Madden: Economic case studies of small cells and Wi-Fi

Joe Madden mobile experts

     Joe Madden

Intuitively, most people realize that Wi-Fi is cheaper than cellular communications. There are several reasons that Wi-Fi is inherently less expensive, ranging from the use of free spectrum to the balance of power in the supplier ecosystem. Mobile Experts has recently completed some studies which examine these factors in an analytical, quantitative way, including examinations of Macro Base Stations, Carrier Wi-Fi, Small Cells, and DAS.

To summarize, the major factors that make Wi-Fi less expensive are:

  • In mobile networks, the OEMs have been able to create a market where operators are locked into proprietary interfaces between equipment, making it difficult for operators to create effective competition within their networks;
  • The level of complexity in mobile networks is higher than in Wi-Fi networks, involving handovers between cell sites, between modes, roaming agreements between carriers, and higher levels of security.
  • Spectrum is free for Wi-Fi.
  • Wi-Fi has already established economy of scale, with low-cost chipsets and software associated with "small cells".

When it comes to real-world case studies, however, there are factors that offset the low cost of Wi-Fi. The primary advantage for licensed standards comes from better propagation within the building....resulting in better coverage for each small cell. Is it cheaper to deploy several Wi-Fi APs, or one indoor small cell?

Let's examine three case studies, to compare the total cost of ownership (TCO) for LTE small cells, carrier Wi-Fi access points, and dual-mode units with both LTE and Wi-Fi.

Scenario #1: Low Density Building

In the first scenario, let's assume that a low-density retail building needs to be covered for wireless data. Imagine a Home Depot store and you get the idea.

  • 5,000 square meters of coverage area
  • 40 Mbps of mobile data demand anticipated by 2015
  • Fiber is leased for backhaul and Ethernet is used to distribute within the building
  • 4 Carrier Wi-Fi access points (802.11ac) required to achieve full coverage of the building
  • 1 LTE small cell required to achieve full coverage (Band 4)
  • 1 dual mode LTE/Wi-Fi small cell required for full coverage

In this scenario, a single small cell is actually cheaper than four Carrier Wi-Fi access points. The cost of setting up four site locations, and paying the building owner for the rights to mount four units outweighs the natural cost advantages of Wi-Fi. In this case, it's clear that the number of sites is the most important factor.

In fact, the dual-mode unit which includes both LTE and Wi-Fi is the best answer, because the unit can handle the coverage and capacity for the 2015 requirement, but also the Wi-Fi capability adds extra capacity for future growth.

Scenario #2: High Density Office Building

What if we have the same 5,000 square meter building, but much higher wireless data demand is required? For our second scenario, let's consider an office building where 400 Mbps of wireless data capacity is required, or ten times the previous case.

  • 5,000 square meters of coverage area
  • 400 Mbps of wireless data demand anticipated by 2015
  • Wireless data demand is concentrated in two key areas of the building
  • Fiber is leased for backhaul and Ethernet is used to distribute within the building
  • 4 Carrier Wi-Fi access points required to achieve full coverage of the building
  • 9 LTE small cells required to meet capacity requirement (limited spectrum)
  • 2 dual-mode small cells required to meet both capacity and coverage

Scenario #3: Convention Center

What if we take this to the extreme case, and convert our hypothetical building to a convention center or a stadium? Let's consider a situation where we have the same coverage requirement but another 10x higher capacity requirement:

  • 5,000 square meters of coverage area
  • 4 Gbps of wireless data demand anticipated by 2015
  • Fiber is leased for backhaul and Ethernet is used to distribute within the building
  • 20 Carrier Wi-Fi access points required to achieve full capacity
  • 100 LTE small cells required to meet capacity requirement
  • 16 dual-mode LTE/Wi-Fi small cells required to meet full capacity

In this final case, all of our options are capacity constrained and Wi-Fi comes into its own. Pure Wi-Fi is, in fact, the cheapest option....although achieving full coverage with LTE also holds value for the operator to maintain control of VoLTE, navigation apps, billing apps, and other features that are best handled over LTE.

At the end of the day, it's clear that Carrier Wi-Fi is absolutely the least expensive alternative for pure capacity, especially with 802.11ac using 5 GHz spectrum. Licensed small cells can be a better choice to achieve wide coverage.

It's not enough to say that Wi-Fi is cheaper for each bit delivered. In the real world, both coverage and capacity are important, and the least expensive total solution includes both LTE and Wi-Fi.

Joe Madden is Principal Analyst at Mobile Experts LLC. Mobile Experts is a network of market and technology experts that provide market analysis on the mobile infrastructure and mobile handset markets. He provides market forecasts for handset, DAS, small cell, and base station markets, with in-depth research down to the nitty gritty details of frequency bands and power levels. Mr. Madden graduated, cum laude, from UCLA in 1989 and is a Silicon Valley veteran. He has survived IPOs, LBOs, divestitures, acquistions, and mergers during his 24 years in mobile communications.

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