I recently visited a local Verizon store to check out a new phone. Using the display model’s browser ( chrome or webkit ) i did some surfing and was really thrilled with the speed and clarity of the large screen. Then i inquired about the price for the unlimited plan – at $120.00 per month Verizon’s unlimited plan represents an increase of $50.00 in comparison to my current, unlimited plan on a competitors network using an unlocked Nexus One. Exiting the store, resigned to another 6 months of old n crappy phone boredom , without future prospects for sitting over latte’s in the local coffee shops, buzzing about my rad technology gizmos, I sulked my way home.
Shuffling along 24th st. in the mission, still annoyed by the economic conundrum that 50 years along the downward slope of Moore’s law and the associated low-price expectations , somehow my cell phone bill continues on its gaseous ascent into the stratosphere. Contemplating cracks in the sidewalk and my hemorrhaging bills, i stopped at 24th and Treat and looked up to see this new type of wireless tower antennae that is rolling out to phone poles across my neighborhood. Although wireless carriers have a point that crushing volumes of mobile app download data threaten network capacity and that someone has to pay fees supporting the investment in these new network technologies, I gazed at the pole loaded with network amplifiers topped by the new antennae and wondered about the economics behind this new capital equipment and its bearing on my monthly phone bill.
What does it cost? what revenue could it generate?
$17,000.00 per telephone pole adds 150MB per second of new, network capacity
IMO, $7000.00 covers the hardware on the pole, including the amplifiers that push the digital signals received at the pole back to a central-office over a fiber, ‘back-haul’ link where the radio signals transit other hardware used for integrating phone radio signals with the rest of the telephone network. Add labor costs and incremental hardware costs in the phone company CO and you get to about $17,000 per pole. For example, in San Francisco, there is a million dollar project underway rolling out 60 of these new antennae to existing poles. While back-haul can be fiendishly expensive under some network scenarios, for the wireless carriers using phone poles in urban areas, existing fiber already connects the poles to the network backbone. There’s no need for microwave backhaul links, no need to dig million dollar per mile trenches for fiber lines, and no need to retrofit T1 technology that is still conveying lots of backhaul traffic across suburban and rural network segments.
Comparing radio signals to network packets, figuring out how volumes of data information transit a radio signal is not an easy process. The math used to do a low-level units translation for a comparison of radio antennae capacity to traditional, TCP units of measure is best left to real geeks who will be all over this snip: 
FWIW I found an alternative calculation in the radio network math for dummies in this chart where the far right colum displays the all important measure for ‘bits per second per Hertz’. Scrolling to the line in the table for HSPDA the bandwidth is listed as 8.44 b/s/Hz. The maximum possible bits type bandwidth per second per 1 Hertz of radio spectrum is 8 bits. Converted from bits-to-Bytes, multiplied times the corresponding total radio frequency amount advertised on the link for the antennae’s spec sheet ( 154/460 MHz ) this comes to approximately 150 MegaBytes per second of computer type bandwidth available per tower. When your talking or playing AngryBirds on your iPhone, 150 MBs is a lot of bandwidth.
What cell phone subscriber revenue is represented by 150 MBs of capacity at the pole?
150 MBs of new bandwidth = $3.00 per Second in Customer Revenue
Capacity of 150 Megabytes per second on just one of these towers, theoretically gets you 15,000 simultaneous phone calls (voice codec G.711 @ 64Kbs). Alternatively, using average 3G download rate of 5 Mbs, 100 simultaneous data downloads could take place on the single tower. Here is a list of cell phone plans. And data only plans are covered here. Reviewing these plans/prices, Its a little like pricing a rental car or an airline seat. Its safe to say that an extra 1 Gigabyte of monthly data priced at $20 by Verizon equates to the $3.00 per second figure mentioned above. From $3.00 per second, you get to a monthly total of $7,776,000.00. If they could saturate that one tower completely peddling every single Byte of its capacity for the going consumer rate, the tower generates annual revenue over $93 Million.
That figure is ridiculous. What about the real world?
Under realistic network operating conditions, the network has to be really smart and really robust and does not perform at or anywhere near this theoretical max. Mobile handsets require that towers handoff connections to neighboring towers as the customer with the phone moves along the road/subway. Accommodation must be made for bursts of calls at 6PM on a busy friday as everyone leaves work. Legacy methods of communication like 2G have to coexist on the network providing support for older hardware. Dropping from the theoretical to a number representing the real world network still works out to a very nice profit for Verizon. Reducing the operating network load from the maximum theoretical by a factor of 1000 still provides $7000.00 per month of additional revenue on $17,000 investment.
Moore’s Law please… and fewer retail stores… my monthly bill declines?
In order to appreciate the effect of Moore’s law in action exerting what should be downward price pressure on the wireless network , take one more look at figures from that chart, comparing the 7 year period between 2002 (CDMA) and 2009 (LTE). The spectral efficiency of the network increased by a factor of 100 meaning that the power requirements to run the radio antennae on the towers also dropped by a factor of 100. In 7 years, a hundred times as many phone conversations could occur in the same segment of radio spectrum. In 2002, CDMA was capable of Max 0.1720 (fully loaded). By 2009, LTE technology increased spectral efficiency to Max.: 16.32. If a company other than Verizon could figure out the vast opportunity in a business model more focused on low cost radio networks that have realized a 100X efficiency increase in just 7 years and less reliant on marketing and the flashy phone retail stores, that could do wonders for my monthly bill. In the long run its all about moving data on the radio frequency – TCP packets saturating the radio spectrum to a greater degree , mobile handsets running VOIP apps pushing Megabytes of data across the wireless space that is just another network. At this point, im feeling no sympathy for Verizon and their $120.00 a month.
