Cost Comparison: Carrier Wi-­‐Fi, Small Cells, DAS, Repeaters Joe Madden, Mobile Experts April 2013 A tectonic shift in the mobile infrastructure market is taking place. Mobile operators are increasingly choosing to invest capital in smaller base station solutions, carrier Wi-­‐Fi, and indoor coverage solutions instead of erecting new towers. Mobile Experts has recently finished a deep-­‐dive study of Small Cells, in which we examined the role of small cells with respect to macro base stations, Carrier Wi-­‐Fi, and coverage products such as DAS systems, repeaters, and relays. Here are some of our conclusions. The tectonic change in the market comes from a fundamental cost advantage in using small cells. Mobile operators face the challenge of an increasing appetite for mobile data services without a similar increase in the ARPU (Average Revenue Per User) paid by consumers. The logical conclusion to this dilemma is that less expensive network equipment is necessary to support future customer demand. Chart 1: Declining cost of network capacity $1,000,000
Cost per Mbps of Capacity
GSM
$100,000
EDGE
UMTS
$10,000
HSPA
LTE Macro
$1,000
LTE HetNet,
high cost backhaul
LTE HetNet,
cheap backhaul
$100
1985
1990
1995
2000
2005
2010
2015
2020
Source: Mobile Experts
Small cells offer mobile operators a way to reduce the cost of mobile capacity. In 2015-­‐2016, an indoor carrier-­‐grade femtocell will be operated with a Total Cost of Ownership (TCO, over 8 years) of roughly $600 per Mbps of capacity. An LTE macrocell will cost almost three times that amount for each Mbps of capacity. Mobile Experts predicts that more than 37 million small cells will be deployed by 2017, with a heavy focus on LTE carrier femtocells to create a capacity layer. There are multiple reasons for this market growth: § More than half of the small cells deployed by 2017 will be residential femtocells, providing coverage for mobile services in small buildings. § The strongest growth rate (and by far the most lucrative market) will be in carrier-­‐
grade small cells, with shipment of almost 5 million units in 2017 alone. These units will be necessary to handle the explosive growth in data demand within busy urban areas. § Enterprise-­‐grade femtocells, picocells, and other variations will also play a role in the growth of indoor coverage solutions on the market. The eventual network will include several different equipment types to support a wide variety in business models for deployment. Chart 2: Forecasted growth of small cells, 2011 to 2017 Source: Mobile Experts
Wi-­‐Fi will also become an important part of the Small Cell market. More than 57% of small cells shipped will include Wi-­‐Fi by 2017, and much closer integration will be employed for authentication, for diverting applications to each radio mode, and for billing purposes. Carrier Wi-­‐Fi conducts a much lower cost per bit than licensed solutions, but mobile operators want to control which customers and applications are “offloaded” to the Wi-­‐Fi network. Alternatives to small cells will also remain in the market, but with a limited role: § Indoor DAS systems will continue to proliferate for the next few years, as a low-­‐cost option for services that cover multiple bands and multiple operators. In the long term, DAS systems will be combined with small cells as a way to distribute multiple small-­‐cell signals through the same building infrastructure. In fact, DAS systems are best for the “middle tier” of applications that need both coverage and capacity. § Repeaters represent the absolute cheapest way to provide coverage, although no capacity is added. The business model for repeaters rests on the desire for end users to invest in improved coverage, not for wide deployment by operators. In the US market, the prospects for consumer repeaters have risen recently with a government ruling to allow open-­‐market sales. § Relays have not achieved much traction in the market, as the capacity and performance improvements that are possible require a high level of engineering by the operator. Chart 3: Comparison of Coverage/Capacity Alternatives $3.00
Indoor
Small Cell
$ / square meter
$2.50
$2.00
$1.50
$1.00
Metrocell
Macro
Stadium DAS
$0.50
Repeater
$0.00
0
Source: Mobile Experts
Carrier Wi-­‐Fi
NOTE:
0.01
0.02
Mbps / square meter
0.03
0.04
Total Cost of Ownership over 8 years used in this calculation, with assumed 2014 equipment cost.
On one end of the spectrum, mobile operators achieve coverage with macro networks, and for stationary, indoor traffic it’s hard to beat Wi-­‐Fi for low cost. However, operators with large Carrier Wi-­‐Fi networks report that the Wi-­‐Fi network can saturate with traffic. Japanese Wi-­‐Fi operators report that unlicensed operation is “saturated” in high-­‐density locations such as Tokyo subways. This problem will grow more widespread over time. Note that, of all technologies shown in Chart 2, only small cells offer significant growth potential in terms of moving to guaranteed high-­‐Q0S service with higher capacity density (Mbps/m2). Over time, Mobile Experts anticipates that Carrier Aggregation and wider spectrum allocations will move the “Indoor Small Cell” data point to the right, giving small cells a significant role to play in dense urban networks. In the short term, Carrier Wi-­‐Fi seems to have the advantage in terms of capacity at low cost. As new spectrum is added for unlicensed operation, this cost advantage will continue for many locations. Based on expected growth in data consumption and changes in both LTE and unlicensed infrastructure, Mobile Experts anticipates a gap in mobile operators’ ability to handle data demand. Macro networks will only be able to handle about half of mobile data by 2017. The other half will be picked up by interesting combinations of Wi-­‐Fi systems, DAS networks, and small cells. These solutions will be competing with each other, but will also be combined to satisfy the demand of a near-­‐infinite variety of applications.