The maturity of small cells has increased significantly over the past two years, with significant advances and cost savings being made in not only the technology but in installation and network management. 2015 saw the first significant shipments of small cells being made leading observers to believe that 2016 will be the year when small cells finally start to take off. With Europe lagging behind in small cell adoption it positions them well to learn valuable lessons from the US and Asia in the rollout of the technology. In this interview TowerXchange speak to Chris Nicoll, Analysys Mason’s Head of the Network Technologies Research Practice. Focusing on the path to 5G and 4G network innovation, his primary areas of specialisation include wireless network technologies, network evolution, mobile infrastructure and operator strategy.
TowerXchange: How big is the European small cell market at present and what growth do you forecast?
Chris Nicoll, Head of Network Technologies, Analysys Mason:
We expect the European outdoor small cell market to grow from approximately US$116.5mn in 2015 to US$1.71bn in 2020. This is only for outdoor small cells.
TowerXchange: Where is the appetite for small cells going to be biggest?
Chris Nicoll, Head of Network Technologies, Analysys Mason:
Two markets are really driving the outdoor small cell market right now: China and the US, but there are installations in every region and significant installations in Europe of course. The outdoor market for small cells finally started to get moving in 2015. The primary outdoor use case is macro cell densification, creating an ‘underlayer’ for the macro network to add capacity and especially coverage. AT&T has been very active in using small cells in this capacity as have the other US MNOs.
The second main use is filling in ‘not spots’ and in this capacity we finally saw some breakthroughs in small cell technology to make this easier – monopole formats and improved interference mitigation techniques. Particularly in the US I think we finally turned a corner with a court supported-ruling that the FCC takes precedent over local and state laws regarding small cell licensing and approvals. This should speed up small cell installations significantly. This is one area where I think Europe is ahead – not that it is easy anywhere, but more so than in the US.
TowerXchange: We have heard comments that the small cell market is somewhat dampened by various factors including multi-band small cells just coming to market and so MNOs wanting to hold off deployment (potentially waiting for 5G). To what extent do you agree with this? What factors do you see holding the market back?
Chris Nicoll, Head of Network Technologies, Analysys Mason:
I think there is some truth to not having multi-band small cells holding up the outdoor market. The bulk of the cost of a small cell network remains installation and backhaul so having to go back to a site and upgrade or replace a unit to support additional spectrum bands, or change a 3G module to a 4G one, is a non-starter for most MNOs. There is still a lot of 3G, especially in Europe, and refarming plans to 4G are not yet set. Small cells remain a key strategy for European MNOs but today a lot of the use is still tactical – fixing coverage and capacity issues.
Another challenge is backhaul. Where small cells are being deployed for densification, fibre access is an issue, but usually one that can be overcome. We are seeing more use of radio backhaul using both TD-LTE and microwave technologies but I would say both of these are in early days. Give them another year or two to really get moving.
I don’t think any of the MNOs are waiting on 5G to deploy small cells. We won’t see commercial-grade 5G Small Cells for three years and at that point prices are going to still be very high, and if you think we have a backhaul bottleneck problem with 4G small cells, wait till the downlink speeds are in the 5G gigabit range to really create a backhaul problem.
Cumulative capex on public small cells by region, worldwide, 2015-202
TowerXchange: How has the US market evolved and what can Europe learn from it? Who are the key players there?
Chris Nicoll, Head of Network Technologies, Analysys Mason:
This is where the European MNOs leaning on their advanced 3G networks and taking time to deploy 4G will serve them well. In both China and the US (as well as early installations in South Korea and Japan) problems with call hand off from the small cell to macro cells were identified. Interference in real-world situations is now better understood, and in general the maturity of outdoor small cells has significantly increased over the past two years.
The key suppliers are the major vendors such as Alcatel-Lucent, Ericsson, Huawei and Nokia with Airvana, IP.Access and ZTE rounding out the top tier of suppliers. I expect in 2016 we will see some significant small cell product announcements that will help boost the outdoor small cell market.
TowerXchange: What are the main challenges and risks in the small cell/ DAS market?
Chris Nicoll, Head of Network Technologies, Analysys Mason:
Scalability and spectrum support are big issues today. How many of what bands can I support to ensure a smooth handover from the macro cell and ensure future service parity – especially with LTE-A. Support or non-support (in the case of DAS installations) for Wi-Fi may be an issue, although in outdoor settings Wi-Fi tends to require a more dense installation than most cellular bands. Avoiding congestion on the backhaul networks could be an issue for non-fibre backhaul.
Management is where I think big gains have been made the past few years with small cells. It is now possible to manage small cells using the same systems as for the macro network and this is a big cost reducer that is easily underestimated.
TowerXchange: How advanced is small cell/ DAS technology? Do you anticipate any major advances on the horizon? Can we expect prices to fall dramatically?
Chris Nicoll, Head of Network Technologies, Analysys Mason:
Small cell technology is pretty much on a par with macro-cell technology from a feature parity perspective. There is still catching up needed to support multi-carrier (>3 carriers) LTE-A carrier aggregation and more advanced 4x4 MIMO. The size of the units has been an issue with the municipalities regulating small cell installations but I think we will see some advances here.
Pricing of small cells themselves has not been a top concern of the MNO’s for a few years now. The main cost drivers are still
1. Cost of site acquisition
2. Power
3. Backhaul
After so many years of saying ‘this is the year of the small cell’, I think in 2016 we will see the outdoor market finally accelerating. The Indoor market for small cells will likely not take off till 2017 or maybe 2018
TowerXchange: When do you forecast mass deployment of small cells/ DAS?
Chris Nicoll, Head of Network Technologies, Analysys Mason:
After so many years of saying ‘this is the year of the small cell’, I think in 2016 we will see the outdoor market finally accelerating. The indoor market for small cells will likely not take off till 2017 or maybe 2018. The indoor market (large venues/stadiums/commercial buildings) is where I see 5G having a big initial impact.
TowerXchange: Ultimately in the era of small cells, what are the commercial opportunities for telecom infrastructure providers?
Chris Nicoll, Head of Network Technologies, Analysys Mason:
Macro network densification is a real ‘thing’ that solves real problems for MNO’s. Coverage and capacity have long been called out as the use-case for small cells, but I think we finally understand how to deploy small cells in a way that complements the macro networks in the right way. LTE-A has given the macro network an extended lease of life by supporting mobile broadband speeds not seen before: right up to 1Gbps today already in tests. This in turn pushes the small cell technology to support faster speeds and more spectrum bands that are finally coming to market such as 2.3, 2.5/2.6 and 3.5GHz. These bands, and the emerging cloud-RAN solutions, will increase antenna requirements on the existing towers, as well as spur new installations on rooftops and building sides and corners.
