The Small Cell Americas Conference and Small Cell Forum events are taking place this week in Dallas, Texas. This makes me think back in time…. I first started discussing small cells as a product in 2002, at Samsung, and 11 years later we have progressed very little in the way technology normally goes. From what I can say, there have been 3 major hurdles that have not helped here.
1. Big iron OEMs make lots of $ from macro cells. They have not seen a business plan that makes sense to them, you know where they introduce a product that essentially cannibalizes their existing revenue stream and converts $40K units into $400 units.
2. The operators are not exactly sure what to do here. Firstly, they have a business model that is pretty tight. They price a flashy new user device at an attractive price (normally break even or lossy), then subsidize this purchase with the anticipated 2 year service revenue. Notice there was no cell in the spreadsheet that was for small cell in that revenue plan. I’ve witnessed arguments between company executives over whom would actually ‘pay’ for the device, example, is it a marketing expense or is it an operations expense? Let’s call this one chicken and egg.
They ask themselves, what will the consumer think of us, or another way, does sending a consumer a small cell signal to the public that our coverage is poor (even if it really is, and forget that it’s cheaper to operate a good network than a poor one)?
Here is an example of the back of napkin numbers that US wireless guys go through in this argument….
Per New subscriber: (So operators outside of the US have a similar calculation, but with smaller numbers- US customers are just gouged that way and, no, Called Party Pays is not the difference.)
- New device cost: -$899
- Customer Paid: $200
- Lifetime Service Revenue: (ARPU X 24) ($109.67x 24 = $2632.08)
- Small Cell Cost: –$599
- Total Adjusted Revenue: $2033.08
Then they say something like, “Now you can plainly see we can’t afford this device at this price” and you are supposed to agree.
Naturally, the chicken would be:
…a small cell to ensure this coverage is perfect at that spot. Don’t forget, the OEM’s are not exactly cheering on the operator’s executives to figure this one out either. Count on these OEMs to throw anything that is really smoky on this campfire pow wow.
3. Exactly what is the business plan for the small cell manufacturer? Before chipsets came to the rescue, they needed to spend many millions on R&D to create a small cell, all very hard to justify at really low unit prices without large commitments in volume. Compounding the problem here: operators not promising small cell unit volume based on challenges above. This situation marginally improved when Qualcomm, Ubiquisys, MindSpeed+picochip, TI etc came with that piece but there are still large investments to make to bring one to market.
So, making a low cost device is not without market promise of volume. Unfortunately, there have been very limited distributions of small cells from operators and the numbers aren’t there. I won’t talk about the other costs (based on complexity) of integrating the SIP based femto core into the networks- that’s a fiasco story for another day.
There are other hurdles but they are minor in comparison. Anyway, for all the promise of small cells, the only definitive thing that’s happened is WiFi is everywhere. You know, THAT, Wifi, that the carriers haven’t been able to monetize… It’s getting depressing- ugh, I’ll stop here…but as you know the story continues…We can finish this chat later….
Oh yeah- here’s a cool presentation from today’s conference….
The unprecedented growth in mobile data consumption, driven by smart phones and other data intensive devices, highlights the need for improved coverage and increased data throughput for subscribers. More than 70% of mobile voice and data traffic is generated indoors (Informa 2008). Unfortunately, macro base stations are located outdoors. Providing coverage from the “outside in” can result in a poor end user experience. In a macro network, user experience can be affected by several factors:
- Cell size
- Users distance from the cell tower
- Number of users
- Traffic levels
Femtocells allow operators to target capex where it is needed by bringing the network access point closer to the mobile user. This enables a higher data connection and an improved user experience. Qualcomm’s femtocell platform helps mobile operators stay competitive and respond to emerging technologies, while increasing coverage and the overall mobile network capacity with greater spectrum reuse for the operator. The Qualcomm platform will provide a flexible, fully integrated System on Chip (SoC) that allows equipment manufacturers and operators to deliver a best-in-class solution with the highest levels of integration and performance.
Increased interference is a concern when operators consider dense femtocell deployments to improve performance. Qualcomm has completed extensive performance analysis, simulations and field tests and developed innovative techniques to address the issue of interference management. These techniques and algorithms will ensure that the femtocell platform delivers a reliable user experience as a mobile phone moves from femtocell to macrocell.
Qualcomm is an active member of the Femto Forum and a key contributor to the Femto Forum white paper, Interference Management in UMTS Femtocells. As a result of research associated with this paper as well as extensive simulation and analysis done independently, Qualcomm has determined four key areas to successful interference management.