Why small cells need to be disproportionately cheaper than macrocells

PiechartWith data traffic growing quickly but revenues remaining static, the cost of carrying each bit of data across a wireless network needs to drop substantially. A recent report by Analysis Mason suggests that a 50% cost reduction per bit is required by 2015 and includes small cells (specifically Wi-Fi) as a critical factor to achieve that goal.



While several studies have shown that small cells are substantially cheaper than macrocells, one aspect worth highlighting is their comparative utilisation levels. Small cells may be idle or handling minimal traffic for longer periods of the day. This means that the small cells must be disproportionately lower cost per unit than their macrocell cousins – a factor that is quite achievable but may be overlooked.

Why is the last mile often more expensive than the long haul

This concept can perhaps be better explained through an analogy with public transport. For example, flying longer distances by airplane has become remarkably low cost. Planes are almost always full in my experience and their utilisation kept very high. Conversely, when arriving back at the airport it is not unusual to be the sole driver of your car which has sat unused for days. In some cases, the cost of the car trip home can exceed the price of the air ticket.

Utilities such as gas, electricity or water are also provided across wide areas with major pipelines carrying the same service shared by thousands of customers. It is again that "last mile" of connection that attracts the highest proportion of the cost, with each individual pipe attracting maintenance costs per mile that are disproportionately high.

Small cells can offer high peak capacity

A small cell may have a significant amount of capacity to offer. Many of today's 3G femtocells can handle peak data rates of 14Mbit/s, matching those of the latest iPhones and potentially track a hundred or more users on standby. By comparison a macrocell may be fitted with multiple carriers (2x or 3x the frequency allocation) and multiple sectors (3x or more). Other advanced features such as MIMO may add further gain, reaching perhaps 10x that of a typical single small cell.

However the small cell is unlikely to get the same level of utilisation as a wide area macrocell. The small cell may be targetted to handle shorter peak periods of high demand with longer periods of minimal use. The macrocell may be covering a mix of different types of buildings and use, including a mix of residential/business/retail where a small cell is more likely to be targeting a single behaviour.

Residential femtocells benefit from free site rental, power and backhaul; metrocells don't

Once the one-off capital cost of a residential femtocell has been paid – typically in the $100-$200 range – then the operator does not have to pay ongoing costs for site rental, power or backhaul. These are all covered by the subscriber themselves. It allows the network operator to scale up to many hundreds of thousands of femtocells without attracting a high ongoing OPEX cost.

This isn't quite the same for public area/outdoor metrocells, where some contribution may be required to cover the site rental, power and backhaul elements.

  • Site rental might be a small fee paid to the town council (or similar owner of the public areas affected). I would expect this to be done through a general agreement, with dramatically lower rates than for large tower sites we are familiar with today.
  • Power requirements for small cells are comparatively low, say in the range 20-200Watts depending on traffic levels (so perhaps less than $100 per annum), higher for rural metrocells with a longer range. Again this is proportionately much lower cost than a macrocell which may consume several kilowatts.
  • Backhaul is likely to be a mix of wireless and wireline (fiber). The peak capacity of a set of small cells can be quite substantial (say 1Gbit or more for the latest LTE small cells)

In addition, the cost of public access small cells tends to be higher because these devices are:

  • Toughened to handle operation in outdoor, unsupervised areas
  • Often have higher traffic capacity
  • May have higher power levels to extend coverage area
  • May have more complex external antenna arrangements

Implications for network planners

Analysts forecast large numbers of small cell deployments in the years ahead, to meet burgeoning demand for wireless data. Figure of anything up to ten times the number of cellsites are suggested in high traffic areas. The decisions of where, when and how quickly to roll out these smaller metrocells are likely to be made using a different set of criteria than for macrocells. The economics of small cell deployment are significantly different than for larger sites.


The lower utilisation levels, more apparent as the number of small cells increases radically, mean that this lower proportion of traffic carried must be financially justified. The costs of deploying and maintaining an individual small cellsite must be at least ten times less than a macrocell – something that should be quite achievable.

As the industry moves focus from residential towards public area metro and enterprise femtocells, the additional costs both of the small cells and the associated operating environment need to be recognised.

Careful cost/benefit planning will be required to ensure that the financial benefits of each new small cell deployment exceed the total CAPEX and OPEX costs of deployment. This will lead to different behaviour and processes within the network operator's planning departments, to ensure that the right decisions are made each time.

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#1 Andy Tiller said: 
Hi David

I'm not sure I agree that public access small cells have a lower level of utilisation compared to wide area macrocells. Although this is certainly true for residential femtocells (where people might be at home only in the evenings, for example), for public access small cells the situation is different. They tend to be deployed in busy indoor locations such as offices and shopping centres where most of the mobile traffic is generated. So in practice we see very high levels of utilisation.

But you're absolutely right about backhaul.

0 Quote 2012-02-08 21:08
#2 ThinkSmallCell said: 
@Andy: Thanks for adding your view. I suspect that the first wave of small cells will provide the most "bang for the buck" and indeed be highly utilised, but perhaps as the numbers increase in coming years we may see them deployed in situations with lower utilisation. By that time the cost equation may have changed further. My point being that this is not black/white situation and that careful analysis of when/where/how to deploy small cells will be very important after the "low hanging fruit"/more obvious installations have been completed.
0 Quote 2012-02-09 07:25
#3 HetNet said: 
Hi David,

I think the issue isn't whether a SmallCell becomes highly utilised (as I would hope it would, or else why deploy it in the first place). I think the issue is whether it is utilised throughout the day.

A Macro cell can cover a range of buildings depending upon its site to site distance. But typically in an urban area will cover not just business/retail locations but also residential locations. As such, it will continue to provide revenues throughout the day.

A small cell is deployed on a targetted approach. You deploy a small cell in a specific location to catch a specific set of traffic. In all likelihood the specific traffic is not continually generated 24hours a day (although we can all come up with some suggested locations that could do this). Put it in a shopping mall for instance and you get traffic during shop opening times only.

Moving away from the utilisation discussion. Your comment on energy efficiency should be remarked upon.

Whilst the power requirements of a small cell by definition will be smaller than a macro cell, the power consumption/sub scriber (or device if you like) for a SmallCell is likely to be much higher than Macro cell. The Macro cell can serve a greater number of devices, over a longer period of time. The small cell does not have a proportionally smaller power consumption of a Macro cell. e.g. you quote 20-200W for a small cell, at a time when you can build a 3-sector Macro cell significant capacity 750W.

In short, your point of there needing to be different economics for SmallCell vs Macro cell..is true. But actually, surely the issue is less about one versus the other, but rather about how SmallCells can be used to support a Macro cell environment. How Smallcells can be used to supplement a Macro environment with focused capacity in the right location / indoor, without the challenges of securing another Macro site location (a difficult challenge in dense urban locations). And hence as they are used to support Macro, then of course they will have a different set of economic rules governing when to deploy them.

Its clear that trying to compare a business case of building a contiguous coverage using Macro versus a business case of contiguous coverage using Smallcell, that Macro will win. A macro deployment having less sites, greater efficiencies in power, support, field maintenance, HW/SW investment, rentals, rates, etc etc due to the concentration will benefit hands down. For SmallCell to win, then if you calculated you needed 20 SmallCells to match the coverage of the Macro cell, then the each Smallcell would have to have less than 1/20th of the Rent, 1/20th of Power, 1/20th of a Support Contract (or 20times the MTBF), or 1/20th of the CAPEX cost, 1/20th of Site Acquisition Cost, 1/20th Transmission Costs etc etc.

Is this really achievable. I would love to review an analysis of a typical OPEX $ per Site for Macro vs Smallcell in different locations (dense urban/urban/rur al/greenfield) covering Rental, Transmission, Power, Field Maintenance, Spares, Support, etc. I would be surprised is the SmallCell values are really small.

What this analysis won't show however if when SmallCells are the ONLY option, because that it where/when SmallCells come into their niche.
0 Quote 2012-02-13 16:34
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