Small Cells: Big Potential, Big Challenges

Two recently published studies suggest that the promise of small cell sites still is recognized, but that the sector’s success is far from a sure thing. A report from ABI Research seems a bit more upbeat than the other, which was published by Infonetics Research.

Small cells can be used to offload data from cellular to the Internet and/or to extend the reach of wireless networks into formerly hard-to-reach areas. The end game is to make these devices – which come in a number of configurations – a complement to the macro base stations that exist today.

ABI’s report, which does not specify whether it is worldwide or limited to North America — the latter seems likely — reports a half million of these devices will be sold this year.

ABI says that about 278,000 units shipped last year, which was a bit lower than the firm’s forecast. The firm suggests that demand will rebound in the immediate future. That growth will be felt in 1 watt small cells that are optimized for “street level deployment.”

The longer-term outlook is bright, ABI predicts:

Outdoor small cell units will grow at 52.7% CAGR to reach over 3.5 million units by 2018. The fastest growing outdoor class of small cells are 4G LTE small cells which will grow to reach almost 1 million unit shipments in 2018 as operators begin to differentiate their LTE services by adding capacity in key strategic locations.

Infonetics’ report is worldwide in scope. The firm found that 86 percent of those questioned plan to use a variety of methods to backhaul traffic from small cells to macrocells, though fiber is favored. A majority of those surveyed, Infonetics reports, demand a five-year total cost of ownership (TCO) that is within 10 percent of a typical macrocell deployment. By 2016, the firm says, in-building and outdoor cells are expected to handle one quarter of mobile traffic.

The release on the report paints a picture of a segment facing a lot of issues. Michael Howard, the co-founder and principal analyst for carrier networks at Infonetics Research, laid out the road ahead:

These operators face some daunting challenges: outdoor small cell gear isn’t small enough or cheap enough yet, and there are problems backhauling in dense urban areas, not to mention municipal regulations regarding the look, size, and color of the equipment and who can mount equipment on streetlights, utility poles and building sides. Even if they managed to solve all these issues, they’re still going to have to pass the fiscal test. Outdoor small cells won’t fly without a viable business model.

In a feature at the IEEE Spectrum, Ariel Bleicher does a very nice job of describing small cells, tracing their development and painting a picture of what the future may look like. She is upbeat. But, at the same time, she echoes ABI and Infonetics: The promise is great, but there still is a lot of work to do.