The Citizens Broadband Radio Service (CBRS) radio-frequency band at 3.5 GHz is becoming the popular choice for enterprises and operators alike. CBRS technology will bring innovative business models and new set of use cases not previously seen.
CBRS technology breaks down into two network segments: private LTE networks and neutral-host networks. The Besen Group defines a private LTE network as a dedicated network for consumers, business and internet of things (IoT). A private LTE network can be based on licensed, shared or unlicensed spectrum. It is ideal for enterprises that are considering security, reliability, coverage, mobility and low-latency applications. Neutral-host networks will provide enterprises with better coverage and capacity to meet their indoor requirements.
The Besen Group has developed a comprehensive methodology to ensure critical factors are in place to launch a successful CBRS private LTE network or neutral-host network. It features:
Strategy positioning: Analyze the regulatory environment and select the appropriate CBRS band for the enterprise. Perform market and competitive analysis to determine optimal business model and strategy. Evaluate partners and establish a target segment marketing plan.
Business plan: Develop a request for information (RFI) to send to vendors and host network operators, in case wholesale spectrum may be purchased. Develop the business plan based on the following modules:
● Market size
● Capital expenditures structure
● Operating expenditures structure
● Revenue structure
● Financial valuation
● Sensitivity analysis
Contract Negotiation: Develop a request for proposal (RFP) to send to vendors and host network operators. Negotiate and sign managed services and wholesale services contracts with each party.
Implementation: Determine in-house processes, design an implementation roadmap and design the systems integration architecture. Launch and evaluate a pilot program, and gain management approval for the CBRS project. Modify the business plan and launch the CBRS service.
To develop a five-year business plan, an enterprise must think through its business in detail and set market-based objectives. Preparing a business plan will also enable benchmarks to be set, allowing the enterprise’s future performance to be monitored.
The Business Plan
A business plan used as a management tool should also highlight the resources the enterprise needs to achieve its plans during the forecast period. These resources will not only be financial. They are likely to include, for example, additional management personnel, skilled labor, production capacity, product development needs and marketing.
The forecasts of financial and operating performance are the core of most business plans and usually the starting point in preparing a plan. The forecasts project expectations in terms of profit and cash.
To prepare the forecasts, enterprises will have to make certain assumptions and projections about what will happen to their business in the forecast period. It will also be necessary to have a clear picture of your enterprise’s present position and have a solid understanding of existing wireless technologies in order to define the starting point and an eventual migration roadmap, which probably will be needed.
At a minimum, the financial information included in the business plan should include an income statement, a cash flow statement and a valuation statement. In addition, ratio analysis, comparative analysis, breakeven analysis and sensitivity analysis can provide a more complete picture of expected financial and operating performance.
The best way to account for uncertainty is to analyze different possible outcomes in performance and illustrate these in the business plan. In other words, perform “what-if” sensitivity analysis with forecasts. The Besen Group recommends that enterprises should consider best case, optimistic case and pessimistic case scenarios.
The Besen Group developed its CBRS business case tools based on private LTE network architecture (see Figure 1) and neutral-host network architecture (see Figure 2). The group incorporated both network architectures into its business case building blocks, as shown in Figure 3.
It is important to identify the uncertainties (i.e., risks) associated with the business plan and show the effects on financial performance when changing these assumptions. The business plan should describe CBRS service and its goals concisely and accurately.
CBRS Business Case Snapshot
First, our company has used number of subscribers and square-foot information to calculate the number of small cells required for the target geographic market.
Dimensioning of small cells is one of the key elements of the business case; therefore, it is crucial to calculate the small cells based on the usage and traffic requirements in the target geographic market.
Next, our company calculated capital expenditures based on the following inputs: indoor small cell, outdoor small cell, small cells network design, the priority access license (PAL) fee, and the Evolved Packet Core (EPC) framework.
The Besen Group calculated operating expenditures based on the following inputs: the spectrum access system (SAS), virtual EPC, EPC managed service, hardware and software maintenance support, network operations management, mobile network operator (MNO) and EPC connectivity, utilities, backhaul, outdoor small cell site rent, interconnection and roaming, telecommunications taxes, marketing and sales, customer care and billing, and general and administrative expenses.
It is important for enterprises to dimension EPC based on number of subscribers and number of small cells.
Once we obtained capex inputs and opex inputs, we calculated the total cost of ownership for the CBRS business plan.
Based on the sample business case, we obtained operating expenditures of 87 percent of total cost of ownership and capital expenditures of 13 percent of total cost of ownership in first year of operation. Capital expenditures were $2 per subscriber. Operating expenditures were $13 per subscriber. The estimated payback period was 3.5 years.
If the enterprise is planning to charge access to the CBRS network in a public venue, we assumed that the revenue module should have the following options for the enterprise to select, based on the enterprise’s go-to-market strategy: subscriber plan, event per subscriber, fixed dollar amount or dollar per square foot.
With the revenue information, we completed the income statement, including depreciation and amortization table for the enterprise. We also produced a valuation table with key performance indicators including net present value, internal rate of return and payback period.
In conclusion, we performed multiple sensitivity analysis to analyze our assumptions, market size data and presented the business plan and the financial indicators for the management approval, negotiation with vendors and implementation.
Alex Besen heads The Besen Group, where he provides strategic advisory, business development, marketing and training services in the mobile data industry. He manages the firm’s network of independent consultants and channel partners, and interacts with his advisers. Visitwww.thebesengroup.com. The image above the title comes from Getty Images. The three figures are copyrighted by The Besen Group LLC.