Until now, over 99% of cellular equipment sales are made to network operators – those who have bought the rights to access and use licenced spectrum. A few niche opportunities such as cruise liners and defence account for a diverse, interesting but relatively small business sideline. Future mobile network operator capital investment isn't forecast to grow. However building owners and property developers are increasingly prepared to contribute towards in-building systems. How will this new revenue source manifest itself and what are the implications?
Speaking at our recent ThinkSmallCell Analyst Spotlight webinar, Joe Madden of Mobile Experts believes that building owners and businesses are increasing prepared to contribute toward the cost of in-building wireless systems. Many already pay for high quality Wi-Fi but full cellular service is often seen as a “must-have”. We described this recently as “the building owners dilemma”.
As long as a reasonably priced solution is available (and you may have different views about what’s reasonable or affordable), then building owners will consider it.
Joe quantified this view in the graph below:
He confirmed this includes the full cost of the system, whether comprising small cells, DAS plus macrocell or some form of C-RAN. No doubt this will vary depending on region and many other factors. While difficult to predict precisely, it does give some indication of how significant this could become.
A separate forecast (Joe provides figures for the Small Cell Forum) indicates rapid growth of the Enterprise Small Cell sector with annual shipments of less than 500K units in 2015 growing to over 5M by 2020. He expects that growth to start quickly, as soon as this year. [Units counted include all forms of in-building cellular wireless architectures from independent standalone small cells through to DAS and remote radio heads.] This forecast also matched figures presented by Caroline Gabriel of Rethink Research.
Some contribution towards in-building costs can already be found. Sometimes overlooked, ongoing costs such as site rental, power, air-conditioning may be absorbed by the building owner. Physical deployment and electrical cabling work may also be handled directly by themselves or their contractors. Building security staff provide equipment security and controlled access. Network operators may provide some of their own equipment (e.g. basestations to drive DAS systems) and are usually involved in the final commissioning, but experienced system installers tell me that for medium sized buildings this final commissioning can be done in as little as half a day.
The thorny problem of Neutral Host
There are some strong views on whether in-building systems must support multiple (or all) mobile network operators equally. Some argue that with such a diverse mix of users, locking a building to a single network won’t work. This debate is partly about technology choice (some solutions are more suitable for multiple network operators than others), but it’s also about network operator differentiation.
Arguably many buildings have some level of cellular service, it’s just that coverage may not be available throughout the building. Often coverage differs between networks. More demanding users might find they have coverage, but poor performance – either with low quality audio phone calls and/or slow/patchy data speeds.
Some distinguish between public and private venues. Buildings used by the general public have a stronger need to support all networks, whereas those serving an enterprise may be satisfied with just one. Some argue that the growing adoption of BYOD (Bring Your Own Device, where staff subscribe to a network of their own choice) negates that. Others disagree.
This greatly affects the choice of technology used to solve the problem.
Enterprise Sales Channels
In recent years, we’ve spoken with many business and building owners who would have liked to install their own in-building wireless solution. They’ve even been prepared to contribute toward the cost. But there is no department or team at their network operator who is able to discuss such a project and take it forward.
What’s needed is for equipment vendors to be able to sell products directly to businesses which can then be approved for connection. The large RAN vendors have not had those sales channels up to now, since they were selling only to network operators. Independent Small Cell vendors often sold through smaller system integrators, local to the country and known to the network operators they would connect through.
Recognising the opportunity, we’ve observed several important announcements to address this. RAN vendors will need to sell solutions to both operators and enterprises to make this work. Ericsson partnered with HP in September 2015 and later with Cisco. Both give them access to Enterprise sales teams. Huawei has a wide product portfolio outside cellular and its own Enterprise sales force. They have less traction in North America but are very visible in Asia. The newly merged Nokia/ALU already has a good footprint of installed gateways in many networks which already handle both residential and enterprise small cells, and are familiar with selling residential products through other sales channels.
A different approach for smaller businesses
I recently spoke to a business developer selling IT into the small business sector. He points out that smaller businesses can be very demanding, with high expectations and often lack extensive procurement processes. That can be good in that they can also be very responsive, quick to approve and adopt new technology. As a generalisation, dealing with larger corporates, he finds they often have a professional procurement team with due process, allow contingency for unexpected delays, and can enforce standard solutions across many remote sites. The sales process may be more extensive, but the rewards more significant.
Large network operators are unlikely to want to deal with each building owner individually. I’d expect there to be a growing number of approved installers/integrators who can deploy a system on their behalf. Medium to large size businesses/buildings would deal with the larger and well known IT companies. Smaller ones may deal with a local SI who has partnered with a Small Cell aggregator.
Adapting to new revenue streams
As with any industry transition, there will be winners and losers. Small cell vendors, large and small, will need to put in place sales channels which can serve the needs of this rapidly growing market. I would expect to see:
- - RAN and Small Cell vendors announcing more partnerships with Enterprise IT companies
- - Small Cell as a Service aggregators providing gateways and interworking for smaller SI’s
- - Small cell products to continue to evolve to serve this market
- - Planning and commissioning tools to continue to simplify initial assessment and final testing
- - Growth in the independent SI sector of companies capable of installing Enterprise Small Cells. Many of these will be existing Enterprise Wi-Fi installers.