China Small Cell Market Update – February 2016

China Mobile UserIt’s been some time since we reviewed the Small Cell situation in China. We find that after extensive LTE investments that now make it the largest LTE network worldwide, indoor services are now getting some attention, with small cells coming to the rescue of the Enterprise sector.

 

 

Quick recap on the three main networks

For those unfamiliar with the Chinese telecom market, there are three national operators, all now licenced for both fixed and mobile services.

Network Technologies Total wireless subscribers 3G only 4G
China Mobile GSM, TD-SCDMA, TD-LTE 826M 169M 312M
China Unicom GSM, WCDMA, FDD-LTE 286M 183M*
China Telecom CDMA, FDD-LTE 198M 85M 58M

*China Unicom don’t publish separate numbers of 4G subcribers, instead show 3G/4G combined.

China Mobile had grown rapidly with 2G GSM and did its best to make a success of the Chinese 3G variant, known as TD-SCDMA. Although that didn’t achieve global market success, the knowledge gained did enable it to bring TD-LTE to market more quickly. They made heavy investments (some $30 Billion during 2014) and equipped over 1 million basestations to ensure widespread coverage.

China Unicom has benefitted from sharing the same GSM, 3G and FDD-LTE technology as the rest of the world, allowing it to grow but not catch up with China Mobile.

China Telecom, starting with the somewhat expensive and less common CDMA technology, has deployed FDD-LTE services.

China Mobile’s plans

China Mobile wants to terminate 3G and ultimately even 2G to reduce cost, but its not that easy just to switch those off. Voice service over LTE (VoLTE) may still be some 2-3 years off nationwide and will be an essential feature. Their 4G network is exclusively TD-LTE for which many smartphone devices, including the iPhone, are now available. China Mobile launched VoLTE during 2015 and are estimated to serve somewhere around 50 million users with the technology (i.e. less than 10% of all subscribers).

Disengaging from Carrier Wi-Fi

During its struggle with 3G TD-SCDMA, China Mobile invested heavily in Carrier Wi-Fi, deploying over 4.3 million hotspots nationally. Since 2014, they are no longer investing in Wi-Fi hotpots partly because the customer experience is very variable and can be really bad. Far more importantly, monetising Wi-Fi hasn’t been possible. During 2013, these Wi-Fi hotspots carried 74% of China Mobile’s data traffic but contributed 2.6% of revenue.

Solving Indoor Service with Small Cells

As is the case in many countries, indoor performance can be a problem. Some cities have quite good experience but Beijing among others has a reputation for poor in-building service. The mentality isn’t yet there for small business owners to pay to resolve this – they’d expect the mobile networks to fund and install solutions.

To address this issue, China Mobile ran a tender process last year for a TD-LTE small enterprise/residential small cell. The Chinese authorities have assigned dedicated spectrum in Band 40 (2.3GHz) for in-building use by Small Cells, DAS and RRH which is not used by macrocells. 24 vendors competed of which 10 won contracts, ranging from the largest worldwide RAN vendors (e.g. ZTE) to some very small new and unknown entrants. The commercial competition was harsh, squeezing very low prices and demanding high technical performance. After extensive trials during 2015, it is thought that a budget of as much as $300 million may be allocated for these enterprise small cells. Initial orders are believed to have been placed for the first 100K units with industry rumours of some 1 million units in the next phase. 

What some will find surprising is the introduction of ten new Small Cell vendors into the network all at the same time. Other operators have often told me how hard it is to integrate a single new RAN vendor - involving many aspects from stock control, staff training, back-office integration (provisioning, network management etc.). Perhaps this is reduced through a tight specification and certification testing. There will be far fewer LTE gateway vendors involved, and this is where the greater integration tasks would arise. CASA systems, a well established player in carrier grade Cable TV and fixed wire networks is a relative newcomer to the Small Cell marketplace. My research indicates they have been closely involved with trials in China but the scope and number of gateway vendors involved isn't public knowledge. 

Other networks not yet woken up

Competitor China Telecom is reputed to be considering dual mode CDMA/LTE small cells, since voice service is crucial. China Unicom doesn’t seem to be making any moves at this time. Their allocations of Band 40 indoor spectrum appear to be lightly populated.

Exports should be a medium to long term opportunity

TD-LTE spectrum has been allocated in many other regions, but is most active in Japan and India. Chinese vendors don’t appear to be active in India at this time. Perhaps that’s partly because the market there is even more price sensitive, combined with the relatively limited wireline broadband available for backhaul. Several of the new Chinese vendors were visible at Mobile World Congress for the first time, such as Sunnada and Baicells.

Japan has its own indigenous LTE vendors who are likely to be first choice.

In other regions, the TD-LTE knowledge and field experience may give Chinese vendors a head start. Whether demand will be for TD-LTE only, or some multi-mode product remains to be seen.

You can also read our previous review of the Chinese market from mid 2014 which included details of spectrum allocation.

 

Our thanks to Calvin Wang, Founder of femtochina.com, a Chinese language information resource about femtocells, for sharing many of the insights and updates above, supplemented from other sources.

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