Cloud RAN Promises to Shape Future Wireless Networks

Wireless Cloud RANWe have released our annual Cloud RAN report with new insights and analysis on the development of this market during 2014. Cloud RAN is certainly gaining in interest in the operator community. This is due to practical reasons related to cost savings that can be realized first by the process of centralization and then by the virtualization of the radio access network. In our analysis of this market, we took a quantitative approach by analyzing the business case for different deployment scenarios (macro cell, HetNets) in different markets (Asia, North America), to determine a plausible evolution and market potential for Cloud RAN. The findings were extremely interesting as they exposed where Cloud RAN makes sense and under what conditions and use case scenarios. This is critical as Cloud RAN has impact on a number of other mobile network solutions such as small cells and distributed antenna systems (DAS).

The critical thing is to recognize that operators in Korea and Japan have already centralized major parts of the radio access network to drive lower operational costs. Therefore, the business case for centralization is well proven, albeit in certain market where conditions are favorable. Such conditions include fiber availability, but also a host of other elements which we uncover in our analysis. Given that the EBITDA margins of operators are sliding – into the 30% range, down from 50% – operators are bound to look at ways to save operational costs.

The second aspect of Cloud RAN is virtualization of infrastructure. This is a tricky area where much more development is required. Virtualization of the physical layer (PHY) of communication systems is hard only because of real-time processing requirements and high processing power requirements for several PHY layer functions (like channel coding) challenge the performance limits of general purpose processors (GPPs). Virtualization provides capex and further opex savings in addition to allowing base stations to provide a whole slew of new services based on applications that run on common compute platform. But the question remains on the optimal form of virtualization that provides the best cost/benefit ratio. Already several vendors have developed a clear view of this manifested in a defined approach to Cloud RAN implementation.

Another key point to Cloud RAN is the potential synergy with mobile edge compute (MEC) concepts.  MEC can be seen as a cloud server running at the edge of a mobile network and performing specific tasks that could not be achieved with traditional network infrastructure. MEC allows content, services and applications to be accelerated, increasing responsiveness from the edge. The mobile subscriber’s experience can be enriched through efficient network and service operations based on insight into the radio and network conditions. Such synergy promises to change the approach to designing next generation networks, which is 5G in today’s lexicon.

Back to our report: Cloud RAN: Enabling NFV in Mobile Networks. We examine the capacity and cost reduction benefits of Centralized RAN and Network Function Virtualization (NFV) in mobile networks.  The report includes deep technical insight and a five-year forecast of the migration for Centralized RAN (co-located baseband units) and Cloud RAN (Virtualized baseband pools). Both high power radio and low-power indoor radio scenarios are covered in this analysis. The study clarifies how mobile operators with access to dark fiber can implement LTE-Advanced features over the next two years, including CoMP and eICIC, and realize the benefits of LTE-Advanced.  Virtualization of the network will take place later in many cases…and this study provides details on the challenges to be solved for virtualization.

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About Frank Rayal
Technology strategy, markets and M&As

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