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Economics of Small Cells

and Backhaul

Stream: Future Communications

Infrastructure Focus

Broadband World Forum - Content Hub 2 October 18 th. 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

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 M East/Africa 50,000 Asia-Pacific C/L America 40,000 N America C/E Europe 30,000 W Europe
60,000
M
East/Africa
50,000
Asia-Pacific
C/L America
40,000
N America
C/E Europe
30,000
W
Europe
20,000
10,000
0
2010
2011
2012
2013
2014
2015
2016
2017
PetaBytes Traffic Throughput

Source: Strategy Analytics Wireless Operator Strategies

October 2012 srudd@strategyanalytics.com

Copyright © Strategy Analytics 2012

3

Why Operators should Deploy Small Cells:

Solving the Capacity Crunch

Small Cells Solve the Capacity Crunch…

Source Of Efficiency

Times Capacity Grows

New Spectrum

~2 Times

Spectral Efficiency

~1.5 Times

TOTAL

~3 times (2*1.5)

Adding Small Cells & Spatial Re-Use = 3 to 5 times Capacity increase

= 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

4

Percent Penetration of Global Population

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%

25%

20%

15%

10%

5%

0%

CDMA Penetration % LTE Penetration % UMTS/HSPA/ HSPA+ Penetration %
CDMA Penetration % LTE Penetration % UMTS/HSPA/ HSPA+ Penetration %
CDMA Penetration % LTE Penetration % UMTS/HSPA/ HSPA+ Penetration %
CDMA Penetration % LTE Penetration % UMTS/HSPA/ HSPA+ Penetration %
CDMA Penetration % LTE Penetration % UMTS/HSPA/ HSPA+ Penetration %
CDMA Penetration % LTE Penetration % UMTS/HSPA/ HSPA+ Penetration %
CDMA Penetration % LTE Penetration % UMTS/HSPA/ HSPA+ Penetration %
CDMA Penetration % LTE Penetration % UMTS/HSPA/ HSPA+ Penetration %
CDMA Penetration % LTE Penetration % UMTS/HSPA/ HSPA+ Penetration %
CDMA Penetration % LTE Penetration % UMTS/HSPA/ HSPA+ Penetration %

CDMA Penetration %

LTE Penetration %

UMTS/HSPA/ HSPA+

Penetration %

CDMA Penetration % LTE Penetration % UMTS/HSPA/ HSPA+ Penetration %
CDMA Penetration % LTE Penetration % UMTS/HSPA/ HSPA+ Penetration %
CDMA Penetration % LTE Penetration % UMTS/HSPA/ HSPA+ Penetration %
CDMA Penetration % LTE Penetration % UMTS/HSPA/ HSPA+ Penetration %
CDMA Penetration % LTE Penetration % UMTS/HSPA/ HSPA+ Penetration %
CDMA Penetration % LTE Penetration % UMTS/HSPA/ HSPA+ Penetration %

2010

2011

2012

2013

2014

2015

2016

2017

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 M East/Africa 8,000 Asia-Pacific 7,000 C/L America 6,000 N America 5,000 C/E Europe 4,000
9,000
M
East/Africa
8,000
Asia-Pacific
7,000
C/L America
6,000
N America
5,000
C/E Europe
4,000
W
Europe
3,000
2,000
1,000
0
2010
2011
2012
2013
2014
2015
2016
2017
Small Cell Shipments 000s

Source: Strategy Analytics Wireless Operator Strategies

October 2012 srudd@strategyanalytics.com

Copyright © Strategy Analytics 2012

6

Pico and Public Femto Cells

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 1,400 Metro Cells 1,200 Pico Cells 1,000 Public Femto Cells 800 600
1,600
Macro Cells
1,400
Metro Cells
1,200
Pico Cells
1,000
Public
Femto Cells
800
600
400
200
0
2010
2011
2012
2013
2014
2015
2016
2017
Macro & Metro Cells

September 2012

Source: Strategy Analytics Wireless Operator Strategies Copyright © Strategy Analytics 2012

6,000

5,000

4,000

3,000

2,000

1,000

0

7

Seven Core Use Cases for Small Cells

Location/Area Characteristics

 

Functions Required for Small cell

 

Add Capacity

Complete

Ensure Quality of Service(QoS)

Integrate WiFi Load Mgt.

Seven Use Cases

w. Thru’put

Coverage

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

8

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…

from Hub … to Hub and Spoke ……to Tree and Branch… October 2012 srudd@strategyanalytics.com Copyright ©

October 2012 srudd@strategyanalytics.com

Copyright © Strategy Analytics 2012

9

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

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

Annual $000s for Backhaul

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

M

East/Africa

Asia-Pacific

Asia-Pacific

C/L America

C/L America

N America

N America

C/E Europe

C/E Europe

W Europe

W

Europe

M East/Africa Asia-Pacific C/L America N America C/E Europe W Europe
M East/Africa Asia-Pacific C/L America N America C/E Europe W Europe
M East/Africa Asia-Pacific C/L America N America C/E Europe W Europe
M East/Africa Asia-Pacific C/L America N America C/E Europe W Europe
M East/Africa Asia-Pacific C/L America N America C/E Europe W Europe
M East/Africa Asia-Pacific C/L America N America C/E Europe W Europe
M East/Africa Asia-Pacific C/L America N America C/E Europe W Europe
M East/Africa Asia-Pacific C/L America N America C/E Europe W Europe
M East/Africa Asia-Pacific C/L America N America C/E Europe W Europe
M East/Africa Asia-Pacific C/L America N America C/E Europe W Europe
M East/Africa Asia-Pacific C/L America N America C/E Europe W Europe
M East/Africa Asia-Pacific C/L America N America C/E Europe W Europe
M East/Africa Asia-Pacific C/L America N America C/E Europe W Europe
M East/Africa Asia-Pacific C/L America N America C/E Europe W Europe
M East/Africa Asia-Pacific C/L America N America C/E Europe W Europe
M East/Africa Asia-Pacific C/L America N America C/E Europe W Europe
M East/Africa 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

Full Small Cells Reports and Forecasts

Source: Strategy Analytics Wireless Operator Strategies

September 2012

Copyright © Strategy Analytics 2012

14

Contact Information

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

Sue Rudd Director Service Provider Analysis srudd@strategyanalytics.com

October 2012 srudd@strategyanalytics.com

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