How will 5G affect infrastructure, and who will own and operate the networks of the future?

While 5G rollout will open up huge opportunities for infrastructure owners and neutral hosts to expand their role and service offerings, there is still very little clarity around both the timescale for network densification and how those networks will be owned and operated. We brought together experts from BT, Russian Towers, Service Telecom, Philips Lytle, Cellnex, OpenCell, JCDecaux Link and Vertical across two days, to discuss the timelines and possible outcomes for the rollout of future networks.

The US and Korea seem to be leading the way in terms of rolling out ‘5G infrastructure’ with massive MIMO working better than expected in San Francisco already. 5G requires a huge densification of sites, with the number of points of presence required multiplying by as much as 10-30 times. Towercos need to create an ecosystem which will allow MNOs to place their equipment anywhere at any time – and to do this towercos must create and maintain relationships with municipalities and MNOs.

Over the next five to seven years, 5G rollout will go step by step, and 4G will continue to be very much ongoing. One panel predicted that in the next seven years 5G will account for only 10-15% of traffic and that will be mostly M2M, with most users having access to something more like 4.5G. For 5G to take off, edge computing and data warehousing must come online and shared base stations will need to be positioned remotely. Sites will need to be connected to fibre with some fixed wireless to site. With all of this going on, it seems to make sense for these services to be offered by one service provider, and towercos are well placed to step in.

Densification is the first step towards 5G, and that is currently underway while issues around capacity and deployment are being worked out. Working more closely with City Halls is going to be critical, and the relationship can be very symbiotic, with approvals for lamp posts and other street furniture being tied into towercos providing data on the devices moving around each small cell. 

Energy and power supply for installing antennas on street furniture are an ongoing issue. Many lamp posts are on an on/off circuit, meaning it’s not possible to tap into their power supply during the day, and local government is often reluctant or unable to serve as a utility in ‘selling’ power on to infrastructure owners.

If the projections are true, and we need 25x more small cells than macrocells to make the 5G network work, what does that mean for the viability of rollout, and what are the price implications? At some point the price point of small cells needs to come down, and the model will need to look at alternative funding. Local and national governments will prove critical in getting the ball rolling, and are beginning to see that intervention will be needed to scale up to the required levels. Educating local governments about how small cells work is not proving easy, however, as many of their policies and ordnances were adopted over a decade ago, and are designed for macro cell rollout.

Government policy coming out of trials which are ongoing currently should make the business case and determine who the main players will be, what the customers are ready to pay, who will host the infrastructure and how it will be paid for.

When looking at the UK market, there has always been conversation about thousands of small cells being rolled out ‘next year’ or ‘the following year’ for several years. The only real motivator for operators to deploy small cells in the UK currently is for capacity. One obstacle has been that infrastructure owners such as local authorities or transport providers have been charging high rents for space which has been prohibitive for further rollout. A lack of backhaul connectivity on this infrastructure has also made small cell rollout more expensive, with dark fibre being a potential big catalyst for change in this area. In addition, operators can find it difficult to get the rights to access certain sites.

Bearing in mind that small cells are currently mainly used to provide coverage solutions as part of tactical roll out, rather than driving volume, it may take longer than anticipated to see small cell rollout gain scale. Most urban sites today are addressing pressing capacity needs, in some areas as an alternative to macro sites as street furniture can offer a cheaper and easier alternative in built up areas. However, small cells are no replacement for macro cells, needing to work in conjunction with the macro network, rather than as a substitute. Those operators who are still baulking at the price of small cells will take time to understand that for truly dense coverage at street level, small cells will be needed.

The public’s reliance on mobile phones is the main driver for capacity demand. One panel discussed a few statistics: that 67% of people use their mobile at work; 80% of mobile traffic is in-building; 39% of millennials interact more with their phone than with their partners – people want to be able to use their phone in their office or hotel and at shopping centres and sports venues.

Another driver for small cells is the fact that modern architecture blocks phone signal. Double glazing blocks 25dB of signal and modern energy-efficient glass blocks up to 45dB, meaning new buildings have low to no mobile phone coverage.

DAS has been used to date to overcome some of these issues, and is a good high-capacity solution, but has encountered some issues, including the square footage needs and site footprint, backhaul requirements and speed of deployment, taking as much as 18 months to deploy whereas small cells can be deployed in as little as 18 weeks.

Overall these challenges should help to improve the relationships between third party infrastructure owners and operators, as it’s an opportunity for towercos to step in and help them with deployment. Towercos already have the real estate relationships in many cases, and would be good candidates for facilitating edge computing and other elements of future architecture on site. The development of DAS in important, not just because of its operational use to operators, but because it offers towercos a first chance to deliver active solutions as well as passive, and is a showcase for performing new roles. For many towercos, getting a foot in the door and becoming a ‘go-to’ service provider will lead the way to becoming a core piece of a complex network. It’s the ability to be more efficient and innovative than MNOs which will keep towercos growing.

It’s broadly agreed that MNOs won’t enter into agreements to share their active networks unless prompted by circumstances. In cases where they’re forced to share, such as on underground networks where a third party provides the service, they will find a way to make it work, otherwise they will often prefer to continue build their own networks. In addition, coverage is still a competitive advantage in some areas, so where it remains relevant MNOs will continue to deploy and control their own networks. Currently, operators are happy to pay more in order to have better coverage than their competitors, with annual coverage reports forming a critical part of network planning and deployment strategy.

Another challenge which needs to be overcome is the fact that operators use their own frequencies which will bleed into buildings, but which will often have dead spots in the middle of a structure. The neutral host scenario makes financial sense in this case, but getting different frequencies to interoperate is very difficult and an elegant solution will be needed.

Nonetheless, third parties see small cells and DAS as areas for growth, believing that the neutral host model is compelling due to their ability to lower the cost of rollout on the scale needed to support 5G. MORAN or MOCN or CBRS can enable MNOs to share one box indoors, but no-one’s done it.

Dark fibre is becoming increasingly critical in the deployment of small cell solutions. In high density cities fibre is a commodity: each of the operators in most European countries will own their own fibre which is already being used for backhaul, and ISPs will also have rolled out a large amount of fibre we well. In urban areas, being close to fibre is not an issue, it’s often just the last five or ten metres to a small cell or street pole which is needed. The main challenge isn’t access to fibre, it’s about sharing the resource as operators can have different ways of connecting it to sites.

In general, the reason fibre is important is the cost. It’s a commodity and an enabler for small cells – anywhere which has low cost fibre will have more small cells, and where fibre is less available or more expensive there will be fewer. We are seeing more and more dark fibre players in Europe and this will be a huge catalyst for change.

Current towerco investors are looking for stable, long term returns. There’s a mismatch when towercos move away from their core expertise and into a different business model with higher risk. Operators aren’t building new sites unless they have to, but virtualisation will allow them to expand and increase their propensity to share: virtualisation allows MNOs to reconfigure and move sites at the lowest cost until they’re happy.

There’s no one model for funding small cell rollout in place as yet. In some cases the enterprise pays for small cells and it’s a free service for MNOs, right down the fibre connection where required. Others follow a different model, with MNOs sometimes paying capex, and their opex contributions are very limited, although they are exploring an opex-only model with some interested clients. Then others use another model again, with the MNO paying a flat fee regardless of how they use the infrastructure.

It seems clear that third parties will be needed to create and aggregate services to enable effective and cost efficient 5G rollout and densification in the long term. However, small cells and other network technologies aren’t just a quick fix, and there are still hurdles to be overcome, as well as clear use cases to drive the business model for neutral host infrastructure.