Small-cell opportunities, strategies and forecasts to 2016

Dimitris Mavrakis, Julian Bright

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Copyright
2012 Informa UK Ltd. All rights reserved. The contents of this publication are protected by international copyright laws, database rights and other intellectual property rights. The owner of these rights is Informa UK Ltd, our affiliates or other third party licensors. All product and company names and logos contained within or appearing on this publication are the trade marks, service marks or trading names of their respective owners, including Informa UK Ltd. This publication may not be:(a) copied or reproduced; or (b) lent, resold, hired out or otherwise circulated in any way or form without the prior permission of Informa UK Ltd. Whilst reasonable efforts have been made to ensure that the information and content of this publication was correct as at the date of first publication, neither Informa UK Ltd nor any person engaged or employed by Informa UK Ltd accepts any liability for any errors, omissions or other inaccuracies. Readers should independently verify any facts and figures as no liability can be accepted in this regard - readers assume full responsibility and risk accordingly for their use of such information and content. Any views and/or opinions expressed in this publication by individual authors or contributors are their personal

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Contents
Contributing analysts........................................................................................................1 Small cells: Shrinking the radio network to meet growing demand............................. 2
Fig. 1: Global femtocell deployments by type..................................................................................................................................3 Fig. 2: Macrocell data throughput in small-cell deployments..................................................................................................4 Fig. 3: Examples of major vendors' small-cell offerings.............................................................................................................. 4 Fig. 4: Number of outdoor small cells required per macro........................................................................................................ 5

Small cells are promising but create some backhaul challenges................................... 9

Fig. 1: Small-cell-backhaul technologies and selected vendors............................................................................................. 10 Fig. 2: Comparison of small-cell-backhaul technologies.......................................................................................................... 10 Fig. 3: Evolution of small-cell backhaul to fronthaul................................................................................................................ 12

Small-cell deployments to be dominated by consumer-driven femtocells................. 13

Fig. 1: Global, small-cell deployment forecasts, by category, 2011-2016......................................................................... 14 Fig. 2: Global, picocell deployment forecasts, by region, 2011-2016.................................................................................. 15 Fig. 3: Global, femtocell deployment forecasts, by region, 2011-2016.............................................................................. 15 Fig. 4: Global, microcell deployment forecasts, by region, 2011-2016...............................................................................16 Fig. 5: Global, metrocell deployment forecasts, by region, 2012-2016.............................................................................. 16 Fig. 6: Global, small-cell deployment forecasts, by region, 2011-2016..............................................................................17 Fig. 7: Informas methodology for microcell, picocell and metrocell forecasts...............................................................18

Small Cell Survey 2012................................................................................................... 20

Fig. 1: Survey respondents location and company type..........................................................................................................20 Fig. 2: In your opinion, what THREE features best define a small cell?.............................................................................21 Fig. 3: Which technology do you expect to be the biggest driver of small-cell shipments in a five-year period (2012-2017)?..................................................................................................................................................................................................22 Fig. 4: What do you believe are the THREE most important reasons for deploying small cells?............................22 Fig. 5: What areas do you expect to be the most important for small cells?..................................................................23 Fig. 6: In your opinion, which will be the most important market for small cells in the next two years?.......... 23 Fig. 7: What is the time-frame for mass-market deployment of small cells?.................................................................24 Fig. 8: What do you expect to be the biggest advantage of different small cells to end users?.............................. 24 Fig. 9: What has held back broader deployment of consumer small cells?..................................................................... 25 Fig. 10: What are the biggest challenges for consumer small cells (femtocells)?..........................................................25 Fig. 11: What are the biggest challenges for outdoor small cells?.......................................................................................26 Fig. 12: What factor is most likely to affect a small cell deployment?.............................................................................. 26 Fig. 13: How do you expect Wi-Fi to affect small-cell deployments?................................................................................. 27

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Contributing analysts
26 June 2012 Informa Telecoms & Media
Alejandro Moreno, Market forecaster Rupert Reid, Informa associate

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Small cells: Shrinking the radio network to meet growing demand

11 June 2012 Julian Bright
Executive summary

Even with the introduction of LTE, the growth in data traffic on mobile networks can be expected to reach saturation soon in areas of high demand. Enhancements to todays 3G/HSPA networks can go some way to meeting the needs of dense urban areas, but the options for growing capacity in the macro network are finite, and a new solution to the problem is required. Small cells represent a fundamental change in radio network architecture that promises greater spectral efficiency and capacity gains above and beyond those achievable with MIMO, high-order modulation, or other macro-network enhancements such as cell splitting or spectrum re-farming. Small-cell products are now a de-facto part of all the major OEMs radio-network offerings, and vendors are attempting to create differentiation around their small-cell strategies. All are agreed that support for Wi-Fi will be an essential element in any small-cell strategy. Among the keys to success for small cells will be low total cost of ownership, capacity and performance gains, ease of installation, and effective self-organizing and selfhealing capabilities.

Market status As well as being a key weapon in the mobile industrys response to the explosion in data traffic, small cells are increasingly regarded as the logical next step in the evolution of the radio-network architecture. Macro networks have served the industry well by building out coverage and meeting early demand for data services, and will continue to do so for the foreseeable future. However, small cells not only provide additional, targeted capacity, but also bring numerous other benefits such as improved spectral efficiency and cell-edge performance, more flexible cell-loading and overall traffic management, and reduced network capex and opex. As traditional macrocell networks struggle to keep pace with data traffic growth in areas of high demand, mobile operators are already pushing the performance limits of todays 3.5G technology by using a combination of techniques to boost throughput and expand capacity. These include moving to higher-order modulation such as 64QAM with MIMO, implementing dual-carrier HSDPA (DC-HSPA) and densification of existing macrocell sites through the use of cell splitting. The introduction of small cells, either individually to provide targeted capacity for traffic hot spots, or in clusters to provide a new capacity layer in larger areas, has the benefit of using existing spectrum rather than requiring an operator to acquire new, costly spectrum resources. The additional capacity can also be concentrated where it is most urgently required, making better use of the available spectrum and relieving the load on the macrocell. Until now, small-cell deployments have focused primarily on consumer femtocells. These compact, low-power units have been rolled out by a number of operators in North America, Europe and Asia Pacific, mainly in order to improve coverage and to offload data traffic from the macro network, providing a better customer experience while also freeing up network capacity (see fig. 1).

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Fig. 1: Global femtocell deployments by type

In the public network, small-cell deployments have so far been primarily aimed at extending coverage in underserved areas, such as rural communities, or in challenging indoor environments, such as shopping malls or transport hubs, where picocell or distributed antenna system (DAS) deployments can provide single-operator or shared-operator access. In anticipation of traffic demand exceeding the available network capacity at hot spots, mobile operators are now studying their options for densification of coverage, and considering at what point dedicated hot-spot coverage through the use of small cells becomes economic. Their key concerns as to the viability of small cells are in regard to cost, performance and backhauling, as well as minimizing potential disruption to the existing macro network. The current focus in most markets is on using small cells to extend capacity in 3G networks, although in advanced LTE markets such as the US they will appear first in 4G networks. Market dynamics Driver and inhibitors The upsurge of interest in small cells is not solely down to vendor push, although all of the major OEMs have incorporated some form of small-cell offering as part of their product roadmap. Even among those mobile operators that have not already committed to the adoption of small cells, the level of interest is high and commitments to further trials of the technology are growing apace. Many operators that have become familiar and comfortable with the working of small-cell technology for example, through their deployment of femtocells are already planning to extend their use of small cells into urban, rural or enterprise applications. For example, AT&T, which already has several hundred thousand consumer femtocells in its network, plans to test public small cells in its macro network later this year. The Small Cell Forum (formerly the Femto Forum) notes that the operator community has been quick to endorse small cells. It cites the examples of NTT DoCoMo, which has argued strongly for early availability of LTE public femtocells, and Vodafone Group, which has been trialing small cells in public outdoor areas. Other operators to have publicly stated their intention to adopt small cells include Verizon, Sprint, Telefonica and China Mobile. The case for small-cell deployment is most commonly founded on capacity gains. The Small Cell Forum estimates that, in a 3G network, the introduction of a single small cell per macro can offload 21% of user traffic, while 10 small cells can achieve a 75% offload. However, it also points out that the addition of four small cells within a macro can triple the median data throughput across both the small cells and the macro, and believes that these gains could also be a driver for small-cell adoption (see fig. 2).

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Fig. 2: Macrocell data throughput in small-cell deployments

Whatever the gains, operators are entering a new learning cycle in their adoption of public small cells. Until now, the deployment of macrocells and smaller cell types, such as microcells, picocells and DAS, has depended to a large degree on the efforts of engineering teams to design, locate, set up and commission individual sites, with aspects such as antenna placement and the distribution of radio heads being optimized to provide coverage and flexibility. Small cells such as metro cells, on the other hand, are designed to function almost from the outset with virtually no human intervention except for the process of physically attaching the unit to a building, lamppost or other item of street furniture. This level of automation is a key factor in achieving the promised opex savings, and these cells will be dependent on the automated set up and maintenance processes provided by their self-organizing network (SON) features. Key players While mobile operators are evaluating the cost and performance implications of small cells and trying to decide when best to start introducing the technology into their networks, differentiation among small-cell vendors is building around their various product offerings and recommendations as to when, where and how their benefits can best be realized. This includes key issues such as how to manage and co-ordinate small cells within the macronetwork environment (see fig. 3).

Fig. 3: Examples of major vendors' small-cell offerings

The small-cell market is not yet the sole preserve of the larger OEMs, and opportunities still exist for smaller providers, from small-cell developers to integrated software, network optimization and backhaul suppliers, to make their mark. Nevertheless, the larger vendors are attempting to allay any concerns operators may have with the promise of small-cell solutions that can deliver maximum cost savings and performance gains, while integrating seamlessly with the macro environment.
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Alcatel-Lucent

Alcatel-Lucent is basing its small-cell offering around its lightRadio architecture, developed by Bell Labs. The vendor is keen to point out that lightRadio comprises more than just the modular antenna cube seized upon by the media at its launch in 2011, it encompasses other elements such as core network integration and baseband pooling. The company claims that lightRadio can offer over a 50% reduction in total cost of ownership (TCO) compared with legacy converged radio access network (RAN) platforms, mainly through reduced site costs, opex costs and power consumption. Alcatel-Lucent has taken a somewhat different stance from its competitors with its approach to small-cell deployments, recommending their use initially as an overlay for LTE networks and only incorporating 3G at a later stage a strategy that the vendor is already implementing for US CDMA operator Verizon, but one which it says is equally applicable for GSM operators. The vendor says that this approach gives operators greater freedom to play with LTE than is afforded by the single-RAN model widely-touted by other large vendors, and which sees small cells initially targeting capacity in 3G networks, and only later in LTE. Alcatel-Lucent also favors the seamless integration of a data-only, small-cell metro layer over the deployment of more isolated small cells. Its Wi-Fi strategy is to create an open ecosystem, providing an interface to Wi-Fi networks while working with a variety of Wi-Fi providers.
Ericsson

Rather than creating a distinct small-cell product line, Ericsson has chosen to add micro and pico base-station products to its existing BTS family, the RBS 6000. The picocell RBS product features integrated Wi-Fi, a technology that has become a key focus for the vendor following its acquisition of Wi-Fi provider, Belair. Ericsson believes that small cells should be added to complement the macro layer only after upgrading and densification of the macrocell network has been fully explored, arguing that it is more cost-efficient to exhaust the potential for increased capacity in the macro network before moving on to deploy small cells. Partly for this reason, the vendors expectations for the speed of small-cell take-up are more conservative than many of its competitors. Ericsson stresses the need for coordination between a small-cell deployment and the macrocell, and maintains that the greatest efficiencies can be achieved when small cells operate in the same frequency as the macro, and with the maximum degree of coordination. For this reason, it says it is important that operators select the same vendor for small cells and for the macro network. Using a separate frequency results in a 50% peak-data-rate loss because of the need to separate the frequencies between the small cell and the macro, says Ericsson. Using the same frequency and applying techniques such as macrodiversity and joint RX/TX, which coordinate the radio base stations by using the same baseband for the existing macro network and the small cells, means that the full peak rate becomes available. Under these conditions, the number of small cells required to achieve a given capacity improvement within a single macrocell is reduced by 30-50% compared with when separate frequencies are used, says the vendor (see fig. 4). Fig. 4: Number of outdoor small cells required per macro

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Huawei

Huawei announced AtomCell, a 3G/LTE picocell designed for infill of macro sites in urban and high-density traffic areas, at this years Mobile World Congress. The vendor has employed a modular design comprised of a basic four-transceiver module that builds to a maximum 16-transceiver unit incorporating higher-order MIMO and beamforming, with an option for baseband pooling. The modules can be incorporated into a pole-mounted spherical unit for deployment in urban environments. The vendor says it will be incorporating Wi-Fi into AtomCell at a later date. At the same time as promoting its small-cell offering, Huawei is supporting efforts to increase capacity in the macro network by using features such as cell splitting and beamforming, with its Adaptive Radio Unit (ARU) technology. The vendor says that, while macro sites will suffice for most areas in a network, pockets of dense traffic or poor coverage will require additional layers of micro coverage. Huawei is also keen to emphasize its capabilities in SON technology, claiming that its SingleSON simplified network configuration, which employs adaptive Inter-Cell Interference Coordination (aICIC) and Automatic Neighbor Relations (ANR) techniques, improves network management efficiency and performance.
Nokia Siemens Networks

NSNs Liquid Radio is built on the vendors Flexi-multiradio active antenna system platform, and supports integrated Wi-Fi offload with connection to the mobile core network. The vendor has recently introduced its FlexiZone concept, which features a large number of small cells deployed as an underlay grid at a street level or in an indoor area and coordinated to provide capacity improvements. All access points in the zone are connected to one another using wireless, and backhauled to a controller that is deployed in the hot zone close to an Internet POP location such as a DSLAM or fibre-to-the-node cabinet. The controller also carries out scheduling coordination between the access points and controls all the levels of interference at zone level, so that new small cells can be added with no interference. FlexiZone supports up to 100 access points, and looks to the network like a single eNodeB, says NSN. The vendor believes that this zoning approach will provide significantly better performance than individual picos or microcells, and allows for an initial deployment of a small number of small cells to provide capacity and offload in hot zones, with the possibility of scaling to provide more densification in the zone area as and when needed. By building a virtual map of the cluster, the controller can apply interference management using SON capabilities, says NSN. It can also control mobility management within the cluster and between the small cells and the macro, to ensure that a stationary or slow-moving subscriber is retained on the pico-cluster while a subscriber moving at high speed, perhaps driving in a car, can be handed back to the macro. Market development Small cell trials and SONs Operators interest in public small cells is currently focusing on metro cells, which are primarily designed to target high-traffic-density areas, and trials of which are commencing this year. Among a number of areas that operators will want to address during these trials are small-cell performance, ease of installation, set-up and optimization, and cost. Above all, any concerns operators may have about interference issues between small cells and the macro network will need to be allayed. One area on which small-cell trials will focus is the implementation of SON capabilities. These have been a feature of femtocells, but will now be a critical feature in other small-cell architectures such as metro cells. Because small cells are being deployed for capacity rather than coverage, it is important to resolve the co-existence issues of small cells and the macro in the same layer. AT&T, which plans to introduce metro cells during 2012, is implementing SON features across its LTE network in the US, currently covering the macrocell level and clusters of femtocells. The operator plans to extend SON capabilities to the management of metro cells when they are introduced on its network later this year, including support for interference management and automatic neighbor relations.

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Nevertheless, many operators believe SONs have some way to go before they are fully able to support small-cell deployments. Areas of concern include the ability of the small cell to automatically set up and register with neighboring small cells and with the macro, where some operators report a continuing need for manual intervention. Vendors are also working to make networks adapt in real time to resolve issues such as cell interference, which currently depend on KPIs gathered over a period of time and which can take some time to process. Practical concerns With regard to cost, operators are looking for as much as a ten-fold reduction in equipment, installation and site costs for a small-cell deployment when compared with a macrocell. In order to achieve this, vendors will not only need to keep equipment costs low, but also reduce touch time to a minimum throughout the installation and set-up process. Experience with microwave systems has shown that site installation costs for a single link often exceed the cost of the equipment itself, suggesting that this may prove the greater challenge for small-cell deployments as well. One leading vendor cautions that the savings that can be achieved in respect of installation are not in the same ratio as the savings in equipment costs, so, although the equipment may be considerably cheaper, the site costs and installation may be higher than for a macrocell in relative terms. As operators move towards the deployment phase, site acquisition also becomes critical. With a limited number of available sites, there is a concern that urban centers could become subject to the equivalent of a land grab as operators try to secure valuable access to lampposts and other items of street furniture. This in turn could have implications from an RF planning perspective, as the optimum site required to realize the maximum benefits from the small cell may not be available. Coupled with the need for accessible backhaul and power, this may necessitate an operator having to adapt its radio coverage according to the available sites, rather than to the optimum network conditions. With regard to health and safety issues, according to one vendor, operators are already seeing power constraints applied to macrocells due to local RF power requirements, so small cells with their lower power profile could serve to redress some of the coverage loss that ensues. On the other hand, operators are conscious that positioning equipment in public thoroughfares as opposed to secure and less-accessible cell sites raises certain safety and security concerns, and these will have to be carefully considered. Conclusions and recommendations Conclusions The case for small-cell deployments is largely uncontested, with widespread operator support and universal commitment from the major network vendors. However, the speed of adoption and degree to which small cells will be deployed in the network is still open to debate. The rationale for small cells as a means of targeting traffic hot spots in dense urban areas is strong and will drive initial deployments. However, the case for greater densification and the significance of the challenges involved with regard to issues such as inter-cell interference in a more complex, multi-layered hetnet environment are still unclear. Mobile operators still have a number of concerns about small cells that will need to be addressed, particularly regarding aspects such as small-cell performance, the integration of small cells into the macro environment, SON capabilities, capex and opex, and interoperability between different vendors products. These issues will need to be effectively addressed during the trial phases if deployments are to go ahead. Vendors are creating differentiation around their small-cell product offerings and deployment strategies. These are sufficiently distinct as to constitute a set of very different expectations as to how small-cell architectures will evolve. During the rollout phase, operators are likely to encounter a number of practical hurdles, such as securing appropriate small cell sites, and access to backhaul and power, that may cause them to adapt their plans.

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Recommendations Mobile operators need to embark on their small-cell deployments with a clear strategy. As well as the feedback from trials, they can look to those operators that have already committed to small-cell deployments for evidence as to how well the technology performs. Vendor selection will be a key factor given the diversity of solutions available in the market. To some degree, it can be argued that, with their small-cell choices, operators are buying into a vision of how the network will evolve, just as much as they are a technology. Key decision points will focus on questions such as whether to adopt a single- or multivendor approach, and which vendor has the capabilities to meet the challenges of scale and complexity involved in managing an evolving heterogeneous network environment. Proven SON capabilities will be a critical element due to the need to keep installation and commissioning costs, as well as ongoing opex, to a minimum. The integration of Wi-Fi will also be important for those operators with existing Wi-Fi networks. The benefits of quality, performance and flexibility offered by small cells will only be realized if TCO relative to providing macro-network coverage can be reduced to a minimum. As well as driving down unit costs, the efficiency gains promised by technical innovations such as SONs will need to be fully realized if small cells are to seriously take off. Further reading Small-cell deployments to be dominated by consumer-driven femtocells

Small cells are promising but create some backhaul challenges

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Small cells are promising but create some backhaul challenges

18 April 2012 Dimitris Mavrakis
Executive summary

The small-cell backhaul market is expected to be significantly more diverse and fragmented than the macro backhaul market, because of the heterogeneous and distributed nature of urban small cells. Several startups and smaller vendors are attempting to attract operator attention for their small-cell backhaul products, which include non-line-of-sight microwave and higher-frequency mm-wave. As with the point-to-point microwave landscape for macro cells, a unique wireless technology is not likely for small-cell backhaul, because each country has its own guidelines for regulating microwave and mm-wave spectrum. An exception is the millimetric 60GHz band, which is unlicensed but exhibits extremely high oxygen absorption, making this band suitable for localized small-cell backhaul. But its unlicensed nature might limit wide operator acceptance in favor of licensed bands. Vendors that offer a multitude of technologies are likely to be dominant, since smallcell backhaul is not likely to rely on a specific technology, topology or frequency.

Market overview Early LTE-network deployments are focusing on coverage rather than capacity in order to attract a critical mass of subscribers and provide an early revenue stream and some level of return on investment and profitability for the costly new radio access network (RAN). Nevertheless, it is clear that in the next stage, deployments will focus on capacity to satisfy traffic challenges operators are facing in urban areas. Driven by smartphones and portable devices (primarily USB modems and Mi-Fi devices), LTE networks are expected to reach congestion much sooner than their 3G predecessors, especially since smartphone penetration is 100% on LTE and there are no feature phones, which consume much less traffic. The launch of Apples iPad with LTE connectivity is only expected to accelerate this trend, while Verizons executive director of network strategy claimed in March 2012 that Verizon might face capacity bottlenecks on its LTE network as early as 2013 if it is not assigned additional spectrum. Nevertheless, operators are now armed with a variety of tools to combat capacity constraints, including traffic management, tiered pricing to limit traffic growth, and, more recently, small cells. LTE small cells are expected to be a deployment standard in a few years, when LTE networks will be mainstream and subscribers will be familiar with the higher-speed, lowerlatency nature of 4G networks. Small cells move the base station closer to the subscriber which makes sense from a technology perspective but create new challenges because of their more-distributed nature. These new challenges include finding real estate for the small cells (which might be lampposts, phone booths, building walls or rooftops), placement and, most important, backhaul. By transforming a macro cell to a small cell, the base station will move from the rooftop to locations most likely closer to the subscriber. This will create last mile conditions for the subscriber but a challenge to connect the small cell with the core network, which might degrade the user experience if not planned and deployed carefully. A variety of backhaul technologies are most likely to be used, but several current technologies might not be applicable to small cells because of their distributed and smaller nature. The vast majority of LTE macro cells are connected via fiber to the core network and the success of US LTE networks is primarily driven by the wide availability of fiber but it will not be economically viable to connect all small cells via fiber because of the high cost of laying fiber. Because small cells will primarily be deployed as an overlay on top of macro cells, the lowest-cost option for fiber backhaul is to extend an existing link from the macro cell to the small cell. But in most cases, extending fiber from the macro site to the small cell will not be an option, since it might require trenching (which could cost more than US$100,000 per kilometer), thus breaking the business case of small cells.

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Because of these backhaul challenges brought to life by small cells, several new technologies and vendors have emerged. Technologies and vendors Several new vendors have entered the small-cell-backhaul value chain, while backhaul incumbents have extended their product lines to cater to small cells, and tier-1 infrastructure vendors have either adapted or provided completely new ways of backhauling small-cell traffic. Carrier Ethernet and IP are now standard for mobile backhaul, especially with LTE and subsequent RAN technologies, which are all-IP. Vendors include Ethernet connectivity in their equipment, or specialist vendors provide demarcation devices at the end points of the backhaul links to enable Ethernet connectivity. Vendor activity is highest in microwave and mm-wave technologies (see fig. 1), because providing wireless backhaul for small cells is the most cost-efficient option and is somewhat familiar to operators network-planning departments.

Fig. 1: Small-cell-backhaul technologies and selected vendors

The range and supported speeds of these technologies varies, and a universal framework for small-cell backhaul is likely to employ several of these, since the terrain, deployment target and legacy network topologies will vary greatly (see fig. 2).

Fig. 2: Comparison of small-cell-backhaul technologies

Contrary to macro cells, which are most likely to have three or more sectors, small cells in most cases will have a single sector, which translates to lower backhaul requirements. However, a minimum speed is likely to be around 100Mbps for LTE backhaul in order to satisfy current and short-term demands. Mobile operators are not likely to invest in a small-cell backhaul technology with a limited life span. Instead, they will expect small-cell backhaul to remain for LTE at least and even for the early stages of LTE-Advanced assuming that cell locations, backhaul and in some cases the small-cell access points will be reusable. Therefore, backhaul technologies that are widely used (including copper and hybrid DSL) are not applicable for small cells, which require higher speeds and are more distributed in nature. Some vendors have diverged even further from traditional backhaul in order to cater to small cells. For example, NSNs Flexi Zone small-cell framework includes street-haul, a backhaul technology that is purpose-built and connects small cells in the vicinity of a central small-cell node through unlicensed Wi-Fi spectrum. Market development Early small-cell deployments are likely to happen by mid-2013, since equipment is expected to be market-ready in early 2013. Mobile operators that deploy small cells in 2013 are likely to be in advanced LTE markets, including the US, Japan, South Korea and the Nordic countries. These operators and especially ones operating LTE networks at 2.6GHz are likely to be early adopters of new backhaul technologies.
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Smaller vendors and backhaul-technology startups are illustrating technology leadership and are spearheading the evolution of backhaul technologies. However, mobile operators are familiar with large vendors and in many cases consider teaming up with small vendors a risk. In many cases, small vendors technology might be significantly more advanced and their costs lower, but operators might not prefer to join forces with them. New entrants are likely to team up with large vendors or system integrators as a go-to-market strategy or even be acquired by larger vendors, as Ericssons acquisition of Belair illustrated in February 2012. Some backhaul startups might go to market directly and participate in operator trials, but deployment life-cycles of typical tier-1 mobile operators might provide an economically hostile environment for small companies with limited capital. The plethora of vendors and technologies for small-cell backhaul is likely to complicate choice for several operators. However, technology trials are expected to take place in 2012 and early 2013, after which operators will choose their preferred partner for small-cell deployments. Small-cell-backhaul vendors are focusing on a variety of technologies and frequencies to be able to provide a holistic offering to operators. Because of the fragmented and heterogeneous nature of small-cell deployments, a single technology will not be able to satisfy all operator demands. Therefore, vendors are reacting by introducing several aspects of wireless technologies in their backhaul product lines, including NLOS, e-band, mm-wave and PMP. Frequency aspects and licensing Microwave and mm-wave frequencies are generally licensed, with a few exceptions:

59-64GHz are designated for unlicensed use in the US and UK. E-band: 71-76GHz, 81-86GHz, 91-94GHz and 94.1-95GHz are light-licensed frequencies, meaning a quick process for assigning frequencies and low costs for individual links, as low as US$100-200 per link.

Such high frequencies (above 10GHz) are subject to increased atmospheric attenuation and very directive antennas (leading to very concentrated transmission links, referred to as pencil-beam), thus not requiring frequency planning. Unlike traditional point-to-point microwave links, mm-wave is a natural fit for small cells, where small areas need to be covered with high-data-rate links in a cost-effective way. Vendors now offer backhaul systems that offer hundreds of megabits per second in short distances (less than 1km) in a cost-effective way (typical link cost is less than US$5,000). However, vendors might face cultural and traditional issues when attempting to sell equipment operating at unlicensed or light-licensed frequencies. Moreover, the FCC mandates that although unlicensed operation at 60GHz requires an antenna that is a minimum of 30-40cm, which cannot be integrated in unobtrusive enclosures in a cost-efficient way. In reality, operators are likely to face different small-cell-deployment environments, and vendors that support a variety of frequencies and topologies will be the most successful. Several vendors that have been traditionally offering LOS PTP systems are now introducing NLOS products to satisfy primarily urban canyon areas, which are most likely niche cases albeit necessary to gain operator acceptance. Finally, a unique property of the 60GHz band is that oxygen absorption is extremely high, leading to high attenuation and excellent spatial reuse. Although well suited for small-cell backhaul, the bands unlicensed nature might provide a significant barrier to large-scale operator adoption. In general, the higher the frequency at which the link operates, the more bandwidth and higher spatial reuse is available, but link distance is sacrificed which might not be a significant challenge in small-cell deployments. Moreover, sub-6GHz frequencies are becoming more interesting for NLOS backhaul because of their characteristics that enable the signal to be reflected by a building to overcome obstacles. Baseband pooling and CPRI Small cells are miniature base stations that include both baseband processing and the radio head. Several vendors are now actively developing baseband pooling technologies (also referred to as cloud RAN), in which baseband processing is centrally located in order to assign resources dynamically and adapt to traffic demand fluidly. However, a key challenge for baseband-pooling base stations is backhaul, which needs to be fiber in most cases. Small-cell deployments are likely to include both current types, but operators might wish to evolve these to baseband pooling, pending the evolution of backhaul to fronthaul (see fig.
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3). However, fronthaul currently operates in CPRI, which can be supported only by optical connections. Several vendors, including Alcatel-Lucent, are attempting to optimize CPRI for more-efficient connection of baseband and radio units, but its not likely that this will ever be able to operate wirelessly. Fig. 3: Evolution of small-cell backhaul to fronthaul

As of March 2012, only Ericsson and E-Blink had announced products that achieve wireless fronthaul. Ericsson has succeeded in connecting baseband and radio units over its E-band wireless link in lab tests and expects to include this capability in future products. Recommendations Although the small-cell market holds significant potential for both infrastructure and backhaul vendors, it is significantly more fragmented and complicated, because there are a variety of technologies and frequencies for small-cell deployments. Informa expects tier-1 vendors to either expand product lines or acquire smaller specialist vendors to strengthen their competitiveness. The following section represents Informas recommendations for mobile operators and vendors:

Smaller vendors or those with expertise in a specific product line should team up with systems integrators or large vendors that dont offer competing products of their own. This will enable a broader reach and fewer cultural barriers in operator discussions. Tier-1 infrastructure vendors should either partner with or acquire smaller vendors for expertise they do not have in-house, including NLOS microwave and high-bandwidth mm-wave. Offering a complete product line that offers a variety of technologies and frequencies is most likely to win operator attention. Operators should perform technology trials with smaller vendors that might offer better technology and specific expertise compared with tier-1 and established backhaul vendors. Operators should be willing to test alternative technologies, including NLOS microwave and unlicensed mm-wave frequencies.

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Small-cell deployments to be dominated by consumer-driven femtocells

17 May 2012 Dimitris Mavrakis
Executive summary

Consumer femtocells will drive small-cell volumes. The consumer femtocells accounted for 74% of total units deployed by the end of 2011 and this proportion is forecast to increase to 89% by the end of 2016. Microcells and picocells are already widely deployed in market but on a lower scale compared with femtocells. Metrocells are expected to enter the market during 2012 through operator trials or pilots and expand significantly during 2014 and 2015 primarily for 3G networks in developed markets and LTE in the US market. Although volumes are driven by consumer femtocells, vendor revenues are expected to be bigger with operator-deployed and managed small cells; profit margins are expected to increase in proportion to cell size. Metrocells and microcells are expected to be the most profitable small-cell market segment, although contracts may vary. Even though the femtocell market has not grown as aggressively as predicted, several operators now have gateways in place which may allow them to grow their deployments incrementally. However, Informa Telecoms & Media expects operators to focus on improving the customer experience for individual subscribers and churn reduction particularly in the enterprise segment.

Definitions and overview Although femtocells have traditionally been targeting the consumer market, small cells is now an umbrella term covering a much wider focus, which includes femtocells, picocells, microcells and metrocells. In order to perform a market-sizing and forecasting exercise, Informa Telecoms & Media has segmented small cells according to their usage. The following definitions have been used throughout the modeling exercise.
Femtocells

Femtocells typically refer to the smallest of small cells, which are primarily targeting the consumer and enterprise markets. These units are typically single-sector with an omnidirectional antenna which is used to improve coverage in indoor locations for 4-32 users, although there is no strict guideline for the number of users. Moreover, consumer femtocells typically transmit less than 50-100mW while enterprise-grade femtocells may transmit up to 300mW due to wider coverage requirements. Femtocells came to market with Sprints Airave during 2008 and several operators have followed with both consumer and enterprise offerings. Some operators are even using femtocells for indoor public areas (coverage improvement), rural areas or in emergency situations.
Picocells

Picocells are small cells that are already established in the market and widely deployed. Picocells usually refer to cells that are deployed in indoor public areas for coverage improvement, including shopping malls, train stations and airports, as well as also enterprise locations. Picocells are widely deployed, although not on the scale of consumer femtocells, due to their larger coverage area and smaller target market. Picocells typically transmit less than 4W, may cater for more than 32 users and are also single-sector. Picocells have also traditionally been a less-intelligent version of femtocells and have acted as typical base stations, although vendors are now including femtocell-developed technologies in these larger units in order to adopt several benefits, including auto-configuration, radio environment awareness and remote support.
Microcells

Microcells can be regarded as small macrocells and are usually deployed in urban areas that are capacity-constrained. There are also many cases where microcells are deployed in rural
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areas, where the coverage area of a macrocell may not make sense due to concentrated population in a limited area. Microcells are also widely deployed and have been in the market for several years. Typical transmit power can be as high as 40W but not more and these units are typically threesector, unless deployed in light poles or building walls when they are typically single-sector. Microcells are typically used when an operator is forced into cell splitting splitting a large macrocell into many smaller microcells in order to increase the overall system capacity. In other words, microcells are typically the only cell present in an urban location and this is an important distinction between microcells and metrocells.
Metrocells

Informa Telecoms & Media considers metrocells as a special type of a single-sector microcell which is deployed primarily in capacity-constrained areas. Metrocells are also deployed as an overlay rather than acting as the primary cellular network, meaning that advanced features are necessary, including self-optimizing (SON) features and auto-configuration.
Other categories

Apart from the categories presented above, there are some additional small-cell types that target specific segments appearing in the market. An example of this is the meadowcell, which has been developed for rural areas; in these forecasts, meadowcells have been included in the femtocell category. Informa Telecoms & Media expects more categories to appear for specific use cases but these are likely to fall within one of the four categories outlined above. Market growth The overall market for small cells is expected to continue growing throughout the forecast period (2011-2016). Although the lions share of unit shipments is dominated by the consumer market, revenue growth for infrastructure vendors is expected to be bigger with operatordeployed small cells: microcells, picocells and metrocells. The total number of small-cell deployments is forecast to experience an overall compound annual growth rate (CAGR) of around 137% throughout the forecast period (see fig. 1):

Femtocell deployments will increase from 2.1 million units at end-2011 to 87.3 million units at end-2016, largely driven by consumer and, to a lesser extent, enterprise deployments. Microcells will continue to be deployed throughout the forecast period, growing from 602,000 units deployed at end-2011 to 2.8 million at end-2016. This growth is primarily driven by additional 3G cells in urban locations and rural coverage expansion in developing areas. Metrocells are expected to enter the market during 2012 with 31,240 cells deployed by the end of the year, increasing to 681,000 by end-2016. Finally, Informa estimates that 194,000 picocells were deployed in the market by end-2011, a number which will increase to 1.1 million by end-2016.

Fig. 1: Global, small-cell deployment forecasts, by category, 2011-2016

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Picocells will remain particularly popular in the developed markets, particularly North America and Europe, throughout the forecast period (see fig. 2). The Asian market is also experiencing the biggest growth due to the size of the Chinese, Indian, South Korean and Japanese markets which are dominant in picocell deployments, primarily for indoor coverage of public areas.

Fig. 2: Global, picocell deployment forecasts, by region, 2011-2016

Femtocell growth is largely driven by the North American, European and Asia Pacific markets (see fig. 3). In North America, all Tier-1 carriers have already deployed consumer femtocells to address the nationwide coverage problems and Informa Telecoms & Media expects this to continue throughout the forecast period. A similar situation is reported in Europe where several mobile operators have deployed femtocells to maintain a good user experience, particularly for enterprise customers. In Asia Pacific, the market for femtocells (which are deployed by the subscribers) is growing more slowly than the other small-cell markets (which are deployed by the operators).

Fig. 3: Global, femtocell deployment forecasts, by region, 2011-2016

Asia Pacific dominates the microcell market due to its wide footprint and population concentration similar trends are also reported in macrocells. The region will remain the largest market and also experience the strongest growth in microcell deployments throughout the forecast period (see fig. 4). North America and Europe follow but are much smaller compared with Asia Pacific. The low growth rates in Africa, Middle East and Latin America are due to the fact that 3G coverage is still the main concern in these markets and it is macrocells that are primarily deployed; these markets are only expected to experience growth after North America, Asia Pacific and Europe.
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Fig. 4: Global, microcell deployment forecasts, by region, 2011-2016

Finally, metrocells will start to be deployed during 2012 in low volumes and primarily in the form of trials and extended pilots. Informa Telecoms & Media expects 2013 to be the year that the metrocell market experiences the highest growth (see fig. 5). Although the annual growth rate will start to diminish from then on, it will continue to be high throughout the rest of the forecast period due to the lack of spectrum and further capacity constraints for 3G and LTE networks.

Fig. 5: Global, metrocell deployment forecasts, by region, 2012-2016

Regional trends The regional segmentation is driven by femtocell deployments and the North American and Asia Pacific markets dominate throughout the forecast period as expected (see fig. 6). Europe follows due to its developed market status, while Latin America, Middle East and Africa lag in terms of units deployed as they are largely still developing markets which are focused on macrocells.

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Fig. 6: Global, small-cell deployment forecasts, by region, 2011-2016

Methodology The small-cell forecasts are derived from a demand model, which takes into account several Informa Telecoms & Media forecasts, including:

Mobile content and applications forecasts, including popular traffic categories. Fixed broadband subscriptions by link speed. Mobile subscriber forecasts segmented by air interface, including WCDMA, HSPA and LTE. Macro-cellular base station forecasts segmented by air interface and geotype, including Dense Urban, Urban, Suburban and Rural.

The microcell, picocell and metrocell forecasts are derived using the methodology below (see fig. 7), while the femtocell forecasts also take into account enterprise demand and fixedbroadband subscriptions.

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Fig. 7: Informas methodology for microcell, picocell and metrocell forecasts

Conclusions and recommendations Informa expects the small-cell market to experience healthy growth through the forecast period, with a CAGR of 137% overall in terms of deployments. Asia Pacific, North America and Western Europe are the primary drivers for small-cell shipments, and their volumes are primarily driven by consumer and enterprise femtocell deployments. Even though mobile operators have not been bullish about consumer femtocells, integration and gateways that connect the Femtocell Access Point (FAP) to the network are now in place for many Tier-1 operators and, given that Iu-h (the protocol that connects the FAPs to the gateway) is standardized, Informa expects operators to continue deploying femtocells to improve coverage. The revenues and profits for infrastructure vendors are expected to increase in proportion to the cell size, meaning that microcells and metrocells may hold the largest potential, even for 3G markets where operators are experiencing congestion. Picocell and distributed antenna (DAS) vendors are expected to experience healthy financial growth due to the need for indoor coverage and also new frequencies being deployed for LTE. Informa expects the US market to be the first to experience metrocells due to the low spectrum used for LTE and, as a consequence, large macrocells. As subscribers continue to
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adopt LTE smartphones and portable devices, operators will find out during 2013 that capacity constraints will start to appear and small cells will be deployed to address these bottlenecks.

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Small Cell Survey 2012

11 June 2012 Dimitris Mavrakis
Executive summary

Cost, physical size and range are the three dominant factors that define a small cell. LTE is expected to be the biggest driver for small cells. In terms of deployment, the three most important reasons for deploying small cells will be to increase capacity and coverage and to cover high-traffic public areas. The US, developed markets in Asia Pacific and the emerging markets are expected to be the biggest drivers for the deployment of small cells in the next two years, with 2014 representing the peak of deployments. A lack of operator commitment, the high prices of femtocell access points and a lack of a clear benefit to end users have been the biggest factors hindering the consumer femtocell market. For public small cells, deployment issues including placement, power, environmental impact and backhaul are perceived as the biggest challenges. Backhaul is also perceived as the most critical factor for a small-cell platform, followed by the ability to self-optimize and cooperate with the macrocell network. Wi-Fi and small cells are expected to evolve in parallel rather than compete with each other. Several vendors are integrating Wi-Fi into their cellular offerings and there are several new entrants targeting the carrier Wi-Fi market.

The survey respondents Informa Telecoms & Medias Small Cell Survey polled key industry executives from around the globe about managed services and outsourcing trends. The survey was conducted online during 1Q12. Over 300 responses were received of which almost 100 were from fixed or mobile operators and 123 from vendors (see fig. 1). Although survey results usually include operator answers only, this survey included questions about the definition of the small-cell ecosystem; therefore all the respondents are included in the following analysis, apart from a few exceptions where operator responses are singled out.

Fig. 1: Survey respondents location and company type

Although the survey respondents were distributed throughout the globe, Western Europe, North America and Asia Pacific were strong regions due to the popularity of small cells there and the need for additional coverage in both the developing and developed markets of these regions. In Africa, Middle East, CES and Latin America, interest in small cells may be less than in some of the developed markets. In terms of company types, the vendor respondents represented the largest percentage, illustrating the interest in the small-cell value chain. Mobile and fixed operators followed, showing that there is increasing interest in this group in small cells. There was a variety of non-categorized respondents, which included consultants, system integrators, component
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suppliers and tower companies. The small-cell ecosystem is well represented in this segmentation, particularly the number of vendors who are active in this value chain. Small-cell definitions A vital part of any technology market is defining the terms. This is an ongoing process in the small-cell market after the focus shifted from femtocells to a greater set of cells, including pico, micro and metro cells. The survey respondents gave their definitions of a small cell (see fig. 2). Cost is perceived as the most important factor defining a small cell, followed by size, range and capacity. Femtocell-specific options (including whether it is operator or user deployed) were far less prominent in the answers to this particular question, illustrating that the mindset of the market is shifting from consumer femtocells to operator-deployed small cells which will tackle a variety of coverage or capacity problems. If only mobile operator responses are selected, the overall results do not deviate from the chart above, but the most important aspect becomes Physical size and level of integration, followed by Range, illustrating the network planning and dimensioning culture of mobile operators. Fig. 2: In your opinion, what THREE features best define a small cell?

Market development Drivers In terms of technology, it is expected that LTE will be perceived as the driver for small cells, due to its strong data nature. Nevertheless, the focus on 3G is still strong and these networks are the ones actually being congested currently. Several vendors report that there is significant interest in 3G small cells, but market perception as illustrated by the survey results is that the small-cell market will be driven by LTE deployments (see fig. 3).

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Fig. 3: Which technology do you expect to be the biggest driver of small-cell shipments in a five-year period (2012-2017)?

In terms of deployment, the three most important reasons for deploying small cells will be to increase capacity and coverage and to cover high-traffic public areas (see fig. 4). The established consumer femtocell market is expected to have a strong impact and small cells are expected to be used primarily in capacity-constrained areas, mainly metro, as LTE deployments start to mature. Coverage is perceived as a major issue in the developed and developing markets alike.

Fig. 4: What do you believe are the THREE most important reasons for deploying small cells?

In terms of geographical areas, most respondents agreed that dense urban, high-traffic public areas (airports, train stations) and enterprise locations will be the most important for smallcell deployments. The public area environment is not new to small cells, in areas where picocells and microcells have been widely deployed and the dense-urban areas have long been subject to cell splitting, where an operator splits a cell to many smaller ones to increase capacity. Nevertheless, the survey responses highlighted the importance of high-traffic areas (see fig. 5).

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Fig. 5: What areas do you expect to be the most important for small cells?

In terms of regional and country importance, the US emerged as the most important market in our survey (see fig. 6), primarily due to the aggressive deployment of LTE networks in low frequency bands which means large cells with an overall low system capacity. Developed markets in Asia (Japan, South Korea) were closely followed by developing markets where small cells may be used for coverage rather than capacity. On the other hand, Western Europe received far fewer mentions, perhaps due to the wide and dense deployment of 3G networks in the region.

Fig. 6: In your opinion, which will be the most important market for small cells in the next two years?

Small-cell deployments are expected to peak during 2014 (see fig. 7), when LTE networks will have been widely deployed and traffic bottlenecks will be appearing. Vendors and technologies may also be mature by 2014 which will create a better environment for operators to adopt small cells. Informa Telecoms & Medias LTE Survey illustrated that the peak for LTE deployments will also be in 2014, which agrees with the small-cell survey results. However, it is expected that small cells particularly for LTE will initially be deployed in developed markets and will later expand to developing markets or operators that are late LTE adopters.

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Fig. 7: What is the time-frame for mass-market deployment of small cells?

From the end-user perspective, the advantages of using small cells are somewhat uniform, with some exceptions. Femtocell advantages are primarily coverage, new services and data pricing, whereas metro, pico and microcell advantages are primarily coverage, capacity and lower latency (see fig. 8). This is perhaps an outcome of the nature of each small-cell category: femtocells are user-deployed and may be tied to new services, but all the rest are perceived as network-enhancing cells which will selectively be added as an overlay or underlay to problem areas.

Fig. 8: What do you expect to be the biggest advantage of different small cells to end users?

In other parts of the survey, 60% of respondents replied that there is a possibility that in the future the end users (whether in the consumer or enterprise market) will pay for some of the cost of the small-cell access point, although this is a primary reason for consumer femtocells not being as widely deployed as originally expected. In terms of usage, 46.7% of respondents claimed that small cells will be deployed for coverage or capacity and a similar percentage for location-driven services when subscribers connect to these small cells. In terms of the factors driving small-cell market growth, the most critical aspect is operators driving wide small-cell deployments in order to establish economies of scale, enhance early technology problems and establish a critical mass of small cells that operate on their networks. Small-cell challenges The consumer femtocell market has been significantly small, as was expected, due to a number of reasons. In our survey results, the largest challenge for consumer femtocells was perceived to be a lack of operator commitment, followed by the lack of a clear benefit to end users and price of femtocell access points. These three issues are related to the way that, while consumer femtocells are an extension of the network, the deployment decision lies with the user. Also, marketing femtocells is tricky at best and few operators have managed to successfully convey the message to their subscribers. Finally, the price for each access point has been higher than operators would wish meaning that they had and still have to subsidize the femtocell access points. Given that handset subsidies and its impact on operator profitability is a major point of discussion currently for mobile operators, femtocell subsidies may be considered as a barrier for market entry. On the other hand, the vendors claim that
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operators generally do not commit in large volumes and are not creating the environment for economies of scale. To summarize, the challenges that are hindering small-cell deployment are: the consumer value proposition is difficult to communicate; consumer femtocells have been far more expensive than expected; and operators havent committed enough to drive economies of scale (see figs. 9 and 10).

Fig. 9: What has held back broader deployment of consumer small cells?

Fig. 10: What are the biggest challenges for consumer small cells (femtocells)?

The challenges for outdoor small cells are very different from their consumer counterparts. Practical issues including placement, power, environmental impact and backhaul are the biggest challenges that dominate all other responses (see fig. 11). This is to be expected as outdoor small cells are radically different from what operators have traditionally been accustomed to and require new skill sets that will have to be developed in cooperation with infrastructure vendors. Small-cell backhaul is also perceived as a major challenge, vendor activity is rapidly increasing as Tier-1, Tier-2 and startup vendors attempt to enter the market.

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Fig. 11: What are the biggest challenges for outdoor small cells?

Technologies Small-cell product lines are currently being developed, with an array of new technologies now entering the market, including baseband pooling, self-optimizing networks (SON), interference management, multivendor interoperability and many more new network aspects that are new to operators network planning departments. When asked which technical aspect of a small cell is most important, the survey respondents chose backhaul, followed by ability to co-exist with macro cells (see fig. 12). Both of these directly relate to operators network-planning and dimensioning departments which perceive these as new challenges and perhaps uncharted territory.

Fig. 12: What factor is most likely to affect a small cell deployment?

Wi-Fi is also considered a very important topic for mobile operators currently and its nature puts it adjacent to small cells. When asked how Wi-Fi may affect small-cell deployments, respondents largely replied that the two will evolve in parallel rather than compete (see fig. 13). Indeed, most vendors are now integrating Wi-Fi into their existing portfolios and there is a flurry of activity in startups and small specialist Wi-Fi vendors that are addressing the Carrier Wi-Fi market.

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Fig. 13: How do you expect Wi-Fi to affect small-cell deployments?

When asked why small cells are better than Wi-Fi, 47.6% of respondents selected that small cells are managed and deployed by operators, 38.7% selected that small cells operate in managed spectrum and 13.7% selected that small cells are more secure. The unlicensed nature of Wi-Fi and its best-effort operation is the complete opposite of cellular networks, and mobile operators are very skeptical of operating their own hot spots in interference-prone, busy areas. Conclusions and recommendations The survey results are in line with Informa Telecoms & Medias opinion and market projections for the small-cell market. Although consumer femtocells were the only small cell initially in the market, several new flavors are now entering the market and are somewhat closer to the established deployment mentality of the mobile operators network-planning departments. Practical challenges dominate public small-cell deployments with environmental, placement and backhaul issues being major factors. The general consensus for public small-cell deployment is that they will be deployed for enhancing the network rather than for new services as expected. However, consumer femtocells are also expected to drive new services, which may be location-driven. Operators are expected to continue deploying consumer femtocells for enhancing coverage at the home environment and increasing customer experience and reducing churn. In contrast, public small cells are expected to be deployed either as an overlay or underlay to existing macrocell networks to satisfy specific coverage or capacity problems in key areas.

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Contact us:
Informa Telecoms & Media Mortimer House 37-41 Mortimer House London, W1T 3JH UK Phone: +44 (0) 207 017 4994 Fax: +44 (0) 207 017 4783 Email: telecoms.enquiries@informa.com

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