Equity Research

Global
Telecommunications
Global

Primer
14 January 2004
Deutsche Bank's 'early learning' tool for

Telecoms for the telecoms industry. This guide looks at

the big picture for the industry before
delving into the basic technology and
how it fits together to create networks. It

Beginners also touches on regulatory issues and

concludes with a glossary of terms
Industry Focus

Technology & Industry Primer

Martin Mabbutt James Dougall Audrey Wiggin

(+44) 20 7545 0625 (+44) 20 7545 1191 (+44) 20 7545 0707
[email protected] [email protected] [email protected]

Deutsche Bank AG
Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors
should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.
Investors should consider this report as only a single factor in making their investment decision.
DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED AT THE END OF THE BODY OF THIS RESEARCH
Global
Telecommunications

14 January 2004
Primer
Telecoms for Beginners
Technology & Industry Primer
Martin Mabbutt James Dougall Audrey Wiggin
(+44) 20 7545 0625 (+44) 20 7545 1191 (+44) 20 7545 0707
[email protected] [email protected] [email protected]

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

Getting started
While perhaps not in the same league as pharmaceuticals, telecoms
nevertheless has its fair share of incomprehensible terminology and
technical issues which affect the investment case but may not be obvious
to the layman. This report is aimed at helping the investor who needs to
know a little about the telecommunications industry, with a particular
orientation towards the technology. It merely scratches the surface of the
many topics covered but we hope it provides some basic knowledge for
newcomers to the industry and a degree of linkage between the technical
and financial worlds of the telcos.

Focusing on technology ad networks

We have chosen to focus on the technology within this piece, both in
order to make it of a manageable length but also to avoid dating the piece
through referring to company specific issues. We have found that whilst
there is a mass of information available on the technology it is often either
far too detailed or too simple, and is seldom put into any financial context.
We hope the contents will not offend the purist too much who no doubt
will find much to argue with in our simplified discussion of the technology
and network issues. Despite its many shortcomings we hope this guide
will provide you with a one-stop shop for a quick and dirty guide to getting
a basic grip on what your colleagues are actually talking about.

Deutsche Bank AG
Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors
should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.
Investors should consider this report as only a single factor in making their investment decision.
DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED AT THE END OF THE BODY OF THIS RESEARCH
14 January 2004 Telecommunications Telecoms for Beginners

Table of Contents
The beginners guide.......................................................................... 3
Outlook ........................................................................................................................3
Risks ............................................................................................................................3
Telecom industry overview .............................................................. 4
The Bluffers/Duffers guide to the Telecommunications Industry ...............................4
Overview......................................................................................................................4
Getting serious...........................................................................................................14
Key Trends .................................................................................................................15
Telecom Services and Business Models........................................ 19
Fixed Line Services ....................................................................................................23
Wireless Services ......................................................................................................28
Integrated Services ....................................................................................................34
Issues for the Industry...............................................................................................34
Communication Media.................................................................... 41
Wired Media (Guided media / physical media) ..........................................................41
Wireless Media / Air / Unguided Media .....................................................................54
Techniques / Technologies ........................................................................................64
Powerline technology ................................................................................................70
Communication Networks.............................................................. 72
Communication Systems...........................................................................................73
Basic Components of a Communication System ....................................................104
Types of Networks ..................................................................................................113
The Regulatory Environment........................................................ 124
Telecom Regulators.................................................................................................124
Regulatory Bodies....................................................................................................132
Technology - Special Interest Groups (SIGs) ...........................................................135
Technology Debates ................................................................................................139
Glossary.......................................................................................... 144

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14 January 2004 Telecommunications Telecoms for Beginners

The beginners guide

Outlook
As far as an investment proposition is concerned telcos have varied from being the
hottest thing in town to being very unloved. Given that this document is designed to
have a long shelf life we make no predictions on where valuations are heading. But
many critical issues facing the industry now are likely to be of a sufficient longevity
to be touched upon within what is principally intended to be a reference document.

This report is aimed at helping the investor who needs to know a little about the
telecommunications industry, with a particular orientation towards the technology. It
merely scratches the surface of the many topics covered but we hope provides
some basic knowledge for newcomers to the industry and a degree of linkage
between the technical and financial worlds of the telcos.

The report is divided into six sections. The first, ‘Telecoms Industry Overview’,
takes a bird’s eye view of the industry and the factors that have driven its
development, principally over the last twenty years. It touches on the key growth
drivers, regulatory issues, and structural issues related to returns and competition.

The second section ‘Telecoms Services and Business Models’ goes into more
detail on industry structure and services provided by telco operators, together with a
look at some of the topical issues facing the industry.

The section on ‘Communications Media’ gets into the detail surrounding the basic
elements used in communications right from copper wires to modulation
techniques.

The fourth section is entitled ‘Communications Networks’ and looks at how the
elements discussed in the previous section are pieced together to form networks,
ranging from fixed through satellite and computer networks to mobile systems.

Then we look at ‘The Regulatory Environment’, why it is important, what

regulators do and how they do it, and take a glance at important topical issues.

The report finishes with a ‘Glossary’ of frequently used telecoms terms.

Risks
Please note that we have worked in conjunction with an outside agency to produce
parts of this publication. We hope we have spotted obvious errors but we will not
have captured all of them, and will certainly have made mistakes of our own.
Hopefully a few errors will not render the entire publication useless!.

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14 January 2004 Telecommunications Telecoms for Beginners

Telecom industry overview

The bluffers/duffers guide to the Telecommunications Industry
This report is aimed at helping the investor who needs to know a little about the
telecommunications industry. It is specifically written to help buy- and sell-side
analysts alike get through the first few months of covering the sector. It does not
intend to make anybody an expert so apologies for those looking for the answers to
intractable problems such as how the technology really works or how to pick a good
investment idea. Purists, and/or experts will no doubt wince at much of what we
have written. Readers will find it possible to gather an abundance of both technical
information and financial information. But finding any sort of coherent framework
that links the pieces together for the lay person, particularly somebody who has no
technical background is not easy. Many of the topics we cover in a short paragraph
have numerous long textbooks and technical manuals dedicated to them. What we
hope to do is give some insight into how the industry evolved into its current shape
and we make a few guesses as to some of the factors which will influence what
may happen going forward. Despite its many shortcomings we hope this guide will
provide you with a one-stop shop for a quick and dirty guide to getting a basic grip
on what your colleagues are actually talking about.

Overview
Before we look at the sector in detail we thought it useful to present a bird’s eye
view for those without the time to delve more deeply into this report. It provides an
overview of some of the basics of the industry structure, how we got to where we
are today and some of the factors influencing the future shape of the industry.

Telco sector represents 3-4% By way of introduction, the telco sector represents about 3-4% of global GDP in
of global GDP terms of telecommunications services revenues. As a percentage of household
spending we estimate telecoms spending at around 2-3%, so well below spending
on tobacco and alcohol. Over many decades it has outpaced GDP growth,
sometimes by a substantial margin, as the following chart shows.

Figure 1: Telecoms as % of household spending

3.40%

3.20%

3.00%

2.80%

2.60%

2.40%

2.20%

2.00%

1.80%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

US UK Japan

Source: Deutsche Bank estimates and company data

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14 January 2004 Telecommunications Telecoms for Beginners

Growth rates not expected One of the biggest issues facing the industry at present is whether the growth rates
to exceed GDP over the next going forward will be substantially lower than hitherto. Our view is that there was a
decade unique combination of events that fed rapid growth throughout the 1990s which will
not be repeated. As Figure 2 shows we expect growth rates for the sector to trend
back to more ‘normal’ levels over the next decade, i.e grow in line with household
expenditure as opposed to rates of around 1.5x that were evident in the 1990s.

Figure 2: Communications expenditure multiplier

1.6

1.4

1.2

0.8

0.6

0.4
1950s 1960s 1970s 1980s 1990s - 2001 2001-11 F
Source: Deutsche Bank estimates; BEA

Note that we use US data for much of our discussion because consistent data tends
to be available over long time periods. More recently, extremely detailed information
is available on regulatory web sites in other parts of the world but invariably this is
limited in terms of its historical perspective. We make no apologies either for
drawing heavily on the UK to illustrate points of detail, it being one of the earliest
markets to deregulate and one with detailed regulatory information available.

The industry has historically been highly capital intensive with the result that it tends
to return high operating margins. As a consequence, its importance to the global
economy and its weight in terms of equity markets is higher than the simple
analysis of revenues would suggest. At a global level telcos makes up around 6.5%
of the MSCI Global Sector Index.

Telecommunications is a key industry. The ability to communicate over wide

distances is a basic key to economic growth and industry competitiveness. As a
result the telecommunications industry has historically been an agent of
government and owned by the state. We refer to these companies as the
incumbents.

Steady progress in achieving Over the last twenty-five years there has been a concerted effort to loosen the
liberalisation shackles of state control. This has taken two forms. The first is straightforward
privatisation of the state telecommunications company. The second is to provide
licences to new entities to bring competition to the existing incumbent operator in
certain parts, or all, of the market. In areas of new technology in particular it has
been possible to introduce more players to the market. The best example would be
the mobile segment where every market has at least two operators, almost
invariably one of which is, or at least was, the incumbent. As in so many other

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14 January 2004 Telecommunications Telecoms for Beginners

industries, deregulation started in the US and was followed at varying rates by

Europe and Asian markets. China is the largest market where state control remains
significant.

Evolution not revolution

Figure 3 below looks at the market shares of a typical incumbent, in this case BT. In
this chart we refer to the fixed line market because that is the traditional business of
the incumbent. Note the first element of the market to be deregulated was
international calls in the early 1980s. Other elements have been progressively
deregulated since that time. The picture in mobile is somewhat different because
here the market has been more recently developed and in many cases was
designed to be competitive from the outset.

Figure 3: Market share of typical incumbent — BT (deregulated early 1980s)

100.0%

90.0%

80.0%

70.0%

60.0%

50.0%

40.0%
1997

1998

1999

2000

2001

2002

2003

2004E

2005E

2006E

2007E
Local calls National calls Int calls
Calls to mobiles Other calls Total call traffic
Source: Deutsche Bank estimates and Oftel

In this case, despite nearly 20 years of liberalisation the incumbent operator still
controls the bulk of the fixed line market. Why?

The emergence of competition

Key to understanding the emergence of competition is a basic knowledge of the
economics of the industry. There are two major factors affecting the economics.
The first is technology and the second regulation.

Without at this stage going into any detail, the pace of advances in terms of
technology far outweigh any ability of a state-run industry to respond to the
implications. This creates a situation where the price of a service can very quickly
get out of step with the cost of providing that service.

The slow pace of Secondly, incumbent monopolies owned by the state are run with political goals to
competitive inroads into the fore. These may include a desire for profits but not necessarily. This has an
existing telco markets impact on the pricing structure. Assuming the government wants to generate some
frustrates many sort of economic return from its asset it will need to decide on a pricing structure. In
general it is fair to say that a critical determinant for creating value from a network is
to get as many people to use it as possible (there is well-established formula for
showing just this, known as Metcalfe’s Law). As a direct result prices in most

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14 January 2004 Telecommunications Telecoms for Beginners

markets controlled by state-owned incumbents in the past were geared towards

creating as many connections to the system as could reasonably be engineered.

Charging for the vast bulk of telecoms services is via a fee for having a connection
to the system and a usage based fee. This would seem to be intuitively right
although, as we shall see, recent pricing models and changes in technology have
begun to overturn even this basic rule. Under the old monopoly model and old
technology the cost of providing connections to the network was far higher than the
monthly rental fee but that was all part of the social engineering. The low price for
the monthly connection was recouped by charging a high price to those subscribers
who actually made calls, effectively subsidising those who had the phone mainly to
receive calls.

Cross subsidy endemic in In terms of variations within prices for calls, the price of international calls reflected
telecoms the limited capacity that once existed between countries and the ‘luxury’ value
associated with these calls at a time when international trade was limited. At the
other end of the spectrum local calls have sometimes been provided for free. So,
put crudely, international calls have subsidised long distance calls which, in turn,
have subsidised local calls. And call charges have invariably subsidised rental
charges. Figure 4 below illustrates the degree of this cross subsidy in the UK
market. The same points hold true for all markets. Bear in mind too that this relates
to recent data, so even where there is theoretically a highly competitive market over
many years these cross subsidies persist.

Figure 4: BT’s Financial Returns — ROCE (%)

FY 1999/00 FY 2000/01 FY 2001/2
analogue access 0.1 1.8 3.2
ISDN2 9.6 49.6 20.9
ISDN30 18.7 49.1 34.6
Local calls 83.1 98.2 108.6
National calls 92 102.2 104.6
International calls 3023.4 -623.7 326.9
(return on sales for international) 43.8 45.3 52.2
Calls to mobiles 68.1 25.1 6
Inland operator assistance 40.5 64.1 27.4
International outgoing operator assistance 52.2 22.4 34.7
Source: Oftel

This cross subsidy is endemic in telecommunications and stems from three factors:
n the difficult job of allocating costs to elements of a network, all of which rely on
each other to allow successful communication to occur
n the deliberate cross subsidies created as part of the social engineering process
n a generally universal requirement to charge the same price for the same service
regardless of who the customer is.
When the industry comprised one company per country it did not much matter
where the money was earned as long as, overall, the industry made a return
acceptable to the government. But where competition is being introduced the
degree of cross subsidy, or the degree to which prices exceed costs in that
particular part of the business, is critical because the size of the differential is
directly related to the perceived opportunity.

We could spend a long time on this issue arguing the technical complexities but
maybe the easiest way to see the impact of cross subsidy is to look at Figure 5

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which shows BT’s market share across various products. This is typical of any
European incumbent.

Figure 5: Market share of access vs international calls vs total calls

100.0%

90.0%

80.0%

70.0%

60.0%

50.0%

40.0%
1997

1998

1999

2000

2001

2002

2003

2004E

2005E

2006E

2007E
Int calls Total call traffic Exchange lines

Source: Deutsche Bank estimates and Oftel

This clearly shows the widespread erosion in the international call market at one end
of the spectrum and the high market share in access at the other. This has occurred
despite widespread differences in the regulatory regimes and the overall
competitive environment.

International calls have The international call market has presented easy pickings thanks to its high returns.
generally commanded In recent years prices have been driven down rapidly as new entrants have entered
highest returns the market and undercut the incumbent. The fact that this cycle has repeated itself
numerous times bears testimony to just how high returns were. For reasons we
shall touch on later the actual cost of technology in the pure international long
distance market has fallen rapidly, and continues to fall so quickly that the element
of cost which is related to the network has become so small that other costs are
becoming more significant.

Moreover the international market value continues to fall. A number of years ago
‘The Death of Distance’ was a popular theme, highlighting that premiums for long
distance and international calls would erode. Some markets have since introduced
flat rate domestic pricing but most operators continue to extract premium prices for
international calls and most still price long distance at a premium to local.
Understandably existing operators will try to maximise revenues and thus it is up to
the new operators to drive down prices. Given that these new operators are by
definition small, the incumbent operators will not have to react that speedily. Hence
tariff changes due to competition are normally slow. More dramatic tariff changes
occur primarily as a result of regulatory edicts.

Competition comes in many Competition takes many forms. But in its broadest sense it can be divided into two
shapes and sizes groups. The first group comprises those whose raison d’être is to exploit the
imbalances mentioned above. These business models tend to be characterised by a
lack of alternative infrastructure. In its purest sense these are the ‘virtual’ network
operators which resell an existing operator’s capacity on a wholesale basis. By
virtue of the fact that the operator is dependent on the incumbent’s network the

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14 January 2004 Telecommunications Telecoms for Beginners

suite of services offered is invariably a subset of that offered by the network owner.
The catch is normally price based, be it just cheaper than the incumbent or
packaged in a different way. The business model works because invariably these
VNOs have a brand strength, and maybe existing distribution and billing capabilities
which allows them to make money despite a relatively thin margin on reselling
capacity.

At the other end of the scale we have the full alternative network operator who will
build extensively. The most dramatic exponent of this is the cable operator. Where a
fresh build occurred, as in the UK, the economics of this can be very challenging
due to the high cost of construction. In this particular case the hook for investors to
finance the venture was the so-called triple play, that is offering a combination of
telephony, internet, and cable TV services across the platform.

Of course, in between these two extremes there is an array of different models,

which we discuss more fully in the main document. To summarise, there is the
light-infrastructure model that uses large chunks of other operator’s networks for
carriage of traffic but its own switches to allow it to offer differentiated services to
customers. There are operators who mainly focus on the international traffic market
and a raft of different solutions where the prime rationale is to compete in the
access area. These are operators whose networks are predominantly city based
(CLECs) and can be further divided depending on the access technology such as
fibre, DSL or wireless, and the amount of information they can transmit, of which
more later. And of course there is a different technology altogether, perhaps the
most significant here being mobile. Satellite technologies are also of passing
interest in this respect.

Technology and regulation guide the interplay between these different types of
operator. Technology we get into in more detail later but now we take a glance at
regulation, or as the regulators would like to call it, deregulation.

Deregulation
The telecommunications industry has been in the throes of deregulation for over
twenty years in some markets like the US, to six or so years in a number of
European markets. Some other countries have seen minimal deregulation while
others have striven for a market that is open to all comers. In practice, many factors
have affected how successful a new entrant has been. The most critical factor of all
has been the regulatory environment.

Depending on the market there can be several layers of regulation. In the US for
instance there is local, state and national regulation. In Europe there is country
specific and EU wide regulation. The balance of power between these bodies is in a
constant state of flux but, whatever the details, together they control how the
market regime works. They recommend to the government concerned what should
be done and then it is up to the government to enact the necessary legislation. For
the moment we will keep it simple and assume the regulators and the governments
are all one and the same body.

The purpose of the regulator is to ensure a fair deal for customers. This can either
be achieved through encouraging competition or by ensuring that a monopoly
operator does not abuse its market position. In the latter case the regulator is in
effect trying to replicate the pricing and service conditions the market would see if it
were competitive. This is a tall order. Where competition is being introduced the
general idea is that regulation will gradually fade away as competition becomes
established.

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Incentive or prescriptive?
How the regulator regulates The most high profile issue for the regulator is whether to adopt a price control
scheme of regulation or one based on a rate of return. Under the price control
scheme the regulator will generally seek to prescribe the price changes permitted to
the incumbent operator. These controls are normally set in relation to a local
measure of inflation. So we see a price control such as RPI+2%, meaning that
prices can rise by no more than 2% above inflation.

Price control schemes These price controls may be applied in a number of ways. They may be imposed
dominate regulatory individually on a number of services or alternatively an overall price control may be
landscape applied to a basket of services. This allows the operator flexibility to change prices
within that basket as long as the overall basket meets the price control. Sometimes
sub caps are set within the basket to control the degree of rebalancing which an
operator can undergo. For instance, as we mentioned earlier, incumbent operators
have historically earned high returns on international and negative returns on local
access. If these two services alone were controlled by a single price cap an operator
not subject to competition would probably seek to raise prices rapidly for access and
reduce them for international. But this would disproportionately hurt low users of
the phone, whose telephone bill is dominated by the access charge, while
benefiting business users where there is a large proportion of revenue driven by
international calls. Given the social engineering aspects to regulation and the need
to have as many people connected to the network as possible (Metcalfe’s Law)
regulators will generally restrict the rate at which prices can rise for access.

The whole system of price control can get pretty complicated depending on what
the regulator is trying to achieve, with numerous sub caps involved. Price cap
control is often described as incentive regulation because it does not attempt to
directly control returns for an incumbent operator. The price control normally runs
for a period of years with a tacit undertaking on the part of the regulator not to
change the control in the event that the regulated entity makes either ‘supernormal’
or ‘subnormal’ profits

In contrast, the ‘rate of return’ method prescribes the return the operator is allowed
to make on a carefully stipulated (by the regulator) asset base. This does not
encourage efficiency because the higher the capital base the more profit is
achievable. As a result there are many rules about what the qualifying asset base is.
Even in markets that originally adopted this method such as the US, price control
regulation is now the norm.

In practice the two methods are more closely linked than they might seem at first
glance. In setting the price control the regulator is making a judgement about what a
reasonable rate of return might be. There is invariably a period of ‘information
sharing’ between regulator and regulated during the period in which the price
control is set. During this period the regulated pleads why efficiency improvements
that the regulator is factoring into his calculations can never be achieved and the
regulator goes through the motions of not believing it. The period over which the
controls will be in place is also important. Too long and the operator may make
returns which are unacceptably high or alternatively may suffer losses. Too short
and it might as well be a straight rate of return control.

Where competition is developing, the pace of that development will often mean that
a regulator must stage a gradual withdrawal in terms of imposing price controls. We
have seen this happen in the international market, which is an area where there is
generally an abundance of competition and the incumbent has generally lost an

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appreciable share of the market (>50%). In most markets this is no longer an area
subject to control.

Interconnection and regulation

Interconnection terms — the Retail prices are not the only area subject to price control. Vital to the development
key to the development of of competition is the price paid by competitors to use the incumbent’s network.
competitive markets Given that the incumbent provides connection to virtually all customers,
interconnection between networks is unavoidable. Other operators, as opposed to
customers, will require different types of service to buying a ‘local’ call or an
international minute of traffic. Quite apart from the thorny issue of price there is a
mass of issues to consider such as how and where the two networks link together,
whether the facilities are dedicated or shared, what sort of traffic will be
accommodated, and the type of technical standards.

A variety of techniques is used to assess the correct basis for these price decisions.
The arcane world of accounting gives us historic cost accounting (HCA), current cost
accounting (CCA), and long run incremental cost (LRIC), all of which can produce
startlingly different answers.

At the end of the day a network by definition relies on other components of the
network to operate. How these interactions are looked at will decide the answer to
the cost price equation. So the regulators’ real job is to identify the major
bottlenecks to allowing successful competition to develop and then deciding which
method will produce the best outcome - bearing in mind this will also be affected by
how strong the regulatory position is from a political perspective. In extreme cases
where the operators take issue with the decisions, the regulator may be forced to
justify the analysis to politicians.

So where are we heading?

Mobile moves into the At the risk of “dating” the piece we thought it worthwhile to provide a brief
ascendancy snapshot of the current market structure and a mile-high look at the ‘big’ issues.
Without any doubt, mobile is the revolutionary driver of change in the industry. On a
global basis there are more mobile subscribers than traditional telephone access
lines. The functionality of a mobile handset is infinitely higher than that of a fixed
phone and the gap is widening all the time. Substantial amounts of traffic are now
carried by mobile as opposed to fixed networks, we would hazard a guess at 25%
of total voice traffic volumes, while there are some telephone users who only use
mobile (although less than 10% globally). We have no doubt that both of these
percentages will increase.

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Figure 6: Ratio of mobile subs versus fixed access lines

2.0
1.8
1.6
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
1995 1996 1997 1998 1999 2000 2001 2002 2003E 2004E 2005E

Europe North America Latin America Asia Pacific

Japan Australasia Global total

Source: Teleglobe

It would be foolish to write off the fixed network operators quite yet. They still
connect most subscribers. Their capability to provide high bandwidth services is
likely to substantially exceed that of mobile operators for some time. Their challenge
is to exploit this advantage by rapidly building usage of internet-based services.

Where does this leave fixed Moreover it is worth remembering that a mobile network is really just a fixed
networks? network with radio at the end of it rather than wires and some clever devices that
allow people to communicate whilst moving about. The fixed networks are not
totally helpless when it comes to fighting back. The key will be to create devices
that can access a wide variety of differing types of networks on an intelligent basis.
Most fixed line operators also own mobile networks. However market shares of
above 50% are rare, while in the fixed-line area market shares of under 50% are
very rare. We would expect incumbents to try to address the market with products
that seek to exploit the segment where they enjoy the highest market shares.

We are already seeing signs of a blurring of distinction between the mobile and
fixed pricing packages occurring in the US markets and we would expect the fixed
line operators to seek to bundle an increasing mix of services into the packages.

Figure 7: Product maturity

Frame Relay Directories
Data solutions Equipment
Growth Wireless ISDN
%/GDP Leased Line
ATM Voice
Pay Phones
Optical DSL
Transport
IP

Development Stage Growth Stage Mature Stage Late Stage

Product Life Cycle Stage

Source: Deutsche Bank estimates and company data

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14 January 2004 Telecommunications Telecoms for Beginners

Nothing radically new on In terms of the overall industry we see little in the way of new services which are so
the technology horizon radically different that they change the way people communicate. The arrival of
mobility in the early 1980s achieved this, and the result was a premium period of
growth for the overall industry. Broadband is still in its infancy, both in the fixed and
mobile arenas, and ultimately may produce a period of revenue growth going
forward. However the market is currently of the view that broadband will not
command a high enough premium to regenerate growth and that a by—product will
be lower revenues from the conventional mainstay of the industry, voice traffic. The
other technology to have come of age with the capacity to provide a further upset to
traditional business models is WiFi. This needs to be watched closely. Our current
thinking is that the deployment of this technology will lead to a further blurring of
the lines between fixed and mobile networks.

But lots of technologies still The niche providers will also continue to pick away at the incumbents. Whatever the
to be fully implemented regulators say about withdrawing from the industry, the fact is that the definition of
significant market power is typically a market share of 25%. No incumbent is
anywhere close to this nor likely to be for the foreseeable future. As a result
regulators are likely to continue to press their case to get lower cost access to
network for the newer players and fight hard for the proverbial ‘level playing field’.

Longer term there are more racy technologies that could eliminate the need for
much of the network that exists today, and ultimately bring down the 100-year old
edifice which is today’s incumbent. Parasitic, or symbiotic, networks would be such
an example and indeed are under active development in the US, the UK and Israel. It
is not beyond the bounds of possibility that many goods sold in the future, including
jewellery, cars, white and brown goods, will contain devices which will allow
communications with other such devices all without any local fixed network. In the
meantime the burgeoning spread of wireless LANs, or WiFi hotspots, will offer a
slightly less flexible version of the same thing. If these really work effectively then
some of the business models surrounding 3G mobile technology could be severely
dented.

Machine to machine communication is growing very fast and by the end of the
decade we think could account for the vast bulk of communications. A recent
speech by Dr Peter Cochrane, a renowned technology expert, suggested that
transponders can currently be printed onto paper for about $0.05. This allows boxes
to attain a degree of intelligence that offers some interesting possibilities. The
message is that telecomms will require much higher bandwidth and with much
larger swings between peak and off-peak traffic. This will place intolerable pressure
on the traditional switched network. The answer for the existing operators is either
to embrace the new technology offered by parasitic networks or face extinction.

However, this is getting into the area of specialism, which extends beyond the
scope of this note. For now let’s get back to the basics of what telecomms actually
is.

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Getting serious
The word Most people think of telecommunications as sending messages over distances
‘telecommunication’ is further than one can shout. But even this basic point needs to be redefined in order
derived from Greek word to understand today’s telecoms environment. Wireless technology has applicability
‘tele’ meaning ‘far off’ and to very short distance communications. There is huge potential associated with
Latin word ‘communio’
Bluetooth technology, more of which later, and machine to machine applications will
certainly prove material, although not necessarily of any help to the telcos directly.
meaning ‘mutual
participation’.
In this report we will concentrate principally on the networks dealing with
communications of 10m and above.

Figure 8: Classification of networks based on distance

Communication Distance 0.1m 1m 10m 100m 1km 10km 100km 1,000km 10,000km
(order of magnitude)
Processors located in same Circuit board System Room Building Campus City Country Continent Planet
Example Data flow Multi- Local Area Network (LAN) e.g. wireless Metropolitan Wide Area Network (WAN) The Internet
machine e.g. computer LAN (WLAN) Area Network e.g. Cellular telephone
handset or PC (MAN) e.g. network
Wireless in
Local Loop
(WLL)
Source: Computer Networks’ by Andrew S. Tanenbaum, 3rd Edition

This report focuses on various types of end-user services and their providers. These
include:
n Fixed voice services — landline (or wired) telephony
n Fixed data services — Internet access through DSL, cable etc.
n Wireless voice services — cellular telephony
n Wireless data services — WLAN, Short Messaging Services (SMS)
n Converged services — Voice over Internet Protocol (also called VoIP or Net
Telephony), text messaging from fixed to mobile phones, Internet access over
mixed cellular-WLAN networks etc.
Just as a train service uses a network of railtracks to carry passengers from one
point to another, voice or data traffic is carried over a communication network. The
media for carrying communication traffic can be categorised into wireless or wired.

Communication services provided include radio or TV broadcast, telephony, Internet

access, Location Based Services, messaging services, Voice over IP (VoIP), Virtual
Private Networks (VPNs) etc. In later sections of this report, the focus is on two-way
communication services and their applications, i.e., fixed and wireless services
providing two-way voice and data communication.

The services and applications that are likely to drive growth in overall telecom
services revenue in the near future are:

Internet access: The following access methods would drive telecom services
revenue growth:
n Wired broadband using Cable and DSL technologies
n Wireless broadband using wireless LAN, 2.5G and 3G cellular networks
n Converged networks e.g. cellular networks and wireless LAN combined
n VoIP

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14 January 2004 Telecommunications Telecoms for Beginners

Messaging services: SMS and MMS services would drive telecom growth both
directly and indirectly:
n Directly: Consumer and business communications
n Indirectly: By enabling other applications such as location based services,
banking, news alerts etc.

Key trends
Figure 9: Worldwide telecom services revenue 2002-2007 (in USD billion)

Independent estimates suggest that globally, the total CAGR (2002-07) = 4.95%
revenues for fixed and wireless services (voice as well as
data) are expected to grow at a Compounded Annual Growth 2
Rate (CAGR) of about 5% from US$1,066.4m in 2002 to
US$ 1,357.9m in 2007. These rates would imply growth of 1.36
just above GDP. 1.07
1
Growth trends vary for service types, such as fixed
telephony, mobile services, Internet etc. Further, the
trends also vary with geography because of the
technological history and environmental factors specific
to the regions. 0
2002 2007F

Source: ‘2002: featuring a clear slowdown in growth and a sector undergoing change’ by Idate, June 2003 (Link: http://www.idate.org/an/qdn/an-03/IF261/index_a.htm)
1 ibid

External observers suggest the growth in revenue from voice services is expected
Asia Pacific is likely to drive to be low. Therefore, the overall telecom services revenue will be driven by growth
growth in the telecom
in data services, i.e., through wired as well as wireless broadband. Among various
geographies, Asia Pacific is likely to drive growth in the telecom services sector
services sector.
given the low penetration rates of telephony in some of the most populous markets,
notably China.

Service trends
High-speed Internet and Telecom services can be broadly categorised into fixed telephony, mobile services
mobile services are likely to (voice and data), Internet (through dial-up and high-speed access) and data services,
increase their dominance such as VPNs.
and the share of fixed line
services in the worldwide
Among these services, the share of fixed line in worldwide telecom services
revenue is likely to decrease from 43% in 2002 to about 37% in 2007 as high-speed
telecom services revenue is
Internet and mobile services increase their dominance (see Figure 10 below).
expected to decline.

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14 January 2004 Telecommunications Telecoms for Beginners

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

100% = USD 1.07 bn in 2002 and USD 1.36 bn in 2007

100%
90%
80% 39% 42%
70% Mobile Services
60% Fixed Telephony
50% Internet & High-speed
40% 43% 37% Data
30%
20%
7% 10%
10%
11% 11%
0%
2002 2007

Source: iDATE1

The share of long-distance Such erosion in fixed telephony’s market share can be explained by the slow growth
fixed telephony in telecom in the fixed telephony services that is expected to continue due to:
services revenue has n Penetration reaching saturation levels in certain geographies, such as North
declined due to substitution America and Western Europe
by mobile communication,
e-mail, VoIP etc.
n Increased competition from competing fixed telephony service providers leading
to pressures on prices and margins
n Substitution by mobile services and other forms of communication such as e-
mail and Voice over IP. These have particularly dented the shares of long-
distance fixed telephony service providers.
Mobile services are expected to gain share, and probably overtake fixed telephony
services, because:
There is an increasing push n In many areas, the penetration of wireless technologies is low. Further there are
by the handset vendors, some areas, especially developing or underdeveloped ones, with low fixed
service providers as well as telephony penetration. These present opportunities for growth of mobile
content providers to services. Regions in Asia-Pacific, such as India and China, are examples of
promote new ways, such as developing areas.
3G and WLAN, to provide n There is an increasing push by the service as well as content providers2 to
mobile voice and data promote new ways to provide these services, such as 3G and wireless LAN.
services.
n For the provision of fixed line services, laying the last mile is expensive to build
and maintain.
The growth in wired data services is likely to be driven by the proliferation of
broadband. Cable and DSL are likely to be the preferred technologies for broadband
access in the near and medium term. Moreover, the growth in these technologies is
likely to be spurred by an increase in demand, especially in the Asia Pacific region
(see Figure 11 below).

1
Source: ‘2002: featuring a clear slowdown in growth and a sector undergoing change’ by Idate, June
2003 (Link: http://www.idate.org/an/qdn/an-03/IF261/index_a.htm)
2
Source: ‘North America Remains a Wasteland for Mobile Content’ by Michael Pastore, Internet.com,
April 2001 (Link: http://cyberatlas.internet.com/markets/wireless/article/0,1323,10094_731141,00.html)

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 14 January 2004 Telecommunications Telecoms for Beginners

Figure 11: Cable and DSL broadband subscribers (in million) by region

80
70
60
50
Voice services are becoming
commoditised and there is an 40
increasing trend towards 30
bundling various services
20
10
0
1999 2000 2001 2002 2003 2004 2005 2006 2007

Asia Pacific DSL Asia Pacific Cable EMEA DSL

EMEA Cable North America Cable North America DSL
3
Source: RHK
*EMEA stands for Europe, Middle-East & Africa

As voice services are becoming commoditised, there is an increasing trend towards

bundling various services with fixed as well as mobile voice services. Such bundling
of services helps in the differentiation of services and, consequently, to gain and
retain customers.

Geographical Trends
Over the next few years, revenue shares of regions with developed telecom
services markets, such as North America and Western Europe, are expected to
stagnate or decline, while emerging markets take the lead (see Figure 12 below).

Figure 12: Split of worldwide telecom services revenue by geographic region

100% = USD 1.07 bn in 2002 & USD 1.36 bn in 2007

100%
90% 27%
31%
80%
70%
North America
60% 32%
30% Asia Pacific
50%
40% Western Europe
30% 23% Rest of the World
23%
20%
10% 16% 18%
0%
2002 2007

Source: iDATE4

3
Source: ‘Telecom Economics Capex Forecast: Europe Annual & North America 1Q03 Update’ by Kate
Horricks and Stephane Terral, RHK, May 2003 (Link: http://www.rhk.com/pdfs/RHK-TE-
Capex_Forecast_EuroAn_1Q03NA-2003-05-35000.pdf)

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14 January 2004 Telecommunications Telecoms for Beginners

Asia Pacific is providing the Telecom services technologies have reached high penetration levels in North
impetus for growth in America and Western Europe. Therefore these markets can be termed mature or
subscriber numbers developed, especially in the case of fixed and mobile data services. The regulatory
worldwide, especially environment and market structure are also reasonably stable in these regions.
through an increase in the
Competition among service providers is often intense. These highly competitive
conditions have led to price wars and increased pressure on the margins earned by
number of mobile services
service providers. Update of mobile data services, such as MMS and high-speed
subscribers and Internet
Internet, through Cable and DSL, are likely to drive growth in these markets in the
users
near future. Other service categories, such as fixed telephony, are likely to witness
sluggish growth, at best, or more probably a decline in revenues in these regions.

In contrast, regions such as Asia Pacific and Latin America do not have high levels of
penetration of telecom service technologies. Of course, there are a few exceptions
to this. For instance, South Korea is the leading country in the world in terms of
broadband penetration. The telecom services markets in most of the countries in
Asia Pacific are either still developing or are under-developed as is evident by the
low penetration of telecom technologies in these regions. Thus, a few emerging
countries, such as China and India, are driving growth in revenue as well as in
number of subscribers in Asia Pacific. In turn, the Asia Pacific region is providing the
impetus for growth in subscriber numbers worldwide, especially through the
increase in the number of mobile services subscribers and Internet users (see
figures below).

Figure 13: Worldwide mobile services subscribers Figure 14: Worldwide internet users by region
by region

100% = 1.15 Bn in 2002 & 1.97 Bn in 2007 100% = 590 Mn in 2002 & 949 Mn in 2007

100% 100%
11% 14%
90% 22% 21% 90%
80% 80%
70% 31% Rest of World
70% Rest of World 40%
60% 36% Asia Pacific 60% Asia Pacific
48% 50%
50% 25% W. Europe
W. Europe 40%
40% 21% North America
30% North America 30%
29%
20% 20% 20% 34%
10% 26%
10% 13% 10% 0%
0%
2002 2007 2002 2007

Source: CommNOW DataBanks, Cellular News and Deutsche Bank Analysis Source: iDATE5

Therefore Asia Pacific is likely to be the growth engine for telecom services’
revenue as well as for the number of subscribers in the near future.

4
Source: ‘2002: featuring a clear slowdown in growth and a sector undergoing change’ by Idate, June
2003 (Link: http://www.idate.org/an/qdn/an-03/IF261/index_a.htm)
5
‘The World Atlas of the Internet’ by Idate (Link: http://www.idate.org/an/qdn/an-03/IF244/index_a.htm)

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Telecom services and business

Models
The telecom services sector comprises players from many allied and supporting
industries. Industries such as equipment providers furnish offerings primarily for the
telecom sector. Supporting industries include software and hardware developers
and implementers. They provide services ranging from the development of basic
technology platforms for device communication to building the whole network.

The telecom service industry can be classified by mode of service offerings, i.e.,
fixed and wireless, and further on the basis of the type of services offered such as
voice and data.

A basic value chain for the telecom services industry is given below.

Figure 15: Telecom Services Value Chain

Implementers Application Content Network Service
Equipment Providers Providers Operators Providers
Providers

n Network n Software and n Basic n Provide content n Owners of n Use their own
Component hardware application to be viewed or the basic or another
Providers integrators platform used while network on network
providers communicating which the operator’s
n End-User & n Also provide
using various voice or data network to
Distribution consulting, n User
applications traffic is provide services
Equipment network application
carried to customers in
Providers maintenance providers
a particular
support, They include: n May
n Test Equipment region
optimisation and n Content creators provide
Providers
upgrade services services to
n Content
end
aggregators
consumers
n Content themselves
distributors

Source: Deutsche Bank

In the telecom services industry, equipment or technical services and products are
provided to the network operators, who own the network. The players providing
equipment are called equipment providers. The providers of technical services and
products are network implementers and application providers. Lucent, for example,
is a network integrator and Microsoft an application provider. The service providers
supply the final services to the customers with whom they have a direct billing
relationship. The network operators can directly offer services to customers, in
which case they are themselves known as service providers. Alternatively, they can
lease the network to service providers. Content providers add value to the telecom
services by providing content useful to the customer. This content may be games,
stock market updates, news, event updates or location-based services useful for the
customer. The content providers can directly charge the customers for their
services or can have a billing relationship with the service providers.

Figure 16 describes the business relationships that these players share with each
other.

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14 January 2004 Telecommunications Telecoms for Beginners

Figure 16: Telecom Services Relationship Chart

Application Content
Providers Providers
Apps or platforms
Set of rules or protocols for content
for communication of development such Content providers could have
devices as web page two business models:
Routers, development using 1. Selling the content by
switches, cables, HTML etc. having a tie-up with the
towers and other service providers.
network hardware 2. By selling content directly
and test Implementers Network to the customer.
equipment Operators Service providers could also
offer exclusive content.

Service applications
Equipment for various services. Service
Providers Providers

Service providers could sell their

offerings through a distributor or
directly to customers
Equipments used in
services distribution

Service End
Distributor User

Mobile phones, PDA, wired telephone sets, DSL Transceivers, Dial-

up modems or Cable modems depending upon the technology used

Source: Deutsche Bank

Player characteristics
The generic roles of players in telecom services are described below.

Equipment providers
The telecom services industry requires network equipment and end-user
equipment. Network equipment includes that which is necessary for laying down
the network such as cables, routers, switches, test and distribution equipment etc.
End-user equipment includes devices for the user to access the network such as
mobile phones, wired telephones, modems etc.

Equipment providers can be further sub-divided into the following major types:
n Network component providers
n End-user equipment providers
n Network Component Providers
These provide the essential components required for building and maintaining the
networks and include components such as transmitters, cables, routers, testing

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equipment etc. Some of the main components, their functions and key suppliers are
outlined in Figure 17 below.

Figure 17: Network Components

Network component function Key suppliers
Transmitters and Receivers Transmitting and receiving signals in the network Motorola, Agere, Harmonic, C-Cor, Scientific-Atlanta, Bookham
Technology, NEC, Sumitomo Electric and JDS Uniphase
Cables Fibre or copper cables for transport of voice or data Alcatel, 3M, Commscope, Corning, Pirelli, Leviton Voice & Data,
General Cable
Routers and Switches Connecting various networks and managing traffic Alcatel, Cisco, Ericsson, Hitachi, Fujitsu-Siemens, Lucent,
Marconi, NEC and Nortel
Repeaters, Amplifiers and Regenerators Strengthening or regenerating the signals in a network ADC, Agere, Alcatel Optronics, Corning, Ericsson
as the signals tend to weaken after travelling some Microelectronics, JDS Uniphase, Lucent and Nortel
distance
Multiplexers & De-multiplexers Allow multiple logical signals to be transmitted Gould Fiber Optics, Ipitek, Excelight, ADVA, ADC, Versitron,
simultaneously across a single physical channel (e.g. Elcommtech Corporation, Telebyte Inc., Lascomm
fibre cable). De-multiplexer performs a function exactly
opposite to that of a multiplexer.
Other network components — Passively involved in the networks (i.e. do not carry Various players are there as this is highly fragmented market
connectors, panels, equipment casing signals)
etc.
Distribution equipment such as CMTS, Retransmit the signals and used in services distribution Cisco, Arris, Motorola are some players who manufacture cable
DSLAM modems.
Testing equipment (LAN/WAN analyser Monitors the signal performance of the overall network Agilent, Lucent, Ericsson and Agere are some key providers
etc)
Source: Deutsche Bank

End-user equipment providers

These provide the equipment to be used by the end-consumer of the telecom
services. Equipment includes handsets, modems and other accessories. These are
provided to the end-users through service providers or distributors (via the bundling
of services).

Retailers
Key players include Alcatel, Nokia, Ericsson, Motorola, Samsung, IBM, Toshiba,
Palm, LG, Sony etc.

Implementers
Implementers use the hardware components provided by the equipment
manufacturers to build the complete network. The implementers may source this
hardware from various vendors. They also source software relevant to the
technologies to be used in the network to be deployed. They integrate the hardware
and software to ensure complete build and rollout of the network. Therefore they
are also known as ‘network integrators’ or ‘turnkey solution providers’. Most of the
implementers also provide consulting, network maintenance support, optimisation
and upgrade services.

Implementers provide their services to network operators, who own the network.

Network implementation services are provided by some of the major equipment

vendors including Cisco, Ciena, Tellabs, Lucent, Nortel and Ericsson.

Application providers
As depicted in the relationship chart, application providers are present at various
steps of the value chain. They provide their services to the implementers, content
providers and service providers and supply the basic technology platform for various
applications such as device communications, network protocols etc.

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Application providers for telecom services can be divided into two types - basic
platform providers and user application providers.
Basic platform providers: These provide the basic platforms (or languages) from
which various applications for device communication can be developed. For
instance, Qualcomm provides BREW, Sun provides Java. Various software or
application developers use these platforms to develop applications for network
implementers and content providers.

Key players include Qualcomm, Microsoft, Apple, Sun, and IBM.

User application providers: These provide applications that run on various devices
or networks. For instance, Microsoft provides Windows and Microsoft Office; Apple
provides Mac OS; Palm provides its own Palm operating system that runs on
various handheld devices. Billing and messaging are examples of applications that
are run on the network level.

Some applications need to be centrally hosted such as mobile staff-management

software, e-mail or games. These are run from a central server and can be accessed
by the end-user devices. There is a trend towards outsourcing the hosting of some
of these applications. The players who provide outsourced hosting are called ASPs
(Application Service Providers). They are also known as WASPs (Wireless
Application Service Providers) in the case of outsourced hosting of wireless
applications.

Key players include Microsoft, IBM, Apple, Palm, Openwave, Aether etc.

Content providers
To add value to their services and products service providers offer information and
value added services such as news, entertainment games, stock market updates
etc to the customer. They provide these services by tying up with various content
providers such as news channels, websites etc.

The content providers can charge the consumer directly for their services or can
have a billing relationship with the service providers.

The content providers can be further sub-divided into:

n Content creators — these create gaming software or programmes for broadcast,
e.g., Namco a leading gaming content creator.
n Content aggregators — these compile content from various sources (e.g.
Reuters).
n Content distributors — distribute content to the end-user. This distribution can be
done through various channels such as tie-ups with service providers, through
portals (e.g. Yahoo! News).
Network operators
The network operators (or carriers) own the basic network on which the voice or
data traffic is carried. They can decide to provide services to end consumers
themselves in which case they are termed as incumbent operators.

Alternatively, they may decide to lease out parts or whole of the network to some
other service provider. These are the principal focus of this document.

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14 January 2004 Telecommunications Telecoms for Beginners

Service providers
These players use their own or an incumbent’s network to provide services to
customers in a particular region. They will normally have a direct billing relationship
with their customers.

Fixed Line Services

Fixed line voice services are also known as landline telephony services or basic
telephony services or plain old telephone service (POTS). In most of the regions,
PSTN6 lines were owned by government-regulated agencies. However, after
liberalisation of telecoms markets ownership of the networks has for the most part
passed into private hands.

Network operators
The network operators, who own the network and manage the traffic on it, are
known by a number of terms. PTO (public telephone operator is a common term,
PTT (public telephone and telegraph), PSTN (public switched telephone network). In
the US the term Incumbent Local Exchange Carriers (ILECs) is used to denote the
peculiarity of the US market where historically the local operator has had to hand
over traffic to a separate group of long distance operators.

Most countries start with only incumbent government-controlled players.

Subsequently, as the telecom market is liberalised, competitors enter the market
and the government may also decide to reduce its stake in the incumbent. Players
competing in the local market are also known as Competing Local Exchange
Carriers (CLECs). Competitors may also enter the long distance and international call
markets, where returns were originally the highest.

Usually, the ILECs use only a portion of the network they deploy. The CLECs lease a
portion of the ILEC’s network to provide competing services in the incumbent’s area
of operation. The telecom regulatory bodies lay down rules for ensuring that ILECs
share a portion of their networks. The regulators also provide guidelines for the
amount that ILECs can charge CLECs for such sharing or, as it is more normally
termed, interconnection.

Content providers
Content providers do not play a significant role in basic telephony. There are some
offerings, such as dating and friendship lines, that could be termed as content using
voice services. Providers of these services usually buy specific numbers from the
service providers. The consumer generally has to pay higher rates for using these
content services. This revenue is shared between the service provider and by the
content services provider.

Service providers
Regardless of who owns the network, the service provider has billing relationships
with the end-users of these services. Apart from the basic services the providers
may also charge the customers for value-added services such as voice mail,
specialised directory services etc. The key services are outlined below.

Domestic calls: The distinction between local and long distance is somewhat
arbitrary and increasingly the cost dynamics of the network suggest that there
should be no appreciable price differential between the two. In some markets

6
PSTN stands for public switched telephone networks. They are the landline networks used for landline
telephony.

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pricing already reflects this. Traditionally local calls have been those that are only
routed via the local exchange while long distance calls utilise both the local and main
exchanges. Charges for local calls are the lowest of all voice services and in a
number of regions, in particular the US, are bundled into the fixed monthly fee.

Long distance calling charges are generally higher than the local call charges. The
charge depends upon the terms of agreement between the service providers
involved and the distance of the circuit used in making a long-distance call.

Voice mail: This is one of the value-added services offered by the service providers
and can be accessed in the following two ways:
n By storing and retrieving voice mails on the phone used by the user
n By storing and retrieving voice mails on the service provider’s server. In this
case, the subscriber is usually charged a fixed amount for maintenance of the
service and a variable amount proportional to the number of messages
retrieved.
Phone book and directory services: Directory services enable the subscribers of a
service provider to list their number in a phone book, often termed Yellow Pages for
obvious reasons. The service provider maintains this phone book. There are many
pricing models ranging from a free service funded by advertising right through to a
cost per enquiry. Managing these directories is seen as one of the growth
opportunities owing to the increasingly sophisticated database services that are
available.

Freephone or special rate numbers (0800, 0345 etc.): Toll free/ freephone
numbers are special numbers which subscribers can access for free or only pay a
local rate wherever they are calling from. Such numbers are used to promote
services and products. The promoter of such services or products buys or leases
the number from the provider and pays for calls made to it. As the volume of calls to
such numbers is usually high, the rate per call charged to the promoter is usually
lower than the normal rate.

These numbers offer value to all involved parties because of:

n Better utilisation of the operator’s network due to the high volume of calls per
number
n Higher revenue per number for the service provider and volumes business
n Increased recall for the promoter in the minds of customers
n Convenience for users as little or no charges and easy recall
Emergency services: Calls to emergency service numbers are offered free of
charge to the subscribers.

In this service, the provider determines the location of the caller7 and arranges for
appropriate help.

Premium content services: In contrast to toll-free services, premium content

services charge the callers extra for accessing special voice content. This premium
content relies heavily on pornographic content, dating services etc. The bulk of the

7
The location may be determined automatically through some software or the caller may be asked to
provide information about his/her own location.

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14 January 2004 Telecommunications Telecoms for Beginners

fee goes to the content provider rather than the network operator. The revenue
generated from such services drives traffic and hence revenue for the network
operator. Moreover, the premium charged may also be shared between the content
provider and the service provider.

Leased voice lines: Leased lines for voice services are dedicated, point-to-point
circuits with their own predetermined routes. Voice grade leased lines include all
dedicated point-to-point services in a particular frequency range to separate circuits
that carry data or non-voice from those which carry voice. Leased lines are invariably
dedicated digital circuits connecting two fixed points across a private network.
Different rates apply depending on the distance and the bandwidth provided.

Others: Service providers also offer other value-added services to the residential or
business subscribers. These include:

n Conferencing: A facility to speak with multiple people, i.e., hold a meeting over
the phone
n Call waiting: A facility to swap calls or put a caller on hold
n Call forwarding: Ability to forward incoming calls to some other phone number
n Conference bridges: A service that allows multiple users to dial into a single
number (also known as conference bridge) by using a number and a password.
This is an enhanced version of the ‘conferencing’ service as there is usually a
limit to the number of people that can join in a ‘conferencing’ service. In
contrast, many more people can join and leave a conference bridge easily. For
instance, companies often use conference bridge services to hold meetings or
to discuss financial results with analysts.

For the services mentioned above, the provider may generate additional revenue by
charging for activation and maintenance of such services. All of these services, and
many more, are embedded in the software provided by the switch manufacturers.
All the telco operator has to do is enable and market them.

Fixed line data services

Data services offered through PSTN lines include Internet services and fax.
Consumers do not pay any extra charge for fax services. They are billed just as they
are for any normal call. Internet services can be provided through the following
technologies, which we discuss in more detail later.

Figure 18: Fixed line data services technologies

Technology brief description
Dial-up Low speed internet access (narrowband) using telephone line and a dial-up modem
Cable High-speed Internet access using a cable modem at subscriber’s end and CMTS8 at the
distributor’s end. This can also be provided over the same cable as the one used for carrying
cable TV channel signals.
XDSL High-speed Internet access using DSL modems.
Satellite High-speed Internet access using satellite instead of the telephony backbone infrastructure.
Source: Deutsche Bank

The value chain for fixed line data services is essentially the same as that for
telecoms in general (see Figure 19 below). Details about the relationships typical to
fixed line data access are explained below.

8
CMTS stands for Cable Modem Termination System.

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14 January 2004 Telecommunications Telecoms for Beginners

Figure 19: Fixed line data services business relationships

Application Content
Providers Providers
Apps or platforms
for content
Device or protocol development e.g. Content providers could have 2 business
Routers, applications Java, .NET models:
switches, cables, 1. Tie-up with service provider. E.g. Internet
other network service MSN signed a $150 million, 5-year
hardware and test deal in 2003 to use CareerBuilder.com as its
equipment exclusive provider of information for job
Implementers Network seekers
Operators 2. Selling content directly to customers. E.g.
Wall Street Journal’s site charges for access
to content.

Service applications
Equipment such as CRM, VPN Service
Providers Providers

ISPs could sell

connections through a
CMTS, DSLAM or distributor or directly to
other equipment customers
depending upon the
technology used
Service End
Distributor User

DSL Transceivers, Dial-up modems or Cable

modems depending upon the technology
used

Source: Deutsche Bank

Equipment Providers
In fixed line data services, the end-user and distribution equipment provided by the
equipment vendors varies with the technology used, be it DSL, cable or modem.
We look at these devices in more detail later on.

Application Providers
Unlike fixed line voice services, application providers have a significant role to play in
fixed line data services. This is because data services are more technology or
software intensive than voice services.

In data services, application providers offer the following:

n Device or protocol applications to the network implementers. These applications

are software specific to the network technology being used, i.e., devices and
protocols9. Cisco, for instance, has a software application (CSR server10) that
provides rules-based logic for routing in a network.

9
Refer to glossary for further information on ‘protocol’.
10
For more details on the example of this software please visit
http://www.cisco.com/warp/public/cc/pd/unco/ps4371/index.shtml

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14 January 2004 Telecommunications Telecoms for Beginners

n Applications or platforms for content development and browsing, e.g., Java by

Sun, .NET by Microsoft. These basic applications help content developers to
build up other user applications and content.
n Service applications such as those for billing, Customer Relationship
Management (CRM) and Virtual Private Network (VPN)11. Service providers use
these applications for managing customers and for providing specialised
services such as VPNs.
The application providers do not have a billing relationship with the end users of
fixed line data services. These providers have B2B relationships with the
implementers, content developers or service providers.

n Content providers could have the following business models:

n Selling the content via a tie-up with the service providers. The ‘tie-up’ could
provide fixed (flat fees) or variable revenue (through revenue sharing) or both to
the content provider. Internet service MSN, for example, signed a $150 million,
five-year deal in 2003 to use CareerBuilder.com as its exclusive provider of
information for job-seekers12.
n Selling/re-selling content directly to the customer e.g. the Wall Street Journal
charges for access to its website.
n In some cases the content could be provided for free to the customer and
revenue generated through advertising or through deep-access or value-added
features. For example, New York Times, and Bloomberg News do not charge
for basic services but do so for value-added services and deep access to their
sites. On the other hand, some sites such as Yahoo rely primarily on advertising
revenue to sustain their services.

Recently there has been a trend towards integration of some components of the
value chain such as a tie up between content and service providers. An example of
this is the AOL / Time Warner merger. However, the success of such ventures is
still open to question.

Service Providers
Providers for fixed line data services are called Internet Service Providers (ISPs).
They have a direct billing relationship with the subscribers to their Internet or other
data services, e.g., VPNs. They offer fixed line data access using one or more of the
available technologies such as DSL, Cable etc. to residential as well as enterprise
customers.

They also manage the customer relationships themselves or through a network of

distributors.

The service provider and the customers mutually decide the billing method. These
methods include:

n Usage based billing: The amount charged depends on the time spent online or
on the amount of data accessed (usually during a month). In some cases, this
charge is over and above a subscription fee.

11
Refer to glossary for further information on ‘VPN’.
12
Source: Microsoft Press Release, August 2003 (Link:
http://www.microsoft.com/presspass/press/2003/aug03/08-05RecruitmentServicesPR.asp)

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14 January 2004 Telecommunications Telecoms for Beginners

n Fixed billing: The amount is fixed irrespective of the usage (usually during a
month). In both the above methods the bandwidth13 to a user is not dedicated
but shared by various users. Therefore, these are more suited to residential
subscribers and Small Offices Home Offices (SOHOs).
n Leased line based: Most Small and Medium Enterprises (SMEs) and large
enterprises have higher usage and require more reliable services. Therefore,
they lease a dedicated bandwidth from the ISP. The monthly charges for this
dedicated bandwidth are fixed irrespective of the usage.

During the Internet boom of late 1990s and 2000, many ISPs were offering free
Internet access to subscribers. Their business model was to generate revenue
through e-commerce or advertisements. However, this business model was found
to be unsustainable and most such ISPs either closed down or revised their
business model.

Distributors
The service providers may have their own distribution network or they may sell their
services through third-party distributors to reach the local consumers.

These distributors could have direct billing relationships with the subscribers and are
also responsible for customer relationship management in some cases. For
instance, local cable operators providing and maintaining the cable TV connections
to various households in a locality could also distribute and manage cable internet
connections after getting a certain amount of bandwidth (usually 128kbps or higher)
from the ISP.

Local distributors may also offer financing or subsidies on modems or transceivers

to the local subscribers. These are offered as a part of a service contract.

Wireless Services
The basic value chain for wireless services is the same as that for fixed line
services. The value chain and business models for wireless services vary according
to the type of services. The business relationships in voice services can be
considered as a subset of package of voice and data services offered nowadays by
various wireless service providers.

These relationships are explained in the following sub-sections.

Wireless Voice and Data Services

The business relationships in wireless services are mostly similar to those in fixed
line services as shown in Figure 20 below.

The backbone infrastructure is fixed and the same as that for fixed line services. The
main difference is that radio frequencies are the medium used (service provider
onwards) for transmission14.

Moreover, the networks may be configured to handle the different wireless

technologies such as GSM, CDMA, W-CDMA, Wi-Fi15 etc. The network
implementers deploy the hardware and software accordingly.

13
Refer to glossary for further information on ‘bandwidth’.
14
The technologies used in wireless transmission are explained in the chapters on ‘Communication
Media’ and ‘Communication Networks’

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Figure 20: Wireless Services Business Relationships

Application Content
Providers Providers
Apps or platforms
for content
Device or protocol development e.g. Content providers could have two
Routers, applications Java, .NET business models:
switches, cables, 1. Tie-up with service provider.
towers, other E.g. Yahoo has an agreement
network hardware with FT to provide WAP services
and test on mobiles.
equipment Implementers Network 2. Direct selling of content e.g.
Operators Phonetunes.com offers ring tones
and MMS for direct download by
customers.

Service applications such

as CRM, mobileVPN
Equipment Service
Providers Providers

1. Cellular/WLL/ PCS connections could be sold through

distributors or directly to customers
The service 2. WLAN could be: (a) enterprise owned e.g. in an office
distributor often sells for its employees (b) service provider owned e.g. at an
end-user equipment airport (c) deployed in coffee shops, hotels, malls etc. as a
along with the value-added service for customers
service

Service
Distributor End
User

Mobile phones, PDAs, Laptops, Network Interface

Cards (NICs), Access Points (APs), Bridges etc.

Source: Deutsche Bank

Details about the relationships typical to wireless services are explained in the
subsections below.

Equipment Providers
Apart from the usual telecom network equipment the equipment vendors provide
the following equipment for wireless networks:

Network equipment: They provide cell-site and base-station related equipment,

such as towers, to the network operator. The equipment also includes access points
and bridges for deploying WLANs etc. The equipment for data services is provided
to service providers e.g. messaging centre equipment and solutions provided by
Logica-CMG.

15
Refer to Chapter 4 on ‘Communication Networks’ for further information on ‘GSM’, 'CDMA', ‘w-CDMA’
and ‘Wi-Fi’.

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End-user equipment: For voice services a handset also known as mobile phone (or
cellular phone in case of cell-based services) is provided.

n For data services more advanced equipment is provided. These include:

n Smart Phones — Similar to mobile phones but can be used for both voice and
data communication (e.g. Nokia Communicator).
n Advanced Handsets — colour phones, GPRS enabled or 3G enabled phones
n PDAs / Palm Top — small data devices, typically of the size of the palm of a hand.
Usually, a stylus is used to browse on these. HP-Compaq, Palm and Sony are
leading providers of this equipment.
n Handhelds — data devices primarily used in enterprises. They are larger than
PDAs and usually have a keyboard for data input.
n Laptops / Notebook PCs — portable computers typically of the size of an A4 size
notebook after folding. IBM, Dell and Toshiba are leading providers of these.
n Tablet PCs — PDA-like devices in which a light pen can be used for input in one’s
own handwriting
n Network Interface Cards (NICs) — a card for inserting in a laptop to be able to
access a wireless LAN
Application Providers
For wireless voice and data services, application providers offer the following:

n Software applications for various network devices to the network implementers

n The applications or platforms for content development and browsing
In wireless services, these are different from those for fixed data services. This is
also due to the small and mobile nature of the devices. Therefore specific
applications are provided, e.g., Windows CE by Microsoft, Palm OS by Palm, BREW
by Qualcomm etc.

Content Providers
The business relationships for wireless content providers are similar to those for
fixed line data content providers:

n They can directly sell the content to the end user.

n They can have tie-ups for a flat fee, or revenue sharing, or both, with service
providers.
In some cases, the content also has to be specifically designed or re-engineered for
access on some wireless devices such as mobile phones - e.g. ring tones and logos
are specifically designed for mobile phones. Moreover, various websites are also re-
designed from languages such as HTML to languages such as XHTML, cHTML and
WML16 usable with varying levels of success on the wireless devices. Location
based content is also specifically designed and delivered for the mobile devices.

Service Providers
Most of the voice-based services offered over fixed line telephones are also offered
through wireless telephones. These include local calls, long distance calls, voice

16
HyperText Markup Language (HTML) is a form of representing Internet text documents. XHTML,
cHTML and WML are extensions of HTML that can support a wider range of documents and media and
can be viewed on a wide range of access devices including PDAs and mobile phones.

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mail, phone book and directory services, toll free numbers, conferencing, call
waiting etc.

In addition to these, there are other significantly different services in wireless

telephones. These include:
n Enhanced emergency services, which provide emergency assistance to the
caller at the location of the caller. They are likely to be offered free to the
subscriber, e.g., E911 services in the US.
n Roaming allows a subscriber to access the services even outside the local
coverage area of its provider. For this, the subscriber is charged a fixed amount
and variable amount. The fixed amount is for service activation and maintenance
and the variable amount is proportional to the number of calls made or received
while roaming.
Types of Wireless Data Services
Apart from these voice services, data services can also be accessed wirelessly.
Wireless data services are mostly analogous to the services offered by wired data
service providers. Examples are Wireless Internet access and Network Services,
such as mobile VPN.

Further, there are services specific to the wireless market. These include:
n Messaging based services: SMS, MMS, Paging
n Location based services: Enhanced 911
n Enterprise applications:
n Voice-enabled services
Wireless Internet Access
Wireless Internet access enables customers to access information on the World
Wide Web through their wireless devices, such as smartphones, PDAs, Laptops
etc. Further, it also enables other applications such as email, video streaming,
mobile commerce etc.

Messaging Based Services

Messaging services offered over mobile devices can be categorised as follows:
n Text messaging
n SMS — Short text messages, typically less than 160 characters, which are
sent over mobile devices
n Paging — Messages sent over paging devices, such as Blackberry.
n Picture and video messaging (also known as MMS — multimedia messaging
service)
The service provider collects all messages and routes them through a Messaging
Centre. The service provider charges the customer for the number of messages
sent during a fixed period. Some service providers bundle a certain number of
messages free or at a discount to differentiate their service and to increase
customer stickiness.

Apart from acting as a communication medium, SMS also acts as a medium for
information alerts, mass advertising, communicating instructions for downloading
information such as ring tones. Due to its recent success, SMS is being touted as a
killer application in wireless data services. SMS is also widely replacing paging,

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14 January 2004 Telecommunications Telecoms for Beginners

which is another messaging service that requires special paging devices and also
different operator than a cellular service provider.

MMS is a relatively new offering enabled by 2.5G and 3G networks. It allows

multimedia (still photos, voice and video) to be sent in a way similar to SMS. MMS
is also charged in a way similar to SMS but at a higher price. The growth of the
MMS market faces many obstacles including high priced handsets and sometimes
interoperability issues, i.e., subscribers having different service providers (offering
MMS) or different MMS-enabled phones may not be able to exchange MMS.
Nevertheless this is expected to be a significant growth area over the next five
years as MMS enabled handsets become near ubiquitous and 3G networks are
rolled out.

Location Based Services

Location-Based Services (LBS) are defined as mobile services that identify a user's
location (either using pinpoint levels of accuracy or Cell-ID) in order to provide a
service to that user. These include:

n Emergency Services: e.g. E911 in North America.

n Enterprise Applications: These are the mobile operated applications that help
enterprises to improve efficiency or productivity levels. Examples are fleet
management, mobile-CRM.
n Presence management and location-based advertising: Presence
management is defined as the maintenance of information about users’ profiles,
so that location information can be better customised. Location based
advertising is defined as the advertising and promotional activities carried out
based upon the target’s location.
Similar to messaging services, these are typically charged on a per use basis. The
service providers may also include a fixed charge for the infrastructure and
maintenance of these services. However, these services are not widespread and
therefore a firm business and pricing model for them is yet to evolve.

Voice-enabled services
Voice-enabled services are value-added and can be initiated by human voice. For the
purpose of this report, these services include only those voice-enabled offerings
that drive network usage revenues. Such services include:

n Speech to text that enables the conversion of human speech to text.

n Voice recognition: also known as ‘Voice Command’ services, these enable
dialling, browsing of voice portals, information requests, etc.
Voice-enabled services are yet to take off in the global wireless market.

Modes of offering wireless data services

For ease of understanding, the wireless data services can be divided into two
categories — (a) WAN data services (over wide area networks e.g. 2.5G, 3G); (b)
Wireless LAN data services (WLAN). We cover these in more detail later in the
report.

Licences
The service providers obtain the licence(s) to provide wireless services to
subscribers in a particular geographical area using a particular frequency. The

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bandwidth remains the property of the government in the region. In the US

spectrum has been auctioned for mobile since the industry started, whereas in
Europe only 3G licences were auctioned. A number of markets still award licences
on the so-called beauty contest basis. The provider may have a revenue sharing
agreement with the government, either as an alternative to the licence fee or in
addition to it.

For regions where the providers do not have a licence, they can enter into ‘roaming’
agreements with the service providers in those regions. The service providers
involved in the ‘roaming’ agreement share the revenue generated through the user
in that particular region. The service provider, who has a contract with the
subscriber, usually passes on the costs of roaming access to the subscriber.

Billing
The billing for wireless voice services is usually by Minutes of Usage (MoU) but
increasingly the market is seeing a trend towards fixed monthly charges for large
bundles of minutes, led by the US.

For data services, billing is by amount of data downloaded. Some operators also
offer a certain amount of free data download as a part of the billing plan. Given that
data is still in its early stages of development we see the revenue model being
particularly fluid for some time to come.

The total Average Revenue Per User is also known as ARPU, normally collated on a
monthly basis. The actual definition of ARPU can vary significantly and care needs to
be taken when comparing figures between different operators and even the same
operator over time may change the method of calculation.

Two broad areas of billing can be categorised:

n Post paid: The customer pays after receiving an invoice for the services already
used. A certain amount is kept as security against default.
n Pre paid: The customer buys a certain amount of usage time valid for a certain
period. To avoid expiry of connection, the customer has to top up the earlier
amount with further credits.

Typically, post-paid subscribers are more loyal and generate higher ARPU. Therefore
service providers offer incentives for customers to shift to post-paid billing plans17.
Appetite for these different plans varies significantly by region and is being driven by
a number of factors including cultural issues. The pricing structure of who pays for
incoming calls does make a radical difference to the attractiveness or otherwise of
the pre-pay offering. In the US the lack of incoming call revenue to mobile operators
from calls which terminate on the mobile network serves to undermine the
economics of prepay. In contrast, high termination rates in Europe make prepay an
interesting proposition. The bulk of growth in the last few years in Europe has been
due to the growth in prepay.

Wireless LAN Services

Wireless LAN is primarily a last mile wireless access technology. It can be deployed
at premises at which high-speed data access is already available through other
technologies such as DSL.

17
Post-paid Vs. pre-paid is discussed in greater detail later in this chapter.

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Licences
WLAN services are offered over the unlicensed spectrum18.

In comparison to the cellular industry, physical locations can be considered as

equivalent to spectrum licences — the right to deploy a wireless service in a given
area. Property owners make money in WLAN in the following two ways:

n By vertically integrating and operating their own hot spots (e.g. in various
enterprises)
n By licensing the right to deploy hot spots to a hot spot operator (e.g. in various
hotels)
In general the hotspot19 operator paying for 100 percent of the cost of deploying and
managing the hotspot infrastructure will share very little or none of the revenue with
the venue owner, at least until the operator’s costs are recouped. The greater the
component of up-front costs paid by the venue owners, the higher their revenue
participation. The roll out of hotspots is proceeding very quickly at present.

Billing
WLANs allow for various kinds of billing as mentioned below:

n Subscriptions
n Monthly charge — A fixed monthly charge for unlimited usage is offered (for
instance US$ 64 /month)
n Pay-as-you-use — In the US, the rates are at a per day or per hour basis
(US$ 7 to US$ 10 per day). In Europe, however, the rates are on a per minute
basis (US$ 0.29-0.58 per minute). Moreover, there is a fixed monthly charge
such as US$ 38 in pay-per-use models.
n One-Time Use / Single Usage Charge — Here the user pays a one-off charge
for unlimited / limited usage over the next 24 hours. In Europe, this typically
costs around US$ 11.

Integrated Services
Integrated services imply As wireless voice and data services are expected to take off in the near future,
both fixed line and wireless players are likely to move towards offering integrated services. Integrated services
services bundled into one imply both fixed line and wireless services bundled into one package. The customer
package. These are offered would also pay one bill for these services. These players are mostly the service
by service providers who
providers who have expertise or close tie-ups so as to offer both fixed and wireless
services. We expect these services to proliferate as incumbent operators seek to
have expertise or close tie-
reduce subscriber churn and fend off competition.
ups to offer both fixed and
wireless services.
Issues for the industry
The telecom industry faces several business and technological issues. Below we list
some of these that are dealt with in the following sub-sections:

n Long gestation periods

n Consolidation
n Pricing/ billing

18
Refer to Chapter 4 on ‘Communication Networks’ for further information on WLANs.
19
Refer to glossary for further information on ‘hotspot’.

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14 January 2004 Telecommunications Telecoms for Beginners

n Revenue and infrastructure sharing

n Customer loyalty
Long gestation periods
Providing telecom services usually involves getting a licence, laying infrastructure
and service provisioning. This can take a significant time (from two to five years).
The issues that such long periods lead to are:

n Technology obsolescence: The technology may change or become obsolete

over that period e.g. WLAN technologies are challenging 3G for high-speed
wireless Internet access. WLAN has a shorter gestation period and hence is
being deployed at a quick rate.
n Premature investments: A pre-mature investment in a technology may not pay
off. For instance, both service providers and equipment providers are being hurt
by the failure of 3G services to take off. Various service providers invested huge
sums in buying 3G service licences. Consequently, the service providers were
left with little money to buy equipment. Keeping faith with 3G technology,
equipment providers wanted to sell the equipment that they had built. Therefore
they financed service providers to sell their equipment. This was known as
‘vendor financing’. However, 3G services did not take off as well as expected.
This led to service providers being encumbered with large interest burdens on
the licence costs. The equipment providers, such as Lucent, were unable to
recover the price of equipment provided to the service providers.
n Similarly, an abundance of fibre cables was laid in expectation of huge demand
for data services. The overall cabling market (copper + fibre shipments)
experienced phenomenal growth in the 1990s as the larger enterprises installed
their initial LANs. Growth rates during this period were in the double-digits with
a 30% to 50%20 range not uncommon. However, the bursting of the Internet
and telecom bubble led to a capacity glut with much of this fibre unused (known
as ‘dark fibre’ or ‘unlit fibre’). This capacity glut led to price pressures21 on the
companies who had laid these networks to lease them out. Many failed.
n Regulatory pressures: The service licences come with a time stipulation.
Pressure from the regulators to provide services within a specified time frame
also builds up. Fines can be levied or licences revoked if the services are not
provided within a certain period. Regulators have proven to be generally
inflexible on these issues.
Consolidation
The starting point for the industry structure was one telephone company per
country. In terms of the original services supplied by the companies it is fair to say
that not a lot has changed. There is competition in most areas of the market but
incumbents still control much of the original fixed voice communications market.
From time to time it has been fashionable to create arguments for large-scale
mergers between incumbents. The US market, which has an unusual structure
created by the original decision to break up AT&T into a long-distance operator and
seven regional operators, is one area where there have been mergers between the
local telephone companies, known as the RBOCs. At one stage there was serious
consideration given to consolidation among some of the European incumbents. But
to date deals have been minimal, the only one of note, the merger between Telia in

20
Source: Report on U.S. Building Fiber & Copper: 2003 by FTM Consulting, Inc. (Link:
http://www.gii.co.jp/sample/pdf/ftm14373.pdf)
21
Source: Telephony online, December 18, 2002 (Link:
http://telephonyonline.com/ar/telecom_dark_fiber_future/)

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Sweden and Sonera in Finland. Political issues continue to loom large in terms of
these major cross border mergers. Ultimately a true European Union could well see
mergers between incumbents.

The development of the mobile industry has provided an opportunity to introduce

more operators and there are at least two in every market. In some cases the
numbers can be as much as seven. As in every new industry there is normally a
period of consolidation once a stage of maturity is reached. In mobile we are close
to reaching that point now as subscriber growth grinds to a halt. As a general rule
mergers within a market offer much more scope for cost cutting and integration
benefits than would cross-border mergers.

Many small players entered the telecoms market at the time of Internet and
telecom boom (late 1990s to 2000). Such players include free ISPs and software
providers that thrived due to the ‘eye ball’ model for Internet prevalent at that time.
There has been a huge shakeout of these small players.

Pricing / Billing
Pricing for fixed line data services has been evolving over the past decade. Free
services based on the ‘eye-ball’ model (i.e., advertising revenue model) have not
generally been successful.

Integrated billing for various wireless voice and data services and including micro-
payments in a phone bill are some billing related issues that wireless service and
content providers are struggling with. Small payments for content such as logos,
ring tones etc. are soon expected to be a part of one unified bill.

Revenue and infrastructure sharing

Revenue sharing with content providers: Revenue sharing between players in a
value chain has always been an issue especially the sharing with content providers.
For instance, game developers, wireless application service providers (WASPs) and
carriers can share revenue from mobile gaming in several ways, depending upon
who ‘owns’ the customer.

n The carrier could pay a licence fee to the WASP and retain the customers.
Unless there is an arrangement to share revenue, incremental gains would go to
the carrier.
n The WASP could provide access to its applications to the carrier’s customers for
a usage-linked charge. In effect, the carrier would act only as a re-distributor of
the application for a share of revenue.
In both situations, the application developer is not the direct beneficiary. The
developer is not only insulated against the application’s (e.g. game’s) failure, but is
also unaffected by its success. The absence of percolation of the upside from their
work’s success reduces their incentive to develop consumer-friendly, market-
oriented applications. In such a situation, the chances for development of
applications that are also successful in the market are greatly reduced. Carriers must
address this issue as it directly affects their own revenue streams, ARPU and
subscriber growth. This is expected to grow as an issue as mobile devices continue
to increase in functionality.

Infrastructure sharing between service providers: There has been an increasing

trend towards sharing of infrastructure in both wireless and fixed line services. This
would appear to make better economic sense than building multiple networks.

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Infrastructure sharing in wireless services: Usually various service providers

share the same network infrastructure to minimise costs and other overheads.
Further, a recent trend has been to offer wireless services on a leased or rented
spectrum as well.

Mobile Virtual Network Operators (MVNOs) are mobile service operators that do not
own the rights to any radio frequency spectrum. Instead, they rent capacity from
established licence-holding network operators. These service providers issue their
own SIM-cards and are likely to operate their own mobile switching centre. Further,
their pricing plans are fully independent from that of the host operator’s network.
They also have their own unique network code with a distinct number series e.g.
Virgin Mobile is an example of an MVNO22.

MVNO value proposition: Regulators want to see more competition in all markets
and have been keen to provide opportunities for more operators to enter the mobile
markets without having to resort to building more networks. For the existing
network owners the ability to load a network more fully is an interesting value
proposition.

An arrangement with an MVNO has benefits for all parties involved. While the
MVNO brings in a brand and skills in marketing and customer relationship
management, the incumbent can concentrate on service provisioning and
maintaining the shared network infrastructure. These benefits are discussed below:

Value to the incumbent: By entering into revenue-sharing arrangements with

MVNOs, carriers with surplus spectrum or infrastructure assets can acquire an
additional revenue stream.

The strength of the carrier might not lie in marketing to specific customer segments
but in maintaining a robust network and servicing the market as a whole. With this,
the carrier is able to concentrate on network management, while the MVNO
exploits its competence in acquiring and managing customers.

In addition, this could be a good way for network operators to target hard-to-reach
consumer segments, without having to address every sector of the market
themselves. The greatly reduced cost of an MVNO in becoming a next-generation
service provider makes it feasible to offer services to many more segments. Indeed,
MVNOs could take over the costly and time-consuming tasks of devising, marketing
and developing targeted services for the licensed operator.

Value to the MVNO: An MVNO receives access to spectrum and an installed

network without bearing significant initial expenses. Consequently, the barriers to
entry into (as well as exit from) the wireless business are significantly lowered.

Therefore, operating as an MVNO is a distinct opportunity for companies that

already have existing customer relationships, own a strong brand and want to
expand their operations into other geographical or consumer segments. It provides
an opportunity to them for leveraging their competence in marketing to address the
segments of most interest to them. It also enables them to compete effectively, as
the relatively lower initial outlay eliminates any upward pressure on prices.

It is also likely to prove to be a useful alternative to those companies that have not
been successful in buying, or could not afford to bid for, a next-generation licence.

22
Please read http://www.speechtechmag.com/pub/industry/889-1.html for more details on Virgin Mobile

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14 January 2004 Telecommunications Telecoms for Beginners

Further, network operators themselves could operate as MVNOs in markets where

they do not have a presence. Nation-wide operators could use this tactic to bridge
any gaps in their service offering.

Benefits for the market

Arrangements with MVNOs can be expected to enhance competition levels in the
market, bringing with them lower prices and better service to consumers as a
whole. In addition, given the lower-cost models of MVNOs, niche market segments
that have so far been underserved are also likely to receive an enhanced service
offering. In fact, as customisation levels rise, the needs of many segments in
particular and the market as a whole are likely to be served better.

Infrastructure sharing between fixed line players

The issue: The incumbents own the largest fixed line networks. Regulators are
understandably keen to ensure this position of dominance is not exploited at the
customers’ expense.

Possible solution: To ensure higher competition and reasonable prices for the
customer, the regulators in the region can liberalise the market. They can also
control the prices at which the incumbent has to share a part of its network with
competing carriers who do not have their own network in that region. These shared
elements are called Unbundled Network Elements (UNEs)23. In practice there can be
literally hundreds of these UNEs on a carrier price list.

The debate around the charges for UNEs and the prices that competing carriers can
charge due to lower cost of ownership is a permanent source of friction between
incumbent, regulator and competitor. Each has a different vested interest. And there
are a number of methods for arriving at what is a ’fair’ price for the UNEs.

Customer loyalty
While the regulators in a particular region are striving to increase competition in the
markets, the service providers are worried that such steps would decrease
customer loyalty and increase churn. Some of the issues affecting customer loyalty
are discussed below:

Bundling of services
The basic voice services in both fixed and wireless services are facing the following
issues:

n low differentiation in voice services resulting in commoditisation

n customer choice of voice services is increasingly driven by price plans
n contracting margins and ARPUs due to high price pressures
To tackle these issues more service providers are trying to bundle more value-added
and differentiating data services together with the basic voice plans. Furthermore,
they are trying to bundle fixed and wireless services into one offering and one bill to
increase customer retention.

End-user equipment subsidisation

Another method adopted by service providers to minimise churn is to offer free to
very cheap handsets with a long-term service contract. Using this, the service
providers not only increase customer loyalty but also attempt to recover the cost of

23
For more details on UNE – please visit: http://www.carrieraccessbilling.com/une-p-unbundled-network-
element.asp.

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14 January 2004 Telecommunications Telecoms for Beginners

the handset via the high monthly rentals paid by the customer. Similarly, modems
may be subsidised by high-speed Internet providers.

The key drivers for such subsidisation are:

n the lowering of subscriber churn though long-term contracts that go along with
the subsidised equipment
n reducing entry barriers for the subscribers by providing equipment at low or no
cost (e.g. expensive 3G phones or colour phones are being subsidised to
enhance take-up of 3G services)
Number portability
One of the major reasons for subscribers not switching operators is that their phone
number is likely to change. Many markets are adopting ‘Number Portability’ which
allows customers transferring between operators to retain their telephone numbers.
This has already been implemented in some countries, such as the UK, Australia
and Hong Kong, with mixed effects on churn rates depending upon the situation of
the particular market.

UK
Mobile Number Portability (MNP) was introduced in the UK in 1999. In the first year
of its introduction, only 1.5% of mobile users ported their numbers24. This low churn
rate may be attributed to the following factors:
n the lengthy and cumbersome process of porting
n the average time to process a request for a change of network is about 25 days
n high porting charges
n all mobile carriers levy a porting charge of £30
n release of misleading information by telecom operators to prevent porting
n an increasing number of mobile users in the UK are pre-paid and hence less
prone to retain their mobile number than higher-value contracted customers25
Australia
MNP was not a significant success. Two months after the introduction of MNP in
September 2001, only 90,000 of the nation’s 11 million mobile subscriber population
switched carriers due to MNP. This translated to approximately a 0.4% incremental
churn rate. The key reasons restricting the marginal increase in churn rates were:
n the majority of the users were restricted by long-term contracts. Of the users,
80% were tied to long-term contracts with high early-termination fees.
n low consumer awareness levels. Despite intensive marketing campaigns by
mobile carriers, only 50% of consumers are aware of MNP.
Hong Kong
MNP was introduced in Hong Kong on 1 March 1999. This was followed by a
declaration from the Telecommunications Authority in 2000 making most existing
contracts null and void. As a result most subscribers were forced to renew their
contracts. The increased competition led to a price war with mobile carriers slashing
their prices and introducing attractive packages to retain customers.

24
Source: ‘Economic Evaluation of Number Portability in the UK Mobile Telephony Market ‘, an Oftel
commissioned study by Ovum (Link: http://www.oftel.gov.uk/ind_info/numbering/ovtitle.htm)
25
Source: ‘Figures don't look good from overseas’ by Anne Hyland, Financial Review, September 2002
(Link: http://afr.com/specialreports/report1/2001/09/19/FFXK0K5QNRC.html)

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The churn rate in Hong Kong for mobile subscribers before MNP was approximately
2.5% per month, which doubled to 5% on MNP’s introduction. A price war in Hong
Kong saw attractive offers such as 500 minutes’ airtime for US$ 9.5 (HKD 38). On
average, mobile tariffs declined by 60% in 1999, following the introduction of MNP.

Competition was further heightened with mobile carriers offering a zero-switching

fee and a three-day porting process to encourage porting amongst the consumers.
As a result, 100,000 of Hong Kong’s 3 million mobile subscribers ported within the
first month of the introduction. Churn rates increased again in 2000, following the
expiry of all 12-month agreements signed in 1999. As a result 120,000 additional
subscribers switched to alternative carriers in 2000.

Switching rates continued to grow through 2001, with over 1.84 million, or 32%, of
all subscribers porting their numbers, contributing to a 70% total churn rate. The
increased churn rates and lowered tariffs have contributed to a sharp decline in the
profitability of mobile carriers in Hong Kong over the period 1999-2002.

In the United States, number portability was implemented in late 2003. The impact
of this on churn has yet to be documented.

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14 January 2004 Telecommunications Telecoms for Beginners

Communication Media
Wired media (guided media / physical media)
In this section we will discuss the two main wired media used for
telecommunications today, namely copper wires and optic fibres.

Copper
Copper is the most widely The use of copper for telephony dates back to 1877, when Thomas Doolittle
used physical medium for invented a process to obtain hard drawn copper wire which could be strung
telecommunications
between poles without sagging or breaking. Up to then, telephone and telegraph
lines used iron and steel wires for transmission. While iron wires could be used for
(primarily telephone lines)
low frequency telegraph signals, the conductivity of copper allowed the
today
transmission of weak, high frequency voice signals over distances of 50 miles
without significant signal attenuation (weakening).

Early copper telephone lines were single, grounded wires. However, these suffered
from heavy signal loss and interference over medium-to-long range transmissions.
In 1881, Alexander Graham Bell developed and patented the two-wire circuit
(metallic circuit) that eliminated a lot of noise and interference in the lines. Two
independently insulated copper wires were twisted around one another. One wire
carried the signal, while the other was grounded and absorbed signal interference
(see Figure 21 below). About the same time, it became necessary to bunch wires
into cables to lay them underground in urban areas.

Figure 21: Twisted Pair Cable

Source: “Evolution of the Technology”, Australian Photonics CRC, 1999

The main disadvantage of early twisted pair lines was that each pair could carry only
one conversation at a time. The development of vacuum tube electronics in 1915
led to the development of carrier systems (also called multiplexing), which allowed
the transmission of multiple conversations on the same pair of lines. Current
multiplexing techniques allow up to 12 simultaneous telephone conversations on
the same pair of lines. Twisted-pair cables are still used by older telephone
networks and remain the cheapest option for telephone lines.

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Evolution from twisted pair to co-axial

Development of coaxial The development of coaxial cables during World War II led to a revolution in
cables allowed a quantum telecommunications. From about 600 conversations per cable pair in 1945, the
jump in telecommunications capacity of coaxial cables has grown to over 10,800 conversations today. The coaxial
— from about 12 cable (see Figure 21 below) consists of a solid wire at the centre surrounded by an
conversations per twisted
insulating material (to minimise electrical and radio-frequency interference) and an
outer conductor.
pair to over 600 per coaxial
cable pair
Figure 22: Coaxial Cable

Source: “Evolution of the Technology”, Australian Photonics CRC, 1999

Coaxial cable is primarily used by the cable television industry and in computer
networks today.

The advantages of copper cables are their:

n Low cost
n Ubiquitous presence as telephone lines
n High capacity-to-cost ratio
The disadvantages of copper cables are their:
n High cost to reach remote locations
n Limited capacity for broadband applications (as compared to optic fibres).
Techniques / Technology
In the following sections, we look at with four technologies that use copper wires
(particularly those in existing telephone lines) for data access:

n Dial-up
n DSL
n Cable modem
n ISDN
n Dial-up
A dial-up connection uses This technology uses basic telephone infrastructure to access the Internet (see
the same infrastructure and Figure 23 below).
frequency bands as a normal
telephone connection to Figure 23: Working of dial-up
access the Internet

Source: Howstuffworks.com

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The device (usually a computer terminal) for accessing the Internet is connected to
the phone line through a modem. The word ‘modem’ is a contraction of the words
‘modulator-demodulator’. The sending modem modulates the data into a signal that
is compatible with the phone line. This signal then travels over the telephone
network to reach the receiving end. The receiving modem demodulates the signal
back into digital data.

In the early days of the Internet (1960s), modems offered speeds of around 300bps.
Present day modems are available for a range of speeds 28.8kbps to 56kbps. Due to
the low speed dial-up, connections are also known as narrowband connections.

The physical characteristics of the copper connection ultimately act as a brake on

data rates. The increases in speeds have been achieved through using more
sophisticated data compression techniques in the modems themselves For higher
connection speeds, more recent technologies (broadband technologies) such as
xDSL, Cable modems or satellite Internet are used.

DSL
DSL (Digital Subscriber Line) DSL technology exploits the fact that copper wires used in telephone networks
is a high-speed connection have a much higher bandwidth (several million Hertz) than that required for normal
that uses the same lines as voice conversation (0-3,400 Hertz). DSL exploits the extra bandwidth for broadband
normal telephones (high bandwidth) Internet connections. A device called the Low Pass Filter (LP filter)
is then installed on the user’s existing telephone devices (e.g. telephone sets, fax
machines) to prevent interference with DSL signals. Hence, a DSL user can browse
the Internet and have a telephone conversation or send a fax at the same time.

The most commonly used variant of DSL is ADSL (Asynchronous Digital Subscriber
Line). ADSL assumes that Internet users would normally receive or download much
more information than they would send or upload. Hence, ADSL connections
normally have three to four times more bandwidth for downloading data than
uploading.

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Figure 24: DSL Network Mechanism

Source: “How DSL Works”, Howstuffworks.com

DSL requires two pieces of specialised equipment (see Figure 24). One, called the
DSL Transceiver (also called the DSL Modem) is installed at the user-end while the
other, called the DSL Access Multiplexer (DSLAM) is installed at the DSL service
provider end (usually an ISP or telephone company). The DSL modem sends
Internet data over the high frequency bands of telephone wires. The DSLAM
aggregates multiple DSL user connections to a single, high capacity Internet
connection.

The main advantages of DSL are that:

n the DSL user can download data off the Internet and make voice calls or send
faxes at the same time.
n DSL connections offer higher Internet speeds (1.5Mbps) than normal modems
(56Kbps).
The main disadvantages of DSL are that:

n DSL is distance-sensitive. The achievable data rate drops as distance increases.

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

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14 January 2004 Telecommunications Telecoms for Beginners

Figure 25: xDSL Technologies

DSL Type Description Maximum Maximum Maximum Lines Phone
Sending Speed Receiving Distance Required Support26
Speed
ADSL Asynchronous DSL — Assigns 800Kbps 8Mbps 18,000ft 1 Yes
higher download speeds than
upload speeds.
HDSL High bit-rate DSL — Receives and 1.54Mbps 1.54Mbps 12,000ft 2 No
sends data at the same rate, but
uses two lines.
IDSL ISDN DSL — Adapts existing ISDN 144Kbps 144Kbps 35,000ft 1 No
connections for DSL.
MSDSL Multi-rate Symmetric DSL — 2Mbps 2Mbps 29,000ft 1 No
Assigns the same transfer rate to
both uploading and downloading
data; but the transfer rate itself is
variable and set by the service
provider.
RADSL Rate-Adaptive DSL — The cable 1Mbps 7Mbps 18,000ft 1 Yes
modem adjusts connection speed
based on length and quality of
line.
SDSL Symmetric DSL — Similar to 2.3Mbps 2.3Mbps 22,000ft 1 No
MSDSL and HDSL, but the
transfer rate is fixed and only one
telephone line is used.
VDSL Very high bit-rate DSL — Similar to 16Mbps 52Mbps 4,000ft 1 Yea
ADSL but is compatible with
optical fibre connections
Source: HowStuffWorks.com27

There are about 41.3 million The worldwide DSL subscriber base had reached 41.3 million by 31 March 2003 and
DSL subscribers worldwide is expected to have grown to 60 million by end 200328. With about 7 million
connections each, Japan and the US are the biggest DSL markets, while Europe and
the Asia-Pacific represent the fastest growing regions29.

Cable Modems
Cable Modems allow cable While existing CATV coaxial cables have the capacity to carry hundreds of channels
TV (CATV) users to access (each channel is typically assigned a 6MHz band on the cable), most users view a far
the Internet through their lesser number. Cable modems exploit the extra bandwidth for Internet access.
local cable operator
Cable providers normally place downstream information (data downloaded by the
user) on a separate 6MHz channel — the same space as any single channel of
programming. Since users normally upload far less information than they download,
the upstream channel requires even less bandwidth — about 2MHz (see Figure 26
below).

26
Whether simultaneous voice conversations and data downloads are possible
27
Source: ‘How DSL Works’ by Howstuffworks.com (Link: http://computer.howstuffworks.com/vdsl3.htm)
28
Source: ‘Worldwide DSL Subscribers Up 15% to 41 Million’ by Converge Network Digest, June 2003.
Figures by The DSL Forum and Point Topic (Link:
http://www.convergedigest.com/DSL/lastmilearticle.asp?ID=7662)
29
Source: The DSL Forum press release (Link:
http://www.dslforum.org/PressRoom/news_newsubscribers_IntlPR_6.04.2003.html)

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Figure 26: Frequency Chart for Cable Modems

Source: Howstuffworks.com30

Networks using cable modems require two pieces of installed equipment. One,
called the cable modem, is installed at the user end while the other, called the Cable
Modem Termination System (CMTS) is installed at the provider end. The cable
modem (see Figure 27 below) can be internal or external to the computer; or even
provided as part of the set-top box (STB) installed by the cable provider.

Figure 27: Cable Modems at the Subscriber-End

Key:

n RF Tuner: Blocks out frequencies used for regular TV

channels.
n Demodulator: Converts radio frequency (RF) signals to digital
signals that can be processed by the computer.
n Modulator: Converts the digital computer network data into RF
signals for upstream transmission.
n MAC (Media Access Control): Interfaces the hardware and
software components of the cable Internet network.

Source: Howstuffworks.com31, Deutsche Bank

The CMTS aggregates Internet traffic from a group of customers and routes it to an
ISP. It allows up to 1,000 users to connect to the Internet through a single 6-MHz
channel (which is capable of 30-40Mbps). Hence, users normally experience better
throughput than from conventional dial-up connections.

Advantage of Cable Modems:

n The performance of cable modems for Internet access does not depend on
distance from the service provider.
Disadvantage of cable modems:
n As the number of users of cable modems increases, the individual bandwidth
available to each user decreases as the total available bandwidth (30-40Mbps) is
distributed between them. However, the cable provider can rectify this problem
by adding a new 6MHz channel for Internet use.

30
Source: ‘How Cable Modems Work’ by Howstuffworks.com (Link:
http://computer.howstuffworks.com/cable-modem.htm)
31
Source: ‘How Cable Modems Work’ by Howstuffworks.com (Link:
http://computer.howstuffworks.com/cable-modem.htm)

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14 January 2004 Telecommunications Telecoms for Beginners

There are about 27 million The worldwide subscriber base for cable modems reached 27 million in mid-2003
cable modem subscribers and was expected to grow to 34 million by the end of the year32. With 14.6 million
worldwide subscriptions, North America remains the largest market for this service.

ISDN
ISDN is a design for a ISDN (Integrated Services Digital Network) is a design for a completely digital
completely digital telecom network that can carry data, voice, images and video; as well as provide a single
network interface for connecting communications devices — telephones, fax machines,
computer systems, videophones, video-on-demand systems etc.

Although ISDN was originally envisaged for an all-optic-fibre network, the high cost
of optic fibre installation led to an ISDN design that would work on normal copper
telephone wires. This design is usually called Narrowband ISDN (sometimes called
N-ISDN). A design for a high-speed ISDN network (called Broadband ISDN or B-
ISDN) is still under development.

The building blocks for N-ISDN are 64Kbps channels. This channel width is based on
the sampling rate used by phone companies for converting analogue voice signals to
digital signals (8000 samples/second, 8 bits/sample). There are two kinds of
channels in ISDN:

n B-Channels or Bearer Channels (64Kbps) used for data/voice transmissions.

n D-Channels or Delta Channels (16Kbps) used by the phone company for setting
up and controlling the B-Channels.
There are two main interfaces used in ISDN:
n Basic Rate Interface (BRI) - mainly for home use, the BRI uses the capacity of
existing copper telephone lines (160Kbps). Hence, the BRI normally consists of
two B-channels, one D-channel and an extra 16Kbps for overheads (data
framing, maintenance and control).
n Primary Rate Interface (PRI) — mainly for business use, the PRI consists of
several B-channels provided to companies with large data needs or the need to
set up their own local phone system. A PRI also allows the combination of
several B-channels into a single large channel called the H-channel.
Optic Fibre
Optic Fibres use light as the Interest in the use of light as a carrier for information grew in the 1960s with the
carrier of information advent of the laser as a source of coherent light. In 1970, it became feasible to use
light as a practical communication medium. This was only possible through use of
fibre optic cables as a transmitting medium.

A raw, unconnected optic fibre is popularly termed as ‘dark’ or ‘unlit’. A dark fibre
usually has no assigned function. On the other hand a fibre in use is called a ‘lit’
fibre. A lit fibre has some information in the form of light flowing through it.

In optical fibres, light pulses are shot into one end of the fibre. The pulses travel the
length of the fibre via internal reflections. In other words, the light bounces off
inside the fibre until it reaches the other end. The speed of light is about 300,000

32
Source: ‘Worldwide Cable Modem Subs Expected to Double By 2007’ by internetnews.com (Link:
http://www.internetnews.com/stats/article.php/2239451)

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14 January 2004 Telecommunications Telecoms for Beginners

kilometres per second. This makes information transmission through optical fibres
extremely fast.33

Figure 28: Fibre Optic Cable Construction

Source: ARC Electronics, website

The most significant difference between conventional copper wires and optical
fibres is in bandwidth, which in optical fibres is much greater. A fibre optic cable has
a bandwidth over 100 times larger than a copper cable of the same thickness.
Greater bandwidth means optical fibres can transmit information over longer
distances and in less time than copper cables.

A single fibre optic cable can manage data rates exceeding 1,000Mbps compared to
copper cables, which have a maximum capacity of around 50Mbps2. A single mode
fibre optic cable can transmit information over distances up to 50km without the
need for a device to boost the signals in between.3 A twisted pair copper cable,
however, is capable of transmitting a signal only up to 5-10km without regeneration.

Large bandwidth also allows fibre optics to send multiple channels of information
over the same line. The fastest fibre optics circuits are able to transmit 250
television channels or thousands of telephone conversations together.

Below we outline the advantages and disadvantages of optic fibre over conventional
information transmission media:

Advantages of optical fibre:

n Capacity — Optical fibres carry signals with lesser energy loss than copper
cables. Moreover, optic fibres have almost 100-times greater bandwidth than
conventional copper wires. This means that fibres can carry more channels of
information over longer distances.
n Size and weight — Optical fibre cables are much lighter and thinner than copper
cables with the same bandwidth. Also for optic fibre much less space is
required in underground cabling ducts.
n Security — Optical fibres are much more difficult to tap information from. Optic
fibre cables are therefore of great use for banks and security installations.
n Immunity — Stray electromagnetic impulses do not affect glass as they affect
copper wires. So optical fibres are immune to errors in data caused by electrical

33
Source: ‘What is Fibre Optics? ‘ by Owen Wood, CBC News Online, April 2002 (Link:
http://www.cbc.ca/news/indepth/nortel/nfibreoptics.html)
2
Source: BPB Online (Link: http://www.bpbonline.com/Chapters/datacommumnication/Bdatach3.pdf)
3
Source: School of Science and Technology, Bell College of Technology (Link:
http://floti.bell.ac.uk/MathsPhysics/introduction.htm#What%20are%20Optical%20Fibres)

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14 January 2004 Telecommunications Telecoms for Beginners

interference. Thus they are ideally suited for use in places such as machine
shops and factories, where conventional wires often require shielding.
n Digital Transmission — Unlike copper cables, optic fibre cables can transmit
information digitally rather than analogically. This makes optic fibres popular for
computer communication.
Disadvantages of optical fibre:
n Price — The most significant disadvantage of optic fibre remains cost. The initial
cost of switching to a fibre optic system is high because of installation cost,
which includes the cost of hardware such as transmitters, fibre bundle, etc.
n Special skills — Optical fibres cannot be joined (spliced) together as easily as
copper cables. Optical fibres also require additional training of personnel and
expensive precision splicing and measurement equipment.
Fibre optic cables are constructed to operate in either single or multi mode and the
difference between the two is described in Figure 29 below.

Figure 29: Comparison of Single mode and Multi mode fibres

Single mode Multi mode
Description Single mode fibres accept only one light ray at a time. They Multimode fibres allow more than one ray of the light at a
concentrate the passage of light to the centre of the fibre moment. Each ray at a slightly different angle from the other in
core. The fibre core in case of single mode is very narrow, a wider core. Light rays travelling straight through the core
about 2 to 10 micrometers in diameter. The ray arrive sooner than refracted rays that have taken longer paths.
concentrated at the centre moves the quickest through the This causes a smearing of the digital signal.
cable with the least distortion and attenuation.
Characteristics Through a single-mode fibre, 30 times the number of pulses Multi mode fibres have lower capacity as compared to single
per second can be transmitted as compared to a multimode. mode, both in terms of speed and distance.
Applications Since the signal distortion and attenuation is very low in Multi mode transmission systems use cost effective LED
single mode transmissions, they can travel tens of transmitters. Multi mode is ideal for small fibre optic systems
kilometers. They are used for long distance data because of its low cost. The multi-mode transmission system is
transmission. Single mode fibres use expensive laser limited to distances of 4 km
transmitters. Due to the use of expensive transmitters and
electronics, single mode is normally used in large and
complicated sites.
Source: Deutsche Bank estimates and company data

Figure 30: Single Mode Figure 31: Multi Mode

Source: Deutsche Bank estimates and company data Source: Deutsche Bank estimates and company data

Manufacturers of single and multi mode optic fibre cables are Alcatel, Corning and
Pirelli.

Techniques / Technology
The following sections deal with multiplexing techniques and protocols involved in
optic fibre communications.

Optical networking techniques

This section deals with WDM and DWDM, two multiplexing techniques used in
optic fibre networks:

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WDM
Wavelength division The developments in WDM technologies are closely linked with identification of
multiplexing transmits data specific windows of wavelengths in optical spectrum, where optical attenuation is
from different sources low. Early WDM began with only two widely spaced wavelength windows in the
together on an optical fibre optical spectrum. These WDM are sometimes called wideband WDM.
with each signal carried at
the same time on its own In the early 1990s, WDM technology evolved and two to eight windows or channels
separate light wavelength were used for communication instead of only two. These were called the
narrowband WDM. In the mid 1990s, WDM with 16 to 40 channels emerged, which
were called dense WDM or DWDM.1

DWDM
By the late 1990s, DWDM systems had evolved to a point where they were capable
of transmitting through 64 to 160 channels. The difference between WDM and
DWDM is that DWDM spaces the wavelengths more closely than does WDM.
DWDM therefore has a greater overall capacity.

DWDM performs the following functions in order to transmit data:

n Generating the signals — The system contains a source providing stable light
rays within the specific narrow wavelength window. Typically, the sources used
by DWDM systems are solid-state lasers.
n Combining the signals — DWDM systems employ multiplexes to combine the
signals from various sources.
n Transmitting the signals — DWDM systems use optic fibre cables to transmit
the signals. Over long-distance transmission, the signal may need to be optically
amplified.
n Separating the signals — At the receiving end, DWDM systems use de-
multiplexers to separate out the multiplexed signals.
n Receiving the signals — The de-multiplexed signals are received by a
photodetector.
Figure 32: Functioning of a DWDM system

Source: Cisco

The market for DWDM systems nearly doubled in both 1999 and 2000, from
US$ 2.3bn in 1998 to US$ 4.2bn in 1999 and US$ 8.3bn in 2000.2 The DWDM market

1
Source: Cisco Documentation (Link:
http://www.cisco.com/univercd/cc/td/doc/product/mels/cm1500/dwdm/dwdm_ovr.htm#xtocid153581)
2
Source: KMI Research, October 2001 (Link:
http://www.kmiresearch.com/fiberoptics_market_studies/dwdm_update.htm)

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has grown steadily since then. Some leading DWDM systems manufacturers around
the world are Alcatel, Cisco Systems, Fujitsu, Marconi and Tellabs.

Multiplexing
Having introduced the term multiplexing it seems an opportune time to explain what
it is. Voice conversations and communications between computers are rarely
continuous, at least not in the sense of filling the available capacity all of the time.
Telecommunications networks rely on scale for their cost effectiveness and this
means providing large channels of information, such as fibre optic cables, and then
squeezing as much information down the transmission link as possible. In order to
utilise the capacity more efficiently a technique called multiplexing is used, which
squeezes a number of streams of information onto a piece of transmission
infrastructure. There are two distinct methods. The first is frequency division
multiplexing with each signal assigned a distinct frequency and time division
multiplexing where each signal has its own time slot. In a typical 2mbit (actually
2.048mbit) transmission system there will be 32 time slots each of 64 kbps (32x 64)
with 30 channels carrying content and two channels left to be used by the system
for control and information purposes.

Mutliplexing works like a fast rotary switch. As the switch rotates it connects each
circuit to the transmission link for a short period so that the information is carried in
chunks down the link. At the other end of the link is another rotary switch which
then links the relevant ‘packet‘ of data to the required recipient device. TDM (time
division multiplexing) is the basis for most basic transmission systems in
telecommunications networks today. The essential component of multiplexers is
the voice channel of 64kbps and may be aggregated to speeds of 2mbps and
higher. Variations to this basic system have been developed such as statistical
multiplexing, which make better use of available time slots by only allocating system
resources to units that have information to send.

Wave division multiplexing

As already mentioned, wave division multiplexing is used for higher speed
transmission circuits along fibre optic cables. This is simply another name for
frequency division multiplexing. A bit stream, which given the speed involved may
actually be thousands of channels which have already been multiplexed together,
will be used to modulate a light source. A number of light sources, each of slightly
different frequency, will be combined onto a fibre using what is in effect a prism. At
the terminating end the signals will be demultiplexed, again using a prism. These
systems run at high speed. Speeds of 2.5 and 10Gbps are common. If many
channels of light are combined onto one fibre the technique is called DWDM or
dense wave division multiplexing. These require very stable lasers to produce light
at a very precise frequency in order to avoid interference with many other light
sources. For all practical purposes these systems will provide near infinite
information carrying capacity.

One advantage of DWDM based networks is that they can carry different types of
traffic at different speeds over the optical channel. Moreover, DWDM allows
transmission of data in various protocols through one cable. These protocols may
include SDH, SONET, ATM and Frame relay, among others. These protocols are
explained in detail in the next section.

Protocols
Before getting into the specifics of individual protocols it might be worth touching
on what protocols are. Protocols govern the way in which information gets from one
place to another. They stipulate the rules that the systems require in order for one

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device to be able to send and receive information in a comprehensible format. In

telecoms parlance you will often hear talk of the OSI Protocol stack, also known as
the seven-layer model. In principle the idea is simple. Each layer of the stack is
expert at dealing with one particular part of the communications process. It’s a bit
like posting a letter. You know that if you put a letter in the post correctly stamped
and addressed it will probably end up where it should do. At every part of the
process each component only has to worry about getting it to the next stage, i.e the
person that collects it from the post box just has to get it to the local sorting office.
His job is unaffected by who wrote the letter, what is in it, or indeed whether it be a
letter or a parcel. Neither does he care where it is going beyond getting it to the
local post office. The local sorting office just gets it to the main office. The main
office pushes it off in the general direction of the region or country on the bottom of
the address. And so on. Use of the OSI protocol stack means that manufacturers
and operators can develop products and services that they know will work with
other product without having to agree a particular standard peculiar to the device.

Transmission protocols
Transmission protocols are In optical transmission information is often encoded or multiplexed before it is
special sets of rules that transmitted. This encoded or multiplexed information has to be decoded or de-
end-points in a multiplexed. Protocols define rules, which are treated as standards. Some of the
telecommunication popularly used protocols have been discussed below. Note that discussion of
connection use when they
protocols and the differences between one and the other is pretty arcane stuff.
While we introduce the principal names we do not attempt to go further. Anybody
communicate
wishing to do so should make sure they have a mathematically oriented degree
before getting out a textbook on the subject!

Synchronous protocols - SONET

SONET or synchronous The development of optical fibre transmission and large-scale integrated circuits
optical network is the made a new generation of networking standards necessary. There were demands
American National for improved and increasingly sophisticated services that required large bandwidth,
Standards Institute (ANSI) better performance monitoring facilities, and greater network flexibility. SONET
standard for synchronous
allows different types of formats, such as different multiplexing formats, to be
transmitted on one line. SONET is the name for the U.S. standard for Synchronous
data transmission on optical
Optical NETworking. The major advantage of SONET is that it provides a set of
media.
generic standards that enable products from different vendors to be connected.
Another advantage of SONET is that it enables reduction in equipment requirements
and an increase in network reliability. SONET has a flexible architecture and is
capable of accommodating different transmission rates in a single cable.1

n SDH
SDH or Synchronous Digital SDH is the European equivalent of SONET (well not quite equivalent but similar).
Hierarchy is the The core data rate is different to SONET but interfaces can be made at higher data
international equivalent of speeds. Together SDH and SONET ensure common standards such that digital
SONET. networks can interconnect internationally. Furthermore, they ensure that existing
conventional transmission systems can take advantage of optical media2.

1
Source: SONET Tutorial, International Engineering Consortium (Link:
http://www.iec.org/online/tutorials/sonet/)
2
Source: SDH Tutorial, International Engineering Consortium (Link:
http://www.iec.org/online/tutorials/sdh/topic01.html?Next.x=36&Next.y=14)

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Asynchronous protocols
n ATM
Asynchronous Transfer ATM allocates specific amounts of bandwidth for specific amounts of time. ATM
Mode (ATM) is a high- has the ability to transport voice, video, data and multimedia over the same virtual
performance switching and circuit. This is made possible by the use of small fixed-size "cells" of data, which can
multiplexing technology be switched at speeds of 155 Mbps and greater. ATM was designed to work in
conjunction with SDH and SONET.

Other protocols
n Frame Relay
Frame Relay is a high-performance wide area network protocol. It is used over a
variety of interfaces including optical networks. Frame Relay is often used for
telecommunication services designed for cost-efficient data transmission. Frame
relay puts data in a variable-size unit called a “frame” and transmits frames. This
speeds up overall data transmission. Frame relay complements and provides a mid-
range service between ISDN, which offers bandwidth at 128 Kbps, and
Asynchronous Transfer Mode (ATM), which operates in a somewhat similar fashion
to frame relay but at speeds of about 155Mbps and more.34

MPLS
The current core networks may be classified under the following three types:

n Data-centric like those of ISPs35

n Voice-centric like those of traditional telecommunications companies
n Converged network that combines voice and data
All these networks are increasingly converging on a model that uses the Internet
Protocol36 (IP) to transport information packets.

Certain issues arise in respect of the quality of transmission across the networks, a
major one being management of speed and traffic so as to deliver the promised
quality of service (QoS).

Multi-Protocol Label Switching (MPLS) is a set of protocols for provisioning and

managing these core networks. MPLS overlays a packet switched37 IP network to
manage traffic flow. It provides virtual links or tunnels through the network to
connect nodes that lie at the edge of the network. The switch is referred to as an
edge of a network where the boundary of one network ends and another starts.

MPLS uses a technique known as label switching to forward data through the
network. A small, fixed-format label is inserted in front of each data packet on entry
into the MPLS network. MPLS facilitates very high-speed data forwarding. Moreover,
the bandwidth is reserved for traffic flow with differring QoS requirements. MPLS
works with the Internet Protocol (IP), Asynchronous Transport Mode (ATM), and
frame relay network protocols. Therefore, MPLS is also called ‘multiprotocol’.

34
Source: searchNetworking.com Definition (Link:
http://searchnetworking.techtarget.com/sDefinition/0,,sid7_gci212153,00.html)
35
Internet Service Providers (ISPs). Refer to glossary for further information on ISPs.
36
Refer to glossary for further information on ‘IP’.
37
Refer to glossary for further information on ‘packet switching’.

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A label switched packet crosses multiple transport media such as ATM, Frame
Relay or Ethernet. Thus MPLS creates end-to-end circuits, with specific
performance characteristics across any type of transport medium.

Wireless Media / Air / Unguided Media

This section introduces electromagnetic spectrum and its uses in radio, television,
microwave and free space optics; evolution of communication technology from
analogue to digital; various techniques and technologies used in the communication;
and the evolution of mobile communication systems.

EM Spectrum
Electromagnetic38 (EM) waves are created by the movement of electrons, which can
then be propagated through free space. By attaching an antenna of appropriate size
to an electrical circuit, the EM waves can be broadcast efficiently and received
some distance away. All wireless communication is based on this principle.

All the EM waves in a All the EM waves in a continuum are arranged according to their frequency and
continuum arranged wavelength to form an EM spectrum. The Electromagnetic Spectrum covers the
according to their frequency range of frequencies right from below mains power (50-60Hz) up to cosmic rays.
and wavelength form an EM The EM spectrum includes:
spectrum
n Visible light - These waveforms39 are visible to the naked human eye.
n Ultraviolet waves — These waveforms are not visible to the naked eye. They
have a shorter wavelength40 than visible light and are used for fibre optic
communication.
n X-rays — These waveforms have shorter wavelength than ultraviolet waves.
They are not used for telecommunication purposes.
n Infrared waves — These have wavelengths longer than those of visible light, but
shorter than radio waves and are used for short distance line-of-sight41
communication.
n Microwave — These waveforms have longer wavelength than infrared, but
shorter than radio waves. They are used for long distance line-of-sight and
satellite communication.
n Radio waves — These waveforms have wavelength longer than microwave.
They are used for radio communication.
n Gamma waves - These waveforms have wavelength less than X-rays. They are
not used for telecommunication purposes.
Figure 33 below shows the EM spectrum and the technologies that utilise various
frequency bands for wireless communication.

38
Source: Computer Networks by Andrews S. Tanenbaum, 3rd Edition; Electro-Optical Industries Inc.
(Link: http://www.electro-optical.com/bb_rad/emspect.htm)
39
A waveform is a representation of alternating current (AC) varying with time. Refer to glossary for
further information on AC.
40
Wavelength is the distance between identical points in the adjacent cycles of a waveform signal
propagated in a medium.
41
In line-of-sight (LOS) communication transmitter and receiver antennas are in visual contact with each
other.

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Figure 33: EM Spectrum for Wireless Communication

Source: California State University42

Now is perhaps a good time to introduce some basic information about frequency
and wavelength, terms that are sometimes interchanged. Frequency is measured in
Hertz or Hz for short. 1 cycle (one oscillation) /second = 1Hz.

Figure 34: Frequencies

Common units are kHz (kilo) — 1,000
MHz (mega) — 1,000,000
GHz (giga) — 1,000,000,000
THz (tera) - 1,000,000,000,000
Source: Deutsche Bank estimates and company data

Visible light 100THz, Human voice 100Hz — 10kHz

Frequency and wavelength The relationship between frequency and wavelength of an electromagnetic wave is
given by the formula wavelength x frequency = 3x10^8 metres/sec (the velocity of
light). It is important to understand this relationship because optical engineers tend
to talk in units of wavelength while electronic engineers use frequency. As the
above formula shows the two are firmly related but to the uninitiated it can be
confusing.

Figure 35: Wavelengths

So wave length units are typically milli(m) — 1x 10^-3
micro (u) — 1x10^-6
nano (n) — 1x10^-9
pico (p) — 1x10^-12
Source: Deutsche Bank estimates and company data

Propagation
Propagation describes the way a signal travels through a medium, be it air, copper
or fibre. The way that electromagnetic waves travel through the air, and indeed
through other mediums, depends on the frequency of the wave. The higher the
frequency the greater the attenuation, i.e. high frequency signals travel shorter
distances than low frequency signals for a given power input. High frequency
signals tend to travel in straight lines while lower frequency signals can bend or
refract around solid objects. In a practical sense this has a material influence on the

42
Source: California State University (Link: www.csun.edu/~vcact008/course/ 457/wireless-cellular.ppt)

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way cellular networks are designed depending on the frequency band allocated.
Networks operating at 900MHz relative to those at 1800 or 1900 Mhz can cover an
area of land with significantly fewer base stations and there are fewer problems
with ‘shadows’ created by buildings or hills because the signals can bend more
readily around these obstacles. In radio technology very low frequency signals can
travel great distances and because of their ‘bendability’ qualities can hug the earth’s
surface. This is why certain radio stations can be picked up thousands of miles from
their broadcasting location. As we will see, there is a downside. Low frequency
signals cannot carry very much information for a given unit of capacity relative to
high frequency signals.

Bandwidth
The range of frequencies in a signal is known as the bandwidth. For example voice
signals spread between 100Hz and 10,000 Hz so the bandwidth is 9,900 Hz. The
amount of information that a channel can carry is limited by the bandwidth and the
frequencies in the spectrum. The higher the bandwidth the greater the information
carrying capability of the channel. In telecommunications it is conventional to talk
about three classes of bandwidth.

Figure 36: Bandwidth

Narrowband — up to 64 kbps
Wideband — 64 kbps up to 2Mbps
Broadband — 2Mbps upwards
Source: Deutsche Bank estimates and company data

In practice these are crude definitions and one user’s broadband may be
narrowband to someone dealing with optical systems. But hold on - where did ‘bps’
come in and what are they? We will look at this when we get on to the difference
between analogue and digital signals.

Analogue and digital

Analogue means continuously variable. Analogue signals therefore are ‘wave’
shaped signals whose amplitude constantly changes. Their frequency is the number
of waves per second. In a telephone network the local part of the network was built
with analogue service in mind. Voice grade telephone lines have a limited bandwidth
capability and are designed to operate in the frequency range 300Hz to 3400Hz. This
compares with the human ear that can deal with frequency ranges from 200Hz to
20,000Hz and this is why a conventional telephone call does not provide perfect
sound quality.

Digital signals are represented by a series of either 1s or 0s, i.e. a binary system.
There are only these two states. In telecommunications systems these can either
be represented by voltages or lights. Increasingly the world is becoming digital
because this is the language of computers. Digital signals have many advantages
over analogue but one of the fundamental differentiators is that errors or distortions
can be far more easily minimised than would be the case in an analogue system.
This is because there are only 1s and 0s or on/off, so hard to get wrong. Of course
bits can go missing but there are ways of dealing with that. For computers of course
accuracy of information is vital whereas in a voice conversation a few distortions do
not necessarily mean the listener cannot understand the message. With digital there
is no accumulation of ‘noise’ in the signal. Digital also offers greater capacity and
higher transmission rates than analogue and is far easier to manipulate.

However, many things we deal with in the real world are analogue in nature. Sound,
movement etc all vary infinitely so in order for the digital system to deal with an

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analogue signal we have to turn it into a digital format. To do this we have to sample
the amplitude of the analogue signal at various points, measure it and convert this
into a binary number. How often do we have to sample the signal to make sure we
have enough information to replicate it accurately? In a traditional voice telephony
system where the maximum allowable frequency is 4,000Hz or cycles per second, if
we sample the wave twice every wavelength we will take 8,000 samples per
second. If we use 8 bits to encode each amplitude then the total number of bits will
be 8x8,000 per second or 64,000 bits per second. This is the building block for
telecommunications systems. Commonly used higher capacity multiples such as 2
Mbits (30x64kbps) are all built up from this basic component.

In practice other systems, in particular mobile systems where capacity is at a

premium, can use fewer bits to represent the signal but at the expense of some
quality and/or more sophisticated electronics to do the encoding/decoding.

Modulation/demodulation
On the local network, signals are transmitted in analogue form (because that is how
the system was originally designed), while signals from computers are in digital
form, i.e. a binary stream of 1s and 0s. To get the digital signal transmitted over the
analogue telephone network we use a process called modulation. At the other end
of the network to extract the digital signal we use a process called demodulation.
The devices used to perform this operation are called modems
(modulator/demodulator). Traditionally these devices have worked at speeds of up
to 56kbps, a limitation imposed by the nature of the local telephone lines which
were only originally designed for voice.

Evolution from Analogue to Digital

There are two principal options for communication systems, analogue and digital
communication system. The essential difference between the two is that analogue
is something which has an infinite number of variations whereas digital is a stream
of 1s and 0s. Most systems are now digital because of advances in processing
technology at the chip level. Key issues are described in the table below:

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Figure 37: Analogue and Digital Communication

Analogue Digital
Definition An analogue communication system uses an analogue signal Digital communication system uses a digital signal that generates, stores,
in which medium's alternating current frequency is modified and processes data in terms of two states: positive and non-positive.
in some way, such as by varying its amplitude or its Positive is expressed or represented by the number 1 and non-positive by
frequency. the number 0. Thus, data transmitted or stored with digital technology is
expressed as a string of 0's and 1's (also known as binary code43)
Technologies Used AMPS44, NMT45, TACS46 and ETACS47 GSM48, TDMA49, CDMA50, WCDMA51
Applications Voice Voice and Data
Speed Depends upon the analogue signal 9.6 Kbps to 2 Mbps
Properties Signals are sent as continuously varying electromagnetic Signals are sent as sequence of voltage pulses
waves.
. Transmission of data is through uninterrupted signals Transmission of data is through interrupted signals.
The system is sensitive to noise52, as it amplifies/repeats the The system is not sensitive to noise, as it regenerates the error signal to
error message. reduce attenuation.
Encryption of the message can be done to increase system security.
It allows multiple messages to be sent in a particular time or frequency
range or by assigning different codes. This process is commonly known
as multiplexing.
It allows packets the data to be sent over a channel.
Source: Helsinki University of Technology53; Govt. of Hong Kong54

Figure 38: Digital and AnalogUE Wave forms

Time

1 cycle

Source: Helsinki University of Technology55; Govt. of Hong Kong56

43
Binary describes a numbering scheme in which there are only two possible values for each digit: 0 and
1. Binary code is developed by any digital encoding method in which there are exactly two possible states.
44
Advances Mobile Phone Service (AMPS) is an analogue cellular radio standard.
45
Nordic Mobile Telephony (NMT) is a common Nordic standard for analog mobile telephony as
established in the early 1980s.
46
Total Access Communication System (TACS) is a mobile telephone standard originally used in Britain
for the 900 MHz frequency band.
47
Extended Total Access Communications System (ETACS) is an analog mobile phone network
developed in the UK and available in Europe and Asia.
48
Global System for Mobile Communications (GSM) was originally developed as a pan-European
standard for digital mobile telephony. It is used on the 900 MHz and 1800 MHz frequencies in Europe,
Asia and Australia, and the MHz 1900 frequency in North America and Latin America.
49
Time Division Multiple Access (TDMA) is explained in the Techniques / Technology section below.
50
Code Division Multiple Access (CDMA) is explained in the Techniques / Technology section below.
51
Wideband Code Division Multiple Access (WCDMA) is a technology used for wideband digital radio
communications of Internet, multimedia, video and other capacity-demanding applications.
52
Noise is unwanted electrical or electromagnetic energy that degrades the quality of signals and data.
53
Source: ‘Analog vs. Digital Wireless Technology’ by Jarrod Creado, Helsinki University of Technology,
October 1999 (Link: http://www.tml.hut.fi/Studies/Tik-110.300/1999/Wireless/analog_3.html)
54
Source: ‘Analog vs. Digital Wireless Technology’ by Jarrod Creado, Helsinki University of Technology,
October 1999 (Link: http://www.tml.hut.fi/Studies/Tik-110.300/1999/Wireless/analog_3.html)

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Robustness of a communication system

A communication system’s robustness is determined by its performance in the
presence of the transmission impairments such as transmission loss and noise.
Transmission loss attenuates the signal, and noise adds unwanted components to
the desired signal.

In an analogue system, an amplifier that boosts the desired signal strength also
boosts the noise level. As a result, the signal-to-noise ratio at the output of the
repeater remains the same. This means that once the noise is introduced into the
desired signal it is physically impossible to make the signal faultless again at the
output of the amplifier. Because of this, analogue systems are sensitive to noise
and their performance degrades continuously as the noise level increases.

In a digital system, regenerators are used instead of repeaters. Instead of mainly

boosting the signal strength, the regenerator determines whether the information
carrying bits is 1- or 0-based on the received signal at the input. Once the decision
of 1 or 0 is made, a fresh uncorrupted signal representing that bit is transmitted at
the output of the regenerator. Assuming that the 1/0 decision is correct, the quality
of the output signal at the regenerator is made as perfect as that at the source.
Because of this the performance of a digital system can remain relatively constant
up to a certain threshold of the bit error rate. In a digital system, therefore,
performance is less sensitive to noise. It is physically possible to maintain a very
high level of steady performance over a certain range of transmission impairments.

Use of EM spectrum in communication

This section covers various applications of the EM spectrum for telecommunication
purposes. These include radio, television, microwave communication and free space
optics.

Radio
‘Radio57 waves’ transmit music, conversations, pictures and data invisibly through
Radio is a device used for the air, often over millions of miles. Radios use continuous sine waves to transmit
transmission or reception of information (audio, video, data). Different groups and devices use radio waves at the
electromagnetic radiation in same time, for example, TV broadcasts, AM and FM radio broadcasts, police and
the radio frequency range. fire radios, satellite TV transmissions, cell phone conversations, GPS signals, and so
on. Each different radio signal uses a different sine wave frequency, which is how
they are all able to be accessed distinctly.

Any radio set-up has two parts:

n the transmitter
n the receiver.
The transmitter takes the message, encodes it onto a sine wave and transmits it
with radio waves. The receiver receives the radio waves and decodes the message
from the sine wave it receives. Both the transmitter and receiver use antennas to
radiate and capture the radio signal.

55
Source: ‘Analog vs. Digital Wireless Technology’ by Jarrod Creado, Helsinki University of Technology,
October 1999 (Link: http://www.tml.hut.fi/Studies/Tik-110.300/1999/Wireless/analog_3.html)
56
Source: ‘Analog vs. Digital Wireless Technology’ by Jarrod Creado, Helsinki University of Technology,
October 1999 (Link: http://www.tml.hut.fi/Studies/Tik-110.300/1999/Wireless/analog_3.html)
57
Source: Computer Networks by Andrews S. Tanenbaum, 3rd Edition

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Two popular modulation methods used by radio to transmit the message are:

n Amplitude modulation (AM)

n Frequency modulation (FM)
Radio communication can be of three types:

n One-way radio - This form of communication is used for broadcasting

information.
n Two-way radio — This form of radio communication is for one to one purposes.
Half Duplex — When two persons cannot communicate simultaneously over the
radio communication channel it is called a half-duplex radio communication.
Full Duplex - When two persons can communicate simultaneously over the radio
communication channel it is called a full duplex radio communication.
Television
Television is a medium for Television is a medium for broadcasting information, a form of one-way
broadcasting information, a communication. A typical TV signal requires 4 MHz of bandwidth. After adding
form of one-way sound, called a vestigial sideband and a little buffer space, a TV signal requires
communication. 6MHz of bandwidth.

The composite video signal is amplitude-modulated into the appropriate frequency,

and then the sound is frequency-modulated as a separate signal (see Figure 39).

Figure 39: Composite Video Signal

(A) Vestigial picture sideband

(B) Video carrier
(C) Fully transmitted picture sideband
(D) Sound carrier
Source: Howstuffworks.com

Microwave
Microwave is a ‘line-of-sight’ Microwave is a ‘line-of-sight’ technology (i.e., a microwave transmission cannot
technology that operates penetrate the earth's surface, therefore will not extend beyond the horizon).
typically in the frequency Microwave communication products typically operate in the frequency range of 1-
range of 1 - 58 GHz 58GHz. Such products have higher bandwidth and can be operated at lower cost
than wired communication links. Above 100MHz, the waves travel in a straight line
and can therefore be narrowly focused. Parabolic antennae are used to concentrate
all the energy into a small beam, which increases the signal to noise ratio. The
directionality of these beams allows multiple transmitters lined up in a row to
communicate with multiple receivers in a row without interference. This made long
distance telephony possible before the fibre optics came into existence. In fact, the
long distance carrier MCI’s name first stood for Microwave Communication Inc.,
because its entire network was originally built on microwave towers.

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Advantages over optic fibre are that it is:

n Easy to install
n Relatively inexpensive
Disadvantages are mainly due to it being a line-of-sight technology. They are that:
n Even though the beam is well focused at the transmitter, there is still some
divergence in space. Some waves may be refracted off low-lying atmospheric
layers and may take slightly longer to arrive than direct waves. The delayed
waves may arrive out of phase with the direct wave and thus cancel the signal.
n It is weather and frequency dependent. For example, the microwave
communication connection is disturbed by rainfall, smog snowfall etc.
Types of microwave systems:
n Terrestrial Microwave58: As microwave is a ‘line-of-sight’ technology, long-
distance terrestrial transmission of messages is accomplished via a series of
relay points known as ‘hops’. Each hop consists of a tower (often atop a
mountain) with one antenna (typically a parabolic antenna) for receiving and
another for re-transmitting. Hops typically are spaced at 25-mile intervals.
n Satellite Microwave: Satellite communication is used for a variety of purposes,
for example, long-distance communications, direct broadcasting, weather
monitoring and navigation. Microwaves can penetrate through the earth's
atmosphere. Therefore they are used to send signals to satellites, and receive
signals from them. A large number of signals are sent daily, making it difficult for
a single satellite to carry them all. To transfer them efficiently, several satellites
are needed. They can be used on different frequencies to avoid interference, but
it is possible to distinguish different satellites if the same range of frequencies is
used. The transmitted microwaves cover a small area. As a result, it prevents
interference if the satellites are separated by a small degree. Figure 40 below
shows the application of microwaves in satellite communication.

58
Source: The Museum of Broadcast Communications (Link:
http://www.museum.tv/archives/etv/M/htmlM/microwave/microwave.htm)

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Figure 40: Microwaves For Satellite Communication

Source: http://ihome.cuhk.edu.hk/~s016969/physproj/Spectrum/Micro/comm.htm

The table below differentiates the two types of microwave applications in wireless
communication:

Figure 41: Difference between terrestrial & satellite microwave communication

Terrestrial Satellite
Uses Long haul telecommunication Television
Closed circuit television (CCTV)59 Long distance telecommunication
Digital data transmission in small regions (< Private business networking
10km)
Transmission Supports data rates from 12 Mbps to 274Mbps Typically 1-10GHz frequency
Characteristics
Operates in bandwidth of 7MHz to 220MHz < 1GHz too much interference
>10GHz atmospheric absorption
Common pairs of uplink and downlink
frequencies
At higher frequencies need stronger signals to
beat attenuation
60
Source: University of Idaho

Free Space Optics61 (FSO), also called Optical Wireless, is a line-of-sight technology
that uses laser or infrared beam to provide optical bandwidth connections. Currently,
Free Space Optics is capable of up to 2.5Gbps of data, voice and video
communications through the air, allowing optical connectivity without requiring fibre-
optic cable or securing spectrum licences. Free Space Optics requires light, which
can be focused by using either light emitting diodes (LEDs) or lasers.

Laser
Laser, an acronym for light amplification by stimulated emission of radiation,
produces an intense monochromatic beam of coherent light. This beam of light is
used to carry data at speeds ranging from 10Mbps to 622Mbps, varying upon the

59
CCTV (closed circuit television) is a television system, which is commonly used in surveillance systems
60
Source: Course Notes, Department of Computer Sciences, University of Idaho (Link:
http://www.cs.uidaho.edu/~krings/CS420/Notes.F02/02-420-05.pdf)
61
Source: LightPointe (Link: http://www.freespaceoptics.org)

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distance between two communication points. Laser systems use infrared

wavelength of 780nm and 850nm. Laser systems provide an alternative form of
optical video, voice, and data transfer when fibre is too costly or logistically
impossible to install.

Laser communication involves two systems, each comprising an optical transceiver

which consists of a laser transmitter and a receiver to provide full duplex (bi-
directional) capability. Each system uses a high-power optical source (laser) plus a
telescope that transmits light through the atmosphere to another telescope that
receives the information. At that point, the receiving telescope connects to a high-
sensitivity receiver through an optical fibre.

n - Lasers systems can be used to solve logistical problems, such as crossing

difficult terrain, expressways, waterways, and international borders.
n - For private corporate networks, laser systems provide a very high bandwidth
link between sites without the recurring costs of leased lines.
n - For high bandwidth applications such as Tele-medicine or videoconferencing,
the laser provides alternatives to installing fibre optic cable between sites where
it is very expensive or impossible to lay.
n For temporary network connectivity needs, such as at exhibitions, conventions,
sporting events, or disaster scenes, high bandwidth links can be easily and
quickly provided using portable laser systems.
n In addition, laser systems are also used as high-speed wireless backup for fibre
optic cable and as ‘last-mile’ solutions, connecting customer sites to fibre
backbones.
Advantages of laser based communication system are that:
n It can be used to set up high-speed data communication links in areas where it
is prohibitively expensive or logistically unfeasible to install fibre optic cables.
n Laser communication systems are cheaper and quickly installed as compared to
fibre optics.
n Laser communication systems provide higher data transfer speeds as compared
to the microwave based communication systems.
Disadvantages of laser based communication system:
n They are weather and temperature dependent and are absorbed or scattered by
rainfall, snow and fog.
n They are also disturbed by any physical obstruction in their path.
n Building sway or seismic activities upset the alignment of the transmitter and
the receiver.
n Heated air rising from the earth or man-made devices such as heating ducts
create temperature variations among different air pockets, which causes
fluctuations in signal amplitude, leading to "image dancing" at the receiver end.
n Safety concerns due to exposure of human eyes to laser, and the high voltage
used in laser systems.
Infrared
Infrared is used as a medium for short-range, indoor communication. The working of
infrared systems is similar to that of the laser systems. It is also a line of sight based

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system. Differences between the infrared and laser transmission systems are given
in the table below:

Figure 42: Difference between Infrared and Laser Transmission Systems

Transmission System Advantages Disadvantages
Infrared Cost effective Short distances only
Medium speeds Reflective sources problematic
Good where cables cannot be used Atmospheric conditions and obstacles may
cause attenuation
Immune to eaves-dropping
Laser High speeds of data transmission possible Short distances
Immune to EMI and eaves-dropping Atmospheric conditions and alignment cause
attenuation
Radiation
Cannot reflect off surfaces like infrared
Source: University of Capetown62

Techniques / Technologies
Access Techniques
The techniques used to The techniques used to transmit data over a channel are known as access
transmit data over a channel techniques. Three types of access techniques are used in wireless communication:
are known as access
techniques.
n FDMA (Frequency Division Multiple Access): FDMA is the division of the
frequency band allocated for wireless cellular telephone communication into
distinct channels, each of which can carry a voice conversation or, with digital
service, carry digital data.
n TDMA (Time Division Multiple Access): TDMA is a technology used in digital
cellular telephone communication that divides each cellular channel into distinct
time slots in order to increase the amount of data that can be carried.
n CDMA (Code-Division Multiple Access): CDMA is a digital wireless
technology and cellular telephone standard developed by Qualcomm. It is a
form of multiplexing, which allows numerous signals to occupy a single
transmission channel. CDMA employs spread spectrum technology. The
frequency of the transmitted signal is then made to vary according to a defined
pattern (code), so only a receiver whose frequency response is programmed
with the same code can intercept it. An oft-used analogy is that of a crowded
room where everybody is shouting at the same time but in different languages.
The receiver simply tunes into the language he understands. All the people who
speak languages other than your own will be a source of disturbance (noise).
The table below gives more details about the access technologies.

62
Source: Department of Computer Science, University of Cape Town (Link:
http://people.cs.uct.ac.za/~dgruijte/DataComm.ppt)

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Figure 43: Access Technologies

FDMA TDMA CDMA
Diagram

US Service Providers using AT&T Wireless AT&T Wireless, Cingular, T-Mobile Sprint PCS, Verizon Wireless, NextWave
the technique
Features Suitable for analogue systems Suitable for digital systems Suitable for digital systems
Provides continuous transmission of data Provides non -continuous transmission Provides non -continuous transmission of data
of data
Continuous transmission of data makes Non - continuous transmission of data Non - continuous transmission of data makes
handoff63 difficult makes handoff simpler handoff simpler
Does not require framing64 or Requires framing or synchronization of Require framing or synchronization of bits of
synchronization of bits of data or no bits of data or higher synchronization data
synchronization overheads overheads
Requires tight filtering to minimize Does not require tight filtering to Does not require tight filtering to minimize
interference minimize interference interference
Requires stringent power control to prevent Less stringent power control to Power control necessary for mitigating near-
inter-user interference prevent inter-user interference far65 problem
Higher synchronization overheads Soft Handover66 increases capacity
Complex network support required for
implementing soft handoff
Soft capacity67 limit
Source: Deutsche Bank

Modulation Techniques
Modulation is the addition Modulation is the addition of information (or the signal) to an electronic or optical
of information (or the signal) signal carrier.
to an electronic or optical
signal carrier When information is transmitted by radio or microwaves there has to be a carrier
wave. The sound information is combined with the carrier wave during modulation
at the radio transmitter. The signal is then demodulated by the radio on the other
end so that the sound information can be sent to the speaker and the sounds
emitted into the air. Figure 44 shows the difference between the various modulation
technologies.

63
Each time a mobile cellular subscriber passes from one cell into another, the network automatically
switches coverage responsibility from one base station to another. This switching process is called
handoff. Refer to glossary for further information on handoff.
64
A protocol that separates incoming bits into identifiable groups so that the receiving multiplexer
recognizes the grouping.
65
Refer to glossary for further information on the near-far problem.
66
Refer to glossary for further information on ‘soft handoff’.
67
System performance decreases as the number of users increase.

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Figure 44: Difference between the Various Modulation Technologies

Amplitude Modulation (AM) Frequency Modulation (FM) Pulse Code Modulation (PCM)
Definition AM is the superposition of the sound FM also requires a high frequency carrier PCM requires a high frequency carrier
information onto a high frequency carrier wave but its frequency is altered - the high wave. However, the sound is encoded as a
wave. This creates a wave with varying voltage period of the information wave series of numbers. The sound wave is
amplitude. The radio subtracts the high increases the frequency of the carrier sampled at regular intervals and the
frequency carrier wave (demodulates) and wave and vice versa. amplitude is measured. The value of the
then feeds the sound signal to the output amplitude is converted into binary (base 2);
(loudspeaker). so 2 is 0010, 4 is 0100, 6 is 0110 and 8 is
1000 etc. The 1s and 0s are now
combined with the carrier wave as 'ONs'
and 'OFFs'
Advantages & Disadvantages The drawback of AM is its susceptibility to FM is preferred as noise or interference is The advantage of PCM is that it suffers
noise or interference. The electromagnetic much less of a problem than AM. much less from interference (noise). Using
waves from a nearby electrical machine error correction codes can rectify
can be picked up by the radio which then distortions caused by interference. Also,
outputs them as sound (hissing or buzzing the signal can be checked and 'boosted' if
as it's a continuous low frequency wave), it is beginning to fade.
which masks the program being
transmitted.
Diagram

Source: Deutsche Bank

Evolution68 of Mobile Communication Systems

The wireless industry has The wireless industry has grown fast in the past two decades. Although cellular
seen the growth of wireless technology is not new it was the advances in chip technology that made it
services from voice based to operationally feasible. This has seen the growth of wireless services from voice
multimedia mobile-based based to multimedia mobile-based services. The various generations of wireless
services.
technology are:

n 1G (First Generation)
n 2G (Second Generation)
n 2.5 (Intermediate Generation)
n 3G (Third Generation)
n 4G (Fourth Generation)
Over time there have been progressive moves to try to standardise across
increasingly wide markets to improve the cost efficiency of developing the
technologies.

68
Sources: 'A 3G Convergence Strategy for Mobile Business Middleware Solutions' by Fredrik Hacklin,
Master's Thesis, Royal Institute of Technology, Stockholm, Sweden, September 2001 (Link:
http://www.d.kth.se/~d98-fah/hacklin/thesis/latex2html/output/node20.html); Wireless Glossary, DevX.com
(Link; http://www.devx.com/wireless/Door/11264); Source: ‘Wireless Communications “Beyond 3G”’ by V.
Kumar, Alcatel Telecommunications Review, 1Q 2001 (Link:
http://www.cs.umn.edu/research/mobile/seminar/SUMMER02/WNfiles/beyond3G.pdf); '4G - Beyond 2.5G
and 3G Wireless Networks'by MobileInfo.com (Link:
http://www.mobileinfo.com/3G/4GVision&Technologies.htm)

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1G
The first generation of The first generation of systems for mobile telephony was analogue, circuit
systems for mobile switched, and only designed to carry voice traffic. The analogue phones used in 1G
telephony was analogue, were less secure and prone to interference where the signal is weak. Given the
circuit switched, and it only unproven nature of the market, the degree of standardisation was low. Analogue
carried voice traffic.
systems include:

n AMPS (Advanced Mobile Phone System): The original standard specification

for analogue systems. Used primarily in North America, Latin America, Australia
and parts of Russia and Asia.
n NMT (Nordic Mobile Telephone): The common Nordic standard for analogue
mobile telephony as established by the telecommunications administrations in
Sweden, Norway, Finland and Denmark in the early 1980s. NMT systems have
also been installed in some European countries, including parts of Russia, and in
the Middle East and Asia.
n TACS (Total Access Communications System): A mobile telephone standard
originally used in Britain within the 900 MHz frequency band.
n ETACS (Extended Total Access Communications System): An analogue
mobile phone network developed in the UK and available in Europe and Asia.
2G
The second generation of The second generation of mobile telephony systems use digital encoding. 2G
mobile telephony systems networks support high bit rate voice, limited data communications and include
uses digital encoding. 2G encryption to enhance security. 2G networks include:
networks support high bit
rate voice, limited data
n GSM (Global System for Mobile Communications): Originally developed as a
communications and
pan-European standard for digital mobile telephony, GSM has become the
world’s most widely used mobile system. It is used on the 900 MHz and 1800
different levels of encryption
MHz frequencies in Europe, Asia and Australia, and the 1900 MHz frequency in
North America and Latin America.
n D-AMPS (Digital Advanced Mobile Phone System): Earlier designation of
American standard for digital mobile telephony used primarily in North America,
Latin America, Australia and parts of Russia and Asia. Now known as TDMA.
n CDMA (Code Division Multiple Access): A technology for digital transmission
of radio signals between, for example, a mobile telephone and a radio base
station. In CDMA, a frequency is identified by a number of codes.
2G networks can support SMS applications. Various transmission technologies were
used in different geographies, for example, Global System for Mobile
Communication (GSM) in Europe and Asia, Digital AMPS (D-AMPS) in the USA,
Code Division Multiple Access (CDMA) in USA and Japan, and Personal Digital
Cellular (PDC) in Japan.

2.5G
2.5G extends 2G systems, 2.5G extends 2G systems, adding features such as packet-switched connection and
adding features such as enhanced data rates. 2.5G variants include:
packet-switched connection
and enhanced data rates.
n EDGE (Enhanced Data for GSM Evolution): EDGE was developed to enable
the transmission of large amounts of data at high speed, i.e., 384kbps. It is an
upgraded version of GSM.
n GPRS (General Packet Radio Service): A packet-linked technology that
enables high-speed (115Kbps) wireless Internet and other data communications.

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n HSCSD (High-Speed Circuit Switched Data): A circuit-linked technology for

higher transmission speeds up to 57Kbps, primarily in GSM systems.
Note that the data speeds given above are, in practice, widely variable. They are
affected by traffic patterns and numbers quoted are normally the maximum
theoretical limit. The extent of the degradation from this maximum will vary widely
depending on the technology and usage patterns. These networks support WAP,
MMS, SMS mobile games, and search and directory. 2.5G is considered to be as an
interim generation built as it was on 2G networks. GSM networks were upgraded
with High-Speed Circuit Switched Data (HSCSD) and General Packet Radio System
(GPRS) in Europe and Asia, while PDC networks were upgraded to i-Mode in Japan.
In practice the technology has been more widely deployed than expected because
of the slow introduction of 3G services.

3G
The third generation of mobile systems provides high-speed data transmissions of
144Kbps and higher (up to 2Mbps). 3G will provide enhanced multimedia (voice,
data and video). 3G initiatives have largely been driven by device manufacturers, not
from operators as in the case of previous technologies and this goes some way to
explaining why the pace of implementation has been disappointingly slow. 3G
networks include:

n W-CDMA (Wideband Code Division Multiple Access): A technology for

wideband digital radio communications of Internet, multimedia, video and other
capacity-demanding applications. WCDMA, developed by Ericsson and others,
has been selected for the third generation of mobile telephone systems in
Europe, Japan and the United States. The technology is also the principal
alternative being discussed in other parts of the world, notably Asia.
n CDMA2000: Cdma2000 is a radio transmission technology for the evolution of
narrowband cdmaOne/IS-95 to 3rd-generation adding up multiple carriers. It is a
natural evolutionary step from CDMA.
n TD-SCDMA (Time Division — Synchronous Code Division Multiple Access):
TD-SCDMA is a third generation mobile telephony standard developed by CATT
(China Academy of Telecommunications Technology) in collaboration with
Datang and Siemens. TD-SCDMA enables the surfing the Internet at a speed of
up to 2 Mbps. This is the least well known of the 3G technologies but the scale
of the Chinese market may yet provide it with a critical mass of customers.
The detailed description of the generations of mobile communication is given in the
table below:

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Figure 45: Mobile Communication Generations

1G 2G 2.5G 3G
System Analogue Digital Digital Digital
some of the Transmission AMPS GSM Enhancements to: CDMA2000
Technology used in systems
NMT CDMA TDMA WCDMA
TACS TDMA GSM TD-SCDMA
CDMA
Applications Voice Voice Voice Voice
Little Circuit Switch Data High Speed Circuit Switch Data Packet Switch Data
Packet Switch Data
Speed Depends on Analogue Signals 9.6Kbps - 14.4Kbps 14.4Kbps — 384Kbps 384Kbps - 2Mbps
Properties Incomplete coverage More secure Web browsing Multimedia data
Poor sound quality Data services available Positioning capability Positioning capability
Broader coverage E-mailing Connection to Internet
Allow more users to Voice mailing Global roaming
communicate at same time
Better sound quality
Source: Deutsche Bank

Various mobile wireless technologies have undergone transitions from second

generation to third generation. The table below shows overview of the roadmap of
these technologies to third generation.

Figure 46: 3G Roadmap — An Overview

Geographies Second generation 2.5 Generation Third Generation
Africa, Asia, Europe, South GSM 9.6—14.4Kbps HSCSD 28.6—57.6Kbps GPRS 28-171Kbps EDGE 384Kbps W-CDMA
America, USA
USA TDMA 14.4Kbps EDGE 384Kbps W-CDMA
Asia, USA cdma2000 9.6—14.4Kbps IS-9.5 B 14.4-64Kbps cdma2000 1XRTT 1XEV
1XTREME
3XRTT
Japan PDC 9.6—14.4Kbps IS-9.5 B 14.4-64Kbps cdma2000 1XRTT 144Kbps LAS CDMA
PDC-P 9.6—14.4Kbps W-CDMA
For all 3G technologies
144Kbps (full mobility)
384Kbps (limited mobility)
2Mbps (fixed location)
Source: Deutsche Bank

4G
4G is the short term for 4G is the short term for fourth-generation wireless, the stage of broadband mobile
fourth-generation wireless, communications that will follow the still to be implemented 3G. Only the Japanese
the stage of broadband operators have given any publicity to this technology, not surprising given that they
mobile communications. were the first to implement 3G. The fourth wireless generation will be characterised
by:

n - Converged data and VoIP-driven architecture

n - Hybrid network architecture between wireless LAN and WAN
n - Higher frequency bands of 2-8 GHz
n - Higher bandwidth of 100 GHz or more
n - OFDM (Orthogonal Frequency Division Multiplexing) and MC-CDMA (Multi
Carrier CDMA) access technologies

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Access technologies for 4G include:

OFDM (Orthogonal Frequency Division Multiplexing) - this divides high-rate data

stream into multiple parallel low-rate streams. It uses these sub-streams to carry
multiple signals. First used in the ETSI Digital Audio Broadcasting (DAB) standard, it
is also employed in ADSL systems, and in IEEE 802.11a and 802.11g Wireless LANs.

n MC-CDMA (Multi-Carrier Code Division Multiple Access)

Combines OFDM and CDMA
More spectrum efficient than CDMA due to overlapping carriers
Ultra-wideband (UWB) technology based systems will enable 4G wireless
communication. UWB transmits very low-power (several hundred µW average
power) radio signals with very short pulses (several hundred pico seconds). This
results in very large bandwidths (several GHz). UWB systems will operate in
frequency bands that are already occupied by traditional services so UWB can
potentially interfere with them. Of particular concern is interference with safety and
emergency services and the Global Positioning System (GPS). UWB is loosely
defined as any wireless transmission scheme that occupies a bandwidth of more
than 25 percent of a centre frequency, or more than 1.5 GHz.

Powerline technology
n This section describes a medium for communication over power line.
Power Line Communication
Power Line Communication Power Line Communication69 (PLC) is transfer of voice and data via a combination of
is transfer of voice and data power network within house or office and metropolitan power grid distribution. It is
via a combination of power based on the concept of ‘no new wires’. It is capable of transmitting data at a rate of
network within house or 1Mbps over the existing electricity infrastructure.
office and metropolitan
The initial attraction of this technology was the fact that the transmission medium
power grid distribution.
was already in place in the shape of the electrical wiring in homes and buildings,
thus obviating the need for expensive last mile technology. Communications
devices could be simply plugged into existing electrical sockets making connection
painless. Electricity utilities thought this a great idea because they had a low cost
entry point into a fast growing market and they already had all the necessary
infrastructure in the shape of billing and customer care facilities in place. However,
the actual implementation has been plagued by a variety of technical and
commercial factors with the result that this is still a niche technology despite the
apparent technical advantages and low cost of implementation.

69
Sources: The Power Line Communications Association (Link: http://www.plca.net) , Plexeon Logistics
Inc. (Link: http://www.plexeon.com/power.html); Powerline World (Link:
http://www.ipcf.org/powerlineintro.html); HomePlug Powerline Alliance (Link:
http://www.homeplug.org/powerline/)

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Figure 47: Comparison with Competing Technologies

Technology System cost Cable Installations Advantages Disadvantages
Fibre Optics High Needed Highest quality Extremely expansive
Stable Networking Intensive cabling required
Widest Bandwidth Sub-networking difficult
xDSL High No Wide bandwidth Developed infra required
Fairly stable Highly depend on line
quality
Cabling may not be needed
Sub-networking difficult
Cable Modems Medium Needed Fairly stable Quality highly depends on
the number of subscribers
Wide bandwidth
Sub-networking difficult
LMDS High No Easy access Still under-development
Sub-networking possible High equipment cost
No cabling required
PLC Low No Easy access Not proven yet
Simple plug-in sub-network Depends on the number of
subscribers connected to
No cabling required
the transformer
Source: Xeline70

How Does PLC Work?

n Power grids transmit electricity in three typical voltages — high, medium and
low.
PLC technology companies are currently introducing their products in the medium
and low voltage grid domains (high voltage is currently under research). Medium
voltage is the power line coming from the utility substation, where voltages range in
the tens of thousands, to the low voltage step-down transformer. The transformer
"steps-down" the medium voltage to the three-wire (one ground, two voltage wires)
low voltage output lines that enter the home or business. The delivery of electricity
from generation through distribution utilises alternating current (AC) at a frequency
of 50/60Hz. When entering an end-premise site, the 50/60Hz AC is reduced to the
low voltage direct current that is required for most electronic devices.

PLC takes advantage of the PLC takes advantage of the medium voltage power grid and the last mile primary
medium voltage power grid and secondary distribution network that extends to the customer premise sites.
and the last mile primary Through ‘conditioning’ of the existing electricity infrastructure, electrical utilities
and secondary distribution transmit regular low frequency signals at 50 to 60Hz and much higher frequency
network that extends to the
signals above 1MHz without affecting either signal. The lower frequency signals
carry power, while the higher frequency signals can transmit data.
customer premise sites

70
Source: Xeline (Link: http://www.xeline.com/english/contents/technology/index.php?file)

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Communication Networks
An overview
The network is the system that links your phone to somebody else’s or your
computer to another. Networks can operate within a building or across the globe.
They can have varying degrees of intelligence. At one end of the scale you could
design a network where every bit of information was carried to every subscriber.
Intelligence at the end of the network in the terminal equipment could decide which
bit of information was relevant and suck it out, discarding everything else. At the
other end you have the more traditional network where the end user equipment is
dumb and the network sorts out how the information makes its way across it and
who gets access to what.

n Public networks
For the moment we will stick to describing a traditional telephone network for
carrying voice and data traffic. This basically consists of lines and switches. The
telephone handset inputs a series of digits, the telephone number, and the switch
connected to that line then uses the information contained in that number to route
the call through the network. The term switch came from the original telephone
exchanges that literally consisted of a vast number of interconnected switches.
Each digit in the telephone number effectively corresponded with one layer of
switches. Today the switches do the same thing but the switch is now a computer.
The computer is faster and much cheaper to maintain and offers the chance to do
much more than just route the call. Hence we now have a host of features
embedded within the traditional telephone network such as answering machines,
dial back when free, caller identification etc, all of which operators classify as value
added services. In the sense that they can charge something for these services they
are value added but in practice they are a simple software implementation normally
provided by the equipment vendors.

n Private networks
These are basically streamlined versions of the public network. Private networks can
be small-scale affairs, perhaps just in one building or complex global networks, and
in many cases they are far more extensive than the networks of many incumbent
operators. Equant is a good case of a private system used by the world’s airlines,
which turned itself into a public company and sought to provide traffic management
services to outside companies. Because private networks handle traffic within a
company they can be designed with many additional features not found in the public
network. Despite the emergence of supposedly global carriers who take away the
hassle of running networks, many large corporations continue to run their own
internal networks.

n The access network

A natural monopoly? The access network is also referred to as the local loop. Effectively that is what it
comprises, a loop of (invariably copper, although sometimes in part aluminium) wire
linking the customer to the local exchange. Nowadays there are other options but
the copper loop still dominates the access network in all markets. It also represents
the biggest long-term investment of operators because of the heavy element of
labour costs associated with digging trenches and running cables to all premises. It
is also generally heavily cross subsidised by other parts of the business which
means incumbents generally still control the vast majority of the local loop globally.

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There are technologies which are sufficiently cheap in certain environments to

present viable competition to the incumbents’ local loop but only cable has the
potential to be a pervasive competitor, rather than a niche competitor using co-axial
cable. Of course mobile technologies can attack the market of the incumbents from
a different direction but more of that later.

As we have said, copper loops dominate the residential and small business market
but fibre is the technology of choice for serving larger business customers. As a
result fibre is creeping further and further into the access network. Certain operators
are also using fixed wireless technology to deliver local loop service, a technology
discussed later. Co-axial cable used by cable TV operators can also be used to carry
telephony or data signals but this requires a special access terminal to allow
separation of data/voice services from TV transmission. In certain countries, like the
UK, the cable TV operators have built out to homes and buildings laying both co-axial
cable and copper twisted pairs to allow simple implementation of telephony
services. In most other markets cable-TV networks were deployed before
competition to the incumbent telephone operators was considered and thus only a
single co-axial cable was laid. Many cable TV networks were owned and
constructed by the incumbent during their days of government ownership and a
number of telco operators still run the cable TV business.

Connected to the access layer are access devices. These will be devices like
telephones, modems, cable modems, terminal adapters, mobile phones, PDAs,
routers etc. Terminal adapters or network terminating units are the digital equivalent
of a modem. Rather than convert digital signals to analogue to be transmitted over
the local loop, only then to be converted back into digital, these devices keep
everything digital. Cable modems allow high-speed connection to the internet over
cable networks.

Linking the access layers together are the network and transport layers. The
physical components are cables, copper and fibre, or microwave and satellite
transmission systems, undersea cables etc. The transport network will nowadays
be managed using SDH (Synchronous Digital Hierarchy) or SONET (Synchronous
Optical Network), while ATM (asynchronous transfer mode) is used to transport and
route information across these facilities.

The old copper based local loop may seem archaic today, providing just POTS (plain
old telephone service), but the sheer scale of the undertaking to upgrade it means
that operators need to be very sure that whatever they introduce into the local
system will have longevity, i.e. support future requirements.

Given these legacy networks and the very fast pace of technological development it
is little surprise that during the 1990s a plethora of new competitors arrived focused
on capitalising on the opportunity created by ‘dozy’ telco giants with decrepit
equipment. The amazing thing is that these new competitors have had so little
success.

This chapter gives some information on these communication networks — their

evolution, basic components used and various kinds of networks.

Communication Systems
Communication systems have evolved from telegraph to wireless systems. For the
major part of the network, landline telephone networks have changed from the

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analogue mode of transmission to the digital mode71. Wireless systems have

evolved from 1G to 3G, offering greater speeds for data transmission and higher
capacity transmission.

This section provides a chronological view of how various technologies, such as

GSM and CDMA, have evolved. Computer network systems such as LAN, Internet
and VPNs are explained later. Converged communication networks such as VoIP are
also covered.

Telegraph
Telegraphy is a mode of Telegraph was the first electrical means of long distance communication. Around
long distance 1840, Samuel F.B. Morse invented the first telegraph. His system could convert
communications that sends words into a code consisting of dots and dashes. This code, called the Morse Code,
signals composed of dots could be transmitted by simple electric pulses. Some years later, a duplex telegraph
and dashes.
was invented, which could send more than one message in one direction at the
same time. This means of communication soon became popular and was used
widely.

In 1847, the first telegraph company, Montreal Telegraph, was founded. Telegraph
cables were laid out and telegraph offices were set up. The technology was soon
commercialised and many large companies such as New York Telegraph,
Newfoundland Telegraph, London Telegraph, Atlantic Telegraph came into being.

After the invention of radio waves in 1890, the first wireless communication system
was developed in 1901. Morse Code was transmitted in the form of radio waves.
This was called Wireless Telegraphy and paved the way for today’s complex
wireless communication systems.

Telegraph system — phasing out

Graham Bell invented the telephone in 1876, and it became commercially deployed
in the 1930s. The advantages of telephone over telegraph pretty obvious. They are:

n Telephone is a full duplex medium. Full duplex medium means that two people
can talk at the same time.
n The Morse Code is complex and requires an interpreter at the receiving as well
as the transmitting station.
n In Telephone, the voice of the person at the other end can be heard. This makes
the communication more interactive.
n Various other forms of data can be transferred via telephone lines.
Telephone
Telephones are the oldest means of communication still used today. The basic
components and working mechanism of the POTS (Plain Old Telephone System)
has remained largely unchanged.

71
Refer to Chapter 3 on 'Communication Media' for further information on ‘analogue’ and ‘digital’ modes
of transmission.

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Public Switched Telephone Network

PSTN (public switched This subsection explains the basic network of landline telephones. Then we discuss
telephone network) is the various transmission modes such as analogue and digital. Data services such as
world's collection of FAX, Internet dial-up offered through Public Switched Telephone Networks (PSTN)
interconnected voice- are also covered. Finally, a brief description of private telephone networks used in
oriented public telephone
offices is given.
networks, both commercial
Fixed line telephone networks, also referred to as Public Switched Telephone
and government-owned.
Networks (PSTN), are used extensively today. A simple telephone consists of three
separate components: the network for carrying the signal, the dialling mechanism
and the ringer or bell. The speech network helps in carrying the voice. The dialling
mechanism dials the numbers in terms of electric signals. The ringer creates sound
to inform about incoming calls. Additional machines such as modems, diallers and
answering machines can be attached to the phone line. Two copper wires connect
the telephone to the nearest local exchange. The local exchange connects to the
main exchange and the main exchanges transmit signals via optic fibre network or
satellites.

The working of a telephone system can be explained as follows:

n On dialling a number, a request is sent through the copper wires and telephone
poles to the nearest local exchange. The local exchange is connected to all the
phones in a small geographic area. The numbers are dependent on how densely
populated the area is but a typical radius of coverage would be of the order of
5kms.
n The local exchange routes the request further to a main exchange.
n The main exchange routes the request to an international exchange or another
main exchange depending upon the intended destination of the call.
n In the case of overseas calls, the call may go from one main exchange to
another via a satellite or through undersea fibre cable.
n For the duration of a call, a permanent circuit is formed to transmit the voice.
This circuit connects the caller to the exchange, the exchange to the destination
and from the destination back via same route to the caller. This is called ‘circuit-
switched’ transmission. To allow more long-distance calls to be transmitted, the
frequencies transmitted are limited to a bandwidth of about 3,000 hertz. All of
the frequencies below 400 hertz and above 3,400 hertz are eliminated72.
A pair of copper wires called ‘the loop’ carries the signal from the telephone handset
to the nearest exchange. Voice services were traditionally provided over a network
of copper cables. Fibre cables are being increasingly deployed for these services
due to their various advantages such as reliability and better quality of service.
However, the cables reaching the consumers’ homes are still copper as it is not
economically feasible to cover the last mile of a network by fibre. Normally fibre
cables are used to connect between main exchanges and international exchanges,
reflecting the high volume of traffic carried on these routes.

Standard voice signals become weak (i.e., attenuate) when the copper portion of the
wire is longer than 6kms. ‘Load Coils73’ are used to extend the range of the local
loop. These coils are added at specific intervals along the loop. Load coils do not

72
The elimination of these frequencies causes someone’s voice on a phone to have a sound different
from that in a face-to-face conversation.
73
Refer to glossary for further information on ‘Load Coils’.

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allow transmission of high frequency signals. Thus, modern broadband services

such as ADSL and ISDN74 cannot be transmitted on lines with load coils. New digital
telephone services also require ‘unloaded’ copper pairs.

Modes of Transmission in PSTN lines

The signal in PSTN lines can be transmitted in two ways:
n Analogue: In analogue mode voice waveform is transmitted as electrical
signals.
n Digital: In digital mode of transmission the voice waveform is converted to a
digital form, by using analogue to digital converters, and is then transmitted.
The figure below explains the difference between analogue and digital.

Figure 48: Analogue vs Digital

1 Cycle 1 Cycle Amplitude

Source: Deutsche Bank

Until recently most telephone networks were analogue. However, the telephone
industry has moved rapidly to the digital mode of transmission. Digital has many
advantages, which are too numerous to mention here, but key is the ability to utilise
infrastructure more efficiently, reduced errors in transmission, and the ability to
manipulate and add intelligence to data.

The telephone industry has rapidly moved to install fibre and digital networks due to
the ability to offer a broader, more flexible range of services compared to analogue.
Most major components of the telephone network these days run in digital mode.
However, the last few miles of nearly all networks are still copper wires carrying
analogue signals. These analogue lines are not expected to be replaced in the near
future. Fax machines and modems still use analogue lines even in buildings with
ISDN and digital PBXs.

n Data Services Offered through PSTN Lines

Forms of data other than voice are also transferred through the PSTN network.
These other forms of data include images (received by a FAX machine), Internet
data etc.

n FAX machines: FAX is an abbreviated form of Facsimile (Derived from Latin

words 'factum' and 'simile' meaning 'made like'). FAX machines transfer images
as data through PSTN lines. Images can be sent and received anywhere in the
world by connecting a Fax machine to the telephone. FAX machines began to
be used widely when image data compression techniques were introduced in
the 1970s. These techniques drastically reduced transmission time. In recent
years fax traffic has declined precipitously as a combination of better PCs and e-

74
Refer to glossary for further information on these technologies.

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mail applications have rendered it all but redundant. The reduction of fax traffic
has been one of the driving forces behind reductions in call volumes noted by
most operators in recent years.
n Internet dial up services: Modems convert the digital data from PC into
analogue, and this analogue signal is transferred through the PSTN lines to the
final server. The server decodes the signal back into a digital form.

Figure 49: Simplified Representation of Internet Dial-Up through PSTN Lines

Modem Telephone Modem

Network
Computer
Terminal
Source: Deutsche Bank

n Transmission Mechanism through PSTN Lines

In conventional telephone lines, the signal line is also the power supply line. The
power is supplied by batteries, thus assuring complete independence from the
electricity outages. At the telephone exchange, the DC voltage and audio signal are
separated. This resilence, archaic as it is, is one of the main strengths of the copper
based system. Fibre based access systems clearly cannot carry power and thus a
totally fibre based access network would require locally delivered ‘non-stop’ power
in order to guarantee continuous operation. Increasingly the issue of network
resilience is being bypassed thanks to the majority of people having access to
mobile phones.

The telephone line is a full duplex medium. This means that both people can talk at
the same time. The hybrid circuit makes it possible to transmit two channels of
information in opposite directions simultaneously on a single pair of wires.

Telephone standards around the world are fragmented. Each country has its own
standards because of the historical domestic roots of the phone. The major
differences are: wiring practices and connectors, loop currents, signalling tones and
electrical safety regulations. For example, to ring the telephone, a telephone
company might momentarily apply a 90 VRMS75 20 Hz AC signal to the line. The
frequency and voltage of this signal varies from one country to another.

75
VRMS refers to the Root Mean Square average of the AC voltage. It is a measure of the average
voltage of AC current.

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Private Telephone Networks

Private Branch Exchange Private Branch Exchange (PBX) is a private telephone network, via which several
(PBX) is a private telephone telephones can be connected to a certain number of external lines (also called trunk
network, by which several lines).
telephones could be
connected to a certain
In a PBX environment a phone is called a line, extension or station. An external line
is called a trunk. Station-to-station76 calls as well as station-to-trunk calls are possible
number of external lines
in a PBX network. PBX telephones have an identity of their own, in the form of a
(also called trunk lines).
unique extension number. The PBX has trunks to the phone company. The PBX
switches calls through itself based on user demands.

There are different kinds of PBX systems in use:

n EPABX (Electronic Public Automatic Branch Exchange): EPABX is a PBX
system built using electronic controlling and signal switching.
n PNX (Packet Network Exchange): A communication-switching platform that
combines PBX and VoIP77 functionalities.
n PMBX (Private Manual Branch Exchange): Some old companies might still
use PMBX, where company-employed operators manually switch each call
through a switchboard.
n KTS (Key Telephone System): KTSs are generally smaller versions of a PBX
that provide direct access to the central telephone lines.
There are many customised PBX systems available to businesses to cater for their
particular needs.

Paging
Pagers are simple mobile Pagers were the first mobile communication devices. They are simple mobile
devices used for sending devices used for sending and receiving text messages. They use simple radio
and receiving text devices that communicate with one station all the time. The radio transmitter inside
messages. a pager sends and receives signals over a specific frequency only.

There are five types of pager:

n Beepers: Beepers provide an alert signal to the user. This could be a beeping
noise, a light flash or a vibration.
n Voice / Tone: These pagers provide the ability to listen to a recorded voice
message, when there is a page alert.
n Numeric: These pagers provide the ability to send numeric messages.
n Alphanumeric: These pagers provide the ability to send text messages along
with a page alert.
n Two-way: These pagers provide the ability to send as well as receive
messages.
Paging networks set up towers just like cell phone networks to cover large areas.
The operation of pagers requires a ‘master transmitter’. This master transmitter is
like a radio station or base station of a cell phone network. The master transmitter
sends out signals that the pagers receive. Pagers are still widely used in the US but
face an inexorable decline as cellular penetration rises and prices fall.

76
Station is an internal line.
77
VoIP means Voice over Internet Protocol. For details refer to the section on VoIP in this chapter.

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Cellular Networks
Cellular Networks are Wireless networks allow a communication device, be it a phone, PC or PDA etc, to
mobile telephony networks be linked without wires to a network. Wireless implies greater freedom. Historically
where the geographical area this has come at a price of high caller costs, but the differentials between fixed and
of coverage is divided into mobile prices are narrowing . Over the last twenty years many have predicted that
adjacent hexagonal areas
mobile will take over from fixed. What they really mean by this is that mobile will
attract a greater part of the revenue generation in the industry. There are now more
called cells.
mobile users around the world than there are fixed phones. Elements of the fixed
networks will remain even if nobody ever uses a fixed terminal. Fundamentally the
mobile network is nothing more than a fixed network but with radio at the ends
rather than copper wires.

There are several manifestations of wireless but the one we will give most attention
to is cellular because this is the most significant market from a value perspective.

Cellular was invented by Bell Laboratories (part of AT&T) in the 1960s but had to
await until the 1980s for commercial implementation while semiconductor
technology caught up. The clever thing about cellular is that it makes efficient use of
a scarce resource, frequency spectrum. In a cellular network the same chunk of
frequency can be used repeatedly. If, for instance, we have 14 units of frequency to
work with we could divide our frequency into seven lots of 2. Each ‘cell’ would be
allocated two unique units of frequency. The diagram below shows how the seven
cells would be located, each with its own unique set of frequencies on which to
operate. Because no two adjacent cells share the same frequencies there is no
interference.

In the middle of each cell stands a transmitter/receiver combined into one unit called
a base station. Assuming for a moment that there is only one mobile user in any one
cell then each user would be able to communicate with the base station using the
first of the two unique frequencies and the base station would be able to talk back
using the second.

Let us now see what happens when we go outside the coverage of the first seven
cells of the network. We build another seven-cell cluster, and another and another.
Each cluster uses all the same set of frequencies as the first cluster but because no
two adjacent cells share the same frequencies there is no interference. In this
diagram we have used different colours to represent the individual frequency ranges
used in each cell.

As the user travels from cell to cell they go through what is termed handover. This
means the handset starts to pick up two signals, one from the base station with
which it was communicating and one from the adjacent cell to which it is moving. At
the point when the signal from the new base station is sufficiently strong the
network completes a handover.

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Figure 50: The Cell Approach

Source: Howstuffworks

Each carrier in a city has a number of base stations and one central office called a
Mobile Telephone Switching Office (MSO) or in Europe a Mobile Switching Centre
(MSC). This office handles all the calls to the land-based phone system and controls
all the base stations.

The working of a cell phone network is described in the following steps:

n When a cell phone is switched on, it connects to a base station. Each carrier
has a unique number known as the Serial Identification Number (SID). The base
station communicates the SID to the phone via a Control Channel. The phone
matches this SID with the SID programmed in the phone. If it matches, the
phone is connected to its home cell.
n Along with the SID, the phone transmits a registration request and the MSC
keeps track of the mobile phone’s location in a database.
n When the MSO gets a call, it locates the mobile phone in its database. The MSC
picks up a frequency pair that the phone will use in the cell in which the phone
is located to take the call. The MSC communicates this frequency pair to the
phone and the tower through a control channel. Once the phone and the tower
switch to that frequency pair, the phone gets connected.
n The tower or base station connects the call to the desired receiver by
communicating with the base station of the receiver. In the case of a landline
call, the call is diverted to the MSC and sends a request to the telephone
exchange.
When a cell phone moves towards the edge of a cell, it notices that the signal
strength is diminishing. Each cell measures the signal strength on all frequencies
and not just its own. At the same time, the base station of the nearest cell notices
that the phones signal strength is increasing. The two base stations coordinate with
each other and through the MSC. Soon a signal is sent through a control channel to
the cell phone and the base station, to change frequencies. Thus, the cell phone
gets connected to the cell with the best combination of signal strength and available
capacity.

If the SID on the Control channel does not match with the SID programmed into the
cell phone, the cell phone knows that it is ‘Roaming78’. The MSC of the cell in which

78
When a Cell phone is outside the range of its home calling area, it is said to be roaming. To connect to
the Cell phone in roaming, the MTSO of the home calling area connects with the MSC of the area the Cell
phone is in.

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14 January 2004 Telecommunications Telecoms for Beginners

the cell phone is roaming contacts the MSC of the home system. Details of the
subscriber are stored in a home location register (HLR).

In practice life there are complications. A network that looked like that shown in
Figure 50 would work well over an area which was completely flat, and where the
usage was uniform at all times of day. The reality is that hills, valleys and buildings
all serve to confuse the issue. So network planners are constantly battling to provide
a reasonable quality of service for subscribers while demand growth is rapid and the
expectations of users are growing fast.

The capacity of a cellular network is a function of how much frequency the operator
has to work with, what frequency is being used, how many cells have been
constructed, the traffic patterns of users, the topography and the type of technology
chosen. The biggest problem any operator faces is that the rapid growth in
subscribers means that traffic is growing rapidly.

The more users the greater the capacity requirement. But there is only a finite
amount of spectrum available, dictated by the operator’s licence. So what do you
do? The options available are to:
n Put in more cells
n Improve the way in which you use the cells already there
n Obtain more frequency spectrum
n Squeeze in more subscribers by making their conversations use up less
bandwidth
n Change your technology
Put in more cells — this directly affects how much capital you spend. Not only is
hardware required but new cellsites require a place to put up a mast. This is getting
steadily more difficult thanks to environmental considerations. Also the
management of small cells can in themselves create problems. A subscriber in a car
moving through an area of cells of only a few hundred metres in diameter would
create havoc because of the number of handovers required in a short time period.
Network planners have ways of dealing with this by creating overlay networks
where cells are layered on top of ‘normal’ cells to handle different types of traffic.

Obtaining more frequency is easier said than done. And governments are no
longer as likely to hand it out for free as once they did. If they do, invariably there
are conditions attached to its use. Frequency trading may or may not be allowed.
Even where licences have been bought frequencies may not be traded, as in
Germany for instance. In the US trading is permitted. The market has experienced
years of consolidation as smaller operators have been absorbed by the national
carriers in order to obtain their frequencies.

The device in the mobile handset which turns the speech into a digital signal is
called a vocoder. This uses clever techniques to minimise the amount of bits of
information that need to be sent to allow replication of the signal at the receiving
end. As compression techniques have got smarter so it is possible to squeeze more
voice signals into a given unit of frequency.

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Cellular technologies are classified by their mode of transmission and the access
technology they use. The important cellular technologies used to date are:

n AMPS
n The GSM family
n GSM
n GPRS
n HSCSD
n EDGE
n CDMA
n CDMA technologies
n cdmaOne
n CDMA2000
n LAS-CDMA
n PDC
n PHC
n Advanced Mobile Phone Systems (AMPS)
AMPS are the first generation of mobile networks. AMPS network is analogue,
circuit switched79, and can carry only voice traffic. AMPS uses a range of
frequencies between 824MHz and 894MHz. Since analogue signals require more
space for transmission, only one signal can be transmitted through one channel.

n Global System for Mobile Communications (GSM)

GSM is a second-generation wireless technology. It differs from the first generation
in that it uses digital technology and TDMA80 transmission methods. In this system
voice is digitally encoded81 via a unique coder, which emulates the characteristics of
human speech. Eight signals can be transmitted on a single frequency by the GSM
system.

GSM can be implemented in any frequency band. The frequency band on which a
GSM system operates varies from one country to another. The following table
explains the frequency bands that are already used or will be in the near future in
various countries.

79
‘Circuit switched networks’ provide a dedicated communication line from sender to receiver. Refer to the
section on ‘Basic components/functions of a communication system and their evolution’ in this chapter for
further information.
80
TDMA stands for Time Division Multiple Access. Refer to Chapter 3 on 'Communication Media' for
further information on ‘TDMA’.
81
Analogue to Digital converters are used to convert the waveform into digital signals.

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14 January 2004 Telecommunications Telecoms for Beginners

Figure 51: Frequency Bands Used In Various Geographies

Frequency Range Player, Country
GSM 450 450.4 — 457.6MHz paired with 460.4 - 467.6MHz Germany
or France
478.8 - 486MHz paired with 488.8 — 496MHz Brazil
Peru
GSM 850 824 - 849MHz paired with 869 - 894MHz AT&T WirelessUSA
Sprint PCS,USA
GSM 900 880 - 915MHz paired with 925 — 960MHz Orange, France
TIM, Italy
Vodafone, UK
GSM 1800 1710 - 1785MHz paired with 1805 - 1880MHz Orange, France
TIM, Italy
Vodafone, UK
GSM 1900 1850 - 1910MHz paired with 1930 - 1990MHz AT&T WirelessUSA
Sprint PCS,USA
Source: Ericsson Website

High bandwidth services are available through second-generation (2G) technologies.

The GSM family has evolved to form advanced technology platforms i.e. GPRS,
HSCSD, EDGE and WCDMA. The figure below depicts the evolution path of GSM.

Figure 52: GSM Family Evolution and Applications Enabled

2001-2002
WCDMA (2Mbps)
Voice n

2001 Video on demand

n
EDGE (384Kbps)
n Broadband internet while
n Voice moving
n Video, Music internet
n Full multimedia
applications streaming clip download
2000
n High speed
SPEED

GPRS (171Kbps)
n Voice n Video, Music
1999 n InternetBrowsing
HSCSD (28Kbps) n Transfer ofimages
n Voice
n File transfer
n Internet Browsing

1994-1998
GSM (9.6Kbps)
n Voice

PERIOD OF EVOLUTION

Source: ITU

n High Speed Circuit Switched Data (HSCSD)

HSCSD is a 2G mobile technology. High Speed Circuit Switched Data (HSCSD) is an
enhancement of data services (Circuit Switched Data) of all current GSM networks.
It allows the transfer of data from portable computers and handsets at a speed of up
to 28.8kbps. The HSCSD solution enables higher rates than the basic 9.6kbps
offered by GSM by using multiple voice channels, enabling faster rates for Internet,
e-mail, calendar and file transfer services. HSCSD allows the user to access the
company LAN, send and receive e-mails, and access the Internet while on the
move. HSCSD is offered using either voice terminals that support the feature, or a

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special PCMCIA82 portable computer card, with a built in GSM phone that turns
notebook computers and other portable devices into a complete high-speed mobile
office with the ability to make voice calls hands free, as well as data transfer.

n General Packet Radio Services (GPRS)

GPRS83 is a 2.5G mobile technology. Many cell phone networks use GPRS for data
services and GSM for voice services. The GPRS network is packet switched. It
enables new non-voice value added services that allow information to be sent and
received across a mobile telephone network.

GPRS provides actual packet radio access for mobile GSM and TDMA users. The
main benefits of GPRS are that it uses radio resources only when the network
actually send or receive data and it reduces reliance on traditional circuit-switched
network elements. The increased functionality of GPRS decreases the incremental
cost to provide data services. In addition, GPRS allows improved quality of data
services as measured in terms of reliability, response time, and features supported.
GPRS supports a broad base of mobile subscribers and allows operators to
differentiate their services. GPRS alleviates the network capacity by sharing the
same radio resource among all mobile stations in a cell, providing effective use of
the scarce resources.

GPRS is important as a migration step toward 3G networks, as it allows network

operators to implement IP-based core architecture for data applications, which
would continue to be used and expanded upon for 3G services for integrated voice
and data applications.

n Enhanced Data rates for GSM Evolution (EDGE)

EDGE is a 2.5G mobile technology. EDGE gives incumbent GSM operators the
opportunity to offer data services at speeds that are approaching those available on
UMTS networks84.

The EDGE technology enables GSM and TDMA operators to deliver third-generation
mobile multimedia services using existing network frequencies, bandwidth, carrier
structure and cell planning process. The mobile multimedia services include
downloading of video and music clips, full multimedia messaging (messages sent
with graphics and images), high speed colour Internet access, video conferencing
and e-mail on the move. By using a more efficient air-modulation technology
optimised for data communications, EDGE increases end-user data rates up to
384kbps and potentially higher in good quality radio environments.

n Wideband Code Division Multiple Access (WCDMA)

WCDMA, also known as UMTS85 in Europe, is 3G standard for GSM in Europe,
Japan and the United States. It's also the principal alternative being discussed in
Asia. WCDMA is a spread-spectrum technology, which means that it will spread its
transmissions over a wide, 5MHz carrier, hence the name W (wideband) CDMA. It

82
PCMCIA is a computer card used to support added features like HSCSD.
83
For further details on GRPS networks, please visit: http://www.ee.oulu.fi/~fiat/gprs.html,
http://www.ee.oulu.fi/~fiat/gprs.html (section Free White Papers, subsection “An Introduction to the
General Packet Radio Service”)
84
Source: http://ebmx.com/edge.htm
85
UMTS stands for Universal Mobile Telecommunications System. Refer to glossary for further
information on ‘UMTS’.

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14 January 2004 Telecommunications Telecoms for Beginners

provides higher capacities for voice and data transmission than provided by GPRS or
EDGE. It supports very high-speed multimedia services such as full-motion video,
Internet access and video conferencing. It uses one 5MHz channel for both voice
and data, offering data speeds up to 2Mbps. The speed of transfer depends on
whether the device is stationary or moving.

WCDMA offers operators a number of significant advantages over alternative

technologies, including increased network capacity, longer battery life for terminals
and enhanced privacy for users.

The following table provides an overview of the GSM family.

Figure 53: GSM Family Overview

2G 2.5G 3G

GSM GPRS EDGE WCDMA

Features Uses TDMA as a carrier Information split in packets and Triples the data transmission Bridge the gap between
technology then transmitted. rate as compared to GPRS by wireless world and the
using a new modulation computing / Internet world
Eight signals can be transmitted Supports TDMA and CDMA
scheme
on the same channel. based systems
The routing network is packet
Can be implemented on any GPRS has an advantage over
switched
frequency band. circuit switched network.
Data speeds 9.6 — 14.4kbps 28 — 171kbps 384kbps 144Kbps (full mobility)
384Kbps (limited mobility)
2Mbps (fixed location)
Applications Provide secure mobile voice Browse Internet Full multimedia messaging Video on demand
and data services (such as
Transfer still images, moving Downloading video and music High speed multimedia
SMS)
images. clips
Mobile Internet access
Most widely used technology
File transfer High Speed internet access
for Cell Phones
Home automation
Source: Deutsche Bank

n Code Division Multiple Access System (CDMA)

CDMA, of which WCDMA discussed above is a variant, is based on Qualcomm
proprietary technology. As previously mentioned it employs a fundamentally
different approach to coding and decoding signals. The debate about whether
CDMA is better than alternative technologies like TDMA is well beyond the scope of
this document and so here we will provide the briefest of overviews.

Figure 54 below shows the evolution of CDMA based system.

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Figure 54: CDMA Evolution

T 307kbps-3.1Mbps
E
C
H
N CDMA2000 1X EV-DV
O
L 153-307kbps n Voice
O
G
Y CDMA2000 1X n SMS
64kbps n Voice n MMS
E
V
O IS-95B n SMS n E-mails
L
U 14.4kbp n n
T Voice MMS n StreamingMultimedia
I s
O IS-95A n SMS n E-mails
N 9.6kbps
n Voice n Other Text services
cdmaOne
n SMS APPLICATIONS
n Voice

1993 1995 1998 1999 2002

Source: Deutsche Bank

n cdmaOne
cdmaOne describes a complete wireless system based on the TIA / EIA IS-95
(Telecommunications Industry Association / Electronic Industries Association Interim
Standard - 95) CDMA standard86, including IS-95A and IS-95B revisions. It represents
the second generation of wireless systems, which were first deployed in the USA
and Asia. cdmaOne provides a family of related services including cellular, PCS and
fixed wireless (wireless local loop). It can support transmission speeds of 9.6kbps.

n IS-95A
The IS-95 CDMA standard was first published in July 1993. The IS-95A revision was
published in May 1995 and is the basis for many of the commercial 2G CDMA
systems around the world. IS-95A describes the structure of the wideband 1.25MHz
CDMA channels, power control, call processing, hand-offs, and registration
techniques for system operation. In addition to voice services, the IS-95A system
provides circuit-switched data connections at 14.4kbps. IS-95A was first deployed in
September 1996 by Hutchison in Hong Kong.

n IS-95B
The IS-95B is categorised as a 2.5G technology. IS-95B system provides circuit-
switched data connections at 64kbps. cdmaOne IS-95B was first deployed in
September 1999 in Korea and has since been adopted by operators in Japan and
Peru.

n CDMA2000
CDMA2000 is a third generation solution based on IS-95 standards. CDMA2000
networks are backward compatible to cdmaOne deployments. The CDMA2000
standard is evolving to continually support new services. The first phase of
CDMA2000 (CDMA2000 1X) delivers average data rates of 144kbps. Phase two,
labelled CDMA2000 1xEV, provides for data rates greater than 2Mbps.

86
For further details on TIA/EIA IS-95 standards please visit:
http://www.tiaonline.org/standards/search_results2.cfm?document_no=TIA%2FEIA%2FIS%2D95%2DA

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n CDMA2000 1X
CDMA2000 1X is the first phase of CDMA2000. The term was originally 1xRTT,
which just meant ‘radio transmission technology’. Then, as the difference between
CDMA2000 and WCDMA was being defined, the term ‘1xMC’ appeared. The MC
stood for ‘multi-carrier87’ to differentiate from the ‘direct spread88’ (DS) used in
WCDMA.

CDMA2000, on the other hand, uses from one to three 1.25MHz carriers89 to
accomplish its high-speed interface; hence, the name MC (multi-carrier). In actual
fact, 1X means one carrier, and the later version, 3X uses three carriers. CDMA2000
1X technology supports both voice and data services over a standard CDMA
channel, and provides many performance advantages over other technologies. It
provides up to twice the capacity of earlier CDMA systems. It provides peak data
rates of up to 153kbps. It is backward compatible with earlier CDMA technology.

n CDMA2000 1XEV
The ‘EV’ stands for ‘evolution’. This is an enhancement to CDMA2000 1X that
includes High Data Rate (HDR)90. The 1XEV standard provides for two phases.
Phase 1 dedicates one carrier (1.25MHz) for high-speed packet data, while one or
more additional carriers are used in the normal manner for voice. Phase 2 combines
packet data and voice in the same carrier, but retains the ability to maintain packet
services on a separate carrier if desired. It provides data rates ranging from 307kbps
to 3.1Mbps

n CDMA2000 3XMC
When CDMA2000 uses three carriers of 1.25MHz each, it is called CDMA2000
3XMC. While WCDMA uses nearly 5MHz for each channel, 3X uses three 1.25MHz
channels, which provides much more flexibility, since the three channels can be
used independently (multi-carrier), or together as a single 3.75MHz channel (direct
spread).

The most obvious advantage to the 3X approach is that it can be implemented in

existing CDMA frequency allocations, which also use 1.25MHz carriers. This also
ensures backward compatibility to 1X and cdmaOne deployments.

The extra bandwidth enhances service for multimedia applications, and provides
data rates up to 2Mbps.

n CDMA2000 1XTREME
Developed jointly by Nokia and Motorola, 1XTREME is marketed as a rival to both
CDMA2000 1XEV and CDMA2000 3XMC. It employs the same modulation
techniques as 1XEV, but uses them for voice as well as data.

According to Motorola, 1XTREME does not require additional antennas as 1XEV, and
it also keeps data on the same spectrum as the voice services. This means that

87
Multi-carrier modulation (MCM) is a method of transmitting data by splitting it into several components,
and sending each of these components over separate carrier signals. The individual carriers have narrow
bandwidth, but the composite signal can have broad bandwidth.
88
Direct spread means that WCDMA will spread its transmissions over a wide, 5MHz carrier. It will use
this wide bandwidth to accomplish high data rates. Hence the name W (wideband) CDMA.
89
A carrier (or carrier signal) is a transmitted electromagnetic pulse or wave at a steady base frequency.
90
Refer to glossary for further information on ‘HDR’.

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carriers do not have to devote any spectrum specifically to data services. 1XTREME
is proposed to deliver the same voice capacity enhancements as standard 1X, and
provide data rates approaching 1.4Mbps. The second iteration of this technology is
expected to deliver data rates as high as 5.2Mbps.

n LAS-CDMA
Large area synchronous code-division multiple access (LAS-CDMA) is a proposed
fourth generation cellular standard being developed by LinkAir. Similar to
CDMA2000, the distinguishing feature of LAS-CDMA is the new set of spreading
codes used to separate signals from users in the wireless channel. According to
LinkAir, LAS-CDMA uses codes different from other CDMA systems, which help it
optimise spectrum usage and increases efficiency. These codes also allow voice to
be strongly separated from data during transmission, which allows for low-power
voice transmission and high-power data transmission. Data throughput peaks are
expected to be 5.5Mbps using LAS-CDMA.

The figure below gives a brief overview of the CDMA family.

Figure 55: CDMA Family

CDMA Technologies Attributes Data Speeds
cdmaOne 2G wireless systems 9.6kbps

First deployed in the USA and Asia

Provides cellular, PCS and fixed wireless services
CDMA2000 1X 2.5G wireless system 153kbps
First phase of CDMA2000
Supports both voice and data services
CDMA2000 1XEV 3G wireless system 307kbps - 3.1Mbps
Enhancement to CDMA2000 1X
Uses two phases for voice and data transmission
CDMA2000 3XMC 3G wireless system 2Mbps
Uses three carriers for data transmission
Provides flexibility, as the three channels can be used
independently
CDMA2000 1XTREME 3G wireless system 1.4Mbps - 5.2Mbps
Developed jointly by Nokia and Motorola
Transmits data and voice on the same spectrum
LAS-CDMA 3G wireless system 5.5Mbps
Developed by LinkAir
Uses codes different from other CDMA systems
Has higher spectral efficiency91

Source: Deutsche Bank

n PDC
PDC (Personal Digital Cellular) is a second-generation technology used in digital
cellular telephone communication in Japan. It uses a variation of TDMA, which
divides each cellular channel into individual time slots in order to increase the
amount of data that can be carried. It operates in the 800MHz and 1,500MHz bands,
making very efficient use of the available bandwidth. It can support peak speeds of

91
Spectral efficiency measures the amount of data that can be transferred through the system per unit of
given frequency (i.e. how many kbps data per kHz of frequency).

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9.6kbps. PDC is the most spectrally efficient92 of TDMA technologies, with

utilization of 8.3kHz of frequency space per channel93, 25kHz per channel for GSM
and 9.5kHz per channel for CDMA.

The PDC network supports many advanced features in-line with the other second-
generation technologies, such as text messaging and caller identification. PDC also
supports pre-paid calling, personal numbers, universal access numbers, advanced
charging schemes and wireless virtual private networks (VPNs94).

To achieve higher data rates of 28.8kbps using PDC systems, mobile Packet Data
Communication Systems (PDC-P) were introduced. As the name suggests, this
system uses packet switching approach for voice and data applications. Here
individual packets of data are routed to the required user and there is no dedicated
channel. This makes far more efficient use of the channels available. By adopting
this approach users can be charged for the data transferred rather than the
connection time.

n PHS
Personal Handyphone System (PHS) was developed by the Nippon Telegraph and
Telephone Corporation (NTT). It is a TDMA based second-generation cordless
telephone system, which is a successor to the conventional analogue cordless
telephones. It uses handover95 and location registration features96 for handling the
incoming and outgoing calls during travelling. These features enable PHS to provide
services equivalent to present cellular telephone system. It works on a frequency
band of 1895.15 — 1917.95MHz with 77 channels. It can support high-speed data
communication with data speeds ranging from 9.8kbps - 32kbps.

PHS employs micro-cell architecture to enable communication. Existing radio

communications system cover large areas with a radius generally falling between
1km - 3km using high power (5W - 6W). In rural areas cells may be significantly
larger. PHS stations cover small zones (also called 'microcells') of 100m - 500m radii
using 10mW power, similar to those of home-use cordless phones. Lower power
consumption allows more efficient use of radio waves, thus making it possible for a
larger number of people to use the system. However, there is one limitation. PHS is
made up of multiple microcells and does not function when the user is moving at
high speeds such as when travelling in a car. As the user moves from one microcell
to another at high speed, it becomes impossible for the system to register the
terminal and so hand off calls.

Satellite Network
A satellite network is a Satellites are used for long distance communication. In satellite communication
communication network networks, satellites act as a base station. A device on earth transmits the signal to a
that uses satellites as base satellite in space and the satellite retransmits it to its destination. Each satellite
stations. system comprises a group of satellites, which communicate with each other to relay
the signal to its final destination. Two types of satellites used are Geostationary and
Orbiting earth satellites.

92
Spectral efficiency measures the amount of data that can be transferred through the system per unit of
given frequency (i.e. how many kbps data per kHz of frequency).
93
A channel is a separate path through which signals can flow.
94
VPNs are closed user groups that allow colleagues working in different locations to communicate
through the mobile phone network as though they were using a conventional office phone system.
95
Refer to glossary for further information on ‘handover’.
96
Refer to glossary for further information on ‘location registration features’.

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Figure 56: A Typical Geostationary Satellite System

Satellites
Relaying signal
to other
satellites

Earth

Satellites

Satellites
Relaying signal
to earth
Source: Deutsche Bank

This subsection provides an overview of satellite systems used for voice and data
communication. It includes a discussion on the types of satellites used, along with a
description of the satellite systems deployed.

Satellite phones have historically found their principal use in remote locations as yet
not reached by conventional wireless communication (and probably unlikely to).

All satellite phones rely on a series of satellites to relay signals almost anywhere in
the world. Satellite phones generally require line-of-site with the satellite. The
satellites have inbuilt base stations. Signals are transmitted from satellite phones on
earth to these base stations. From these base stations they are transmitted to other
base stations or to a receiver in the same base station’s range.

Data transfer rates tend to be low compared to other systems. Iridium’s service
currently only offers a data rate of 10Kbps, which is a little better than the WAP97
access on a standard second-generation mobile phone. However, various systems
are in development to offer near-broadband capability.

97
Refer to glossary for further information on ‘WAP’.

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The satellite used for communication can be geostationary or orbiting round the
earth.

Geostationary
A geostationary satellite follows a circular orbit in the plane of the Equator at a
height of 35,600km. From a viewer’s perspective, it appears to hover over a chosen
point on the Earth's surface. Three such satellites are enough to cover most of the
globe, and mobile users rarely have to switch from one satellite to another.

A call from a mobile terminal goes directly to the satellite overhead, which routes it
back down to a gateway on the ground called a land earth station (LES). From there
the call is passed into the public phone network.

n Limitations of Geostationary base stations

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

n Inmarsat: Inmarsat's primary satellite constellation consists of four Inmarsat-3

satellites in geostationary orbit. A call from an Inmarsat mobile terminal goes
directly to the satellite overhead, which routes it back down to a gateway on the
ground called a land earth station (LES). From there the call is passed into the
public phone network. The Inmarsat-3 satellites are backed up by a fifth
Inmarsat-3 and four previous-generation Inmarsat-2s, also in geostationary orbit.
A key advantage of the Inmarsat-3s over the predecessor systems is its ability
to generate a number of spot-beams as well as single large global beams. Spot-
beams concentrate extra power in areas of high demand as well as making it
possible to supply standard services to smaller, simpler terminals.
n Thuraya: Thuraya mobile satellite system is a key project built by Boeing
Satellite Systems, formerly Hughes Space and Communications International,
Inc. The operating consortium was founded in the UAE in 1997. Thuraya’s
satellite’s geo-synchronous orbit is at 44° East. Thuraya’s satellites have been
specially designed to achieve network capacity of about 13,750 telephone
channels. Thuraya’s hand held mobile terminals are comparable to GSM
handsets in terms of size and appearance, as well as in voice quality. Coverage
is Europe, the Middle East, North and Central Africa Central and South Asia.
n ACeS system: The ACeS system uses a Garuda geostationary satellite. The
Garuda satellite provides 11,000 simultaneous telephone channels and is
capable of supporting up to 2 million subscribers. The communications payload
will feature two 12-meter antennas, which will provide links with the user
terminals via 140 satellite spot beams. The ACeS gateways provide the primary
interface between ACeS and other telecommunication networks. They provide
the interface with public landline and mobile networks, allowing users to call
anyone anywhere in the world. Each gateway provides an individual satellite-
GSM network over the entire service area with its home subscribers registered
at the gateway. Visitor subscribers are able to roam to the gateway from other

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ACeS gateways or GSM networks. ACeS coverage area is 11 million square

miles extending from Pakistan in the east to the Philippines in the west. It also
ranges from China in the north to Indonesia in the south.
Orbiting base stations
Orbiting satellite systems use larger numbers of satellites in lower, non-
geostationary orbits. From the user's point of view, they move across the sky at a
comparatively high speed. They often require a switch from one satellite to another
in long distance communication.

The major satellite systems using orbiting base stations are:

n Iridium System: The Iridium system is a satellite based Personal

Communication Services (PCS). Iridium provides voice, messaging and data
services to mobile subscribers using handheld user terminals.
The Iridium Satellite system provides complete coverage of the Earth (including
oceans, airways and polar regions). Iridium delivers communications services
through a constellation of 66 low-earth orbiting (LEO) satellites operated by Boeing.
Iridium currently provides services to the United States Department of Defense and
launched commercial service in March 2001.

n Globalstar system: The Globalstar satellite network is a constellation of 48

LEO98 (Low Earth Orbit) satellites offering virtually global coverage at all times.
Globalstar T550 is a high tech and user-friendly satellite terminal as it looks and
acts like a mobile or fixed phone. The difference is that Globalstar systems can
operate virtually anywhere, carrying the call over a clear and secure CDMA
satellite signal. The dual mode terminal on the ground can talk with up to three
satellites simultaneously. The risk of dropped calls is virtually zero.
n Teledesic: While Iridium and Globalstar are the equivalent of cellular phone
service, Teledesic was the first proposed broadband LEO, providing the satellite
equivalent to optical fibre. It was designed with the needs of the internet in
mind rather than traditional voice and data requirements. However the collapse
of the capital markets for telecoms projects led to the plans being mothballed in
September 2002.
Virtual Small Aperture Terminals (VSATs)
VSATs utilise a network of satellites to provide a communication network for
terminals at far away places. VSATs technology is used extensively for connecting
remote offices.

The VSAT system functions by connecting a number of remote terminals to a

central hub or earth station via satellite. Remote VSATs receive and send data, voice
and video through a central satellite hub. This central hub also directs the satellite
traffic to the rest of the stations in the network. Some VSATs function in a one-way
communication link, while other systems utilise two-way communication. The
central hub acts as a ‘traffic Manager’ for VSAT activity. It utilises a much larger
antenna in order to receive the weaker signal from the remote VSAT.

VSATs are relatively cheap, costing around US$ 5,000 per terminal, and can be
easily installed and maintained. They allow for expansion within the network fairly
inexpensively. VSATs afford greater bandwidth than terrestrial copper systems.
Thus VSATs have greater capabilities for exchanging information with their remote
locations.

98
Low Earth Orbit satellites hover close to the earth and do not remain at the same altitude.

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Typical applications of VSATs are:

n VSAT Intranets in the Developed World: VSAT technology is used extensively
to create networks that connect remote offices. Local-area networks (LANs) and
wide-area networks (WANs) have both been created and enhanced by the use
of VSATs.
n VSATs for educational purposes: Distance learning is a common feature in
some counties. Lectures are sent via VSATs to remote locations where
students interact with a centrally located professor.
n VSATs for medical purposes: In China, doctors in remote locations are able to
send patients' X-rays via VSAT to better equipped hospitals in urban centres.
The remote doctors can thus receive back information pertinent to the medical
procedure immediately.
n VSATs used in tracking moving objects: In the US market, VSATs are being
utilised in traffic management systems.
The VSAT industry is expected to grow as countries deregulate their
telecommunications infrastructure and prices come down. Business-related
intranets should continue to expand in world markets. Governments and private
industry can also be expected to pay some attention to VSAT-linked intranets in
order to enhance development.

Direct Broadband Satellite (DBS)

Internet access can also be provided by means of a satellite. Direct broadband
satellite, refers to transmitting and receiving signals directly from a satellite. Internet
access with speeds in hundreds of kilobytes can be provided via direct broadband
satellite.

The signals are transmitted from a station on earth to the central hub. The central
hub is where the satellite operator and the ISP are located with a very high-speed
Internet backbone for worldwide networking connectivity. The request for web
pages goes to the satellite network hub dish and is then routed via the terrestrial
Internet network to the appropriate web server. The web server responds by
sending back the requested web page (html file) and associated pictures. The
requested files go back to the hub dish where they are interleaved with other traffic
and put onto a large high speed outlink carrier (e.g. 36Mbps). The customer’s
terminal equipment extracts only the data destined for it using an encoding system
similar to digital satellite TV.

The equipment at the user end consists of a small antenna dish, similar to satellite
TV. This dish antenna is used together with an indoor box unit modem. The dish
antenna consists of a reflector to receive the outlink (signals from the satellite) and
transmits the return link (or uplink) data using an outdoor transmit block upconverter
(BUC).

Direct broadband satellite can also be provided via VSATs connecting the remote
terminals to a central hub via satellites. These VSATs are generally used for forming
VPNs (Virtual Private Networks).

Major providers of Direct Broadband satellite are StarBand and DirecWay.

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Fixed radio access

The local loop controlled by the incumbent presents an enormous obstacle to the
successful development of broad-based competition. In many cases it also presents
problems for the incumbents themselves because the cost of running new copper
cables to premises can be prohibitive depending on the location. Fixed radio access
essentially replaces the traditional copper loop with a radio link.

On a per subscriber basis the cost of provisioning a new FRA link is generally
significantly less costly than via new copper plant and the base station unit can be
readily re-deployed in the event that the customer no longer requires service.

The radio link is a much simpler proposition than cellular given that both the
transmitter and receiving location are stationary. On the other hand, consumers
expect this type of service to offer quality comparable with the traditional fixed line
network. This typical 99.999% quality can be difficult to deliver given the
possibilities for problems with radio links. Problems range from adverse weather
interfering with transmission to trees growing up unexpectedly to obscure the
beam. The exact problems are partly dependent on the frequency of the
transmission. As we mentioned under the frequency section the exact frequency
will determine the prorogation characteristics, i.e. how far the signal travels for a
given power, how far it spreads and how much information the signal can carry.
Infrared systems can operate with very high bandwidth capabilities, effectively
equivalent to offering fibre to the home or business while a 2GHz system can offer
an equivalent service to ISDN.

In theory the business proposition offered by FRA is strong, as demonstrated by the

number of companies that have managed to raise large chunks of equity on the
back of a business plan but there are few commercially successful new entrants.
While new entrants generally have not been a roaring success, those companies
pursuing this technology have been unusually disaster prone. Ionica, Atlantic,
Winstar, Teligent have all been high profile failures.

Microwave Wireless Technologies

Microwave communication systems operate in the frequency range of 1- 58 GHz.
Microwaves travel in a straight line and so require line of sight between transmitter
and receiver. Two widely used microwave technologies are Local Multipoint
Distribution System (LMDS) and Multichannel Multipoint Distribution System
(MMDS).

This section provides an overview of LMDS and MMDS network and technology
along with their applications.

n Local Multipoint Distribution System (LMDS)

Local Multipoint Distribution The basic network consists of a base station situated on a high-rise building and
system (LMDS) is a wireless various client stations. LMDS can be used to transmit voice, data and Internet
technology able to transmit services at the same time. Even broadband services can be provided through the
a large amount of data and LMDS network. However, the microwave signals used by LMDS cannot travel
information at a very high
distances greater than 5 miles.
rate of speed.
The base station responds to various client radios. Microwave radio is installed onto
a building at the client site and another microwave radio is installed at the LMDS
base station. The base station can respond to many client radios through one radio
itself. The base station uses a special type of radio, which allows it to have a 90-
degree field of view.

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The hub or station is located at a key position to interface directly with landline fibre
optic network as well as standard telephony. Video conferencing, Voice, Data,
Internet access, and TV signals can all be provided even at the same time through
this wireless service.

LMDS uses microwave signals to transmit voice, video, and data signals using low
power. As a result the signal generally does not reach greater than a five-mile range.
It is a wireless broadband service that relies on microwave radios to send large
amounts of information between each of the radios at very high speeds. Broadly
LMDS operates between the 28Ghz & 29Ghz bands. The specific frequency bands
are: 27.50Ghz - 28.35Ghz & 29.10Ghz - 29.25Ghz & 30.00Ghz & 31.075Ghz -
31.225Ghz.

LMDS provides an effective last mile solution for incumbent service providers and
can be used by competitive service providers to provide services directly to the end
users.

Benefits of LMDS can be summarised as follows:

n Lower entry and deployment costs
n Ease and speed of deployment
n Fast realisation of revenue
n Demand based build-out - LMDS has a scalable architecture. This allows the
system to expand its network and add new customers in new areas easily.
n Costs shift from fixed to variable - In traditional systems, the major capital
investment is in the infrastructure. In LMDS, capital costs are involved in setting
up new radios on customer sites.
n No stranded capital when customers churn
Limitations of LMDS
n Signals cannot be transmitted to large distances. Thus LMDS provides only a
last mile solution of service providers.
n The transmitter at the clients end has to be in line of sight with the antenna at
the base station.
n Transmission of microwave signals is weather dependant.
n Multipoint Multichannel Distribution System (MMDS)
Multichannel Multipoint Distribution System is a wireless technology used to
provide TV signal transmission. The wireless system consists of head-end
equipment and reception equipment at each subscriber location. A typical set-up of
an MMDS system is shown in the figure below.

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Figure 57: A Typical MMDS System

Receive
Antenna

Satellite Down
Antenna Transmit converter
Antenna

Baseband
Audio and Converter
Helix or
video Signals / Decoder
waveguide

Satellie Decoders
Receiver Decoders
RF
Baseband Encryption
Encryption

Up Television
Modulators
converter
Source: Wireless Communications Association (WCA) Int’l

The head-end equipment consists of satellite signal reception equipment, radio

transmitter, other broadcast equipment and transmission antenna. Microwaves
transmit all signals, so modulators are used to convert to the desired frequency. The
reception equipment consists of an antenna, frequency conversion device, and set-
top device. At the receiver end, the signal is converted to the desired frequency and
through a set-top box the channels can be viewed on the television.

Signals for MMDS broadcast at the transmitter site originate from a variety of
sources, just like at cable head-ends. Satellite, terrestrial, cable delivered
programmes and local broadband services are the material to be delivered over
MMDS. All these signals are converted to the desired microwave frequencies.

MMDS networks have a limited number of channels available in the low RF

spectrum. Only 200MHz of the spectrum (Between 2.5 GHz and 2.7 GHz) is
allocated for MMDS use. This constraint reduces the effective number of channels
in a single MMDS system. For TV signals with 6MHz bandwidth, merely 33
channels can fit into the spectrum.

MMDS channels are transmitted from an omni-directional or directional antenna

having extensive line of sight in all directions. Repeater stations can be used to
redirect MMDS signals to screened areas.

Computer Networks
A computer network is an Since we are on the subject of networks it is appropriate to touch on computer
interconnected collection of networks. There has always been a linkage between telecoms and computer
autonomous computers. networks, if only because any form of computer network required terminals to be
linked. But as telecoms networks have become digitalised and more of telecoms
traffic is originated via computers so the differences between the networks is
becoming indistinguishable.

Companies
n Resource sharing: All programmes, equipment (e.g. printers) and data are
available to every employee/partner on the network.

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n Reliability: Networks allow for duplication of data and resources, ensuring that
the workflow is not affected if, for instance, a computer crashes or a printer is
not working.
n Communication and collaboration: Employees located at different parts of
the office, or different offices (sometimes in different countries) can collaborate
on projects using networks.
Home Users
n Access to remote information: Users can access bank statements, train
schedules, news headlines over computer networks.
n Person-to-person communication: Email, chat and bulletin boards can be used
to communicate cheaply with other users who are otherwise inaccessible.
n Interactive entertainment: Users can obtain video-on-demand or participate in
online gaming for entertainment.
Computer Networks can be classified based on geographical scale as follows:

n Local Area Networks (LANs): These are privately owned networks within a
building or campus.
n Metropolitan Area Networks (MANs): These are private or public networks
that cover a group of nearby corporate offices or a city.
n Wide Area Networks (WANs): These span a large geographical area such as a
country or a continent.
These networks will be covered in greater detail in a subsequent section.

The following section deals with the Internet — the largest global collection of
networks.

Internet
The Internet is a global The Internet (also sometimes mistakenly called the “World Wide Web” or WWW) is
“network of networks”. a global “network of networks” (also called an internetwork). An internetwork is
formed when distinct networks (e.g. a LAN and a WAN, or a LAN and another LAN)
are connected together.

The Internet evolved from the combination of two US networks — the ARPANET and
the NSFNET. ARPA (Advanced Research Projects Agency) was formed by the US
Department of Defense in the 1960s to develop a command-and-control network
capable of withstanding a nuclear war. Fixed telecoms networks are generally highly
reliable. Five nine’s or 99.999% is often quoted as the ‘up time’ The problem is that
for the 0.001% of the time they are not operating at all and this would create real
problems in the event of a national emergency. In this case better to have a system
which always allows communications to take place under any circumstances even if
the quality may not be as good in other respects. Hence the internet was created.

The ARPANET connected the DoD with licensed research agencies and universities.
Seeing the success of the ARPANET, the US National Science Foundation (NSF)
created its own network in the 1970s that would be open to all universities. After
the two networks were interconnected in the 1980s and TCP / IP (Transmission
Control Protocol / Internet Protocol — a set of rules that allow computers on different

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networks to communicate and send data to each other99) was adopted as the official
protocol, users started referring to it as the Internet.

Internet users connect to the Internet through their local Internet Service Provider
(ISP) — either directly (through a dialup or DSL connection) or indirectly (through the
LAN). Users connect to their ISPs local facility (called a Point of Presence or POP).
The various ISPs are linked to each other through very high-speed lines (usually
optic fibre trunk lines) called backbone networks — forming the Internet. The point of
connection between the ISP and the backbone is called a Network Access Point
(NAP).

Specialised pieces of equipment (generically called routers) are required whenever

two networks are inter-connected. Routers ensure that data packets are directed to
the correct computer on either network. For this, routers use a unique identifier for
each computer — called an IP address. A typical IP address looks as follows:
192.168.8.221

Since IP addresses can be quite cumbersome to remember, a way to map IP

addresses to text was devised — the Domain Name System (DNS). E.g. “db.com” is
a domain name. Domain names can be used in emails (e.g. [email protected]) or
as part of a URL (Uniform Resource Locator — a standard for specifying hypertext or
other files on the WWW) — e.g. http://www.db.com. An extension of the Internet
Protocol, called IPv6100, has the potential to assign IP addresses to every telecom
device on Earth.

The clever thing about the internet is that it is not really very clever at all. When a
packet gets to a router the IP address it is carrying helps the router decide where
the packet should be sent next. The router only really cares about the other routers
it talks to directly. It uses its experience with sending data out to its fellow routers
to build up a picture of which ones are busy and which ones are not. It is
programmed to send the data out in the right general direction based on the IP
address but there is no fixed route. It will send the information out towards the path
of least resistance. Thus if one router is subject to catastrophic failure as it might for
instance if it was blown up, the network simply bypasses it. Given the enormous
number of different routes traffic can take to get to the final destination it is a highly
resilient system.

The pace of technological advance is such that routers over time have become
rather smarter, and the protocols being developed, such as MPLS, allow the routers
to prioritise different types of data in different ways. But the fundamental operation
is unchanged.

The main applications of the The four traditional applications of the Internet are as follows:
Internet are: the WWW
(which makes accessing n Email: Originally text messages sent between computers, modern email
web-pages possible), email, programs can handle multimedia (audio-video) messages as well.
remote login and file n News: Newsgroups are specialised forums in which users with a common
transfer. interest can exchange messages101. These include technical topics — such as
networking and UNIX — and non-technical topics — such as recreation and
politics.

99
Refer to glossary for further information on ‘Internet Protocol (IP)’.
100
Refer to glossary for further information on ‘IPv6’.
101
‘Computer Networks’ by A.S. Tanenbaum, Prentice-Hall India, 1996

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n Remote Login: Remote login programmes (such as telnet and login) enable
authorised users to access their accounts (usually containing emails, data etc)
on another computer on the Internet.
n File Transfer: The FTP (File Transfer Protocol) programme can be used to
transfer files from a remote computer to the local one or vice versa.
In addition to these, the WWW (which is actually an Internet application) allows
users to make accessible to other Internet users a variety of text, hypertext,
multimedia and other information.

What makes the Internet interesting?

There is much confusion about the internet business model. Many articles suggest
that the internet is going to kill the telcos, presumably because of the apparent
disconnect between pricing of what appear similar services on the two systems.
First the facts. The internet is made up of components almost entirely provided by
traditional telcos. Local access, local switching and long distance connections are all
the basic building blocks required to create the internet. The only real difference is
that the connections are made using routers rather than traditional switches. So
whatever happens the telcos are providing most of the crucial elements.

What the internet has done is to present an entirely different pricing model for using
these assets. We mentioned earlier that prices and costs in most conventional
telecoms networks bear little relationship to each other. The business continues to
run with huge cross subsidies. At its heart, calls subsidise access. Voice based
switches are expensive to run and are dedicated to voice requirements. The internet
model on the other hand is more closely aligned to costs, fundamentally because all
the agents involved in the chain are striking commercial relationships with each
other rather than being subject to some overall central price control. Running a
telecoms network is basically a fixed cost exercise, regardless of traffic volumes.
The internet pricing model reflects this with users paying for access but generally
not on a usage sensitive basis.

The internet is good at carrying data. Traditional voice networks are not. It is still the
case that in the local access network, data has to be made to look like voice in order
to transit the local loop. That is what modems do. But there is a fundamental shift
afoot. The internet is getting to the point where it is good enough to start dealing
with voice. We cover this in more detail under the Voice over IP section. So the
question can be raised, why do we not turn voice into data and make the whole
network run just data. Ultimately this will happen because it makes good economic
sense. A single network, rather than today’s multiple networks, would be much
cheaper to run.

But it will not happen overnight or indeed over years. Most telcos we are aware of
are rebuilding their backbone networks to be data only and based on internet
protocols. This will bring about significant reductions in operating costs. In order for
voice and data to happily live together in the local network broadband access needs
to be pervasive, something which is many years away. In the meantime services
like VoiP will become increasingly widely available.

Converged Networks
Converged Networks mark Converged Networks represent the intersection of traditional telecom applications
the intersection of traditional (such as voice telephony) and computer network architectures. Converged networks
telecom applications and can take the form of existing applications provided over a completely different but
computer networks existing architecture (as in the case of VoIP or Internet Telephony) or a completely

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new architecture formed by the combination of two or more existing architectures

(as in the case of WLAN-Cellular convergence).

The key drivers behind the emergence of converged networks are:

n The need to provide a common framework for dealing with different types of
signals (e.g. voice and data) so that network architectures can be simplified
n The need to provide low-cost, high-quality services to users (e.g. VoIP is much
cheaper than International Long Distance telephony over PSTN lines)
n The need to reduce the number of telecom devices that the average user will
need to own and carry on his / her person (e.g. a converged WLAN-Cellular
laptop reduces the need to carry two separate devices)
In this section, we deal with two key converged network technologies:
n VoIP
n WLAN-Cellular Networks
VoIP
Internet Protocol (IP) telephony, known in the industry as Voice-over IP (VoIP), is the
transmission of telephone calls over a data network such as the Internet. VoIP is
also known as telephony over Internet or net telephony. This technology is
considered as a major step towards convergence of voice and data.

The consolidation of separate voice and data networks offers an opportunity for a
significant reduction in communication costs. Since data traffic is growing faster
than telephone traffic, then transport voice over data networks rather than the
transmission of data over voice networks makes sense, as described earlier. This
has brought about the rise in Voice over IP (VoIP). It has become especially
attractive given the low-cost, flat rate pricing of the public Internet.

Bear in mind that low call prices are no more than an arbitrage and do not rely on
some technological miracle, but merely reflect that the internet is subject to flat rate
charging for access and maybe some local access charges, depending on the pricing
model. Thus international and long distance call charges can appear very low
compared to current voice rates. But the crucial point is that ultimately, if all traffic
switched to the internet, the overall costs of providing the services would need to
be recovered some way or another. As we have said before, most of these assets
are already in place.

n Calling Process
There are numerous different forms of VoIP. But the basics are simple. Voice is
turned into packets of data and then transmitted over the internet just like any other
data until it gets to the recipient. It is then turned back into voice. The complexities are
introduced by the needs of voice customers, which are different to those of the data
user. In simple terms an e-mail or data download will not be affected if there is some
delay to the transmission. Neither will it be affected if the packets that make up the
whole message arrive at the receiving end in the wrong order because the system
can re-assemble them. (Bear in mind that the critical characteristic of the internet is
that the packets to form a message may each travel on a different route to their final
destination.) But for a voice call, delay in receiving and potentially voice quality are
major issues. We will look at how these issues are gradually being overcome.

In a traditional telephone call, a user dials the number of the person he or she
wishes to talk to. The call reaches the local carrier network that forwards the call to

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the desired number. When the call is answered at the other end, the connection is
said to be complete. That ‘virtual connection’ remains in place for the duration of the
call. In a VoIP call, the Internet replaces the long distance elements of the network.
The VoIP system converts the continuous voice signals into packets of data so that
they can be transmitted over the Internet just like any other data packet.

The virtual connection in the normal telephone system helps explain why the
traditional voice system is thought of as costly and inefficient versus the internet.
The traditional voice call uses up a whole channel even if little is being said for the
duration of the call (in reality this is not entirely true but it will do for now!). The
internet on the other hand makes much more efficient use of the available
infrastructure by squeezing packets onto whatever capacity there is. The exact
efficiency advantage will depend on the nature of the traffic.

In a VoIP system, on the transmit side, voice signals are gathered together to form a
set of voice data. That data set is run through the compression mechanism
embedded in a VoIP gateway102 and reduced for transmission. The resultant data are
packed inside an IP packet103 with a header containing the details about the place of
delivery. This packetised data is finally transmitted over the Internet. A protocol is
run for end-to-end delivery of this packetised data over the Internet. The protocol
provides services such as data type identification, time stamping, and delivery
monitoring. Two commonly used protocols in VoIP system are:

n H.323 Protocol Suite104 - A standard created by the International

Telecommunications Union (ITU).
n Session Initiation Protocol (SIP) - a standard created by Internet Engineering
Task Force (IETF).
The figure below represents a typical VoIP system.

Figure 58: VoIP System

Signal
Sender Signal
Receiver

Data Compression
and Packet Forming Data
Machine Decompression
and Signal
Forming Machine
Internet
Used for
Transmission
of the Data
Signal
Sender Signal
Receiver

Internet Protocol Applied

Source: Deutsche Bank estimates and company data

There are four ways to make call over a VoIP Network. They are:

102
A gateway is a network point that acts as an entrance to another network.
103
A packet is the unit of data that is routed between an origin and a destination on the Internet.
104
For more detail on the protocols please visit: http://www.protocols.com/voip.htm

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n Computer-to-Computer: In this type of communication one requires software

from a VoIP service provider, a microphone, speakers, a sound card and an
Internet connection. Except for the normal monthly ISP fee, there is usually no
charge for computer-to-computer calls, irrespective of the distance.
n Computer-to-Telephone: This method allows calls to anyone (who has a
phone) from a computer. Like computer-to-computer calling, it requires a
software client. The software is typically free, but the calls may be charged a
small amount per-minute.
n Telephone-to-Computer: This method allows a standard telephone user to
initiate a call to a computer user. The requirement is that the computer user
must have the software of the vendor providing this service installed and
running on his or her computer. The cost of the call is usually cheaper than a
traditional long-distance call.
n Telephone-to-Telephone: This method allows the user to connect directly with
any other standard telephone in the world. To use this method one needs a
connection from the service provider. First, the user needs to dial a special
identification code to access the service providers network and then dial the
number he or she wishes to call. Thereafter, the service provider connects the
user through their IP-based network. The cost for the call is typically lower than
standard long distance calls. There also now options to just dial the normal
telephone number and the system does the rest. Most VoiP implementations
use broadband connections.
Benefits of VoIP
n It reduces the cost of communication as compared to the standard long
distance telephony. The savings are possible as it avoids telephony access
charges and settlement fees among the various standard long distance
telephony providers.
n An integrated infrastructure for voice and data networks that supports all forms
of communication allows more standardization and reduces the total equipment
cost.
n The combined infrastructure for voice and data services supports bandwidth
optimisation.
n Consolidation of the voice and data networks reduces the overhead costs
incurred on maintenance of these networks.
n Transmitting VoIP is also beneficial as Internet is a packet switched or
"connectionless" network, the individual packets of each voice signal travel over
separate network paths for reassembly in the proper sequence at their ultimate
destinations. This makes for a more efficient use of network resources.
n Sound Quality of VoIP
The major factors affecting the quality of voice over the VoIP network are given
below:

n Delay in data packet transmission

Two problems that result from end-to-end delay in a voice network are:

n Echo — It is caused by signal reflections of the speaker’s voice from the far end
telephone equipment back into the speaker’s ear.

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n Talk over lap — It is the problem of one caller stepping on the other talker’s
speech.
n Jitter — It is also known as delay variability. It is the variation in inter-packet
arrival time as introduced by the variable transmission delay over the network.
n Packet Loss
n IP networks cannot provide a guarantee that packets will be delivered at all,
much less in order. Packets may be dropped under peak loads and during
periods of network congestion. In voice communications, packet loss shows up
in the form of gaps or periods of silence in the conversation, thus leading to a
"clipped speech" effect that is unacceptable in business communications.
We should say at this point that VoiP presents very different challenges depending
on whether it takes place across a private network or the public switched telephone
network (PSTN). In a private network the quality can be tightly controlled. As a result
corporate users have whole-heartedly embraced VoiP because of the substantial
cost savings that can be made. In a public environment no one company can control
all elements of the infrastructure and so quality can be variable. However, as the
internet builds resilience globally so we are beginning to get to the point that the
worst may be good enough for voice.

WLAN-Cellular Networks
WLAN-Cellular Networks WLAN105 services offer high data speeds over laptops and PCs, while cellular
offer high-speed WLAN networks such as GSM and GPRS provide universal coverage for voice services.
connections near hotspots, Thus handsets / laptops that are capable of switching between the WLAN and
and regular cellular services cellular modes have great potential for business applications. The debate on ‘WLAN
elsewhere.
vs. 3G’ in the chapter on ‘Regulatory Environment’ deals with this issue in greater
detail. This subsection deals with the architecture of WLAN-Cellular networks.

WLAN-Cellular services are provided through a multi-band106, multi-standard107 chip

supporting cellular telephony. This chip incorporates the WLAN technology with an
enhanced capability to operate in the cellular telephone spectrum. The chip uses the
RFIC108 transceiver technology. This technology enables wireless convergence of
cellular and WLAN networks. It gives the mobile users a single platform for cellular
voice services as well as high-speed data communication near WLAN access points.

Many architectures and protocols are available for integrating the WLAN and cellular
networks. However, the core cellular network is separate from WLAN in all
architectures. Authentication occurs through the SIM card and existing GSM
authentication procedures.

The key issues facing the integration of the two networks are:
n Handovers between WLAN and Cellular networks
n Common authentication, authorisation and accounting procedures
n Common billing for both the services

105
Wireless Local Area Network. For details on WLAN, please refer the chapter on ‘Communication
Networks’.
106
Multi-band refers to a technology that can work on different frequencies.
107
Multi-standard refers to a technology that can operate on two different network architectures.
108
RFIC stands for Radio frequency integrated circuit. Essentially, it is a chip used for communicating
radio signals.

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The Remote Authentication Dial-In User Service (RADIUS) protocol is commonly

used to provide centralized authentication, authorization, and accounting between
the two network types109.

Some companies such as Nextel (in partnership with RadioFrame Networks)110 and
T-Mobile (in partnership with Lucent)111 have already commercialised converged
WLAN-cellular networks.

Basic components of a communication system

Now for some real basics. The three essential components of a communication
system are access devices, switching systems and the transmission media. Access
devices are used for transmitting and receiving signals. The switching systems
manage the network traffic and route to these signals to reach the desired
destination. Transmission media such as air and wires carry these signals. This
section explains the function of each of these systems and the technologies they
use.

Figure 59: Basic Components of a Communication System

Satellites as transmission media

Fibre optic
network at
transmission
medium

Switching
Station

Transmission
media such as
copper cables

Source: Deutsche Bank

Access devices
Access devices contain the equipment necessary for receiving the signal and
converting the signal in a form that humans can recognise. Landline telephones or

109
For more details on the Radius Protocol, refer to the Microsoft white paper ‘RADIUS Protocol Security
and Best Practices’ (http://www.microsoft.com/windows2000/techinfo/administration/radius.asp)
110
‘Nextel and RadioFrame Networks Introduce First In-Building Wireless Platform with Cellular and
WLAN capability’, Lycos, 19th August 2003
(http://finance.lycos.com/home/news/story.asp?story=35330810)
111
‘T-Mobile and Lucent test 3G/WLAN roaming’, ComputerWeekly.com, 22nd January 2003
(http://www.computerweekly.com/Article118837.htm)

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mobile networks convert analogue or digital signals into voice form. The access
devices can be categorised on the basis of the technologies they use. This
subsection looks at the basic components of the commonly used access devices
and how they connect to their network.

Wired devices
Wired devices receive signal from a wire. This wire could be copper or fibre optic
depending on the communication network. Wired devices used commonly include
telephone, computers, laptops etc. Given below is a brief description of their basic
components and the access devices they use to communicate with the network.

n Telephone
A telephone receives an analogue signal through a pair of wires called the ‘local
loop’112. It converts this analogue signal into voice form and transfers it to the
receiver through a speaker.

A telephone consists of three separate assemblies

n Speech network — The speech network consists of a speaker and a microphone
to transmit and receive voice.
n Dialling mechanism — The dialling mechanism consists of a switch to connect
and disconnect the phone and a dialling circuit.
n Ringer or bell — It consists of a bell and an amplifier circuit.
Additional machines such as modems, diallers and answering machines can be
added to the phone line.

Figure 60: A Telephone Assembly

Source: Howstuffworks

n Laptops and Computers

These devices connect to the Internet through a dial-up connection, Digital Service
Line (DSL) or WLAN.

n Dial-up connection — A computer connects to a PSTN line through a modem. A

user dials the number of an Internet Service Provider (ISP) and a connection is
established. Modems convert digital signals into analogue and transfer this
through the PSTN lines. This analogue signal is again converted to digital form at
the ISP’s end. Please refer to the chapter on ‘Communication Media’ for further
details.

112
Local loop refers to the pair of copper wires from the telephone box outside the house to the telephone.

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n DSL — DSL uses the existing telephones networks only. A device called low
pass filter is installed on the user’s telephone devices. This prevents
interference of telephones signals with DSL signals. Thus a DSL user can
browse the Internet and have a telephone conversation at the same time. DSL
systems have been explained in detail in the chapter ‘Communication Media’.
Please refer it for further details.
n WLAN — A computer connects to the local area network through a LAN card.
Copper wires carry the signal from a switch to the computer. WLANs have been
explained in greater detail in the section ‘Computer Networks’. Please refer it
for further details.
Wireless Devices
Wireless devices transmit and receive signals in the form of radio or microwaves.
Commonly used wireless devices are Mobile Phones, Pagers, Satellite Phones etc.
Below is a brief description of each of these devices.

n Mobile Phones
Mobile phones contain the basic radio equipment needed for transmitting and
receiving signals. The cell phones have to transmit the signal to a nearby base
station, within 15kms.

The basic components of mobile phone are:

n Circuit Board — The circuit board consists of a Microprocessor, and various chips
to convert analogue signal to digital and vice versa.
n Antenna — It transmits and receives radio signals
n Liquid Crystal Display (LCD) — A screen to display the contents.
n Microphone and Speaker — To send and receive voice.
n Battery — Battery powers the circuit and all the components of a Cell Phone.
The Microprocessor inside the Mobile phone is like a mini computer and can
perform millions of calculations per second.

Mobile phone devices can be categorized on the basis of technologies and operation
frequencies. Cell phones are frequency specific. So the same phone cannot be used
for communicating at two different frequency bands. Different countries
communicate radio signals at different frequencies. However, cell phones, which
can communicate on different frequencies, are also available. These phones are
called ‘Multi-band Cell phones’. These Multi-band Cell phones can be used in more
than one country.

A CDMA cell phone is different from a GSM one. For instance, a normal GSM
handset used in Europe cannot be used on CDMA networks in USA. Cell phones,
which can communicate with both GSM and CDMA networks, are also available.
These phones are called ‘Multi-mode cell phones’.

n Satellite Phones
Satellite phones carry the equipment necessary for transmission of micro signals.
Satellite technology is also known as ‘Line-of-sight’ technology. Thus the antenna of
the Satellite phones has to point in the direction of the satellite.

The main components of a Satellite phone are:

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n Radio Antenna Unit (RAU): RAU acts as a receiver and a transmitter. It

connects the phone to the orbiting satellites.
n Junction Box: It provides the user equipment with protection against nearby
lightning strikes when properly grounded.
n Power supply: Fixed satellite phones can use power from mains or have a back
up battery.
n Two-wired telephone set: Two wired telephone sets, like the sets used with
PSTN lines, are used in fixed wireless units.
n Mounting equipment: Mounting equipment ensures that the antenna faces
the satellite.
Figure 61: A Typical Satellite Phone

Source: Globalstar

n Pagers
The basic components of a pager are

n Batteries: Charge the pager

n Speakers: Provide the voice waveform to be heard by the user.
n Light-emitting Diodes (LEDs): LEDs provide a light flash when a message is
sent.
n Motor: DC motor provides a small vibration that acts as a signal.
n Radio Antenna coil: The antenna coil picks up the signal and sends it to the
microprocessor.
n Microprocessor: Microprocessor is the brain of the circuit. It identifies the
signal and performs all the calculations.

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Figure 62: Typical Pager

Source: 2waygadgets.com

n PDA
Personal Digital Assistants (PDAs) are small palm-type computers used for storing
data for mobile customers. These devices are designed to complement but not
replace a desktop or a laptop. PDAs have evolved into machines for crunching
numbers, playing games or music and downloading information from the Internet. A
PDA communicates with a PC to download and save data. The communication
between a PDC and a PC is called as ‘Data Synchronization’ or ‘syncing’. A PDA
requires a modem to connect to the Internet.

The basic parts of a PDA are similar to a computer. It contains the following parts.
n Microprocessor
n Operating System
n Memory
n Battery
n Input and Output devices
n Desktop PC software.
Figure 63 below shows a typical PDA.

Figure 63: A Typical PDA

Source: Pdabuzz.com

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Switching
The phenomenon of forming Two basic technologies are used for building high-capacity networks:
a communication link
between the dialler and the n Circuit Switching
destination, using various n Packet Switching
communication media like
Circuit Switching
radio channels and fibre
In circuit-switched networks, resources are dedicated all the way from sender to
optic network is called
receiver before the start of the transfer, thereby creating a circuit. The dedicated
Switching.
resources could be a physical circuit, as in a fixed line network or a radio channel as
in GSM networks.

Conventional cellular radio and landline telephones use circuit switching. In circuit
switching, physical switches are set in the telephone network to create a physical
circuit. Such switches are set up at the beginning of the connection and maintained
throughout the connection. Thus network resources are reserved and dedicated
from sender to receiver.

Figure 64: Circuit Switching in PSTN Lines

Source: University of California Santa Cruz Website

Network resources set up calls over the most efficient route. Once a route is
dedicated for a cell, no matter how convoluted the route, the path or circuit for a
connection stays the same throughout the call. It's like having a dedicated railroad
track with only one train.

With circuit switching, all packets go directly to the receiver in an orderly fashion,
one after another on a single track. Like the train mentioned above, hauling one
boxcar after another.

Packet Switching
In packet switching, voice or data is transmitted as packets of information. Wireless
services such as GPRS, Bluetooth, CDMA, and 3G use packet switching technology.
In packet switching, the voice or data to be transferred is divided into packets at the
sender’s end. These packets are sent as such to the destination and reassembled
there.

The network can be compared to a conveyer belt in a warehouse. Items are picked
from the storage room and placed on the conveyer belt every time the customer
makes an order. Different customers may order for different items. Different user

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items may be interspersed on the conveyer belt. At the receiver end, the items of a
single customer are sorted.

Each packet is composed of:

n Payload: Payload contains the data that is to be transmitted.
n Header: The header contains information such as
Sender’s address
Destination address
Packet size
Sequence number
Error checking information.
In general all packets need not be of the same size. These packets are sent through
various communication lines such as cable or radio channels.

Unlike circuit switched networks, all the data does not go serially on a single track.
These packets are retransmitted through various ‘routers113’. Routers determine a
path for each packet or boxcar on the fly, dynamically, ordering it to use any rail
track available. Other packets from other calls race upon these circuits as well,
making the most use of each track or path, quite unlike the circuit switched calls
that occupy a single path, exclusive to itself.

Upon getting to their destination, the individual packets get put back into order by a
packet assembler. The different routes practically ensure that packets arrive at
different times. This causes delays at the receiver end. One notices even the tiniest
delay with voice. Thus delays in packet switching for voice causes voice quality to
degrade. Circuit switching guarantees the best-sounding call because all packets go
in order and there is no delay.

The following table compares circuit switching and packet switching networks.

Figure 65: Comparison of Circuit switching and Packet switching networks

Attribute Circuit Switching Packet Switching
Utilization of resources Network resources are dedicated from sender to receiver. Not a Resources are shared. Many signals are transmitted on one
very efficient strategy channel. It utilizes the available resources to maximum extent.
Initial set up Initial delay in setting up a connection Very small set-up delay
Reliability Connection is reliable Possible congestion can cause consequent packet drop
Capacity Resources are dedicated, so capacity of network is limited Capacity of the network is significantly enhanced due to sharing
of resources
Source: Deutsche Bank

Transmission
Transmission media carry signals from sender to its recipient. Transmission media
depend on the technology used for generating the signal. In this section we explain
the various transmission media used for wired and wireless technologies. We also
give an overview of various multiplexing technologies used for both wired and
wireless systems. Finally, we discuss the various transmission technologies or
protocols used for transmitting the signal.

113
Refer to glossary for further information on ‘Routers’.

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Transmission media have been explained in detail in the chapter on ‘Communication

Media’. This section shall provide a comprehensive summary of various
transmission media and technologies used for wired and wireless communication.

Transmission media can be categorized as wired or wireless.

Wired media
Wired communication systems carry signal in the form of a current in a wire. This
signal can be analogue or digital. The cables can carry both voice and data
information as signal. The cables used can be copper or fibre optic.

n Copper Cables
Copper cables carry analogue signal. Details of Copper cables have been provided in
the chapter on ‘Communication Media’. Copper cables have evolved from twisted
pair of copper wires to co-axial cable. Multiplexing technologies have increased the
information capacity of copper cables. Copper cables normally cover the last mile of
many networks such as PSTN, Internet cable etc. Computer networks like LAN etc.
also deploy copper cables for the last mile delivery.

Access devices added at the user and the transmission end, enable digital signals to
be transmitted through copper cables. These access devices, such as modems,
convert this digital signal to analogue and then transmit it through the copper wires.

n Optic Fibre Cables

Fibre optic networks carry signal in a digital form. Details of Optic fibres are provided
in the chapter on ‘Communication Media’. The most significant difference between
copper and optic fibres is the difference in bandwidth. Optical fibres have much
larger bandwidth. Optic fibres use light as the carrier of information. A single fibre
optic cable can manage data rates exceeding 1,000Mbps.

Fibre optic networks are used for long distance communication in any network.
Fibre cables have a greater capacity and it is much more difficult to tap information
from these cables, than from conventional copper cables. Thus, fibre optic cables
are used for transmission of secured and precious information. Since these cables
carry signals in a digital form they are used for ISDN, computer networks such as
LAN, PAN, WAN etc. Fibre optic networks also cover a major part of the PSTN
network.

n Power Line Communication (PLC)

PLC is the transfer of voice and data via a combination of power networks within
house and metropolitan grid distribution. The major advantage of these systems is
that no new wires have to be installed for the last mile connection. This technology
has still to find widespread acceptance.

Wireless Media
Wireless media utilises the electromagnetic spectrum in radio, television,
microwave and free space optics. Cellular networks such as CDMA, GSM, PDC,
PHC etc, use radio waves. Microwaves have shorter wavelength than Radio waves.

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Figure 66: Uses of various EM waves in Telecom

EM Waves Application in Telecom
Radio waves Cellular networks
Microwaves Satellite communication
Infrared Short distance line-of-sight communication
Source: Deutsche Bank

n Radio waves
Radio waves are most efficient for wireless transmission. However, the frequency
bands or channels available for transmission are limited. Thus the regulating
authority in any country, allots particular frequency bands to each cell phone carrier.
Multiplexing techniques have enabled many signals to be transmitted on the same
radio channel.

Radio waves are used for transmission in many wireless networks such as cell
phones etc. Radio waves also carry radio and TV signals.

n Microwaves
Microwaves have shorter wavelength than radio waves. Microwave communication
systems have larger bandwidth than radio systems. Microwaves travel in a straight
line and cannot be narrowly focused. They can travel larger distances than radio
waves because they travel in a straight line. Parabolic antenna are used to
concentrate all the energy into a small beam, which increases the signal strength.

Microwaves are used in communication networks like LMDS, MMDS, satellite

systems etc.

n Free Space Optics

Free space optics is a line-of-sight technology114 that uses laser or infrared beams
for transmission. Data, voice and video communications are possible through free
space optics. Free Space Optics are used for temporary network connectivity, such
as exhibitions, conventions, sporting events etc.

Multiplexing Technologies
Multiplexing means combining different communication streams into just one
communication line. Many multiplexing techniques are used in wired and wireless
systems. This subsection provides a brief overview of such technologies.

n Wired
WDM and DWDM115 are the commonly used multiplexing technologies in fibre optic
communications. DWDM systems are capable of transmitting 64 to 160 radio
channels. The basic difference between WDM and DWDM is that DWDM spaces
the wavelengths more closely than does WDM. DWDM based networks can carry
different types of signals at different speeds over an optical channel.

n Wireless
Wireless systems use the following access technologies to transmit many signals
onto a single radio channel.

114
In Line-of-sight communication transmitter and receiver antennas are in visual contact with each other.
Disruption of the visual contact by any means leads to a communication breakdown.

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n FDMA
n TDMA
n CDMA
A detailed description of all these technologies is given in the chapter on
‘Communication Media’.

Transmission Protocols
In optical transmission and in transmission of radio waves, information is encoded or
multiplexed before it is transmitted. This encoded or multiplexed information has to
be decoded or de-multiplexed. Protocols define the rules, which are treated as
standards. Some popularly used protocols are:

n SONET
n SDH
n ATM
n MPLS
These protocols are discussed in detail in the chapter on ‘Communication Media’.

Types of Networks
Networks are primarily classified on the basis of their geographic scope or area of
coverage:

n Personal Area Networks (PANs): These cover distances of just a few metres
and usually refer to wireless networks formed by devices communicating with
each other.
n Local Area Networks (LANs): These are privately owned networks within a
building or campus.
n Metropolitan Area Networks (MANs): These are private or public networks
that cover a group of nearby corporate offices or a city.
n Wide Area Networks (WANs): These span a large geographical area such as a
country or a continent.
In addition, we will also deal with an emerging type of network, the Virtual Private
Network (VPN), which functions like a private LAN on a public network backbone.

PAN
A Personal Area Network A personal area network (PAN) is the interconnection of information technology
(PAN) connects devices devices within a range of around 10 metres116. Thus a person carrying a laptop, a
within a range of 10 metres PDA (Personal Digital Assistant) and a portable printer could connect them together
using a PAN via some wireless technology. This PAN can also be connected to
other networks or the Internet. PAN works by sending weak, low frequency signals
to devices in contact with, or in the immediate vicinity of, the body.

116
Source: SearchNetworking.com Definitions (Link:
http://searchnetworking.techtarget.com/sDefinition/0,,sid7_gci546288,00.html)

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The difference between PAN With PAN the body is used as the medium to create an electric field that can be
and Bluetooth is that, while used to send data to various devices in the immediate vicinity. This is different from
the former uses the body as Bluetooth — a short-range radio technology that allows devices to communicate via
the medium for the ISM117 radio band.
communication, the latter
PAN technology has several potential applications in business, medicine, retail etc:
uses radio waves.

n Business associates can exchange electronic business cards with a handshake.

n Corporate security devices can automatically log people on and off computer
systems.
n Subway commuters can pay for their tickets by walking through a turnstile.
n People can carry digital versions of their medical profiles for emergency access
by paramedics.
n ATMs (Automatic Teller Machines) can identify and authenticate customers
even as they approach.
LAN
LANs are networks within a LANs are usually privately owned by universities or companies, who use them to
single building or campus connect personal computers and workstations for resource sharing (e.g. printers)
and operate within and to exchange information.
distances of a few
kilometres.
LANs have three properties that distinguish them from other networks:

n Limited Size: Since LANs operate within a few kilometres; a worst-case

transmission time can be computed. Knowing this boundary simplifies network
management and allows custom network applications to be designed.
n Transmission Technology: Most LANs use a single cable to connect all
machines together. By using high-speed optic or T1 cables, LANs can operate
up to speeds of several hundred Mbps. They have very low delays (less than
100 micro-seconds) and low error-rates.
n Simple Topology: Most LANs adhere to one of two topologies — Bus and Ring
(see Figure below). In the Bus topology, all computers on the network connect
to a single common cable, called the bus. In the ring topology, each computer is
connected to two other computers — the adjacent links in the ‘chain’.

117
The ISM (Industrial, Scientific and Medical) radio bands are reserved internationally for non-
commercial use of RF electromagnetic fields for industrial, scientific and medical purposes (Link:
http://www.wikipedia.org/wiki/ISM_band). Refer to glossary for further information.

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Figure 67: LAN Network Topologies - Bus Figure 68: LAN Network Topologies - Ring
Topology Topology

Source: Computer Networks’ by A.S. Tanenbaum, Prentice-Hall India, 1996 Source: Computer Networks’ by A.S. Tanenbaum, Prentice-Hall India, 1996

The IEEE LAN / MAN Standards Committee has developed several standards,
collectively called the IEEE 802118, for LANs and MANs. The next two sections deal
with two IEEE LAN standards (parts119 802.3 and 802.5):

n Ethernet (802.3)
n Token Ring (802.5)
Ethernet
The Ethernet standard Ethernet was developed by researcher Bob Metcalfe at Xerox’s PARC (Palo Alto
describes a LAN where all Research Centre) in 1973. All Ethernet devices are connected to a common medium
devices are connected to a along which electrical signals are transmitted (see figure below).
single cable.
Figure 69: A Small Ethernet Network

Source: HowStuffWorks.com

Ethernet devices transmit data in the form of frames (variable-sized chunks of data).
The Ethernet standard specifies maximum and minimum sizes for frames, as well
as certain mandatory information that each frame must contain (e.g. source and
destination addresses). Every device connected to the Ethernet has a unique
address. Devices process only those frames intended for their use and ignore

118
So named after the corresponding project identifier at IEEE – Project 802.
119
IEEE standards are divided into parts. Each part is indicated by the identifier 802.x, where x is the part
number.

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others. The Ethernet standard also allows for the implementation of a broadcast
address — an address that indicates that the data transmitted is intended for every
device connected to the system.

Ethernet regulates communication between devices using the CSMA / CD (Carrier

Sense Multiple Access with Collision Detect) protocol. Under Carrier Sense devices
first “listen” to ensure that no other device is transmitting on the medium before it
transmits. With Multiple Access all devices can access the medium both for sending
and receiving data. A collision is a situation that occurs when two devices try to
transmit data at the same time. Collision Detect indicates that all devices are
listening to the medium at the same time as transmitting, to prevent collisions.
When two devices begin transmitting simultaneously, they both stop and wait for a
random interval of time before re-transmitting.

An analogy to the Ethernet would be a group of people seated around a dinner table.
Each person would listen (carrier sense) before speaking so that he or she does not
interrupt an ongoing conversation. All persons seated at the table have the right to
speak as long as no one else is speaking (multiple access). If two people start
speaking at the same time, they both stop and wait a random interval of time before
trying again (collision detect and resolution).

Although Ethernet is the most common standard for LANs, it has a few limitations:

n An electrical signal propagated along a physical medium weakens as it travels,

and is affected by nearby electric disturbances (e.g. fluorescent lights). This
places an upper bound on the length of the medium used for the Ethernet.
n Since, in CSMA / CD, only one device can transmit on the medium at a time, it
places a limitation on the number of devices that can be connected to the
medium. Else, some devices may have to wait arbitrarily long before they can
transmit. This scenario is also known as congestion.
Ethernet LAN speeds range from 1-1000Mbps.

Token Ring
Token Ring is a ring The Token Ring design was proposed by IBM as an alternative to the Ethernet
topology network design design for networks. In this design, all devices are connected together in a logical,
where a unique frame, called unidirectional ring (see figure below). In physical implementation, this means that
the token, determines which each device is connected to two others using point-to-point links. A special frame,
device can transmit data at
called the token, is created at the time of initialising the network. The token circles
the ring until it encounters a device that wishes to transmit.
any given time.

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Figure 70: Token Ring Network

Token

Source: Computer Networks’ by A.S. Tanenbaum, Prentice-Hall India, 1996

A device wishing to transmit on the medium “captures” the token; i.e. replaces the
token with a data frame that goes round the network. Once the data frame returns
to the transmitting device, it replaces it with a new token and forwards this to the
next device in the ring.

The presence of the token frame assures a device wishing to transmit data that
there will be no collisions. Further, because each transmitting device can put only
one data frame on the network before relinquishing control of the token, each
station gets a chance to transmit in a fair and deterministic manner. However, the
point-to-point nature of the network indicates that data rates would be lower than
for Ethernet LANs. Token ring networks typically operate between 4-16Mbps.

WLANs
A wireless LAN (WLAN) is a A WLAN is a LAN where part or all of the communications between devices occurs
wireless extension of, or through the wireless medium, i.e. using electromagnetic waves (radio and infra-red).
alternative to traditional WLANs are most commonly used to provide the final few metres of connectivity
LANs. between users and the backbone network.

A typical WLAN configuration is shown in the figure below. Transmitter / receivers

(transceivers) called access points connect to the wired network from fixed
locations using standard Ethernet cable. The access point receives, buffers and
transmits data between the wired network and the wireless device. Access points
typically cover a range of a few hundred feet.

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Figure 71: Typical WLAN Configuration

Wired
Server

Ethernet Backbone

Mobile Computer with

WLAN PC Card
Access Point

Source: Deutsche Bank, WLANA

End users access the WLAN through WLAN adapters usually implemented as PC
cards for mobile computers or fully integrated devices in handheld computers.

There are two configurations for WLANs:

Independent WLANs: This is a peer-to-peer WLAN where computers with WLAN
adapters connect directly to each other whenever they are within range (see figure
below).

Figure 72: Independent WLAN Configuration

Source: Deutsche Bank, WLANA

Infrastructure WLANs: These WLANs use multiple access points to connect users
to the wired network. Access points here acts both as an intermediary between the
device and the backbone, as well as a regulator for wireless traffic in the immediate
vicinity. Using microcells120, WLANs can provide roaming for a device within a
building or campus (see figure below).

120
A microcell is the immediate area within which an access point can receive and transmit data.

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Figure 73: Infrastructure WLAN with Microcells

Access Device

Server

Access
Point

Source: WLANA

The most popular standard for WLANs is the IEEE 802.11, developed in 1997. There
are two types of WLAN (based on physical characteristics and data rates) as defined
by the IEEE 802.11, as seen below:

Figure 74: Comparison of 802.11a and 802.11b WLANs

Parameter 802.11a 802.11b
Standard Approved July 1999 July 1999
Maximum Data Rate 54Mbps 11Mbps
Modulation OFDM CCK
Data Rates 6, 9, 12, 18, 24, 36, 48, 54Mbps 1, 2, 5.5, 11Mbps
Frequencies 5-GHz range 2.4 GHz range
Range Approximately 150 feet Approximately 250 feet
Cost Medium Low
Market Acceptance Low due to lack of compatibility with 802.11b Industry Standard
Source: IEEE 802.11g — The New Mainstream Wireless LAN Standard’ by Broadcom Corporation, July 2003

In June 2003 the IEEE released a new standard for WLANs — called the 802.11g —
that combined 802.11a and 802.11b, and was backward compatible with both.

There are four main classes of WLAN users121:

n Enterprises: WLANs augment the existing backbone network to provide
mobility to workers. Coverage is normally more important than data speed.
Popular verticals include health-care, retail, manufacturing, warehousing and
universities, where users have high mobility needs.
n Public Access (Hotspots) Users: Hotspots are public access points that are
available to any user with WLAN-enabled device. These include employees on
the move wishing to connect to the corporate network or the Internet, as well
as students. Compatibility and range are the most important parameters.
n Small Businesses: Small businesses use WLANs as an alternative to more
expensive Ethernet LANs. Typical applications would include email, web
browsing and file transfer.

121
Source: ‘IEEE 802.11g – The New Mainstream Wireless LAN Standard’ by Broadcom Corporation,
July 2003

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n Home Users: Homeowners with more than one computer sometimes use an
independent WLAN to connect the devices together and provide mobility.
WLANs have a number of advantages122:
n Installation Speed and Design Simplicity: Installation for WLANs is quicker
than that of traditional LANs as no cables have to be laid.
n Installation Flexibility: WLANs can be deployed in certain situations where
wired LANs cannot be installed, e.g. military theatres.
n Scalability: WLAN topologies are very flexible and are easily re-configured,
allowing for greater scalability than wired networks. This, in turn, leads to lower
life-cycle costs (e.g. when the enterprise shifts offices or expands).
Bluetooth
Bluetooth is an industry- Bluetooth is an emerging standard for short-range radio links between mobile PCs,
developed standard for mobile phones and other portable devices (e.g. headsets). Bluetooth standards are
connecting electronic developed and maintained by the Bluetooth SIG (Special Interest Group) — an
equipment using the alliance of nearly 2000 companies led by Ericsson, Nokia, Toshiba, Intel and IBM.
wireless medium.
The technology is named after Harald Blåtland (Bluetooth), a 10th century king who
unified the Danes and the Norwegians.

The Bluetooth standard has both physical specifications (e.g. frequency, power) as
well as a communication protocol. Bluetooth devices operate on the 2.45GHz ISM
(Industrial, Scientific and Medical) band — which is licence-free in most countries.
Further, Bluetooth uses the spread-spectrum frequency hopping technique to
reduce interference. Bluetooth devices choose from 79 individual, randomly chosen
frequencies in the ISM band for transmission, switching frequencies 1600 times a
second123.

Bluetooth devices have a range of only up to 10 metres (due to the low power
specifications — only 1mW as compared to 3000mW for mobile phones). When two
or more Bluetooth-enabled devices enter within range of each other, they
automatically communicate with each other to determine if they need to send /
receive data. Once the user decides to transfer data from one device to the other, a
piconet124 is set up. All members of the piconet hop frequencies in unison to avoid
other piconets within range. Up to 10 piconets can overlap to form a scatternet,
linking up to 80 Bluetooth devices.

Bluetooth data speeds have an upper bound of 1Mbps125.

Bluetooth has several advantages:

n Unlike infrared wireless connections, Bluetooth devices do not have to be in
“line of sight” with each other to transmit data.
n Bluetooth devices communicate with each other automatically and do not have
to be “turned on” by the user.
n Bluetooth devices are manufacturer-enabled and do not require additional
equipment to communicate with other Bluetooth devices.

122
Source: ‘Introduction to Wireless LANs’ – The Wireless LAN Alliance (WLANA), 1999.
123
Source: HowStuffWorks.com (Link: http://electronics.howstuffworks.com/bluetooth3.htm)
124
A Bluetooth network with range less than 10 metres.
125
Source: HowStuffWorks.com (Link: http://electronics.howstuffworks.com/bluetooth3.htm)

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n Due to its frequency-hopping standard, Bluetooth devices are highly robust in

environments with signal noise.
n It is comparatively cheap — a Bluetooth chip costs between US$ 5-20.
The main disadvantage of Bluetooth is the low-range (less than 10 metres or about
30 feet).

While Bluetooth and WLANs are normally complementary technologies, Bluetooth

transmissions can interfere with 802.11b and 802.11g transmissions (as these are in
the same 2.45GHz ISM band). Bluetooth also competes with PAN technology
(which uses the human body, rather than radio waves, as the medium for data
transmission) for data communication between devices close to the human body.

MAN
A Metropolitan Area MAN uses similar technology to LANs. It can be either private or public and range in
Network (MAN) is a bigger area from a few buildings to a city. MANs support both data and voice, and may
version of a LAN that can even be related to the local cable TV network. MANs are specified by the IEEE
cover up to an entire city 802.6 standard.

Unlike LANs, MANs use two unidirectional cables (called buses). One end of each
bus, called the head end, emits a constant stream of blank data packets (see figure
below). Once a packet reaches the end of the bus, it is discarded. Upstream
computers wishing to communicate with downstream computers on a bus replace
the blank packet with a data-carrying one.

Figure 75: IEEE 802.6 MAN Architecture

Direction of flow on bus A
Bus A

Head
end

Direction of flow on bus B

Source: Deutsche Bank

802.6 MANs use the Distributed Queue Dual Bus (DQDB) standard. Under this
standard, a computer wishing to communicate with another one must first
determine whether the receiving computer is to the left or the right of the
transmitting one. This determines the choice of buses for transmission. Then, the
transmitting computer must send a request to all upstream computers on the bus126
so that they temporarily cease transmission (DQDB gives priority to downstream
computers so that a computer near the head end does not monopolise the bus).
Then it proceeds to place its data packets on the bus. DQDB systems can run up to
160km at speeds of 44.736Mbps (the speed of T3 lines)

Wireless MANs offer speeds The IEEE 802.16 standards cover broadband wireless MANs. These MANs operate
up to 120Mbps. in the 10-66 GHz licensed bands and will offer data speeds up to 120Mbps. These

126
This is done using the other bus. Hence, if a computer wants control of bus A, it uses bus B to send the
request to all upstream computers of bus A.

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are primarily intended for small office / home office (SOHO) use as well as medium
to large office applications.

WAN
A Wide Area Network WANs contain a collection of hosts — machines intended for running user programs.
(WAN) spans a large These hosts may be connected to different LANs. Hosts are connected together by
geographical area, often a a subnet (see figure below):
country or continent.
Figure 76: WAN Architecture

Subnet

LAN

Router

Host
Source: Deutsche Bank estimates and company data

The subnet has two components — transmission lines and routers (specialised
computers used to connect two or more transmission lines). The function of the
transmission line is to carry data from one host to another. The router determines
which transmission line a particular data transmission should be placed on so that it
arrives at the correct destination host. In most subnets, routers that do not have a
direct point-to-point connection can also use another router as an intermediary.
These are called packet-switched subnets.

WAN speeds depend on the speeds of the individual LANs composing the WAN as
well as the properties of the routers. Examples of WANs include the US
Department of Defense ARPANET, the National Science Foundation’s NSFNET and,
of course, the Internet.

VPNs
A Virtual Private Network VPNs have the same security and encryption features as a private network, but
(VPN) is a private network exploit the scale economies and greater reach of public networks (such as the
that uses a public network Internet).
to link remote sites.
There are two types of VPNs:

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

127
Providers of such services are also called Enterprise Service Providers (ESPs).

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The main characteristics of a VPN are:

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

ISPs providing VPN services also usually bundle other services such as consulting,
VoIP and e-commerce design.

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The Regulatory Environment

There are two major types Regulation is one of the key factors affecting business and technological
of regulatory bodies: developments in the telecom industry. There are two major types of regulatory
National and International bodies:
Regulators
Industry and Technology
n National and International Regulatory Bodies — commonly known as ‘Telecom
Regulators and
Regulators’
Standardising Bodies n Industry and Technology Regulators and Standardising Bodies — commonly
known as ‘Special Interest Groups’ (SIGs)
We scratch the surface of what regulation is about here.

Telecom Regulators
The telecom regulatory bodies are of two kinds:

n International regulatory bodies128: These are non-government bodies and

have a primary role of advising various national regulatory bodies. They provide
guidelines for telecom policies across various member countries.
n National regulatory bodies: These are the government bodies prevailing in a
geographical region to regulate activity in the telecom industry in that region129.
For instance, Federal Communications Commission (FCC) regulates the
activities of various players in the United States. Their roles and responsibilities
vary with the country that they operate in.
International regulatory bodies are not aligned to a particular country’s government
and hence have more of an advisory than policy-making role. Therefore, the national
regulatory bodies are discussed in greater detail subsequently in this section. The
details include the reasons behind existence of regulators and their functions. Some
contentious regulatory issues are also discussed in greater detail.

Objectives
National telecom regulators The key objectives of national regulators are to strike a balance between
suggest, formulate and encouraging competitiveness, consumer interests and their country’s interests. The
implement policies to national regulators suggest, formulate and implement telecom policies to address
balance competitiveness, these objectives. The international regulators attempt to regulate the telecom
consumer interests and their
policies formulated by their member countries.
country’s interests.
These key objectives of national regulators are discussed in greater detail in the
International regulators
following sub-sections.
attempt to regulate the
telecom policies formulated Ensuring competitiveness
by their member countries. In most countries, the telecom industry is in the process of changing from a
monopoly situation to one where competition is widespread. This change is deemed
necessary to ensure that there are enough players to drive and take full advantage
of the pace of technological changes. One of the primary responsibilities of the
regulators is to manage this change.

128
Refer to glossary for a list of some key international regulators provided under ‘regulators’.
129
There are very few countries that do not have a telecom regulator.

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Not only do the regulators encourage more players and more competition but they
also materially influence consolidation activity that could make the market less
competitive. Against this they must balance the incumbent operator’s need to earn
a satisfactory return on its business to ensure that there is an incentive for it to
invest in new technology and new service development. This can be a tough
balancing act.

Ensuring better consumer services

The telecom industry experiences rapid development of new technologies and
services. However, service providers often avoid or delay investment in these new
technologies or services because they may not believe that such investment would
add to their ability to compete in the market. This is not necessarily in the larger
interest of the telecom industry or the consumers. Therefore, regulators try to
ensure that the providers work towards newer and better consumer services. For
instance, regulators have been encouraging:

n Wireless broadband services offered by 3G — by ensuring that the operators

invest in the infrastructure over and above the investments already made in
licences allotted for 3G services. Regulators also ensure that the operators meet
the deadlines for rollout of advanced services, offered by 3G, for consumers.
n Number portability — to ensure that consumers are not deprived of better
services because of the restriction of changing their phone number when they
change to a different service provider.
n Alternative access technologies — such as WLAN, DSL, cable modems, WLL
etc
The regulators also ensure that national security is not breached in attempts to offer
consumer telecom services. For this, licences are allotted so that national security is
not endangered. The regulators also promote security and emergency
communication services. For instance, there has been a push towards location
based wireless emergency services (E-911) in the US.

Functions
To achieve their objectives, country regulators perform the following functions:
n Distributing licences for service provision
n Determining rules for rollout of various types of services
n Regulating tariffs
n Determining interconnect rules — Providing guidelines for sharing of revenues by
service providers in case of usage of one another’s networks
n Others — Numbering plans, dispute settlement, emergency services (E-911),
number portability
The roles of regulators vary from ‘merely advisory’ to ‘final decision-making’.
Additionally, these roles may vary from regulator of one country to another. A
comparison of some of the roles played by regulators in some countries is provided
in the table below.

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Figure 77: Comparison of Roles of Regulators in Some Countries

Does the agency have France Germany Spain United Kingdom United States
responsibility for:
Granting Licenses? No. Yes. Yes, in most cases. No. Yes, but for broadcasting
only.
Monitoring and enforcing Yes (including revocation Yes (including revocation Yes (including revocation Yes (including revocation Yes (revocation of
compliance with regulations? of licences). of licences). of licences). of licences). licences has to be
approved by
government).
Approving Tariffs? No. Ministry130 approves Yes. No. Ministry approves Yes . Yes (but some tariffs are
tariffs. tariffs. unregulated).
Setting conditions for Yes (must approve Yes (must approve Intervenes if parties fail Yes — controlled under Has issued detailed
interconnection? standard offer of standard offer of to agree. complex price cap regime interconnection rules
dominant operator). dominant operator). (state-level regulators
approve each agreement)
Administering Universal Service Follows detailed rules set Undertook studies to
Obligations (USOs)131? by decree to calculate quantify size of USO
and allocate the costs of
USOs.
Scope of USOs and choice of Can designate operators. Designates operators and Determines scope of Follows broad rules set
operators defined by law. Follows rules set by law follows rules set by law USOs, designates by law to determine the
to calculate and allocate or decree to calculate and operators, and calculates costs of USOs and their
the costs of USOs. The allocate the costs of and allocates the costs of allocation. Scope of
government can define USOs. Scope of USOs USOs. USOs set by federal state
scope of USOs. defined by law. board, set up by the
federal regulator.
Source: World Bank compilation based on information provided by the five regulatory agencies, 2001

Some of the functions are described in greater depth in the following sub-sections.
For each of the functions the following have been provided:

Licensing
n What is licensing?
As discussed in the chapter on ‘Telecom Services and Business Models’, most132
service providers require a licence to operate. For fixed line services, the licences
are provided for operations in a geographical region. For wireless services, the
licences are for a set of airwaves (spectrum) in a particular geographical region.

It is usually the regulators’ Licences invariably contain a set of terms and conditions that must be met or the
responsibility to draw up the licence can be revoked. It is usually the regulators’ responsibility to draw up the
terms of the licence and to terms of the licence and to ensure that they are met. These terms and conditions
ensure that they are met. include (but are not limited to):

n Period of validity of licence

n Applicable fees and royalty
n Frequency of any payments
n Manner of service provision133
n Obligations to provide services to remote areas
In the case of wireless services, the operators need to obtain licences for operating
in a particular frequency of radio airwaves in a particular region. The particular

130
Ministry refers to the government telecommunication authority, which is different from the regulators.
131
‘USOs’ are discussed later in this chapter
132
Some service providers that operate in unlicensed spectrum may not require these licenses. For
instance, WLAN service providers operate in unlicensed spectrum and hence do not need to obtain
licenses.
133
For instance, wireless in local loop (WLL) players may not be permitted to offer value-added services
such as SMS or roaming. Refer to glossary for further information on ‘WLL’, ‘SMS’ and ‘roaming’.

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frequencies to be allotted to various operators are decided within the following

constraints:

n The spectrum for national defence or military communication services are kept
separate
n The spectrum for one operator should not interfere with that of another
n Some technologies can operate in particular frequency ranges
In case of fixed line services, the operators are provided licences to provide the
fixed line services in a particular region. Similarly, there are also licences for
providing services through various technologies e.g. WLL.

The licences to be allotted are generally decided through:

n Auction: The highest bidder wins the licence. The bidding for 3G licences has
already gone down in legend as the driver of the telcos sector’s collapse in
2000. Before that point the main user of licence auctions was the US wireless
industry. There are numerous forms of auction which can have a material
outcome on the eventual outcome interim’s of prices achieved and
consequently the efficient allocation of capital.
n Beauty contest: Various operators file tenders and the most attractive tender
overall wins the licence. The attractiveness of the tender is decided by various
factors such as price offered, past experience, proposed service rollout plan,
financial stability etc. Finland and Spain, for example, used this method to
select operators to whom 3G licences were granted. Until the 3G auctions this
was the principal method used within Europe for allocating licences. It remains
the preferred method in most of Asia.
Regulating Tariffs
In an ideally competitive market, prices do not need to be regulated because the
market forces would determine the prices. However, telecoms markets have many
components contributing to whether an individual player has what is perceived to be
market power or market dominance. In markets where competition exists the
regulator is charged with the job of trying to create a so-called level playing field
which ensures competition can operate on a fair and equitable basis with the
dominant or incumbent operators. The regulators have to resort to complex price
control schemes to achieve this aim. In practice arguments about what represents a
level playing field keeps lawyers very busy.

Such regulation of prices needs to be done to ensure fair competition and to protect
consumer interests, i.e.:
n In a monopoly situation, the tariffs need to be regulated to ensure that
consumers are not over-charged for basic services.
n On the other hand, in a competitive situation, a new operator in the local market
must be able to compete against the incumbent on an equal basis. That is, an
incumbent with extensive network and subscriber base may charge very low
prices for basic services (e.g. local calls) to make the entry of a new player
infeasible. Therefore, there is a need to control the rates of the incumbent.

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Interconnect Rules
‘Interconnection’ is the ‘Interconnection’ is the process by which the network of one operator is connected
process by which the to that of another operator so that voice and data traffic can pass between them.
network of one operator is
connected to that of another There are ‘Interconnect Rules’ to govern:
operator for the passage of n The amount that one network operator can charge another
voice and data traffic
n The amount that the service provider can pass to the consumer
In an ideally competitive market, the operators involved would reach mutually
satisfactory interconnection agreements between themselves. Moreover, the
demand-supply economics would determine the amount that they can charge the
consumers.

Such agreements are usually reached for interconnection between similar networks.
These are known as roaming or peering agreements. The cost of roaming is
generally passed on to the consumer using the device over a network outside its
own service provider’s network. One of the major attractions of the internet was
that it grew up using peering agreements which meant that operators of similar size
simply agreed to transfer data between each other at no cost. This has been a
significant factor in reducing the costs of running the internet.

Unfortunately, such agreements are not easily reached in the case of different
networks or where the scale of volume transfer is different. Regulators have to step
in to resolve the situation. Interconnection involves resolving a wide range of issues
that relate to technical, commercial and political matters. At the heart of the
philosophy is the amount of political will behind the creation of a competitive
market. All interconnection terms invariably must be based on some assessment of
the operators’ underlying costs. After all, most capitalist governments stop short of
forcing an incumbent operator to provide services at a ‘loss’. There are so many
methods for arriving at the appropriate cost base, and the level of return over a
defined period that two regulators looking at the same issue could easily arrive at a
very wide range of answers. Typical accounting methodologies would range from
operators being allowed a return based on historic cost accounts (HCA) to the
opposite end of the spectrum such as LRIC (long run incremental cost). This allows
operators to recover costs only on the basis that it is always operating the very
latest technology and can only recover incremental costs incurred by the existence
of the alternative operator. These two methods would deliver startlingly different
results.

Customers will eventually find themselves paying the costs of interconnection. The
two main options are CPP (calling party pays) or RPP (receiving party pays). In fixed
telecoms the person making the call pays for it. Mobile can present a few
complications. And the reason is because the mobile number dialed does not give
much information about how much the call will cost the sender. In the US and a few
other markets the receiving party pays for all calls, whether outgoing or incoming. In
Europe and Asia mobile users normally pay only for outgoing calls provided they are
in their home market. But when roaming in other markets they will pay for the bulk
of incoming call charges.

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Figure 78: Ways of Paying for Interconnection

Receiving party pays (RPP) Calling party pays (CPP)
Description The receiver of a call contributes to the call of each call received. The caller pays the entire cost of the call wherever it originates
from. The caller may have to pay a premium to terminate the call
on a network using a technology different than that used by the
caller’s service provider
Features134 RPP was chosen by countries with un-metered135 calls on the CPP was chosen by countries with metered call on fixed line
fixed networks because RPP provided a simple transition from networks as it was easy to implement.
the billing systems of traditional fixed network.
Price differential in fixed-to-mobile and mobile-to-fixed call is
Price differential in fixed-to-mobile and mobile-to-fixed call is low high. Therefore, numbering of phones is different for mobile
or none. Therefore, there is no need to warn callers about phones to warn the callers about the charges.
receiving calls from a particular type of number. So, phones
Not recommended for countries with un-metered calls on fixed
using different technologies have similar prefixes e.g. in the US.
networks as it would lead to billing issues.
May discourage use of mobile phones as people may decline to
receive a call.
May not be scalable to CPP at a later date due to similar
numbers allotted to different types of phones in some countries.
Examples USA, Canada Most common pricing regime. Dominant in Europe and in other
markets where GSM standard is used e.g. India
Source: Deutsche Bank estimates and company data

Similar interconnection issues are also encountered for mobile networks with
different technologies, e.g., calls from cellular network to WLL network and vice
versa.

The choice between CPP and RPP is made at a countrywide level by the regulator or
by the government. This choice is largely influenced by the existing traditional
systems e.g. the system of un-metered calls favours RPP. However, CPP is clearly
emerging as the dominant scheme as it favours growth of mobile technologies. The
facts136 in support of this argument are as follows:

n Although RPP markets may outperform CPP markets in the early years of
mobile communications, recent figures demonstrate that CPP countries have
much higher subscriber growth than RPP countries
n RPP has been empirically shown to discourage mobile use. Subscribers in RPP
countries are much more likely to turn their phone off, or refuse to answer calls,
in order to avoid paying for them.
n Calls to mobile phones are increasing dramatically in CPP countries, where
mobile users can receive calls free of charge on their home network.
The interconnect rules are regulated to:
n Guard consumer interest
n Ensure that the interconnection charges are consistent and their
implementation does not lead to confusion among consumers (!)
n Ensure fair competition between various technologies
n The charges have to be implemented in such a manner that ensures that no
particular technology is favoured due to exceptionally lower prices. For instance,
if there is a high number of fixed line subscribers in a country and the charges

134
For further information on ‘Interconnection’ refer to:
http://www.itu.int/osg/spu/ni/fmi/workshop/FMI_Briefing_Final1.doc
135
Un-metered calls mean that the number of calls made by customers using their connection is not
measured.
136
For details on these facts please visit:
http://www.itu.int/osg/spu/ni/fmi/workshop/FMI_Briefing_Final1.doc

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for fixed-to-mobile calls are much lower than those for mobile-to-fixed calls, then
this would hamper the growth of mobile technology.
It is worth making the point that interconnection is more than just about the price of
moving a call from one network to another. It involves issues like the mechanics of
how the interconnection is actually achieved, i.e. how the operators physically
connect their systems and the technical stipulations governing this. There are
frequently disputes about the cost of providing heating and lighting services in the
exchanges and a host of minutiae. Perhaps the biggest complaint heard by new
operators is the extensive delays which the incumbent operator can create in the
process of interconnecting systems. These all provide the regulator with much work.

In passing, we would just mention two buzzwords: unbundled local loop (ULL)
and UNE-P. In their quest to create competition regulators are keen to give
unfettered access to the local loop. It is now possible for operators to rent a local
loop from the incumbent operator such that they can connect their own equipment
at each end and provide services such as DSL. The most popular variant is known as
unbundled local loop. However there are variants of this, such as bit-stream access
that leave the incumbent with the loop but give an alternative operator the right to
use part of the channel for its own service provision.

In the US the interconnection regime goes under the generic name of UNE-P
(unbundled network elements Platform) or UNE—L (line). This system effectively
identifies all the elements in a telephone network and allocates a specific cost to
each based on the volume of usage per element. Essentially most interconnect
models are based on broadly similar principles.

Others
Apart from the major functions mentioned above the regulatory authorities also have
responsibility for:
n Implementing auxiliary services, such as number portability, or emergency
services
n Numbering plans
n Unified licences
n Emergency services
n Universal service obligations
n Spectrum and infrastructure sharing
n Dispute settlement
Number Portability137
In some regions, subscribers to telephone services are not allowed to retain their
phone numbers when they switch from one service provider to another. This has
been identified as a major issue slowing the progress of competitors. The ability to
allow retention of numbers on switching service providers is known as ‘Number
Portability’. Many markets have now implemented fixed-to-fixed portability to
ensure customers are not prevented from switching operators by what is seen as
an artificial barrier.

137
Refer to Chapter 2 on ‘Telecom Services and Business Models’ for some facts and figures on Number
Portability.

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In some countries, portability of fixed line phone numbers to mobile phone numbers
and vice versa is also of interest. In November 2003 the US implemented
widespread portability between wireless phones and also between wireless and
wireline phones, subject to certain conditions. This is a more contentious type of
portability because of the confusion that would be potentially created by tarrifing
and the different rates for calling fixed and mobile phones. In the US the problem is
minimised by the fact that the regime is RPP so whatever happens the recipient
pays for the call. But it would not be so easily implemented in a RPP system.

Unified Licences
Most countries offer licences to operators for providing services using a particular
technology, e.g., for providing wireless services based on GSM technology.
However, fixed line and wireless services have started converging. Additionally,
telephony and broadcasting are beginning to enter into each other’s markets.

As the various technologies compete and converge, there is an increasing need for
common licences, also known as ‘Unified Licences’, for providing services. These
licences are technology-neutral, i.e. they allow provision of services in a region
irrespective of the technology the operator may decide to use. Most countries are
already moving towards unified licences and the European Union has given direction
to member countries that they must move to the unified-licensing regime.

Under a unified licence, the licensee is assigned a spectrum allocation as well as a

geographical region to operate in.

Arguments for:
n Consumer interest: Consumers would be able to get a bouquet of services. It
would also be easier for them to deal with unified bills from fewer providers.
n Enhanced competition: Although some smaller players may be eliminated, the
larger players will compete on a more ‘level field’. This is because, they would
be able to provide various kinds of services without worrying about the entry
barriers related to acquiring licences for each technology.
Arguments against:
n Unified licensing may eliminate small players in the markets
Separate licences enable a large number of small players to enter the various
markets. Some of the markets such as those for ISPs (Internet service providers)
allow the presence of many players. In contrast, other service markets requiring
large investments in frequency spectrum or the infrastructure rule out entry of many
smaller players. After introduction of unified licences, small players may not be able
to compete with other players with deep pockets because these licences are likely
to be expensive.

n Modification in existing licensing agreements

n The licence agreements already existing need to be modified. This could lead to
fresh debates and legal issues.
n Competition from disruptive technologies such as telephony over Internet (VoIP)
n Telephony over the Internet is a technology that would compete with basic
service because it may be able to provide this service at lower costs. In some
countries telephony over Internet is not covered under the licensing regime.
Therefore if a government does allow a unified licence for telephony, it must
consider telephony over the Internet under it.

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Emergency Services
The regulators make it mandatory for service providers to offer some basic services
to help consumers in emergency situations.

It is easier to provide It is easier to provide such services for fixed line subscribers as their location is
emergency services for fixed fixed. However, in case of mobile subscribers, these services have to be enhanced
line subscribers as their to make them location specific. That is, the location of callers from wireless devices
location is fixed. However, needs to be determined. Subsequently, appropriate help needs to be provided at
for mobile subscribers these
that location.
services have to be
Universal Service Obligations
enhanced to make them
A ‘Universal Service Obligation’ (USO), as the name suggests, is the obligation
location specific.
placed on one or more service providers to ensure that basic telephone services are
available to the whole community. To the best extent possible, these services
should be provided:

A ‘Universal Service n At the same quality

Obligation’ (USO), as the
name suggests, is the
n With the same availability
obligation placed on one or n At the same cost
more service providers to
A USO usually includes the provision of a service to:
ensure that basic telephone
services are available to the n The handicapped
whole community n The elderly
n Remote locations
n To promote service provision in rural areas, the regulators or the government
provide incentives to operators. These incentives include, lower licence costs,
lower percentage of revenue to be shared with the government etc.
USO also includes the provision of emergency services.

In some countries, one operator undertakes the USO obligation. In such cases,
other operators contribute to the cost according to arrangements agreed or
mandated by the regulator.

Spectrum and Infrastructure Sharing in Wireless Services

In the case of wireless services, both the infrastructure (such as base stations) and
the spectrum could be shared. Some operators lease the spectrum to offer services
under their brand and have billing relationships with the customers. These are
known as Mobile Virtual Network Operators (MVNOs). This is a relatively new
concept and there is a lot of uncertainty around the reliability of their business
model. Regulators in some countries have been allowing MVNOs to operate
because their entry is likely to fuel competition and also push newer services such
as 3G.

Regulatory Bodies
Regulatory bodies are of two major types:
n International regulators
n National regulators
These are outlined in the following sections.

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International Regulators
The major role of international regulators is:
n Ensure interoperability across countries
n Settle telecommunication-related disputes among various countries
n Promote development in telecommunication
Some key international regulatory bodies are shown in the table below.

Figure 79: International Regulators

Region Name of regulator Website
Africa ATU — African Telecom Union http://www.atu-uat.org/
Caribbean CANTO — Caribbean Association of National Telecom http://www.canto.org/
Organisations
Commonwealth Countries CTO — Commonwealth Telecommunications Organisation http://www.cto.int/
Europe ECTA — European Competitive Telecommunications Association http://www.ectaportal.com/
International ITU — International Telecommunication Union http://www.itu.int
Source: Deutsche Bank

National Regulators
Each country has a government regulatory body that performs the functions
mentioned in the preceding sections.

A list of regulators in some key countries (considered important for this report) is
provided in the table below138:

138
The link to English version of the website has been provided, wherever possible

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Figure 80: List of Regulators in Major Countries

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

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Technology - Special Interest Groups (SIGs)

A SIG is a group of In addition to national and international regulators, the telecom industry also
individuals or organisations regulates itself through industry associations and technical Special Interest Groups
having a narrow field of (SIGs). These groups often comprise industry players such as telecom operators,
interest in a technical area equipment manufacturers, content developers etc; as well as researchers and
universities. Some prominent SIGs in the telecom industry are the Institute of
Electrical and Electronics Engineers (IEEE), the GSM Association (GSMA) and the
DSL Forum. This section deals with the role and functions of a telecom SIG. Some
prominent SIGs are also discussed in detail.

Functions
The four main functions of a SIG are to:
n Develop standards
n Promote the technology
n Create a common forum for academia and industry
n Define evolution paths for new technologies
Develop Standards
The primary function of SIGs The primary function of the SIGs is to develop standards and ensure uniformity of
is to develop standards and implementation. For instance, the IEEE develops standards for use in computer
ensure uniformity of networks such as LANs and MANs. The GSMA develops standards for equipment
implementation and networks based on the GSM technology for wireless communications.

SIGs often develop standards by forming working committees or working groups to

tackle each aspect of the standard. E.g. The DSL Forum has technical working
groups for Architecture & Transport, Operations & Network Management, and
Testing & Interoperability.

While the working groups develop the technical specifications for the standard, the
SIG will also have committees or working groups aimed at fostering greater
cooperation between members. In some cases, members may be bound to follow
the specifications developed by the SIG. In most cases, however, members develop
solutions that adhere to the SIG standard but have additional features that make the
particular solution more attractive than other similar ones in the marketplace.

Promote the Technology

Another primary function of The most common means by which SIGs promote their technology are:
SIGs is to increase public n Conducting Trade Shows and Road Shows: These are public exhibitions of
awareness and acceptance
the technology that serve two purposes — increase public awareness of the
of the technology technology and improve business-networking relationships within the industry.
E.g. The DSL Forum conducts annual trade shows worldwide to showcase DSL
technology.
n Publishing Journals and Articles: SIGs often create public awareness of their
technology through articles and publications in prominent industry journals,
trade magazines etc. SIGs also release white papers and tutorials on their
websites to promote the technology.
n Compiling a Central Repository of Reference Material: SIG websites also act
as a one-stop directory of reference material and articles about the technology.
These might include tutorials, white papers, research papers, statistics etc.

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n Lobbying with Government Regulators: SIGs also play an important role in

lobbying with Government regulators for new legislation that enables faster
technology uptake, or removal of old legislation that hinders the same.
Standardising Bodies
In this section, some prominent SIGs in the telecom industry are profiled, viz.:
n IEEE
n GSMA
n CDG
n DSL Forum
IEEE
The IEEE is a leading SIG in The Institute of Electrical and Electronics Engineers (IEEE) is a non-profit, technical
computer engineering, association. It has over 380,000 individual members worldwide. It is a leading
electronics and authority on computer engineering, electronics and telecom. The IEEE produces
telecommunications almost 30% of the published literature in these fields.

The IEEE creates and maintains industrial and technological standards through its
IEEE Standards Association (IEEE-SA). In addition to researchers and interested
individuals, the IEEE-SA also has a corporate membership programme. Hence, both
industry players and research organisations collaborate to develop and approve new
standards.

The IEEE-SA has several working groups and committees that develop standards in
technical areas ranging from aerospace electronics to voting systems engineering. It
has over 877 active standards. From the telecom perspective, the most important
working committee is the ‘IEEE 802 LAN / MAN Standards Committee’. The
Committee develops Local Area Network (LAN) and Metropolitan Area Network
(MAN) standards including Ethernet, Token Ring and Wireless LAN. Each area has
an individual working group focusing on it. As standards become obsolete, working
groups may be rendered inactive. Similarly, new working groups may be created for
the development of a new standard in the same area.

GSMA
The GSMA is a global trade The GSM Association (GSMA) was founded in 1987 and has over 570 GSM
association of GSM mobile operators as its members. The GSMA covers the entire family of GSM technologies
operators including GSM, GPRS, EDGE and W-CDMA.

The GSMA operates primarily through working groups. These are groups of
operators and suppliers worldwide that specialise in the practical aspects of
providing wireless services. Some working groups also look at the needs of
particular regions or the impact of new technologies. The main technical working
groups of the GSMA are listed below:

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Figure 81: Main Technical Working Groups of GSMA

Working Group Function
Billing and Accounting Roaming Focuses on the administrative, financial and procedural issues involved in providing
Group (BARG) global GSM roaming
International Expert Roaming Group Focuses on technical, operational and performance issues supporting global GSM
(IREG) roaming
Transferred Account Data Defines data interchange procedures between operators and base stations,
Interchange Group (TADIG) including billing
Security Group (SG) Maintains and develops GSMA security algorithms and protocols139, technical
security aspects of devices, and recommends operator-side solutions to combat
fraud
Services Expert Rapporteur Group Develops basic GSM services and provides a roadmap for operators to realise
(SERG) marketing objectives
Fraud Forum (FF) Identifies and analyses techniques used to perpetuate fraud in GSM networks and
recommends practical, cost-effective solutions
Terminal Working Group (TWG) Deals with GSM Mobile Station (MS) or base station issues
Environmental Working Group Provides the GSMA with information and advice regarding the EMC140 and
(EWG) biological effects of GSM equipment.
Source: GSMA Website

Through its website (www.gsmworld.com), the GSMA provides a publicly

accessible library of technical and market information about GSM networks
worldwide. In addition, the GSMA organises several conferences and exhibitions
worldwide aimed at showcasing GSM technology. In recent times, the GSMA has
also played a role in lobbying for adoption of GSM as the preferred mobile
technology in several emerging markets. For instance, in recently liberated Iraq, the
GSMA has lobbied the occupying US Government for adoption of GSM as the
cellular standard.

CDG
The CDG is a consortium of The CDMA Development Group (CDG) is an international consortium of CDMA
CDMA operators and service providers and manufacturers. It focuses on increasing the adoption of
equipment manufacturers CDMA wireless systems worldwide, as well as developing a roadmap for the
worldwide evolution of CDMA systems and technology. The CDG covers the cdmaOne and
CDMA2000 families of technology.

CDMA standard development is managed by CDG’s ‘Technical Teams’. Team

activities include specifications development, contributions to other standards
committees and the development of ‘CDG Reference Documents’141. The main
technical teams of the CDG are listed in the table below:

139
Refer to glossary for further information on ‘algorithm’ and ‘protocol’.
140
Electromagnetic Compatibility (EMC) standards are environmental standards regulating the amount of
radiation emitted by electrical and electronics equipment. These standards were developed by the
European Union (EU).
141
These are technical reference documents dealing with CDMA technical specifications. They are
available for purchase from the CDG website.

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Figure 82: Technical Teams of the CDMA Development Group

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

The CDG website (www.cdg.com) contains a repository of technical and market

information about CDMA technology, subscriber-base, evolution etc. The CDG also
attempts to popularise CDMA technology through public seminars, symposiums,
trade shows etc. In addition, the CDG also lobbies various government and
regulatory bodies for legislation favorable to CDMA network growth. For instance,
the CDG lobbied for full mobility services in the 1.9GHz spectrum (used by CDMA
technology) in Brazil in April 2003.

DSL Forum
The DSL Forum is a DSL Forum (DSLF) members include telecom, equipment, computing, networking
consortium of nearly 200 and service provider companies. The DSLF covers all xDSL technologies including
leading DSL industry players ASDL and SHDSL.

DSLF members participate in working groups, both technical and marketing, to

create common protocols, processes and best practice recommendations for the
industry. The main working groups of the DSLF are listed in the table below.

Figure 83: Main Working Groups of the DSL Forum

Group Name Function
Technical Groups
Architecture & Transport Coordinates all architecture and transport related technical work in the
DSLF
Autoconfiguration Develops simple Internet access solutions and frameworks for DSL
Operations & Network Management Provides recommendations for operations and network management for
ADSL network providers
Testing & Interoperability Develops procedures and standards for cross-vendor DSL interoperability
Marketing Groups
Strategic Communications Develops communications plans that provide direction to the other
Marketing working groups on initiative priorities
Deployment Council Promotes public awareness of the DSL industry and also provides market
feedback to members
Marketing Interoperability and Qualification Builds public awareness of interoperability efforts
Summit and Best Practices
Produce Summit Agenda, retain experts in the field to speak, and facilitate
a Best Practices interactive session for member knowledge enrichment
SHDSL Builds awareness of SHDSL capabilities
Source: DSLF Website

142
Refer to glossary for further information on ‘Internet Protocol’.
143
‘Over The Air’ refers to the medium (radio waves) used for CDMA or some other wireless technologies.
144
Refer to glossary for further information on ‘Multimedia Messaging’.

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The DSLF defines the specifications for xDSL broadband technologies, as well as
best practices and recommendations for service providers intending to deploy xDSL
technology. These specifications are published as technical reports that are available
on the DSLF website (www.dslforum.org), along with DSL market statistics and
information. The DSL forum also conducts public seminars and trade shows to
promote DSL technology adoption.

Others
In addition to the SIGs described in previous sections, the telecom industry has
several other SIGs and industry associations (both regional and international) that
promote specific communications technologies:
n Bluetooth SIG: This is a trade association of telecom companies that jointly
develop the Bluetooth standard for short-range wireless communication
between devices. The Bluetooth SIG also promotes awareness of Bluetooth (for
instance, by providing free Bluetooth licences to educational and research
institutions).
n NCTA: The National Cable and Telecommunications Association is the trade
association of US cable service providers (including Cable Modems). The NCTA
promotes awareness of cable modems through trade shows and lobbies for
favorable legislation.

Technology Debates
Almost all telecom technologies have some companies or group of companies
promoting it for their interests. Some such Special Interest Groups (SIGs) have
already been discussed in the preceding section.

These technologies are not only affected by the promotion but also by the
regulatory and technologically dynamic environment in which they operate. This
inevitably leads to a competition among the technologies providing similar services.

Some such competing technologies are:

n DSL Vs Cable — for high speed fixed line internet access
n CDMA Vs GSM — technologies for mobile networking
n WLAN Vs 3G — for wireless broadband services
The debates surrounding these technologies are expanded on in the following sub-
sections.

DSL Vs Cable
The need for high-speed always-on145 Internet has grown over the past couple of
decades. DSL and Cable are the primary modes of such access. DSL is provided via
the traditional fixed phone line, while Cable Internet access is primarily provided
over the cable carrying the TV signal. Both these technologies have their advantages
and disadvantages as mentioned below.

Arguments
Speed, cost, security etc. are the major parameters that affect the decision of
subscribers regarding their preferred Internet access technology. We have avoided
discussing cost in the table because this will vary by market and ultimately the total
package to the customer will be broadly similar if there is to be effective
competition.

145
Always-on refers to 24x7 access to Internet.

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Figure 84: Comparison of DSL and Cable

Attribute dsl cable
Speed 384kbps download / 128kbps upload to 1.5Mbps download / 2Mbps download / 300kbps upload (Shared speed - lower if
384kbps upload more users)
Speeds decline as distance from provider increases. However, it Speeds decline as number of users connected increase.
is unaffected by number of users connected However, speeds are unaffected by distance from the provider
Requirements The coverage area has to be within 18,000 feet (5,460 metres) Depends on availability in the local area. A local cable TV
of the central office146 provider may decide not to provide internet access to the
subscribers of its cable TV services
An existing phone line at the customer’s premises is An existing cable TV connection from the local cable Internet
recommended. Otherwise, the service may be more expensive. provider is recommended. Otherwise, the set up costs may be
higher.
Security DSL keeps the computer constantly connected to the Internet. Cable connection is shared with the people in the neighborhood.
This may result in a static (unchanging) IP address - a unique Therefore, it is easy for a hacker to hack a computer in the
number that identifies the computer on the Internet. Traditional neighborhood. However, a user can disable such visibility of
dial-up services randomly assign a new IP address for every log computer on the local network.
in, so it is unlikely that someone can find a computer at the
same IP address twice. With an always-on Internet connection
like DSL, a computer is vulnerable to hackers who can gain
access to the computer.
To avoid these issues many DSL providers assign a dynamic Like DSL, cable is also always-on connection with a static IP
(constantly changing) IP address on request. For additional address, which increases vulnerability to hackers.
security, some providers include personal firewall software as
part of the deal.
Source: CNET147, Get Broadband — Cable and DSL

The debate about the better technology for high-speed Internet access has been
raging for quite some time. However in practice both technologies are often not
present in the same local area. Therefore, the consumer is often left with no choice.
Cable is definitely maintaining a lead in the US market where DSL and cable are
head to head but the view continues to be that DSL will eventually close the gap.

CDMA Vs GSM
The GSM and CDMA families are competing technologies in the 2G, 2.5G and 3G
wireless communication market space.

GSM technology is open source and promoted by the consortium for GSM
operators (GSMA), whereas CDMA is a proprietary technology of Qualcomm.
Currently, about 70% of the world’s cellular networks use GSM technology. This
gives GSM a marked advantage in terms of potential economies of scale.

146
ADSL is a distance sensitive technology. As the connection length increases, the signal quality and
connection speed diminish. ADSL cannot be offered over networks having loading coils, which are used to
boost voice signals in fixed line telephone networks when the connection length increases.
147
'Which Broadband Connection Is Right for You?' by CNET, Sep 2000 (Link:
http://www.cnet.com/internet/0-3762-7-2643119.html)

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Figure 85: GSM Versus CDMA

Attributes GSM CDMA
Data Speeds 9.6kbps — 2Mbps 9.6kbps — 5.5Mbps
Handoff Hard (connection with one cell is broken before next connection Soft (simultaneous connection with multiple base stations)
is made)
Size of cell 30km 50km
scalability The capacity of the system is rigid, that is, GSM system cannot The capacity of the system is not rigid but the quality of the
add more than a fixed number of subscribers in a cell. system deteriorates with the addition of more customers.
quality of service Inferior voice quality as compared to CDMA. Superior voice quality as it works on a single frequency. Also, it
supports soft-hand-off, which prevent breaks in voice signal.
Security The signal transmitted is not coded. It is vulnerable to hacking. Provides high security as the data transmitted over the medium
is coded.
Power Requirements It has higher power requirements than CDMA. It has lower power requirements than GSM.
Roaming It is available in a large number of countries therefore provides It is not available in large number of countries therefore provides
international roaming. limited international roaming.
Type of Multiplexing TDMA & FDMA CDMA
Carrier Frequencies Available 900MHz, 1800MHz 1.23MHz or 3.69MHz
Source: Deutsche Bank estimates and company data

In the present market scenario, GSM is dominant in Europe and Asia, whereas
CDMA dominates in North and Latin America. However there are pockets of GSM in
North America and pockets of CDMA in Asia. There are two broad options for 3G,
these being:
WCDMA - Supported by the GSM Association.

CDMA 3XMC - Proprietary technology of Qualcomm.

Both these options are CDMA based, but they are not similar in terms of operation.
WCDMA uses 5MHz frequency to transmit signals, whereas CDMA 3XMC carries
signal on three channel frequencies of 1.25MHz. Moreover, GSM being more
prominent worldwide should lead to WCDMA having higher long term penetration.
In addition, the CDMA2000 3XMC is upgradeable only on CDMA IS-95B based
systems whereas WCDMA is upgradeable from both CDMA IS-95B and EDGE /
GPRS based systems.

Existence of hybrid networks based on a mix of 2.5G and 3G technologies is also

possible. Indeed given the slow take up of data usage it appears highly likely that 2,
2.5 and 3G platforms will co-exist for most of this decade in many networks. Since
the 3G technologies provide higher network capacities, deploying them in high
population density areas will be viable for operators. 2.5G technologies such as
GPRS, EDGE etc. can be deployed in low population density areas. Benefit of such
model for operators would include lower network equipment costs.

WLAN Vs 3G
While technological advances Most workplaces today offer wired LAN speeds of at least 10Mbps, with 100Mbps
have led to a much higher or more becoming increasingly popular. This is an order of magnitude higher than
bandwidth for 3G networks than those offered by 3G Networks (2-3Mbps148). With speeds comparable to that of
2G or 2.5G, this might still not wired LANs, WLANs have emerged as the most natural solution to this problem149
be sufficient for business for business travellers.
travellers

148
These are best-case speeds. In reality, congestion on the networks may force actual speeds to be
much lower.
149
Refer to Chapter 4 on 'Communication Networks' for a description of ‘WLANs’. 3G technologies are
described in depth in Chapter 3 on ‘Communication Media’.

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This has led to a debate over whether WLANs pose a threat to cellular network-
based data services, especially for business use.

Issues
A comparison of the two technologies on various parameters is provided below:

Figure 86: Comparison of WLANs and 3G

Parameter WLANs 3G
Data Speeds 1-54Mbps Up to 2Mbps
Cost to customer Cheaper than 3G150 More expensive than WLANs
Range Up to 250 feet Nation-wide coverage
Penetration of Solid Obstacles Cannot penetrate buildings Can penetrate most buildings and solid obstacles. May not
penetrate basements and underground structures
Market Penetration Becoming extremely popular with business travelers and Has been rolled out in South-East Asia and Europe. Popular in
universities worldwide Japan and Korea
Availability Available at hotspots. E.g. Hotels, universities, Starbucks coffee Available nation-wide where operators have rolled out 3G
houses etc. It can also be deployed in large enterprises. networks
Spectrum Operates in the unlicensed 2.4GHz and 5GHz bands Operates in the licensed 800-960MHz, 1.7-2GHz and 2.5-2.7GHz
bands
Security Suffers from security flaws involving encryption Comparatively more secure than WLANs
Interference The unlicensed 2.4GHz band is vulnerable to interference from Few interference issues
devices such as cordless phones and microwave ovens, as well
as Bluetooth devices.
Cost to operator Low cost. Setting up a WLAN access point only costs about High cost.
USD 1000151.
Source: Deutsche Bank, commNOW152

Conclusion
Although WLANs pose a threat to data service revenues of 3G operators, they are
expected to complement (rather than compete with) 3G data services. While 3G
networks provide universal coverage, the limited range of WLANs reduces their
scope of use. The most common access devices for 3G networks are mobile
phones and PDAs, while the most common access devices for WLANs are laptops
and PCs fitted with WLAN cards. Customers use WLANs and 3G in different areas
and on different devices (usually for different applications). In practice, therefore,
WLANs and 3G are not expected to compete head on, although there will clearly be
some areas of overlap.

Some operators are exploring ‘hybrid’ solutions that offer WLAN speeds at select
hotspots and regular 3G services elsewhere including allowing roaming between
WLANs and 3G networks153. A SWOT analysis of such hybrid solutions is presented
in the table below:

150
Source: ‘Is WLAN a threat to 3G?’ eWirelessNews Press Release, October 30, 2002
151
Source: ‘Is WLAN a threat to 3G?’ eWirelessNews Press Release, October 30, 2002
152
Source: ‘Wireless LANs: Global Trends in the Workplace and Public Domain’, February 2002 (Link:
http://www.commnow.com/NL_DownLRWL.asp)
153
Source: ‘T-Mobile and Lucent test 3G/WLAN roaming’, ComputerWeekly.com, January 22, 2003 (Link:
http://www.computerweekly.com/Article118837.htm)

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Figure 87: SWOT Analysis of WLAN-3G Hybrid Solutions from an Operator’s

Perspective
Strengths Weaknesses
WLAN model plays to key strengths of Operator, i.e. need to have Network infrastructure and operating costs.
effective service launch, authentication, reliability, competitive, ease
Potentially confusing strategy, i.e. should
of use, etc.
customer perceive WLAN as a tactical solution
Large base of existing customers; has network and billing prior to the arrival of full 3G services?
relationship with customer.
Customer segment is ill—defined.
Fully integrated model, opportunity for cross— and up—sell of services
to WLAN Customer base and offer unified billing of services to
customer.
Can retain maximum percentage of revenue if supporting fully
integrated (i.e. end—to—end) model.
Well—placed to acquire prime sites.
Opportunities Threats
Potential new channel for services. Licence exemption and low barrier to entry may
undermine 3G investments.
Provides early 3G-like services for customers, which operators
should define. Potential cannibalisation of 3G investments, i.e.
competitiveness of WLAN services could act to
Provision of better personalisation / profiling, in particular for high—
de—value future 3G services.
value customers.
Source: Deutsche Bank

The success of these hybrid solutions depend on the development of handsets /

laptops that are capable of switching between WLAN and 3G modes. Also, the
absence of high-quality VoIP applications for WLANs limits their use for voice
applications (which are expected to continue as the major application for 3G
networks).

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Glossary
3G (Third Generation)
The collective name used to describe mobile systems able to support a wide range
of Mobile Internet services, operating with greater bandwidth. 3G also goes by the
complicated monikers, IMT-2000, and UMTS (for Improved Mobile Telephone
Service 2000, and Universal Mobile Telecommunications System respectively).
Includes WCDMA, CDMA2000 1XEV, CDMA2000 1XTEME, LAS CDMA etc.

For further details, refer the ‘Wireless Media’ section of chapter 3 (Communication
Media).

AC
Alternating current (AC) occurs when charge carriers in a conductor or
semiconductor periodically reverse their direction of movement. Hence, the current
changes periodically from positive to negative and vice-versa.

Attenuation
Attenuation is a term that refers to any reduction in the strength of a signal.
Attenuation occurs with any type of signal, whether digital or analogue. Sometimes
called loss, attenuation is a natural consequence of signal transmission over long
distances. The extent of attenuation is usually expressed in units called decibels
(dBs).

In conventional and fibre optic cables, attenuation is specified in terms of the

number of decibels per foot, per 1,000 feet, per kilometre, or per mile. The less the
attenuation per unit distance, the more efficient the cable. When it is necessary to
transmit signals over long distances via cable, one or more repeaters can be
inserted along the length of the cable. The repeaters boost the signal strength to
overcome attenuation. This greatly increases the maximum attainable range of
communication.

Bandwidth
Bandwidth represents the amount of data that can be transmitted in a fixed amount
of time. For digital devices, the bandwidth is usually expressed in bits per second
(bps) or bytes per second. For analogue devices, the bandwidth is expressed in
cycles per second, or Hertz (Hz).

The available bandwidth in a packet switched network is like a road. Individual cars
(packets) can drive down the road, and there is no imposed limit to how many of
them can try to do so at the same time. But as the density of cars exceeds the
road’s capacity, the road becomes congested, collisions may occur, and packets are
lost.

The available bandwidth in an optical network is more like a train service. Trains are
scheduled to leave at regular intervals, and anyone wishing to travel (send data)
must book a seat (wavelength or time slot) on a train. Once the seat is booked,
travel is completely reliable and there is no possibility of congestion.

Base Station
The central radio transmitter/receiver that maintains communications with mobile
radiotelephone sets within a given range (typically a cell site).

Basic Rate Interface

See also BRI

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Bearer Channels
See also B-Channels

B-Channels
Bearer Channels (B-channels) are 64Kbps channels on ISDN connections used for
data/voice transmissions. Refer the section on ‘Wired Media’ in ‘Communication
Media’ for more details.

See also: ISDN, D-Channels

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

See also: ISDN, N-ISDN

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

See also: ISDN, PRI

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

See also: Narrowband

Broadband ISDN
See B-ISDN

Cable Modem
Cable Modems allow cable TV (CATV) users to access the Internet through their
local cable operator. Refer to the section on ‘Wired Media’ in ‘Communication
Media’ for more details.

Se also: Dial-up Connection, DSL

Cable Modem Termination System

See CMTS

Carrier Systems
See Multiplexing

Cell-ID
Cell-ID is a network-based solution to determine the position of a cellular device
user. In a network-based solution, the network computes the position of the user.
No hardware or software computation takes place in the end-device. These
techniques thus, work with legacy phones. Cell-ID technique basically determines

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the location according to the strongest base station signal the end-device receives
and thus the approximate position of the user. The accuracy of this technique
depends on how closely the cells are located.

CDMA
A technology for digital transmission of radio signals between, for example, a mobile
telephone and a radio base station. In CDMA, a frequency is divided using codes,
rather than in time or through frequency separation. Implemented in 800 and 1900
MHz systems around the world. Refer the section on ‘Wireless Media’ in
‘Communication Media’ for further details.

CDMA One
Also written as cdmaOne, it refers to the original ITU IS-95 (CDMA) wireless
interface protocol that was first standardized in 1993. It is considered a second-
generation (2G) mobile wireless technology. Refer the section on ‘Communication
Systems’ in ‘Communication Networks’ for further details.

See also: CDMA

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

See also CDMA

Cellular
In cellular mobile service the coverage area is divided into adjacent cells. For further
details, refer the section on ‘Communication Systems’ in ‘Communication
Networks’.

Channel
In telecommunications in general, a channel is a separate path through which
signals can flow. In the public switched telephone network (PSTN), a channel is one
of multiple transmission paths within a single link between network points.

In optical fibre transmission using dense wavelength-division multiplexing (DWDM),

a channel is a separate wavelength of light within a combined, multiplexed light
stream.

Churn
A measure of the number of customers who leave or switch to another service
provider, usually stated as a percentage of the total subscriber base

Circuit Board
See PCB

Circuit Switching
Networks are interlinked by switches. The switching across these networks may be
connection oriented or connection less. A connection oriented switching requires a
dedicated circuit or channel for transmission.

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See Also: Packet Switching

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

See also: ILECs

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

See also: Cable Modem

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

See also: Twisted-Pair Cable

Code Division Multiple Access

See CDMA

Computer Network
A computer network is an interconnected collection of autonomous computers.
Refer the section on ‘Computer Networks’ in ‘Communication Networks’ for further
details.

See also: LAN, MAN, WAN

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

See also: Lit Fibre

D-Channels
See Delta Channels.

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

See also ISDN, B-Channels

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

See also: Multiplexing

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Dense WDM
See also DWDM

Dial-up Connection
A Dial-up connection uses the same infrastructure and frequency bands as a normal
telephone connection to access the Internet. Refer the section on ‘Dial-Up
Connections’ in ‘Communication Media’ for more details.

See also: DSL, Cable Modem

Digital Subscriber Line

See also DSL

DSL
It is a high-speed connection that uses the same lines as normal telephones, but on
frequencies different from voice conversations. Refer the section on ‘Copper Wires’
in ‘Communication Media’ for more details.

See also: Dial-up Connection, Cable Modem

DSL Access Multiplexer

See also DSLAM

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

See also: DSL, DSL Modem

DSL Modem
The DSL modem sends Internet data over the high frequency bands of telephone
wires in a DSL connection. Refer the section on ‘DSL’ in ‘Communication Media’ for
more details.

See also: DSL, DSLAM

DSL Transceiver
See also DSL Modem

DWDM
Dense Wavelength Division Multiplexing (DWDM) is a technology that puts data
from different sources together on an optical fibre, with each signal carried at the
same time on its own separate light wavelength. Using DWDM, up to 80 (and
theoretically more) separate wavelengths or channels of data can be multiplexed
into a light stream transmitted on a single optical fibre. Each channel carries a time
division multiplexed (TDM) signal. In a system with each channel carrying 2.5 Gbps
(billion bits per second), up to 200 billion bits can be delivered per second by the
optical fibre. DWDM is also sometimes called Wave Division Multiplexing (WDM).
Since each channel is de-multiplexed at the end of the transmission back into the
original source, different data formats being transmitted at different data rates can
be transmitted together. Specifically, Internet (IP) data, Synchronous Optical
Network data (SONET), and Asynchronous Transfer Mode (ATM) data can all be
travelling at the same time within the optical fibre.

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E911
911 is the official national emergency number in the United States and Canada. The
wireless Enhanced 911 (E911) rules seek to improve the effectiveness and reliability
of wireless 911 service by providing 911 dispatchers with additional information on
wireless 911 calls.

E-OTD
The E-OTD (Enhanced Observed Time Difference) method is based on
measurements in the MS (Mobile Station) of the time difference between the
arrivals of bursts from nearby pairs of Base Stations. It is employed to calculate the
position of the MS and may be used for LCS (LoCation Service).

See also: Location Based Services

Fibre Optics
A technology that uses glass (or plastic) threads (fibres) to transmit data.

Frequency
Frequency is the number of complete cycles per second in alternating current. The
standard unit of frequency is the hertz, abbreviated Hz. If a current completes one
cycle per second, then the frequency is 1 Hz; 60 cycles per second equals 60 Hz
(the standard alternating-current utility frequency in many countries).

General Packet Radio Services

See also GPRS

GPRS
GPRS is a packet-based wireless communication service that promises data rates
from 56 up to 114 Kbps and continuous connection to the Internet for mobile phone
and computer users. The higher data rates will allow users to take part in
videoconferences and interact with multimedia Web sites and similar applications
using mobile handheld devices as well as notebook computers. GPRS is based on
GSM communication. For further details, refer the section on ‘Communication
Systems’ in ‘Communication Networks’.

See also: GSM

GPS
The GPS (Global Positioning System) is a ‘constellation’ of 24 well-spaced satellites
that orbit the Earth and make it possible for people with ground receivers to pinpoint
their geographic location. The location accuracy is anywhere from 100 to 10 meters
for most equipment.

GSM
GSM (Global System for Mobile communication) is a digital mobile telephone
system that is widely used in Europe and other parts of the world. GSM uses a
variation of time division multiple access (TDMA) and is the most widely used of the
three digital wireless telephone technologies (TDMA, GSM, and CDMA). GSM
digitises and compresses data, then sends it down a channel with two other
streams of user data, each in its own time slot. It operates at either the 900 MHz or
1800 MHz frequency band. GSM is the de facto wireless telephone standard in
Europe. Refer the section on ‘Communication Systems’ in ‘Communication
Networks’ for more details.

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Handover
See also Hand-Off

HDR
The main component of CDMA2000 1xEV is High Data Rate technology (HDR). By
dedicating an entire 1.25MHz of bandwidth to packet data, HDR provides data
speeds up to 2.4 Mbps. This allows data packets to be sent to many different users
on the same traffic channel. Upload speed is up to 153 kbps.

See also: CDMA

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

See also: WLAN

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

See also: CLECs

Integrated Services Digital Network

See also ISDN

Internet Protocol
The Internet Protocol (IP) is the method or protocol by which data is sent from one
computer to another on the Internet. Each computer on the Internet has an IP
address that uniquely identifies it from all other computers on the Internet. When
one sends or receives data (for example, an e-mail note or a Web page), the
message gets divided into little chunks called packets. Each of these packets
contains both the sender's Internet address and the receiver's address. Any packet
is sent first to a gateway computer that understands a small part of the Internet.
The gateway computer reads the destination address and forwards the packet to an
adjacent gateway that in turn reads the destination address and so forth across the
Internet until one gateway recognizes the packet as belonging to a computer within
its immediate neighborhood or domain. That gateway then forwards the packet
directly to the computer whose address is specified.

Internet Service Provider

See also ISP

Internet Telephony
See also VoIP

IPv6
IPv6 is an extension of the Internet Protocol (IP) that uses 128 bits for encoding IP
addresses instead of the current 32 bits. This exponentially increases the number of
devices that can be connected to the network and may some day be used to assign
IP addresses to every telecom device on earth.

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See also: IP

ISDN
Integrated Services Digital Network (ISDN) is a design for a completely digital
telecom network. Refer the section on ‘Copper Wires’ in ‘Communication Media’
for more details.

See also: N-ISDN, B-ISDN

ISP
Internet Service Providers (ISPs) provide a range of IP based services including
Internet access and related connectivity, web hosting, data warehousing and
targeted information services.

LAN
LANs are networks within a single building or campus and operate within distances
of a few kilometres. Refer the section on ‘Classification of Networks’ in
‘Communication Networks’ for further details.

See also: Computer Network, MAN, WAN, WLAN

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

See also: Dark Fibre

Load Coils
Standard voice signals become weak (i.e., attenuate) when the copper portion of the
wire is longer than 6kms. ‘Load Coils ’ are used to extend the range of the local
loop. These coils are added at specific intervals along the loop. Load coils do not
allow transmission of high frequency signals. Thus, modern broadband services
such as ADSL and ISDN cannot be transmitted on lines with load coils. New digital
telephone services also require ‘unloaded’ copper pairs.

Local Area Network

See also LAN

Location-based Services
Location-based services (LBS) are services that exploit knowledge about where an
information device user is located. For example, the user of a wireless-connected
smart phone could be shown ads specific to the region the user is travelling in.

MAN
A Metropolitan Area Network (MAN) is a bigger version of a LAN that can cover up
to an entire city. Refer the section on ‘Classification of Networks’ in
‘Communication Networks’ for more details.

See also: Computer Network, LAN, WAN

Metropolitan Area Network

See also MAN

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Microprocessor
A microprocessor is a computer processor on a microchip. It's sometimes called a
logic chip. It is the "engine" that goes into motion when you turn your computer on.
A microprocessor is designed to perform arithmetic and logic operations that make
use of small number-holding areas called registers. Typical microprocessor
operations include adding, subtracting, comparing two numbers, and fetching
numbers from one area to another.

MMS
MMS allows for non-real-time transmission of various kinds of multimedia contents,
such as images, audio, and video clips.

See also: SMS

Modulation
Modulation is the process of combining an information signal (to be transmitted) and
a carrier signal (a signal used to transmit the information through a transmission
medium). The information signal can be voice or data. The carrier signal is usually an
electromagnetic wave.

For further details on modulation techniques, please refer to ‘Communication

Media’.

Multimedia Messaging Service

See also MMS

Multimode Fibre
Multimode fibres transmit more than one ray of the light simultaneously. Refer the
section on ‘Optic Fibre’ in ‘Communication Media’ for more details.

See Also: Single Mode Fibre

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

See also: De-multiplexing

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

See also: Broadband

Narrowband ISDN
See also N-ISDN

Near-Far Problem154
A critical problem in CDMA is the near-far problem. This problem occurs due to the
lack of effective power control. If all mobiles were to transmit at a fixed power the

154
Source: http://ace.unm.edu/Documents/el-osery.htm

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mobile closest to the base station, from communication point of view, will
overpower all others signals. Another reason for power control is the battery
lifetime. If the mobile station is always transmitting at higher power than that
needed to maintain an acceptable Signal to Interference Ratio (SIR), the battery will
have a short lifetime. With power control, each mobile station may transmit using
the minimum power needed for maintaining the required signal to interference ratio,
and hence maximizing the system capacity by keeping the noise floor as small as
possible.

See also: CDMA.

N-ISDN
Narrowband ISDN (N-ISDN) is An ISDN design that works on normal (copper)
telephone wires and is primarily intended for narrowband applications. Refer the
section on ‘ISDN’ in ‘Communication Media’ for more details.

See also: ISDN, B-ISDN

Operating System
See also OS

Optic Fibre
See also Fibre Optics

OS
An Operating System (OS) is a program that acts as an interface between the
hardware and other application programs in a computer.

See also: Computer Network

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

See also: Circuit Switching

PCM
PCM (pulse code modulation) is a digital scheme for transmitting analogue data. The
signals in PCM are binary; that is, there are only two possible states, represented by
logic 1 (high) and logic 0 (low).

Personal Handy-phone Systems (PHS)

These are portable mobile devices that act as cordless phones. These devices are
extensively used in some Asian countries such as Japan and Korea.

PRI
The Primary Rate Interface (PRI) is an ISDN interface with scalable bandwidth and is
intended for office use. Refer the section on ‘ISDN’ in ‘Communication Media’ for
more details.

See also: ISDN, BRI

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Primary Rate Interface

See also PRI

Protocol
Network components can understand and communicate effectively only when there
exists a common language and a set of rules, which define the guidelines for
communication. A protocol is defined as a set of such rules and guidelines.

See also: Transmission Protocol, Internet Protocol

PSTN
PSTN (public switched telephone network) is the world's collection of
interconnected voice-oriented public telephone networks, both commercial and
government-owned. It's also referred to as the Plain Old Telephone Service (POTS).

Roaming
Roaming is the ability to access mobile telephony and data services when the user
is outside his regular service provider’s network coverage area. The user gains
access through a local service provider’s infrastructure (the local service provider
will have a revenue-sharing agreement with the remote service provider on
roaming).

Router
A router is a specialised piece of network equipment used to connect two or more
networks and ensures that data transmitted is directed towards the right network.
Refer the section on ‘Computer Networks’ in ‘Communication Networks’ for more
details.

See also: Computer Network

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

See also: SONET

Short Messaging Service

See also SMS.

SIG
A SIG is a group of individuals or organisations having a narrow field of interest in a
technical area. Refer to ‘The Regulatory Environment’ for more details.

SIM Card
The SIM (Subscriber Information Module) card holds all of a subscriber's personal
information and phone settings. In essence, it is the subscriber's authorization to
use the network. It also holds the phone number, personal security key and other
data necessary for the handset to function. The card can be switched from phone to
phone, letting the new phone receive all calls to the subscriber's number.

See also: GSM

Single Mode Fibre

Single mode fibres accept only one light ray at a time. Refer the section on ‘Optic
Fibre’ in ‘Communication Media’ for more details.

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14 January 2004 Telecommunications Telecoms for Beginners

See Also: Multi Mode Fibre.

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

See also: MMS

Soft Handover155
A process by which control of a mobile phone is transferred between two base
stations without interrupting the conversation.

Soft Capacity156
This means that there is no hard limit to how many users we can allow on the
system. Each time a user is added, the noise floor for the other users is increased
by a little bit. CDMA has the advantage of having more system capacity than the
other multiple access schemes.

See also: CDMA

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

See also: SDH

Special Interest Group

See also SIG

Spread Spectrum Modulation

Spread Spectrum (SS) Modulation is a modulation process where the output
modulated signal has a much greater bandwidth than the original, un-modulated
signal. Hence, the modulation process ‘spreads’ the spectrum of the signal. The
resulting signal is also called an SS signal, and CDMA is often denoted as spread-
spectrum multiple access (SSMA).

SS modulation techniques use a ‘code signal’ in addition to the original data signal
(also called the ‘information-bearing signal’). The code signal is known to both
sender and receiver and is used while encoding and decoding the SS signal.

See also: CDMA, Modulation

Switch
A switch is a device that channels incoming data from any of multiple input ports to
the specific output port that will take the data toward its intended destination.

See also: Router

155
Source: http://www.soi.wide.ad.jp/class/20020005/materials_for_student/04/4-CDMA.pdf
156
Source: http://ace.unm.edu/Documents/el-osery.htm

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Synchronous Digital Hierarchy

See also SDH

Synchronous Optical Network

See also SONET

Telegraph
A communications system that transmits and receives simple unmodulated electric
impulses, especially one in which the transmission and reception stations are
directly connected by wires.

Transmission Protocol
Transmission protocols are the special sets of rules that end points in a
telecommunication connection use when they communicate.

See also: Protocol, Internet Protocol

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

See also: Coaxial Cable

Unlit Fibre
See also: Dark Fibre

Virtual Private Network

See also: VPN

Voice over Internet Protocol

See also: VoIP

VoIP
VoIP is a set of facilities used in delivering voice information over the Internet using
the Internet Protocol (IP).

For further details, refer the section on ‘Converged Networks’ in ‘Communication

Networks’.

See also: IP

VPN
A Virtual Private Network (VPN) is a private network that uses a public network to
link remote sites. Refer the section on ‘Classification of Networks’ in
‘Communication Networks’ for more details.

See also: Computer Network, LAN, MAN, WAN

WAP
WAP (Wireless Application Protocol) is a specification for a set of communication
protocols to standardize the way that wireless devices, such as cellular telephones
and radio transceivers, can be used for Internet access, including e-mail, the World
Wide Web, newsgroups, and Internet Relay Chat (IRC).

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Wavelength Division Multiplexing

See also WDM

WAN
A Wide Area Network (WAN) is a network that spans a large geographical area,
often a country or continent. Refer the section on ‘Classification of Networks’ in
‘Communication Networks’ for more details.

See also: Computer Network, LAN, MAN

W-CDMA
WCDMA, an ITU standard derived from code- CDMA, is officially known as IMT-
2000 direct spread. WCDMA is a 3G mobile wireless technology offering much
higher data speeds to mobile and portable wireless devices. WCDMA can support
mobile/portable voice, images, data, and video communications at up to 2 Mbps
(local area access) or 384 Kbps (wide area access). The input signals are digitised
and transmitted in coded, spread-spectrum mode over a broad range of frequencies.
See also ‘Communication Networks’ for further details.

WDM
Wavelength division multiplexing (WDM) is a technology that transmits data from
different sources together on an optical fibre, with each signal carried at the same
time on its own separate light wavelength. Refer the section on ‘Optic Fibre’ in
‘Communication Media’ for more details.

See also: DWDM.

Wide Area Network

See also WAN

Wideband Code-Division Multiple Access

See also W-CDMA

Wi-Fi
Wi-Fi ("wireless fidelity") is the popular term for a high-frequency wireless local area
network (WLAN).

See also: WLAN

Wireless Local Loop

See also WLL

Wireless LAN
See also WLAN

WLAN
A wireless LAN (WLAN) is a wireless extension of, or alternative to, traditional
LANs. Refer the section on ‘Classification of Networks’ in ‘Communication
Networks’ for more details.

See also: Computer Network, LAN

WLL
A radio access technology that links subscribers into a fixed public telecom network.
The radio link replaces the traditional wired local loop.

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14 January 2004 Telecommunications Telecoms for Beginners

Evolution of Telecom Services: excellent reading for anybody expecting to have to

take part shortly in a telco trivia quiz.

Figure 88: Timeline of Important Events in Telecom Evolution in Europe (from a UK perspective!)
Year Event
1794 Frenchman Claude Chappe constructed his 'Tachygraphe', the first working telegraph machine, which transmitted messages between Paris
and Lille.
n This marked the start of telecommunication in Europe
1839 The world's first commercial telegraph line using the Cooke and Wheatstone five-needle system was commissioned by the Great Western
Railway and built between Paddington and West Drayton, a distance of 13 miles.
n Marked the launch of first commercial telecom service
n The International Telegraph Union was formed by 20 participating countries, The Union was later to become today's International
1865
Telecommunications Union.
1878 n The Post Office provided its first telephones. The administration of telegraphs is absorbed by the postal services

1882 W H Preece, Post Office Engineer-in-Chief and Electrician experimented in wireless telegraphy between Southampton and Newport, Isle of
Wight.
n Marked the start of wireless communication in Europe

1898 Marconi established the first permanent wireless station

1903 A cheap rate telephone service was introduced by the Post Office
n First Public telecom service in Europe

1906 The Post Office's first coin-operated call box was installed by the Western Electric Company at Ludgate Circus, London.
n The Wireless Telegraphy Board was set up to coordinate interference problems in radio communication in the English Channel,
1918
marking the beginning of the frequency management structure that exists today
1932 The International Telecommunications Union was created from the International Telegraph Union and the International Radiotelegraph
Union.
n The first large centralised Directory Enquiry Bureau was opened in August in the UK.
1932
1937 n The 999 emergency telephone service was made available to London subscribers

1951 Telephone Act became a law

n It enabled the Postmaster-General to set rental charges and so forth by statutory regulation

1958 Subscriber Trunk Dialing (STD) service

n Telephone callers were able to make trunk calls automatically without the aid of the operator

1963 International Subscriber Trunk Dialing (ISD) was introduced

1965 n INTELSAT 1 (Early Bird) the first commercial communications satellite launched

1969 The Post Office Act 1969 established the General Post Office (GPO) as a statutory corporation. The first cable television installation in the
UK was introduced
1980 The British Telecommunications Bill received royal assent.
Led to splitting of the GPO into Post and British Telecom

1977 A radio paging service was opened in London

1978 The first optical cable system in Europe to form part of the public telephone network was installed between the Post Office Research
Centre at Martlesham and Ipswich telephone exchange.
1980 British Telecom began operating under a licence and independent suppliers of telephones were permitted.

1982 The Mercury consortium received a licence to build and operate an independent network for telecom services in the UK.
Nordic Telecom and Netherlands PTT propose to CEPT (Conference of European Post and Telecommunications) the development of a new
digital cellular standard that would cope with the ever-burgeoning demands on European mobile networks.
The European Commission (EC) issues a directive, which requires member states to reserve frequencies in the 900 MHz band for GSM to
allow for roaming.
1983 The Telecommunications Bill was reintroduced in the UK.
n The Bill allowed for the selling of BT and setting up of Oftel
n Oftel was created in 1984

1987 13 operators and administrators from 12 areas in the CEPT GSM advisory group sign the charter GSM (Groupe Spéciale Mobile) MoU "Club"
agreement, with a launch date of 1 July 1991.
1991 Oftel takes over the UK numbering scheme
n Introduced number portability

1993 Vodafone started offering GSM digital services.

Mercury One-2-One launched the first DCS 1800 network in the UK

1995 GSM MoU is formally registered as an Association registered in Switzerland - 156 members from 86 areas.

1996 Liberalisation of telecommunications infrastructure and liberalisation of telecommunications services across Europe

2003 All EU states implemented the EU Harmonized Regulatory Framework

n All communication services - radio, telecom, IT and television — will be regulated under a common platform
n All forms of communication licensing except for the spectrum had been abolished
Source: Deutsche Bank

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14 January 2004 Telecommunications Telecoms for Beginners

Disclosures
Additional Information Available upon Request

For disclosures pertaining to recommendations or estimates made on a security mentioned in this report, please
visit our global disclosure look-up page on our website at http://equities.research.db.com.

The views expressed in this report accurately reflect the personal views of the
undersigned lead analyst(s) about the subject issuer and the securities of the issuer.
In addition, the undersigned lead analyst(s) has not and will not receive any
compensation for providing a specific recommendation or view in this report.
Martin Mabbutt

Rating key Rating dispersion and banking relationships

Buy: Total return expected to appreciate 10% or more over a

1200 46% 44%
12-month period
1000
Hold: Total return expected to be between 10% to —10%
over a 12-month period 800

Sell: Total return expected to depreciate 10% or more over a 600

12-month period 400 10% 22% 26%
200 13%
0
Sell Hold Buy

Companies Covered Cos. w/ Banking Relationship

Global Universe

Deutsche Bank AG Page 159

14 January 2004 Telecommunications Telecoms for Beginners

Global Telecom research team

EUROPE GLOBAL TELECOM STRATEGY USA
Wireline
Martin Mabbutt +44 20 7545 0625 Martin Mabbutt +44 20 7545 0625 Viktor Shvets +1 212 250 7250
[email protected] [email protected] [email protected]
Guy R. Peddy +44 20 7545 8490 EEMEA Andrew Kieley +1 212 250-7817
[email protected] Iouli Matevossov +7501 797 5193 [email protected]
Vivek Khanna +44 20 7547 2905 (Russia) [email protected] Edward Bryant +1 212 250 0771
[email protected] Max Koep +27 11 775 7264 [email protected]
Wireless (South Africa) [email protected] Nigel Coe +1(212) 250-7808
Gareth Jenkins +44 20 7547 5849 Alexey Yakovitsky [email protected] [email protected]
[email protected] (Russian Telecom Sector)
Prabhdeep Singh +44 20 7547 2906 LATIN AMERICA
[email protected] Carlos Constantini + 55 11 3168 8452
carlos.constantini@deutsche ixe.com AUSTRALASIA
Specialist Sales Rene Pimentel + 1 646 442 0720
James Dougall +44 20 7545 1191 [email protected] Richard Long +61 2 9258 1529
[email protected] ASIA [email protected]
Audrey Wiggin +44 20 7545 0707 Tucker Grinnan +852 2203 6252 Peter Roberts +61 2 9258 2013
[email protected] [email protected] [email protected]
Other Europe Fung-Ee Lim +852 2203 6251 JAPAN
Carola Bardelli (Italy) +39 02 8637 9708 [email protected] Tetsuro Tsusaka +813 5156 6708
[email protected] Piyush Mubayi +852 2203 6186 [email protected]
Ivano Brullo (Italy) +39-02-86379706 [email protected] Miwako Nakamura +81(3)5156-6759
[email protected] Jae Min Lee +822 316 8903 miwako.nakamura @db.com
Pontus Grönlund (Nordic) +358 9 2525 2552 (Korea) [email protected]
[email protected] Kenny Liu +852 2203 6180
Peter Irblad (Nordic) +44 20 754 53805 [email protected]
[email protected] Molly Chen +852 2203 6227
[email protected]
Source: Deutsche Bank

Page 160 Deutsche Bank AG

Deutsche Bank AG

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