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BusinessWeek: “Making Mobile Networks Cheap and Green”

by Jennifer L. Schenker, BusinessWeek August 1, 2008

VNL of Sweden unveils a solar-powered base station for the cellular industry that is a fraction of the size and cost of conventional towers.

It has taken 21 years to get mobile phones into the hands of 3 billion people around the world. Reaching the next 1.5 billion, who live in the world’s poorest and most remote corners, is expected to take a lot less time but will pose much tougher challenges.

There is, for instance, the thorny question of how to justify the expense of installing transmission towers in areas where people can only afford to pay as little as $2 per month for phone service—not to mention the cost of running and servicing equipment where electricity and engineers are in short supply.

That is where VNL, a new, privately funded Swedish-Indian telecom equipment maker comes in. Co-founded by Anil Raj, a Stockholm-based mobile industry veteran who held key roles at Ericsson (ERIC) and Sony Ericsson, VNL includes a dozen of the engineers and executives who created the digital-mobile technology known as GSM. They have turned their expertise to the challenge of making mobile networks that are vastly cheaper, simpler, and less power-hungry than anything ever before devised.

The Four-Year Wait is Over

Now, after four years in stealth mode, VNL is finally pulling back the curtain. In July, the company introduced its radically new mobile transmission towers—known in industry parlance as base stations. Costing just $3,500 each (compared with prices typically ranging from $10,000 to $100,000 for conventional base stations) and roughly the size of a laser printer, VNL’s base stations are powered by solar energy and use only as much energy as a 100-watt lightbulb. That’s one-sixth the amount needed by the most efficient competing base stations that run on alternative energy.

Low prices and stingy energy use are only part of VNL’s top-to-bottom rethink of mobile networks. The company’s equipment also is designed to be transported in small pieces that can fit into oxen-drawn carts traveling over rough terrain. The components carry Ikea-type instructions that use pictures and color codes instead of text, so that nonliterate people can install the gear. Further simplifying the job: When the microwave portion of the tower is correctly aligned, the base station issues a series of rapid beeps, like the ones trucks make in reverse. Once installed, the base stations can be managed remotely, reducing maintenance costs by 90%, VNL says.

The combination of these and other breakthroughs should mean that, for the first time, operators can build profitable businesses serving the poorest people in difficult-to-reach places, says VNL chief Raj, a former head of Ericsson India and founder of Hutchison India, now the country’s second-largest operator. Raj says it is in India—one of the world’s hottest telecom growth markets—where the limitations of existing equipment are becoming most apparent. There are 700 million people in rural areas there who would be able to afford $2 a month for mobile service, if only operators could figure out a way to serve them economically.

Prime Target

Technology consultancy Frost & Sullivan figures the global market for rural base stations is already $15 billion annually and growing at 15% to 20% a year. According to Sharifah Amirah, a principal analyst in Frost & Sullivan’s London office, mobile equipment sales in emerging markets soon will surpass those in developed markets.

Of course, that means that the opportunity VNL is pursuing is also a prime target for traditional vendors such as Ericsson, Motorola (MOT), Alcatel-Lucent (ALU), and Nokia Siemens Networks, a joint venture of Nokia (NOK) and Siemens (SI). All of them are developing base stations for developing countries, powered by wind, solar energy, or biofuel, with an eye to bringing mobile-phone service to people not currently on the network or the power grid.

The difference, says VNL’s Raj, is that traditional telecom equipment vendors “are on a never-ending quest for higher and higher speeds,” not making cheaper base stations. “We have just one focus, and that is to make the best and most cost-effective rural telecom system.”

Fuel Consumption is a Major Challenge

Indeed, typical base stations today are about the size of a large refrigerator and require about 1,000 watts of power. Most of that energy is wasted as heat, so the base stations also require cooling equipment that uses another 1,000 watts. Backup batteries draw another 500 watts. Since most rural areas in developing countries have either intermittent electricity or none at all, expensive diesel generators are used to power them. In India alone an estimated 1.8 billion liters of diesel are used each year to fuel mobile-phone networks. Operating these networks is getting more expensive as the price of diesel rises. Fuel can account for as much as two-thirds of base station operating costs (, 2/20/08), and then there is the expense of trucking diesel over poor roads to far-flung locations and protecting the fuel against theft.

In the search for alternatives, the GSM Assn, an industry group, said it has successfully tested wind- and solar-powered base stations in Namibia made by Motorola and base stations from Ericsson fueled by used restaurant cooking oil in India. “We expect to see real innovation in Africa and Asia, which will end up being adopted by Europe and North America,” says Dawn Haig-Thomas, director of the GSM Assn.’s development fund.

Still, the most efficient of these alternative energy powered base stations use anywhere from 600 watts to 700 watts, says Godfrey Chua, an analyst at technology consultancy IDC. And only a tiny fraction of base stations are run on alternative energy today, leaving the majority of the 1.6 billion people who live off the electricity grid, and another billion living in areas in which the grid is inconsistent, without phone service.

Submarine Batteries Save Energy

Getting mobile phone service to customers in these areas has been on the agenda of traditional vendors like Ericsson for the last 10 years. The incentive is obvious. “Our future growth is in emerging markets,” says Ulf Ewaldsson, a vice-president at Ericsson and head of the company’s radio division. He notes that Ericsson, the world’s largest telecom equipment maker, now sells one base station every 11 minutes in India.

But Ewaldsson concedes that cost has held back solar-powered solutions. Only about 200 of Ericsson’s 1.3 million installed base stations around the globe use solar power. A far larger number use diesel or alternative fuels. Once companies find a way to cut the cost of solar panels and governments put their weight behind affordable renewable energy, Ericsson says it will be ready to integrate these power sources more widely. “We are extremely well prepared for this,” says Ewaldsson. “We are selling base stations with software that is prepared to take in a variety of energy sources, including off-grid.”

In the meantime, the company has come up with some innovative ways to ensure that base stations gulp less energy. It now uses submarine batteries in base stations that can be charged and recharged many more times. Diesel is used only to charge the batteries, reducing fuel consumption by 40%. Ericsson also has developed a sleep mode for radio transmitters so that they automatically shut down when no one is making phone calls. If all of Ericsson’s installed GSM base stations had this feature, carbon dioxide emissions would be reduced by 1 million tons per year—the equivalent of 330,000 cars each traveling about 10,000 miles or 16,000 kilometers per year.

Stolen for Scrap

The company also has developed a new approach to building towers. In the past, they were constructed of steel, but the material was often stolen for scrap in developing markets. Ericsson’s new Tower Tube is instead made of concrete cylinders, which have the added advantage of better protecting batteries and other equipment from extreme heat without the need for expensive cooling.

In addition to its in-house innovations, Ericsson is keeping its eye on interesting approaches being developed by startups, says Ewaldsson. VNL is just one of some 30 young companies trying to tackle the challenge of connecting the rural poor, he says, and Ericsson is looking at all of them with a single goal in mind. “We are not just talking about serving the next 1.5 billion,” says Ewaldsson. “We are aiming at the next 3 billion—we want to get a mobile phone to everyone on earth.”

If VNL has its way, it will play a big role, alongside the big equipment makers, in making that dream a reality.

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