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Small cell deployment – is this an opportunity for MSOs?

Commissioned by Amdocs

Issued to: AmdocsIssue date: 20 February 2014Version: 1.02

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Small cell deployment – is this an opportunity for MSOs?Issue date: 20 February 2014Version: 1.02

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Item DescriptionSource Real WirelessClient AmdocsReport title Small cell deployment – is this an opportunity for MSOs?Sub title Commissioned by AmdocsIssue date 20 February 2014

Version Date Comment1.0 19/02/2014 Issued to Amdocs1.01 19/02/2014 Edits1.02 20/02/2014 Minor amendments to Sections 3.1 and 4.1

NoteThis report was commissioned by Amdocs. However, the report has been prepared by Real Wireless independently of Amdocs and represents our own views and those of the survey respondents.

Copyright ©2014 Real Wireless Limited. All rights reserved.Registered in England & Wales No. 6016945

About Real WirelessReal Wireless is a leading independent wireless consultancy, based in the U.K. and working internationally for enterprises, vendors, operators and regulators –indeed any organization which is serious about getting the best from wireless to the benefit of their business.

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Executive summary

Mobile data demand is projected to grow vigorously in the coming years, e.g. Cisco predictthat global mobile data traffic will increase 11-fold from 2013-18. Small cells (using bothlicensed and unlicensed spectrum) are likely to provide an important method of being able to support traffic in areas of high demand density. Small cell deployment is likely to contrast with traditional macrocell deployment – requiring installation of a large number of relatively inexpensive small cells rather than a small number of bespoke macrocell sites. This could require different network design and deployment processes. It is possible that some of the skills needed may be more akin to the challenges of deploying cable or fiber networks than traditional mobile networks.

In this independent study conducted by Real Wireless on behalf of Amdocs, we have sought input from 40 national and large regional mobile network operators (MNOs), multiple system operators (MSOs) and converged wireless/wireline operators to ascertain their understanding of the challenges involved in deploying and managing small cell networks. The views of the industry have been considered to allow Real Wireless to form an independent view on the challenges and opportunities for small cell deployment. The focus was on developed mobile markets and large emerging markets in North America, Europe and APAC. These findings are therefore likely to reflect the views of players in the industry who are more advanced in their plans for small cells rather than being representative of the industry as a whole.

Based on the survey, it is clear that there is an opportunity both for MSOs and MNOs in working together to deploy small cells.

70% of MNOs are prepared to use small cell networks rolled out by or owned by a third-party partner;

MSOs can secure access to sites, and provide backhaul and power at a rate much faster than MNOs currently do, and can match or exceed the lead times targeted by MNOs;

The principle challenges identified by MNOs in small cell rollout are project management (65%), negotiation with partners (45%) and technical aspects (40%).

There is potential synergy with the existing skills from the MSOs for deploying backhaul to small cells compared to existing deployments where a high level of commonality in skills to deliver the task was cited, including field force expertise (95%), reducing the total cost of ownership (TCO) (95%) and project management (85%).

Whilst MSOs are likely to be able to offer useful services, skills and experience to help small cell deployment there are some challenges:

85% of both MNOs and MSOs believe that automation will be critical or important for small cell deployment to be successful. 55% of both MNOs and MSOs see a need to upgrade their automation tools.

80% of MNOs believe existing tools are inadequate and of those, 30% believe better tools will become available this year, while 50% think there will be a longer wait to secure the complete toolkit.


Detailed technical aspects relating to small cell deployment are seen as a major issue by both MNOs and MSOs, but have little commonality with MSOs’ previous experience.

Survey responses indicated that there will be a rapid uptake in deployment of both carrier grade Wi-Fi and combined small cell and Wi-Fi solutions towards 2016. 55% of the MSOs surveyed have already started deploying Wi-Fi for offload and only 30% are either undecided or have no plans for Wi-Fi offload. Many of the skills required to facilitate alicenced small cell deployment are common to small cell Wi-Fi deployment and are seen by MNOs as key issues to address. Wi-Fi build-out is cited by some operators as a ‘rehearsal’ for small cell deployment services – the same processes of securing sites and backhaul, without the complexities of licensed spectrum or the same level of QoS expectation.


Contents

1. Scope and description of this report .........................................................12. Small cell deployment ...............................................................................22.1 Meeting traffic demand .............................................................................22.2 Deployment challenges ..............................................................................33. Small cell deployment expectations ..........................................................53.1 The changing patterns of MNO small cell and backhaul deployment ..........53.2 MNOs’ increased interest in small cell services...........................................83.3 How MSOs can improve small cell economics ..........................................104. The response from MSOs ........................................................................164.1 MSOs' small cell plans ..............................................................................164.2 Challenges................................................................................................194.3 Tools ........................................................................................................204.4 New relationships ....................................................................................214.5 Issues emerging and implications for the industry....................................225. Summary and Conclusions.......................................................................25References .............................................................................................................27

FiguresFigure 1: Projected timescales for MNOs’ commercial trials/deployments of small cells, including Wi-Fi, in 2014-2018 ...............................................................................................5Figure 2: Percentage of small cell sites which will be backhauled by different technologies by 2018 based on all MNOs surveyed...................................................................................7Figure 3: Percentage of small cell sites which will be backhauled by different technologies by 2018 according to MNOs from N. America and W. Europe...............................................7Figure 4: Expected ownership (%) of MNOs’ commercial small cell networks (excluding Wi-Fi) based on all MNOs ..........................................................................................................8Figure 5: Percentage of all MNOs considering partnerships for various aspects of small cell strategy 9Figure 6: MNO views on the average business days currently needed for key aspects of small cell deployment, without partnerships, and the targeted number of days for mass-scale deployment to be viable............................................................................................11Figure 7: MSO’s typical timescales for key aspects of small cell deployment, compared with those of MNOs (current and targeted). ..............................................................................12Figure 8: Key MNO challenges in deploying backhaul to small cells (MNO base, excluding time and cost) 13Figure 9: Chief issues in deploying backhaul to small cells, and how far they are shared with existing MSO deployments (MSO base, excluding time and capex/opex)............................14


Figure 10: Percentage of MNOs which would consider various providers as partners in small cell deployment .................................................................................................................15Figure 11: Percentage of MSOs planning to support various small cell services within the next five years 16Figure 12: Projected timescales for MNOs’ commercial trials/deployments of small cells, contrasted with small cell MSO backhaul timescales (2014-2018) ......................................17Figure 13: Projected timescales for MNO carrier Wi-Fi and MSO deployment for Wi-Fi offload and small cells (2014-2018) ....................................................................................18Figure 14: Percentage of MSOs placing each customer group in its top three targets for small cell services...............................................................................................................18Figure 15: Issues in deploying small cell backhaul, as placed in number one position, and in the top three, by MSOs ......................................................................................................19Figure 16: Comparison of MNO and MSO assessments of the need for specific small cell planning tools 20Figure 17: Comparison of MNO and MSO ratings of the importance of automation in the small cell backhaul model...................................................................................................21Figure 18: Comparison of preferred arrangements for MSOs and MNOs for providing small cell backhaul services .........................................................................................................22

Small cell deployment – is this an opportunity for MSOs?Issue date: 20 February 2014Version: 1.02 1

1. Scope and description of this report

Mobile data demand is projected to grow vigorously in the coming years, e.g. Cisco [1] anticipate global mobile traffic to grow by a factor of 11 between 2013 and 2018 equivalent to an annual growth rate of 61%. Small cells (using licensed spectrum and unlicensed spectrum) are likely to provide an important method of being able to support traffic in areas of high demand density.

Small cell deployment is likely to contrast with traditional macro cell deployment –requiring installation of a large number of relatively inexpensive small cells rather than a small number of bespoke macro sites. This could require different network design and deployment processes. A key challenge is likely to be supporting backhaul to each of these small cells. It is possible that some of the skills needed may be more akin to the challenges of deploying cable or fiber networks than traditional mobile networks.

In this independent study conducted by Real Wireless on behalf of Amdocs, we have sought input from 40 national and large regional MNOs (Mobile Network Operators), MSOs (Multi-Service Operators (such as large cable companies)) and converged wireless/wireline operators to ascertain their understanding of the challenges involved in deploying and managing small cell networks. The views of the industry have been considered to allow Real Wireless to form an independent view on the challenges and opportunities for small cell deployment.

This report is organised as follows:

In chapter 2 we review the need for small cells and present an overview of the case for small cells and likely challenges in deployment;

In chapters 3 and 4 we present results of the survey to identify the opportunity for MSOs and the readiness of the MSO community to provide services to assist with small cell deployment.

In chapter 5 we draw out the key implications for the industry based on an analysis of the survey responses and,

Lastly, in chapter 6 we summarise the report and conclude.


2. Small cell deployment

2.1 Meeting traffic demand

Small cells are likely to be essential element to expand mobile network capacity. Small cells offer high capacity density, improved indoor coverage and improved user experience. MNOs will benefit as the traffic load on existing macrocells is reduced. There is now a near universal recognition amongst cellular carriers that small cells will be an essential part of their future RAN strategy.

The use of small cells has been growing rapidly and was estimated to have overtaken the global number of macrocells deployed, early in 2013. Worldwide, 11 million small cells were active in February 2013 (including units supplied commercially and free to end-users), as reported by Informa Telecoms & Media in its small-cell market status report for the Small Cell Forum [2]. They predicted an 8-fold increase in the number of small cells to 92 million to 2016, with an estimated market value of USD22 billion. Residential and enterprise small cells have made the early running and comprise a high proportion of the total market. For example Sprint and AT&T in the US have all reached the million residential femtocell deployment mark. Changes in the standards allow licensed small cells to move from residential environments to being part of a public access RAN architecture.

Many analysts believe that public access small cells are set to become a key driver in small cell deployments over the next five years. Asia Pacific countries have led the way, accounting for 67% of public access small cells in 2013 according to Maravedis-Rethink Research [3] with SK Telecom (10,000 mainly indoor public access units as of June 2013), Korea Telecom and Softbank among the first movers. Developments in residential small cell technology have spilled over to the public access market and this has transformed the efficiency and cost of public access small cell deployments. Other developments such as SON (Self-Optimizing Networks) software have also reduced installation and operating costs by enabling carriers to plan, configure, manage and optimize networks automatically based on real-time demands.

Public access small cell deployments will accelerate as the early adopters scale up their deployments and new operators make significant commitments. For example AT&T announced a 40,000 unit public access small cell deployment by the end of 2015 as part of Project Velocity IP overhaul of its wireless and wired networks. Other operators in the US, such as Verizon, have also planned deployments, though not yet committed to the same scale of development as AT&T. However, with China Mobile expected to roll out a major small cell deployment in the next few years and developments in India and Indonesia, the Asia Pacific region should still be the leader in public access small cells over the next five years.

Small cells operating in licensed spectrum (as opposed to Wi-Fi which operates in unlicensed non-exclusive spectrum) can offer advantages in terms of security and the ability to manage service quality. However, many analysts expect these networks to converge into heterogeneous networks (HetNets) which would provide a seamless capacity layer, although significant enhancement of current network software is still required to achieve this aim.


Cisco’s 2014 VNI data traffic forecast [1] noted that 45% of mobile data traffic was carried by Wi-Fi or licensed small cells in 2013 and anticipates this rising to more than 50% by 2018. Small cells that combine multi-mode licensed spectrum technologies and unlicensed spectrum Wi-Fi are anticipated to become more prevalent in future. Synergies in deploying such a HetNet will reduce costs of multiple network deployment.

In summary, small cells offer the potential of providing a high performance capability that can support the mobile traffic growth – particularly in the high traffic density environments that can be difficult to support on macrocell networks. They have been deployed extensively in residential environments and are increasingly likely to be deployed in multi-technology variants for public access. However, deploying a large number of outdoor small cells and connecting these cells back to the core network can be a challenge.

2.2 Deployment challenges

The small cell network must be deployed and managed efficiently so that the capacity delivered can:

be provided at a low cost per gigabyte. User data volume is increasing much faster than ARPU and all additional capacity capability must be accompanied with a low total cost of ownership.

be located where it is required; these demand hot-spots must be identified and monitored to match capacity to demand at the same time as ensuring adequate, reliable backhaul connectivity.

Be able to be deployed at scale – since a large number of small cells will be required to meet traffic demand.

However, while these drivers are well known, there is far less consensus amongst carriers about when they need to plan for small cells or about how they will manage the deployment of a large number of small cells, each with a relatively small capacity compared to traditional macrocells. Each cell must be connected back to the core, integrated within the overall network, positioned in a suitable legally contracted location and provided with adequate power. And, of course, these cells need to be planned, managed and maintainedas part of the overall network. The cost of these individual elements must be spread over a smaller number of subscribers than with a macrocell. It is perhaps worth emphasising that licensed small cells are intrinsically part of a cellular operator’s network. They have delicate interactions with the macrocell layer and raise fears of interference and dead-zones if planning and deployment are not executed correctly. Similarly, they must integrate with the core functionality and with sophisticated protocol interaction.

As will be seen later in this report, currently a few, more advanced mobile operators have already decided that they need small cells and are now well advanced in plans on how they will use them with businesses cases and processes established. Many carriers are just coming to terms with the requirements but are still wrestling with the complexities of deployment and provisioning required to deploy small cell solutions. Finally there is still a substantial segment of operators who are only just starting their analysis of what is required and how they will use small cells within their overall RAN architecture.

As such, while there are a variety of business models possible for cellular operators considering small cells, it is important to stress that the initiative and the strategic direction


must come from them, the cellular operator. Small cells have the potential to deliver better ways of reaching their customers, of reducing or eliminating dead-spots, of improving the efficiency of their network and of increasing capacity. But these benefits can only be delivered as the result of a coherent plan, originated by the cellular operator whose spectrum will be used, about how they will be used, deployed and integrated.

Conversely, operators must be aware that this is a fiercely competitive environment and that other MNOs are at various stages of conducting similar analyses: in many cases this is a land-grab1 and there is significant competitive advantage to be had from securing the right sites, backhaul and supporting resources now, even in advance of mass deployments.

As such, cellular operators should be considering their small cell strategies as a matter of urgency to avoid being left behind by competitors. The very real complexities around planning, deployment and provisioning do need to be addressed – but there are some very interesting options including automation, out-sourcing or partnering with others that could help enable them, simplifying the deployment of small cells for the cellular operators.

A trend of note is the emergence of wholesale services, particularly Small Cell as a Service (SCaaS), which would provide MNOs with full or partial alternatives to self-provision. MSOs may be well placed to offer these services where they have extensive fibre assets for backhaul and expertise in the installation and maintenance of dense networks in the field. For example, Virgin Media in the UK has completed extensive trials and announced plans to offer a Small Cell as a Service (SCaaS) [4] as have others such as Cloudberry in Norway.

1 Or indeed a lamp grab: see http://www.realwireless.biz/2013/06/25/join-our-small-cell-webinar-the-hunt-for-the-golden-lamppost-23-july-2013/

http://www.realwireless.biz/2013/06/25/join-our-small-cell-webinar-the-hunt-for-


3. Small cell deployment expectations

A survey was conducted in January 2014 of 40 national and large regional MNOs, MSOs and converged wireless/wireline operators. The focus was on developed mobile markets and large emerging markets in North America, Europe and APAC. All respondents had been pre-selected as having an active deployment, trial or evaluation of small cell services during the period 2013-2018.

Based on our understanding of the likely challenges posed by MNOs and the potential opportunity of partner organisations, this survey was designed to test our views of the challenges and opportunities to deploy small cells, the likely suitability of MSOs to offer useful services and the willingness of MNOs to partner with third parties.

In the first part of this section we present the expectations of MNOs to understand what they plan to do and when. We later examine the skills required to deploy small cells, what aspects of deployment are shared with MSOs’ normal deployments, and the willingness of MNOs to partner with third parties to help with their small cell network deployment.

3.1 The changing patterns of MNO small cell and backhaul deployment

For the MNOs surveyed (who had a commitment to deploy small cells in the next four years), Figure 1 shows the timescales of anticipated commercial trials and small cell deployment. For 3G/4G small cells, 55% of the sample are already operating or trialling the technology, albeit usually on a small scale, though most networks will expand rapidly after 2014. By 2018, 20% of MNOs expect to have deployed networks of over 100,000 small cells (excluding Wi-Fi-only) and 70% will have between 25,000 and 100,000 small cells deployed per country. This will represent an increase of, on average, 15-20 times above current deployed numbers.

Figure 1: Projected timescales for MNOs’ commercial trials/deployments of small cells, including Wi-Fi, in 2014-2018

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This indicates a rapid uptake in deployment, though that is expected by most respondents to be weighted towards 2016 and later as they wait for several key factors to fall into place to make the business case workable. Notably those are:

Automated tools and processes for site, backhaul and RF planning and provisioning

Low cost availability of cell site equipment and of backhaul especially fiber Increased confidence in the added value business case Maturity of key standard and non-standard technologies e.g. SON and eICIC Wide availability of LTE, LTE-A and cellular/Wi-Fi cells

Another cited reason for some delay in large-scale deployments is that, compared to similar studies conducted two years ago, there is a marked recognition by MNOs that, in order to achieve the full benefits they are seeking from small cells, they will need to embark on far bigger and highly complex roll-outs than previously expected. This is because the scale of capacity they will require to support competitive services will be even higher than previously anticipated. They are looking beyond simple coverage and capacity, aiming to build new revenue streams which harness small cells' capabilities, such as personalised services and M2M. To achieve such aims they need:

Large numbers of cells (hyper-densification of some parts of the urban network) Guaranteed quality of service Very flexible provisioning of capacity in order to provide optimal quality of

experience without equipping every cell for peak loads

There are several areas of technology and process which will help meet these objectives, notably:

The ability to identify and secure optimal small cell sites and backhaul connections. There is a notable shift in thinking from MNOs placing cells where backhaul is available, to trying to secure backhaul for optimal locations.

The ability to plan and deploy very large numbers of cells quickly and at low cost The ability to plan and modify very complex networks from end-to-end for peak

efficiency and performance. Flexible provisioning and SON-type techniques must apply to the backhaul as well as the RF.

The ability to backhaul as many cells in high-traffic urban areas as possible with fibre, to allow for maximum capacity and upgradeability, provided this can be done affordably.


Figure 2: Percentage of small cell sites which will be backhauled by different technologies by 2018 based on all MNOs surveyed

Figure 2 shows the focus of the MNOs surveyed on securing last mile fiber if they can do so affordably because of the future-proofing it offers. In early stage roll-outs, at least outside China, Japan and Korea, cable and even DSL have frequently been used. Wireless solutions optimized for small cells will remain important throughout the period especially in suburban or rural areas with lower capacity requirements and density. The use of fiber is also very regionalized and is far greater in eastern APAC while high quality cable is most commonly used in North America and wireless in Europe. Separating out these MNOs from W. Europe and N. America, Figure 3, shows rather more balanced proportions of small cell sites backhauled by different technologies. It is interesting to note that the anticipated use of cable by 2018 increases primarily at the expense of fiber backhaul. The relatively small percentage of DSL backhaul remains the same across all regions.

Figure 3: Percentage of small cell sites which will be backhauled by different technologies by 2018 according to MNOs from N. America and W. Europe

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By 2018, globally, MNOs expect just under two-thirds of urban small cells to be backhauled by last mile fiber especially in the dense urban centers (which will require the largest number of cells) and almost one-third with wireless In N.America and W.Europe it is expected that backhaul is fairly evenly split by fibre, wireless and cable solutions.

Although MNOs with access to their own fiber (as part of a converged telecoms group) are often early movers for that reason, about 47% of small cell backhaul links will still be provided by an unrelated partner once networks achieve scale. This percentage will be higher in fiber since wireless will be more commonly deployed by the MNO itself.

3.2 MNOs’ increased interest in small cell services

The increasing complexity and business-critical nature of small cell deployments are driving many MNOs to expand the scale of their original projects, and this in turn is creating notable interest in outsourcing some or all elements of their small cell projects in order to reduce their own risk, accelerate deployment and make costs for capex and opex more predictable.

Figure 4: Expected ownership (%) of MNOs’ commercial small cell networks (excluding Wi-Fi) based on all MNOs

Figure 4 indicates a strong leaning towards outsourcing elements of small cell networks. 70% of MNOs expect their primary networks to be managed or fully owned by a third party. Regionally, APAC operators are far more inclined to keep full ownership and control, though this trend may well dilute in future - early large-scale deployers have been concentrated among large APAC MNOs with exceptional access to their own infrastructure including fiber. 50% of APAC respondents expect to own and manage the bulk of their networks including backhaul, compared to just 12% in EU and one-quarter in North America. Within those networks there may still be considerable reliance on third party infrastructure and services to fill gaps.

There are three broad levels of small cell services in which MNOs have significant interest and which MSOs could provide:

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'Simple' backhaul - providing fiber or cable last mile connections to operators' small cell and/or Wi-Fi sites. Increasingly this will include sophisticated planning and 'Backhaul SON' techniques to provide the optimal connections.

Wi-Fi small cells - many MSOs are deploying large Wi-Fi hotspot networks for their own customers but also see MNO offload as a revenue stream.

SCaaS - providing the whole infrastructure for small cells and Wi-Fi including sites, backhaul, management. The model will be enhanced if these can be built on a neutral host basis though this will not be a feature of standard equipment until 2015. A simpler version of this managed service approach is to offer Wi-Fi-only SCaaS.

As Figure 5 shows, by far the most common choices will be leasing of small cell backhaul and offloading data to a partner's network, most commonly Wi-Fi. One or both of these will form at least an element of the small cell strategy for no fewer than 85% of MNOs in urban areas (often MNOs will choose to own some of their own Wi-Fi cells and backhaul links and outsource others). Even in APAC, the region where MNOs are most keen to keep ownership and control of their networks, there will not be a simple divide. MNOs will often own some backhaul and Wi-Fi cells themselves and rely on some from one or more partners. Most commonly they will retain ownership and roll-out of cellular small cells while relying on partners for backhaul and Wi-Fi.

Figure 5: Percentage of all MNOs considering partnerships for various aspects of small cell strategy

As providing carrier grade Wi-Fi becomes fully integrated into the MNO's network, any partnership that provides an appropriate Wi-Fi service (more hotspots of higher quality and in good locations) will become more strategic. As seen in Figure 1 (above), one-quarter will start multimode cellular/Wi-Fi small cell roll-outs by the end of this year and 60% by the end of 2016. In addition, single-mode Wi-Fi - which is carrier-class but not fully integrated with small cells - is also of rising interest, with 60% of MNOs trialling or using it for offload, often via third party hotspots. Every MNO expects Wi-Fi to form some part of its network by the end of 2016, though there will be the need to modify procurement and planning processes to accommodate unlicensed technologies.

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For cellular small cells there will be two main ways to work with partners for cellular small cells:

offloading to a network owned by a third party or opting for full SCaaS.

Both are included in about one-third of MNOs' plans, with European operators being most enthusiastic. Professional services providers will also be important for more than half of MNOs in deploying small cells.

When interviewed, MNOs generally said they were far more inclined towards outsourcing than they had been 1-2 years ago. This was because:

They had wanted to deploy initial trial or small-scale networks themselves, to understand the challenges and how they would interwork with the macro networks and also because outsourced services were not available or suitable. However, having fully understood the workings of a small cell network, they would look to feed that knowledge into the KPIs for outsourcing partners.

Their network plans had become more complex and business critical, leading to concerns about unpredictable costs and diversion of resources.

They realised that maximising the benefits of small cells would depend on securing optimal sites, not just large numbers of random sites, and on flexible planning and provisioning in the backhaul not just the RAN. Securing all that backhaul would often require not only a partner with existing fiber, cable or even wireless, but one with strong planning/optimization tools also in place.

The more they understood small cell roll-outs and increased the scale, the more they recognized that many of the processes involved were not among their key competencies (outside of RF planning). Many of the key challenges associated with mass-scale urban roll-out are within the experience of other types of operator such as MSOs. This MSO experience includes relationships with infrastructure owners such as councils; deployment of many thousands of end-points at low cost etc.

3.3 How MSOs can improve small cell economics

The last point above is critical to the opportunity for MSOs to take advantage of the trend towards small cell outsourcing by mobile carriers. Planning and deploying a large-scale small cell network involves entirely different approaches to those with which MNOs are familiar from their macrocell deployments. The survey shows that planning is the biggest challenge because of the many technical and logistical elements involved, all of which make timescales and costs very unpredictable. Respondents mentioned planning timescales ranging from one month to almost one year (after spectrum had been secured). Figure 6shows the number of business days needed for what MNOs consider to be the key aspects of small cell deployment.


Figure 6: MNO views on the average business days currently needed for key aspects of small cell deployment, without partnerships, and the targeted number of days for mass-scale deployment to be viable

There are, of course, two main elements of planning – the sites and the RF. Outside of full-scale SCaaS the latter will generally remain the domain of the MNO and they are looking for new tools dedicated to RF planning for complex small cell and HetNet roll-outs, to improve their ROI (see later section).

Most of the large variations in timescales relate to site issues, notably identifying optimal sites, gaining permissions, negotiating leases and securing backhaul and power. These site and backhaul issues loom high on the list of the challenges to the MNO small cell model –almost as high as the biggest challenge in large-scale small cell networks, managing and continually reconfiguring a huge network (that is a top three challenge for 60% of MNOs, while securing appropriate sites is close behind on 50%). Even the management task, as many interviewees pointed out, is eased by deploying first in the right sites with the right backhaul.

MNOs have clear targets for reducing time and cost of deployment which will be essential to achieve for most to begin large-scale roll-out. These targets become more critical when there is already less access to sites and fiber for MNOs via sister companies or existing partnerships. Partnering with a company which can provide pre-approved sites with backhaul is the single biggest positive contributor to improving time-to-market as well as upfront cost, according to three-quarters of those companies interviewed in depth.

There is significant variation in the time spent securing a site, but a delay of 150 days is common when a carrier has to go through site permissions, leasing negotiations etc. with a number of site owners. Securing backhaul – either from a wireline carrier or by building wireless links in-house – typically takes 90 business days and again, there may be multiple sources involved. RF planning averages 25 days and without new optimised tools and more advanced SON operators say this would increase as networks get more complex. Installation is relatively quick on a per-cell basis and small cell vendors are constantly improving their products to ease installation once sites and backhaul are in place. However, many MNOs acknowledge that they lack the field processes or workflow to acquire and

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install large numbers of cells and will need a more scalable approach to reduce upfront time and cost.

Traditionally, Wi-Fi small cells have been less burdensome since they have often been ‘best effort’ networks built on readily available, rather than optimal, sites and often backhauled by DSL. However, the more they become an integral part of the MNOs’ networks, the more they will be subject to the same planning and service delivery requirements as cellular.

MSOs that can provide any combination of existing site provision, backhaul provision and installation will see an opportunity with MNOs – especially, of course, with those who are not part of a telco group. MSOs’ deployment timescales for large-scale connectivity are far closer to those which MNOs are targeting to make their small cell cases viable.

Figure 7: MSO’s typical timescales for key aspects of small cell deployment, compared with those of MNOs (current and targeted).

Figure 7 shows the timescales for the MNO (from Figure 6) and contrasts these to the timescales for MSOs to perform the same range of tasks. These times may be optimistic, since they refer to MSOs’ day-to-day operations that would not involve some of the complexities of scale and sophistication anticipated for licensed small cells – but they do demonstrate the potential benefit. MSOs believe their average time to secure sites is close to the MNO target because they already have alliances in place with many infrastructure owners such as local authorities. For backhaul, they will sometimes have a connection already in place for a suitable location though more commonly MNOs will want dedicated bandwidth and optimal site planning. However, it is part of the MSO’s process to pull last mile cable or fiber to new sites and this can be achieved far more quickly.

Of course, outsourcing does not reduce the MNOs’ time-to-deploy to zero. For the best results time will be spent managing the relationship and working closely with the MSO to optimize the backhaul planning. It is clear that a rising number of MNOs are looking to partners for an optimised network and ongoing business relationship rather than a simple line leasing deal.

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In that context, the MSO’s opportunity does not lie only in reducing time to market for MNOs, but also in shielding them from many other complex processes. MNOs believe that the most difficult issues in deploying backhaul to small cells (apart from time and cost) will be last mile connections to the right cells and project management (see Figure 8). Other issues include the process of securing and deploying backhaul to many hundreds of cells, many of them related to communications, internal or with partners in the deployment chain.

Figure 8: Key MNO challenges in deploying backhaul to small cells (MNO base, excluding time and cost)

Many of these issues, which are seen as obstacles by MNOs, are already part of MSOs’ established processes. Unlike mobile operators, which have been accustomed to securing sites and backhaul on a relatively small number of towers and buildings, MSOs roll out cable and fiber connectivity to thousands of nodes and sometimes millions of homes, a process which is far closer to that of deploying small cells near street level. Figure 9 indicates that several of the obstacles cited by MNOs are considered by MSOs to be generic challenges, shared with their more traditional roll-outs – in particular, field force expertise and training; project management and TCO elements.

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Figure 9: Chief issues in deploying backhaul to small cells, and how far they are shared with existing MSO deployments (MSO base, excluding time and capex/opex)

These factors (see Figure 10) help to explain why MSOs are commonly cited as likely small cell providers by mobile carriers. For MNOs which would consider using a partner, MSOs are the group to which the largest number would turn - 45% name them as the most likely partner for small cell backhaul and 20% for full services (sites, backhaul and potentially Wi-Fi). 30% of MNOs would partner with network equipment providers (NEPs) for their small cell deployment. A further 15% expect to work with full SCaaS providers, which might also be MSOs, as in the case of Virgin Media in the UK. Other important partners are telcos, especially for wireline backhaul and equipment providers and integrators for broader services. Indeed, with the equipment providers increasingly running MNOs’ networks for them on an outsourced basis, they are likely themselves to become customers for backhaul services as they expand into small cells hosting and, technology permitting, neutral host roll-outs. Regionally, the MSO is considered the primary partner by more operators in North America and Europe than in APAC.

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Figure 10: Percentage of MNOs which would consider various providers as partners in small cell deployment

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4. The response from MSOs

The preceding section highlighted the areas in which MSOs could enhance the small cell business case for MNOs, creating new revenues from their own wireline deployments in the process. This section examines the MSO community's readiness to provide these services and the challenges they will face to grasp the opportunity.

4.1 MSOs' small cell plans

As outlined above, for most MSOs, small cell activities fall into two related categories. One is to harness their fiber and cable networks to backhaul small cells - cellular sites for MNOs and MVNOs and Wi-Fi sites for a range of providers/users. The other is to take advantage of that backhaul infrastructure to build out their own Wi-Fi hotspots which can be used to provide wireless access services to their own subscribers and data offload/wholesale to MNOs and others. Amongst the MSOs surveyed, 80% plan to offer small cell services and/or Wi-Fi offload by 2017. There are clear advantages to doing both - the effort of deploying Wi-Fi can provide a footprint for small cell sites and backhaul for instance.

Figure 11: Percentage of MSOs planning to support various small cell services within the next five years

Two-thirds of MSOs believe small cell backhaul will become an important element of their business within the next 4-5 years, while 55% expect to deploy public Wi-Fi, in most cases serving a mixture of their own subscribers and wholesale partners. Only 15% currently envisage offering full SCaaS services, primarily because of uncertainty about the business model but also about practical issues such as the precise division of labour and ownership between the provider and the MNO, especially in the RF/spectrum area. However, a few –mainly in the US and Western Europe – believe SCaaS will allow them to harness their infrastructure assets in a far more strategic and profitable way than simply offering backhaul alone.

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Although it is clear that there is very high interest in providing small cell services theconversations with MSOs indicate that their plans are at a less concrete stage, in most cases, than those of MNOs (at least outside the US and a few large European markets).

We can consider these different levels of expectation for MSOs providing backhaul services and to providing small cells. Figure 12 shows anticipated timescales for MNO deployment of small cells, carrier Wi-Fi and combined small cells versus the anticipated timescales for MSO to provide backhaul to small cells, indicating a potential delay of one to two years. Figure 13shows the anticipated timescales for MNO deployment of carrier Wi-Fi, contrasted with the timescales for MSOs to support Wi-Fi offload and small cells. MSOs are clearly more advanced in the role of deploying small cells for Wi-Fi offload and relatively immature at deployment of licenced small cells.

Over half the MSOs surveyed have already started to deploy Wi-Fi hotspots and that figure will rise to 70% - and far larger deployments – by 2017. The progress is far slower in small cell backhaul although this, of course, is partly down to the small scale of MNOs’ requirements so far. As their need for backhaul services rises, many MSOs plan to rise to the challenge, as indicated by the uptick in 2015 – by the end of that year, two-thirds of MSOs expect to be offering these services and no MSO has ruled out the option entirely.

Figure 12: Projected timescales for MNOs’ commercial trials/deployments of small cells, contrasted with small cell MSO backhaul timescales (2014-2018)

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Figure 13: Projected timescales for MNO carrier Wi-Fi and MSO deployment for Wi-Fioffload and small cells (2014-2018)

The exception to the general caution about small cells is seen in the US, whose MSOs are the pioneers in harnessing their wireline networks to support small cell backhaul and in building large-scale Wi-Fi networks, to support their own data services and those of partners. This is the opposite situation from that in the early small cell market, which has been pioneered by a few Asia-Pacific operators, usually those which have access to significant amounts of backhaul.

Figure 14: Percentage of MSOs placing each customer group in its top three targets for small cell services

For MSOs that do move into small cell services MNOs are not the only target customer for their last mile connections and hotspot sites. While MNOs are the largest potential source

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of revenue here, and are cited as a top three target by 85% of MSOs, Wi-Fi pure-play operators, enterprises and government/public safety agencies are also considered important and there is some emerging interest from the M2M community.

4.2 Challenges

Despite some clear advantages which MSOs can bring to the small cell map they also face challenges if they are to work strategically with mobile providers.

The biggest challenge will be to drive down the costs of backhaul connections. The cost of provisioning huge numbers of small cells can be the biggest single item and a major deterrent to the widespread use of fiber (except where an MNO has low cost access to fiber resources within its business group), or other suitable points of presence (PoPs). Many MNOs are targeting backhaul operating costs of under US$250/month, which will place the emphasis on cable or wireless last mile, outside of the densest urban environment.

Apart from cost, MSOs will need to add new skills and tools to offer the strategic and high value services for which MNOs will pay the highest sums, rather than merely offering line leasing. Most of these, in the MSO's opinion, will revolve around specific technical and integration aspects of backhauling cellular base stations and provisioning optimally for very unpredictable levels of traffic compared to the residential and business locations usually served by MSOs. There are also aspects of their established wholesale backhaul relationships which MNOs will want to import to the small cell arena and which will be unfamiliar to MSOs that do not provide macrocell services - notably the monitoring of SLA elements like Ethernet loss and jitter at the demarcation line.

Figure 15: Issues in deploying small cell backhaul, as placed in number one position, and in the top three, by MSOs

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There are other areas where close MNO relationships will involve changes in the typical MSO's skills and processes including:

The approach to planning the cable or fiber links The mechanisms for leasing backhaul connections to MNOs Additional relationships within an expanded deployment chain

4.3 Tools

Although MSOs have many tools and skills for supporting large scale roll-outs of small cells for consumer use their main need for new tools will focus on planning for public and unpredictable traffic, especially for those which have not experimented with public Wi-Fi.

About 30% think there is a shortage of suitable tools for small cell planning, higher than the proportion for MNOs. This suggests that tools to address small cell backhaul provisioning, or end-to-end views of the network, are behind those for the access side (see Figure 16). As deployments and trials are at an early stage in most cases there is low current usage of specific small cell planning tools for backhaul. Therefore 30% of MSOs think their existing conventional approaches are adequate but two-thirds of those respondents believe that, over time, specialized software will be necessary to provide the optimized performance that MNOs will increasingly demand, and to use wireline resources efficiently in large and complex networks.

Figure 16: Comparison of MNO and MSO assessments of the need for specific small cell planning tools

As can be seen above, 80% of MNOs believe existing tools are inadequate and of those, 30% believe better tools will become available this year while 50% think there will be a longer wait to secure the complete toolkit. There is a potential dilemma in determining how long to wait for the ‘perfect’ set of tools as opposed to moving more quickly with some trade-offs in planning time and efficiency.

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Figure 17: Comparison of MNO and MSO ratings of the importance of automation in the small cell backhaul model

Among both MNOs and MSOs it is clear that the model for small cells will rely heavily on automation and this will have to be supported at every level of the process, and in all kinds of tools, whether these are being used by the MNO itself or a third party provider. Automation will apply to planning and provisioning backhaul as well as RF and to the workflow and processes for project management of huge numbers of deployments. As Figure 17 shows that almost half of providers, whether MNOs or MSOs, believe automation will be critical to small cell success and a further 40% of MSOs and 45% of MNOs believe it will be important.

4.4 New relationships

Although many MSOs provide wholesale and leased services on their lines the complexity of the mobile small cell model will often involve them in new partnerships and processes involving many agencies. One trend may be more flexible approaches to selling and provisioning backhaul with the endpoint, for some players, being an ‘on-demand’ system based on a marketplace model. MNOs and MSOs have a slightly different emphasis on their preferred partnering arrangements (see Figure 18). Though in many ways disruptive to their norms, MSOs have greater belief than MNOs in the marketplace model taking over from bilateral deals for securing small cell backhaul over time. 25% of MSOs think the marketplace will become the dominant model allowing them to trade more flexibly, compared to 20% of MNOs. Both groups, however, see the traditional bilateral deals remaining powerful and there are strong regional variations – US players are most favourable to the marketplace and APAC providers to integrators, for instance.

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Figure 18: Comparison of preferred arrangements for MSOs and MNOs for providing small cell backhaul services

4.5 Issues emerging and implications for the industry

It is clear from the above that MSOs have valuable skills and experience that can be applied to small cell deployment. Mobile operators working with MSOs can accelerate small cell deployments but both MSOs and MNOs need appropriate workflow and planning tools to manage the process efficiently and gradually build up the trust needed to evolve to a long term partnership.

Key themes that emerge from the consultation with industry players are:

New business models

70% of MNOs are prepared to use small cell networks rolled out by or owned by a 3rd party partner.

Deployment timescales

55% of MNOs surveyed are in the trial phase or have already launched small cell networks (and 60% carrier Wi-Fi).

Only 40% of MSOs believe they will be supporting small cell deployment or commercial trial by the end of this year.

Considering deployment timescales and new business models there appears to be a “deployment gap” with MNOs expecting to move earlier than MSOs. MSOs’ caution on deployment timescales is possibly because of an uncertainty on how quickly MNOs will deploy at scale. For backhaul services many MSOs are able to move more quickly should they see the right signs from the market.

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MSOs have skills that can help small cell rollout

The principle challenges identified by MNOs in small cell rollout are project management (65%), negotiation with partners (45%) and technical aspects (40%)

MSOs can secure access to sites and provide backhaul and power at a rate much faster than MNOs currently do. They can also match or exceed the lead times targeted by MNOs

Although 85% of MSOs believe that technical aspects of small cell rollout are different to their normal deployment a number of issues cited as obstacles by MNOs for small cell deployment are part of the everyday business of MSO rollout e.g. field force expertise (95%), TCO (95%) and project management (85%).

The role of Wi-Fi (across MNO & MSO)

There will be a rapid uptake in deployment of both carrier grade Wi-Fi and combined small cell and Wi-Fi solutions towards 2016. 55% of the MSOs surveyed have already started deploying Wi-Fi for offload and only 30% are either undecided or have no plans for Wi-Fi offload. This contrasts starkly with MSOs preparations for licenced small cell deployment where 65% of MSO have not decided or have no plans. This is despite the fact that many of the skills required to facilitate a licenced small cell deployment are common to small cell Wi-Fi deployment and are seen by MNOs as key issues to address. The project management and existing relationships that MSOs already have in place can reduce the deployment time for MNOs.

Wi-Fi is a separate, though related, opportunity for MSOs to work with MNOs. Many MSOs, especially in the US and Europe, are rolling out large networks of Wi-Fi hotspots in order to provide wireless services for their cable/fiber customers. These networks can also be harnessed for revenue from MNOs via mobile data offload deals. Wi-Fi build-out is cited by some operators as a ‘rehearsal’ for small cell deployment services – the same processes of securing sites and backhaul but without the complexities of licensed spectrum or the same level of QoS expectation.

Tools and automation

85% of both MNOs and MSOs believe that automation will be critical or important for small cell deployment to be successful. The majority of MNOs and MSOs see a need to upgrade their tools in the near future.

80% of MNOs believe existing tools are inadequate and of those, 30% believe better tools will become available this year, while 50% think there will be a longerwait to secure the complete toolkit.

There is a potential dilemma in determining how long to wait for the ‘perfect’ set of tools as opposed to moving more quickly with some trade-offs in the early adopters of deployments with planning time and efficiency.


Backhaul:

65% of MSOs believe they will be providing backhaul to small cells in the next 5 years and 55% believe they will be supporting public Wi-Fi in the next 5 years.

47% of small cell backhaul links will be provided by an unrelated partner once networks achieve scale.

Regional variations

There are regional variations reflecting the infrastructure and business environments in different regions:

Fiber backhaul is more likely to be used in APAC than in N. America or W. Europe. US players are most favourable to marketplace solutions for backhaul ‘on-

demand’ services whereas APAC countries currently favour integrators.


5. Summary and Conclusions

Based on our understanding of the likely challenges posed by MNOs and the potential opportunity of partner organisations, we have surveyed 40 national and large regional MNOs, MSOs and converged wireless/wireline operators to test views on the challenges and opportunities to deploy small cells, the likely suitability of MSOs to offer useful services and the willingness of MNOs to partner with 3rd parties. The focus was on developed mobile markets and large emerging markets in North America, Europe and APAC. These findings are therefore likely to reflect the views of players in the industry who are more advanced in their plans for small cells rather than being representative of the industry as a whole.

Small cell deployment is likely to contrast with traditional macrocell deployment – requiring installation of a large number of relatively inexpensive small cells rather than a small number of bespoke macrocell sites. The key issue was to determine if the different deployment challenges are an opportunity for MSOs.

Based on the survey it is clear that there is an opportunity both for MSOs and MNOs in working together to deploy small cells.

70% of MNOs are prepared to use small cell networks rolled out by or owned by a third-party partner;

MSOs can secure access to sites, and provide backhaul and power at a rate much faster than MNOs currently do, and can match or exceed the lead times targeted by MNOs;

The principle challenges identified by MNOs in small cell rollout are project management (65%), negotiation with partners (45%) and technical aspects (40%).

There is potential synergy with the existing skills from the MSOs for deploying backhaul to small cells compared to existing deployments where a high level of commonality in skills to deliver the task was cited, including field force expertise (95%), reducing the total cost of ownership (TCO) (95%) and project management (85%).

Whilst MSOs are likely to be able to offer useful services, skills and experience to help small cell deployment, there are some challenges:

85% of both MNOs and MSOs believe that automation will be critical or important for small cell deployment to be successful. 55% of both MNOs and MSOs see a need to upgrade their automation tools.

80% of MNOs believe existing tools are inadequate and of those, 30% believe better tools will become available this year, while 50% think there will be a longer wait to secure the complete toolkit.

Detailed technical aspects relating to small cell deployment are seen as a major issue by both MNOs and MSOs, but have little commonality with MSOs’ previous experience.

There will be a rapid uptake in deployment of both carrier grade Wi-Fi and combined small cell and Wi-Fi solutions towards 2016. 55% of the MSOs surveyed have already started deploying Wi-Fi for offload and only 30% are either undecided or have no plans for Wi-Fi offload. Many of the skills required to facilitate a licenced small cell deployment are common to small cell Wi-Fi deployment and are seen by MNOs as key issues to address. Wi-


Fi build-out is cited by some operators as a ‘rehearsal’ for small cell deployment services –the same processes of securing sites and backhaul, without the complexities of licensed spectrum or the same level of QoS expectation.


References

1 “Cisco VNI: Global mobile data traffic forecast update (2013-2018)”, Cisco, February 2014. http://www.cisco.com/c/en/us/solutions/collateral/service-provider/visual-networking-index-vni/white_paper_c11-520862.html. 2, “Small Cell market Status”, Informa, February 2013. http://www.smallcellforum.org/smallcellforum_resources/pdfsend01.php?file=050-SCF_2013Q1-market-status%20report.pdf3 “Think SmallCell Interview with Kim Chang-young”, Think Small Cell, July 2013. http://www.thinksmallcell.com/Femtocell-Interview/thinksmallcell-interview-with-kim-chang-young-senior-manager-of-access-network-lab-sk-telecom.html. 4 “An assessment of the value of small cell services to operators”, Real Wireless for Virgin Media, October 2012, http://www.realwireless.biz/small-cells-as-a-service-trials-report/

http://www.cisco.com/c/en/us/solutions/collateral/service

http://www.smallcellforum.org/smallcellforum_resources/pdfsend01.php?file=050

http://www.thinksmallcell.com/Femtocell-Interview/thinksmallcell-interview-with-kim-

http://www.realwireless.biz/small

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