Madden: The small cell market takes a coffee break

Joe Madden mobile experts

     Joe Madden

For the past five years, Mobile Experts has been the most conservative analyst firm in the femtocell and small cell market. That's why we were selected to track the market on behalf of the Small Cell Forum. We've predicted flat numbers for femtocells (nailed that one) and we've predicted steady growth in carrier-deployed small cells, which has been accurate through the end of 2013.

During 2012 and 2013, about 200,000 small cells were shipped for non-residential applications. We estimated that these initial units would be followed by another 200,000 units in 2014, leading to 800,000 in 2015. We also assumed that for every five indoor units there will be one outdoor unit.

Five months into 2014, however, the shipments are not rolling out the door as expected. Carrier deployments of small cells have slowed down in Korea and Japan. Now that dense LTE hotspots are covered with small cells, the pressure has lifted and fewer units are rolling out for secondary areas.

We're still learning about how this deployment model works. Watching what's happened in Tokyo and Seoul, our conclusion is that there are super-dense areas that need small cells for capacity, but other urban neighborhoods are more than one year behind in terms of traffic density and capacity requirements. The demographics of cities and mobile video usage seem to be making mobile data more concentrated than it has been in the past, centered on subways and other "waiting zones" with less density on normal streets. If this same deployment profile is seen in Manhattan, Sao Paolo, and Berlin, our model was predicting the small-cell hockey stick at least one year too early.

In addition, while we had predicted concurrent growth of indoor and outdoor small cells, today it appears that indoor small cells will deploy more quickly. Instead of five indoor small cells for every outdoor unit, the ratio looks more like 20 to 1 so far. This ratio is likely to change over time, so the early experience of 2-3 operators is only a reference point.

After a careful review of semiconductor shipments and backlog during 2014, as well as our recent mobile operator survey, we're making a few changes to our forecast:

  • The ramp-up of indoor small cells is moving out from 2015 to 2016.
  • The number of outdoor small cells is dropping across the board.
  • Our femtocell numbers are still accurate; we're leaving the residential femto forecast fairly flat through 2018.

The market has finally reached a point where real-world experience can replace the assumptions behind a forecast. We still believe in small cells--they are simply the best way to add capacity in most high-density networks. Nobody has good models for future mobile traffic patterns, but we now have some experience with deployment that we can use to make better estimates of small cell volume and timing. Contact us for more details on expectations for the small-cell market.

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.