Implications of 4G Deployments (MEF for MPLS World Congress Ethernet Wholesale Summit - Paris)

1. 1 Implications of 4G Deployments MEF Workshop – Carrier Ethernet for Mobile Backhaul A presentation for “Ethernet Wholesale Summit 2010” January 2010 Presented by Javier E. Gonzalez MEF Representative

2. 2 Market Analysis, Scale and Trends –  Current trends in backhaul deployments –  Growth drivers and challenges worldwide –  Packet-based backhaul cost advantage analysis –  Implications of 4G (WiMAX, LTE) deployments

3. 3 Market Analysis, Scale and Trends – Packet-based backhaul cost advantage analysis – Implications of 4G deployments •  Backhaul market drivers + What’s driving 4G ? •  Economics of 4G Networks •  Carrier Ethernet for 4G solutions

4. 4 Packet-based backhaul cost advantage analysis The Carrier Ethernet Backhaul Economic Driver TDM backhaul for 4G is costly and unreliable •  Monthly TDM cost per tower for 10Mbps ~ $20K. 4G builds are capital intensive •  Fiber and microwave costs require significant investment ($20-$50K per tower) •  Existing tree topologies are cost-inefficient •  Leased services can balance the CAPEX load

5. 5 Implications of LTE Deployments Backhaul Market Drivers Increased bursty data traffic and streaming video •  User Interface Improvements •  Additional cell sites, devices, and increased b/w (10-100x) •  Wildly varying traffic patterns Rapid deployment is a must •  First to market captures market share (WiMax has a 2-3 yr. lead over LTE) •  Rapid construction requires multiple strategies for backhaul deployment (self-build, lease)

6. 6 Economics of 4G networks Mobile backhaul is a COST issue! Carrier Ethernet Backhaul Bends the Curve.

7. 7 Keys to Profitable Ethernet Services •  Bandwidth Control –  Flexible, granular service definitions •  Scalability –  Wide area coverage with simple, repeatable service tagging •  Flexible Interworking –  Cost optimize the right technologies in the right place •  Resilience –  Robust service protection, high availability •  Manageability –  Clear diagnostics, service level agreement •  Low Touch Operations –  Time to service = time to revenue with lower OpEx Raise Revenues With Differentiated Services Improve Service Margins via Lowered Costs Profitability!

8. 8 Carrier Ethernet for 4G Operators need Ethernet for: –  Greenfield WiMax deployments •  Opportunities limited today but increasing •  All eyes on successful deployments (Clearwire/Xohm) –  ATM 3G Leapfrogs •  Developing world operators slow to adopt 3G technology –  Wireline Wholesalers •  May have separate PWE3 requirements (e.g. ATT, BT) –  4G deployments (2-3 yrs from now) •  Evolution to LTE from GSM/UMTS family à 88% of market •  Key is to commence now during transition from TDM to Packet •  Ethernet + T1/E1 –  Combined Ethernet + T1/E1 (ATM & TDM) over Ethernet backhaul –  Represent roughly 80-90% of today’s MWB

9. 9 4G (WiMAX) Transport Requirements –  Stable, redundant architecture –  Comprehensive management/provisioning system –  Optimized network utilization –  Scalability in MAC addresses, customers, sites –  Point-to-point and multipoint service models –  Microwave friendly –  Flexible “Best Practices” design –  MPLS / PBB-TE / VLAN (QinQ)

10. 10 4G (WiMAX) Transport Challenges •  Operators require a solution that provides: –  Scalability: Scalable MACs & customers •  Directly at tower site - no MAC learning network between towers –  Reliability: Redundancy & rapid restoration •  Dedicated Primary & Back-up tunnels from each tower with rapid restoration –  Predictable QoS: Strict Priority settings •  Committed & Excess Information Rates per service –  Bandwidth Utilization: Efficient use of network resources •  Bandwidth engineering, no automatic path disabling for loop prevention (STP) –  Simplified Provisioning: Reduce complexity •  Provisioning wizards with GUI interface for service creation –  Management: Comprehensive OAM capabilities •  Service assurance, Fault-Config-Performance Mgmt (802.1ag, 802.3ah, Y. 1731) –  Cost Effective: Economies of Scale of Carrier Ethernet •  Advantages of a Layer-2 Carrier Ethernet architecture •  Minimize costly Layer-3 devices at head-end.

11. 11 Carrier Ethernet OAM Customer Domain Provider Domain Operator Domain Operator Domain Eth Access MPLS Access Customer CustomerService Provider MPLS Domain MPLS Domain PW/MPLS OAM Service OAM MEP MIP Operator Domain MPLS Core Network OAM IEEE 802.1ag CFM Connectivity Fault Management Operations, Administration, and Maintenance offering enables service providers to use cost-effective Ethernet networks as the means to reliably deliver high-bandwidth, profitable, retail and wholesale services. IETF RFC 5357 TWAMP Two-Way Active Measurement Protocol Layer 2 SLA Monitoring & Metrics: Delay, Jitter, Frame Loss ITU-T Y.1731 Ethernet OAM Enhanced troubleshooting, rapid network discovery IEEE 802.3ah EFM Service Heartbeats, End-to-End & Hop-by-Hop fault detection Layer 3 SLA Monitoring & Metrics: Delay, Jitter •  SLA Assurance •  Rapid Fault Isolation •  Minimized Downtime

12. 12 Key drivers for Carrier Ethernet Solutions Ethernet is Carrier Class & Cost Less –  Universally accepted that Ethernet is less expensive and ubiquitous technology –  By 2008, 89% of providers believed that Carrier Ethernet is mature enough for “carrier class” deployments –  Solid Ethernet OAM features that provide a comfort factor for providers (SDH like characteristics) –  Connection oriented Ethernet (COE) solutions provide deterministic & resilient services (VLANs, PBB-TE, etc..) Enterprises & Providers want Ethernet –  Reported growth in the Ethernet services revenue ($14.9B in 2008 to $19.9B in 2011) –  Service Providers have lowered the price per bit for Ethernet services, making it more attractive than legacy services (TDM, ATM, etc…) Ethernet is integral to Network Transition –  Ethernet is the key component to many NGN packet network transformations –  COE is well-placed to replace legacy SDH applications –  Evolution of 40G and 100G are being driven by data centre applications and are complimentary to Optical networks Source: Infonetics Research

13. 13 Advantages of Carrier Ethernet Advantage Benefits Cost- Effective Ø  Capex: Ethernet Economics Ø  Opex: Provisioning, Fault Resolution, Network Engineering Simple Ø  Flexible network topologies Ø  Avoids L3 routing complexity Ø  Transparent regarding IPv4, IPv6, IPSec Secure Ø  No network-layer attacks Ø  No misconfigured Access Control Lists (ACLs) Ø  Inherent security of L2 EVCs Carrier- Class Ø  Resilient Ø  Ethernet OAM Ø  Deterministic “SONET/SDH-like” Ø  Convergence with business and residential traffic

14. 14 … further challenges Packet bandwidth consumption continues to grow…. But revenue growth is slowing 2004 2006 2008 2010 10% 20% 30% 41% 3% 7% 13%13% -5%-3%-1% 4% Broadband Wireless Wireline ** ** Sources: Yankee Group and Pyramid Research

15. 15 IP-Ethernet Mobile Backhaul: Preparing for LTE February 9 MEF Workshop - Carrier Ethernet for Mobile Backhaul Tuesday, 0915-1000 - Market Analysis, Scale, and Trends Presented by Michael Howard Co-founder and Principal Analyst, Carrier and Data Center Networking Infonetics Research

17. 17 Copyright © 2009 Infonetics Research, Inc. 17 •  Social changes under way, unabated mobile subscriber growth will prompt 95% of operators to migrate to LTE •  …Creating mobile backhaul challenges –  Mobile subs and their bandwidth grow strongly; ARPU cannot –  Data and video traffic growing fast –  Multiple operators at cell site; transport provider wants single backhaul –  WiMAX, LTE coming; need to prepare for IP/Ethernet backhaul •  Operators must go to packet backhaul •  Operators need OAM&P and service assurance now •  Conclusions and Q&A Agenda

18. 18 Copyright © 2009 Infonetics Research, Inc. 18 Social changes underway… •  Social phenomena: consumer, business –  Connected, competitive world •  Anytime, anywhere connections •  More bandwidth, mobile broadband •  Confluence of fixed/mobile, wireless/wireline –  Video inserted into most applications, so traffic never stops growing

19. 19 Copyright © 2009 Infonetics Research, Inc. 19 …Causing unabated mobile subscriber growth Source: Fixed and Mobile Subscribers Annual Worldwide Market Forecasts, March 2008 5.2 0 1 2 3 4 5 6 Billions CY06 CY07 CY08 CY09 CY10 CY11 Worldwide Mobile Subscribers

20. 20 Copyright © 2009 Infonetics Research, Inc. 20 Backhaul connections are growing quickly •  Connections and bandwidth per connection drive equipment spending; adding 100,000s of new connections per year •  Mobile operators pay incremental charges for 2x to 10x bandwidth –  Ethernet options solve costs—but need service assurance, OAM&P tools Source: Mobile Backhaul Equipment, Installed Base, and Services, May 2009 0 1,000 2,000 3,000 4,000 5,000 6,000 Connections(K) CY07 CY08 CY09 CY10 CY11 CY12 CY13 Worldwide Mobile Backhaul ConnectionsL Installed vs New Installed connections New connections

21. 21 Copyright © 2009 Infonetics Research, Inc. 21 …And data dramatically increases traffic load Operators rolling out increased capacities via EDGE, EV- DO, HSPA, WiMAX, then LTE 0 10 20 30 40 TB Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 JRA 09 .0 9.2 00 9 0 10 20 30 40 TB Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 JRA 09 .0 9.2 00 9 Live network KPI data Operators: 9 Europe, 4 APAC, 6 Americas Average Y-Y growth over 500% Total HSDPA Traffic per Day Source: Nokia Siemens Networks

22. 22 Copyright © 2009 Infonetics Research, Inc. 22 3 stages of IP/Ethernet backhaul for LTE •  IP/Ethernet backhaul solves ARPU-traffic disconnect today and backhaul problem for HSPA today…and LTE tomorrow 2G BTS 3G NodeB E1/T1 RNC BSC PDH Backhaul 2G BTS 3G NodeB E1/T1 RNC BSC Hybrid/Dual Backhaul 2G BTS 3G NodeB RNC BSC All IP/Ethernet Ethernet Ethernet Internet Gateway LTE eNodeB 2G BTS 3G NodeB E1/T1E1/T1 RNC BSC PDH Backhaul PDH Backhaul 2G BTS 3G NodeB E1/T1E1/T1 RNC BSC Hybrid/Dual Backhaul Hybrid/Dual Backhaul 2G BTS 3G NodeB RNC BSC All IP/Ethernet All IP/Ethernet Ethernet Ethernet Internet Gateway LTE eNodeB

23. 23 Copyright © 2009 Infonetics Research, Inc. 23 Operators already moving to IP/Ethernet backhaul 40% 80% 100% 0% 20% 40% 60% 80% 100% PercentofRespondents 2008 or before By 2009 By 2010 Year Deployed •  From Infonetics’ August 2009 IP/Ethernet in Mobile Backhaul Networks: Global Service Provider Survey •  OAM&P and service assurance tools needed •  Major investments in staffing/operations, procedures changes –  Rich IP/Ethernet options very complex compared to TDM circuits

24. 24 Copyright © 2009 Infonetics Research, Inc. 24 Many triggers for IP/Ethernet backhaul before LTE •  From the same Infonetics service provider survey •  LTE is the final, absolute time to move to IP/Ethernet backhaul 47% 93% 80% 80% 73% 60% 47% 0% 20% 40% 60% 80% 100% Support iPhone or other smartphones Deploy HSPA Need to lower backhaul costs Deploy HSPA+ Deploy IP base station or base station with Ethernet connection Deploy IP IuB (R6) Deploy LTE Events Percent of Respondents Rating 6 or 7

25. 25 Copyright © 2009 Infonetics Research, Inc. 25 Costs drive operators to IP/Ethernet backhaul •  Ethernet offers huge drop in cost per bit of bandwidth that almost matches the 2x to 10x traffic increases HSPA delivers •  IP/Ethernet naturally fit WiMAX and LTE as well Source: Mobile Backhaul Equipment, Installed Base, and Services, May 2009 $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 $45,000 $50,000 CY08 CY09 CY10 CY11 CY12 CY13 Calendar Year AnnualBackhaulChargesperConnection PDH and ATM over PDH New wireline Mobile Backhaul …or move to Ethernet Stay on TDM Mobile Backhaul Equipment and Services Biannual Worldwide and Regional Market Size and Forecasts

26. 26 Copyright © 2009 Infonetics Research, Inc. 26 Worldwide Mobile Backhaul New Connections (by Technology) -300 -150 0 150 300 450 600 750 900 CY05 CY06 CY07 CY08 CY09 CY10 CY11 Connections(K) Ethernet microwave Ethernet copper and fiber Other PDH/SDH microwave SONET/SDH ATM over PDH PDH Ethernet backhaul—connections of choice •  De-commissioning legacy (no more hybrid): use Ethernet backhaul to carry voice, data, and video traffic for 2G, 3G, WiMAX, and LTE –  New 1588v2 solves clock synch problem Source: Mobile Backhaul Equipment, Installed Base, and Services, October 2008 Ethernet

27. 27 Copyright © 2009 Infonetics Research, Inc. 27 IP/Ethernet backhaul before LTE and for LTE •  Backhaul costs are the principal driver, due to traffic growth •  Operators are making the investment to move to the eventual IP/Ethernet backhaul networks •  IP/Ethernet backhaul –  Solves ARPU-traffic disconnect today –  Solves backhaul problem for HSPA today –  …and LTE tomorrow

28. 28 Thank You Michael Howard Co-founder and Principal Analyst, Carrier and Data Center Networks Infonetics Research +1 408.583.3351 michael@infonetics.com www.infonetics.com

29. 29 Accelerating Worldwide Adoption of Carrier-class Ethernet Networks and Services For more information regarding joining the MEF: Visit: www.metroethernetforum.org Email us at: manager@metroethernetforum.org Call us at: +1 310 258 8032 (California, USA) For in-depth presentations of Carrier Ethernet for business, Ethernet services, technical overview, certification program etc., visit: www.metroethernetforum.org/presentations

30. 30 Panelists Javier E. Gonzalez jgonzale@ciena.com | +33.6.88.21.43.34

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Implications of 4G Deployments (MEF for MPLS World Congress Ethernet Wholesale Summit - Paris)

Javier Gonzalez

Implications of 4G Deployments (MEF for MPLS World Congress Ethernet Wholesale Summit - Paris)