The most demanding locations of growing mobile data demand are in the urban city centres. Metrocells – small cells designed to provide huge capacity in public areas – can provide this more cost effectively than traditional macrocell approach. But will the limited number of locations mean that those operators who move quickly to acquire premium sites gain competitive advantage, or will this cause different commercial models and other pressures to take precedence?
Advertising billboards, street vendors, parking spaces, charity recruiters all compete for space in our busy urban areas.
There are four major factors we commonly hear network operators talk about when looking at how they will deploy metrocells. These are not the only issues, by any means, but are the most common:
- Site acquisition: Negotiating and agreeing suitable locations with landlords including site access for maintenance at a sensible cost.
- Power: 24×7 electricity
- Deployment staff: The logistics of installing and maintaining large numbers of units with suitably skilled and trained staff
- Backhaul: Cost effective transmission back to the operator’s core network, especially for the last few hundred metres.
Deal or no deal?
When scaling up to thousands of metrocells in a city, it probably isn’t feasible to have thousands of individual commercial agreements with separate landlords. Operators will want to deal with a relatively small number of landlords, and have flexible agreements with them. This is likely to mean local councils coming together to negotiate as a group regionally or nationally, opportunities for aggregation across many property landlords (such as already happens for macrocell sites today), and new entrants appearing in the market (billboard advertising companies, utility companies etc.)
Council site pricing has to strike a balance
Local councils have a balance to keep between maximising their income from site rental versus enabling good mobile data service in their area. With a monopoly on prime urban city centre sites, they can dictate prices which would drive operators to look elsewhere (such as on privately owned buildings) or not make it viable to install adequate capacity to meet demand.
Councils face a similar dilemma in other areas, such as determining the price of car parks. If they raise prices too high, not only might revenues fall off but local commerce will suffer when customers choose other retail and entertainment venues elsewhere.
Some councils understand the value of good communication infrastructure, and actively support and promote installation of new technology and service.
Exclusive agreements less likely
Some operators wanting to differentiate through better service in urban areas may be looking for exclusive deals with local councils, blocking their competitors from using street furniture for their metrocells.
Councils have several reasons not to take this course of action.
- Citizens (their voters) will use a mix of network operators, and if only one has exclusive rights then the majority may be unhappy about being prevented from better mobile service from their own network.
- The majority of visitors from outside the area would also not benefit, since only a minority would be using the single exclusive operator.
- The potential total site rental revenue from all network operators is likely to exceed that from a single one, even if paid a premium for exclusive rights. It’s unlikely to be commercially viable for an operator to pay three or four times the going rate for sites on a national basis.
Landgrab by stealth
We’ve seen one or two network operators start to deploy public Wi-Fi hotspots, sometimes even offering service for free. Some councils welcome and encourage this, agreeing to favourable terms for site rental and power. A measureable benefit to the operator is that traffic is offloaded from the 3G cellular network, improving service levels for everybody.
Perhaps a hidden benefit is that these sites could in future be expanded to provide 3G and/or 4G cellular data service, with the site locations having been captured early on. Traffic statistics from Wi-Fi usage augment those from 3G to pinpoint the most worthwhile locations for small cells.
Network Sharing of metrocells
Great strides have been taken in sharing of macrocell network sites and equipment in recent years. Some agreements simply share the same physical site, with separate equipment (basestations, antenna) being installed at each mast.
In other cases, a new commercial entity is setup which installs and operates the equipment. The same physical metrocell may be partitioned to deliver service for multiple operators, sharing the same mast, antenna, power and backhaul. Some products are already designed and available to cater for this.
There are different schools of thought about metrocell sharing:
• Metrocells will give individual networks a strong competitive advantage, with clear distinctive performance improvement where deployed. Therefore, operators should install their own to give them competitive advantage, even if they share macrocell networks.
• The lower costs of operating a shared metrocell network, combined with the higher quality of site locations (because there is less duplication and competition), outweigh the competitive benefits. Differentiation will be more through customer service and other marketing activities than on pure network performance alone.
Perhaps it will be a combination of finance and marketing views that determine which path to take. Engineering and planning teams could implement either, but the consequences are much more significant for the long term business strategy.
Outsourcing commercial models
In the last couple of years, we’ve seen the rise of commercial outsourcing models offering “Small Cells as a Service”. It’s clear that several European operators are actively trialling and testing this option. We haven’t seen specific commercial deals published yet, but I’d expect some announcements during 2013.
A couple of non-mobile network providers have been visibly marketed this service.
COLT telecom, a European wireline network operator with a strong fibre presence in many European urban areas, has been offering to install and connect small cells for mobile networks. They’ve discussed several commercial arrangements, which include a fully managed service where they own the equipment and lease it at a monthly fee. Mobile operators would simply request installation of a new small cell at a specific location, and it would be connected on demand. All traffic would be consolidated and sent through dedicated broadband connections to the operator’s small cell gateway.
The mobile operators would control each small cell site themselves. Remote configuration and diagnostics would set the frequencies, power and other parameters.
Virgin, a UK cable broadband network already supply high capacity Ethernet backhaul for mobile operator’s macrocells. They offer a hosting option where they install metrocells and associated short range wireless links for the last few hundred metres. Site acquisition, power, fibre backhaul from a nearby hub and on-site field staff for installation and maintenance are all included. They have completed successful trials in two UK cities using Alcatel-Lucent and Airspan metrocells.
In the US, Clearsky/NEC and Public Wireless offer similar services. The more common high level street wiring found in many US towns and cities may lend itself to rapid deployment of metrocells.
Early adopters of metrocells have a lot to gain. They can identify and resolve technical and operational issues, understand how Wi-Fi and small cell traffic will co-exist, and understand their full potential.
But most importantly they may have a choice of the best sites for metrocells, and the ability to outpace their competitors to deliver high capacity service in these areas more cost effectively.
While some exclusive agreements for site locations in our urban areas will be made, the long term potential for site sharing and outsourcing arrangements may make this less advantageous. Those who have started earlier in the game will be in a stronger position.