Intelligent Underlay Overlay (IUO) scheme is one of the most cost effective solution for capacity enhancement of Global System for Mobile Communication (GSM). However, the overall gain from this type of complex architecture depends on how efficiently it is designed and available radio resources are utilized. This paper proposes a step by step process to design IUO in order to optimize the gain. Here, the network configurations are determined analytically and a traffic model is developed to estimate the traffic distribution among different layers of IUO cell. Equations for frequency reuse in each layer are derived and Frequency Hopping (FH), Power Control (PC) and Discontinuous Transmission (DTX) are integrated. Effect of various parameters on cluster sizes is studied. It is found that for some cases it is better to utilize the advantages from FH rather than IUO when these features are combined. Several factors are taken into consideration during design phase like co-channel cells, super area coverage, traffic distribution, ratio and speed of moving vehicles, blocking probability intended by operator etc. Finally an IUO cell is designed which shows 41.42% capacity enhancement over normal cells having similar features and resources.
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