Small cells are well past their hype cycle now, and with VoLTE being rolled out at scale, the role they will play over the next three years or so is becoming increasingly clear. We've constantly heard about spectrum bottlenecks, indoor penetration challenges and of course data-hungry subscribers as the main drivers for small cells, but mobile carriers have nevertheless continued to grow their macro cell networks in response. AT&T, for example, cited its Leap Wireless acquisition as a reason for pulling back from its small cells rollout targets.
VoLTE looks set to be the game-changer for small cell adoption. Mobile carriers have started to roll out VoLTE in increasing numbers, currently with more than 78 global deployments, according to the GMSA. At the same time, operators are also signaling a strong intent to turn off their older 2G and 3G networks. In the US, for example, both Verizon and AT&T have plans to turn off their 2G networks (in 2019 and 2017, respectively), and we've been hearing similar plans from carriers across in Europe and Asia, as well. This 2G/3G "turn off" strategy is just a logical step, in order to leverage the best that 4G has to offer in voice, avoid having to operate multiple mobile network standards in parallel, and go ahead with spectrum refarming.
However, if the carriers are to go ahead with turning off 2G or 3G, it is essential that VoLTE achieves at least voice call performance parity with 2G and 3G networks in terms of basic quality and coverage. This means that densification of the current 4G network becomes necessary to achieve this performance parity demand, and small cells offer a promising way to achieve that.
While most mobile carriers recognize the need for 4G densification, challenges remain regarding the practical deployment challenges. With data in many countries pointing to around 80% of both voice and data calls being generated indoors, it should be clear that indoor 4G densification is the way to start.
Further, indoor small cells deployments are relatively less complex compared to their outdoor counterparts, which have constantly been challenged for power and backhaul. But indoor small cells also have their own challenges, from demand for aesthetically appealing hardware to complaints that deployments are too intrusive at private venues.
Mobile carriers have often struggled to sell their own indoor deployment plans for small cells to venue and large enterprise owners. What's happened over the last couple of years, however, is that the vendor community has started taking a more proactive role. Many vendors are now looking to sell their solutions directly to the venue and enterprise owners, leveraging existing relationships with these businesses. We've seen Ericsson team up with HP with the intent to sell through HP's enterprise channels. Similarly, Cisco is able to do the same, leveraging its large WLAN enterprise footprint as a platform for selling small cells. We see evidence that venue and large enterprise owners are starting to recognize that capacity and coverage of mobile services at their venues can be a critical differentiator for them. Many are becoming more receptive to these types of partnership models.
In contrast to indoor deployments, the business case for outdoor small cells remains very challenging. Availability of power and backhaul at the desired locations are among the key factors that continue to break the business case for outdoor small cells. More fundamentally, many operators have not yet run out of road when it comes to further densification of their macro and micro cells.
In urban districts, we're already seeing macro cells at very short inter-site spacing of just a few hundred meters, so in many cases there is no pressing case for further densification.
Clearly, in the foreseeable future, VoLTE is expected to fuel small cell growth, which is bound to accelerate as 5G arrives.
— Ravi Narayanan, Senior Analyst, Heavy Reading