Economics of Small Cells and Backhaul

Stream: Future Communications Infrastructure Focus

Broadband World Forum - Content Hub 2 October 18th. 2012

Presented by: Sue Rudd Director Service Provider Strategies email: srudd@strategyanalytics.com

Copyright Strategy Analytics 2012

Outline
Why Operators should Deploy Small cells:
Traffic Capacity 3G Life Extension

How will Small cells Roll Out? Public Femto, Pico, Metro.. How will Small Cells change Backhaul? How do we Resolve other Challenges created for Backhaul by Small Cells? How much Backhaul is Required? Summary: Small Cells offer a Significant Market Opportunity .but create Backhaul Challenges

October 2012 srudd@strategyanalytics.com

Why Operators should Deploy Small Cells: Mobile Data Traffic Explosion
Asia Pacific will be by far the largest Mobile Broadband Data Market with North America & Western Europe virtually tied in 2017
Mobile Data Traffic Explosion

60,000

PetaBytes Traffic Throughput

M East/Africa 50,000 40,000 30,000 20,000 10,000 0 2010 Asia-Pacific C/L America N America C/E Europe W Europe

2011

2012

2013

2014

2015

2016

2017

Source: Strategy Analytics Wireless Operator Strategies

October 2012 srudd@strategyanalytics.com

Copyright Strategy Analytics 2012

Why Operators should Deploy Small Cells:

Solving the Capacity Crunch
Small Cells Solve the Capacity Crunch..
Source Of Efficiency
New Spectrum Spectral Efficiency TOTAL Adding Small Cells & Spatial Re-Use = 3 to 5 times Capacity increase

Times Capacity Grows ~2 Times ~1.5 Times ~3 times (2*1.5) = 9 - 15 Times (3 *3 5)

Sources: Alcatel Lucent, Farpoint Group and Strategy Analytics estimates

Source: Strategy Analytics Wireless Operator Strategies

October 2012 srudd@strategyanalytics.com

Copyright Strategy Analytics 2012

Why Operators should Deploy Small Cells:

3G Life Extension Tri-Mode will Dominate + WiFi
Global Penetration by Technology Generation CDMA, 3G & LTE Legacy Technologies will co-exist for many years
Global Penetration of CDMA, 3G (UMTS, HSPA & HSPA+ and LTE
45% 40% 35% 30%

Percent Penetration of Global Population

CDMA Penetration %
25% 20% 15% 10% 5% 0% 2010 2011 2012 2013 2014 2015 2016 2017
5

LTE Penetration % UMTS/HSPA/ HSPA+ Penetration %

October 2012 srudd@strategyanalytics.com

Source: Strategy Analytics Wireless Operator Strategies

How will Small Cells Roll Out?

Small Cell Shipments By Region
Asia Pacific will be by far the largest market for small Cells
Small Cell Shipments By Region through 2017

9,000 8,000 M East/Africa Asia-Pacific C/L America N America C/E Europe W Europe

Small Cell Shipments 000s

7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2010 2011

2012

2013

2014

2015

2016

2017

Source: Strategy Analytics Wireless Operator Strategies

October 2012 srudd@strategyanalytics.com

Copyright Strategy Analytics 2012

How will Small Cells Roll Out?

Public Femto, Pico, Metro..Small Cell Shipments
Public Femto Cells dominate initially but are overtaken by Pico Cells (Right Axis) By 2014 Metro Cell Shipment Volume will overtake Macro Cells (Left Axis)
Macro, Metro, Pico and Public Femto Cellls 000s
1,600 Macro Cells 6,000

Pico and Public Femto Cells

Macro & Metro Cells

1,400 1,200 1,000 800 600 400 200 0 2010

Metro Cells Pico Cells

5,000

4,000 Public Femto Cells 3,000

2,000

1,000

0 2011 2012 2013 2014 2015 2016 2017

Source: Strategy Analytics Wireless Operator Strategies

September 2012

Copyright Strategy Analytics 2012

Seven Core Use Cases for Small Cells

Location/Area Characteristics Functions Required for Small cell
Add Capacity w. Thruput Complete Coverage Ensure Quality of Service(QoS) Integrate WiFi Load Mgt.

Seven Use Cases

1. Urban Low Speed Hot Zone 2. High Mobility Hot Zone 3. Suburban Neighborhood 4. Outdoor Sporadic Use Locations

5. Indoor Public Spaces 6. Range Extension for Macro Cells

7. Offload to Fixed/WiFi Note: Degree of Shading indicates Relative Importance
Source: Strategy Analytics Wireless Operator Strategies Small Cell Market Outlook 2012 - 2017 - Seven Market Opportunities Quantified
September 2012

Copyright Strategy Analytics 2012

How will Small Cells change Backhaul?

New Topology Part 1 New Topologies Require more connections Per Cell Site
Evolution from Hub .. to Hub and Spoke to Tree and Branch..

October 2012 srudd@strategyanalytics.com

Copyright Strategy Analytics 2012

How will Small Cells change Backhaul?

New Topology Part 2 New Topologies Require More Connections for Redundant Cell Site Connectivity and Real Time Redirect/ Offload
Evolution to Ring and Partial Mesh

October 2012 srudd@strategyanalytics.com

10

How do we Resolve other Challenges created for Backhaul by Small Cells?

Smart Backhaul, QoS, Synch., C-RAN, OAM, SON & SDN

Small cells need more than new Partial Mesh Architecture for Backhaul Connectivity.. Small Cells Require:
High Performance Resilient Multi-path Links QoS for very high Signaling & Network Performance (S1 Links , Diameter etc.) Synchronization for Packet Ethernet connected sites Intelligent Pro-active Network Management with Tools for Network Operations Support Self-Organizing Networks (SON) to handle increasing Complexity

October 2012 srudd@strategyanalytics.com

Copyright Strategy Analytics 2012

11

How much Investment in Backhaul is Required?

Forecast by Region based on Traffic Demand & Estimated $/GB of Backhaul By 2017 Traffic Growth Requires over $35 Billion in Backhaul
Required Backhaul Expenditures to meet Traffic Demand
M East/Africa

Annual $000s for Backhaul

Asia-Pacific C/L America N America C/E Europe W Europe

2010

2011

2012

2013

2014

2015

2016

2017

Source: Strategy Analytics Wireless Operator Strategies

October 2012 srudd@strategyanalytics.com

Copyright Strategy Analytics 2012

12

Summary: Small Cells offer a Significant Market

Opportunity .but create Backhaul Challenges Small cells will help solve the Capacity Crunch and will add capacity to legacy 2.5G/3G Macro Cells
Public Femto cells will play a key role for a few years Pico cells with more intelligence and remote configurability take off Metro Cells will complement Macro Cells in Integrated Heterogeneous Networks (HetNets)

BUT Small cells are not necessarily cheaper AND create Backhaul Challenges that Require:
High Performance Signaling Network QoS Network Management Partial Mesh Architectures .

Separate Report shows it is worthwhile to increase Expenditures for Backhaul

Source: Strategy Analytics Wireless Operator Strategies
September 2012

Copyright Strategy Analytics 2012

13

Small Cell and WiFi Reports from Strategy Analytics

Below are selected Reports that you may find useful.

Complimentary Executive Summaries

Executive Summary: Too Good to be True? Small Cells Solve the Capacity Crunch and Improve Service WiFi Hotspots will be Small Cells in Mobile Broadband Networks by 2015

Full Small Cells Reports and Forecasts

Small Cell Economics - Key to 3G Profitability and Small Cell Market Outlook 2012 - 2017 - Seven Market Opportunities Quantified and Small Cell Market Outlook 2012 - 2017 - Forecasts By Region and Cell Type

Source: Strategy Analytics Wireless Operator Strategies

September 2012

Copyright Strategy Analytics 2012

14

Contact Information

www.strategyanalytics.com Sue Rudd Director Service Provider Analysis srudd@strategyanalytics.com

October 2012 srudd@strategyanalytics.com

15