Five factors improving small cell economics

Last year appears to have been a turning point for the small cell market, when small cell revenues exceed $1 billion for the first time. The momentum is continuing in 2016.
According to analyst firm Mobile Experts, carrier small cell deployments grew 140% in 2015, including both indoor and outdoor units; the growth rate “will be even bigger in 2016,” noted Joe Madden, principal analyst for Mobile Experts. The firm expects enterprise small cell shipments to double this year, with a 270% spike in sales growth, and estimates that enterprise small cell shipments will be worth $4 billion annually by 2020. Transparency Market Research, meanwhile, predicts the global femtocell market to be worth $4.7 billion by 2019.
The boost in small cell deployments hasn’t come out of nowhere. Small cell economics are improving due to a number of factors that are impacting the related capital expense and operating expense of such deployments. The three biggest challenges for small cell deployment have consistently been site acquisition; and the availability of power and backhaul – typically fiber (and most preferably dark fiber), but sometimes microwave.
At some level it has simply taken time for sites and infrastructure to move through regulatory and installation processes. Crown Castle says it takes 18 to 24 months to deploy small cells for an anchor tenant, with additional tenants taking nine to 18 months to come online. Many projects started during the peak of initial small cell hype are just now being turned up, and deployment numbers should grow from here.
Other factors improving small cell economics include:
Equipment: Hillol Roy, partner at IBB Consulting, said equipment costs have significantly improved over time, as have coordination features.
“We are getting to a place where the small cell can be almost plug-and-play,” Roy said, adding this reduces the costs for drive or walk tests and optimization of the sites.
Jim Parker, director for wireless small cell product management at Huawei Technologies USA and formerly of AT&T’s antenna solutions group, said better coordination features are making for easier deployment. Centralized baseband approaches for small cells also avoid each cell being its own “island” and mitigates the problems of handovers and dropped calls. Telecom consultant Wade Sarver, who runs the blog Wade4Wireless, said opex for small cells is also improving as operators discover they don’t need to be maintained at the same level as macro sites and much can be done remotely. As more self-organizing network features are adopted, Sarver expects this cost to continue to drop.
Better aesthetics: It’s been a challenge to move wireless equipment from the macro tower to street level, but the industry is getting better at unobtrusive small cells that are more likely to win regulatory approval. Small cells are getting smaller and have more form factor choices, from radomes that can be painted with custom colors to blend in; to street lights that have slightly thicker poles to conceal a small cell; to small cells that integrate with bus shelters and other street furniture. Kathrein has developed an in-street small cell implementation called Street Connect that sits in a vault underground and is accessed by manholes. It was initially deployed by Swisscom, and Kathrein has said it will be available to other operators in the middle of this year.
Time to market: In addition to small cell support infrastructure coming increasingly online from companies such as Crown Castle, players like Verizon Communications have invested in fiber, buying XO Communications at least in part as a strategy for using metro fiber rings to support small cell deployments.
“Operators are getting quite creative on how they’re using small cells, and I would say what I am seeing is that creativity is, in a lot of cases, around the ease of deployment of the small cells and the cost of the deployment versus deploying a macro,” said Randy Cox, head of product management for small cells at Nokia. “The other is the speed at which you can deploy a small cell versus a macro.”
Another factor in time to market is deployment planning. Expanded planning solutions such as Nokia’s HetNet Engine Room, IBWave Mobile Planner for on-site surveying and design, and carrier-specific tools such as AT&T’s proprietary HetNet Analysis and Resource Planning tool have all been developed to support streamlining of small cell deployment processes.
Interoperability and testing: Vivek Vadakkaputta, VP of product management and marketing for Azimuth Systems, said the company often hears from operators who run into interoperability issues between small cell and macro vendors, which can often lead to finger-pointing. But, he added, two things are happening: operators are either opting to go with the same infrastructure vendor as their macro network, or small cell vendors are coming to operators with demonstrated interoperability testing success to prove that they can coexist in a multivendor environment. Operators, he said, have also gotten a better handle on what acceptance tests they need to insist upon for small cell equipment to be installed with the least amount of network disruption or interference.
Potential for monetization: The trend toward mobile edge computing may provide new opportunities for small cell-centric services in large venues or the enterprise that could provide direct monetization of small cells. Nokia is looking at combining small cell solutions with mobile edge computing so new services can be developed, such as video that can be served directly from live, local events with little to no latency because it doesn’t have to traverse the rest of the network to get to nearby subscribers’ mobile devices. Small cell services beyond simple cellular connectivity, however, are still in very early days.