Wi Max Business Plan Sergio Cruzes V4
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Wi Max Business Plan Sergio Cruzes V4



This work is based on a translation of my MBA monograph whose certification was issued in April 30th, 2010, by FIPE (Fundação Instituto de Pesquisas Econômicas). Some recent information was added ...

This work is based on a translation of my MBA monograph whose certification was issued in April 30th, 2010, by FIPE (Fundação Instituto de Pesquisas Econômicas). Some recent information was added to this paper while other information was removed from the original MBA monograph.
Brazil launched in 2010, its National Broadband Plan. The aim is to grow broadband at home from 12 million to 40 million by the end of 2014. This means to provide broadband coverage to 72% of total households of the country.
Government’s expectation is to reduce the broadband cost from around 5% average household income to around 0.2% for the most popular plan (speed up to 512 kbps and download limitation) and to around 0.45% for the plan with speed between 512 kbps and 784 kbps.
The different ways to access the internet are changing the people’s behavior. It can be in the business environment , at home or at any other place.
Statistics show that the number of internet users in Brazil increased at a rate greater than 40% a year between 2000 and 2008 (source: Barômetro Cisco 2009).
As per Ibope Nielsen (Source: Meio & Mensagem, 22/June/2009), the number of internet users reached 62.3 million people in Brazil in the first quarter of 2009. However the number of internet accounts is only 15.05 millions (10.4 million for fixed internet and 4.62 million for wireless broadband internet)
At the same time, Telco’s revenue from circuit switching telephone systems are decreasing due to mobile systems user’s growth and the emergence of VoIP systems.
The need to offer broadband services are introducing great access technological innovations such as VDSL, FTTH, 3G HSPA , WiMAX and LTE.
WiMAX is a wireless broadband access technology for the last mile based on 802.16 standard from the Institute of Electrical and Electronic Engineering (IEEE). WiMAX means Worldwide Interoperability for Microwave Access. This name was introduced by the WiMAX Forum which is an organization with a goal to promote, standardize and define the strategy of WiMAX.
The aim of this work is to capture the most important items that influence the WiMAX business case at 2,5 GHz band and provide insights to minimize risks and uncertainties that occur in the deployment of a WiMAX network. It is shown an example of deployment in São Paulo city, Brazil, containing numbers of base stations, subscribers, payback period and internal rate of return.
The study begins with the analysis of the micro-environment providing a summary containing subscribers forecast for the next years.
It is also described the macro-environment analysis. On the technological environment should be noted the delay in the availability of WiMAX-embedded devices while on the 3G side there are more than 800 hundred devices available worldwide. It is also commented about the LTE technology which is being developed by most of the greater telecommunications vendors. On the legal-political environment, it should be noted the delays on the spectrum auctions and the power of cellular operators which influence the rules for WIMAX such as mobility and spectrum usage restriction.
It is also emphasized the importance of the project planning, scope characterization and definition, work breakdown structure definition containing the decomposition of the work to be executed up to the package level, the activities sequencing, costs involved, risks and response plans, schedule and critical path.



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Wi Max Business Plan Sergio Cruzes V4 Wi Max Business Plan Sergio Cruzes V4 Document Transcript

  • Wireless Broadband Business Plan WiMAXSergio CruzesMBA in Project Management and Technological Innovation – FIPE USPMsC in Electrical Engineering – EESC USPPMP certified
  • Table of ContentsTable of Contents .............................................................................................................. 21. INTRODUCTION ...................................................................................................... 51. CONTEXT .................................................................................................................. 72. DEMAND ANALYSIS .............................................................................................. 8 3.1 Fixed Broadband ....................................................................................................... 8 3.2 Wireless Broadband ................................................................................................ 113. BROADBAND REVENUE...................................................................................... 134. BROADBAND BARRIERS..................................................................................... 135. END USERS ............................................................................................................. 146. BROADBAND OFFERINGS .................................................................................. 177. WiMAX CONSIDERATIONS ................................................................................. 188. MACRO ENVIRONMENT...................................................................................... 19 8.1 Social and Cultural environment ............................................................................ 19 8.2 Demographic environment...................................................................................... 20 8.3 Economic environment .......................................................................................... 20 8.4 Technological environment .................................................................................. 21 8.4 Political environment ............................................................................................ 249. INTERNAL MICRO ENVIRONMENT .................................................................. 2510. KEY SUCCESSES FACTORS ............................................................................. 2611. BUSINESS SUMMARY FRAMEWORK ............................................................ 2712. BUSINESS CONCEPTION .................................................................................. 29 12.1 Business Plan Definition ....................................................................................... 29 12.2 Strategic Planning ................................................................................................. 30 12.3 Purpose of the Organization: Vision, Mission, Believes & Values, and Objectives ....................................................................................................................................... 32 12.4 Generic Competitive Strategies ............................................................................ 34 12.4 Marketing Strategy................................................................................................ 35 12.4.1 Marketing Plan Definition ............................................................................. 35 12.4.1 Market Segmentation ..................................................................................... 36 12.4.1 Marketing Mix ............................................................................................... 3813. WIMAX NETWORK BUSINESS PLAN ............................................................. 41 13.1 Input Parameters .................................................................................................. 42 13.1.1 Morphologic Area .......................................................................................... 42 13.1.2 Spectrum and Bandwidth ............................................................................... 43 13.1.3 Coverage Area – Radio Frequency Engineering ........................................... 43 13.1.4 CAPEX Assumptions..................................................................................... 45 13.1.5 Subscribers Growing Rate Assumptions ....................................................... 49 13.1.5 OPEX Assumptions ....................................................................................... 51 13.2 Output Parameters ............................................................................................... 5214. WiMAX NETWORK DEPLOYMENT ................................................................ 53 14.1 Diamond Model ................................................................................................... 56
  • 14.2 Project Charter ..................................................................................................... 58 14.3 Work Breakdown Structure (WBS) ..................................................................... 61 14.4 Planning – Activities estimation ........................................................................... 62 14.5 Planning – Activities sequence ............................................................................. 64 14.6 Risks...................................................................................................................... 65 14.6 Adjustments .......................................................................................................... 6715. REFERENCES ...................................................................................................... 68
  • Acronyms and Abbreviations2G Second-generation mobile network technology3G Third-generation mobile network technologyAAA Authorization, Authentication and AccountingADSL/DSL Asymmetric Digital Subscriber LineARPU Average Revenue per UserBTS Base Transceiver StationBWA Broadband Wireless AccessCAGR Compound Average Growth RateCapex Capital ExpenditureCDMA Code Division Multiple AccessCPE Customer Premises EquipmentCRM Customer Relationship ManagementDOCSIS Data Over Cable Service Interface Specification (Cable Modem)DSL Digital Subscriber LineEVDO Evolution Data OnlyFTTH Fiber to the HomeGbps Gigabits per secondGSM Global System for Mobile CommunicationsHSPA High-Speed Packet AccessIBGE Brazilian Institute of Geographic and StatisticsIEEE Institute of Electrical and Electronics EngineersIMS IP Multimedia SubsystemIP Internet ProtocolIPC Potential Index of ConsumptionIPTV Internet Protocol TelevisionLTE Long Term EvolutionMIMO Multiple-Input Multiple-OutputMMDS Multichannel, Multipoint Distribution SystemOFDM Orthogonal Frequency Division MultiplexingOPEX Expended CostsPC Personal ComputerPMP Price per Megahertz per PopQoS Quality of ServiceRAN Radio Access NetworkSLA Service Level AgreementVDSL Very High Bit-rate Digital Subscriber LineVoIP Voice over IPxDSL any type of DSLWBS Work Breakdown StructureWiMAX Worldwide Interoperability for Microwave Access
  • 1. INTRODUCTION This work is based on a translation of my MBA monograph whosecertification was issued in April 30th, 2010, by FIPE (Fundação Instituto dePesquisas Econômicas). Some recent information was added to this paper whileother information was removed from the original MBA monograph. Brazil launched in 2010, its National Broadband Plan. The aim is to growbroadband at home from 12 million to 40 million by the end of 2014. This meansto provide broadband coverage to 72% of total households of the country. Government’s expectation is to reduce the broadband cost from around 5%average household income to around 0.2% for the most popular plan (speed upto 512 kbps and download limitation) and to around 0.45% for the plan withspeed between 512 kbps and 784 kbps. The different ways to access the internet are changing the people’sbehavior. It can be in the business environment , at home or at any other place. Statistics show that the number of internet users in Brazil increased at arate greater than 40% a year between 2000 and 2008 (source: Barômetro Cisco2009). As per Ibope Nielsen (Source: Meio & Mensagem, 22/June/2009), thenumber of internet users reached 62.3 million people in Brazil in the first quarterof 2009. However the number of internet accounts is only 15.05 millions (10.4million for fixed internet and 4.62 million for wireless broadband internet) At the same time, Telco’s revenue from circuit switching telephone systemsare decreasing due to mobile systems user’s growth and the emergence of VoIPsystems. The need to offer broadband services are introducing great accesstechnological innovations such as VDSL, FTTH, 3G HSPA , WiMAX and LTE. WiMAX is a wireless broadband access technology for the last mile basedon 802.16 standard from the Institute of Electrical and Electronic Engineering
  • (IEEE). WiMAX means Worldwide Interoperability for Microwave Access. Thisname was introduced by the WiMAX Forum which is an organization with a goalto promote, standardize and define the strategy of WiMAX. The aim of this work is to capture the most important items that influencethe WiMAX business case at 2,5 GHz band and provide insights to minimizerisks and uncertainties that occur in the deployment of a WiMAX network. It isshown an example of deployment in São Paulo city, Brazil, containing numbersof base stations, subscribers, payback period and internal rate of return. The study begins with the analysis of the micro-environment providing asummary containing subscribers forecast for the next years. It is also described the macro-environment analysis. On the technologicalenvironment should be noted the delay in the availability of WiMAX-embeddeddevices while on the 3G side there are more than 800 hundred devices availableworldwide. It is also commented about the LTE technology which is beingdeveloped by most of the greater telecommunications vendors. On the legal-political environment, it should be noted the delays on the spectrum auctionsand the power of cellular operators which influence the rules for WIMAX such asmobility and spectrum usage restriction. It is also emphasized the importance of the project planning, scopecharacterization and definition, work breakdown structure definition containingthe decomposition of the work to be executed up to the package level, theactivities sequencing, costs involved, risks and response plans, schedule andcritical path. Keywords: Broadband ♦ Business Plan ♦ WiMAX ♦ LTE ♦ ProjectManagement
  • 1. CONTEXT The service growing rate of circuit switching telephone systems is startingto decrease in Brazil and Latin America. So, Telcos are investing in fixed broadband access technologies which areshowing high growing rates. Also, Cellular operators are also noticing a decreasing on their growingrates for voice services. At the same it is very difficult to provide differentiatedvoice services. The price competition is one main drivers of the voice revenuestagnation. The exhibit 2.1 shows the ARPU for cellular operators in Brazil Cellular Operators ARPU 32 30 30.1 29.3 29.4 29.6 28 27.5 27.3 27.1 27.2 R$ 26 ARPU 24.8 24 22 20 1H07 2H07 3H07 4H07 1H08 2H08 3H08 4H08 1H09 Exhibit 2.1 – Cellular Operators ARPU For most cellular operators in the world, the mobile data revenue hasreached more than 20% of the service revenues. The exhibit 2.2 shows the mobile data revenue participation in the totalrevenue of the Cellular operators in Brazil.
  • % of data revenue in the total revenue Vivo Tim Oi/BrT Brasil 13.10% 14.00% 11.30% 11.30% 11.20% 10.90% 10.90% 10.80% 10.30% 9.90% 12.00% 9.80% 9.70% 9.50% 9.40% 8.70% 8.40% 10.00% 6.80% 6.40% 6.30% 8.00% 5.60% 6% 6.00% 4.00% 2.00% 0.00% 1H08 2H08 3H08 4H08 1H09 Exhibit 2.2 - % of data revenue in the total cellular operator revenue Based on the above chart there is still a big room to increase theavailability of data services. 2. DEMAND ANALYSIS 3.1 Fixed Broadband The fixed broadband penetration in Brazil per 100 inhabitants reached5.16% at the end of 2008 (source: Barômetro Cisco) and 5.47% at the firstquarter of 2009. In 2009, the penetration reached 5.93%. These numbers show that the broadband penetration in Brazil is still verylow and it is below the world average (See Exhibit 3.1)
  • Broadband penetration: Brazil versus World (per 100 inhab.) 7 6 6.1 5.1 5.3 5 Brazil 4.3 4.1 World 4 3 3 2 2006 2007 2008 Exhibit 3.1 – Broadband Penetration: Brazil versus World average: (Source: Teleco, Barômetro Cisco, Pyramid Research) – 2008 As per site Teleco (www.teleco.com.br), Brazil is in 67º position regardingbroadband penetration in 2008, behind Mexico (7.1%) and Argentina (8.0 %). The Brazilian average Broadband residential penetration is 15.94%. Thisnumber shows that there is enough room for a very sustainable growth. In terms of internet users and internet accounts, there is a big gap showinga potential demand for internet services. Exhibit 3.2 shows this scenario. 53.9 60 50 40 Internet users 30 Fixed broadband access 20 10.43 10 0 1 Exhibit 3.2 – Internet users versus number of Internet accounts (in millionusers – 2008)
  • In terms of technology, the ADSL is the leader one followed by the CableModem (DOCSIS). Exhibit 3.3 depicts the percentage market share of eachtechnology (69.55% for ADSL, 26.42% for Cable Modem and 4.02% for othertechnologies) Broadband connections (in thousand) 12000 10435 10000 8000 7258 6000 Broadband connections 4000 2757 2000 420 0 ADSL Cable Other (Radio) Total Modem Exhibit 3.3 – Broadband connections per technology In 2009, the number of ADSL connections increased 10.55% compared to2008, reaching 7,705 thousand connections. The growth of Cable connectionswas 20.97% reaching 3,132 thousand connections. Globally the ADSL is also the market leader penetration for fixedbroadband access with 290 million lines representing 68%, followed by the Cablemodem with 21% and FTTx with 9% (source: Pyramid Research 2008). Theexhibit 3.4 details the fixed technologies participation in the world.
  • World broadband connections 70% 60% 50% 40% 30% World broadband connections 20% 10% 0% ADSL Cable FTTx Others Modem Exhibit 3.4 – World Broadband Connections (source: Pyramid Research2008) It is expected that the FTTx technology will be the leader on the growth rateon the next years when compared with other technologies. 3.2 Wireless Broadband The wireless broadband access service is offered by all cellular operatorsin Brazil. In the first half of 2009, there were 3,022 thousand 3G mobile devices.At the end of 2009, there were 6,990 thousand 3G mobile devices. In the state of São Paulo there were 1,188 thousand wireless broadbandconnections, 3G HSPA and CDMA 1xEV-DO (source: Anatel) Based on Yankee Group and Ericsson research (2009), in 2012 there willbe 46 million 3G subscribers. Pyramid Research (2008) forecasts that WiMAXwill capture 2% of the total 3G subscribers. So, there will be 920 thousandWiMAX subscribers by 2012. Assuming that São Paulo state will have the samesubscribers growth rate of Brazil, it is expected that by 2012 there will be 206thousand WiMAX subscribers in the state.
  • According to Infonetics Research (2009), Brazil is a great potential marketfor WiMAX. It is expected that the number of WiMAX subscribers in the countrymove from 184,000 to 8 million in 2013. Wireless Broadband - Brazil (in thousand connections) 50000 46000 40000 30000 3G WiMAX (Pyramid) 20000 WiMAX (Infonetics)* 10000 8000 5300 184 184 920 0 Maio 2009 2012/2013* Exhibit 3.5 – Wireless broadband forecast based on Pyramid Research and Infonetics The exhibit 3.6 depicts the estimated number of WiMAX users for the Stated of São Paulo based on Brazil’s estimate numbers. Banda Larga Móvel - Estado de São Paulo (mil conexões) 12.000 10.308 10.000 8.000 3G 6.000 WiMAX (Pyramid) 4.000 2.057 WiMAX (Infonetics)* 1.188 2.000 47 47 206 0 Maio 2009 2012/2013* Exhibit 3.6 – Wireless broadband forecast for São Paulo state (thousand of connections)
  • 3. BROADBAND REVENUE The wireless broadband will be the main driver of mobile operator revenuesin Latin America in accordance to the Pyramid Research analysis (source:Teletime magazine, 29/June/2009). This also applies to the fixed wirelineoperators. The main drivers are: • Common platforms based on IP protocol • WiMAX technology will force traditional operators to invest heavily on 3G and LTE in order to maintain their competitiveness and increase revenue Telefonica in Brazil has its fixed broadband access called Speedy. This service represented in 2008 to 30% of the company revenue. 4. BROADBAND BARRIERS The broadband access price in Brazil is the main barrier for thepopularization of internet. One study done by the United Nations in 154 countries appointed Brazil asone of the countries with the most expensive broadband access. In USA, thebroadband access represents in average 0.4% of the population average salarywhile in Brazil it represents 9.6% of the population average salary. In accordance to the research done by the Technology Information Usagein Brazil in 2008, 25% of the households in the South and Southeast has amicrocomputer while 71% of these households has internet access. In North andNortheast regions, only 7% of the households has internet access. The internet and computer usage penetration is very dependent to thepopulation salary range and education level. The internet usage penetration for agroup of population which has university degree is 83% and for the population
  • which did not conclude the basic education level is only 7%. Regarding theinternet usage, the main barriers are associated to the lack of ability to deal withthe computer or internet (pointed by 61%), lack of interest (44%) and price(23%). Government launched this year the Broadband National Plan whose idea isto provide to the population access to the internet at reasonable prices. In terms of technology, the plan will consist in the construction of an opticalbackbone connecting the main cities of the country. This will probably drive theconstruction of access networks based on different technologies. WiMAX may beone of these technologies. Regarding new entrants operators, the main barrier is the need of a hugeamount of capital to build a network and cost to interwork with the internet (inorder to provide internet access to its end users). The price in Brazil is veryexpensive compared to the USA prices. 5. END USERS For the end-user media consumer, the open TV main content provider inBrazil. However it is beginning a trend to search for different forms to accesscontent , entertainment or information, at devices such as PCs and mobiles. The group of users that is constantly searching for information on differentchannels other than TV, is composed of persons under 35-year old (Accenturestudy published at Converge Magazine in 13/April/2009). A study done by Yankee Group and Ericsson shows that the 3G user inBrazil is predominantly young (Teletime news, 29/July/2009). It is estimated that in the state of São Paulo the population between 20and 30-years old is around 7,250 thousand (source: IBGE and growthestimations) corresponding to 18.2 % of the total state population.
  • In accordance to the study done by Pesquisa de Condições de Vida 2006,65% of young population from São Paulo state has high school completed.Assuming that the conclusion of high school as a key factor for acquiring aninternet broadband subscription, it can be derived that 4,712 thousand peopleare potential consumers of broadband internet. By extrapolating the result for thetotal state population (72% of internet users are young people between 20 and30-years old, 28% is the remaining part of the population that uses internet), it isestimated that there are 6,545 thousand potential internet users in the statebased on the education level criteria. The social classes in Brazil are distributed as per Exhibit 5.1 (source:Associação Brasileira de Pesquisas, 2009) Family average income per month (Reals) 16000 14400 14000 12000 10000 8100 8000 6000 4600 4000 2300 1400 950 620 440 2000 0 A1 A2 B1 B2 C1 C2 D E Exhibit 5.1 – Social classes in Brazil and family income per month Based on a report of the Exame magazine (08/April/2009) about theconsumption of the Brazilian families and IBGE information, it can be derived thatthe social classes in Brazil are distributed as per Exhibit 5.2.
  • 30,00% 25,40% 25,00% 21,80% 20,70% 20,00% 15,70% 15,00% Percentagem Brasil 8,90% 10,00% 4,10% 5,00% 2,60% 0,90% 0,00% A1 A2 B1 B2 C1 C2 D E Exhibit 5.2 – Social classes percentage in Brazil In order to better estimate the total potential users based on income salary,the table 5.1 simplifies the number of classes. The total potential number in Brazilis 15,789 thousand users. This number can be derived for the state of São Paulobased on the Wireless broadband rate between Brazil and São State. So, thepotential wireless broadband internet users in São Paulo state is 3,946 thousandsubscribers. Percentage of People Wireless the Brazilian between 20 - internet Potential Classes population 30 years old (potential) users A and B 29.60% 11,248 85% 9,560.8 C 42.50% 16,150 30% 4,845 D and E 28.00% 10,640 13% 1,383.2 Table 5.1 – Potential internet users in Brazil based on the income salary
  • Based on the study of Informa Telecom & Media (2008), WiMAX willcapture 6% of 3G users until 2014. So: • It is expected 920 thousand WiMAX subscribers in Brazil until 2014 • It is expected 237 thousand WiMAX subscribers in the state of São Paulo until 2014 The exhibit 5.3 depicts the estimated growth rate of the WiMAXsubscribers between 2008 and 2014 in Brazil and in the state do São Paulo. It isexpected a CAGR of 30.8%. WiMAX Subscribers Growth 1000 920 800 600 Brasil 400 São Paulo* 237 184 200 47 0 2008 2014Exhibit 5.3 – Estimated WiMAX subscribers growth – 30.8% CAGR 6. BROADBAND OFFERINGS The cable modem access reaches only 184 cities representing 74 millionpeople, or 40% of Brazilian population which represents 53% of total Brazilianconsumption in accordance to the IPC/Target.
  • While the broadband competitiveness is so tough, the end user has fewchoices. The leader subscription service is called Speedy (from Telefonica and itis present only on the state of São Paulo). The exhibit 6.1 depicts the main fixed broadband offerings in 2009. Fixed Broadband Operators (in thousand subscribers) 2460 2500 2120 2000 1920 1762 1500 1320 1000 500 402 80 0 Telefonica NET Oi Brasil Telecom CTBC GVT TVA Exhibit 6.1 – Fixed Broadband Operators in 2009 An analysis done by IDC in July 2008 (published atwww.puccamp.br/servicos em 06/07/2009), provides the broadband accessprices in Brazil. The average price of minimum throughput (128 Kbps) was US$30. In Argentina, 512Kbps was US$ 27.05. 7. WiMAX CONSIDERATIONS The WiMAX community is doing a great effort to expand the possibilitiesand alternatives of devices and data applications from laptops and PCs, PDAsand other devices. WiMAX Operators around the world point the following key factors of thistechnology:
  • • Broadband access where it is not possible to reach with xDSL technology. The facility to focus the service at regions where there is demand allows a better return on investments • New player who intent to provide broadband services in a very short deadline • Unblunding restrictions done by traditional operators • Differentiation in comparison with xDSL. WiMAX may be positioned as a fixed network, portable, mobile within the same network. • IP architecture • Lower spectrum cost compared to 3G 8. MACRO ENVIRONMENT As per KOTLER (1995, p. 49), the macro environment consists of theforces that affect the whole micro environment: demographic, economic,technological, natural, political and cultural. 8.1 Social and Cultural environment The cultural characteristics of the areas to be serviced by a wirelessbroadband business are very non-homogeneous. The WiMAX service will not befocused for specific population profiles . In other countries, the WIMAX has beendeployed to attend the regions that the ADSL cannot provide a quality service.For an operator like Telefonica, WiMAX could attend users from medium to bigcities that live far away from urban areas. Other option would be to provide anadditional service to the Speedy subscribers, not focusing on a specific socialprofile. For a new entrant which would compete with ADSL and 3G, there would
  • not be segmentation of the area to be serviced. The segmentation could only beused during the implementation phase. 8.2 Demographic environment The demographic environment is a very important force since it consistsof the population profile in terms of its age, ethnics, immigration, education level,lifestyle, etc.. As these trends are out of control of the company, it is important toanticipate the movement of the trends, to develop scenarios and to provide aconstant adjustment on the market strategies. The observation of the demographic environment trends allow to developgeographic, ethnics, income salary and age segmentation strategies. The geographic segmentation is extremely important for a WiMAXdeployment project. It allows identifying areas with great growth potential and lowlevel of competition. It is on these areas that the deployment should start. 8.3 Economic environment The main implications of future changes on the economic environment arerelated to the demand. The demand is very sensitive to the variations of theeconomic activity and any well defined plan may fail if it ignores the influence ofthe economic environment. Brazil, which has the fifth greater population and the eighth consumermarket in the world, it is becoming one of the best option for business in theworld. The internal market growth and the continuous class C expansion hasboosted the consumption in Brazil. As per magazine Exame (08/April/2009), the Class C spend its incomesalary as:
  • • 21% at commercial establishments (supermarket, drugstores) • 11% with transport (bus, subway, gasoline, taxi) • 10% with food (restaurant, groceries, snack bars) • 8% with entertainment (gifts, sightseeing, internet) • 7% with basic services (telephone, light, water, house rent) Based on this scenario, it is expected a high demand broadband services on the next years. 8.4 Technological environment At highly competitive segments, the technology is a key determinant factorfor the business continuity. The innovations which aggregate product andservice value affect the end user perception, creating a maximization of the costbenefit and an increase on the competitive advantage. The main deployed technological solutions to offer broadband services inBrazil are the UMTS with its HSPA platform and the old EVDO technology. Othermobile technologies that offer wireless data are GPRS and EDGE from GSMnetworks and 1xRTT from CDMA networks. MMDS operators also offer wirelessinternet (radio connection). The mobile broadband HSPA is the dominant technology. If we considerthe UMTS cellular phones and 3G data devices, they represent 96% of 3Gaccesses in Brazil (source: Teleco). Regard the fixed telephone market, the operators are updating their ADSLnetworks with ADSL2, ADSL2+, VDSL and also are beginning to deploy theFTTH technology. The Exhibit 8.1 depicts a performance comparison among differenttechnologies
  • Peak ThrouputAccess Technology Mode Downlink ReachWiMAX* 3,5 GHz - 5 MHz <1.0 kmbandwidth FDD Wireless Fixed 15 Mbps (urban area)WiMAX* 2,5 GHz - 5 MHz Wireless <1.25 kmbandwidth TDD mobile 10 Mbps (urban area)WiFi (802.11a/b/g) Mobile < 54 Mbps < 0.1 kmADSL Fixed 8 Mbps 3 kmADSL2 Fixed 12 Mbps 1.5 kmADSL2+ Fixed 24 Mbps 1.5 kmVDSL Fixed 50 - 100 Mbps 0.4 kmFTTP (BPON-ATM) Fixed 622 Mbps 20 kmFTTP (EPON-Ethernet) Fixed 1.250 Gbps 20 kmFTTP (GPON-Ethernet/GEM) Fixed 1.244 Gbps 20 kmFTTP (GPON-Ethernet/GEM) Fixed 2.488 Gbps 20 kmEVDO* rel A - 1.8/1.9 GHz - Wireless1.25 MHz bandwidth mobile 3.1 Mbps <1.7 kmHSPA* 1.8/1.9 GHz - 5 Mhz Wirelessbandwidth mobile 14.4 Mbps <1.7 kmHSPA+* 1.8/1.9 GHz - 5 MHz Wirelessbandwidth mobile 28 Mbps <1.7 kmExhibit 8.1 – Technology performance comparison among different technologies* Reach refers to a throughput that is less than the peak value It is noticed that in terms of access technology, WiMAX will face strongcompetition from 3G technology (HSPA and HSPA+). In the latest years the WiMAX technology had the following successes: • ITU accepted WiMAX as the sixth aerial interface for the IMT-200 • UQ Communications (sponsored by KDDI operator and Intel) granted the 2.5 GHz license in Japan for WiMAX • Intel invests heavily in infra-structure makers in Taiwan • Clearwire starts its operation in USA • Certification equipment is started at 2.5 GHz spectrum • Notebooks with embedded WiMAX are launched At the same time:
  • • Em junho de 2008, número de usuários HSPA atinge 65 milhões no mundo, um aumento de 81% em relação a Dezembro 2007. • In June 2008, HSPA users reach 65 millions in the world, a 81% increase compared to December, 2007. • The great success of the iPhone 3G as an strategic mark for the mobile industry • NGMN (Next Generation Mobile Networks Alliance) adopts the LTE as the preferred technology • At the end of 2008 there was more than 800 HSPA devices (mobile phones, PCMCIA cards, USB modem, laptops, etc) available on the market This proves that the HSPA has a great world market and continues gainingroom and benefiting from the economies of scale. Other negative aspect for WiMAX is the requirement of capital intensivewhile the HSPA deployments are already done and requires only expansion orupgrades to accommodate new users. One of the crucial factors for the WiMAX market is the availability of end-users devices. The first devices, the CPEs (table devices and outdoor ones) hada very restricted market while laptops and USB cards will have a bigger market.The WiMAX success is directly linked to the availability of devices. This makesthe user visualize value and bring advantage competitiveness to the business.Until now the device availability is very shy. Other competitor for WiMAX is the LTE technology which a technologicalfundamental similar to WiMAX. A telco could wait for the LTE consolidation anduse it instead of WiMAX. LTE has been supported and developed by greatvendors of network infrastructure while the majority WiMAX infrastructure aresmall companies.
  • 8.4 Political environment The political and legal environment is composed of laws, governmentagencies and pressure groups that influence and restrict the actions of thecompanies. The political environment provides great restriction over theorganizations and individuals. In July 2009, Anatel proposed a smoothly reduction on the TV operatorsfrequencies in the 2.5 GHz band. The proposal consists in reducing the availablespectrum from 190 MHz to 70 MHz in 2012 and from 70 MHz to 50 MHz in 2015.To start a WiMAX operation, 50 MHz may be enough. But 50 MHz of spectrumeliminates any possibility of expansion. It may be possible one or two operatorsin the same region with 25 MHz of spectrum without considering the band guardthat may reach 5 MHz. In Portland, USA, Clearwire started its operation with 30MHz of band and can increase the spectrum usage until 120 MHz (source:Teletime magazine, August 2009). The great movement on this area was the TVA acquisition by Telefonica inthe cities of São Paulo, Rio de Janeiro, Curitiba and Porto Alegre. It iscommented that Telefonica paid between R$ 1 billion and R$ 1.6 billion and thatmost part of this value was due to the acquisition of the spectrum which iscurrently used by MMDS operation (2.5 GHz range). Recently Telefonicaacquired Vivo which means that their interest on WiMAX may not exist anymore. Anatel intends to use the 2.5GHz spectrum with services such as LTE. The 3.5 GHz spectrum range is another band to be used for WiMAX.There are few operators on this range such as Embratel (whole country license),Brasil Telecom (license for 12 ANs), Grupo Sinos (AN RS1), Neovia (DirectNet)in the state of São Paulo, and WKVE (6 ANs in the states of Minas Gerais,Espírito Santo and Bahia). It should also be noticed that there is the lobby from cellular operatorswhich had already invested billions to obtain their spectrum license. They
  • argument that a MMDS operator deploying WiMAX would have a non fairadvantage by offering wireless broadband services with WiMAX technology. 9. INTERNAL MICRO ENVIRONMENT The internal micro environment considers the resources, capabilities andthe essential competencies of an organization which although they do notprovide an intrinsic value, they represent value when seen by the possibility ofgeneration of competitive advantage for the enterprise, providing return oninvestment above the average (CECCONELO e AJZENTAL, 2008 p. 114). The deployment and operation of a WiMAX network require diverse anddifferent competencies of human resources and also from the organization. Thecompetence of an organization represents the summation of the learning of allgroups of abilities both at personal level and organizational level (HamelePrahalad (1995, p.233). Basically the competencies required to deploy and operate an WiMAXnetwork are: • Knowledge and experience with radio-frequency engineering (it requires knowledge and experience with propagation, network design, antennas, etc). The challenge is to design a network to meet day one requirements as well as future requirements • WiMAX knowledge on both access and core sides • Cellular network deployment experience • Experience in site acquisition and site sharing • Technological group to evaluate infra-structure equipment as well as device hardware
  • • Experience in network operation, CRM, IP, billing, security and services • Marketing experience: coverage area segmentation and priorities, traffic estimation and growth prediction, business models, subscriber packages positioning, competitors knowledge As already commented on this paper, the content is the crucial part of thewireless broadband business. Users are not only interested on the broadbandpipe. They want the applications and services that the broadband can provide.This means that the broadband provider needs to do partnerships with contentdistributors and also brings to the market the more advanced end-user WiMAXdevices. 10. KEY SUCCESSES FACTORS The business and competitor knowledge will allow to determine the keysuccesses factors which are the minimum requirements that are necessary for aenterprise to compete with possibilities of success. Based on literature, it is known that main success factors in the WiMAXnetwork operation are the availability of CPEs, laptops and smartphones, serviceprice and the cost of the backbone access to internet. Regarding the project deployment, as per COMARCH, the main successfactors are the choice of WiMAX infra-structure provider totally engaged with thistechnology. Also, it is very important to minimize the number of additionalproviders for IP network, BTS backhaul, data servers, civil infra-structure, siteacquisition. Other important success factors are definition of site priorities;maximize site sharing options, and a presence of a very skilled deployment team.
  • 11. BUSINESS SUMMARY FRAMEWORK In accordance to CECCONELLO and AJZENTAL (2008, p. 134), it isimportant to aggregate all related information that concerns to the business planin a table in order to make available a qualitative and quantitative summary aboutthe aspects that can and cannot interfere directly or not directly in the businessthat is being proposed. The elaboration of this frame intends to bring to the tablean integrated view about different existent variables that are pertinent to theproposed business, pertinent to the definition of the business and to the genericand marketing strategies. Table 11-1 provides this framework. 1 Potential Demand Fixed broadband access lines should increase from 10.38 millions to 18.9 millions by 2013 (source: Pyramid Research 2008) The number wireless broadband connections will surpass the number of broadband fixed connections by 201, when it wil reach 28 million connections (source: Pyramid Research 2009) The number of 3G subscribers will reach 46 millions in 2012. More thant half of these subscribers will use the cellular handset to access the internet (source: Yankee Group and Ericsson 2009) Infonetics Research (2009) forecasts 8 million WiMAX connections in Brazil by 2013 from 184 thousand connections in 2008. This means a CAGR of 112.64% The incorporation of people and families into the consumer market 2 Problems in meeting the demand Recent news show that there is a growing demand for broadband connections in a pace that the service providers cannot meet. 3 Not satisfied users xDSL services (e.g. Speedy from Telefonica) has presented several complaints mostly due to congestion in the network 3G services need to improve the network quality
  • 4 Strong and weaknesses of the services xDSL services (e.g. Speedy from Telefonica) show throughput options that 3G services do not support The strong aspect of 3G services is the mobility 5 Technical viability Mobility restriction imposed by Anatel is one of the negative factors to be considered. However the subscriber can still access the internet from anywhere where there is service coverage The 50 MHz range of spectrum proposed by Anatel in the 2.5 GHz band can make not feasible growing plans of the WiMAX. This 50 MHz band could be shared between up to two providers 6 Economic viability Growing demand for broadband flags the WiMAX potential Few availability of WiMAX handsets in comparison to 3G devices can kill the WiMAX technology WiMAX will face heavy competitiveness from 3G systems which have more thant 800 different access devices in the world It is not sure for investment banks what is the differential that the WiMAX provides in comparison to the 3G networks WiMAX system at 3.5 GHz band will need a greater investment than 2.5 GHz systems (3,5 GHz coverage is pretty less than 2.5 GHz coverage) Network deployment requires very intensive capital. Providers which already have transmission backhaul and internet backbone access, can deploy WiMAX with less capitalTable 11.1 – Framework for the business conception
  • 12. BUSINESS CONCEPTION The goal of this chapter is to provide a base foundation for, given theopportunities analysis, to structure and develop a strategic proposal for , in thesequence, to verify its viability.12.1 Business Plan Definition The business plan is a tool in which the entrepreneurs employs it in orderto detail their ideas in a concise way based in assumptions of quality where it isdemonstrated its viability and the probability of the business success. In accordance to Chiavenato (2005), the business plan consists of ananticipated planning in which the entrepreneur, based in a collection of data andinformation about a business, try to make it viable Business plans are needed at different scenarios. They can be used toexpand a manufacturer plant, to verify the viability in attending a new market, tomanufacture a new product, to offer a new service. This study will show a business plan for a new business. This plan has asthe first goal to dissolve doubts for a possible decision maker about the quality ofthe plan In accordance to CECCONELLO and AJZENTAL (2008, p. 146), thechallenge of every business plan is to identify precisely the reasons that suggestits elaboration. The reasons can be understood as the characterization of aproblem motivated by the uncertainties about the viability of the business. Theeconomic- financial analysis will reflect the verification of the hypothesis andvariables concerned to the problem under study. In order to obtain a very trustful and solid economic-financial analysis, itshould be necessary to perform an exploratory research that connects trendsand correlations with the observed facts in the environment of the business.
  • The proposed business plan will show the viability of deploying a WiMAXnetwork at 2.5 GHz band. Several researches already commented; indicate anextraordinary growth of the broadband users for the next years, thereforeshowing a great business opportunity.The proposed business plan can be defined as: • Business: broadband access and content in any place • Function: entertainment, research, games, information • Groups: PC users and smartphones • Technology: wireless12.2 Strategic Planning It is seen that there is a kind of difficulty to define the planning function inthe enterprise world, to define its real magnitude and reach (OLIVEIRA, 2007, p.3). Steiner (1969, p. 12) defined five dimensions non-reciprocally exclusive andwithout very defined borders of the planning: • Subject of interest: manufacturing, research, new products, finance,marketing, installations, human resource, etc. • Planning elements: intents, objectives, strategies, politics, programs,budget, standard, procedures, etc. • Time dimension: long-term, medium-term or short-term • Business unit: corporate planning, business unit strategy planning, affiliateplanning, functional groups planning, division planning, department planning,product, services, etc.. • Characteristic: complex or simple, quantity or quality strategic or tacticplanning, public or confidential, formal or informal, expensive or non expensive
  • So, the planning is defined as a process based on the five showndimensions, done to reach a future scenario in more efficient and effective way,using optimized efforts and resources from the organization. In accordance to SLACK et all, (2002 p. 87), strategy is the global standardof decisions and actions that position the organization on its environment andhas the mission to make it reaches its objectives of long term run. Thesedecisions will take place before, during and after the elaboration and deploymentof the plan. The planning can be distinguished into three types: strategic, tactic andoperational. According to OLIVEIRA, (2007, p. 17), the strategic planning is theadministrative process which provides marketing sustentation in order toestablish the best direction an organization should follow, aiming an optimizedlevel of interaction with the external factors - non manageable – and acting in aninnovative and differentiate way. According to FISCHMANN and ALMEIDA (1991, p. 25), strategic planningis an administrative technique which based on the organization environment, itcreates the conscious of the opportunities and threats, strengthens andweaknesses of the organization for the accomplishment of its mission. Basedon this conscious, it is established the purpose of the direction that theorganization should follow in order to take advantage of the opportunities andavoid risks. According to OLIVEIRA (2007, p. 18), the objective of the tactic planning isto optimize the results of determined area of the organization. So, it works withthe decomposition of the objectives, strategies and politics that were establishedin the strategic planning. It is developed by the intermediate management levelsof the organization.
  • OLIVEIRA, (2007, p.19) defines operational planning as the formalizationof the methodologies of development and deployment of specific results to bereached by the functional areas of the organization. The subject matter of this work is the supply of wireless broadbandservices and contents with an objective of return on investment in seven years. The scenario that is expected for the next years (2010 – 2014) ischaracterized by a sustainable economic growth (better than 4% a year). Theincrease in the power consumption of the population will stimulate theappearance of new services and increase the dispute among cellular operators,internet via Cable Modem and ADSL service providers.12.3 Purpose of the Organization: Vision, Mission, Believes &Values, and Objectives According to CECCONELLO and AJZENTAL, (2008, p. 149), the purposeof one organization gathers vision, mission, believes & values, and objectives,which help the arrangement of the organization. These aspects are important inorder for the entrepreneur to build the identity of its business, establishing theorganization climate, the standard of behaviors to be followed, what is reallybeing pursued on its business. According to OLIVEIRA, (2007, p.65), the vision is defined as the limits thatthe owners and main executive people can visualize within a certain period of alonger time and one wider approach. Within this context, the vision provides asolid outline of the strategic planning to be developed and deployed by theorganization. The vision represents what the organization intends to be. According to OLIVEIRA, (2007, p.107), the mission is the reason of beingof the organization. Therefore, it tries to find what is real business of theorganization, why it exists, what activities the organization will concentrate in thefuture.
  • According to OLIVEIRA, (2007, p.67), the values represent a set offoundations and fundamental beliefs of an organization, and at the same timethey provide sustentation for all your main decisions. The values should have astrong interaction with ethical and moral values of the organization. According to OLIVEIRA, (2007, p.141), the objective may be defined as astate, situation or a future result that the executive intends to reach. It relates toeverything that implies in obtaining a final result. Objective is a target with adefined execution deadline and assigned responsibilities. According to OLIVEIRA, (2007, p.141), the objective may be defined as astate, situation or a future result that the executive intends to reach. It relates toeverything that implies in obtaining a final result. Objective is a target with adefined execution deadline and assigned responsibilities. According to CECCONELLO and AJZENTAL, (2008, p. 155), theobjectives show a more quantitative approach of the company goals, on therevenue, market share and profitability sides. Four our business plan, there are: • Vision: innovate and offer entertainment, information and communicationat any place • Mission: provide excellence in content services • Main objective: reach 360 thousand subscribers within five years
  • 12.4 Generic Competitive Strategies According to OLIVEIRA (2007, p. 181), strategy is defined as a path, orway, or a defined and appropriate action to reach, preferably in a differentiateway, the goals, the challenges and established objectives, in a better positioningof the company in front of its environment.. The strategies may be defined inaccordance with the situation of the company, it may be related to the survival ofthe company, growing or development . Porter (1996) identified three generic competitive strategies which a firmcan face and tackle the competitive strengths of the industry in which the firmacts: cost leadership strategy, level of differentiation, and scope of target marketor approach. These strategies are defined below: • Cost Leadership: this strategy aims to obtain a cost structure thatis lower to the firm’s competitors, allowing it to obtain a great revenue volume.The firms that adopt this strategy need to minimize costs by controllingadministrative, marketing, distribution, research and development, humanresources costs etc.. • Differentiation: the firm distinguishes its products in way that theyare noticed as unique on its industry. The differentiation may be in the offer ofproducts or services, on the deployed technology, on the delivery system, on themarket process, on the brand, style, performance, post-sale support, etc.. • Scope of target market: this strategy consists of concentrating theefforts in a determined group of customers, in a product line segment or in aspecific market. This strategy is based on the assumption that a firm is differentwhen it better attends the needs of a specific market, or provide lower costs forthis specific market or both things. For the proposed business plan, intends to be: • Cost leader when compared to 3G systems. The differentiationwill appear as a consequence of the business. If a fixed wireline operator deploys
  • this project, it will be the only company to offer fixed and mobile broadbandaccess at the same time.12.4 Marketing Strategy The marketing strategy should be elaborated with the aim of reaching thepurposes of the organization and or of the business. According to KOTLER & ARMSTRONG (1993, p. 367), the strategic plandefines the mission and general objectives of the firm. Each business unit shouldprepare its functional plans, including the marketing plan. If the business unitconsists of so many product lines, brands and markets, it may be necessary todevelop plans for each of them. The marketing plans may include product, brandand market plans.12.4.1 Marketing Plan Definition According to CECCONELLO and AJZENTAL (2008, p.161), the marketingplan integrates the interdependent elements of the marketing such as sales,product management, customer assistance, advertisement, merchandise, salespromotion, lobby, public relations, brand and distribution. The marketing mix defines the strategic position of a product in themarket. It includes the four main variables that a firm can administer in order toimplement its market strategy: Product, Place (distribution), Promotion and Price. According to CECCONELLO and AJZENTAL (2008, p.161), the marketingplan should be specific for product line, by market and by region and must besupported by the market research. The main objectives are to provide theexecutive board a concise and complete financial and marketing summary reportcontaining the forecast result and objectives.
  • The proposed business plan intends to provide: • Executive summary: the broadband service will attend firstly theurban areas where there are greatest fixed broadband subscriber density • Current market situation is dominated by a great expansion of 3Gbroadband subscribers. 3G system quality is still a issue (EXAME magazinereport, 15/July/2009 p. 91) • As described in the beginning of this work, there will be a greatdemand for broadband services on the next years. This is the great opportunityThe threat is the lack of user devices such as smartphones, USB dongles, andlaptops with embedded WiMAX modem. • Be present in the fixed broadband users market, by offering themwireless broadband access by a small additional amount. The plan is to capture360 thousand subscribers in five years.12.4.1 Market Segmentation 1. Segmentation Market segmentation consists of identifiable groups within a market: Benefit segmentation consists in dividing a market into groups based on the different benefits that consumers seek on a product or service (people that seek for low prices, others that seek superior quality, and others that seek service quality). Demographic segmentation consists in dividing the market into groups based on age, sex, education, income, religion, etc.. Occasion segmentation consists in dividing the market into groups according to the occasion when the consumers get the idea, purchase, use the product (e.g.: passengers traveling by business, by leisure or emergency reasons
  • Usage rate segmentation means in grouping persons based on their usage rate: heavy, medium, light, and nonusers of a product. For instance, some people drink one cup of coffee per day (light users) while others drink five or more cups per day (heavy users). Life style segmentation is a type of psychographic segmentation which consists in grouping persons or diving a market based on preferences of their lifestyle (for instance high class people which consume imported cigars and use sport cars, people that enjoy outdoor life, etc) According to KOTLER (2009, p. 45), the market professional can concentrate its efforts into one or two segments and which of them receiving the appropriate consideration. 2. Market Niche KOTLER (2009, p. 45) defines niches as a group of small customers whichshow more defined characteristics, or a unique combination of needs. Byconcentrating in attending a niche provides some advantages, including theopportunity of knowing each customer in a more personal way, to face lesscompetitors and sell services and products with a superior margin once thecustomers intend to pay more for the fact of having their specific needs attended. 3. Local Market According to KOTLER (2009, p. 47), the firms may identify smallercustomer groups which share some characteristics and offer marketopportunities known as local market. Many companies provide customerdatabases which contain information about demography, previous customerpurchase, preferences and other customer characteristics Our business plan intends to:
  • • Use demographic segmentation: the network rollout will start in the high income areas and reach the suburban areas in a later date.12.4.1 Marketing Mix The marketing mix, also know as the 4P’s - product, price, promotion, anddistribution (place) - translates into actions that should be performed in order toinfluence the buyer. As per CECCONELLO and AJZENTAL (2008, p.163), and KOTLER(2009, p. 126), the 4P’s are described as: • Product: attributes of any good, service, idea, person, institution, etc., which potentially has an exchange value. It is featured by variety, quality, design, brand, package, size, warranty, reimbursement. • Price: attributes that reflect the cost of the product to the consumer, as the price itself, payment conditions, acceptance or not of credit cards among others. It includes price list, discounts, licenses, payment deadline, credit conditions. • Distribution (Place): is everything that relates to the distribution, physical location and logistics to make the product arrives to the final consumer. It consists of channels, coverage, location, stock, transport. • Promotion: is the active communication process of the attributes and benefits of a product for the intended target market. It is characterized by sales promotion, advertisement, sales force, public relations, direct marketing.
  • KOTLER (2009, p. 127) considers the inclusion of two other P’s that arevery important for the global market: politics and public opinion. CECCONELLO and AJZENTAL (2008, p.164) state that when a service isbeing offered, three more P’s may be added to the 4P’s: • People: they are the individuals involved in the service delivery (how they are trained, how they behave in the service delivery, etc..) • Processes: consist of the activities that the individuals perform to provide the service delivery • Physical evidence: it is an element of the marketing mix which customers can actually experience or visualize when they use a service, and which contributes to the perceived quality of this service. It is the place where the service is delivered (airplane, doctor’s clinic, etc) Our business plan consists of: • Product: wireless broadband and differentiated content • Competitive price when compared to the 3G systems • Establish a process where the service subscription may be completed in five minutes • Service will be delivered in any place in São Paulo city where there is network coverage The table 12.1 presents a summary frame of the business plan conception.
  • Dimension Definition Business: Broadband and content access anywhere Function: entertainment, research, games, information 1 Business Plan Groups: portable computer and smartphones users Technology: wireless (WiMAX) The subject matter of this work is the supply of wireless broadband services and contents with an objective of return on investment in seven years. The scenario that is expected for the next years (2010 – 2014) is 2 Strategic Planning characterized by a sustainable economic growth (better than 4% a year). The increase in the power consumption of the population will stimulate the appearance of new services and increase the dispute among cellular operators, internet via Cable Modem and ADSL service providers. Vision: innovate and offer entertainment, information and communication at Purpose of the any place 3 Organization Mission: provide excellence in content services Main objective: reach 360 thousand subscribers within five years Cost leader when compared to 3G systems. The differentiation will appear as Generic a consequence of the business. If a fixed wireline operator deploys this 4 Competitive project, it will be the only company to offer fixed and mobile broadband Strategies access at the same time 5 Marketing Strategy Executive summary: the broadband service will attend firstly the urban areas where there are greatest fixed broadband subscriber density Current market situation is dominated by a great expansion of 3G broadband subscribers. 3G system quality is still a issue (EXAME magazine report, 15/July/2009 p. 91) As described in the beginning of this work, there will be a great demand for 1 Marketing Plan broadband services on the next years. This is the great opportunity The threat is the lack of user devices such as smartphones, USB dongles, and laptops with embedded WiMAX modem Be present in the fixed broadband users market, by offering them wireless broadband access by a small additional amount. The plan is to capture 360 thousand subscribers in five years Market Use demographic segmentation: the network rollout will start in the high 2 Segmentation income areas and reach the suburban areas in a later date. Product: wireless broadband and differentiated content Competitive price when compared to the 3G systems Establish a process where the service subscription may be completed in five 3 Marketing Mix minutes Service will be delivered in any place in São Paulo city where there is network coverageTable 12.1 – Business plan conception summary frame
  • 13. WIMAX NETWORK BUSINESS PLAN The elaboration of the business plan is the first step in order to build aWiMAX network. It is a critical step whose final results will depend heavily on theassumptions defined on this phase. Bad assumptions will improperly influencethe next steps of the project. The business plan is characterized by several analyzes involving thetechnical and economic areas that will provide profitability and risks estimationsderived from the assumed assumptions. The business plan should consider the competitors that are part of thebroadband market and their technologies, initial investment to build the networkand the operation costs of this network. The competitors are the 3G networks(1xEVDO and mainly the HSPA networks0, WiFi networks, Cable modeminternet service providers, and ADSL internet service providers (Haig Sarkiassianand Randal Schwartz, 2007), and the LTE networks. Some authors such asEthevaldo Siqueira (2008), mention that WiMAX will be an advanced alternativefor the broadband access, while the 3G and WiMAX would complementthemselves. The sensibility analysis will determine what are the factors that stronglyaffect the return of investiment of the business. Several methodologies and tools may be used to estimate the profitabilityof the business. The discounted cash flow (DCF) is one of them. This tool candetermine the period of return of the business and also the Net Present Value(NPV) based on an estimation of the discounted future cash flows in order to givetheir present values. In the analysis of the WiMAX business, it should be necessary to estimatethe service penetration and its evolution in the next years, the churn rate and theallowance for doubtful accounts, the revenue evolution and the network operationcosts. The terms CAPEX (capitalized expenses which are the network infra-
  • structure costs) and OPEX (expended costs which are the operation andmaintenance costs of the network) will used on this analysis. The elaboration of this business plan will be based on the methodologydescribed by Sarkissian and Schwartz (2007).13.1 Input Parameters The first step for the elaboration of the business plan is to obtain allrelevant parameters that concerns to the business.13.1.1 Morphologic Area It includes the morphologic areas to be attended by the broadbandservices: high density urban areas, urban areas, suburban and rural areas. It isimportant to obtain detailed information for each morphologic area about numberof inhabitants, houses, companies, terrain profile (flat, mountain, etc) and type ofvegetation (grass, trees, etc). For this plan, the intention is to attend the areas described in the table13.1 Total area Environment (km²) Dense urban / urban 187.06 Urban / Suburban 519.62 Suburban / Rural 504.13 Total 1210.81 Table 13.1 – Profile of the areas to be serviced
  • 13.1.2 Spectrum and Bandwidth For a wireless operator, the spectrum ownership is its more valuableasset. The spectrum cost is one of the more critical items of the business plan. Awell elaborated business plan determines how much a future operator can offerby the acquisition of the spectrum in order to provide a reasonable return ofinvestment to its investors. For this plan, it is assumed a bandwidth of 30 MHz (each BTS will have 3channels of 10 MHz) in the 2.5 GHz spectrum band.13.1.3 Coverage Area – Radio Frequency Engineering To determine the coverage area of each base station in order todimension the network, it should be necessary to consider the morphologicenvironment of each base station and the BTS overlapping factor. The tables 13.2 and 13.3 show the generic link budget of a 2.5 GHzWiMAX network for both downlink and uplink. The propagation model used is theSUI (Erceg and others, 1999). Columns A, B and C refer to the morphologicenvironment that can be referenced to the dense urban/urban, suburban andsuburban/rural. The link budget refers to a WiMAX terminal (Smartphone or laptop withembedded modem) in the cell border with rates of 1.5 Mbps and 512 Kbps for thedownlink and uplink respectively.
  • Parameters Downlink A B COperation Frequency (MHz) 2500 2500 2500Frequency reuse N =3 N =3 N =3Mobility Fixo Fixo FixoBTS power transmitter (dBm) 36 36 36Gain: MIMO + array (dB) 5 5 5Ganho da antena da ERB (dB) 17.5 17.5 17.5Jumper losses (dB) 0.5 0.5 0.5Terminal receiver antenna gain (dBi) 0 0 0Terminal receiver sensitivity (BPSK 1/2)(dBm) -96.5 -96.5 -96.5Fading margin (90% area reliability) (dB) 5 5 5Interference margin (dB) 3 3 3Building penetration loss (dB) 18 15 8Maximum allowed loss (dB) 128.5 131.5 138.5Coverage radius based on SUI model(km) 0.85 1.25 2.1Table 13.1 – 2.5 GHz WiMAX link budget (downlink)Parameters Uplink A B CTerminal transmitter power (dBm) 26 26 26Terminal antenna gain (dBi) 5 5 5Receiver jumper losses of the BTS (dB) 0.5 0.5 0.5Receiver antenna gain of the BTS (dBi) 17.5 17.5 17.5Diversity gain (dB) 2 2 2Array anrenna gain (dB) 0 0 0BTS receiver sensibility (dBm) -99 -99 -99Fading margin (90% area reliability) (dB) 5 5 5Interference margin (dB) 3 3 3Building penetration loss (dB) 18 15 8Sub-channelization gain (512 kbps naborda) 3 9 9Maximum allowed loss (dB) 126 135 142Coverage radius based on SUI model(km) 0.75 1.55 2.55Table 13.2 – 2.5 GHz WiMAX link budget (uplink) The business plan intends to deploy 300 BTSs in São Paulo city (andpossibly in some areas in the metropolitan area) as: • Dense urban / urban environment: 128 stations • Urban / Suburban environment: 128 stations
  • • Suburban / Rural environment: 44 stations Considering a consistent level of overlapping among cells, the quantitiesdescribed above meet the coverage needs described in table CAPEX Assumptions The CAPEX includes the acquisition and construction cost of the stations,the BTSs cost, the BTSs installation cost, power equipments, transmissionbackhaul and Core network (ASN, routers, DHCP servers, AAA servers, billingservers, NMS and CRM servers). 1. Sites The future WiMAX operator can develop different strategies of site sharing in order to install a WiMAX BTS. It may share the station, the shelter, antennas, transmission backhaul. Dian and Kettani (2004) show several alternatives of resources sharing. For this plan, it will be used the strategy described in the table 13.4. Sites Percentage New sites 30% Existing sites 30% Shared sites 40% ‘Table 13.4 – Sites deployment strategy The sharing model is the traditional one where it is arranged aplace to install the BTS and the tower is shared to install the antennas. 2. Spectrum The spectrum may be considered as the main asset of the operator.According to Pyramid Research (2008), the average world price for the
  • Megahertz per population (PMP) is US$ 0.007. This price tends to be greater inthe emergent markets and less on the developed countries. The spectrum price is a very sensitive parameter when determining thepayoff period of a business. A very high price will make not viable the businessplan. According to the Magazine Exame (August 2009, p. 11), it is described thatthe purchase of TVA by Telefonica represented to the spanish operator a valuebetween R$ 1 billion and R$ 1.6 billions. It is estimated that 50% of this value isdue to the spectrum cost (190 MHz in the 2.5 GHz band). For this plan, it is assumed a price for the spectrum much greater than theworld average price. It is being assumed a price of R$ 0,20 per Megahertz perpopulation. Segregating for the São Paulo city, the spectrum price will be R$ 66millions (30 MHz spectrum band). This price is well in accordance with the priceTelefonica paid to acquire 190 MHz of spectrum from TVA for the cities of SãoPaulo, Rio de Janeiro, Curitiba and Porto Alegre. These cities represent 21million inhabitants. However, due to the need of guard band between MMDS andWiMAX systems, it is being assumed a value of R$ 90 millions for 30 MHzspectrum in the city of São Paulo. 3. BTS The base station transceiver (BTS) is the network element responsible bythe communication of the WiMAX system with the subscriber devices. Thecomplete system contains BTSs, RF cables, antennas and a transmissionbackhaul system. The backhaul is responsible of transmitting the aggregatetraffic of the subscribers under a BTS towards the network core. It is being assumed that the proposed network will require 210 radio point-to-point links. The remaining backhaul transmission will be provided by fiberoptics whose cost will be assumed as network operation. The table 13.5 showsthe estimated costs of acquisition of BTSs and accessories, antennas, radio linksand installation material.
  • Unit price Item (R$) Number Total price BTS, acessories, installation material 95.000 300 28.500.000 Antennas 600 1800 1.080.000 Digital - point-to-point (70% of the sites) including the installation material 68.500 210 14.385.000 Total 43.965.000Table 13.5 – Expected costs for BTSs, antennas and radios acquisitionIt will be assumed the following values for the installation costs • BTS: R$ 8.000,00 per unit • Radio: R$ 5.100,00 per link 4. Civil costs The civil part includes all the necessary elements in order to prepare thesite to start the WiMAX BTS installation. It includes site acquisition costs(purchase or rent), civil infra-structure construction costs and powering. The table 13.6 exemplifies the costs where the scenario consists of 30%new sites, 30% existing sites and 40% shared sites. Item Unit price (R$) Number Total price Metalic post (30% of the sites) 50.000 90 4.500.000 Metalic post foundation (30% of the sites) 80.000 90 7.200.000 Installation material (civil) 5.000 90 450.000 Civil construction 15.000 300 4.500.000 Site acquisition costs 7.500 90 675.000 Total 17.325.000 Table 13.6 – Infrastructure costs for new sites
  • 5. Core Network The WiMAX core basically consists of the ASN (Access Service Network)and CSN (Customer Service Network) entities. The ASN includes the necessary functions to provide radio access to theusers terminals. The ASN entity consists of the BTSs and the ASN gateway. The CSN consists of the AAA (entity responsible for authentication,authorization and accounting of users traffic), DNS/DHCP (domain name serviceand dynamic host configuration protocol. It is an entity for internet access), HA(Home agent. It provides the PDSN (packet data service node) function andprovides IP connectivity to the users terminals), NMS (Network ManagementSystem. It provides the function of operation administration and maintenance ofthe network). The WiMAX core network usually also includes a CRM (Customerrelationship management) platform and an IP network in order to interconnect allplatforms of the core network. The table 13.7 shows the assumed values used for the Core network. Item Unit price (R$) Number Total price 20 SUN V440 platforms (main and backup: AAA, Billing, DNS, CRM, NMS) 80.000 20 1.600.000 CRM Platform (software) 1.000.000 2 2.000.000 AAA Platform (Bridgewater or Metasolv) 150.000 2 300.000 NMS Platform (software) 500.000 4 2.000.000 Switch router 103.700 4 414.800 Firewall 25.000 2 50.000 Installation material for the interconnection of platforms and equipments 25.000 1 25.000 Total 6.389.800 Table 13.7 – Core network costs
  • 6. Deployment costs The deployment costs refer to the Project management, engineering andinstallation costs. It is assumed a total cost of R$ 16 million reals for a 18-monthdeployment.13.1.5 Subscribers Growing Rate Assumptions In the beginning of this work, it was elaborated an analysis to dimension thewireless broadband subscribers base for the next years based on projectionsfrom research institutions, education level of the Brazilian population, wirelessinternet users profile and also projections based on the income rate of theBrazilian population. The more pessimistic result provides a number of 4 millionwireless broadband users in the state of São Paulo. The forecast of several research institutes is that the number of WiMAXsubscribers in the world will vary between 2% and 10% of the total 3G broadbandusers. This forecast limits the number of WiMAX users. So, the strategy of theplan is that a fixed operator (e.g. Telefonica in São Paulo), offer an additionalwireless broadband service to their subscribers. This plan is limited to the São Paulo city where there is an estimation of acapacity of up 2 million users of wireless internet in the next years. The goal is tocapture 360 thousand subscribers as depicted below: 1. Service plan The WiMAX technology intends to provide a great price decrease of themegabit. In addition, it provides a fast network deployment. Also, the presence inthe market of laptops and smartphones with WiMAX embedded modems, all thiswill provide the operators a great competitive advantage.
  • The proposed service plan consists in providing for ADSL users thepossibility of acquiring a wireless broadband service by a small amount ofmoney. The table 13.8 shows the service plan. Users Price Class QoS DL OSR distribution (R$) Minimum 1500 kbps 25Business Maximum 5000 kbps 50 5,0% 129 Minimum 512 kbps 25Platinum Maximum 1500 kbps 50 10,0% 44.9 Minimum 256 kbps 25 Gold Maximum 1000 kbps 50 35.0% 34.9 Silver Best Effort 512 kbps 50 50,0% 24.9Table 13.8 – Service Plan (QoS: Quality of service, DL: downlink, OSR:oversubscription rate) The OSR parameter informs the amount of the designed overload for thenetwork, i. e. , how much capacity is exceeded if all users access the network atsame under their designed nominal rate. Typical overload values are between 25and 40. The business plan does not consider additional value services that theoperator may offer to their subscribers such as video and music download,content distribution such as online news and specific on demand entertainment. According to ANDRÉ RIEDEL and others, different ways of incentives mayreduce the traffic demand at congestion periods and allow to increase theoverbook value of the project subscribers. 2. Subscribers evolution growth The subscribers growth plan forecasts: • 54 thousand subscribersin average in the first year
  • • 144 thousand subscribers in average in the second year • 230 thousand subscribersin average in the third year • 300 thousand subscribers in average in the fourth year • 360 thousand subscribers in average in the fifth year13.1.5 OPEX Assumptions OPEX represents the costs incurred to keep the firm in an operational state.It includes the network operational costs and planning, transmission backhaulmaintenance, power, site rents, sales, marketing, promotion and customersupport. According to some technical papers from WiMAX Forum, “Business CaseModels for Fixed Broadband Wireless Access based on WiMAX Technology andthe 802.16 Standard” (2004) and “WiMAX: The Business Case for Fixed WirelessAccess in Emerging Markets” (2005), it was developed the assumptions for thenetwork operation costs. These publications also contain the estimation of thecosts for internet connectivity. It is estimated the internet connectivity costs willvary between R$ 5 million reals and R$ 17 million reals per year. The table 13.9shows the cost assumptions for the network operation.
  • Item Assumptions 20% of the revenue in the first year, decreasing to 11% of the revenue in the fifth year andMarketing and Sales expenses beyond 10% of the revenue in the first year, decreasing to 7% of the revenue in the fifth year andNetwork Operation beyond 6% of the revenue in the first year, decreasing toG&A 3% of the revenue in the fifth year and beyondBTS Maintenance 5% of the BTS CAPEXNMS Maintenance 5% of the NMS CAPEXRadio Maintenance 5% of the Radio CAPEXSite rent R$ 1800,00 a month in average per siteProvision for bad debts 1% of the revenueCRM Maintenance 5% of CRM CAPEXAAA Maintenance 5% of AAA CAPEXSun platforms maintenance 5% of Sun CAPEXInternet connectivity access Between 5 million and 17 million reals per yearTable 13.9 – OPEX assumptions13.2 Output Parameters The main Project output parameters are the period of return of theinvestment, the Internal Rate of Return (IRR) and also the Net Present Value(NPV) . The network deployment will cost R$ 94 million of reals in equipments, sitesand project team. In the year zero, it will be necessary R$ 65.7 million of realsand R$ 28.3 million of reals in the first year of network operation. Additional R$18 million reals are necessary in the first year to operate the network in its firstyear. Based on the above assumptions, it is estimated that the period of return ofthe investment will be six years. It is estimated an IRR of 11.56% on the end ofthe seventh year of network operation.
  • The Business plan development of a WiMAX network is a very complexprocess that takes so much time. As there are several involved variables, it iscrucial that the project assumptions be consistent and precise. The sensibility analysis shows that the more sensible items are spectrumlicense price and the internet connectivity price. As already commented, this proposed service is to be offered to the fixedbroadband users (e..g. Speedy from Telefonica). So, by a small additional price,these users could purchase wireless broadband internet with mobility. Thisstrategy is aligned with the studies done by LANOO and others. 14. WiMAX NETWORK DEPLOYMENT A Project is a temporary effort undertaken to create a unique product,service or result (PMBOK 2004). Temporary means that all projects consist of avery well definite beginning and a definite end. The projects are a way of organizing activities that cannot be approachedwithin the operational limits of an organization. The PMBOK (Project Management Body of Knowledge) has become avery widely used standard by several organizations in the world. Together with the Project Management, the Six Sigma methodology hasbeen deployed by project managers and other professionals in search of greaterefficiency and effectiveness in the deployment of projects and businessmanagement. ISREFANI C. de PAULA and others (2006) compare the approachof Project Management and Six Sigma methodology, identifying similarities anddifferences. According to WERKEMA, the Six Sigma methodology is not just anotherinitiative of project management or a program of process improvement that usesold concepts in a modern way. The Six Sigma methodology is a continuous
  • strategy based on data statistics information collected in projects andorganizations. According to ISTEFANI C. de PAULA and others (2006), on themajority of the projects, the Six Sigma methodology is conducted by teams ledby Black Belts or Green Belts and it is usually deployed with the processimprovement method called DMAIC (Define, Measure, Analyze, Improve,Control). According to to Eckes (2001), each phase means: According to WERKEMA, the Six Sigma methodology is not just anotherinitiative of project management or a program of process improvement that usesold concepts in a modern way. The Six Sigma methodology is a continuousstrategy based on data statistics information collected in projects andorganizations According to ISTEFANI C. de PAULA and others (2006), on themajority of the projects, the Six Sigma methodology is led by teams leadered byBlack Belts or Green Belts and it is usually deployed with the processimprovement method called DMAIC (Define, Measure, Analyze, Improve,Control). According to to Eckes (2001), each phase means: 1. Define: definition of improvement goals for the different levels of the organization such as improvement of the profitability numbers of operation and projects, manufacturing level and improvement, and service quality improvement. The problems and the inefficiencies should be considered as opportunities of improvement. In this phase, it is started the stream value mapping. 2. Measure: measure the efficiency and effectiveness of the current system using reliable metrics that will allow to monitor the progress of the system through these metrics. In this phase, it is the stream value mapping is finished. 3. Analyze: use of techniques and statistics tools in order to eliminate thegap between current performance and desired performance level. It isdetermined the root cause of the problems and inefficiencies.
  • 4. Improve: find creative methods based on root of the problems in orderto improve process that will result in way to accomplish the activities in a betterway providing the desired outcomes. 5. Control: Implement the control in the new system or process andensure that the improvements will be sustained in the future and that the desiredoutcomes are achieved. The control should be done both at tactic and strategiclevel of the organization. ] According to PETERKA (2005), the search of the root cause of theproblems, the magnitude and accuracy of the Six Sigma methodology, all thismake the Six Sigma methodology different of the typical project management.The Six Sigma method contains a Project Charter model very well defined thatdescribes the project scope, financial goals, benefits, milestones and others. It isstrongly based on data and economies with hard control (DMAIC) that performsspecific measurements, identify specific problems and their root causes, andprovide specific solutions that can be measured. In project management cases,the organizations usually implement projects without a complete knowledge ofwhat are the financial gains. According to MUNIZ (2008), in the implementation of a project, it should betaken into account that the main goal is to create value to the final consumerproviding an enough and competitive profitability margin to the allocated projectcapital. Therefore, besides of the mastering of the process techniques (initiation,planning, execution, control and administrative closure) and project managementtools, it is strictly necessary to consider the concepts and market analysistechniques, risks modeling and evaluation, and the return of the projectinvestment. So, it is important that the project manager consider the investment,financial and operational decisions. The Six Sigma methodology will provideperformance metrics in a continuous way to the project manager. So, decisionscan be taken in a fast and precise way.
  • 14.1 Diamond Model One of the more common myths in the world of project management is thatall projects are similar and that tools and similar methods can be used for allproject activities. This erroneous concept took several projects to succumb to thefailure and created great disappointments to the project managers, stakeholdersand project sponsors. The reality is that projects differentiate by themselves in several aspectsand few organizations acknowledge this formally. According to SHENHAR (2005), the diamond model consists in fourdimensions which are novelty, complexity, technology and pace. He shows howto classify the projects and how to adapt the management style for the correctproject. The four dimensions for distinction among project types are • Novelty: how new is the product to customers and users o Derivative, Platform, Breakthrough • Technology: how much new technology is used o Low-tech, Medium-tech, High-tech, Super-tech • Complexity: how complex is the system and its subsystems o Assembly, System, Array • Pace: How critical is the time frame o Regular, Fast/Competitive, Time-critical, Blitz
  • An example of incorrect use of this model was the project of theconstruction of the Denver Airport. (technological dimension wasunderestimated). The exhibit 14.1 shows the Diamond Model that was defined for theproject described on this work. In terms of novelty, it is a platform, i. e., the final user will have a product(internet access) which is not a disruptive technology, i. e., the embeddedtechnology of this product is transparent for the user (user wants to access theinternet with mobility). In terms of complexity, this project fits as a system, i. e.,the deployment will request a reasonable number of interactions in theorganization. In terms of technology, this project fits as high-tech because it hasnever been deployed by the organization. Also, WiMAX is a relatively newtechnology and considered as disruptive by many authors such as ORTHMAN(2005). The deployment pace is fast / competitive (most of cellular networkdeployments fits on this pace). Therefore, based on above, it can be defined the management stylerequired for the Project as well identify the benefits and risks of the Project. Thedimension technology is identified as high-tech. This requires an engineeringteam very well trained and experienced and a project management team veryconscious of this aspect of the project where it will be necessary an amount oftests above the average of the other projects. This requires a consciousdimensioning of the budget for this activities as well as a realistic estimation ofthe deadline of the acceptance of the project.
  • Technology Super HIgh Tech High Tech Medium Tech Novelty Low Tech Complexity Breakthroug Platform Derivativ Assembly System Array h e Regular Fast / Competitive Time- Critical Blitz PaceExhibit 14.1 – Diamond model of the WiMAX network14.2 Project Charter According to the PMBOK, the Project charter is the document thatauthorizes formally a project and provides to the project manager the authority toapply resources of the organization in the project. The project charter dealsmainly with the documentation of the needs of the project, the justification of theproject, the customer needs, the new product or service, or the project result. The project charter should address the following information: • Requirements that satisfy the needs, desires and expectations of the customer, sponsor and other interested parties
  • • Business needs, high level project description or product requirements for which a project is undertaken • Project purpose or justification • Allocation of the project manager and authority level assigned to him/her • Milestone schedule • Influence of the interested parties • Functional organizations and their participation • Organizational, environmental and external assumptions • Organizational, environmental and external constraints • Project business case with return on investment and other financial metrics • Summarized budgetThe table 14.1 provides the main topics of the project charter.
  • Information Answer Opportunity of offering wireless broadband internet access to Fixed internet users.Problem or Opportunity Therefore, compete with 3G systems Deploy a wireless broadband network using the WiMAX technology in the city of São Paulo. The network consists of 300 BTSs providing a total coverage area of 1200 km2. Note: The business plan forecasts that 42.5% of the sites will be installed in denseProposition to solve the problem or urban / urban environment, 42.5% in urban / suburban environment and 15% intaking advantage of the opportunity suburban / rural environment Goal: reach 360 thousand subscribers after 5 years of network operation Innovation: platform; Technology: high-tech; Complexity: system; Pace: fast /Project Type competitive Deadline: 18 months Project Budget: R$ 65.7 million reals in the first year plus R$ 28.3 million reals in theSuccess criterias second year (Total: R$ 94 million reals) Project target: IRR of 11.59% at the end of the seventh year of network operation Sponsors, stakeholders, project team, vendors, government agency (Anatel), real stateInterested parties agencies,subscribers Definition of 300 hundred locations – for WiMAX BTS installation and Core Network installation The new sites that will built represent 30% and the shared sites represent 40% of the total sites. Te remaining 30% of the sites will be existing ones. Definition of the vendors for:Project Scope - WiMAX BTS - Antennas - Digital radios - Core network (ASN, CSN, routers, DHCP severs, DNS servers, billing, security, CRM) Installation, configuration and network testing.Project description - Acceptance The 300 BTSs should provide a coverage área of 300 km2 and each BTS should providecriteria 45 Mbps of aggregate throughput. Local government approval of the installation projects and civil work of the sites.Project description - External Strikes in the Brazilian Federal Revenue Office may delay the customs clearance ;dependencies Regulatory agencies (eg.: Anatel) may delay the certification of the BTSs Exchange rate: dollar price between R$ 2.00 and R$ 2.20 Availability of human resources for the several needs of the firm. Special attention to the project management team which should contain experienced and certified people due to the existence of several simultaneous activities in the project and several acquisitions The site civil projects need to be approved in the local government in a maximum deadline of 20 days. The average number of subscribers in the sixth year of operation should be close to 360,000 users. In order for this to become true, it is important that the Brazilian PIBProject description - assumptions grows in average 4% per year on this period. The BTSs will be purchased from a vendor which meets the required deadlines and whose technical specifications of its WiMAX product be in accordance with the standard. This vendor will also provide the ASG (BTS controller), NMS (BTS and ASG management), WiMAX terminals, BTS antennas, routers, firewall, AAA platform, CRM and spectrum clearance certification. During the network operation, the IP costs of internet access should drop 10% per year.Project description - restrictions Regulatory ( Anatel, city hall, others), budget, deadlineTable 14.1 – Project Charter
  • 14.3 Work Breakdown Structure (WBS) The WBS is part of the project scope management as well as scopeplanning, scope definition, scope verification and scope control. According to the PMBOK 2004, the WBS is the decomposition of theproject work. The WBS consists in the subdivision of the main projectdeliverables and project work into smaller and more easily manageable pieces ofwork. So, the estimation of budget, deadlines, resources and projectdeliverables, is more easily defined. The WBS allows assigning tasks andresponsibilities, identifying interfaces and events, control and program the projectand coordinating the flow of information. In order to verify if the decomposition iscorrect, it is necessary to determine if low level components of the WBS arenecessary and enough for the accomplishment of the deliverables of thecorrespondent higher levels. The decomposition technique provides a tree structure where each leveldetails the items of the above level until it is reached the work package levelwhich is lowest level in the WBS. At the work package level, it is possible tobetter estimate schedule, cost and assign responsibilities. Exhibit 14.2 depicts the WBS for the proposed WiMAX implementation.
  • Exhibit 14.2 – WiMAX deployment WBS14.4 Planning – Activities estimation After the definition of the WBS activities, it is necessary to estimate theeffort for each WBS work package level. This is a very difficult part of a project,especially in new scenarios which it was never deployed. There are severaltechniques and tools which may help to create estimations such as Wide BandDelphi, software Construx and PERT. For the proposed project, based on historical information from cellularnetworks, it may be possible to estimate the necessary effort for each of theactivities described in the WBS.
  • It should be emphasized that the effort to be described herein concernsonly to the WiMAX operator. In the following example, the operator will beresponsible for the preliminary engineering (a), final engineering project part 1(b), hiring of the equipment vendor (k), hiring of the site acquisition firm (i), hiringof the civil work (l). All other activities will be provided by the equipment vendor(BTS, digital radio, Core network including Sun stations, installation,configuration and integration of all these hardware), site acquisition firm (searchsites in accordance to the preliminary engineering project), civil work firm (civilwork project, approval of these projects into city hall and other entities, projectexecution). The WiMAX operator will participate in all these activities, providingnecessary information required for the elaboration of all described projects. Thetable 14.2 shows a summary of the responsibilities.Firm ResponsibilitiesEquipment vendor Provides BTS, digital rádios, antennas, cables, RF acessories, Core network (including Sun stations, softwares for AAA, DH|CP/DNS, NMS, Billing, and CRM, routers, firewall), installation, configuration, integrations and optimizations of all these equipments and network. It will be also responsible for the shipment, storage and delivery of all this hardware to the operator sites.Site acquisition Site prospecting and a close interface with the operator engineering team. Elaboration of the legal part of the rent contractsCivil Project elaboration, obtain approval and civil work executionTable 14.2 – Responsibilities summary So, based on the above responsibility frame, it is necessary an effort of1,080 men-week for the operator (effort distributed among engineering,marketing, commercial, project management, installation). This provides anaverage of 14 resources for 1.5 years of work.
  • 14.5 Planning – Activities sequence At the same time that the estimation of the duration and resources of theactivities are done, it is possible to create the sequence of the activities. According to the PMBOK 2004, the activities sequencing involves theidentification and documentation of logic relationships between the scheduleactivities. The schedule activities can be sequenced logically with properprecedence relationships as well as leads and lags to support later developmentsof a realistic and achievable project schedule. From the activities sequencing, it is possible to determine the critical path.The critical path methods calculates the theoretical early start and finish dates,and late start and finish dates for all schedule activities without considering anyresource limitations. The exhibit 14.3 shows the activities sequencing of the WiMAX project. Exhibit 14.3 – WiMAX activities sequencing
  • 14.6 Risks The Project plan includes assumptions and these contain embedded risks.So, the risks should be managed in way of increasing the probability and theimpact of positive events and lowering the probability and impact of pessimisticevents. According to the PMBOK 2004, the risks management of the projectincludes the processes which deal with the identification, analysis, responses,and monitoring and control on a project. The risks should therefore be identified and prioritized. Decisions should betaken to avoid and mitigate the main risks.. The allocation of resources to theproject should be done for the elaboration of contingent plans against these risks.There are also unpredictable risks that demand the construction a very robustmanagement system that is able to deal with the unknown and unexpectedevents. The tables 14.3 and 14.4 show the identified risks and possible mitigationactions in the deployment of a WiMAX network.
  • Event Probability Impact Actions Work with a priority plan of the sitesRaining level above the average low high once the project starts Transfer the risk to the equipment vendor. Close an agreement based in a fixed value of dollar or make a hedgeDollar valuation high high contract Schedule already considers a possibleCustoms strike medium high customs strike of up to 6 weeks Accept the risk. A lower growth rate willPIB growth below 5% per year in the cause a greater payback period and anext six years medium high smaller IRR There will be impact the business plan with a reduction of the expected number of users per year. Plan is to work withSubscriber handset price reduction less smaller expectations (hire less internetthan 10% a year low high connectivity band) There will be impact in the business plan with a reduction of the expected number of users per year. band). Impact isInternet connectivity prices not reduced with a very tight traffic controldecreasing low high at the user level Work with a priority plan of the sitesCivil project approval delay medium high once the project startsTable 14.3 – Risk response plan – contingencyEvent Probability Impact Actions Strengthen project management teamManagement: Several activities taking with certified and experient professionalsplace simultaneously medium high (includes this in the project scope) Prioritize acquisitions based on a trafficDelays in the site acquisition process medium high demand study Use a rigid RFP criteria including penaltiesEquipment vendor providing products in case of vendor not meeting deadlinesand services without quality medium high and quality metrics (KPIs)Table 14.4 – Risk response plan - preventive
  • 14.6 Adjustments According to the PMBOK 2004, the critical paths have either a zero ornegative total float. It may be necessary adjustments in the activities duration,logic relationships, leads and lags or other restrictions to the schedule may benecessary in order to produce networks paths with a zero or positive total float. The resources and cost constraints also require adjustments in theschedule in order that it gets adapted to the real conditions of the organization. The PMBOK 2004 describes some techniques of schedule adjustment asduration compress (Crashing: this technique consists in additional resourcesallocation, overtime hours and scope simplification; Fast tracking: parallelism). Based on project experiences, the concept of fitting the schedule within apre-determined deadline without knowing the problems and resourcesconstraints, this will take the project to have a few probability or even no chanceto be successful. To maximize the success probability, the manager shouldestablish initially a real finish date using the critical path and not through anarbitrary decision. Based on this date, the project manager may compress theduration of schedule using resource management techniques and risk analysis.The plan should also accommodate the uncertainties in the execution of theactivities in order to ensure the project will finish within the deadline. In case it isnot possible to compress the schedule using the above techniques, the projectsponsor and customer need to be informed about this.
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