2015 Prediction Update: Small cell deployments have been limited to only a few pilot programs, as capital expenditure has been focused on completing LTE macro networks in order to reach near universal coverage. There is still no comprehensive vision of what 5G will look like, although some countries have ambitious targets to deploy new 5G infrastructure by 2020.

By Ben Rogers and Guan Yeap

- Industry Prediction Update

LTE Small Cells – Not yet a priority for infrastructure spend

‘Small cells’ are a catch-all term for operator-controlled, low-powered radio access nodes that have a range from ten to several hundred metres. With global mobile data traffic increasing, carriers urgently need increased network capacity and small cells offer improved frequency reuse. There have been some small cell network rollouts recently, for example in China and the USA. However, LTE small cells have not been deployed in significant numbers during 2015, with three main reasons behind this:

2015 Prediction: LTE feeds small cell backhaul revenue growth, while 5G fails to take shape

  1. Continued focus on coverage: Network operators still need to increase coverage, so they are building out LTE macro networks instead of deploying initiatives to increase density, as shown in Figure 1 below.
  2. Manageable traffic growth: Mobile broadband usage has not yet reached levels which necessitate the increased bandwidth that small cells can provide.
  3. Cost of backhaul: Backhauling of small cells remains expensive as fibre often needs to be laid to locations that are often difficult to reach. This problem is exacerbated by declining mobile ARPUs, as price wars between operators (particularly in Europe) have seen operators largely fail to monetize the move to LTE.

Figure 1: LTE Coverage and Mobile Broadband Penetration

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5G – A known unknown

While generally speaking 2020 is the target for 5G rollout, what this means in practice is ill defined by the industry. 5G is chiefly aimed at increasing the data rates and bandwidth available (up to 800 Gbps) to end users in order to cope with the huge increase in expected mobile data traffic, as shown in Figure 2 below.

Figure 2: Projected Mobile Data Traffic Growth, 2014-19

Projected Mobile Traffic Growth (Cisco VNI Mobile, 2015)

Source: Cisco VNI Mobile, 2015

One of the key use cases for 5G is expected to be the Internet of Things, or Machine to Machine communication, which will rely on extremely low latency, low power requirements, and a reliable “always on” network which will remove safety concerns when automating automotive and industrial processes.

However, it is unclear whether the architecture of the 5G network needs to be significantly different to that of the LTE (4G) network in order to achieve this. Refarming of 2G and 3G spectrum, network densification through small cells, and a heterogeneous network (“HetNet”) of varying cell types, should enable LTE networks to cope with increasing mobile data traffic and deliver much higher speeds. LTE Advanced trials have achieved speeds reaching 450Mbit/s[1]. Bell Mobility, the Canadian wireless services operator, has enabled speeds of up to 290 Mbps in select communities in Canada [2].

Samsung expects to have a temporary trial 5G network in place in South Korea for the Winter Olympics in 2018, and Huawei aims to implement a version in Moscow for the 2018 World Cup [3].

Emergence of LTE small cells and 5G to take time

Small cells will likely play an important role in future networks, as consumer behaviour increases the demand for bandwidth. They may also form the cornerstone of a future “HetNet”, or even the architecture of 5G networks. However, while the technological case for such deployments has already been made, the economic case has not. Small cell backhaul remains prohibitively expensive, and MNOs are struggling to monetize their most recent infrastructural investments. It will take new monetization strategies with higher expected returns on LTE and 5G networks to justify the investment that small cell rollouts will require.

Will 2016 be the breakthrough year for small cells, and will 5G finally take shape? We will take another look in our 2015 Year End Review in December.

In the ten weeks leading up to our Year End Review, read about the ten events and themes we believed would shape the technology, media and communications industry in 2015. Which ones are leading the transformation?

Read about:

Coming soon:

  • Soft SIM
  • Repurposed spectrum
  • OTT and the cable industry
  • 4K OTT
  • Cloud services
  • Wearables
  • The sharing economy
  • Apply Pay

> Read our industry predictions for 2015 in our December 2014 Coordinates Newsletter

Notes:

1 http://www.telecompaper.com/news/vodafone-portugal-tests-450-mbps-mobile-connection--1052100

2 http://network.bell.ca/en/lte/

3 http://www.bbc.co.uk/news/technology-30224853