Telecom Lead India: Caroline Gabriel, research director, Maravedis-Rethink, shares telecom operator strategies for profitable small cell networks.
The biggest challenge for mobile operators in this decade is to narrow the gulf that has opened up between data demand and available wireless capacity. Capacity crunch, data deluge, spectrum famine – all these phrases refer to a mounting crisis, with mobile traffic set to rise by 30 times by 2016, while cellular data revenues could stagnate.
This makes it vital for mobile operators to slash the costs of delivering data while charging more for their services, by adding value or devising new applications. Both those critical challenges will require a complete rethink of current approaches to the access network. That rethink contains many elements, but the dominant one in carrier plans is the use of public access small cells.
The usual tactics for dealing with increased mobile demand – acquiring new spectrum and upgrading the air interface – will be important, but will enable less than 40 percent of the capacity increases carriers will require by 2016 (if 3G network design patterns are retained). By their own calculations, they will need to make up the rest of the shortfall with a new approach to RAN planning and data delivery.
Small cells and the associated move to a heterogeneous network (HetNet) are considered to be the most significant aspect of meeting the mobile data challenge. A complex mixture of tools to improve costs and ARPUs are identified in the mobile broadband deployment plans of the cellcos, but the adoption of small, low cost, low power base stations is named the ‘killer weapon’ by 52 percent of operators with plans to deploy LTE and/or HSPA+ in the next 2-3 years.
Key reasons to adopt small cells for public access are:
1. To add capacity to 3G and 4G networks in a targeted and affordable way
2. To create ‘hotzones’ in areas of high traffic/revenue potential
3. To use existing spectrum more efficiently
4. To unlock the potential of new or underused spectrum bands, especially at high frequency, adding to overall capacity
5. To integrate carrier Wi-Fi into an overall ‘pool’ of capacity, evolving towards a full HetNet
6. To reduce operating costs by implementing automated techniques associated with small cells
7. To support targeted and localized charging mechanisms and quality of service, enabling improved ARPU
8. To deliver local or targeted applications and services, increasing value proposition
9. To reduce power consumption across the network as a whole
The carriers surveyed believe that well planned small cell networks could arrest the decline in ARPU and deliver three times better data revenues by 2016 (when full HetNet and LTE-Advanced will be in play). Meanwhile, cost of delivering data could be 46 percent lower than with current network topologies.
Although offloading data to Wi-Fi or femtocells is seen as the most effective way to increase capacity in the near term, small cells will overtake by 2014. For 2012, over 50 percent of operators already regard small, self-organizing base stations as a top three weapon in designing a profitable mobile data system. Two-thirds of tier one mobile operators believe small cells will be more important than macrocells in delivering the benefits of 4G.
This kind of thinking will drive huge investment in small cells over the coming four years and beyond. The report forecasts that deployment of public access small cells, for 3G and 4G, will rise from under 30,000 in 2011 to 11.3m in 2016, amounting to a capex spend of almost $4bn, up tenfold in a five-year period.
The logical extension of these trends will be two radical network designs which will be fully enabled by LTE-Advanced – the heterogeneous network (HetNet) and the fully distributed network, or Cloud RAN. Both of these will be firmly on the cellcos’ roadmaps from 2013 with the beginnings of LTE-Advanced upgrades.
The public small cell, in its modern form, has its roots in the domestic and residential femtocell, which introduced many new assumptions to the value chain. Although this report focuses on public access, the use of femtocells will continue to grow, complementing the new RAN and boosting expertise and confidence in small cell architectures as a whole. The number of carriers with commercial private small cell offerings will rise from 45 this year to 155 by the end of 2016.
However, there are many challenges to achieving the opeators’ targets, all of them analyzed in the report. In the operators’ view, the most pressing obstacles to achieving the full business benefits of small cells lie in two areas:
1. Site issues such as acquiring and leasing positions which are optimal for service delivery and quality.
2. Backhauling small cells cost effectively
Other important challenges include planning and managing vast numbers of base stations – despite the availability of automated techniques like SON (self-organizing networks), over 40 percent of carriers will invest in new planning and management tools optimized for small cells. Other issues center on acquiring spectrum and introducing tactics like carrier aggregation; achieving standards and interoperability to support multivendor purchasing; and interference issues (between small cells, with the macro network, and with unlicensed bands).
Although spectrum issues are counted as a potential obstacle, small cells also create new spectrum opportunities.
One of the most important side-effects of the new networks will be to turn underused frequencies to good effect, especially in the 3.5GHz band. This will increase the usage, and the value, of spectrum of 2.3GHz and above. A key motivation for carriers to invest in this technology will be the ability to free up the vast capacity in high bands for mobile services.
Higher bands have often been uneconomical for cellular networks because of their short range, but the economics will be transformed by small cells, which only need to cover small populations. This could free up huge data capacity – many carriers are looking for a fivefold increase by deploying underused bands.
Another important source of new spectrum capacity is in the unlicensed bands, and integrating Wi-Fi into the carrier network, and even into integrated cellular/WLan small cells, will be one of the most important features of the move towards HetNet. Standard methods for unified login and seamless hand-off between 3G, 4G and Wi-Fi networks will enable operators to treat hotspots as though they were part of the cellular system, linking them to a common core and management systems. This will be an important aspect of small cell deployments, especially from 2013.
The adoption of small base stations built around highly integrated SoCs (systems-on-chip) shifts the wireless infrastructure supply chain significantly towards commoditized access points and backhaul combined with complex management software and core networks. This introduces some new players into the carriers’ supply chain and forces traditional vendors to adapt their products and pricing.
On the chip side, specialist pioneers like Picochip have nearly all been acquired, while stalwarts like Freescale and Texas Instruments have launched small cell platforms. The same process is occurring in infrastructure, as major OEMs like Alcatel-Lucent assess whether to fight or work with specialists. And in other areas of the mobile value chain, including core networks and back office systems, old and new providers are adapting their offerings for the specific demands of small cells.