23 January 2009

What Stuff Costs, Part 1: OPEX

Most African cellular carriers are partly owned by corporations like Millicom and Vodaphone that are traded on stock exchanges in Europe and America.  They publish regular financial reports.  From those reports we can tell that the typical 2007 African cellular subscriber paid $10-$12/month to talk on the phone for just over half an hour.  That sounds like a rip-off until you do a little more math and realize that it actually cost the carrier about $6/month to provide the service, not counting the cost of internetworking.  What the heck?

Let's say, for simplicity, that all of the traffic is compressed into 6 hours each day, so that you see a load of about 0.003 Erlang per subscriber during this peak traffic time.  A minimum 3-sector GSM BTS site provides about 10.5 Erlangs at 2% blocking and thus serves 3,500 subscribers at your typical daily peak load.  If your cost of operation is $6/sub/mo, that corresponds to a cost of about $252k/year per BTS site to run your network, with most of that cost in the BTS site itself: about $200k/year. (!)  When we first estimated this, we though we'd misplaced a decimal point somewhere.  Then we did we read this article in Balancing Act that put the cost of operating an off-grid BTS site in Africa at around $210k/year.  Then we talked to some telecom people from Africa who said the cost was well over $150k/yr but they didn't know by how much.  So it probably really is around $200k/yr.  Why?

It's all about power.  Suppose you have a BTS that draws 5 kW.  And since it's in the tropics you have to cool it, which brings your power budget up to 7 kW.  To supply that, you need a generator.  And since a generator is a target for theft, you need security lighting and cameras, which drive up your power budget and add at least 1 Mb/s to your backhaul requirement, which requires yet more power.  Before long, the site is drawing over 1o kW continuously and you are burning at least 25 gallons of diesel fuel every day.  Now you need a crew with a truck to drive around fixing generators and fences and filling fuel tanks, which is complicated by the fact that most of these sites aren't even near roads.  It starts looking like war logistics, where Sun Tzu tells us that every sack of rice at the front cost 10 more just to get there.  By the time you have everything in place you're spending nearly $20k/mo to keep this beast running.

This matters a lot to the long term development of these countries, because most of the people who live out in the countryside cannot afford $6/mo for anything, meaning that they will never get telephone service, not even on a non-profit basis.  To achieve universal service, someone will need to try something completely different.

So here's the good news: if you can keep site power consumption down to just a few hundred Watts, this all changes dramatically.  Instead of a generator, you can run the whole site on solar panels or microturbines in many parts of the world.  No more diesel fuel.  No more crews in trucks.  Every two years, you replace the batteries in the power system.  That's all.  That's why the design target for OpenBTS is 75 Watts per transceiver, a target that we are very near already just using off the shelf equipment.

Other other cost components in the subscriber rate are internetworking and capital amortization. Most connections between African carriers happen in Europe. That means that if you call from your MTN cell phone to a wired phone down the street that call may well get routed through France at French long distance rates. And the capital cost of rolling out a rural GSM network is at least $100/subscriber.  But those are topics for other posts.


  1. A reader commented privately in e-mail:

    read your post and have a reflection to add to this...
    solar panels are great, but you'll still need to pay crews to check things up because they get stolen...
    here in france, my lab (seismology) has a station that was running on solar panels, the panels disappeared one morning... (I can't imagine how fast they'd be going in africa).

    now, lets say a complete openbts system needs 100w, that's 100w/h
    or, 2400w/day. lets say we're on the equator, so we have exactly 12h of sun year round.
    however, you don't have that much energy produced, say, only 75% efficient (it doesn't really work in the early morning and in the evening), so that's 9 hours.
    you thus need 2400/9 = 266w of solar panel (take 300 for security)
    so... 2*150w panels which go for 1300 usd each according to google
    if you need to replace the panels once a week...

    Then you have other issues. In certain areas of africa, they steal fiber optics cable, just like copper cables... for the kevlar inside, out of which they make bullet proof vests...

    Good comments. My response:

    You're right about the solar panels being a theft target, but they are light enough for mast-mounting in single-TRX sites. If we can get everything on the mast and wrap the bottom in razor wire, we should be at least as secure as current sites. Also, if the people in the local community are actually USING the thing and value the service, I think we'll be less likely to suffer theft and vandalism. (Or is that just wishful thinking on my part?)

  2. With average income for unskilled labor in Kenya being a few USD a day, you may have your site under 24 hours guard for something in the order of ten USD a day. Since it may spare you a few supervision visits and some menial work on-site, and since the people doing the guarding may also in a rural setting work a plot of land nearby to increasing their incentive to keep this job, you have a pretty good a pretty cheap insurance against opportunistic theft.

  3. Routing PSTN calls through third countries has long been a bane of telecommunications operators in the developing world, but the situation is improving. It is certainly changing radically with Internet exchange points spreading and present at the moment in at least twenty African countries. With a VOIP core network (or at least a VOIP gateway) and an Internet exchange point available, local routing of local calls is a solved problem.

  4. I've never thought that calls between African regions were routed through European countries like France. But maybe this has to do with political reasons. Cause this means secret agents in France can intercept certain calls they interested in.

    I once discussed with an uncle in Morocco about alternative green energy like sun and wind. Cause in Morocco there is a lot of sun, and in the west coast near Atlantic Ocean, there is a lot of wind. He said that electrical energy suppliers won't allow that. Which means the game is the same as the telecom industries.