access Point

Source: WLANA
The most popular standard for WLANs is the IEEE 802.11, developed in 1997. There are two types of WLAN (based on physical characteristics and data rates) as defined by the IEEE 802.11, as seen below:
Figure 74: Comparison of 802.11a and 802.11b WLANs
Parameter 802.11a 802.11b
Standard Approved Maximum Data Rate Modulation Data Rates Frequencies Range Cost Market Acceptance
July 1999 54Mbps OFDM 6, 9, 12, 18, 24, 36, 48, 54Mbps 5-GHz range Approximately 150 feet Medium Low due to lack of compatibility with 802.11b
July 1999 11Mbps CCK 1, 2, 5.5, 11Mbps 2.4 GHz range Approximately 250 feet Low Industry Standard
Source: IEEE 802.11g The New Mainstream Wireless LAN Standard by Broadcom Corporation, July 2003
In June 2003 the IEEE released a new standard for WLANs called the 802.11g that combined 802.11a and 802.11b, and was backward compatible with both. There are four main classes of WLAN users121:
n
Enterprises: WLANs augment the existing backbone network to provide mobility to workers. Coverage is normally more important than data speed. Popular verticals include health-care, retail, manufacturing, warehousing and universities, where users have high mobility needs. Public Access (Hotspots) Users: Hotspots are public access points that are available to any user with WLAN-enabled device. These include employees on the move wishing to connect to the corporate network or the Internet, as well as students. Compatibility and range are the most important parameters. Small Businesses: Small businesses use WLANs as an alternative to more expensive Ethernet LANs. Typical applications would include email, web browsing and file transfer.
Source: IEEE 802.11g The New Mainstream Wireless LAN Standard by Broadcom Corporation, July 2003 Deutsche Bank AG Page 119
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Home Users: Homeowners with more than one computer sometimes use an independent WLAN to connect the devices together and provide mobility.
WLANs have a number of advantages122:

n
Installation Speed and Design Simplicity: Installation for WLANs is quicker than that of traditional LANs as no cables have to be laid. Installation Flexibility: WLANs can be deployed in certain situations where wired LANs cannot be installed, e.g. military theatres. Scalability: WLAN topologies are very flexible and are easily re-configured, allowing for greater scalability than wired networks. This, in turn, leads to lower life-cycle costs (e.g. when the enterprise shifts offices or expands).
Bluetooth is an industrydeveloped standard for connecting electronic equipment using the wireless medium.
Bluetooth Bluetooth is an emerging standard for short-range radio links between mobile PCs, mobile phones and other portable devices (e.g. headsets). Bluetooth standards are developed and maintained by the Bluetooth SIG (Special Interest Group) an alliance of nearly 2000 companies led by Ericsson, Nokia, Toshiba, Intel and IBM. The technology is named after Harald Bltland (Bluetooth), a 10th century king who unified the Danes and the Norwegians.
The Bluetooth standard has both physical specifications (e.g. frequency, power) as well as a communication protocol. Bluetooth devices operate on the 2.45GHz ISM (Industrial, Scientific and Medical) band which is licence-free in most countries. Further, Bluetooth uses the spread-spectrum frequency hopping technique to reduce interference. Bluetooth devices choose from 79 individual, randomly chosen frequencies in the ISM band for transmission, switching frequencies 1600 times a second123. Bluetooth devices have a range of only up to 10 metres (due to the low power specifications only 1mW as compared to 3000mW for mobile phones). When two or more Bluetooth-enabled devices enter within range of each other, they automatically communicate with each other to determine if they need to send / receive data. Once the user decides to transfer data from one device to the other, a piconet124 is set up. All members of the piconet hop frequencies in unison to avoid other piconets within range. Up to 10 piconets can overlap to form a scatternet, linking up to 80 Bluetooth devices. Bluetooth data speeds have an upper bound of 1Mbps125. Bluetooth has several advantages:
n
Unlike infrared wireless connections, Bluetooth devices do not have to be in line of sight with each other to transmit data. Bluetooth devices communicate with each other automatically and do not have to be turned on by the user. Bluetooth devices are manufacturer-enabled and do not require additional equipment to communicate with other Bluetooth devices.
122 123
Source: Introduction to Wireless LANs The Wireless LAN Alliance (WLANA), 1999. Source: HowStuffWorks.com (Link: http://electronics.howstuffworks.com/bluetooth3.htm) 124 A Bluetooth network with range less than 10 metres. 125 Source: HowStuffWorks.com (Link: http://electronics.howstuffworks.com/bluetooth3.htm) Page 120 Deutsche Bank AG
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Due to its frequency-hopping standard, Bluetooth devices are highly robust in environments with signal noise. It is comparatively cheap a Bluetooth chip costs between US$ 5-20.
The main disadvantage of Bluetooth is the low-range (less than 10 metres or about 30 feet). While Bluetooth and WLANs are normally complementary technologies, Bluetooth transmissions can interfere with 802.11b and 802.11g transmissions (as these are in the same 2.45GHz ISM band). Bluetooth also competes with PAN technology (which uses the human body, rather than radio waves, as the medium for data transmission) for data communication between devices close to the human body.
MAN MAN uses similar technology to LANs. It can be either private or public and range in area from a few buildings to a city. MANs support both data and voice, and may even be related to the local cable TV network. MANs are specified by the IEEE 802.6 standard.
A Metropolitan Area Network (MAN) is a bigger version of a LAN that can cover up to an entire city
Unlike LANs, MANs use two unidirectional cables (called buses). One end of each bus, called the head end, emits a constant stream of blank data packets (see figure below). Once a packet reaches the end of the bus, it is discarded. Upstream computers wishing to communicate with downstream computers on a bus replace the blank packet with a data-carrying one.
Figure 75: IEEE 802.6 MAN Architecture
Direction of flow on bus A
Bus A
Head end Direction of flow on bus B

802.6 MANs use the Distributed Queue Dual Bus (DQDB) standard. Under this standard, a computer wishing to communicate with another one must first determine whether the receiving computer is to the left or the right of the transmitting one. This determines the choice of buses for transmission. Then, the transmitting computer must send a request to all upstream computers on the bus126 so that they temporarily cease transmission (DQDB gives priority to downstream computers so that a computer near the head end does not monopolise the bus). Then it proceeds to place its data packets on the bus. DQDB systems can run up to 160km at speeds of 44.736Mbps (the speed of T3 lines)
Wireless MANs offer speeds up to 120Mbps.
The IEEE 802.16 standards cover broadband wireless MANs. These MANs operate in the 10-66 GHz licensed bands and will offer data speeds up to 120Mbps. These
This is done using the other bus. Hence, if a computer wants control of bus A, it uses bus B to send the request to all upstream computers of bus A.
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are primarily intended for small office / home office (SOHO) use as well as medium to large office applications.
WAN WANs contain a collection of hosts machines intended for running user programs. These hosts may be connected to different LANs. Hosts are connected together by a subnet (see figure below): Figure 76: WAN Architecture
A Wide Area Network (WAN) spans a large geographical area, often a country or continent.
Subnet
LAN Router
Host
The subnet has two components transmission lines and routers (specialised computers used to connect two or more transmission lines). The function of the transmission line is to carry data from one host to another. The router determines which transmission line a particular data transmission should be placed on so that it arrives at the correct destination host. In most subnets, routers that do not have a direct point-to-point connection can also use another router as an intermediary. These are called packet-switched subnets. WAN speeds depend on the speeds of the individual LANs composing the WAN as well as the properties of the routers. Examples of WANs include the US Department of Defense ARPANET, the National Science Foundations NSFNET and, of course, the Internet.
VPNs VPNs have the same security and encryption features as a private network, but exploit the scale economies and greater reach of public networks (such as the Internet).
A Virtual Private Network (VPN) is a private network that uses a public network to link remote sites.
There are two types of VPNs:

n
Remote-access: These are also called virtual private dial-up networks (VPDNs). Employees wishing to connect to the company LAN remotely are provided a dial-up connection to a Network Access Server (NAS), provided to the company by the ISP127, through which they connect to the LAN. Site-to-site: Multiple locations of a company or its associates are connected together using dedicated equipment and large-scale encryption over the Internet.
127
Providers of such services are also called Enterprise Service Providers (ESPs). Deutsche Bank AG
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The main characteristics of a VPN are:

n n n n n
Security Reliability Scalability Network management Policy management
VPNs use one or more of the following mechanisms to ensure security:

n
Firewalls: A firewall can be used to restrict the number and type of remote connections, as well as monitor the data flow between the company LAN and remote user. Encryption: Encryption methods are used that encode the data in a form that only the other computer can decode. IPSec: Internet Protocol Security Protocol (IPSec) is a protocol that provides improved encryption algorithms and authentication. AAA Server: AAA (authentication, authorisation and accounting) servers require remote users to identify themselves (using a login and password), adding an extra level of security.
Most site-to-site VPNs use a technique called tunneling to create a private network across the Internet. Essentially, tunneling encapsulates an (encrypted) data packet within another (non-encrypted) data packet. An analogy would be wrapping a gift under two layers of wrapping paper. The outer packet contains information that is recognisable for computers and routers on the Internet (and hence is treated like any other packet), while the inner packet is encrypted and cannot be decoded if intercepted. ISPs providing VPN services also usually bundle other services such as consulting, VoIP and e-commerce design.
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The Regulatory Environment

There are two major types of regulatory bodies: National and International Regulators Industry and Technology Regulators and Standardising Bodies
n n
Regulation is one of the key factors affecting business and technological developments in the telecom industry. There are two major types of regulatory bodies: National and International Regulatory Bodies commonly known as Telecom Regulators Industry and Technology Regulators and Standardising Bodies commonly known as Special Interest Groups (SIGs)
We scratch the surface of what regulation is about here.
Telecom Regulators
The telecom regulatory bodies are of two kinds:
n
International regulatory bodies128: These are non-government bodies and have a primary role of advising various national regulatory bodies. They provide guidelines for telecom policies across various member countries. National regulatory bodies: These are the government bodies prevailing in a geographical region to regulate activity in the telecom industry in that region129. For instance, Federal Communications Commission (FCC) regulates the activities of various players in the United States. Their roles and responsibilities vary with the country that they operate in.
International regulatory bodies are not aligned to a particular countrys government and hence have more of an advisory than policy-making role. Therefore, the national regulatory bodies are discussed in greater detail subsequently in this section. The details include the reasons behind existence of regulators and their functions. Some contentious regulatory issues are also discussed in greater detail.
Objectives The key objectives of national regulators are to strike a balance between encouraging competitiveness, consumer interests and their countrys interests. The national regulators suggest, formulate and implement telecom policies to address these objectives. The international regulators attempt to regulate the telecom policies formulated by their member countries.
National telecom regulators suggest, formulate and implement policies to balance competitiveness, consumer interests and their countrys interests. International regulators attempt to regulate the telecom policies formulated by their member countries.
These key objectives of national regulators are discussed in greater detail in the following sub-sections.
Ensuring competitiveness In most countries, the telecom industry is in the process of changing from a monopoly situation to one where competition is widespread. This change is deemed necessary to ensure that there are enough players to drive and take full advantage of the pace of technological changes. One of the primary responsibilities of the regulators is to manage this change.
128 129
Refer to glossary for a list of some key international regulators provided under regulators. There are very few countries that do not have a telecom regulator. Deutsche Bank AG
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Not only do the regulators encourage more players and more competition but they also materially influence consolidation activity that could make the market less competitive. Against this they must balance the incumbent operators need to earn a satisfactory return on its business to ensure that there is an incentive for it to invest in new technology and new service development. This can be a tough balancing act.
Ensuring better consumer services The telecom industry experiences rapid development of new technologies and services. However, service providers often avoid or delay investment in these new technologies or services because they may not believe that such investment would add to their ability to compete in the market. This is not necessarily in the larger interest of the telecom industry or the consumers. Therefore, regulators try to ensure that the providers work towards newer and better consumer services. For instance, regulators have been encouraging:
n
Wireless broadband services offered by 3G by ensuring that the operators invest in the infrastructure over and above the investments already made in licences allotted for 3G services. Regulators also ensure that the operators meet the deadlines for rollout of advanced services, offered by 3G, for consumers. Number portability to ensure that consumers are not deprived of better services because of the restriction of changing their phone number when they change to a different service provider. Alternative access technologies such as WLAN, DSL, cable modems, WLL etc
The regulators also ensure that national security is not breached in attempts to offer consumer telecom services. For this, licences are allotted so that national security is not endangered. The regulators also promote security and emergency communication services. For instance, there has been a push towards location based wireless emergency services (E-911) in the US.
Functions To achieve their objectives, country regulators perform the following functions:
n n n n
Distributing licences for service provision Determining rules for rollout of various types of services Regulating tariffs Determining interconnect rules Providing guidelines for sharing of revenues by service providers in case of usage of one anothers networks Others Numbering plans, dispute settlement, emergency services (E-911), number portability
The roles of regulators vary from merely advisory to final decision-making. Additionally, these roles may vary from regulator of one country to another. A comparison of some of the roles played by regulators in some countries is provided in the table below.
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Figure 77: Comparison of Roles of Regulators in Some Countries

Does the agency have responsibility for: France Germany Spain United Kingdom United States
Granting Licenses? Monitoring and enforcing compliance with regulations?
No.
Yes.
Yes, in most cases.
No.
Yes, but for broadcasting only.
Yes (including revocation Yes (including revocation Yes (including revocation Yes (including revocation Yes (revocation of of licences). of licences). of licences). of licences). licences has to be approved by government). No. Ministry130 approves Yes. tariffs. Yes (must approve standard offer of dominant operator). Yes (must approve standard offer of dominant operator). No. Ministry approves tariffs. Intervenes if parties fail to agree. Yes . Yes (but some tariffs are unregulated).
Approving Tariffs? Setting conditions for interconnection?
Yes controlled under Has issued detailed complex price cap regime interconnection rules (state-level regulators approve each agreement) Undertook studies to quantify size of USO
Administering Universal Service Follows detailed rules set Obligations (USOs)131? by decree to calculate and allocate the costs of USOs. Scope of USOs and choice of operators defined by law. Can designate operators. Follows rules set by law to calculate and allocate the costs of USOs. The government can define scope of USOs.
Designates operators and Determines scope of Follows broad rules set follows rules set by law USOs, designates by law to determine the or decree to calculate and operators, and calculates costs of USOs and their allocate the costs of and allocates the costs of allocation. Scope of USOs. Scope of USOs USOs. USOs set by federal state defined by law. board, set up by the federal regulator.
Source: World Bank compilation based on information provided by the five regulatory agencies, 2001
Some of the functions are described in greater depth in the following sub-sections. For each of the functions the following have been provided:
Licensing n What is licensing?
As discussed in the chapter on Telecom Services and Business Models, most132 service providers require a licence to operate. For fixed line services, the licences are provided for operations in a geographical region. For wireless services, the licences are for a set of airwaves (spectrum) in a particular geographical region.
It is usually the regulators responsibility to draw up the terms of the licence and to ensure that they are met.
Licences invariably contain a set of terms and conditions that must be met or the licence can be revoked. It is usually the regulators responsibility to draw up the terms of the licence and to ensure that they are met. These terms and conditions include (but are not limited to):
n n n n n
Period of validity of licence Applicable fees and royalty Frequency of any payments Manner of service provision133 Obligations to provide services to remote areas
In the case of wireless services, the operators need to obtain licences for operating in a particular frequency of radio airwaves in a particular region. The particular
Ministry refers to the government telecommunication authority, which is different from the regulators. USOs are discussed later in this chapter 132 Some service providers that operate in unlicensed spectrum may not require these licenses. For instance, WLAN service providers operate in unlicensed spectrum and hence do not need to obtain licenses. 133 For instance, wireless in local loop (WLL) players may not be permitted to offer value-added services such as SMS or roaming. Refer to glossary for further information on WLL, SMS and roaming.
131 130
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frequencies to be allotted to various operators are decided within the following constraints:
n
The spectrum for national defence or military communication services are kept separate The spectrum for one operator should not interfere with that of another Some technologies can operate in particular frequency ranges
n n
In case of fixed line services, the operators are provided licences to provide the fixed line services in a particular region. Similarly, there are also licences for providing services through various technologies e.g. WLL. The licences to be allotted are generally decided through:
n
Auction: The highest bidder wins the licence. The bidding for 3G licences has already gone down in legend as the driver of the telcos sectors collapse in 2000. Before that point the main user of licence auctions was the US wireless industry. There are numerous forms of auction which can have a material outcome on the eventual outcome interims of prices achieved and consequently the efficient allocation of capital. Beauty contest: Various operators file tenders and the most attractive tender overall wins the licence. The attractiveness of the tender is decided by various factors such as price offered, past experience, proposed service rollout plan, financial stability etc. Finland and Spain, for example, used this method to select operators to whom 3G licences were granted. Until the 3G auctions this was the principal method used within Europe for allocating licences. It remains the preferred method in most of Asia.
Regulating Tariffs In an ideally competitive market, prices do not need to be regulated because the market forces would determine the prices. However, telecoms markets have many components contributing to whether an individual player has what is perceived to be market power or market dominance. In markets where competition exists the regulator is charged with the job of trying to create a so-called level playing field which ensures competition can operate on a fair and equitable basis with the dominant or incumbent operators. The regulators have to resort to complex price control schemes to achieve this aim. In practice arguments about what represents a level playing field keeps lawyers very busy.
Such regulation of prices needs to be done to ensure fair competition and to protect consumer interests, i.e.:
n
In a monopoly situation, the tariffs need to be regulated to ensure that consumers are not over-charged for basic services. On the other hand, in a competitive situation, a new operator in the local market must be able to compete against the incumbent on an equal basis. That is, an incumbent with extensive network and subscriber base may charge very low prices for basic services (e.g. local calls) to make the entry of a new player infeasible. Therefore, there is a need to control the rates of the incumbent.
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Interconnection is the process by which the network of one operator is connected to that of another operator for the passage of voice and data traffic
Interconnect Rules Interconnection is the process by which the network of one operator is connected to that of another operator so that voice and data traffic can pass between them.
There are Interconnect Rules to govern:

n n
The amount that one network operator can charge another The amount that the service provider can pass to the consumer
In an ideally competitive market, the operators involved would reach mutually satisfactory interconnection agreements between themselves. Moreover, the demand-supply economics would determine the amount that they can charge the consumers. Such agreements are usually reached for interconnection between similar networks. These are known as roaming or peering agreements. The cost of roaming is generally passed on to the consumer using the device over a network outside its own service providers network. One of the major attractions of the internet was that it grew up using peering agreements which meant that operators of similar size simply agreed to transfer data between each other at no cost. This has been a significant factor in reducing the costs of running the internet. Unfortunately, such agreements are not easily reached in the case of different networks or where the scale of volume transfer is different. Regulators have to step in to resolve the situation. Interconnection involves resolving a wide range of issues that relate to technical, commercial and political matters. At the heart of the philosophy is the amount of political will behind the creation of a competitive market. All interconnection terms invariably must be based on some assessment of the operators underlying costs. After all, most capitalist governments stop short of forcing an incumbent operator to provide services at a loss. There are so many methods for arriving at the appropriate cost base, and the level of return over a defined period that two regulators looking at the same issue could easily arrive at a very wide range of answers. Typical accounting methodologies would range from operators being allowed a return based on historic cost accounts (HCA) to the opposite end of the spectrum such as LRIC (long run incremental cost). This allows operators to recover costs only on the basis that it is always operating the very latest technology and can only recover incremental costs incurred by the existence of the alternative operator. These two methods would deliver startlingly different results. Customers will eventually find themselves paying the costs of interconnection. The two main options are CPP (calling party pays) or RPP (receiving party pays). In fixed telecoms the person making the call pays for it. Mobile can present a few complications. And the reason is because the mobile number dialed does not give much information about how much the call will cost the sender. In the US and a few other markets the receiving party pays for all calls, whether outgoing or incoming. In Europe and Asia mobile users normally pay only for outgoing calls provided they are in their home market. But when roaming in other markets they will pay for the bulk of incoming call charges.
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Figure 78: Ways of Paying for Interconnection

Receiving party pays (RPP) Calling party pays (CPP)
Description
The receiver of a call contributes to the call of each call received. The caller pays the entire cost of the call wherever it originates from. The caller may have to pay a premium to terminate the call on a network using a technology different than that used by the callers service provider RPP was chosen by countries with un-metered135 calls on the fixed networks because RPP provided a simple transition from the billing systems of traditional fixed network. CPP was chosen by countries with metered call on fixed line networks as it was easy to implement.
Features134
Price differential in fixed-to-mobile and mobile-to-fixed call is Price differential in fixed-to-mobile and mobile-to-fixed call is low high. Therefore, numbering of phones is different for mobile or none. Therefore, there is no need to warn callers about phones to warn the callers about the charges. receiving calls from a particular type of number. So, phones Not recommended for countries with un-metered calls on fixed using different technologies have similar prefixes e.g. in the US. networks as it would lead to billing issues. May discourage use of mobile phones as people may decline to receive a call. May not be scalable to CPP at a later date due to similar numbers allotted to different types of phones in some countries. Examples USA, Canada Most common pricing regime. Dominant in Europe and in other markets where GSM standard is used e.g. India
Similar interconnection issues are also encountered for mobile networks with different technologies, e.g., calls from cellular network to WLL network and vice versa. The choice between CPP and RPP is made at a countrywide level by the regulator or by the government. This choice is largely influenced by the existing traditional systems e.g. the system of un-metered calls favours RPP. However, CPP is clearly emerging as the dominant scheme as it favours growth of mobile technologies. The facts136 in support of this argument are as follows:
n
Although RPP markets may outperform CPP markets in the early years of mobile communications, recent figures demonstrate that CPP countries have much higher subscriber growth than RPP countries RPP has been empirically shown to discourage mobile use. Subscribers in RPP countries are much more likely to turn their phone off, or refuse to answer calls, in order to avoid paying for them. Calls to mobile phones are increasing dramatically in CPP countries, where mobile users can receive calls free of charge on their home network.
The interconnect rules are regulated to:

n n
Guard consumer interest Ensure that the interconnection charges are consistent implementation does not lead to confusion among consumers (!) Ensure fair competition between various technologies The charges have to be implemented in such a manner that ensures that no particular technology is favoured due to exceptionally lower prices. For instance, if there is a high number of fixed line subscribers in a country and the charges and their
n n
For further information on Interconnection refer to: http://www.itu.int/osg/spu/ni/fmi/workshop/FMI_Briefing_Final1.doc 135 Un-metered calls mean that the number of calls made by customers using their connection is not measured. 136 For details on these facts please visit: http://www.itu.int/osg/spu/ni/fmi/workshop/FMI_Briefing_Final1.doc Deutsche Bank AG Page 129
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for fixed-to-mobile calls are much lower than those for mobile-to-fixed calls, then this would hamper the growth of mobile technology. It is worth making the point that interconnection is more than just about the price of moving a call from one network to another. It involves issues like the mechanics of how the interconnection is actually achieved, i.e. how the operators physically connect their systems and the technical stipulations governing this. There are frequently disputes about the cost of providing heating and lighting services in the exchanges and a host of minutiae. Perhaps the biggest complaint heard by new operators is the extensive delays which the incumbent operator can create in the process of interconnecting systems. These all provide the regulator with much work. In passing, we would just mention two buzzwords: unbundled local loop (ULL) and UNE-P. In their quest to create competition regulators are keen to give unfettered access to the local loop. It is now possible for operators to rent a local loop from the incumbent operator such that they can connect their own equipment at each end and provide services such as DSL. The most popular variant is known as unbundled local loop. However there are variants of this, such as bit-stream access that leave the incumbent with the loop but give an alternative operator the right to use part of the channel for its own service provision. In the US the interconnection regime goes under the generic name of UNE-P (unbundled network elements Platform) or UNEL (line). This system effectively identifies all the elements in a telephone network and allocates a specific cost to each based on the volume of usage per element. Essentially most interconnect models are based on broadly similar principles.
Others Apart from the major functions mentioned above the regulatory authorities also have responsibility for:
n
Implementing auxiliary services, such as number portability, or emergency services Numbering plans Unified licences Emergency services Universal service obligations Spectrum and infrastructure sharing Dispute settlement
n n n n n n
Number Portability137 In some regions, subscribers to telephone services are not allowed to retain their phone numbers when they switch from one service provider to another. This has been identified as a major issue slowing the progress of competitors. The ability to allow retention of numbers on switching service providers is known as Number Portability. Many markets have now implemented fixed-to-fixed portability to ensure customers are not prevented from switching operators by what is seen as an artificial barrier.
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In some countries, portability of fixed line phone numbers to mobile phone numbers and vice versa is also of interest. In November 2003 the US implemented widespread portability between wireless phones and also between wireless and wireline phones, subject to certain conditions. This is a more contentious type of portability because of the confusion that would be potentially created by tarrifing and the different rates for calling fixed and mobile phones. In the US the problem is minimised by the fact that the regime is RPP so whatever happens the recipient pays for the call. But it would not be so easily implemented in a RPP system.
Unified Licences Most countries offer licences to operators for providing services using a particular technology, e.g., for providing wireless services based on GSM technology. However, fixed line and wireless services have started converging. Additionally, telephony and broadcasting are beginning to enter into each others markets.
As the various technologies compete and converge, there is an increasing need for common licences, also known as Unified Licences, for providing services. These licences are technology-neutral, i.e. they allow provision of services in a region irrespective of the technology the operator may decide to use. Most countries are already moving towards unified licences and the European Union has given direction to member countries that they must move to the unified-licensing regime. Under a unified licence, the licensee is assigned a spectrum allocation as well as a geographical region to operate in. Arguments for:
n
Consumer interest: Consumers would be able to get a bouquet of services. It would also be easier for them to deal with unified bills from fewer providers. Enhanced competition: Although some smaller players may be eliminated, the larger players will compete on a more level field. This is because, they would be able to provide various kinds of services without worrying about the entry barriers related to acquiring licences for each technology.
Arguments against:
n
Unified licensing may eliminate small players in the markets
Separate licences enable a large number of small players to enter the various markets. Some of the markets such as those for ISPs (Internet service providers) allow the presence of many players. In contrast, other service markets requiring large investments in frequency spectrum or the infrastructure rule out entry of many smaller players. After introduction of unified licences, small players may not be able to compete with other players with deep pockets because these licences are likely to be expensive.
n n
Modification in existing licensing agreements The licence agreements already existing need to be modified. This could lead to fresh debates and legal issues. Competition from disruptive technologies such as telephony over Internet (VoIP) Telephony over the Internet is a technology that would compete with basic service because it may be able to provide this service at lower costs. In some countries telephony over Internet is not covered under the licensing regime. Therefore if a government does allow a unified licence for telephony, it must consider telephony over the Internet under it.
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Emergency Services The regulators make it mandatory for service providers to offer some basic services to help consumers in emergency situations.
It is easier to provide emergency services for fixed line subscribers as their location is fixed. However, for mobile subscribers these services have to be enhanced to make them location specific.
It is easier to provide such services for fixed line subscribers as their location is fixed. However, in case of mobile subscribers, these services have to be enhanced to make them location specific. That is, the location of callers from wireless devices needs to be determined. Subsequently, appropriate help needs to be provided at that location.
Universal Service Obligations A Universal Service Obligation (USO), as the name suggests, is the obligation placed on one or more service providers to ensure that basic telephone services are available to the whole community. To the best extent possible, these services should be provided:
n n n
A Universal Service Obligation (USO), as the name suggests, is the obligation placed on one or more service providers to ensure that basic telephone services are available to the whole community
At the same quality With the same availability At the same cost
A USO usually includes the provision of a service to:

n n n n
The handicapped The elderly Remote locations To promote service provision in rural areas, the regulators or the government provide incentives to operators. These incentives include, lower licence costs, lower percentage of revenue to be shared with the government etc.
USO also includes the provision of emergency services. In some countries, one operator undertakes the USO obligation. In such cases, other operators contribute to the cost according to arrangements agreed or mandated by the regulator.
Spectrum and Infrastructure Sharing in Wireless Services In the case of wireless services, both the infrastructure (such as base stations) and the spectrum could be shared. Some operators lease the spectrum to offer services under their brand and have billing relationships with the customers. These are known as Mobile Virtual Network Operators (MVNOs). This is a relatively new concept and there is a lot of uncertainty around the reliability of their business model. Regulators in some countries have been allowing MVNOs to operate because their entry is likely to fuel competition and also push newer services such as 3G.
Regulatory Bodies
Regulatory bodies are of two major types:
n n
International regulators National regulators
These are outlined in the following sections.
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International Regulators The major role of international regulators is:

n n n
Ensure interoperability across countries Settle telecommunication-related disputes among various countries Promote development in telecommunication
Some key international regulatory bodies are shown in the table below.
Figure 79: International Regulators
Region Name of regulator Website
Africa Caribbean Commonwealth Countries Europe International

ATU African Telecom Union CANTO Caribbean Association of National Telecom Organisations CTO Commonwealth Telecommunications Organisation
http://www.atu-uat.org/ http://www.canto.org/ http://www.cto.int/
ECTA European Competitive Telecommunications Association http://www.ectaportal.com/ ITU International Telecommunication Union http://www.itu.int
National Regulators Each country has a government regulatory body that performs the functions mentioned in the preceding sections.
A list of regulators in some key countries (considered important for this report) is provided in the table below138:
138
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Figure 80: List of Regulators in Major Countries

Country name of regulator Website
Australia Austria Argentina Belgium Brazil Canada Caribbean Chile China Denmark Finland France Germany Greece Hong Kong India Ireland Italy Japan Mexico Netherlands Norway Philippines Portugal Singapore South Africa South Korea Spain Sweden Switzerland United Kingdom USA Taiwan
Australian Communications Authority (ACA) Telekom-Control Secretaria de Comunicaciones Belgian Institute of Postal services and Telecommunications ANATEL Canadian Radio Television and Telecommunications Commission Eastern Caribbean Telecommunications Authority (ECTEL) Subsecretaria de Telecommunicacaiones (SUBTEL) Ministry of Information Industry (MII) Telestyrelsen National Telecom Agency Ministry of Transport and Communications Autorit de Rgulation des Tlcommunications (ART) Telecoms and Postal Regulator EETT (National Telecommunications and Post Commission) Office of the Telecommunications Authority (OFTA) Telecom Regulatory Authority of India (TRAI) Office of the Director of Telecommunications Regulation (ODTR)
http://www.aca.gov.au http://www.tkc.at/web.nsf/englisch/startseite? Opendocument http://www.secom.gov.ar/ http://www.ibpt.be/bipt_E.htm http://www.anatel.gov.br http://www.crtc.gc.ca/eng/welcome.htm http://www.ectel.info http://www.subtel.cl http://www.mii.gov.cn/ http://www.tst.dk/ http://www.mintc.fi/ http://www.art-telecom.fr/eng/index.htm http://www.regtp.de/en/index.html http://www.eett.gr/eng_pages/index2.htm http://www.ofta.gov.hk/frameset/home_index_ eng.html http://www.trai.gov.in/ http://www.odtr.ie/
Italian Communications Authority (Autorit per http://www.agcom.it/eng/eng_intro.htm le Garanzie nelle Comunicazioni) Ministry of Public Management, Home Affairs, http://www.soumu.go.jp/english/index.html Posts and Telecommunications Comisin Federal de Telecommunications OPTA Norwegian Post and Telecom Authority National Telecommunications Commission (NTC) Autoridade Nacional de Comunicaes (ANACOM) http://www.cft.gob.mx/ http://www.opta.nl/ http://www.npt.no/ http://www.ntc.gov.ph/ http://www.icp.pt/
Infocomm Development Authority of Singapore http://www.ida.gov.sg/ Independent Communications Authority of South Africa Ministry of Information and Communication Comision del Mercado de las Telecommunications (CMT) Post-och Telestyrelsen (PTS) Federal Office for Communications (OFCOM/BAKOM) The Office of Telecommunications (Oftel) Federal Communications Commission (FCC) http://www.icasa.org.za/ http://www.mic.go.kr/index.jsp http://www.cmt.es/cmt/index.htm http://www.pts.se/?Lang=EN&Page= http://www.bakom.ch/en/index.html? http://www.oftel.gov.uk/ http://www.fcc.gov/
The Directorate General of Telecommunications http://www.dgt.gov.tw/english/flash/index.shtm l
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Technology - Special Interest Groups (SIGs)

A SIG is a group of individuals or organisations having a narrow field of interest in a technical area
In addition to national and international regulators, the telecom industry also regulates itself through industry associations and technical Special Interest Groups (SIGs). These groups often comprise industry players such as telecom operators, equipment manufacturers, content developers etc; as well as researchers and universities. Some prominent SIGs in the telecom industry are the Institute of Electrical and Electronics Engineers (IEEE), the GSM Association (GSMA) and the DSL Forum. This section deals with the role and functions of a telecom SIG. Some prominent SIGs are also discussed in detail.
Functions The four main functions of a SIG are to:
n n n n
Develop standards Promote the technology Create a common forum for academia and industry Define evolution paths for new technologies
The primary function of SIGs is to develop standards and ensure uniformity of implementation
Develop Standards The primary function of the SIGs is to develop standards and ensure uniformity of implementation. For instance, the IEEE develops standards for use in computer networks such as LANs and MANs. The GSMA develops standards for equipment and networks based on the GSM technology for wireless communications.
SIGs often develop standards by forming working committees or working groups to tackle each aspect of the standard. E.g. The DSL Forum has technical working groups for Architecture & Transport, Operations & Network Management, and Testing & Interoperability. While the working groups develop the technical specifications for the standard, the SIG will also have committees or working groups aimed at fostering greater cooperation between members. In some cases, members may be bound to follow the specifications developed by the SIG. In most cases, however, members develop solutions that adhere to the SIG standard but have additional features that make the particular solution more attractive than other similar ones in the marketplace.
Promote the Technology The most common means by which SIGs promote their technology are:
n
Another primary function of SIGs is to increase public awareness and acceptance of the technology
Conducting Trade Shows and Road Shows: These are public exhibitions of the technology that serve two purposes increase public awareness of the technology and improve business-networking relationships within the industry. E.g. The DSL Forum conducts annual trade shows worldwide to showcase DSL technology. Publishing Journals and Articles: SIGs often create public awareness of their technology through articles and publications in prominent industry journals, trade magazines etc. SIGs also release white papers and tutorials on their websites to promote the technology. Compiling a Central Repository of Reference Material: SIG websites also act as a one-stop directory of reference material and articles about the technology. These might include tutorials, white papers, research papers, statistics etc.
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Lobbying with Government Regulators: SIGs also play an important role in lobbying with Government regulators for new legislation that enables faster technology uptake, or removal of old legislation that hinders the same.
Standardising Bodies In this section, some prominent SIGs in the telecom industry are profiled, viz.:
n n n n
IEEE GSMA CDG DSL Forum
The IEEE is a leading SIG in computer engineering, electronics and telecommunications
IEEE The Institute of Electrical and Electronics Engineers (IEEE) is a non-profit, technical association. It has over 380,000 individual members worldwide. It is a leading authority on computer engineering, electronics and telecom. The IEEE produces almost 30% of the published literature in these fields.
The IEEE creates and maintains industrial and technological standards through its IEEE Standards Association (IEEE-SA). In addition to researchers and interested individuals, the IEEE-SA also has a corporate membership programme. Hence, both industry players and research organisations collaborate to develop and approve new standards. The IEEE-SA has several working groups and committees that develop standards in technical areas ranging from aerospace electronics to voting systems engineering. It has over 877 active standards. From the telecom perspective, the most important working committee is the IEEE 802 LAN / MAN Standards Committee. The Committee develops Local Area Network (LAN) and Metropolitan Area Network (MAN) standards including Ethernet, Token Ring and Wireless LAN. Each area has an individual working group focusing on it. As standards become obsolete, working groups may be rendered inactive. Similarly, new working groups may be created for the development of a new standard in the same area.
GSMA The GSM Association (GSMA) was founded in 1987 and has over 570 GSM operators as its members. The GSMA covers the entire family of GSM technologies including GSM, GPRS, EDGE and W-CDMA.
The GSMA is a global trade association of GSM mobile operators
The GSMA operates primarily through working groups. These are groups of operators and suppliers worldwide that specialise in the practical aspects of providing wireless services. Some working groups also look at the needs of particular regions or the impact of new technologies. The main technical working groups of the GSMA are listed below:
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Figure 81: Main Technical Working Groups of GSMA

Working Group Function
Billing and Accounting Roaming Group (BARG)
Focuses on the administrative, financial and procedural issues involved in providing global GSM roaming
International Expert Roaming Group Focuses on technical, operational and performance issues supporting global GSM (IREG) roaming Transferred Account Data Interchange Group (TADIG) Security Group (SG) Defines data interchange procedures between operators and base stations, including billing Maintains and develops GSMA security algorithms and protocols139, technical security aspects of devices, and recommends operator-side solutions to combat fraud Develops basic GSM services and provides a roadmap for operators to realise marketing objectives Identifies and analyses techniques used to perpetuate fraud in GSM networks and recommends practical, cost-effective solutions Deals with GSM Mobile Station (MS) or base station issues Provides the GSMA with information and advice regarding the EMC140 and biological effects of GSM equipment.
Services Expert Rapporteur Group (SERG) Fraud Forum (FF) Terminal Working Group (TWG) Environmental Working Group (EWG)
Source: GSMA Website
Through its website (www.gsmworld.com), the GSMA provides a publicly accessible library of technical and market information about GSM networks worldwide. In addition, the GSMA organises several conferences and exhibitions worldwide aimed at showcasing GSM technology. In recent times, the GSMA has also played a role in lobbying for adoption of GSM as the preferred mobile technology in several emerging markets. For instance, in recently liberated Iraq, the GSMA has lobbied the occupying US Government for adoption of GSM as the cellular standard.
CDG The CDMA Development Group (CDG) is an international consortium of CDMA service providers and manufacturers. It focuses on increasing the adoption of CDMA wireless systems worldwide, as well as developing a roadmap for the evolution of CDMA systems and technology. The CDG covers the cdmaOne and CDMA2000 families of technology.
The CDG is a consortium of CDMA operators and equipment manufacturers worldwide
CDMA standard development is managed by CDGs Technical Teams. Team activities include specifications development, contributions to other standards committees and the development of CDG Reference Documents141. The main technical teams of the CDG are listed in the table below:
Refer to glossary for further information on algorithm and protocol. Electromagnetic Compatibility (EMC) standards are environmental standards regulating the amount of radiation emitted by electrical and electronics equipment. These standards were developed by the European Union (EU). 141 These are technical reference documents dealing with CDMA technical specifications. They are available for purchase from the CDG website.
140
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Figure 82: Technical Teams of the CDMA Development Group

Technical Team Function
Evolution Team - Manufacturers Evolution Team - Operators International Roaming
Defines standards for CDMA evolution from the manufacturer perspective Defines standards for CDMA evolution from the operator perspective Develops open standards and interfaces for global CDMA roaming as well as prepare documentation for operators intending to deploy roaming on their networks Promotes awareness and openness in CDMA standards and generates specifications for interoperability of various CDMA technologies Proposes IP-based standards for handsets Develops specifications for MMS services in CDMA-based 3G networks Develops verification and testing procedures to check interoperability of CDMA technologies
Interoperability Specification (IOS)
IP142-based OTA143 (IOTA) Device Management MMS144 Team System Test

Source: CDG Website
The CDG website (www.cdg.com) contains a repository of technical and market information about CDMA technology, subscriber-base, evolution etc. The CDG also attempts to popularise CDMA technology through public seminars, symposiums, trade shows etc. In addition, the CDG also lobbies various government and regulatory bodies for legislation favorable to CDMA network growth. For instance, the CDG lobbied for full mobility services in the 1.9GHz spectrum (used by CDMA technology) in Brazil in April 2003.
DSL Forum DSL Forum (DSLF) members include telecom, equipment, computing, networking and service provider companies. The DSLF covers all xDSL technologies including ASDL and SHDSL.
The DSL Forum is a consortium of nearly 200 leading DSL industry players
DSLF members participate in working groups, both technical and marketing, to create common protocols, processes and best practice recommendations for the industry. The main working groups of the DSLF are listed in the table below.
Figure 83: Main Working Groups of the DSL Forum
Group Name Technical Groups Function
Architecture & Transport Autoconfiguration Operations & Network Management Testing & Interoperability
Marketing Groups
Coordinates all architecture and transport related technical work in the DSLF Develops simple Internet access solutions and frameworks for DSL Provides recommendations for operations and network management for ADSL network providers Develops procedures and standards for cross-vendor DSL interoperability
Strategic Communications Deployment Council
Develops communications plans that provide direction to the other Marketing working groups on initiative priorities Promotes public awareness of the DSL industry and also provides market feedback to members
Marketing Interoperability and Qualification Builds public awareness of interoperability efforts Summit and Best Practices Produce Summit Agenda, retain experts in the field to speak, and facilitate a Best Practices interactive session for member knowledge enrichment SHDSL
Source: DSLF Website
Builds awareness of SHDSL capabilities
142 143
Refer to glossary for further information on Internet Protocol. Over The Air refers to the medium (radio waves) used for CDMA or some other wireless technologies. 144 Refer to glossary for further information on Multimedia Messaging. Page 138 Deutsche Bank AG
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The DSLF defines the specifications for xDSL broadband technologies, as well as best practices and recommendations for service providers intending to deploy xDSL technology. These specifications are published as technical reports that are available on the DSLF website (www.dslforum.org), along with DSL market statistics and information. The DSL forum also conducts public seminars and trade shows to promote DSL technology adoption.
Others In addition to the SIGs described in previous sections, the telecom industry has several other SIGs and industry associations (both regional and international) that promote specific communications technologies:
n
Bluetooth SIG: This is a trade association of telecom companies that jointly develop the Bluetooth standard for short-range wireless communication between devices. The Bluetooth SIG also promotes awareness of Bluetooth (for instance, by providing free Bluetooth licences to educational and research institutions). NCTA: The National Cable and Telecommunications Association is the trade association of US cable service providers (including Cable Modems). The NCTA promotes awareness of cable modems through trade shows and lobbies for favorable legislation.
Technology Debates
Almost all telecom technologies have some companies or group of companies promoting it for their interests. Some such Special Interest Groups (SIGs) have already been discussed in the preceding section. These technologies are not only affected by the promotion but also by the regulatory and technologically dynamic environment in which they operate. This inevitably leads to a competition among the technologies providing similar services. Some such competing technologies are:
n n n
DSL Vs Cable for high speed fixed line internet access CDMA Vs GSM technologies for mobile networking WLAN Vs 3G for wireless broadband services
The debates surrounding these technologies are expanded on in the following subsections.
DSL Vs Cable The need for high-speed always-on145 Internet has grown over the past couple of decades. DSL and Cable are the primary modes of such access. DSL is provided via the traditional fixed phone line, while Cable Internet access is primarily provided over the cable carrying the TV signal. Both these technologies have their advantages and disadvantages as mentioned below. Arguments Speed, cost, security etc. are the major parameters that affect the decision of subscribers regarding their preferred Internet access technology. We have avoided discussing cost in the table because this will vary by market and ultimately the total package to the customer will be broadly similar if there is to be effective competition.
145
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Figure 84: Comparison of DSL and Cable

Attribute dsl cable
Speed
384kbps download / 128kbps upload to 1.5Mbps download / 384kbps upload
2Mbps download / 300kbps upload (Shared speed - lower if more users)
Speeds decline as distance from provider increases. However, it Speeds decline as number of users connected increase. is unaffected by number of users connected However, speeds are unaffected by distance from the provider Requirements The coverage area has to be within 18,000 feet (5,460 metres) of the central office146 Depends on availability in the local area. A local cable TV provider may decide not to provide internet access to the subscribers of its cable TV services
An existing phone line at the customers premises is An existing cable TV connection from the local cable Internet recommended. Otherwise, the service may be more expensive. provider is recommended. Otherwise, the set up costs may be higher. Security DSL keeps the computer constantly connected to the Internet. This may result in a static (unchanging) IP address - a unique number that identifies the computer on the Internet. Traditional dial-up services randomly assign a new IP address for every log in, so it is unlikely that someone can find a computer at the same IP address twice. With an always-on Internet connection like DSL, a computer is vulnerable to hackers who can gain access to the computer. To avoid these issues many DSL providers assign a dynamic (constantly changing) IP address on request. For additional security, some providers include personal firewall software as part of the deal.
Source: CNET147, Get Broadband Cable and DSL
Cable connection is shared with the people in the neighborhood. Therefore, it is easy for a hacker to hack a computer in the neighborhood. However, a user can disable such visibility of computer on the local network.
Like DSL, cable is also always-on connection with a static IP address, which increases vulnerability to hackers.
The debate about the better technology for high-speed Internet access has been raging for quite some time. However in practice both technologies are often not present in the same local area. Therefore, the consumer is often left with no choice. Cable is definitely maintaining a lead in the US market where DSL and cable are head to head but the view continues to be that DSL will eventually close the gap.
CDMA Vs GSM The GSM and CDMA families are competing technologies in the 2G, 2.5G and 3G wireless communication market space.
GSM technology is open source and promoted by the consortium for GSM operators (GSMA), whereas CDMA is a proprietary technology of Qualcomm. Currently, about 70% of the worlds cellular networks use GSM technology. This gives GSM a marked advantage in terms of potential economies of scale.
ADSL is a distance sensitive technology. As the connection length increases, the signal quality and connection speed diminish. ADSL cannot be offered over networks having loading coils, which are used to boost voice signals in fixed line telephone networks when the connection length increases. 147 'Which Broadband Connection Is Right for You?' by CNET, Sep 2000 (Link: http://www.cnet.com/internet/0-3762-7-2643119.html) Page 140 Deutsche Bank AG
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Figure 85: GSM Versus CDMA

Attributes GSM CDMA
Data Speeds Handoff Size of cell scalability quality of service Security Power Requirements Roaming Type of Multiplexing Carrier Frequencies Available
9.6kbps 2Mbps
9.6kbps 5.5Mbps
Hard (connection with one cell is broken before next connection Soft (simultaneous connection with multiple base stations) is made) 30km 50km
The capacity of the system is rigid, that is, GSM system cannot The capacity of the system is not rigid but the quality of the add more than a fixed number of subscribers in a cell. system deteriorates with the addition of more customers. Inferior voice quality as compared to CDMA. The signal transmitted is not coded. It is vulnerable to hacking. It has higher power requirements than CDMA. It is available in a large number of countries therefore provides international roaming. TDMA & FDMA 900MHz, 1800MHz Superior voice quality as it works on a single frequency. Also, it supports soft-hand-off, which prevent breaks in voice signal. Provides high security as the data transmitted over the medium is coded. It has lower power requirements than GSM. It is not available in large number of countries therefore provides limited international roaming. CDMA 1.23MHz or 3.69MHz
In the present market scenario, GSM is dominant in Europe and Asia, whereas CDMA dominates in North and Latin America. However there are pockets of GSM in North America and pockets of CDMA in Asia. There are two broad options for 3G, these being: WCDMA - Supported by the GSM Association. CDMA 3XMC - Proprietary technology of Qualcomm. Both these options are CDMA based, but they are not similar in terms of operation. WCDMA uses 5MHz frequency to transmit signals, whereas CDMA 3XMC carries signal on three channel frequencies of 1.25MHz. Moreover, GSM being more prominent worldwide should lead to WCDMA having higher long term penetration. In addition, the CDMA2000 3XMC is upgradeable only on CDMA IS-95B based systems whereas WCDMA is upgradeable from both CDMA IS-95B and EDGE / GPRS based systems. Existence of hybrid networks based on a mix of 2.5G and 3G technologies is also possible. Indeed given the slow take up of data usage it appears highly likely that 2, 2.5 and 3G platforms will co-exist for most of this decade in many networks. Since the 3G technologies provide higher network capacities, deploying them in high population density areas will be viable for operators. 2.5G technologies such as GPRS, EDGE etc. can be deployed in low population density areas. Benefit of such model for operators would include lower network equipment costs.
WLAN Vs 3G Most workplaces today offer wired LAN speeds of at least 10Mbps, with 100Mbps or more becoming increasingly popular. This is an order of magnitude higher than those offered by 3G Networks (2-3Mbps148). With speeds comparable to that of wired LANs, WLANs have emerged as the most natural solution to this problem149 for business travellers.
While technological advances have led to a much higher bandwidth for 3G networks than 2G or 2.5G, this might still not be sufficient for business travellers
These are best-case speeds. In reality, congestion on the networks may force actual speeds to be much lower. 149 Refer to Chapter 4 on 'Communication Networks' for a description of WLANs. 3G technologies are described in depth in Chapter 3 on Communication Media. Deutsche Bank AG Page 141
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This has led to a debate over whether WLANs pose a threat to cellular networkbased data services, especially for business use.
Issues A comparison of the two technologies on various parameters is provided below: Figure 86: Comparison of WLANs and 3G
Parameter WLANs 3G
Data Speeds Cost to customer Range Penetration of Solid Obstacles Market Penetration Availability Spectrum Security Interference
1-54Mbps Cheaper than 3G150 Up to 250 feet Cannot penetrate buildings Becoming extremely popular with business travelers and universities worldwide
Up to 2Mbps More expensive than WLANs Nation-wide coverage Can penetrate most buildings and solid obstacles. May not penetrate basements and underground structures Has been rolled out in South-East Asia and Europe. Popular in Japan and Korea
Available at hotspots. E.g. Hotels, universities, Starbucks coffee Available nation-wide where operators have rolled out 3G houses etc. It can also be deployed in large enterprises. networks Operates in the unlicensed 2.4GHz and 5GHz bands Suffers from security flaws involving encryption Operates in the licensed 800-960MHz, 1.7-2GHz and 2.5-2.7GHz bands Comparatively more secure than WLANs
The unlicensed 2.4GHz band is vulnerable to interference from Few interference issues devices such as cordless phones and microwave ovens, as well as Bluetooth devices. Low cost. Setting up a WLAN access point only costs about USD 1000151. High cost.
Cost to operator
Source: Deutsche Bank, commNOW152
Conclusion Although WLANs pose a threat to data service revenues of 3G operators, they are expected to complement (rather than compete with) 3G data services. While 3G networks provide universal coverage, the limited range of WLANs reduces their scope of use. The most common access devices for 3G networks are mobile phones and PDAs, while the most common access devices for WLANs are laptops and PCs fitted with WLAN cards. Customers use WLANs and 3G in different areas and on different devices (usually for different applications). In practice, therefore, WLANs and 3G are not expected to compete head on, although there will clearly be some areas of overlap.
Some operators are exploring hybrid solutions that offer WLAN speeds at select hotspots and regular 3G services elsewhere including allowing roaming between WLANs and 3G networks153. A SWOT analysis of such hybrid solutions is presented in the table below:
Source: Is WLAN a threat to 3G? eWirelessNews Press Release, October 30, 2002 Source: Is WLAN a threat to 3G? eWirelessNews Press Release, October 30, 2002 152 Source: Wireless LANs: Global Trends in the Workplace and Public Domain, February 2002 (Link: http://www.commnow.com/NL_DownLRWL.asp) 153 Source: T-Mobile and Lucent test 3G/WLAN roaming, ComputerWeekly.com, January 22, 2003 (Link: http://www.computerweekly.com/Article118837.htm)
151
150
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Figure 87: SWOT Analysis of WLAN-3G Hybrid Solutions from an Operators Perspective
Strengths Weaknesses
WLAN model plays to key strengths of Operator, i.e. need to have Network infrastructure and operating costs. effective service launch, authentication, reliability, competitive, ease Potentially confusing strategy, i.e. should of use, etc. customer perceive WLAN as a tactical solution prior to the arrival of full 3G services? Large base of existing customers; has network and billing relationship with customer. Customer segment is illdefined. Fully integrated model, opportunity for cross and upsell of services to WLAN Customer base and offer unified billing of services to customer. Can retain maximum percentage of revenue if supporting fully integrated (i.e. endtoend) model. Wellplaced to acquire prime sites.
Opportunities Threats
Potential new channel for services. Provides early 3G-like services for customers, which operators should define. Provision of better personalisation / profiling, in particular for high value customers.
Licence exemption and low barrier to entry may undermine 3G investments. Potential cannibalisation of 3G investments, i.e. competitiveness of WLAN services could act to devalue future 3G services.
The success of these hybrid solutions depend on the development of handsets / laptops that are capable of switching between WLAN and 3G modes. Also, the absence of high-quality VoIP applications for WLANs limits their use for voice applications (which are expected to continue as the major application for 3G networks).
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Glossary
3G (Third Generation) The collective name used to describe mobile systems able to support a wide range of Mobile Internet services, operating with greater bandwidth. 3G also goes by the complicated monikers, IMT-2000, and UMTS (for Improved Mobile Telephone Service 2000, and Universal Mobile Telecommunications System respectively). Includes WCDMA, CDMA2000 1XEV, CDMA2000 1XTEME, LAS CDMA etc.
For further details, refer the Wireless Media section of chapter 3 (Communication Media).
AC Alternating current (AC) occurs when charge carriers in a conductor or semiconductor periodically reverse their direction of movement. Hence, the current changes periodically from positive to negative and vice-versa. Attenuation Attenuation is a term that refers to any reduction in the strength of a signal. Attenuation occurs with any type of signal, whether digital or analogue. Sometimes called loss, attenuation is a natural consequence of signal transmission over long distances. The extent of attenuation is usually expressed in units called decibels (dBs).
In conventional and fibre optic cables, attenuation is specified in terms of the number of decibels per foot, per 1,000 feet, per kilometre, or per mile. The less the attenuation per unit distance, the more efficient the cable. When it is necessary to transmit signals over long distances via cable, one or more repeaters can be inserted along the length of the cable. The repeaters boost the signal strength to overcome attenuation. This greatly increases the maximum attainable range of communication.
Bandwidth Bandwidth represents the amount of data that can be transmitted in a fixed amount of time. For digital devices, the bandwidth is usually expressed in bits per second (bps) or bytes per second. For analogue devices, the bandwidth is expressed in cycles per second, or Hertz (Hz).
The available bandwidth in a packet switched network is like a road. Individual cars (packets) can drive down the road, and there is no imposed limit to how many of them can try to do so at the same time. But as the density of cars exceeds the roads capacity, the road becomes congested, collisions may occur, and packets are lost. The available bandwidth in an optical network is more like a train service. Trains are scheduled to leave at regular intervals, and anyone wishing to travel (send data) must book a seat (wavelength or time slot) on a train. Once the seat is booked, travel is completely reliable and there is no possibility of congestion.
Base Station The central radio transmitter/receiver that maintains communications with mobile radiotelephone sets within a given range (typically a cell site). Basic Rate Interface See also BRI
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Bearer Channels See also B-Channels B-Channels Bearer Channels (B-channels) are 64Kbps channels on ISDN connections used for data/voice transmissions. Refer the section on Wired Media in Communication Media for more details.
See also: ISDN, D-Channels

B-ISDN Broadband ISDN (B-ISDN) is an ISDN design that works on optic fibre networks and is primarily intended for broadband applications. Refer the section on Wired Media in Communication Media for more details.
See also: ISDN, N-ISDN

BRI The Basic Rate Interface (BRI) is an ISDN interface with limited bandwidth (160Kbps) intended for home use. Refer the section on Wired Media in Communication Media for more details.
See also: ISDN, PRI

Broadband Broadband refers to telecommunication in which a wide band of frequencies is available to transmit information. Because a wide band of frequencies is available, information can be multiplexed and sent on many different frequencies or channels within the band concurrently, allowing more information to be transmitted in a given amount of time (in the same way as more lanes on a highway allow more cars to travel on it at the same time).
See also: Narrowband

Broadband ISDN See B-ISDN Cable Modem Cable Modems allow cable TV (CATV) users to access the Internet through their local cable operator. Refer to the section on Wired Media in Communication Media for more details.
Se also: Dial-up Connection, DSL

Cable Modem Termination System See CMTS Carrier Systems See Multiplexing Cell-ID Cell-ID is a network-based solution to determine the position of a cellular device user. In a network-based solution, the network computes the position of the user. No hardware or software computation takes place in the end-device. These techniques thus, work with legacy phones. Cell-ID technique basically determines
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the location according to the strongest base station signal the end-device receives and thus the approximate position of the user. The accuracy of this technique depends on how closely the cells are located.
CDMA A technology for digital transmission of radio signals between, for example, a mobile telephone and a radio base station. In CDMA, a frequency is divided using codes, rather than in time or through frequency separation. Implemented in 800 and 1900 MHz systems around the world. Refer the section on Wireless Media in Communication Media for further details. CDMA One Also written as cdmaOne, it refers to the original ITU IS-95 (CDMA) wireless interface protocol that was first standardized in 1993. It is considered a secondgeneration (2G) mobile wireless technology. Refer the section on Communication Systems in Communication Networks for further details.
See also: CDMA

CDMA2000 CDMA2000, also known as IMT-CDMA Multi-Carrier, is a code-division multiple access (CDMA) version of the IMT-2000 standard developed by the International Telecommunication Union (ITU). The CDMA2000 standard is third-generation mobile wireless technology. CDMA2000 can support mobile data communications at speeds ranging from 144kbps to 2Mbps. Refer the section on Communication Systems in Communication Networks for further details.
See also CDMA

Cellular In cellular mobile service the coverage area is divided into adjacent cells. For further details, refer the section on Communication Systems in Communication Networks. Channel In telecommunications in general, a channel is a separate path through which signals can flow. In the public switched telephone network (PSTN), a channel is one of multiple transmission paths within a single link between network points.
In optical fibre transmission using dense wavelength-division multiplexing (DWDM), a channel is a separate wavelength of light within a combined, multiplexed light stream.
Churn A measure of the number of customers who leave or switch to another service provider, usually stated as a percentage of the total subscriber base Circuit Board See PCB Circuit Switching Networks are interlinked by switches. The switching across these networks may be connection oriented or connection less. A connection oriented switching requires a dedicated circuit or channel for transmission.
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See Also: Packet Switching

CLECs In the United States, a CLEC (competitive local exchange carrier) is a company that competes with the already established local telephone business by providing its own network and switching.
See also: ILECs

CMTS The Cable Modem Termination System (CMTS) aggregates Internet traffic from a group of cable modem customers and routes it to an ISP. Refer the section on Wired Media in Communication Media for more details.
See also: Cable Modem

Coaxial Cable It consists of a solid wire at the centre surrounded by an insulating material (to minimise electrical and radio-frequency interference) and an outer conductor. Refer the section on Copper Wires in Communication Media for more details.
See also: Twisted-Pair Cable

Code Division Multiple Access See CDMA Computer Network A computer network is an interconnected collection of autonomous computers. Refer the section on Computer Networks in Communication Networks for further details.
See also: LAN, MAN, WAN

Dark Fibre Optical fibre that is unlit, i.e. it is available as a raw commodity linking network access points. Refer the section on Optic Fibres in Communication Media for more details.
See also: Lit Fibre

D-Channels See Delta Channels. Delta Channels D-channels are 16Kbps channels on ISDN connections used by network operators for setting up and monitoring B-channels. Refer the section on ISDN in Communication Media for more details.
See also ISDN, B-Channels

De-Multiplexing The opposite process of multiplexing. De-multiplexing takes a multiplexed signal and makes available the individual signals.
See also: Multiplexing

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Dense WDM See also DWDM Dial-up Connection A Dial-up connection uses the same infrastructure and frequency bands as a normal telephone connection to access the Internet. Refer the section on Dial-Up Connections in Communication Media for more details.
See also: DSL, Cable Modem

Digital Subscriber Line See also DSL DSL It is a high-speed connection that uses the same lines as normal telephones, but on frequencies different from voice conversations. Refer the section on Copper Wires in Communication Media for more details.
See also: Dial-up Connection, Cable Modem

DSL Access Multiplexer See also DSLAM DSLAM The DSL Access Multiplexer (DSLAM) aggregates multiple DSL user connections to a single, high capacity Internet connection at the provider end. Refer the section on DSL in Chapter 3 (Communication Media) for more details.
See also: DSL, DSL Modem

DSL Modem The DSL modem sends Internet data over the high frequency bands of telephone wires in a DSL connection. Refer the section on DSL in Communication Media for more details.
See also: DSL, DSLAM

DSL Transceiver See also DSL Modem DWDM Dense Wavelength Division Multiplexing (DWDM) is a technology that puts data from different sources together on an optical fibre, with each signal carried at the same time on its own separate light wavelength. Using DWDM, up to 80 (and theoretically more) separate wavelengths or channels of data can be multiplexed into a light stream transmitted on a single optical fibre. Each channel carries a time division multiplexed (TDM) signal. In a system with each channel carrying 2.5 Gbps (billion bits per second), up to 200 billion bits can be delivered per second by the optical fibre. DWDM is also sometimes called Wave Division Multiplexing (WDM). Since each channel is de-multiplexed at the end of the transmission back into the original source, different data formats being transmitted at different data rates can be transmitted together. Specifically, Internet (IP) data, Synchronous Optical Network data (SONET), and Asynchronous Transfer Mode (ATM) data can all be travelling at the same time within the optical fibre.
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E911 911 is the official national emergency number in the United States and Canada. The wireless Enhanced 911 (E911) rules seek to improve the effectiveness and reliability of wireless 911 service by providing 911 dispatchers with additional information on wireless 911 calls. E-OTD The E-OTD (Enhanced Observed Time Difference) method is based on measurements in the MS (Mobile Station) of the time difference between the arrivals of bursts from nearby pairs of Base Stations. It is employed to calculate the position of the MS and may be used for LCS (LoCation Service).
See also: Location Based Services

Fibre Optics A technology that uses glass (or plastic) threads (fibres) to transmit data. Frequency Frequency is the number of complete cycles per second in alternating current. The standard unit of frequency is the hertz, abbreviated Hz. If a current completes one cycle per second, then the frequency is 1 Hz; 60 cycles per second equals 60 Hz (the standard alternating-current utility frequency in many countries). General Packet Radio Services See also GPRS GPRS GPRS is a packet-based wireless communication service that promises data rates from 56 up to 114 Kbps and continuous connection to the Internet for mobile phone and computer users. The higher data rates will allow users to take part in videoconferences and interact with multimedia Web sites and similar applications using mobile handheld devices as well as notebook computers. GPRS is based on GSM communication. For further details, refer the section on Communication Systems in Communication Networks.
See also: GSM

GPS The GPS (Global Positioning System) is a constellation of 24 well-spaced satellites that orbit the Earth and make it possible for people with ground receivers to pinpoint their geographic location. The location accuracy is anywhere from 100 to 10 meters for most equipment. GSM GSM (Global System for Mobile communication) is a digital mobile telephone system that is widely used in Europe and other parts of the world. GSM uses a variation of time division multiple access (TDMA) and is the most widely used of the three digital wireless telephone technologies (TDMA, GSM, and CDMA). GSM digitises and compresses data, then sends it down a channel with two other streams of user data, each in its own time slot. It operates at either the 900 MHz or 1800 MHz frequency band. GSM is the de facto wireless telephone standard in Europe. Refer the section on Communication Systems in Communication Networks for more details.
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Handover See also Hand-Off HDR The main component of CDMA2000 1xEV is High Data Rate technology (HDR). By dedicating an entire 1.25MHz of bandwidth to packet data, HDR provides data speeds up to 2.4 Mbps. This allows data packets to be sent to many different users on the same traffic channel. Upload speed is up to 153 kbps.
See also: CDMA

Hot Spot A public access point to a WLAN to be found at restaurants, hotels, parks, universities etc.
See also: WLAN

ILECs An ILEC (incumbent local exchange carrier) is a telephone company in the US that was providing local service when the Telecommunications Act of 1996 was enacted. ILECs include the former Bell operating companies (BOCs), which were grouped into holding companies known collectively as the regional Bell operating companies (RBOCs) when the Bell System was broken up by a 1983 consent decree.
See also: CLECs

Integrated Services Digital Network See also ISDN Internet Protocol The Internet Protocol (IP) is the method or protocol by which data is sent from one computer to another on the Internet. Each computer on the Internet has an IP address that uniquely identifies it from all other computers on the Internet. When one sends or receives data (for example, an e-mail note or a Web page), the message gets divided into little chunks called packets. Each of these packets contains both the sender's Internet address and the receiver's address. Any packet is sent first to a gateway computer that understands a small part of the Internet. The gateway computer reads the destination address and forwards the packet to an adjacent gateway that in turn reads the destination address and so forth across the Internet until one gateway recognizes the packet as belonging to a computer within its immediate neighborhood or domain. That gateway then forwards the packet directly to the computer whose address is specified. Internet Service Provider See also ISP Internet Telephony See also VoIP IPv6 IPv6 is an extension of the Internet Protocol (IP) that uses 128 bits for encoding IP addresses instead of the current 32 bits. This exponentially increases the number of devices that can be connected to the network and may some day be used to assign IP addresses to every telecom device on earth.
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See also: IP
ISDN Integrated Services Digital Network (ISDN) is a design for a completely digital telecom network. Refer the section on Copper Wires in Communication Media for more details.
See also: N-ISDN, B-ISDN

ISP Internet Service Providers (ISPs) provide a range of IP based services including Internet access and related connectivity, web hosting, data warehousing and targeted information services. LAN LANs are networks within a single building or campus and operate within distances of a few kilometres. Refer the section on Classification of Networks in Communication Networks for further details.
See also: Computer Network, MAN, WAN, WLAN

Lit Fibre An optic fibre in use for carrying light signals is known as Lit Fibre. Refer the section on Optic Fibres in Communication Media for more details.
See also: Dark Fibre

Load Coils Standard voice signals become weak (i.e., attenuate) when the copper portion of the wire is longer than 6kms. Load Coils are used to extend the range of the local loop. These coils are added at specific intervals along the loop. Load coils do not allow transmission of high frequency signals. Thus, modern broadband services such as ADSL and ISDN cannot be transmitted on lines with load coils. New digital telephone services also require unloaded copper pairs. Local Area Network See also LAN Location-based Services Location-based services (LBS) are services that exploit knowledge about where an information device user is located. For example, the user of a wireless-connected smart phone could be shown ads specific to the region the user is travelling in. MAN A Metropolitan Area Network (MAN) is a bigger version of a LAN that can cover up to an entire city. Refer the section on Classification of Networks in Communication Networks for more details.
See also: Computer Network, LAN, WAN

Metropolitan Area Network See also MAN
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Microprocessor A microprocessor is a computer processor on a microchip. It's sometimes called a logic chip. It is the "engine" that goes into motion when you turn your computer on. A microprocessor is designed to perform arithmetic and logic operations that make use of small number-holding areas called registers. Typical microprocessor operations include adding, subtracting, comparing two numbers, and fetching numbers from one area to another. MMS MMS allows for non-real-time transmission of various kinds of multimedia contents, such as images, audio, and video clips.
See also: SMS

Modulation Modulation is the process of combining an information signal (to be transmitted) and a carrier signal (a signal used to transmit the information through a transmission medium). The information signal can be voice or data. The carrier signal is usually an electromagnetic wave.
For further details on modulation techniques, please refer to Communication Media.

Multimedia Messaging Service See also MMS Multimode Fibre Multimode fibres transmit more than one ray of the light simultaneously. Refer the section on Optic Fibre in Communication Media for more details.
See Also: Single Mode Fibre

Multiplexing Multiplexing is sending multiple signals or streams of information on a carrier at the same time in the form of a single, complex signal and then recovering the separate signals at the receiving end.
See also: De-multiplexing

Narrowband Narrowband describes telecommunication that carries voice information in a narrow band of frequencies. More specifically, the term has been used to describe a specific frequency range set aside by the US FCC for mobile or radio services, including paging systems, from 50bps to 64Kbps.
See also: Broadband

Narrowband ISDN See also N-ISDN Near-Far Problem154 A critical problem in CDMA is the near-far problem. This problem occurs due to the lack of effective power control. If all mobiles were to transmit at a fixed power the
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mobile closest to the base station, from communication point of view, will overpower all others signals. Another reason for power control is the battery lifetime. If the mobile station is always transmitting at higher power than that needed to maintain an acceptable Signal to Interference Ratio (SIR), the battery will have a short lifetime. With power control, each mobile station may transmit using the minimum power needed for maintaining the required signal to interference ratio, and hence maximizing the system capacity by keeping the noise floor as small as possible. See also: CDMA.
N-ISDN Narrowband ISDN (N-ISDN) is An ISDN design that works on normal (copper) telephone wires and is primarily intended for narrowband applications. Refer the section on ISDN in Communication Media for more details.
See also: ISDN, B-ISDN

Operating System See also OS Optic Fibre See also Fibre Optics OS An Operating System (OS) is a program that acts as an interface between the hardware and other application programs in a computer.
See also: Computer Network

Packet Switching The various types of networks are interlinked by switches, which are basically owned by network operators. The switching across these networks may be connection oriented or connection less. Connection less switching uses the entire bandwidth for transmission by sending information in packets.
See also: Circuit Switching

PCM PCM (pulse code modulation) is a digital scheme for transmitting analogue data. The signals in PCM are binary; that is, there are only two possible states, represented by logic 1 (high) and logic 0 (low). Personal Handy-phone Systems (PHS) These are portable mobile devices that act as cordless phones. These devices are extensively used in some Asian countries such as Japan and Korea. PRI The Primary Rate Interface (PRI) is an ISDN interface with scalable bandwidth and is intended for office use. Refer the section on ISDN in Communication Media for more details.
See also: ISDN, BRI
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Primary Rate Interface See also PRI Protocol Network components can understand and communicate effectively only when there exists a common language and a set of rules, which define the guidelines for communication. A protocol is defined as a set of such rules and guidelines.
See also: Transmission Protocol, Internet Protocol

PSTN PSTN (public switched telephone network) is the world's collection of interconnected voice-oriented public telephone networks, both commercial and government-owned. It's also referred to as the Plain Old Telephone Service (POTS). Roaming Roaming is the ability to access mobile telephony and data services when the user is outside his regular service providers network coverage area. The user gains access through a local service providers infrastructure (the local service provider will have a revenue-sharing agreement with the remote service provider on roaming). Router A router is a specialised piece of network equipment used to connect two or more networks and ensures that data transmitted is directed towards the right network. Refer the section on Computer Networks in Communication Networks for more details.
See also: Computer Network

SDH SDH or Synchronous Digital Hierarchy is the international equivalent of SONET. Refer the section on Optic Fibre in Communication Media for more details.
See also: SONET

Short Messaging Service See also SMS. SIG A SIG is a group of individuals or organisations having a narrow field of interest in a technical area. Refer to The Regulatory Environment for more details. SIM Card The SIM (Subscriber Information Module) card holds all of a subscriber's personal information and phone settings. In essence, it is the subscriber's authorization to use the network. It also holds the phone number, personal security key and other data necessary for the handset to function. The card can be switched from phone to phone, letting the new phone receive all calls to the subscriber's number.
See also: GSM

Single Mode Fibre Single mode fibres accept only one light ray at a time. Refer the section on Optic Fibre in Communication Media for more details.
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See Also: Multi Mode Fibre.

SMS 2G phones introduced SMS to allow users to send and receive short text messages (up to 160 characters) via the network operator's message centre or from the Internet via the operator's SMS gateway website. If the phone is powered off or out of range, SMS messages are stored in the network and delivered at the next opportunity.
See also: MMS

Soft Handover155 A process by which control of a mobile phone is transferred between two base stations without interrupting the conversation. Soft Capacity156 This means that there is no hard limit to how many users we can allow on the system. Each time a user is added, the noise floor for the other users is increased by a little bit. CDMA has the advantage of having more system capacity than the other multiple access schemes.
See also: CDMA

SONET SONET or synchronous optical network is the American National Standards Institute (ANSI) standard for synchronous data transmission on optical media. Refer the section on Optic Fibre in Communication Media for more details.
See also: SDH

Special Interest Group See also SIG Spread Spectrum Modulation Spread Spectrum (SS) Modulation is a modulation process where the output modulated signal has a much greater bandwidth than the original, un-modulated signal. Hence, the modulation process spreads the spectrum of the signal. The resulting signal is also called an SS signal, and CDMA is often denoted as spreadspectrum multiple access (SSMA).
SS modulation techniques use a code signal in addition to the original data signal (also called the information-bearing signal). The code signal is known to both sender and receiver and is used while encoding and decoding the SS signal. See also: CDMA, Modulation
Switch A switch is a device that channels incoming data from any of multiple input ports to the specific output port that will take the data toward its intended destination.
See also: Router
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Synchronous Digital Hierarchy See also SDH Synchronous Optical Network See also SONET Telegraph A communications system that transmits and receives simple unmodulated electric impulses, especially one in which the transmission and reception stations are directly connected by wires. Transmission Protocol Transmission protocols are the special sets of rules that end points in a telecommunication connection use when they communicate.
See also: Protocol, Internet Protocol

Twisted-Pair Cable Two independently insulated copper wires twisted around one another. One wire carries the signal, while the other is grounded and absorbs signal interference. Refer the section on Copper Wire in Communication Media for more details.
See also: Coaxial Cable

Unlit Fibre See also: Dark Fibre Virtual Private Network See also: VPN Voice over Internet Protocol See also: VoIP VoIP VoIP is a set of facilities used in delivering voice information over the Internet using the Internet Protocol (IP).
For further details, refer the section on Converged Networks in Communication Networks. See also: IP
VPN A Virtual Private Network (VPN) is a private network that uses a public network to link remote sites. Refer the section on Classification of Networks in Communication Networks for more details.
See also: Computer Network, LAN, MAN, WAN

WAP WAP (Wireless Application Protocol) is a specification for a set of communication protocols to standardize the way that wireless devices, such as cellular telephones and radio transceivers, can be used for Internet access, including e-mail, the World Wide Web, newsgroups, and Internet Relay Chat (IRC).
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Wavelength Division Multiplexing See also WDM WAN A Wide Area Network (WAN) is a network that spans a large geographical area, often a country or continent. Refer the section on Classification of Networks in Communication Networks for more details.
See also: Computer Network, LAN, MAN

W-CDMA WCDMA, an ITU standard derived from code- CDMA, is officially known as IMT2000 direct spread. WCDMA is a 3G mobile wireless technology offering much higher data speeds to mobile and portable wireless devices. WCDMA can support mobile/portable voice, images, data, and video communications at up to 2 Mbps (local area access) or 384 Kbps (wide area access). The input signals are digitised and transmitted in coded, spread-spectrum mode over a broad range of frequencies. See also Communication Networks for further details. WDM Wavelength division multiplexing (WDM) is a technology that transmits data from different sources together on an optical fibre, with each signal carried at the same time on its own separate light wavelength. Refer the section on Optic Fibre in Communication Media for more details.
See also: DWDM.

Wide Area Network See also WAN Wideband Code-Division Multiple Access See also W-CDMA Wi-Fi Wi-Fi ("wireless fidelity") is the popular term for a high-frequency wireless local area network (WLAN).
See also: WLAN

Wireless Local Loop See also WLL Wireless LAN See also WLAN WLAN A wireless LAN (WLAN) is a wireless extension of, or alternative to, traditional LANs. Refer the section on Classification of Networks in Communication Networks for more details.
See also: Computer Network, LAN

WLL A radio access technology that links subscribers into a fixed public telecom network. The radio link replaces the traditional wired local loop.
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Evolution of Telecom Services: excellent reading for anybody expecting to have to take part shortly in a telco trivia quiz. Figure 88: Timeline of Important Events in Telecom Evolution in Europe (from a UK perspective!)
Year
1794
Event
Frenchman Claude Chappe constructed his 'Tachygraphe', the first working telegraph machine, which transmitted messages between Paris and Lille.
n
1839
This marked the start of telecommunication in Europe The world's first commercial telegraph line using the Cooke and Wheatstone five-needle system was commissioned by the Great Western Railway and built between Paddington and West Drayton, a distance of 13 miles. n Marked the launch of first commercial telecom service
n n
1865 1878 1882
The International Telegraph Union was formed by 20 participating countries, The Union was later to become today's International Telecommunications Union. The Post Office provided its first telephones. The administration of telegraphs is absorbed by the postal services
W H Preece, Post Office Engineer-in-Chief and Electrician experimented in wireless telegraphy between Southampton and Newport, Isle of Wight. n Marked the start of wireless communication in Europe Marconi established the first permanent wireless station A cheap rate telephone service was introduced by the Post Office
n
1898 1903
First Public telecom service in Europe
1906 1918 1932 1932 1937 1951
The Post Office's first coin-operated call box was installed by the Western Electric Company at Ludgate Circus, London.
n
The Wireless Telegraphy Board was set up to coordinate interference problems in radio communication in the English Channel, marking the beginning of the frequency management structure that exists today The International Telecommunications Union was created from the International Telegraph Union and the International Radiotelegraph Union. n The first large centralised Directory Enquiry Bureau was opened in August in the UK.
n
The 999 emergency telephone service was made available to London subscribers
Telephone Act became a law

n
It enabled the Postmaster-General to set rental charges and so forth by statutory regulation
1958
Subscriber Trunk Dialing (STD) service

n
Telephone callers were able to make trunk calls automatically without the aid of the operator
1963 1965 1969 1980
International Subscriber Trunk Dialing (ISD) was introduced

n
INTELSAT 1 (Early Bird) the first commercial communications satellite launched
The Post Office Act 1969 established the General Post Office (GPO) as a statutory corporation. The first cable television installation in the UK was introduced The British Telecommunications Bill received royal assent. Led to splitting of the GPO into Post and British Telecom
1977 1978 1980 1982
A radio paging service was opened in London The first optical cable system in Europe to form part of the public telephone network was installed between the Post Office Research Centre at Martlesham and Ipswich telephone exchange. British Telecom began operating under a licence and independent suppliers of telephones were permitted. The Mercury consortium received a licence to build and operate an independent network for telecom services in the UK. Nordic Telecom and Netherlands PTT propose to CEPT (Conference of European Post and Telecommunications) the development of a new digital cellular standard that would cope with the ever-burgeoning demands on European mobile networks. The European Commission (EC) issues a directive, which requires member states to reserve frequencies in the 900 MHz band for GSM to allow for roaming. The Telecommunications Bill was reintroduced in the UK.
n n
1983
The Bill allowed for the selling of BT and setting up of Oftel Oftel was created in 1984
1987 1991
13 operators and administrators from 12 areas in the CEPT GSM advisory group sign the charter GSM (Groupe Spciale Mobile) MoU "Club" agreement, with a launch date of 1 July 1991. Oftel takes over the UK numbering scheme
n
Introduced number portability
1993
Vodafone started offering GSM digital services. Mercury One-2-One launched the first DCS 1800 network in the UK
1995 1996 2003
GSM MoU is formally registered as an Association registered in Switzerland - 156 members from 86 areas. Liberalisation of telecommunications infrastructure and liberalisation of telecommunications services across Europe All EU states implemented the EU Harmonized Regulatory Framework
n n
All communication services - radio, telecom, IT and television will be regulated under a common platform All forms of communication licensing except for the spectrum had been abolished
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Disclosures
Additional Information Available upon Request

For disclosures pertaining to recommendations or estimates made on a security mentioned in this report, please visit our global disclosure look-up page on our website at http://equities.research.db.com.
The views expressed in this report accurately reflect the personal views of the undersigned lead analyst(s) about the subject issuer and the securities of the issuer. In addition, the undersigned lead analyst(s) has not and will not receive any compensation for providing a specific recommendation or view in this report. Martin Mabbutt
Rating key
Buy: Total return expected to appreciate 10% or more over a 12-month period Hold: Total return expected to be between 10% to 10% over a 12-month period Sell: Total return expected to depreciate 10% or more over a 12-month period
Rating dispersion and banking relationships

1200 1000 800 600 400 200 0 Sell Companies Covered Hold Buy
46%
44%
10% 13%
22%
26%
Cos. w/ Banking Relationship
Global Universe
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Global Telecom research team

EUROPE Wireline GLOBAL TELECOM STRATEGY USA
Martin Mabbutt Guy R. Peddy Vivek Khanna
+44 20 7545 0625 martin.mabbutt@db.com +44 20 7545 8490 Guy.peddy@db.com +44 20 7547 2905 Vivek.khanna@db.com
Wireless
Martin Mabbutt
+44 20 7545 0625 martin.mabbutt@db.com

EEMEA
Viktor Shvets Andrew Kieley
+1 212 250 7250 viktor.shvets@db.com +1 212 250-7817 andrew.kieley@db.com +1 212 250 0771 edward.bryant@db.com +1(212) 250-7808 nigel.coe@db.co.uk
Iouli Matevossov (Russia) Max Koep (South Africa) Alexey Yakovitsky (Russian Telecom Sector)
+7501 797 5193 iouli.matevossov@db.com Edward Bryant +27 11 775 7264 max.koep@db.co.za AYakovitsky@ufg.com
LATIN AMERICA
Nigel Coe
Gareth Jenkins Prabhdeep Singh
+44 20 7547 5849 Gareth.jenkins@db.com +44 20 7547 2906 Prabhdeep.singh@db.com

Specialist Sales
Carlos Constantini Rene Pimentel
+ 55 11 3168 8452
AUSTRALASIA
carlos.constantini@deutsche ixe.com + 1 646 442 0720 Richard Long Peter Roberts James Dougall Audrey Wiggin +44 20 7545 1191 james.dougall@db.com +44 20 7545 0707 audrey.wiggin@db.com
Other Europe
rene.pimentel@deutscheixe.com
ASIA
+61 2 9258 1529 richard.long@db.com +61 2 9258 2013 peter.roberts@db.com

JAPAN
Tucker Grinnan Fung-Ee Lim Piyush Mubayi Jae Min Lee (Korea) Kenny Liu Molly Chen
+852 2203 6252 tucker.grinnan@db.com +852 2203 6251 fung-ee.lim@db.com +852 2203 6186 piyush.mubayi@db.com +822 316 8903 jaemin.lee@db.com +852 2203 6180 kenny.liu@db.com +852 2203 6227 molly.chen@db.com
Carola Bardelli (Italy) Ivano Brullo (Italy)
+39 02 8637 9708 carola.bardelli@db.com +39-02-86379706 ivano.brullo@db.com +358 9 2525 2552
Tetsuro Tsusaka Miwako Nakamura
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Telecoms For Beginners

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Telecoms for Beginners

Technology & Industry Primer

Telecoms for Beginners Technology & Industry Primer

Telecommunications Telecoms for Beginners

The beginners guide.......................................................................... 3

Telecom industry overview .............................................................. 4

Telecom Services and Business Models........................................ 19

The Regulatory Environment........................................................ 124

Telecommunications Telecoms for Beginners

The beginners guide

Telecommunications Telecoms for Beginners

Telecom industry overview

Telecommunications Telecoms for Beginners

Telecommunications Telecoms for Beginners

Local calls Calls to mobiles

National calls Other calls

Telecommunications Telecoms for Beginners

0.1 9.6 18.7 83.1 92 3023.4 43.8 68.1 40.5 52.2

Telecommunications Telecoms for Beginners

Total call traffic

Competition comes in many shapes and sizes

Telecommunications Telecoms for Beginners

Telecommunications Telecoms for Beginners

How the regulator regulates

Price control schemes dominate regulatory landscape

Telecommunications Telecoms for Beginners

Interconnection terms the key to the development of competitive markets

Mobile moves into the ascendancy

Telecommunications Telecoms for Beginners

Figure 6: Ratio of mobile subs versus fixed access lines

2003E 2004E 2005E Asia Pacific

North America Australasia

Latin America Global total

Product Life Cycle Stage

Telecommunications Telecoms for Beginners

Nothing radically new on the technology horizon

But lots of technologies still to be fully implemented

Telecommunications Telecoms for Beginners

Figure 8: Classification of networks based on distance

Local Area Network (LAN) e.g. wireless LAN (WLAN)

Source: Computer Networks by Andrew S. Tanenbaum, 3rd Edition

Telecommunications Telecoms for Beginners

CAGR (2002-07) = 4.95%

Asia Pacific is likely to drive growth in the telecom services sector.

Telecommunications Telecoms for Beginners

Figure 10: Split of worldwide telecom services revenue by service categories

Telecommunications Telecoms for Beginners

50 40 30 20 10 0 1999 2000 2001 2002 2003 2004 2005 2006 2007

Asia Pacific DSL EMEA Cable

Asia Pacific Cable North America Cable

EMEA DSL North America DSL

Telecommunications Telecoms for Beginners

Figure 13: Worldwide mobile services subscribers by region

Figure 14: Worldwide internet users by region

21% Rest of World

14% 40% Rest of World Asia Pacific W. Europe North America

Asia Pacific W. Europe North America

29% 13% 2002

20% 10% 2007

Source: CommNOW DataBanks, Cellular News and Deutsche Bank Analysis

Telecommunications Telecoms for Beginners