AT&T drops goal of deploying 40,000 small cells by end of 2015, citing benefits of Leap deal

AT&T Mobility (NYSE: T) no longer plans to deploy 40,000 small cells on its network by the end of 2015, a goal that had been a key element of its Project Velocity IP (VIP) network initiative. The carrier is not saying how many small cells it plans to deploy by year-end but said that its 2014 acquisition of Leap Wireless removed the need to deploy as many small cells as it originally had planned because the deal gave AT&T more macro cell sites for capacity.

AT&T executives never explicitly declared that deploying 40,000 small cells by end-2015 was no longer the company's goal. However, its executives hinted over the course of last year, following the close of the Leap deal in March 2014, that the carrier's plan were shifting, according to AT&T.

Even though AT&T is pulling back from its original goal, the company insists that small cells remain an integral part of its network. The company's original goal, which included both indoor and outdoor small cells, made AT&T one of the biggest proponents of the technology, which is designed to augment capacity as an element of heterogeneous networks. Despite repeated requests for clarification, AT&T declined to comment on how many small cells the company has deployed on its network today or how many it plans to have deployed by the end of 2015.

"While we originally gave a target for our small cell deployment, with our Leap acquisition in 2014, we withdrew this guidance," AT&T said in a statement to FierceWireless. "The Leap deal gave us additional spectrum and towers that allowed us to pull back on our original target because we added more macro sites, providing us additional capacity to meet the rising traffic demands."

However, a person outside of AT&T with knowledge of its plans said that AT&T has deployed only about half as many small cells, or 20,000, as it originally envisioned. Further, this person said, AT&T's explanation--that the Leap deal obviated the need to deploy as many small cells as it originally intended--is not the actual reason the company has fallen short of the 40,000 goal, or at least not the only one. The person, who requested anonymity to preserve a relationship with AT&T, said that AT&T has pulled back mainly because the company did not account for the time and effort involved in deploying small cells and that AT&T has a long checklist of legal and site-acquisition issues it must go through before deploying small cells. AT&T declined to comment.

Several months after the Leap acquistion was announced, AT&T indicated that it might revisit its small-cell strategy. In response to questions, AT&T representatives pointed to multiple examples of when its executives indicated that the Leap deal might change AT&T's small-cell plans.

"We also are excited about the Leap acquisition and how it will support our Project VIP deployment," AT&T CFO John Stephens said on the carrier's fourth-quarter 2013 earnings conference call in January 2014, according to a Seeking Alpha transcript of his remarks. "Once the deal is closed, we will take a look at how it will impact our cell plans and densification initiatives."

During AT&T's first-quarter 2014 earnings conference call in April 2014, after the close of the Leap deal, Stephens noted that AT&T had started integrating Leap's customers and network and that it would "start deploying unutilized spectrum immediately, continuing our efforts into 2015."

"CapEx will be in a $1 billion range, but significantly offset by efficiencies with other wireless build plans and with the majority of the spend targeted in 2015," Stephens said of Leap, according to a Seeking Alpha transcript.

Ralph de la Vega, CEO of AT&T's Mobile & Business Solutions Group, seemed to downplay the importance of small cells at an investor conference in August 2014. "Customers really don't care if their data travels on LTE, Wi-Fi, macro-cell, small-cell, U-verse, broadband, VPN, fiber; they just want an experience that is seamless, that is fast, that is secure and is ubiquitous, and we've invested and upgraded aggressively in our networks to provide it," he said, according to a Seeking Alpha transcript.

AT&T's decision to revise its original plan comes as there is more momentum than ever for small-cell deployments, especially in the U.S. In October the FCC approved rules designed to accelerate the deployment of wireless infrastructure, including small cells. Specifically, the FCC approved changes to the federal environmental review process that make it easier to deploy small cells as well as collocated equipment. Under the new rules, that equipment includes gear on not only buildings and cell towers but also utility poles. The rules also exclude equipment associated with antennas, including wires and cables, from counting against a deployment. Additionally, the FCC's new rules make clear that its "shot clock" for towers also applies to small cells and DAS.

More than 1 million small cells shipped in North America last year, according to new data published earlier this week by the Small Cell Forum, making the region the world leader in terms of small cells. The group reported that 1.01 million small cells shipped in North America in 2014, more than double the 419,000 that shipped in the next-biggest region, Europe. The firm said the Asia-Pacific market came in next, at 357,000 shipped, followed by the Middle East and Africa, at 282,000.

In its statement, AT&T said: "Small cells remain a key part of our advanced network toolset but we're also finding that other technology advancements are helping us reach our goals in reliability and performance so we may not need to deploy as many small cells in our current deployment cycles as our initial plans from more than two years ago before the Leap acquisition indicate. That's part of the technology business."

"AT&T was one of the first carriers globally to deploy its metrocell solution in both indoor and outdoor environments and we are deploying small cells where and when they are the best network solution available to improve our customers' network experience," the company noted.

"Through investment in small cells, AT&T is supporting its customers' growing desire for high-quality, fast wireless services. Our small cell strategy has increased reliability and speeds for our customers in previously difficult to serve areas," AT&T added.

AT&T also touted its proprietary HetNet Analysis and Resource Planning (HARP) tool, which analyzes key data points to help network planners understand how RF waves behave in a small-cell environment. Based upon a location's traffic demands, along with building floor plans or topography maps, HARP can determine expected coverage for both indoor and outdoor small cells and recommend the optimal number and placement of small cells needed in a given area.

Later this year AT&T said it plans to introduce a multistandard metrocell solution combining Wi-Fi, 3G and LTE technology. AT&T said it is currently testing the product in its labs.

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