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How Heavy Reading Called Small Cells Right

Patrick Donegan
Heavy Lifting Analyst Notes
Patrick Donegan, Chief Analyst
1/6/2014
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A couple of years ago, Heavy Reading carried out a multi-client survey for half a dozen clients on the subject of public access small cells and small cell backhaul. We proposed the survey to clients because of the almighty swell of hype that had built up around the idea of extending the principle of the closed user group femtocell out from the home and the enterprise and into the public domain where these small cells could be used by any of an operator's mobile subscribers. Who, for example, could forget Picochip 's epic assertion in October 2011 that Chicago would need 84,500 small cells by 2015 "to deliver truly high speed LTE" and that this would be "in addition to residential femtocells and WiFi"?

Our clients asked us to carry out an online survey of 100 qualified mobile operators worldwide, combine that with a series of more detailed face-to-face and telephone interviews with folks engaged in RAN and backhaul network planning in the mobile operators, and reach our conclusions as to the direction of the public access small cell market, the likely rate of adoption, and the role of the backhaul network in this evolution.

The findings that we shared with clients in April 2012 proved to be right on the money. Whilst the theoretical logic of leveraging public access small cells for capacity fill-in was clearly compelling, operators flagged a number of major practical operational and other business case constraints such as site acquisition, RF performance at street level, installation issues, cost points, and coordination with the macro layer. This made it clear that nothing much by way of volume deployments was going to happen for the next two or three years.

The online survey results also yielded two other crucial findings. The operators told us that they were heavily focused on re-using existing backhaul infrastructure and decidedly lukewarm about investing in dedicated new backhaul for small cells -- be it fiber, copper, or radio. But as any cellular network planner will tell you, a public access small cell can't go in roughly the right location. For the business case to have the best chance of kicking in, the small cell needs to go where it needs to go. And that required a far greater willingness on the part of the operators to invest in taking the backhaul to the small cell, rather than count on being able to take the small cell to the backhaul.

The survey also yielded a marked disparity between the outlooks of operator respondents that classified themselves as RAN engineers and the responses of the survey sample as a whole. The survey showed RAN experts to be much more likely to cite site acquisition and other operational issues as barriers to public access small cell deployment and also markedly more concerned about interference with (and coordination with) the macro layer.

In other words, the guys who were going to be on the front line rolling out these devices according to a viable business model were easily the most skeptical about the deployment timeframes. Yes, yes, we recognized that small cells are more threatening to an RF engineer's skillsets than those of other personnel in the operator. But we only attributed a portion of their negative sentiment to that kind of narrow self-interest. And amongst the reasons for that is that small cells don't dilute RF planning skills to the extent that some people think (or would like to think). We emerged from the study, blinking into the daylight, in April 2012, with a forecast that there would be no more than half a million public access small cells in live service by the end of 2015, a definition we later refined to half a million public access small cells in live service requiring new backhaul by the end of 2015.

Being very conservative compared with many other analyst forecasts at the time, our forecast was about as popular as the proverbial turd in a punchbowl with some clients. We just didn't "get it," according to one, who didn't sponsor our market research (or indeed anyone else's). Another pressed us pretty much every quarter for something more favorable, becoming ever more pink with every passing quarter. An unimpressed and exasperated competitor from another analyst firm actually demanded to know how we could possibly "expect to help grow a market by being so 'down' on it."

So why did Heavy Reading call this market correctly (at least so far)? Well for one thing, on the basis that timing is everything in business -- particularly in the hi-tech sector -- we see it as our goal to support telecom sector clients in making the right investment decisions at the right time. And on that score, we served our clients exceptionally well with this study. Three of the six clients that sponsored our study were executives that were under varying degrees of pressure from investors or peers in the management team (or both) to "do something big" in small cells.

They didn't and they still haven't. Instead they've continued to target scarce R&D resources at where the operators really are spending, are now watching the public access small cell pioneers take the arrows in their backs, and are poised to capitalize once the market does take off (which in one shape or another it will). Did these clients hold back entirely because of Heavy Reading's study? Of course not. But was the study between somewhat and very valuable in helping clients argue the case internally and externally that the operators weren't ready to spend big yet? Yes it was.

It would be nice to think that what made Heavy Reading call this right in this case was the overwhelming superiority of our analysts. Nice but not true -- well, not entirely anyway. And (whisper it…) there has even been the odd occasion when we too have been overly aggressive or overly conservative with our forecasts.

But one of the things that gives Heavy Reading its sustainable differentiation -- what we were able to leverage to tremendous effect in this public access small cell study -- is our access to Light Reading's database of registered readers. When Heavy Reading sends out a survey invitation it goes out to thousands of Light Reading's registered readers within service providers worldwide. Once we've filtered out all the survey responses from people who claim to work for Vodafone but actually have an @largeequipmentvendor.com email address, we end up with a survey sample of anywhere from 70-150 fully qualified operator respondents from around the world for any given Heavy Reading survey.

That's a pretty decent sample. That in itself doesn't mean we inevitably go on from there to reach the right conclusions and make accurate forecasts. But gauging market demand on the basis of the disposition of a large sample of buyers rather than the aspirations of the sellers does give you a hell of a head start. A happy new year to all Heavy Reading's clients.

— Patrick Donegan, Senior Analyst, Heavy Reading

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Justinpaul1
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Justinpaul1,
User Rank: Light Beer
1/20/2014 | 4:10:58 AM
Mass market of adoption of small cells will come
Patrick makes some very good points, and also highlights some of the reasons that may have made Heavy Reading's analysis more accurate.  Despite the global nature of the telecoms business, it is interesting to see how some regions adopt new technologies faster than others.  In a previous company, we tried hard to convince the femtocell market it was ready some years before it really was, but we now see a very healthy Residential and Enterprise Femtocell market.

 

Public access small cells or metrocells will have their day, this isn't conjecture, the laws of physics dictate that despite new spectrum, and improvements in technology the only way to match the exponential demand for data capacity is through spatial efficiency....adding more cells.

 

Patrick highlights the issues preventing the rapid rollout of small cells are the engineering and logistics related to design and rollout of networks, rather than the small cell devices themselves.  In my opinion, the tools and methodologies used to plan and design macrocellular rooftop and tower sites are just not flexible enough and scalable enough to meet the speed and volume expectations for small cells. He's also right about small cell backhaul.  10GB fiber is perfect for an urban rooftop site, but you can't use that same technology to connect every other lampost in the street, so small cell backhaul is going to need to rely heavily on "wireless technologies".

 

However, in some regions, especially North America, operators are rolling out public access small cells in volume  and these operators will be among the first to use network experience to increase customer satisfaction. Open to chatting more about this if you are, Patrick!
Ray@LR
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Ray@LR,
User Rank: Blogger
1/13/2014 | 6:17:53 AM
Great insights - doesn't mean lack of activity
Great insights into the methodology and pressures associated with top class market research.

What this helps to highlight is that there are always plenty of opportunities for insightful, targeted R&D to help develop a market that, as Patrick points out, will eventually happen.

So while there may not be billions in revenues to be made from the sale of public domain small cells and the associated services (which will be substantial - planning, optmization, testing, deployment etc) just yet, there's plenty of work to be done on how to enable public domain small cells with new backhaul connections and power sources, how to best manage hetnets, the role of virtualization technologies etc

Maybe there are opportunities for startups? 
Carol Wilson
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Carol Wilson,
User Rank: Blogger
1/6/2014 | 4:44:11 PM
Sometimes the hype is just that
Having listened to the reaction to the 2012 research Patrick is discussing here, it's gratifying to see how things played out. There was considerable skepticism at Heavy Reading's conservative take on small cell deployment but every operator who spoke on the topic kept coming back to the issues Patrick cites here. 

Backhaul is still an enormous challenge and one that creative minds are still working at addressing. 
DOShea
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DOShea,
User Rank: Blogger
1/6/2014 | 4:42:52 PM
Conservatives types
Yes, these Heavy Reading analysts can be conservative and buttoned-down with their estimates on occasion, but they're not afraid to drop "turd in the punch bowl" into a story when the situation calls for it.
MordyK
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MordyK,
User Rank: Light Sabre
1/6/2014 | 2:49:51 PM
Re: backhaul
It appears that they've come to the conclusion that thats an impossibility, so the strategy is to re-use whenever possible and then have a toolkit of backhaul solutions to choose from for a given deployments profile.

I think the message will come across quite strongly from some carrier strategic investments this year in backhaul as well as some public deployments and partnerships.
Sarah Thomas
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Sarah Thomas,
User Rank: Blogger
1/6/2014 | 12:24:41 PM
backhaul
Have operator views on small cell backhaul changed much since the survey? Seems like vendors are still having to convince them that they can't reuse existing backhaul.

 
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