Crsm2010 nov22 gronsund_pal_businesscasesendora_v4
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Crsm2010 nov22 gronsund_pal_businesscasesendora_v4



A business case study for a cognitive radio system based on a wireless sensor network (SENDORA).

A business case study for a cognitive radio system based on a wireless sensor network (SENDORA).



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  • The sensor network identifies ”spectrum holes” with higher detection confidence The sensor network provides improved protection of primary networks with good interference control The capacity of the cognitive radio network is improved due to better detection of spectrum holes and interference control
  • NPV (Net present value) is the sum of a series of cash flows (revenues subtracted by costs), when discounted to the present value. NPV is the most important criteria when defining the profitability of the project. IRR (Internal rate of return) is the discount rate, that gives NPV = 0. The higher the IRR is, the better the project is. Assuming all other factors are equal among various projects, the project with the highest IRR would probably be considered the best.

Crsm2010 nov22 gronsund_pal_businesscasesendora_v4 Crsm2010 nov22 gronsund_pal_businesscasesendora_v4 Presentation Transcript

  • A Business Case Study for a Cognitive Radio System based on a Wireless Sensor Network Pål Grønsund, Ole Grøndalen, Markku L ä hteenoja CRSM 2010, IBBT-MIT Brussels, November 22nd, 2010 Spectrum owner 1 Spectrum owner 2 Spectrum owner N Joint venture system operator
  • SEVENTH FRAMEWORK PROGRAMME THEME ICT-2007-1.1 The Network of the Future Project 216076
  • The SENDORA concept can be described as a "Sensor Network aided Cognitive Radio" technology Primary Network Cognitive Network Wireless Sensor Network queries on spectrum status reports on spectrum status
  • The SENDORA system architecture has 3 main parts: sensor network, communication network and fusion centre
  • The remainder of this presentation will focus on an example of a SENDORA business case for a “Joint Venture” Overview of the business case for a “Joint Venture” Introduction to Cash Flow analysis and business case assumptions Cash Flow results and sensitivity analysis Cash Flow Customers Revenue OPEX Cost CAPEX Sensors and fusion centre Cognitive functionalities New sites Customer acquisition Operation & maintenance Site rental
  • A set of spectrum owners establishes a “Joint Venture” that gets the right to use its owners unused spectrum At least one of the owners is an operator having a cellular infrastructure in the area Spectrum owner 1 Spectrum owner 2 Spectrum owner N Joint venture SENDORA system operator
      • Easy to implement from a regulatory point of view since only the joint venture owners’ own spectrum are used
    Rationale for the “Joint Venture” scenario
      • The joint venture can be composed in a way that makes it very probable that:
        • at least some unused spectrum is available at all times
        • little new cognitive radio access infrastructure is required
      • The scenario is an example of spectrum sharing, which can be seen as a natural extension of infrastructure sharing
        • The joint venture is a good way to share the expenses and incomes between the companies
  • In the business case scenario, the joint venture will
        • Deploy the system in a hypothetical European city:
        • 1 million inhabitants
        • covering an area of 200 km2,
        • downtown area is 50 km2
        • Study period: 2015 – 2020
  • NOTE! SENDORA is an innovative concept and much research and development remains before commercial realizations will appear => the input data for the business case is uncertain => the results give indications, not definite answers or strong conclusions
  • Traditional cash flow analysis is used to get an indication of the profitability, enhanced with sensitivity analysis
      • Discount rate: 10%
    Cash Flow Customers Revenue OPEX Cost CAPEX Sensors and fusion centre Cognitive functionalities New sites Customer acquisition Operation & maintenance Site rental
  • Revenue assumptions
      • ARPU (Average revenue per user) per month for nomadic broadband user:
        • 20 € (2015) decreasing to 18,1 € (2020)
      • Number of nomadic broadband subscribers for the joint venture
        • 10 000 (2015) increasing to 100 000 (2020)
    Customers Revenue
    • Fixed sensors
      • Density: 65 sensors per km 2
      • Roll-out
        • 2015: 50 km 2 (most dense areas of the city)
        • 2016 and 2017: 75 km 2 for each year
      • Sensor price 300 € (2015) decreasing to 177 € (2020)
      • Installation 40 € (2015) decreasing to 35 € (2020)
    • Integrated sensors
      • 50% of the cognitive terminals have an integrated sensor
    CAPEX (CApital EXPenditure) assumptions
    • Fusion centre
      • One fusion centre for the city
      • One time CAPEX 150 000 € in 2015 and10 000 € for installation
    Cost CAPEX Sensors and fusion centre Cognitive functionalities New sites
    • Cognitive functionalities
      • Starting from 50 “cognitive” base stations in 2015 and increasing to 450 in 2020
      • CAPEX for updating a base station is 5000 € (2015) decreasing to 2953 € (2020)
      • Cognitive functionality in the terminals is assumed to be a part of the normal terminal development
    • New sites
      • 60 000 € per new site establishment
    CAPEX (CApital EXPenditure) assumptions Cost CAPEX Sensors and fusion centre Cognitive functionalities New sites
    • OPEX for fixed sensor network
      • Power supply, maintenance visits
      • 15 € (2015) per sensor per month decreasing to 13,6 € (2020)
    • OPEX for base stations
      • Maintenance, backhaul rental and site rental
      • 1000 € (2015) per base station per month decreasing to 904 € (2020)
    OPEX (OPerational EXPenditure) assumptions
    • General OPEX
      • Customer acquisition, operation of the company
      • 8 € (2015) per user per month decreasing to 5,6 € (2020)
    OPEX Cost Customer acquisition Operation & maintenance Site rental
    • Net Present Value (NPV): 1,36 million € (2015-2020)
    • Internal Rate of Return (IRR): 16%
    • Pay-back period about 5 years
    Cash flow results with assumptions presented above show that there is a potential for profitability
    • Required fixed sensor density might be reduced by e.g.:
      • Improved sensing technology
      • More terminals with integrated sensors
    • It will be a challenge to produce sufficiently cheap fixed sensors :
      • Includes inter-sensor communication
      • Outdoor environment
    Sensitivity analysis show that sensor performance and costs are critical parameters Fixed sensors per km 2 NPV [million Euro] 10 11.44 30 7.77 65 1.36 Base case 72 0 120 -8.72 Fixed sensor price [Euro] NPV [million Euro] 50 3.98 150 2.93 300 1.36 Base case 430 0 500 -0.74 700 -2.84 1000 -5.99
    • Fixed sensors must be very power efficient and robust:
      • Power consumption must be low
      • High number of sensors => MTBF must be very low for each
    • New sites should be avoided:
      • Will favour joint ventures of operators with “complementary” base station sites
    Sensitivity analysis show that sensor OPEX and share of new sites are critical parameters Fixed sensor OPEX [€/month/sensor] NPV [million Euro] 5.0 6.82 10.0 4.09 15.0 1.36 Base case 17.5 0 20.0 -1.37 25.0 -4.10 Share of new sites NPV [million Euro] 0 % 1.36 Base case 6 % 0.00 10 % -0.89 20 % -3.03 30 % -5.28 40 % -7.43 50 % -9,67
    • This business case is probably one of the best cases for SENDORA, because it is based on the “joint venture” idea
      • Free access to frequency resources from the mother companies
      • Good possibilities for re-using existing infrastructure
      • Exploit detailed knowledge of the primary systems
    • The accumulated cash flow is quite similar to many other infrastructure projects in telecommunication
      • The joint venture must be patient with financial strength to wait a longer period for the ROI. But there is a potential for a long term profitability.
    In summary and conclusion
    • The main value of this business case calculation is to identify the critical aspects for SENDORA profitability, so that the technical R&D work can focus on them. Examples of those are:
      • Sensor network planning (density of sensors and coordination between fixed and integrated sensors)
      • Sensor design to minimize CAPEX and OPEX
      • Solutions that allow re-use of existing infrastructure and require few new sites
    Questions? Pål Grønsund ( )