Wednesday, November 28, 2012

Mobile Capital Investment Will Shift to Small Cells, but When?

Joe Madden of Mobile Experts thinks the global mobile service provider industry is about to enter a period where capital investment shifts to smaller cells. To be sure, 2012 seemed to see a waning of capital investment, with 12 percent lower RF transceiver shipments than 2011.

Madden says that fits a pattern of investment in transmission facilities that has been typical of second generation and third generation networks.

He calls the pattern a "two hump camel.” The first hump reflects the initial build. About four years later, those initial systems are upgraded with additional radio capacity and additional towers, and the second "hump" begins.

Of course, many service providers globally are on the cusp of major investments for Long Term Evolution. But global economic uncertainty appears to be causing a delay in capital investment, either in the form of additional 3G base stations or new LTE base stations, Madden argues.

The next big upsurge in investment will occur about 2014 or 2015, when consumers start to complain about performance. At that point, mobile service providers will turn to small cells for their 3G and LTE networks. Madden predicts more than nine million carrier-grade capacity small cells will therefore be deployed during 2017.

By 2017, roughly $1 billion worth of small cell infrastructure gear will be sold globally, Mobile Experts predicts.

Madden is not as optimistic as some about the use of carrier Wi-Fi to offload traffic. Softbank in Japan has tested the offload potential of dense Wi-Fi deployments and apparently has concluded that less than 25 percent of mobile data traffic can be offloaded to public Wi-Fi in the long term.

Those estimates correspond with figures Boingo suggests. Boingo believes about 22 percent of mobile traffic will be offloaded to Wi-Fi by about 2016.

Others might disagree. Cisco analysts say as much as 30 percent of mobile traffic could occur on Wi-Fi networks. And analysts at Juniper Research think more than 60 percent of mobile device traffic could be offloaded to Wi-Fi means by about 2015.

Others say studies show as much as 70 percent of smart phone traffic uses a Wi-Fi connection.

By 2017, Ericsson expects each macro base station in urban areas will be supplemented by about three small cells small cells.

Today, there are about five million macro base stations deployed worldwide and those in metro areas account for about 15 percent of the total, or about 750,000. That suggests a total of perhaps 2.25 million small cells.

It always is difficult to predict the deployment of small cells because that category sometimes includes virtually all cell sites smaller than a macrocell, including potentially large numbers of consumer grade units used inside homes or offices, plus larger small cells deployed as part of the public mobile network.

Even a casual conversation about the definition of a "small cell" will quickly lead to a series of necessary qualifications and a "fuzzy" answer. Pressed for a concise answer, many observers might point out that a "small cell" approach meaningfully could include every radio installation smaller than a traditional cellular macrocell.

And that's quite a lot of terrain. It includes "carrier" cell sites of 2-kilometer radius, "pico" cells of  perhaps 200 meters, but also customer-owned "femto" cells that cover indoor areas of perhaps 50 meters, and use the customer's own "backhaul" or "access," not a carrier-supplied link.

Those are some reasons why the "heterogeneous network" terminology now has become commonplace.  Future mobile networks will use a variety of cell types, with different capital investment parameters and coverage areas.

Future networks also might make much more direct use of both carrier-supplied and customer-supplied backhaul. A carrier public Wi-Fi hotspot might use a carrier-supplied access connection, while, on an informal basis, most smart phone customers use their own fixed network connections, with their devices connected to in-home or in-building Wi-Fi, in place of any of the mobile cell site types.

Without making too much of the development, "heterogeneous" implies a mix of carrier and consumer-supplied radio and backhaul network resources; a range of management options and quality of service mechanisms.

One might also say that heterogenous networks and customer offloading to Wi-Fi also represent an unparalleled and new form of asset sharing. Whether by formal contract or simply informal mechanisms, customers are using a mix of carrier and "owned" access to support their "untethered" access requirements.

While some entrepreneurs continue to work at creating whole networks using end user supplied access and radio assets, the heterogeneous network does the same thing, essentially. In a broad sense, users and their devices are supported by a mix of carrier-owned and customer-owned networks, both "mobile" and "fixed," using mobile air interfaces and simple Wi-Fi.

The point is that "small cells" are more than a technology. They are part of a shift to more use of "shared" networks in a real sense.

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