1. Build, Buy or Rent Backhaul Strategies for 4G Mark Kelley Formulate Wireless

2. Build, buy or rent?- Strategic Network Planning for Wireless Backhaul 4GWE Conference Los Angeles, CA 5 October, 2010

3. Wireless Network Business Wireless business remained strong through the recession In late 2008 and early 2009, US Economy (GDP) declined over 6% each quarter…but… US Wireless subscriber growth continued adding 14 million new subs in 2009 and on track to do the same this year (Frost and Sullivan) ARPU has grown 2% in this period, data ARPU up 25% (Aberdeen) WSJ – 13 July, 2010 – “Prepare for the Tower Surge” For investors seeking a defensive play in a time of economic shakiness, operators of cell towers stand out in the landscape.

4. ç Wireless Subscriber Growth Source: Visant Strategies

5. Annual Base Station Growth Source: Visant Strategies

6. Technology Deployment Source: Visant Strategies

7. New network weak link: backhaul Backhaul is Achilles heel of 3G and 4G networks Today’s typical BTS has 4-9 T1s (approximately 15 Mbps max) Some estimates are that 20% of existing BTSs may be “under provisioned” >50% by 2015 Cause of manysmartphone driven capacity issues Example : single 3-sector WiMAX BTS 3 x 10 MHz, 7 Mbps peak traffic/sector = 21 Mbps Will grow when second BTS added In 2005 – 3 x 1XRTT, 5 Mbps max LTE High use BTSs expected to require 100-300 Mbps by 2015 With 3 carriers/site will exceed 1 Gbps/tower

8. Backhaul Penetration TDM still holds the lions share of backhaul traffic – leased copper is close to 70% of today’s backhaul (source – ABI) This will migrate to a split approach before becoming all IP by the end of the decade

9. Fiber Connection: Slowly Increasing

10. Growth of 4G

11. Build or pay as you go: T1/E1 T1 prices have dropped precipitously (up to) $1500 down to <$500 today Still at >$100/ Mbps Linearly increasing cost with capacity – no “volume discount” Limit of many towers/rooftops => DS3 Still – it’s TDM 2G, not ideal for 3G, really not ideal for 4G Ethernet/IP

12. Upgrading carrier backhaul alternatives: Fiber installation Cost/time depends on distance and topology Cost effective where it’s easy/short (<500M) Prohibitive and time consuming in suburbs, exurbs, and rural But – virtually unlimited capacity Microwave Reusable gear can provide up multi-Gbps Cheaper/faster to deploy, shorter ROI Both are complex with multi-service (Ethernet, TDM) protocols, and both are used ideally Roll your own: self deploy

13. Increasing complexity of backhaul Exploding bandwidth >50Mbps/cell site Multi protocol 2G (voice, TDM), 3G (some data, TDM/IP), 4G (IP) Costs T1s don’t scale to tomorrow needs Huge CAPEX for re-piping backhaul to 80% of cell sites on legacy networks Summary – 2010 backhaul

14. Ideal Solution – Shared backhaul Tower model – shared critical component Many carriers see the network as the business Excellent viewpoint – emphasizing network quality But every carrier shares tower resources Higher quality can be maintained, at lower cost Five towers in the same location? Neutral host – splits costs, passes savings Complexity eliminated by focused effort of experts Costs lowered by sharing fat pipe of hybrid fiber/microwave network

15. Conclusions Carriers today spend $1300 (average) monthly on backhaul OPEX at each cell site The carrier business model is highly sensitive to OPEX The expected backhaul throughput requirements over 10 years (2005 – 2015) increase from 5 Mbps to 50 Mbps – but the cost cannot change Technology and network backhaul sharing can provide the means to meet the speed/latency/quality need, and maintain the cost