“How to Make a lot more Money from your Network” TLEN 5510 Future of Inter-Networking Robert Duncan Transaction Network Services rduncan@tnsi.com +1 (303) 810-2634 (m) If you can, cover all of Chapter 10 (it is mostly 2G to 3G network evolution to packet data, and is based on this section of class notes: http://morse.colorado.edu/~tlen5510/text/classwebch10.html#x55-20000010 Attached are a couple of slides I typically use for it. I want to cover the basics, but feel free to adapt any of it But feel free to emphasize whatever you feel is more important, and glance over or even skip things. TS

Topics Interconnection of Networks Why? How? Future: All-IP Network Interconnection (IPX) Roaming among Networks

Intro 20 years in Mobile networks 30 years in Telecom (see “Bellhead”) Author (“Wireless Intelligent Networks”) Standards contributor, Chair Experience in Network Planning, Engineering, Operations AT&T, Qwest/U S WEST Wireless TDMA, CDMA, GSM, WiMax, Wi-Fi, LTE

Inter-Network Connections Why? How?

Recurring Pattern Hub Connections: n*(n-1) n

Telephone eXchange Toll eXchange Local eXchange Local Local Local eXchange eXchange WHY Interconnect networks? More subscriber connections, traffic, revenue

Network Interconnection eXchange Network Network Network Network WHY use an eXchange? Fewer network connections, Lower cost

New Network Interconnection eXchange New Network Network Network Network > 1000 Mobile networks! WHY use an eXchange? Fewer network connections, Lower cost

Connecting Networks Creates Value Metcalfe’s Law Connecting Networks Creates Value Value (Network A) + Value (Network B) = ??? Example: Value (Network A) = 1,000,000 subscribers’ traffic Value (Network B) = 1,000,000 subscribers’ traffic 1 2 … S1,000,000   1,000,000 1 2 … S1,000,000   1,000,000 1 2 … S1,000,000 S2,000,000   1,000,000 2,000,000 + =

Why Inter-Networking? Maximize Revenue (Metcalfe’s Law) … at Minimum Cost

Convergence Ahead Inter-Network Future From Circuit to Packet

Cellular Calls Connect via _____?

Current Inter-Network Connections Fixed Network Fixed Network Telephone eXchange Mobile Network Mobile Network Any Disadvantages? IP Network IP Network

Disadvantages of Public Telephone Connections Fixed Network Fixed Network Telephone eXchange Mobile Network Mobile Network ↑ Cost ↑ Complexity ↓ QoS ↓ Features IP Network IP Network

Native Inter-Network Connections Telephone eXchange Fixed Network Fixed Network Mobile Network Mobile Network IP eXchange IP Network IP Network

Today: Mobile Connects via Public Telephone (PSTN) PSTN (LEC + LD) STP Signaling Voice MSC MSC GRX BG BG Data SGSN SGSN Evolution of All-Circuit to All-Packet Op A Op B Circuit Voice Circuit Voice Circuit Voice

Tomorrow: Mobile connects via IP PSTN (LEC + LD) Existing technology Not All-IP STP MSC MSC MSC Server MSC Server IPX Signaling BG BG Data SGSN SIP Proxy SGSN CLARIFY: Should we even show MGW, is this vocoder-free? Voice MGW ENUM MGW Op A Op B Circuit Voice Packet Voice Circuit Voice

Future: LTE connects via IP PSTN (LEC + LD) LTE/All-IP STP MSC MSC CSCF CSCF IPX Signaling BG BG Data SGSN SIP Proxy SGSN ADD: LTE-specific nomenclature, but not too much Voice MGW ENUM MGW Op A Op B Packet Voice Packet Voice Packet Voice

Choosing the Least Cost Route for Voice Connections

IPX Provides Voice & Data Connectivity A Common Connection Point for Voice & Data ISPs MNOs TNS IPX Packet Data Packet Voice GSM, GPRS/UMTS Operators Circuit Voice ASPs CDMA Operators SPs The IPX designed to interconnect any type of service provider for any type of IP service for both voice and data. FNOs

Benefits of Native (IP) Connections ↓ Cost <10% of Current ↓ Complexity Flat ↑ QoS Fewer vocoders ↑ Features Unobstructed operation International LD: $0.0500/MOU Current LEC interconnect: $0.0025/MOU Current VoIP interconnect: $0.0005/MOU 100X less revenue/minute

Observing this Trend in Use International LD (greatest margins) use of IP 2006: 2% to 4% of all VoIP traffic goes through a peering service 2010: Over 50% International Voice via IP 2010: Mobile-Mobile use of IP eXchange (IPX)

Greater Market Growth (30%) in Int’l VoIP MOU

Inter-Network Future An IP eXchange (IPX)

All Operators Can Use IP eXchange (IPX) MNOs ISPs Applicability Mobile Network Operators (MNOs) Fixed Network Operators (FNOs) Internet Service Providers (ISPs) Application Service Providers (ASPs) IPX SPs ASPs The IPX is GSMAs proposed solution. It is designed to interconnect any type of service provider for any type of IP service, via common commercial agreements guaranteeing the appropriate standard of end to end quality and security. FNOs

Aicent IPX Viewpoint Market Needs IP Interworking MNOs needs to support a wide range of multimedia-based application with high quality. FNOs are developing Next-Generation Networks ISPs & ASPs are offering more content/application services All entities want to interconnect each other in a controlled, efficient, profitable and cost-effective manner. IP Interworking IP is the common protocol of above networks and service. IP Packet eXchange (IPX) is a standardized solution for interconnecting various service providers over a global IP network with high QoS.

IPX Interconnect Principles Openness Open to everyone Ubiquitous access (fixed, mobile, ISP or ASP) choice (in addition to open Internet) Quality guaranteed QoS (E2E SLA, Reliability, Capacity) quality relationship with your IPX Provider security (accountability, spam reduction) Cascading payments cascading of revenues from End to End Payment by whoever perceives the value transparent value-based service pricing Efficiency ubiquitous Service via single Gateway multilateral commercial agreements flexibility & scalability Mobile ISP FNO MNO IPX TRUSTED ENVIRONMENT Private IPX Domain IPX 1 IPX 2 IPX 3 Fixed INTERNET

Peering Ensures Competition, Choice of IPX Provider MNOs FNOs IPX IPX The IPX is designed to deliver an efficient commercial and technical solution for all the key stakeholders. The IPX is provided in normal competitive market conditions, allowing choice and global or regional specialisation. The IPX is designed to allow global interconnectivity, either via bi-lateral arrangements or multi-lateral arrangements where one contract provides access to many destinations. SPs ASPs ISPs

Layers of IPX Functionality Clearing Inter-Carrier Billing Billing ENUM Routing and Addressing Service Aware for event-based and stream-based traffic VoIP Signaling Traffic Detection for routing, charging, and multi-lateral destination policing Clearing is not part of IPX by GSMA definition - but is part of IPX, in practice Media Conversion Fixed & Mobile Termination Network

Key Components of IPX IPX traffic has managed QoS at various levels of performance Payments associated with the business model are identified and settled between operators Operators are free to select bi-lateral or the efficient multi-lateral modes of interconnection for different types of traffic All IP traffic is protected Services not requiring premium quality can use less demanding QoS bearers The IPX provides several functions to service provider users. SPs may choose to use bi-lateral or multi-lateral modes of interconnect according to their commercial preference on a per service basis. Accordingly the IPX bills the service provider according to the agreed rate for each service and passes payments on to other parties in the chain. The quality of service required by each service is signalled by the originating service provider and invoked by each IPX in the chain. Only contracting parties are connected to the IPX and the IPX is isolated from the internet, ensuring security and traceability.

Implementers: IPIA Board Members Representation Mobile Operators 8 Fixed Operators 8 International Carriers 9

Benefits Simple Secure Efficient Interoperability Subscriber access to content/services while roaming Secure Private network access to e-commerce, public internet, corporate intranets and e-mail systems Efficient Operator gains efficiencies by utilizing a common network for multiple business systems Single point on the network for routing management Interoperability Common solution for 2G/3G/4G Mobile, Fixed, ISPs

For more information, please visit www.gsmworld.com/technology/ipi Quality Openness For more information, please visit www.gsmworld.com/technology/ipi or email us at ipi@gsm.org Thank you Cascading Payments Efficiency

Network Roaming Why? How?

Roaming eXchange Mobile Network Network Network Network

Why Roam? ↑ Coverage ↑ Revenue Who benefits? Roam out of your Network (Retail revenue) Roam in to your Network (Wholesale revenue) Who benefits? Subscriber Your network (“Home” network) Roaming partner network (“Serving” network)

Data Access       Data Access Steps: Mobile: Select system Service Home Network  Internet  Radio Control Data Gateway     Home AAA Subscriber Database Data Access Steps: Mobile: Select system Mobile& System: Attach and establish session Serve: Authenticate Mobile Serve: Authorize Mobile System: Connect System: Accounting User Data (Mobile IP) AAA signaling (RADIUS)

Data Access when Roaming Service Home Network Serving Network  Roaming eXchange Internet  Radio Control Data Gateway Data Gateway Radio Control            Proxy AAA Serving AAA Subscriber Database Home AAA Subscriber Database Rating & Billing  Data Access while Roaming: Mobile: Select system Mobile & System: Attach and establish session Serve: Authenticate Mobile Serve: Authorize Mobile System: Connect System: Accounting User Data (Mobile IP) AAA signaling (RADIUS)

Data Access when Roaming on Wi-Fi Service Home Network Serving Wi-Fi Network  Roaming eXchange Internet Internet  Radio Control Data Gateway Data Gateway            Proxy AAA Serving AAA Subscriber Database Home AAA Subscriber Database Rating & Billing  Data Access while Roaming: Mobile: Select system Mobile & System: Attach and establish session Serve: Authenticate Mobile Serve: Authorize Mobile System: Connect System: Accounting User Data (Mobile IP) AAA signaling (RADIUS)

Network Roaming As a network offload solution

November 3, 2010 Reducing the Cost of Data: Wi-Fi Roaming as an Extension of CDMA Roaming Marcio Avillez VP, Network Offerings Robert Duncan Director, Product Management

Solution: Reuse Established CDMA Data Roaming Benefits Agenda Problem: Exponential Cost (Data use) [“How to Cope with Future Demand for Data Services,” CDG IRT, Tokyo, April 2009] Solution: Reuse Established CDMA Data Roaming Benefits Reduced OPEX (Cost of Roaming) Reduced CAPEX (Increased Capacity, Coverage) Reduced Churn Implementation

A Tsunami of Connected (Mobile Internet) Devices Chris laid out the trends we see shaping the market, and how TNS as a company, is responding. I’m going to share with you a more detailed response plan and then open the floor for feedback from you as to how we can better help your company respond. Let me begin by saying I understand your pain – I live it on a daily basis. I not only run TSD, but serve as the COO for TNS as well. Over the past few years we’ve invested more than $100M to ready ourselves for the ‘anywhere’ evolution. The most important things we’ve done to date are uplift our core backbone to MPLS/IP and build intelligence into our networks so we’re able to support a ubiquitous ‘anywhere’ experience. A lot of services you have relied on to generate revenue in the past are subject to price pressure. This is true for TNS as well. TNS’ focus going forward is two-fold: mitigate cats for our customers AND, as importantly, increase our customer’s revenue. With respect to increasing revenue, we will do so not only by introducing new services but also by helping you monetize assets that you currently have. I personally think it is an exciting time from a business perspective…challenging no doubt…but exciting. <Corbis Images catch wave> Proprietary & Confidential

Problem: Traffic (Cost) Growing Faster than Revenue Forecast: 25X traffic increase Forecast: 2X revenue increase Latest forecast: “Data traffic over mobile networks will be 100 times greater in 2015 than in 2008, according to Yankee Group. Over the same period, revenues from mobile data will be just 1.9 times greater in the same period, according to ABI Research. This makes a compelling case for Wi-Fi Offload, as data costs have to come down in every way possible, and the RAN is the biggest cost. ——— 120% Growth/year for 2008-2012 = 25x (2.2 ^ 4) Consistent with other forecasts, if a bit conservative “How to Cope with Future Demand for Data Services,” Robert Duncan, TNS, Tokyo CDG IRT, April 2009] Sources: Cisco, from Operators’ network data and Analysts; “Mobile data revenue will double by 2012,” Dan Locke, Analyst Insight, Pyramid, 4/2008]

Exponential Cost - if not Controlled - will Exceed Revenue “Service providers deploying a multi-access offload strategy can expect savings in the range of 20 to 25 per cent per annum” Many service providers are beginning to adopt a range of strategies including optimization of 3G networks using intelligent policy control, mobile data traffic offload, and transformation to 4G to reduce costs and alleviate congestion. Together, these strategies could reduce data delivery costs by more than 60 per cent over the next three years.1 In an era of huge mobile data growth, this holistic approach to the congestion management conundrum is vital to long-term success. [Chetan Smarma, 2009] Service providers deploying a multi-access offload strategy can expect savings in the range of 20 to 25 per cent per annum. In the US market, service providers could save between $30 and $40 billion per year by 2013. [Chetan Smarma, 2009]

Leading Operators Adopt Data Offload to Wi-Fi AT&T + Wayport Investment + Builds Korea Carriers + 3 Operators build Wi-Fi Vodafone + BT OpenZone O2 UK + The Cloud (UK) T-Mobile + T-Mobile Verizon + Boingo Current deployments validate Wi-Fi as beneficial across multiple carrier and user scenarios Vodafone/Everything Everywhere/O2 work with BT Openzone and The Cloud in the UK T-Mobile uses its own network in the US Verizon wireless is offering the Boingo network (through a Verizon contract vehicle) included with every Mobile data plan it offers in the US. Sprint is lagging. 2008 2009 2010

Wi-Fi Roaming Solution (looks like Data Roaming via CRX) Reuses CRX functionality (looks like Data roaming) to reduce impact on Operator Visited Operator Home Operator CRX Reporting/ Customer Service HLR Proxy/ AAA Proxy Rating / Clearing Signaling Gateway Wi-Fi Connection Manager Visited Wi-Fi Operator

3G Wi-Fi Offload – Primary Use Cases International Use cases Cost Avoidance: Leverage Wi-Fi to lower roaming costs for international users Revenue/Coverage Expansion: Leverage Wi-Fi to expand adoption and coverage of international roaming services Domestic Use Cases Capex Avoidance/Management: offload as a capex management tactic or a hedge against unpredictable or exponential data growth Owned Networks or Commercial Networks Roaming Cost Avoidance: regional domestic players who pay to roam on national carrier networks Potential Concerns Cannibalizes roaming revenue Operator sets Retail Price & therefore revenue Robert: Here is some more color behind the use cases: International Use cases Data Roaming Cost Avoidance – Provider looking to leverage Wi-Fi to improve data roaming experience and expand adoption within their customer base Coverage Expansion – Typically CDMA or WiMAX providers seeking to expand relevance of service to customers with international usage patterns Domestic Use Cases Capex Avoidance/Management – typically use Wi-Fi offload as a capex management tactic or an insurance policy against unpredictable data growth Can be on Owned Networks or Commercial Networks Roaming Cost Avoidance – typically smaller, regional domestic players who pay to roam on national carrier networks, thy already receive coverage from roaming agreements, and Wi-Fi is a way to potentially reduce roaming costs

Benefits of Data Offload via Wi-Fi Roaming OPEX Cost Savings Wi-Fi per MB rates lower than equivalent roaming costs CAPEX Savings Increased Capacity with offload in high-usage venues: Airport, Hotel, Conference center, City, Cafe, etc. Indoor Coverage Reduced Churn (avoid sticker shock) No network impact Reuses existing Data Roaming solution (CRX)

Device Form Factor Trends Smartphones consume 65% of bandwidth Android, iPhone, Symbian and RIM comprise ~90% Forecast: Global Smartphone and Modem Monthly Data Consumption Forecast: Smartphone Sales by OS Source: Gartner (August 2010) Source Data: Morgan Stanley, 2009; Cisco VNI, 2010, iPass estimates

-------------------------------------------- Thank you! -------------------------------------------- Q & A

Data Revenue Overtaking Voice 2004: 5% of US wireless operator’s ARPU ($4B) 2010: >30% ($45B) and growing at over 20%/year Rampant global growth Mobile data revenue globally in 2009 was $220B or 26% of the total wireless service revenues. Annual growth rates range from 15% to 40% depending on the region Non-SMS services dominant Non-SMS data revenues continue to increase as a % of overall data revenue. In the US ~60% of data revenue is non-SMS, ~70% for Japan/Korea and ~30% for Europe (this is a good trend for us as SMS is not included in data roaming revenue via CRX) 5252

… and we are only at the beginning of Mobile Internet adoption! 2009: 660 M Mobile Internet users (vs. 2,400 M SMS subs) 2014: 2,100 M Mobile Internet users Mobile Data subs

Further Adoption of Broadband, “All-IP” Networks LTE deployments begin in 2010 All CDMA and GSM 3G networks evolve to LTE! 200 M subscribers by 2014 to 2017, making it the fastest-adopted wireless technology ever $42B LTE service revenues by 2013 WiMAX mobile deployments ongoing 92M Mobile WiMAX subscribers by 2015, a CAGR of 69% [Yankee] > 500 deployments and 6M+ subs (about 25% mobile-enabled) $15B WiMax Mobile service revenues by 2014