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A Business Case Study for a Cognitive Radio System based on a Wireless Sensor NetworkPål Grønsund, Ole Grøndalen, Markku Lähteenoja
CRSM 2010, IBBT-MIT Brussels, November 22nd, 2010
Spectrum owner 1
Spectrum owner 2
Spectrum owner N
Joint venturesystem operator
SEVENTH FRAMEWORK PROGRAMME
THEME ICT-2007-1.1 The Network of the Future
Project 216076
The SENDORA concept can be described as a "Sensor Network aided Cognitive Radio" technology
Primary Network
Cognitive Network
Wireless Sensor Network
queries on spectrum status
reports on spectrum status
The SENDORA system architecture has 3 main parts: sensor network, communication network and fusion centre
The remainder of this presentation will focus on an example of a SENDORA business case for a “Joint Venture”
Cash Flow
Customers
Revenue
OPEX
Cost
CAPEX
Sensors and fusion centre
Cognitive functionalities
New sites
Customer acquisition
Operation & maintenance
Site rental
Overview of the business case for a “Joint Venture”
Introduction to Cash Flow analysis and business case assumptions
Cash Flow results and sensitivity analysis
A set of spectrum owners establishes a “Joint Venture” that gets the right to use its owners unused spectrum
Spectrum owner 1
Spectrum owner 2
Spectrum owner N
Joint ventureSENDORA system operator
At least one of the owners is an operator having a cellular infrastructure in the area
Easy to implement from a regulatory point of view since only the joint venture owners’ own spectrum are used
Rationale for the “Joint Venture” scenario
The joint venture can be composed in a way that makes it very probable that:
• at least some unused spectrum is available at all times
• little new cognitive radio access infrastructure is required
The scenario is an example of spectrum sharing, which can be seen as a natural extension of infrastructure sharing
• The joint venture is a good way to share the expenses and incomes between the companies
In the business case scenario, the joint venture will
• Deploy the system in a hypothetical European city:
o 1 million inhabitants
o covering an area of 200 km2,
downtown area is 50 km2
• Study period: 2015 – 2020
NOTE!SENDORA is an innovative concept and much research and development remains before commercial realizations will appear
=> the input data for the business case is uncertain
=> the results give indications, not definite answers or strong conclusions
Cash Flow
Customers
Revenue
OPEX
Cost
CAPEX
Sensors and fusion centre
Cognitive functionalities
New sites
Customer acquisition
Operation & maintenance
Site rental
Traditional cash flow analysis is used to get an indication of the profitability, enhanced with sensitivity analysis
Discount rate: 10%
Revenue assumptions
• ARPU (Average revenue per user) per month for nomadic broadband user:
o 20 € (2015) decreasing to 18,1 € (2020)
• Number of nomadic broadband subscribers for the joint venture
o 10 000 (2015) increasing to 100 000 (2020)
Number of users
0
20 000
40 000
60 000
80 000
100 000
120 000
2014 2015 2016 2017 2018 2019 2020 2021
Year
Customers
Revenue
Fixed sensors
• Density: 65 sensors per km2
• Roll-out
o 2015: 50 km2 (most dense areas of the city)
o 2016 and 2017: 75 km2 for each year
• Sensor price 300 € (2015) decreasing to 177 € (2020)
• Installation 40 € (2015) decreasing to 35 € (2020)
Integrated sensors
• 50% of the cognitive terminals have an integrated sensor
CAPEX (CApital EXPenditure) assumptionsCost
CAPEX
Sensors and fusion centre
Cognitive functionalities
New sites
Fusion centre
• One fusion centre for the city
• One time CAPEX 150 000 € in 2015 and10 000 € for installation
Cognitive functionalities
• Starting from 50 “cognitive” base stations in 2015 and increasing to 450 in 2020
• CAPEX for updating a base station is 5000 € (2015) decreasing to 2953 € (2020)
• Cognitive functionality in the terminals is assumed to be a part of the normal terminal development
New sites
• 60 000 € per new site establishment
CAPEX (CApital EXPenditure) assumptionsCost
CAPEX
Sensors and fusion centre
Cognitive functionalities
New sites
OPEX for fixed sensor network
• Power supply, maintenance visits
• 15 € (2015) per sensor per month decreasing to 13,6 € (2020)
OPEX for base stations
• Maintenance, backhaul rental and site rental
• 1000 € (2015) per base station per month decreasing to 904 € (2020)
OPEX (OPerational EXPenditure) assumptions
OPEX
Cost
Customer acquisition
Operation & maintenance
Site rental
General OPEX
• Customer acquisition, operation of the company
• 8 € (2015) per user per month decreasing to 5,6 € (2020)
• Net Present Value (NPV): 1,36 million € (2015-2020)
• Internal Rate of Return (IRR): 16%
• Pay-back period about 5 years
Cash flow results with assumptions presented above show that there is a potential for profitability
Required fixed sensor density might be reduced by e.g.:
• Improved sensing technology
• More terminals with integrated sensors
It will be a challenge to produce sufficiently cheap fixed sensors:
• Includes inter-sensor communication
• Outdoor environment
Fixed sensorsper km2
NPV [million Euro]
10 11.4430 7.7765 1.36 Base case72 0
120 -8.72
Fixed sensor price [Euro]
NPV [million Euro]
50 3.98150 2.93300 1.36 Base case430 0500 -0.74700 -2.841000 -5.99
Sensitivity analysis show that sensor performance and costs are critical parameters
Fixed sensors must be very power efficient and robust:
• Power consumption must be low
• High number of sensors => MTBF must be very low for each
New sites should be avoided:
• Will favour joint ventures of operators with “complementary” base station sites
Fixed sensor OPEX [€/month/sensor]
NPV [million Euro]
5.0 6.8210.0 4.0915.0 1.36 Base case17.5 020.0 -1.3725.0 -4.10
Share of new sites
NPV [million Euro]
0 % 1.36 Base case6 % 0.0010 % -0.8920 % -3.0330 % -5.2840 % -7.4350 % -9,67
Sensitivity analysis show that sensor OPEX and share of new sites are critical parameters
This business case is probably one of the best cases for SENDORA, because it is based on the “joint venture” idea
• Free access to frequency resources from the mother companies
• Good possibilities for re-using existing infrastructure
• Exploit detailed knowledge of the primary systems
The accumulated cash flow is quite similar to many other infrastructure projects in telecommunication
• The joint venture must be patient with financial strength to wait a longer period for the ROI. But there is a potential for a long term profitability.
In summary and conclusion
The main value of this business case calculation is to identify the critical aspects for SENDORA profitability, so that the technical R&D work can focus on them. Examples of those are:
• Sensor network planning (density of sensors and coordination between fixed and integrated sensors)
• Sensor design to minimize CAPEX and OPEX
• Solutions that allow re-use of existing infrastructure and require few new sites
Questions?Pål Grønsund (http://palgronsund.com/about)