...which includes pre-wiring buildings to be 3G capable using Small Cells.
Cisco has recently spent over $2 billion on acquisitions in the mobile network equipment market. They say they don't plan to become a macrocell vendor but do have a strategy to take a large chunk of the $50 billion annual CAPEX spend of today's dominant RAN vendors (Ericsson and Huawei).
We look at how they might do this and how the market dynamics might change.
Nobody's building large cell towers any more
Perhaps a slight exaggeration, but in developing countries we are seeing fewer towers rather than more. That's because (with a few exceptions), nationwide coverage has been achieved. The release of lower frequency spectrum from the digital dividend (i.e. switching off old analog TV) allows the same tower sites to provide wider coverage including deeper in-building penetration.
In some countries, such as here in the UK, we've actually seen the number of tower sites reduce significantly because of RAN sharing and site sharing agreements between the mobile network operators – effectively we'll have just two sets of tower sites each shared by 2 or 3 operators. In other countries, I've heard of some high wide-area towers being decommissioned and replaced by multiple smaller range ones to improve capacity and inbuilding coverage.
RAN equipment vendors are still shipping lots of kit though, because:
- More capacity is being added to each site
- LTE is being installed on macrocells first
- "RAN Refresh" programs are replacing old 2G/3G kit with the latest multimode equipment
Backhaul vendors are doing quite well too, with substantially increased backhaul data traffic driving wireless (microwave) and wired (fibre) capacity upgrades.
It's tough entering the market as a macrocell vendor
It's said that RAN vendors can be quite persuasive when winning that first sale, offering great prices and finance packages, with a view to recouping profits over the longer period of later capacity and system upgrades. Services, outsourcing also have a major part to play.
A new vendor trying to enter the macrocell marketplace on this basis will find it tough. There are perhaps only half a dozen with the financial clout and global presence able to compete in this space – in alphabetical order Alcatel-Lucent, Ericsson, Huawei, Nokia-Siemens, Samsung and ZTE. Samsung is the "new kid on the block" pushing its advanced LTE solution already proven in Korea and winning important deals in the USA (Sprint) and UK (3). However, this is standalone LTE equipment and not the multi-RAT (2G/3G/4G) SingleRAN basestations offered by others.
And it's worth remembering that about half of the 6 billion or so mobile phone subscriptions are still running on GSM only. Perhaps plenty of opportunity for new towers in some of the less wealthy/developed countries, but the largest potential revenues will be in developed markets that demand massive mobile broadband capacity.
The traffic is indoors
When you look more closely at where wireless traffic is expected to grow most quickly, you find it's indoors. We use much more when we are sitting down – whether at home, in the office, at a meeting, or relaxing socially with others.
Today, much of this traffic is being handled by Wi-Fi – typically more than 50% of all the wireless data that gets to your smartphone will travel this way. So it is only to be expected that there will be greater demand for indoor data capacity in the future.
In the past, the solution would be to build a large macrocell to cover an entire area including penetrating inside buildings. This shares the capacity across a wide number of users, distributing the cost between different types of users, times of day and location. This approach simply won't work if we are to deliver the quantity of data and at the speeds expected by customers.
Abdication to Wi-Fi becomes acceptance and adoption
Mobile operators have at first ignored Wi-Fi, suggesting that the quality of service wasn't good enough. Users have adopted it, first in their homes, then in their offices and more recently in public venues such as hotels and shopping malls. This is key – it's not operators pushing a new technology but customers/consumers actively seeking to use Wi-Fi.
My own experience is that it can work very well indeed in less populated areas when I'm not moving around – especially the home and office where there is little interference or conflict between different Wi-Fi hotspots. I still struggle with it when physically moving about, and prefer to switch back entirely to cellular.
More recently, carrier grade Wi-Fi is improving and we've heard that HotSpot 2.0 could make it much easier and transparent to login securely to public Wi-Fi when out and about.
The venue owner has an interest
The different business case between cellular and Wi-Fi is that Wi-Fi is generally installed by the property or venue owner, such as an Enterprise/business or a Hotel. They might outsource this to a specialist firm, who might also install their IT network, voice phone system etc. Some hotels outsource this to WISPs, who pay for, install and maintain the service on a revenue share or fixed monthly cost basis.
There is a complex mix of different business drivers which together add up to make a viable business case, where sometimes individually none would do so. Venues may want to provide good service from all cellular operators and so need shared or neutral host solutions rather than being tied to a single network. Individual businesses may be comfortable with a single operator solution which serves the majority of their staff and is linked with an enterprise-wide cellular contract.
Cisco's proposition to the venue owners
Cisco are already a major supplier of Wi-Fi and IT network infrastructure from small private offices to large public venues. While they do have strong competition, their pervasive and comprehensive portfolio is perceived to offer low risk, high service quality and the latest technology.
This has allowed Cisco to become widely established with a footprint throughout enterprises around the globe. Their Wi-Fi access points, powered by Ethernet, and connected back to a Cisco router, can be found in many businesses (including my own shared office). Their sales channel sells through System Integrators: a vast army of trusted sales and technical staff interact directly with venue owners. Their direct sales channel to Service Providers has seen rapid growth from the carrier Wi-Fi business.
Through their Ubiquisys acquisition, Cisco now has the technical product to install an upgrade module into their Wi-Fi access points which adds 3G cellular service. The low power budget of Ubiquisys module was a key factor highlighted by Jared Headley of Cisco in his recent interview with us. Using Broadcom's chip, this allows a Wi-Fi access point to be upgraded to include 3G small cell and stay within the Power over Ethernet power budget.
The proposition to venue owners who already have Cisco Wi-Fi hotspots is that they could relatively quickly and cost effectively upgrade to full 3G inbuilding service. It wouldn't be disruptive (just plugging in a few modules in existing points, no re-wiring) and wouldn't affect their existing Wi-Fi service.
Once upgraded, the building is their "3G cellular ready" and only needs to be connected to/integrated with a friendly mobile operator to put it into service.
Cisco's proposition to mobile network operators
Cisco already sells directly to network operators through their Service Provider sales channel. Network operators often have a lot of high capacity IP networking gear, so naturally this is a good market for them. Having acquired Starent, they also supply LTE core network equipment too.
Their 3G femtocell gateway, demonstrably scalable at AT&T, should be a relatively easily installation but will need some integration work to deal with provisioning, operations and planning aspects – it has to sit alongside the existing technology and processes of the operator.
Perhaps because of the customisation and integration work required (rather than the cost of the box itself), operators typically don't like to install more than one small cell gateway from different vendors. The Iu-h standard (which Cisco complies with) is one way around this problem. However, I'd still expect all but the smallest operators to install small cell gateways from more than one vendor – just as they typically buy RAN equipment from two vendors to "keep them honest".
Gluing the two together
We could then be in a position where "pre-wired for small cell" venues might be able to negotiate with multiple network operators for the best deal.
For enterprises, they have the additional carrot of their staff subscriptions. Perhaps the additional cost of the small cell upgrade could be re-couped when negotiating an enterprise SIM card contract.
For public venue owners, it becomes more tricky. They'd typically like to serve all their customers and connect to all major networks (or have roaming arrangements). It's possible that multiple sets of small cells might be installed to cater for different operators – these may have better range than Wi-Fi and so could be alternated between. Or perhaps more complex small cell units supporting multiple operators might be installed – we've already seen some from other vendors that are dual mode and dual band (ie. Total of 4 carrier frequencies). These will compete with DAS systems and if seen to be more cost effective and convenient should win the day.
Convincing the radio planners
A major concern for mobile network planning and operations teams is how to configure and optimise this rapidly changing and growing small cell estate. Indoor systems are considered easier to handle, because the signals are bounded by the physical walls of the buildings with less risk of serious interference issues.
Cisco is addressing this through their SON (Self Organising Network) acquisition of IntuCell, with a software system that can remotely reconfigure both the existing macrocell and small cell parameters in a co-ordinated approach.
My perception of Cisco's approach is that they plan to address the need for indoor coverage using a synergy of Wi-Fi and small cells. This also involves a radical change of business case which is more akin to Wi-Fi than today's macrocellular proposition. Their individual small cell products will be very much lower cost than a typical macrocell but there will be substantially more of them.
While Cisco is planning to deliver a solution built from "best of breed" elements, it is already geared up to serve a diverse range of vertical businesses (e.g. healthcare, hospitality, retail, transport) that it can capitalise on.
This should pull through services and outsourcing business to their existing Wi-Fi systems integrators and resellers, with mobile network operators continuing to remotely configure and control the licenced spectrum for optimal performance.
I'd like to make it clear that the above is my own personal opinion and does not represent Cisco's own views of their business strategy.
Cisco is a sponsor of ThinkSmallCell.