A $1 trillion opportunity: Business drivers for connecting the unconnected via small cells

A $1 trillion opportunity: Business drivers for connec6ng the unconnected via small cells 3rd March 2015

18/03/2015 1 © Real Wireless Ltd. 2015

Rural villages

Military

Public safety Disaster Recovery / humanitarian

Remote industrial

Special events

Transporta6on

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© Real Wireless Ltd. 2015 18/03/2015

Some Clients

Some Places Some Technologies

2

Small Cell Business Cases •  Commissioned by Small Cell Forum but conducted independently by Real Wireless •  A highly referenceable, credible starLng point for product and scenario-‐specific analysis •  These are public: but many specific exercises conducted for real world cases

18/03/2015 © Real Wireless Ltd. 2015

Urban Enterprise Rural & Remote

3

Study seHng – Who are rural and remote users?


Rural Community Coverage for underserved community beyond range of normal service

Remote Industrial Coverage for community of workers at a site hard to reach from exisLng infrastructure

Public Safety Coverage for emergency services & first responders.

Disaster Recovery / Humanitarian Rapid reinstatement of coverage aRer extensive damage to mobile infrastructure, and support for ongoing humanitarian efforts.

Special Event Services for temporary planned gathering

Military Service for military personnel

Transporta6on Services for passengers and operaLonal needs on all classes of shipping, aircraR and trains

Tradi6onally these users are poorly served


•  Alphonzo Samuels, CTO of Telekom South Africa, recently highlighted that urban populaLons take up just 2% of landmass but provide for operators [1]:

•  50% of revenue •  80% of profit

•  Natural tendency to target urban so more cost effecLve rural soluLons needed.

•  Even markets with high cellular penetraLon have a gap between urban and rural user mobile experience (as per Ofcom figure on right).

•  GSMA esLmate average unique subscriber level 79% in developed countries but only 41% in developing countries [3].

•  Implies main subscriber growth will come from rural and developing areas.

•  But key barriers for operators are: •  Deployment costs •  Closed, bespoke equipment ecosystems

•  Can small cells overcome these barriers?

The difference in the call comple6on rates across UK operators between rural and urban users from Ofcom [2]

Mobile adop6on versus rural popula6ons from GSMA [3]

Key Findings •  Rural and remote users increasingly need mobile •  MoLvaLons for mobile differ but there are

common mobile soluLon requirements •  Small cells fit these common requirements

excepLonally well technically •  Operators can tap into capLve, previously

untapped markets via: •  Lower, more granular deployment costs •  Enabling more flexible ecosystems with varying

levels of operator involvement

•  Small cells challenge the assumpLon that there is necessary divide between urban users and rural and remote users

•  The economic and social benefits from serving this market segment are compelling too

A trillion dollar opportunity! 18/03/2015 6 © Real Wireless Ltd. 2015

Users

Market drivers

Requirements

Ecosystems

Users

Market drivers

Requirements

Ecosystems

…

Sector customisaLons


Core small cell capabiliLes

Small cell ecosystem

Mobile industry

Small cells are the “glue” across apparently disparate rural and remote applica6ons

Rural villages Transport Remote industrial

Special events

Public safety

Disaster recovery / humanitarian Military

R&R markets need mobile and are big markets •  In developing naLons

•  Mobile only means for medical assistance, employment and finances in some areas. •  Mobile access higher than basic sanitaLon in some sub-‐Saharan countries [3]. •  10% improvement in mobile gives 1.4% increase in GDP [3].

•  In developed naLons •  Increased recogniLon of the importance of mobile by regulators •  Teleworking rising – 80% increase in US from 2005 to 2012 [5] •  Operators differenLaLng on user experience 1.6 billion subscribers could be added via small cells worldwide by 2017 -‐ rural populaLons are key


Rural communi6es

o  Huge capLve audience: 2.98 billion air passengers in 2012 (and growing) with 54.9 million flight hours [6]

o  Passengers expect mobile – poor Internet second biggest stress factor for business passengers [7]

o  Morale networks for staff key for staff retenLon o  OperaLonal benefits and addiLonal revenue for transport companies o  Growing M2M tracking freight o  Access to on-‐shore markets in mariLme case

Transport

R&R markets need mobile and are big markets •  Worldwide military expenditure of $1.75 trillion in 2013 [8]. •  Move from bespoke to cellular due to:

•  Reduced costs of COTS •  Increased funcLonality •  Shorter procurement cycles

•  More hi-‐tech banlespace needs bener wireless support •  SituaLonal awareness •  LogisLcs and operaLonal communicaLons •  Remote control of vehicles and remote devices


Military

•  In US in 2013 alone $9.7 billion spent on public assistance [9]. •  155,000 LTE public safety basestaLons forecast globally by 2020 with 4 million subs [10]. •  Big transiLon to cellular driven by:

•  Drive for bener interoperability •  Reduced costs and increased funcLonality of COTS •  Emergency responses becoming more hi-‐tech as in military but also open GSM cells to locate

survivors and public relying on cellular in incidents more

Public safety

R&R markets need mobile and are big areas •  Between 2000 and 2009 2.2 billion people impacted by 4,484 natural disasters [11] •  Increasing problem due to global warming and unplanned urbanisaLon [12]. •  Growing recogniLon that wireless is key in operaLons with groups like Vodafone

FoundaLon and Télécoms Sans FronLères. •  SituaLonal awareness via video and images and open cell features to locate survivors

in addiLon to voice aiding operaLons. •  Increased reliance on mobile by survivors •  Increased internaLonal awareness of management of relief efforts.


Disaster recovery

•  London 2012 was esLmated to anract nine million spectators and 300,000 athletes, officials, media and workforce [13].

•  Increasing operaLonal communicaLons requirements: •  CCTV •  Wireless payment systems •  Public safety networks

•  Spectators expecLng connecLvity to: •  Give live feedback on events and share experiences •  Review event related staLsLcs and info.

Special events

R&R markets need mobile and are big markets •  Move from PMR to cellular in this area. •  Forecast that by 2015 $8 billion will be spent on oil and gas mobile applicaLons [14]. •  Mobile is the 2nd highest priority for CIOs in this area aRer cyber security [14]. •  Drivers include:

•  Improving operaLonal efficiencies via remote working and situaLonal assessment •  Improving staff retenLon •  Being high value, hi-‐tech environments


Remote industrial

•  Key common drivers •  Higher expectaLons from consumers and workers of

connecLvity everywhere •  Working environments becoming more hi-‐tech •  Increasing interest in cellular from specialist usersg more hi-‐tech as in

military but also open GSM cells to locate survivors and public relying on cellular in incidents more

Why don’t operators serve these needs be\er? •  Operators perceive that:

•  Deployment challenges make them complex to address and not cost effecLve with macrocells

•  The ecosystems are unfamiliar to operators with a closed set of players who know the market needs well

•  But our analysis and stakeholder feedback suggest these applicaLon areas could be very interesLng to operators: •  CapLve markets with good brand and differenLaLon opportuniLes. •  Some high value lucraLve applicaLon areas with extra subscriber recruitment

opportuniLes in specialist environments. •  Opportunity to generate significant social and economic value •  Opportunity to leverage exisLng investments in small cells •  Knock on operaLonal benefits of network resilience and responding to network

outages 18/03/2015 11 © Real Wireless Ltd. 2015

Small cells fit these common requirements excep6onally well technically •  Small cells have special characterisLcs

of: •  Being low cost, low power and small

form factor soluLons •  Providing support for a range of

backhaul and power opLons •  Providing targeted local coverage •  Providing dedicated capacity •  Delivering cellular services and COTS

standards based equipment •  Providing easy installaLon and retrofit •  SupporLng rapid deployment and self-‐

organising features


Small cells using a range of backhaul solu6ons – Vodafone open SureSignal uses premise’s broadband (leb), Altobridge/iDirect using Satcom backhaul and Airspan 4G outdoor picocell with integrated point to mul6 point backhaul (right)

Femtocells illustra6ng the small form factor of small cell products

Even though drivers for mobile differ there are common solu6on requirements


Key Requirement Rural town / villages

Transport Military Public safety Humanitarian / disaster recovery

Special events Remote industrial

Low cost ü ü ü

Support for a range of backhaul

ü ü ü ü ü ü ü

Targeted local coverage

ü ü ü ü ü ü ü

Low power ü

ü ü ü

Small form factor ü ü ü ü

ü

Delivers cellular services

ü ü ü

COTS standards based equipment

ü ü ü

Easy installa6on and retrofit

ü ü ü ü ü ü

Rapid deployment ü ü ü ü

Self-‐organising ü ü ü ü

Dedicated capacity ü ü ü ü ü

Rugged form factor ü ü ü ü ü

Many common requirements suit small

cells well

•  Small form factor •  Low power •  Dedicated capacity •  Dedicated coverage in small areas

•  Easy install and self organising features •  Wide range of backhaul

But various levels of customisa6on are s6ll needed


Rural Remote Temporary Dedicated Moving

Feature Op6ons

Backhaul Satellite, residenLal broadband, fibre, microwave, NLOS

Power supply Solar panels, banery, vehicle power supply, generator, mains

Cell size Village, plane, ship, disaster area, special event venue

Regulatory Emission levels, spectrum, antenna height

Add standard R&R product features for the categories of characterisLcs that target market exhibits

Start with exisLng outdoor small cell products

Core small cell offering

Customise for final market segment

•  Branding •  Ruggedize •  Packaging

•  Integrate with other systems •  Sector safety standards and

regulaLons

•  Integrate with bespoke services and applicaLons

•  EncrypLon and security

Special events Rural villages Transport – Mari6me, avia6on and trains Military First

responder Disaster recovery Humanitarian

Remote industrial

The path to

success

Small cells have proven themselves already in these areas


•  Some example case studies given here but many more in the report

Example social and economic benefits from small cells in R&R markets

•  Rural developing naLons [3]: •  Mobile advisory services increased farmers’ incomes by 50% •  Mobile has saved one million lives in sub-‐Saharan Africa •  Enables novel services like mobile money and Azuri pay as

you go solar power

•  Disaster relief, humanitarian and public safety •  Mobile in-‐field communicaLons saves lives •  Locals clearly benefit in immediate and on-‐going recovery •  Importance demonstrated by one Vodafone FoundaLon

Instant Network carrying 264,104 calls over 47 days when deployed to support Red Cross in Kenya [16].

•  Remote industrial •  PotenLal economic impact of mobile and internet via oil,

metal and mineral extracLon industries expected to exceed $100 billion annually by 2025 [17].


Lower, more granular deployment costs


Illustra6ons of the small form factor of some small cells that ease deployment barriers – Alcatel Lucent small cell in a Virgin Media trial in Newcastle, UK (top right) – Altobridge/iDirect deployments in remote communi6es in Malaysia (leb) and to remote enterprises (bo\om right)

•  Small cells ease deployment costs by: •  Reducing the iniLal CAPEX investment

to enter a new market or area •  Opening up more backhaul opLons in

remote areas •  Reducing on-‐going OPEX in remote

areas •  TargeLng small concentrated pockets

of users

Comparing costs

•  Small cells are: •  5% – 10% of macrocell capex •  10%-‐25% of macrocell opex


Small cells challenge macrocells even on cost per km2


•  Cost benefits of small cells are further strengthened if users are concentrated in clusters such as villages. •  Here the cost per subscriber benefit with small cells will be greater than in this cost per km2 comparison. •  This makes mobile more affordable for low ARPU levels and low populaLon densiLes. •  For current ARPU levels our analysis indicates the following break even populaLon densiLes for the above

assumed small cell costs: •  4.1 to 8.7 subscribers per km2 for developing naLons •  1.2 to 2.5 subscribers per km2 for developed naLons.

Worst case needs only 46 people in the small cell area to break even

Deployment costs for real popula6on distribu6ons


•  We have analysed real populaLon distribuLons at a resoluLon of populaLon data commensurate with small cell range.

•  We apply a macrocell and small cell placement algorithm to this populaLon database to obtain cost comparisons for different mobile extension strategies.

•  Example graph for Germany on right compares the total cost of extending mobile coverage from 60% to the level indicated on the x axis for:

•  A macrocell only strategy •  A small cell strategy with small cells at varying cost

levels compared with macrocells

•  This shows with small cells: •  95% of the populaLon could be covered for half the

total cost of ownership •  Or for the same Int$2 billion investment an extra 3% of

coverage could be gained.

•  But Germany is a densely populated medium sized country so does this benefit translate to other countries?

95% coverage achieved at ½ the cost with small cells at today’s prices

Total cost of ownership (20 year NPV) to extend coverage for Germany

Every country in our analysis benefits from small cells


•  Have analysed for rural populaLons in countries across: •  Europe •  Africa •  LaLn America •  The US •  South East Asia

•  Placed small cells at ‘best’ locaLons to increase mobile broadband populaLon coverage from current levels towards 100%

•  Within this we have : •  Analysed 215 countries and US states •  Considered 2.86 billion people •  Spent 7,500 hours of simulaLons

•  Regional maps shows the addiLonal coverage achieved for the same investment via small cells over macrocells i.e. the benefit of small cells.

•  We conservaLvely assume small cells at 15% of macrocell costs in line with today’s prices

Every country analysed benefits although the extent varies with distribu6on of gaps rela6ve to popula6on

Benefit of small cells – increase in popula6on coverage for same investment

Every country in our analysis benefits from small cells


Benefit of small cells – increase in coverage for same investment

Small cells have a huge poten6al impact globally •  We extrapolate our results for

the countries analysed to a worldwide result for the benefit of small cells.

•  650 million addi6onal people poten6ally benefiHng from mobile via small cells worldwide.

•  This 9% increase in coverage equates to $1 trillion increase in GDP worldwide.

•  Number of people benefixng increases sharply as small cell costs fall.


Popula6on benefi6ng from small cells globally for different small cell cost levels

650 million people benefiHng worldwide

Key Findings •  Rural and remote users increasingly need mobile •  MoLvaLons for mobile differ but there are

common mobile soluLon requirements •  Small cells fit these common requirements

excepLonally well technically •  Operators can tap into capLve, previously

untapped markets via: •  Lower, more granular deployment costs •  Enabling more flexible ecosystems with varying

levels of operator involvement

•  Small cells challenge the assumpLon that there is necessary divide between urban users and rural and remote users

•  The economic and social benefits from serving this market segment are compelling too

A trillion dollar opportunity! 18/03/2015 24 © Real Wireless Ltd. 2015

Users

Market drivers

Requirements

Ecosystems

Users

Market drivers

Requirements

Ecosystems

…



Core small cell capabiliLes

Small cell ecosystem

Mobile industry

Small cells are the “glue” across apparently disparate rural and remote applica6ons

Rural villages Transport Remote industrial

Special events

Public safety

Disaster recovery / humanitarian Military

Contact Real Wireless PO Box 2218 Pulborough West Sussex RH20 4XB United Kingdom

realwireless.biz

Tel: +44 (0) 207 117 8514 Web: www.realwireless.biz Blog: realwireless.biz/blog Email: [email protected] Twiner: twiner.com/real_wireless


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A $1 trillion opportunity: Business drivers for connecting the unconnected via small cells