Paolini: Small-cell backhaul market update - what has changed and what has stayed the same

By Monica Paolini, Senza Fili Consulting

Monica Paolini

I have been following the evolution of backhaul solutions for a while because backhaul is crucial to the small-cell business case. The reason for this is simple: backhaul accounts for up twice as much of the percentage of the TCO for small cells than it does for macro cells. As it is always the case with wireless TCOs, most of it comes from the opex. While equipment cost is an important variable, the key issue is that the backhaul solution has to be low cost to install, maintain, and operate.

Continuing trends

The implication is that it is not sufficient for small-cell backhaul to be cheaper than macro-cell backahul. It also has to operate at a very low cost in dynamic environments where mobile operators have little control over the RF characteristic. This means the equipment has to be small, easy to install and to reconfigure as the number small cell grows, and cheap to run (i.e., have low site rental or recurring charges). To complicate matters, the backhaul link will have to carry traffic from more than one small cells, thus increasing the capacity requirements, and in many cases it will have to do so without a fiber connection (which can be too expensive or not available to locations such as lampposts) or a line-of-sight link. This makes small-cell backhaul much more challenging to provide (and fascinating to research) than macro-cell backhaul.

While many technologies are available to meet the requirements for small-cell backhaul, finding the right mix of features that meets both performance and cost requirements is challenging. For sure, no single solution is sufficient to meet all the backhaul requirements of small-cell deployments. What mix of solutions will eventually prevail? We still have to find out, but we can report on what has been changing over the last year (for more detail, download this free report).

Innovation from vendors

Backhaul vendors have been listening to mobile operators and are well on their way to develop specific solutions for the emerging small-cell market. Established vendors have gradually abandoned the approach of simply repackage their macro-cell solutions in a smaller and cheaper format--mostly pushed by a large cohort of innovative new entrants targeting this market.

In talking to vendors, it is clear that they are trying to develop agile solutions that can be deployed by non-telecom installers in an hour or two. They also see that their solution is unlikely to be sufficient on its own to meet the requirements of a large deployment, and hence are working more closely with partners to propose a complete solution to mobile operators.

The downside of all this activity is the risk that this is a segment that is becoming too crowded, with more vendors than the market can support. There will be room for some consolidation, but it will be challenging for many new entrants to success, especially since small-cell deployments will require longer than expected to reach critical mass. Over the next couple of years, small commercial deployments or trials will continue to dominate the market. New entrants will have to demonstrate the ability to survive with limited revenues for some time, and only in the longer term we will be able to see who, among those who survive, will succeed.

Survival of the fittest: Wi-Fi

Perhaps the most interesting change over the last year is the increasing role that Wi-Fi is taking in the development of small cells. Initially Wi-Fi was considered an alternative (or competitor) to small cells, an interim solution or, at any rate, a technology that did not play a crucial role in the network densification process.

The perspective on Wi-Fi has changed for at least three reasons.

First, operators want to deploy LTE and not 3G small cells, as LTE provides more capacity and lower per-bit costs, but they are not ready to do so because they may not have an LTE network yet or it does not operate at capacity (and hence small cells would not relieve any congestion). But they do see congestion in 3G networks. Wi-Fi small cells can provide capacity relief, and it can do so more cost efficiently than 3G as we have shown in a recent paper.

Cellular and Wi-Fi small-cell TCO over a five-year period. Source: Senza Fili

Second, the availability of carrier Wi-Fi functionality through Passpoint and Hostspot 2.0 elevates Wi‑Fi from an offload technology to a fully-fledged radio-access technology. Residential and office offload are and will remain hugely beneficial to mobile operators for offload, but this type of blind offload remains outside the operators' control.  Carrier Wi-Fi gives operators the same type of control they have over the cellular infrastructure (i.e., where it is available, or which subscribers can or should use it), even though throughput is not guaranteed because of the use of license-exempt spectrum.

Finally, the marginal cost of adding Wi-Fi to a cellular small-cell is minimal, and this is likely to lead to Wi-Fi adoption in most small cells. Operators may find it more difficult to justify the exclusion of Wi-Fi than its inclusion in cellular small-cell deployments.

The increased role of Wi-Fi changes the backhaul requirements. Since this is carrier Wi-Fi, the requirements for Wi-Fi are comparable to those for 4G, but the overall backhaul capacity required by the small-cell underlay is going to grow.

The move to the indoors

As much as 80 percent of the data traffic comes from subscribers in indoor locations, it is not too surprising to see that mobile operators are increasingly exploring the possibility of diverting some of the planned outdoor small cells to indoor locations which are closer to their users, reuse the spectrum more efficiently, and create less interference in the macro layer.

An increased role in indoor small cells is likely to result into a greater reliance on wireline technologies such as fiber that are often less expensive and more readily available at indoor rather outdoor locations.

A blurring line between LOS and NLOS

Finally, we are seeing is a combination of more point-to-point solutions in what is traditionally non-line-of-sight spectrum (sub 6 GHz), with an exploration non-line-of-sight links over spectrum (beyond 6 GHz) that is typically used for line-of-sight solutions.

Point-to-point links in sub-6 GHz bands increase capacity, and this addresses a main disadvantage of solutions operating in these bands compared to microwave and millimeter wave ones. The ability to use non-line-of-sight links in >6GHz spectrum in commercial deployments still has to be proven and, but it is an exciting opportunity because this is spectrum that is available at a lower cost and in wider channels.

Monica Paolini, PhD, is the founder and president of Senza Fili Consultingand can be contacted at [email protected]. Senza Fili Consulting is an analyst and consulting firm that provides advisory services on wireless data technologies and services.