Market Trends Cellular Small 322625 Garnet

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Market Trends: Cellular Small Cells and Carrier

Wi-Fi Coverage Expands While 5G and Shared
License CBRS Are Waiting to Meet Market
Demand
Published: 7 June 2017 ID: G00322625
Analyst(s): Ian Keene
The market for small cells continues to expand and shared license access
will reveal further opportunities. Communications service providers and their
technology business unit leaders need to take note of the latest trends.
Key Findings
■ Citizens Broadband Radio Service (CBRS) has gained a wide range of interested parties in the
U.S. and exposes the potential for new types of small cell networks. Other country regulators
are expected to follow with licensed shared access frequency provisioning.
■ 4G small cells are planned as a capacity upgrade program as mobile network operators (MNOs)
start to prepare their networks to support 5G, which in most countries will be from 2021
onwards.
■ Expanding the number of outdoor picocells to improve network capacity often remains the more
costly and time-consuming option than is necessary. However there are signs of this improving.
■ Managed Wi-Fi hot spots are an essential part of communications networks. The emergence of
Long Term Evolution (LTE) licensed-assisted access (LAA) and LTE Wi-Fi aggregation (LWA)
means they can support a low cost way of adding LTE small cell locations.
Recommendations
In order to modernize communications service provider (CSP) IT operations and networks:
■ Investigate Licensed Shared Access opportunities as CBRS launches in the U.S. and European
Telecommunications Standards Institute (ETSI) ratifies Licensed Shared Access (LSA). Assess
the use of these frequency bands for neutral host small cells and private LTE networks.

■ Create partnerships with property owners, IT service suppliers, neutral host and system
integrator companies and local governments to maximize opportunities and develop
ecosystems while minimizing costs and the time to deploy small cell solutions.
■ Adopt new ways of network planning, installation and operations support to enable large-scale
small cell developments with much lower capital expenditure (capex) costs.
■ Investigate the added-value service revenue opportunities with your chief marketing officer
(CMO) that can be delivered to enterprises and property owners through small cell solutions.
Table of Contents
Introduction............................................................................................................................................ 3
Market Trend.......................................................................................................................................... 5
Main Market Changes Over the Past Year.........................................................................................5
Impacts Going Forward.................................................................................................................... 6
Issues to Be Addressed....................................................................................................................6
Market Size and Growth Trends........................................................................................................7
Users Demand More Bandwidth and Better Coverage................................................................7
Position the Network Where the Users Are................................................................................. 8
CBRS Exposes More Opportunities............................................................................................ 9
5G Small Cells Planned From 2018 Onwards........................................................................... 10
Outdoor Picocells..................................................................................................................... 10
Indoor Picocells — Enterprise Opportunities, Is There a Future for Private LTE Networks?........ 11
Carrier Wi-Fi Will Remain an Important Part of CSP Infrastructure............................................. 12
Femtocell Market...................................................................................................................... 13
Rural/Remote Small Cell Deployments......................................................................................14
Summary of Small Cell Deployment Locations.......................................................................... 14
Technology Trend........................................................................................................................... 15
Market Structure Trend................................................................................................................... 16
Partnerships Are Key to Building Small Cell Opportunities.........................................................16
Monetization of Small Cell Infrastructure Through Value-Added Services........................................ 19
Vendors to Watch.................................................................................................................................20
Gartner Recommended Reading.......................................................................................................... 23
List of Figures
Figure 1. Small Cell Form Factors........................................................................................................... 4
Page 2 of 25 Gartner, Inc. | G00322625

Figure 2. Small Cell Shipments (2G, 3G, 4G), 2013-2021, Worldwide.....................................................7

Figure 3. Mobile Device Data Traffic, 2016 and 2021.............................................................................. 9
Figure 4. Typical Indoor Small Cell Solutions......................................................................................... 12
Figure 5. Installed Base of Small Cell Locations (Millions)...................................................................... 14
Figure 6. Small Cell Installed Base 2016 and 2021............................................................................... 15
Figure 7. The Use of Analytics in Managed Wi-Fi Networks.................................................................. 19
Introduction
Small cells become an established extension to 4G macrocell

networks.
On a large scale basis, 5G is not forecast to see big growth before 2021 in the majority of countries.
Hence, most CSPs have to formulate a network strategy that accommodates growth in mobile data
demand by leveraging their 4G networks. The use of small cells is an important part of that strategy.
Communications service providers (CSPs) are developing technology strategies for the next five
years and their 5G plans are starting to solidify. 5G networks will appear in 2018, initially in South
Korea and the U.S. As of April 2017, we have identified 11 countries in total that have solid plans for
commercial 5G by 2020. However, these networks are either being built for fixed wireless
applications (like Verizon in the U.S.) or for high profile sporting events (such as the 2018 Winter
Olympics in South Korea).
Small cells can come in several forms as shown in Figure 1.
Gartner, Inc. | G00322625 Page 3 of 25

Figure 1. Small Cell Form Factors
SMB = small or midsize business
Source: Gartner (June 2017)
We have observed growth in all of these sectors during 2016 and expect this to continue throughout
2017 and beyond. New business models are developing and new industry partnerships are
emerging. The traditional model of cellular operators building expensive macrocell sites and directly
providing services to subscribers is not always applicable for small cells. There are many
stakeholders in small cell infrastructures and the license-holding cellular operator is one of several
participants. Ecosystems are developing between CSPs, building owners, neutral hosts, IT services
vendors and system integrators.
The main advantages of small cells are:
■ Improving in-building coverage

■ Efficiently meeting the growing demands for more capacity (either indoor or outdoor)
■ Improving the subscriber experience
■ Creating a platform for value-added services through mobile edge computing.
Most cellular operators are now committed to small cell network solutions in one form or another,
and have them in their business plans. While some cellular operators are still in the planning or
trialing stages, others are ramping up their deployments and expanding into new market areas.
Market Trend
Main Market Changes Over the Past Year
Since last year's Market Trends research (see "Market Trends: Picocell, Carrier Wi-Fi Hot Spot and
Femtocell Market Lead Small Cell Market Growth") the following changes have impacted the
market.
■ A fast accelerating interest in shared license small cells and the use of the CBRS spectrum in
the U.S. in particular. There are a growing number of equipment vendors that have — or are
developing — CBRS products. In North America, these activities have overshadowed Long
Term Evolution Advanced (LTE-A) over unlicensed spectrum (LTE-U), licensed-assisted access
(LAA), Wi-Fi aggregation (LWA) and MulteFire. However, it will probably be some time (if at all)
before license shared access spreads across other regions.
■ Growth in the number of indoor 4G small cells in the mature Asia/Pacific and Greater China
regions. As opposed to other more hesitant markets, cellular operators have been active in the
deployment of outdoor picocells as well as indoor small cells in the retail, transportation and
education market segments.
■ Continued expansion of neutral host businesses, particularly in the U.S. Targeting both indoor
and outdoor LTE small cells, there are an increasing number of these businesses looking to
profit from the design, installation and operation of small cells — on behalf of both cellular
operators and property owners. Macrocell tower companies, such as Crown Castle and
American Tower, are joining IT services companies like ExteNet and CommScope in pursuing
opportunities. Sales are starting to gain traction as cellular operators remain hesitant with their
large scale plans, and solutions are yet to be effectively marketed to enterprises.
■ The development of templates for the interworking of city governments and CSPs to streamline
the process of locating small cells. Unsatisfactory procedures, costs and time scales have so
far limited the market for small cell city deployments. Regulators are starting to provide
guidelines with the Federal Communications Commission (FCC) providing strong guidance in
the U.S.
■ The retail industry often outsource their customer-facing Wi-Fi to CSPs and has expanded the
use of location analytics, opening up opportunities for more value-added applications.

■ More small cell products have emerged that support multiple CSPs and these products are
gaining interest from location owners.
Impacts Going Forward

■ 5G will start to make an impact on the small cell market, starting with a relatively small number
of small cell shipments during 2018 but it's forecast to accelerate from 2021 onwards.
■ CBRS will emerge in the U.S. Its future is a little uncertain, but it is a technology with significant
potential. Use of the LSA shared license frequency band in Europe will be explored by new
service providers.
■ Interest in private LTE networks (already detected), will expand. Both shared license, unlicensed
and fully licensed spectrum is expected to be used. Initial deployments will be in large campus
industrial locations. Private LTE can provide a lower cost solution for wide area Internet of
Things (IoT) communications, for example, in an environment such as an oil refinery.
■ Mobile virtual network operators (MVNOs) expand their activities with a "Wi-Fi first" policy to
minimize their cellular wholesale costs. The number of carrier class Wi-Fi hot spots will continue
to grow, and there will be more partnerships that present both service providers and
subscribers with access to a large number of hot spots.
■ LTE in unlicensed spectrum creates new types of small cell. LTE-LAA in carrier Wi-Fi hot spots
and MulteFire in residential femtocells will make an impact.
■ Mobile-edge computing will start to be adopted in small cells.
■ Maturing of the neutral host model and expansion of this model to outside of the U.S. Therefore,
progress is expected in the lowering of costs and CSP willingness to allow third parties to
design and install small cells.
Issues to Be Addressed
■ While a few CSPs are moving forward with small cell deployment plans, many are doing little
more than small volumes while they continue to resolve how to deploy and commission large
numbers of cells with good coverage and interference management — higher volumes than with
macrocells but it needs to be done with a much lower budget.
■ What would be the best way of managing the relationship between building owners and CSPs
when small cell infrastructure is used to support multiple CSPs? Will CSPs adopt network-
sharing technologies such as Multioperator Core Network (MOCN)?
■ The cost of picocell deployment — while equipment is competitively priced — since the cost of
installing and operating a small cell can be very restrictive when macrocell methodologies are
applied. There have been examples of total installation and commissioning costs exceeding
$100,000 for a $3,000 piece of small cell equipment. This research deems that there is a linear
relationship between cost and number of small cells deployed. The CSPs responsible for
dramatically reduced installation and commissioning costs are those deploying most of the
picocells.

Market Size and Growth Trends

Gartner estimates that the total number of small cell shipments grew by 12% in 2016, and this is
forecast to grow a further 13% during 2017. The highest shipment growth was in the smaller of the
subsegments, picocells, which grew 61% in 2016 and is forecast to grow 40% through 2017.
Equipment revenue growth was 24% in 2016 as all categories — femtocell, picocell and carrier Wi-
Fi — sold well.
Overall, small cell equipment market revenue was around $3.4 billion in 2016, forecast to grow to
$4.3 billion during 2017 and then approach $6.5 billion by 2021 with a compound annual growth
rate (CAGR) of 11%.
User needs, developing strategies, better products and the emergence of workable business plans
have all contributed to this growth, and will continue to do so over the forecast period. The vast
majority of CSPs now agree that small cells are essential to future cellular networks in order to meet
user demands; and in countries with a developed cellular infrastructure, most are now implementing
small cell strategies to meet both capacity and coverage needs.
Figure 2. Small Cell Shipments (2G, 3G, 4G), 2013-2021, Worldwide
Users Demand More Bandwidth and Better Coverage

Cellular network data traffic will increase with a compound annual growth rate (CAGR) of 55% from
2014 to 2018, according to Gartner's "Forecast: Mobile Data Traffic, Worldwide, 2011-2018." Traffic
over cellular mobile networks is expected to reach 172 exabytes in 2018, putting a tremendous

strain on traditional macrocell architectures. Cisco's Visual Networking Index (VNI) shows a wide
variation of growth between different countries, however over 50% growth in data traffic is common
even in developed markets where the lowest growth measured was 31%. Bandwidth drivers include
more smartphone connections, a move toward more 4G coverage and more use of video. Cellular
operators that have transitioned to LTE to solve the previous traffic crunch find that a 4G-connected
smartphone will often consume far more data than when connected to 3G. Gartner has forecast that
figure to be 3.7 times the amount of data per month by 2018.
To meet subscriber needs, macrocell coverage is inadequate. Even with carrier aggregation and
smart antenna, macrocell coverage can remain an issue in many areas — especially indoors.
In a competitive environment, CSPs need to focus on improving the subscriber experience by

keeping the traffic on-network. Then, as a result, they must meet the objectives of decreasing churn
and opening up opportunities to increase average revenue per unit (ARPU). While doing little or
nothing will minimize network costs, it would not achieve these objectives. Overall, CSPs need to
balance costs, network efficiency, flexibility and competitiveness, all while increasing ARPU.
Position the Network Where the Users Are

Usage of small cells is being driven by patterns of user traffic. The vast majority of subscriber data
traffic arises when subscribers use their devices indoors. Estimates vary from between 65% to
90%, depending upon the survey source and country surveyed. Gartner considers — as a
reasonable average — that slightly over 80% of traffic is generated when the user is indoors.
However, many LTE and 3G frequencies are poor at macrocellular indoor coverage, which means
subscribers receive a "cell edge" experience with reduced effective cell capacity and bandwidth. An
Ericsson survey found that only 36% of users are satisfied with indoor cellular coverage.
In most cases, CSPs do not see increasing the density of macrocells to be a cost-effective solution.
Traditional distributed antenna systems (DASs) are cost-effective only for the largest venues and can
be capacity limited. Hence, CSPs are interested in small cells.
Picocells and femtocells are not a complete solution on their own. Many user devices do not have
cellular connectivity, and integrating carrier Wi-Fi into the solution is a key component. Use of Wi-Fi
in the home and office will also remain a highly popular means of data connectivity. The distribution
of mobile device traffic, including both smartphone and tablet for 2016 and predicted use for 2021,
is shown in Figure 3.

Figure 3. Mobile Device Data Traffic, 2016 and 2021
CSP = communications service provider
CBRS Exposes More Opportunities

LTE over licensed Shared Access could be described as the "hot" small cell technology at the
beginning of 2017. It is based upon the concept of sharing licensed access to a currently
infrequently used piece of spectrum. In the U.S., it is called CBRS and opens up a 150 megahertz
(MHz) piece of spectrum in the 3.5 gigahertz (GHz) band. While the incumbent users of this
frequency band have priority, other license holders are permitted providing they do not create
interference. Portions of the frequency allocation can be licensed to a sole user at a particular
location (such as a campus environment or shopping mall) or allow other parties a third grade of
access if spectrum is available. A spectrum allocation system manages any potential conflict
between the authorized users. Formal certification is expected from the FCC by the end of 2017 and
the first deployments are expected from 2018 onwards. The Japanese MNO NTT Docomo released
3.5GHz LTE services in 2016, it is at a slightly different frequency range but smartphone handsets
could be adapted for CBRS. However, how long it will take for these devices to penetrate the U.S.
market remains to be seen. Other country regulators are examining similar concepts. In Europe, the
ETSI standards body has completed specifications for Licensed Shared Access (LSA), which would
operate in the 2.3GHz frequency band.
CBRS can overcome a number of issues that exist within the small cell market:

■ Property owners that require good cellular connectivity for the public but have been unwilling to
fund DAS installation would be able to provide coverage and operate a gateway to MNO cellular
networks for which they could potentially charge.
■ Enterprises could operate their own private LTE-based network with access to external MNO
networks.
■ Neutral hosts can build a one-frequency-band small cell installation instead of trying to
accommodate multiple licensed frequencies from all the MNOs.
■ MNOs can overcome the high cost of deploying small cells at many locations by connecting to
CBRS gateways.
5G Small Cells Planned From 2018 Onwards

There are a growing list of CSPs announcing solid plans for commercial 5G and prestandard 5G
during the 2018 through 2019 period. To date, Gartner has identified network plans in 11 countries
— U.S., South Korea, Japan, China, Russia, Australia, U.K., Singapore, Sweden, Qatar and United
Arab Emirates (UAE). However, in many cases these deployments are initially more for "showcasing"
rather than wide-scale deployment. 5G small cells operating in the 28GHz frequency band are likely
to be the first products on the market, predominantly used for fixed wireless applications. Therefore
5G counters the trends that have been seen in all previous generations of network builds, where
mobile is the main application and macrocells are deployed first. The end result is likely to be areas,
islands of small cell 5G coverage before 5G macrocells are deployed from 2021 onwards. Gartner
will be separately forecasting 5G — including 5G small cells — as a quarterly published line item in
our CSP-operational technology (OT) forecasts.
Outdoor Picocells
In countries with a maturing LTE infrastructure, outdoor traffic congestion issues are becoming
increasingly common. Advances in picocell products — including equipment functionality, self-
organizing network (SON) capability and network planning tools — now make outdoor picocell
deployments more cost-effective and efficient. However, there is still some way to go in cost
reduction. Minimizing the cost of electricity supply, location rents and communications backhaul/
fronthaul are critical factors when planning picocells. However, with every year that passes, the
increasing volumes of cellular traffic make picocells a higher priority. Densifying the macrocell
network is often not an efficient solution. For example, China Mobile have noted that its macrocells
have less than 10% utilization in some places, yet are oversubscribed in others; 20% of locations
produce 80% of the traffic. Thus, positioning the cell where the traffic density is high makes for a
much more efficient infrastructure.
Moves to streamline the process of installing and commissioning outdoor picocells are taking place.
It is not only an issue for the MNOs but also for city governments that can find themselves with a
very large number of applications arriving on their desks. Many city governments are now
establishing processes for small cell planning applications to ease the whole exercise. In the U.S.,
the FCC has produced guidelines to promote fast and efficient small cell deployment. Picocell
installation and commissioning in key outdoor city locations have commonly cost above $50,000

per site. With a streamlined process and agreements between city and MNO partners, this cost can
be reduced to below $10,000.
Indoor Picocells — Enterprise Opportunities, Is There a Future for Private LTE Networks?
Enterprises realize the increasing need for better cellular coverage within buildings. Gartner's
research shows that 30% of calls made by enterprise employees at their desks are on mobile
phones. However, cellular coverage within buildings is often poor or nonexistent. Modern building
design attenuates outdoor macrocellular signals to a larger degree than older designs, therefore the
issue will continue to get worse unless in-building cellular solutions are deployed.
The upsurge in bring-your-own-device (BYOD) policies within enterprises has generated some
interest in office small cells. Access to corporate applications via secure cloud cellular services —
both inside and outside of the office, and on a wide range of user devices — is a solution to the
BYOD dilemma. Gartner predicts that by 2021, 27% of corporate data traffic will flow directly from
mobile devices to the cloud.
Interest in private LTE networks, already detected by Gartner, will expand. Both shared license,
unlicensed and fully licensed spectrum is expected to be used. The shared license option could be
particularly attractive since it will enable one radio channel to be used to connect to all MNO
networks via a gateway and at the same time provide access to internal enterprise applications.
Initial deployments will be in large campus industrial locations. Some small cell products allow
licensed enterprise networks to provide enterprise-specific applications via mobile-edge computing
functionality within the baseband unit of the small cell. The use of MulteFire in unlicensed
frequencies is another option — if and when mobile devices become available at an acceptable
cost.
Private LTE can possibly provide a lower cost solution like the wide area IoT communications, for
example, in an environment such as an oil refinery.
Indoor Small Cell Solutions
Some equipment vendors are providing stand-alone femtocells, often with self-organizing network
(SON) capabilities, while others have distributed radio systems that are connected to a common
radio controller and baseband unit. Utilizing existing office LAN cabling will significantly decrease
installation costs and many vendors provide coordinated picocell solutions that are popular in many
enterprise deployments (see "Magic Quadrant for Small Cell Equipment").
For large indoor areas and stadiums, the traditional distributed antenna systems approach is
adopted so as to provide equal coverage for all cellular operators. However, this can suffer from
capacity issues and 2G/3G installations are becoming supplemented with LTE small cells. Small cell
equipment vendors claim that their solutions can provide 10 to 15 times the capacity with lower
installation cost and capital expenditure of traditional distributed antenna systems. Costs of less
than 30% of a traditional DAS has been claimed, but modern, next-generation, DAS has reduced
such cost differences.

In the past, a significant problem with indoor small cells has been that they can only support one
MNO without having to duplicate some of the equipment or for MNOs to share the baseband
processing unit. However several vendors have now launched multi-MNO small cell solutions.
Typical guidelines as to the appropriate system is shown in Figure 4; however, new products that
can coordinate multiple picocells can be used instead of distributed radio systems; and in turn
distributed radio systems can be used in large area locations where capacity is key and only one or
two cellular operators are supported — as in some Asia airports.
Figure 4. Typical Indoor Small Cell Solutions
DAS = distributed antenna system; m = meters
Carrier Wi-Fi Will Remain an Important Part of CSP Infrastructure

Carrier-grade hot spots continue to grow in number as practically all CSPs now view Wi-Fi as an
important part of their subscriber connectivity strategy. Since their rise in popularity in 2001, carrier
Wi-Fi hot spots have had their rise and fall in popularity. When cellular capacity, availability and data
tariffs become issues for users, Wi-Fi gains in popularity despite the common issues of getting
connected and relatively poor quality of experience compared to 4G. From 2017, Wi-Fi and cellular
will start to merge, with specifications such as LTE-LAA, LTE-LWA and MulteFire blurring the divide
between the two technologies.
Subscriber connectivity through tablet devices also makes Wi-Fi an important part of the mix. Even
in mature markets, the majority of tablet devices had no cellular capability in 2016. Cellular operator
tariffs also need to be taken into account. Gartner surveys have shown that many respondents
delayed downloading applications or streaming video content until they were in a Wi-Fi coverage
area.

Gartner estimates that there were nearly 11 million CSP Wi-Fi hot spot locations in 2016, forecast to
rise to over 15 million by 2021. These hot spot service providers are of many different types, ranging
from cellular operators, cable multiple service operators (MSOs), fixed line carriers, Wi-Fi internet
service providers (ISPs), hot spot aggregators and over-the-top (OTT) players such as Google's
Project Fi. Add community hot spots where city/local governments and transportation authorities
are very active and then the numbers grow considerably.
Subscriber access to a large number of Wi-Fi hot spots is essential for MVNOs to run highly
profitable services. By offloading as much cellular traffic as possible onto Wi-Fi, the wholesale costs
of using a cellular network are minimized. An increasing number of cable operators, fixed-line only
telcos and OTT service providers are using such "Wi-Fi first" strategies. Crowd-sharing subscriber
home Wi-Fi connections by giving the access points a separate public service set identifier (SSID)
produces huge numbers of carrier hot spots — more than 20 million worldwide. The number of hot
spots in useful public locations — such as retail outlets, coffee shops, transportation hubs — is,
however, far less and this lower number is used in our market statistics.
Femtocell Market
The consumer household femtocell market remains strong, driven by the requirement to boost poor
or nonexistent cellular coverage indoors. This is despite the support of voice calls over Wi-Fi by
many operators, which does not seem to have had much impact on the shipments of 3G and 4G
femtocells.
There is also the issue of transitioning subscribers from 3G to 4G contracts. Most 4G networks do
not currently support voice calls over LTE networks, meaning that dual mode (3G and 4G)
femtocells are needed to provide subscribers with good overall support. This raises the cost of
femtocell products.
The domestic femtocell market may be boosted if CSPs adopt LTE-LAA technology or possibly
MulteFire in the future, leveraging the heavy-load capability of 5GHz Wi-Fi with the authentication,
control and billing capability of LTE.
Fixed-line operators without an existing macrocell infrastructure may consider licensed shared
access, such as CBRS femtocells at fixed-line subscriber locations, since they can provide
"crowdsourced" coverage at a relatively low cost. This would typically be supplemented with a
contract from a mobile network virtual operator for outside of femtocell coverage.
Femtocells in the SMB market is a growth area (as discussed in the Enterprise section of this
research). All in all, femtocell shipment growth is forecast to be a CAGR of 5% during 2017 through
2021. This is not only driven by the need for improved cellular coverage and capacity, but
sometimes by a growing number of value-added applications that are making small cells
increasingly attractive in these environments.

Rural/Remote Small Cell Deployments

In just about every country there are rural areas where cellular services have not made good
business sense to CSPs. There are high capital and operational costs associated with locating
macrocell sites in remote locations, as well as difficulties with the supply of power and backhaul,
along with high operating costs but low network utilization — impeding return on investment.
Installing small cells in rural communities presents an alternative business model and can be
attractive, particularly where fixed broadband backhaul is available and access to suitable cell
locations and a supply of power is also available from the community. However, it still might take
some prompting from the regulators to spur CSPs into action. For example, in the U.K. the regulator
had to threaten forced network sharing to spur cellular operators to start small cell deployments in
rural communities. Public safety LTE plans in an expanding number of counties will also improve
rural LTE coverage.
Summary of Small Cell Deployment Locations

Figure 5 summarizes the forecast mix of small cell locations.
Figure 5. Installed Base of Small Cell Locations (Millions)
Figure 6 shows the forecast mix of femtocell, picocell and carrier-class Wi-Fi installations.

Figure 6. Small Cell Installed Base 2016 and 2021
CSP = communications service provider
Recommendation: Use small cells to improve coverage, meet capacity demands, build a platform
for value-added services and enhance subscriber experience.
Technology Trend
CSPs agree that there is no single solution for every requirement, so most plan to take a
multivendor approach when selecting infrastructure equipment. Some vendors focus on one or two
market areas, while others try to cover all options. Some provide a suite of professional services or
core network capability while others focus on radio access network (RAN) equipment sales.
However, throughout the range of products there are some general themes of product development
to better meet CSP needs. These include:
■ Lower total cost of ownership (TCO)

■ Multiple mobile operator capability
■ Unlicensed and licensed shared access capability
■ Plug-and-play installation
■ Using existing network infrastructure where possible
■ Advanced SON features

■ Scalable to high capacity

■ Value-added services capability
Different types of equipment have different features, options and requirements with regard to
networks and integration. Femtocells favored by CSPs for residential and small or midsize business
settings are often SONs and plug-and-play, with highly scalable femtocell gateways. Competitive
pricing and reliability are key. CSPs should also consider the need for features such as presence
sensing and processing capability to support additional services.
Enterprise small cells can be single cells or multiple distributed cells. They can be stand-alone and
self-organizing or synchronized with a macrocellular network. They may also be able to operate on
existing LAN infrastructure, or may require specific cabling, such as Common Public Radio Interface
(CPRI) fiber connections. Features such as support for multiple frequency bands (3G plus LTE, for
example), multiple operator support and mobile-edge computing via blade server support for
business applications.
Outdoor picocells can be either part of a heterogeneous network, or stand-alone products.
Wi-Fi equipment can be stand-alone, or can be integrated into femtocell and picocell equipment.
Carrier-class features include support for Hotspot 2.0 and dual-band operation. CSPs should
choose highly scalable gateway controllers to integrate Wi-Fi traffic into their core networks.
Recommendation: Make use of Gartner's latest "Magic Quadrant for Small Cell Equipment" to
keep abreast of the technology attributes of the equipment vendors.
Market Structure Trend
Partnerships Are Key to Building Small Cell Opportunities

Partnerships and interrelationships between service providers and property owners has become
well established in Wi-Fi hot spot networks (see "Optimizing Wi-Fi Hot Spots for Profitability and
User Experience"). However, the emergence of picocells in cellular operator networks has generated
new business models and created the need for more partnerships from the point of view of both
CSPs and suppliers of network infrastructure and solutions.
Traditionally, MNOs have had a macrocell mindset. Small cells need different business plans,
different installation and maintenance management, require different total cost of ownership (TCO)
equations, create new issues with partner negotiations (site procurement and backhaul, for
example) and present different technical issues, such as cell planning and SON. The basic guideline
is to prioritize low capex and operating expenditure (opex) over optimum radio performance.
Some CSPs are considering alternative approaches with independent self-organizing small cells
that use backhaul that already exists in most cases (cable, Ethernet or even DSL); yet generally
need only provide support for a relatively small number of concurrent users (typically 32 or 64).
However, in most cases, cellular operators are uncomfortable with sharing WAN access with other
WAN traffic. Other CSPs are looking at a cloud radio access network (RAN) architecture with low

latency CPRI interfaced to the radio units. In this case, the number of small cells will be limited due
to cost limitations unless there is a dense optical fiber fixed infrastructure in place.
New business models for indoor small cells continue to be developed. An increasing number of
enterprises are demanding far better cellular coverage and capacity than is available from the
macrocellular network. While the CMO of cellular operators can see opportunities to increase ARPU
and reduce the churn of enterprise customers with office small cells, the CTO department finds it
hard to scale up to so many concurrent projects as well as keep operational expenditure under
control. Financial risk is an issue too, with CSPs having to invest in infrastructure with the guarantee
of typically only a three-year — possibly five-year — contract with the enterprise. Partnerships that
can reduce financial risk are often a key component. So CBRS may prove to be a relatively simple
solution.
Outdoor picocells have their issues too, where network planning, site acquisition, backhaul and
power sourcing, operations and maintenance create new challenges. These new business models
are creating ecosystems that can involve the entities described in the following sections.
Property Owners
Property owners are key to introducing small cells into buildings and also as potential sites for
locating outdoor picocells. Interest is growing as good cellular services are becoming key to the
attractiveness of these buildings, particularly those where office and retail businesses are located.
While there is some willingness to invest in small cell infrastructure, property owners are wary of
committing to long contracts with just one CSP. While some building owners see small cells as a
possible cost center that can be justified through better tenant services, a few are considering small
cells as a profit center — building the infrastructure and charging cellular operators for providing
services to subscribers. Businesses with the rights to property also include municipal governments
and entities such as JCDecaux, which has the rights to over 480,000 billboards in 3,700 cities
worldwide. This company has been an active partner in the development of small cells.
Regulators
Regulators should play an important role in accelerating the deployment of small cells, but many do
not. Regulators can stimulate the efficient cooperation of city governments and MNOs so as to
reduce both the capex and opex of small cell deployment. Regulators can also promote initiatives
like the CBRS licensed shared access frequency allocations to encourage neutral host small cells.
Enterprises
The needs of enterprises are explained further in an earlier section of this research. Minimum
disruption during installation and a high degree of flexibility are key for proposed solutions to prove
effective. Reuse of existing LAN infrastructure, plug-and-play installation, software-configurable
radio and low operating costs are properties that will determine the small cell technology solution.

Neutral Hosts and SCaaS
Hosting small cell infrastructure is a concept that has been around since 2013, it is now starting to
gain traction. Adding operations, maintenance to this concept has created small cell as a service
(SCaaS), often known as SCaaS providers. Not only can these entities take responsibility for the
installation and operation of the infrastructure, they can also be one of the commercial risk takers in
establishing the ecosystem. SCaaS examples include Arqiva, Ericsson, ExteNet Systems and Virgin
Media Business.
System Integrators
System integrators can often bridge the gap between the aspirations of a building owner, the
demand for high-quality communications services, and the CSP's plans. Particularly active in the
U.S. right now — but expected to make their presence felt in other regions — system integrators
such as affini, American Tower, CommScope, and Crown Castle are playing a role in this ecosystem.
Equipment Vendors
Eager to get the small cell market moving, equipment vendors have been vital in creating
partnerships and enabling workable business plans that would otherwise lack essential ingredients.
Constructing solutions for network planning, locating sites, system integration, site surveys, IT
services — and in some cases, financial risk — have been key in many small cell markets.
Equipment vendors are also starting to use networking equipment channels to the enterprise
market, proposing solutions directly to the end user. See "Magic Quadrant for Small Cell
Equipment" for analysis of the small cell equipment vendors.
City Governments
Not only can city governments help with providing rights of way and small cell site locations, but
they have an interest in improving city communications to expand the economy, improve citizen
satisfaction, and provide an infrastructure that can support smart city initiatives. Cities are
increasingly involved with promoting Wi-Fi access for citizens (see "Optimizing Wi-Fi Hot Spots for
Profitability and User Experience") and some have become active with cellular solutions —
examples include the Amsterdam transport authority and the city governments of Shanghai and
London. However, there remains the need for far more efficient interworking between the MNOs and
city governments.
Cellular Operator
Last, but not least on this list, are the cellular operators who hold the key frequency licenses. While
some are practically doing most things themselves and have limited partnerships, the majority need
to partner in order to maximize their opportunities. The 25-year-old business model of traditional
cellular operators needs to change; in order to reap rewards from small cell business opportunities.

Monetization of Small Cell Infrastructure Through Value-Added Services

One of the most difficult obstacles for large-scale small cell networks is the justification of TCO.
While alternative approaches to the traditional macrocell TCO model can reduce cost, small cells
are still an expense that needs to be justified, particularly at indoor customer locations where
increased ARPU and low customer churn is sought. This can be achieved through the addition of
value-added services, such as real-time analytics or outsourced Internet Protocol private branch
exchange (IP PBX) services.
Gartner has estimated that 30% of calls made while employees are at their desks are made over a
cellular network. Eliminating the need for fixed desk phones by providing IP PBX functionality at the
small cell baseband controller through mobile-edge computing is an option for enterprise customers
that have the capability to raise ARPU.
Real-time mobile analytics offers a way to monetize investments in small cell infrastructure making
the business justification for deployment much more appealing. A growing number of CSPs are
providing carrier Wi-Fi solutions that include analytics features, real-time responses and reporting.
The main initial focus has been the retail vertical industry, where retailers have embarked on a new
generation of customer-facing cloud managed Wi-Fi systems within their premises. The majority of
retailers already outsource their customer Wi-Fi service and are increasingly conscious of the
opportunity to use this to improve operating efficiencies, engage the customer and promote
customized advertising (see Figure 7). The use of LTE instead of Wi-Fi is happening in China. LTE-
LAA products are expected to become popular in public and retail locations where a cellular
operator is already the Wi-Fi provider.
Figure 7. The Use of Analytics in Managed Wi-Fi Networks
IoT = Internet of Things

Recommendation: Become part of an ecosystem to maximize revenue opportunity and subscriber

experience.
Vendors to Watch
Equipment vendors that are leading new product developments, or are market share leaders,
include Ericsson, Huawei Technologies, Nokia, Samsung, SpiderCloud Wireless and ZTE. Track the
activities of these vendors to understand future market developments.
CSPs who are leading with new small cell developments and new value-added services include
AT&T, BT/EE, China Mobile, Comcast, Telstra, Verizon and Vodafone. Track their new service
launches and network capacity build-outs to help refine your small cell strategy.
Property owners and system integrators that are active in the small cell ecosystem include affini,
American Tower, CommScope, Crown Castle and JCDecaux. Expect them to expand their CSP
partnerships.
Finally, neutral host companies and SCaaS providers are providing alternative business strategies
for small cell networks. Track the activity of Arqiva, Ericsson, ExteNet Systems, NEC and Virgin
Media Business, to determine whether this is a suitable strategy for your network expansion.

Acronym Key and Glossary Terms

2G second generation
3G third generation
3GPP Third Generation Partnership Project
4G fourth generation
5G fifth generation
ARPU average revenue per unit
BYOD bring your own device
CAGR compound annual growth rate
capex capital expenditure
CBRS Citizens Broadband Radio Service
CMO chief marketing officer
CPRI Common Public Radio Interface
CSP communications service provider
CTO chief technology officer
DAS distributed antenna system
DSL digital subscriber line
ETSI European Telecommunications Standards Institute
FCC Federal Communications Commission
FDD frequency division duplex
GHz gigahertz
IoT Internet of Things
IP Internet Protocol
IP PBX Internet Protocol private branch exchange

ISP internet service provider
LAN local-area network
LSA Licensed Shared Access
LTE Long Term Evolution
LTE-A Long Term Evolution Advanced
LTE-LAA Long Term Evolution-licensed-assisted access. Licensed assisted access through LTE,
using both licensed and unlicensed frequencies.
LTE-U Long Term Evolution Advanced over unlicensed spectrum
LWA Long Term Evolution Wi-Fi aggregation
m meters
m2 square meters
macrocellular Traditional cellular architecture with one or more cells covering a large area, often from a
high location
Mbps megabits per second
MHz megahertz
MOCN Multioperator Core Network
MSO multiple service operator
MVNO mobile virtual network operator
opex operating expenditure
OTT over-the-top
PBX private branch exchange
PON passive optical network
RAN radio access network
QoS quality of service
SCaaS small cell as a service

SMB small or midsize business
SSID service set identifier
SON self-organizing network
TCO total cost of ownership
TDD time division duplex
UAE United Arab Emirates
VNI Visual Networking Index (Cisco)
WAN wide-area network
Wi-Fi Wireless Fidelity (also called Wireless LAN)
Gartner Recommended Reading

Some documents may not be available as part of your current Gartner subscription.
"Optimizing Wi-Fi Hot Spots for Profitability and User Experience"
"Market Trends: Small Cell Infrastructure, Femtocell, Picocell and Carrier Wi-Fi Hot Spot
Deployment Plans Start to Solidify"
"Market Trends: Picocell, Carrier Wi-Fi Hot Spot and Femtocell Market Lead Small Cell Market
Growth"
"Magic Quadrant for Small Cell Equipment"
"Forecast: Mobile Data Traffic, Worldwide, 2011-2018"
"Emerging Technology Analysis: 5G"
"Five Best Practices of C-RAN Introduction for Network-Based CSPs"
"Market Insight: It's Time to Start Migrating to LTE for Mission-Critical and Public Safety Private
Networks"
Evidence
Evidence has been collected from Gartner surveys, published vendor surveys, CSP and vendor
briefings plus discussions, associated Gartner research, Gartner market forecasts and Gartner client
discussions.

Note 1 Definitions
There are two types of small cell — 3G/LTE small cells, and carrier-grade Wi-Fi hot spots — that are
managed as an integral part of a CSP network. Small cells are compact (approximately the size of a
shoebox), with a cell radius of a few tens to a couple of hundred meters. They emit five watts or less
and are deployed in a variety of places to complement macrocells in order to provide optimal radio
propagation and coverage. Cellular products include picocells and femtocells.
This document is published in the following Market Insights:

Carrier Network Infrastructure Worldwide

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Market Trends: Cellular Small Cells and Carrier

Analyst(s): Ian Keene

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Figure 1. Small Cell Form Factors........................................................................................................... 4

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Figure 2. Small Cell Shipments (2G, 3G, 4G), 2013-2021, Worldwide.....................................................7

Small cells become an established extension to 4G macrocell

Small cells can come in several forms as shown in Figure 1.

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Figure 1. Small Cell Form Factors

SMB = small or midsize business

Source: Gartner (June 2017)

The main advantages of small cells are:

■ Improving in-building coverage

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Impacts Going Forward

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Market Size and Growth Trends

Figure 2. Small Cell Shipments (2G, 3G, 4G), 2013-2021, Worldwide

Source: Gartner (June 2017)

Users Demand More Bandwidth and Better Coverage

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In a competitive environment, CSPs need to focus on improving the subscriber experience by

Position the Network Where the Users Are

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Figure 3. Mobile Device Data Traffic, 2016 and 2021

CSP = communications service provider

Source: Gartner (June 2017)

CBRS Exposes More Opportunities

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5G Small Cells Planned From 2018 Onwards

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Indoor Small Cell Solutions

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Figure 4. Typical Indoor Small Cell Solutions

DAS = distributed antenna system; m = meters

Source: Gartner (June 2017)

Carrier Wi-Fi Will Remain an Important Part of CSP Infrastructure

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Rural/Remote Small Cell Deployments

Summary of Small Cell Deployment Locations

Figure 5. Installed Base of Small Cell Locations (Millions)

Source: Gartner (June 2017)

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Figure 6. Small Cell Installed Base 2016 and 2021

CSP = communications service provider

Source: Gartner (June 2017)

■ Lower total cost of ownership (TCO)