Mobile operators draw a new small cell order in 2014

by Elias Aravantinos and Frank Rayal

Elias Aravantinos, left, and Frank Rayal

Elias Aravantinos, left, and Frank Rayal


Mobile operators are frequently described to be under pressure to upgrade the capacity of their networks in response to unrelenting demand for mobile data services.  Small cells are one such technology deemed indispensible for operators. As a case in point, AT&T announced that it will aggressively push to deploy 40,000 small cells by the end of 2015 under its Project Velocity IP (VIP). In the meantime, Verizon Wireless expressed the desire to deploy small cells but only if they are inexpensive.

What the two leading North American operators are saying is that inexpensive small cells, specifically outdoor carrier deployed compact base stations, makes possible for high-volume deployments. However, small cells remain to date an object of great debate with operators actively engaged in field trials during 2013 while promises of deployments are deferred into the future. This begs the question: how do we map the current state into the deployment cycle of a new technology? What do operators see as the challenges holding up small cell deployments? What are their key requirements for small cell deployments? What type of small cells will be deployed and how do the different backhaul solutions stack up?

A new market research, Small Cells New Order: A Global Status Report, by ExelixisNet and Xona Partners answers these questions based on the perspective of leading multinational and regional operators who answered probing questions on their plans for outdoor small cell deployments. In the operators view, we are at the dawn of a new order in network architecture--the heterogeneous network (hetnet): operators are bullish on small cells and the vast majority of those surveyed say 2014 is the year of small-cell deployments. But in probing further on the readiness for mass scale deployment of small cells, it is our view that 2014 will be the year of sporadic deployments used by operators to gain confidence in the small cell value proposition and continue to assess their on network performance. It will be at least by 2015 that operators will be ready for mass deployment, armed with confidence in the business case and toolbox of solutions to the backhaul conundrum. Some of the reasons that lead us to this conclusion include the state of evaluating the business case for small cells, resolving the question of small cell spectrum and other key challenges that impact the total cost of ownership such as the high variability in municipal laws that can have large impact on cost.

 

Operators in the Americas, Europe, Middle East and Africa indicates they are in process of making decisions on how to set out this new order for network architecture and build out. There is a growing confidence, as recently expressed by operators in Europe, that there is more capacity to squeeze out of the macro layer through what is called super macro cells which feature multiple radio access technologies (RAT), up to six base station sectors, and operate in multiple frequency bands using carrier aggregation techniques. That could slow down plans for massive small deployment in 2014 as super macro cells help operators defer capital expenditure targeted for small cells into the future. This timeline works well from a perspective of maturing LTE roadmap, specifically the introduction of interference management techniques targeted at enhancing small cell performance in LTE-Advanced (3GPP Release 10 and later) and widening traction of self-organizing network techniques (SON) critical to lowering the operating cost of hetnets. As such, small cells will be mainstream in 2015. By then, operators are looking for multimode base stations including LTE, 3G, and Wi-Fi.

The cost challenge to small cell deployments echoed recently by Verizon is mirrored by an equal concern for backhaul. Backhaul presents a techno-economic challenge and contribute significantly to the total cost of small cell deployments. Based on the report's findings, operators prefer to use fiber overwhelmingly over any other type of backhaul technology when fiber is available. Yet, for two thirds of surveyed operators the probability of fiber availability is under 25 percent. Multiple wireless backhaul technologies made for their alternative solution, but most interestingly, over half the operators surveyed are considering NLOS in unlicensed band, leading over any other type of backhaul. This surprise could be explained by the availability of high-capacity affordable equipment that does not require licensed spectrum.

With 2013 being a year of trials, operators gave E-Band solutions a good drive test: these are the most trialed solutions for small cell backhaul followed by point-to-multipoint microwave, millimeter-wave and sub 6-GHz non-line-of-sight technologies (licensed and unlicensed bands). In effect, operators acknowledged the need of a technology toolbox of different backhaul solutions, and are still active in their evaluation ahead of mainstream deployments.

Despite the anticipated delay in small cell deployments, we are at the cusp of a new order for wireless network architecture where the prerequisites for small cells such as interference management technologies, SON and backhaul technologies are put in place. Small cells are just an aspect of this evolution which has the potential to shake up the industry with new technologies, business models and supporting ecosystem of vendors.

Frank Rayal is Partner at Xona Partners. He advises investment firms, vendors, and operators on wireless technology and business strategy, spectrum, competitive positioning, and market analytics.

Elias Aravantinos is the Lead Analyst of the Research Firm ExelixisNet and has over 10 years experience in the ICT and telecommunications market.

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