Analyst Angle: Disorganized value chain: the story of small cell and DAS

Editor’s Note: Welcome to our weekly feature, Analyst Angle. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry.
In early April, I had the pleasure of participating in the NEDAS Forum event in New York City. The forum had attendees and speakers covering all aspects of the deployment value chain. From attending, it became clear that Manhattan has served as a very unique test case for a number of operators and ecosystem vendors. In reviewing examples from around Manhattan and the broader tri-state area, several trends became abundantly clear:
–Deployments (even in the most congested areas) take a lot of time.
–Network planning economics for in-building versus outdoor deployments are very different.
–The ecosystem and value chain around deploying small-cell and distributed antenna system infrastructure remains highly fragmented.
In the end, we were all reminded that at this point in the evolution of the ecosystem, key gaps remain in enabling carriers to make scaled deployments of network support infrastructure. That said, in continuing to review the U.S. DAS and small-cell arena, several key discussions are emerging with regard to network deployments, economics and fragmentation of the value chain, with significant holes in the economics surrounding deployments slowing the expansion of DAS and small-cell networks. Note the following:
With network traffic growth in plain view, now should be the time for deployments of small-cell and DAS infrastructure to support network needs, but operators continue to struggle with deployments.
Much discussion has been made around economic barriers, but even when the economics are favorable, time to deployment remains a battle. For example, at the NEDAS Forum operators revealed that deployment time for in-building network projects in Manhattan averaged about six months (though the fastest operators cited two-month time periods in best-case scenarios and up to 12 months in slow moving scenarios). With these time frames, network deployments represent a long-term evolution; a single in-building network could represent a half-year undertaking. The general consensus is that nothing in this space happens overnight, so all projects are long-term evolution.
Digging deeper into economics, key differences exist today in terms of the economics between in-building and outdoor deployments.
When reviewing in-building versus outdoor deployments it becomes clear that the in-building market has a much deeper understanding of economics and end-user value. This is primarily the byproduct of the ability to evaluate opportunity on a building-by-building basis based on either the tenants or the foot traffic passing through the facility. Operators can easily correlate end-user presence in commercial buildings, malls, stadiums and corporate campus environments with set revenue or churn reduction opportunities, thereby driving a complete business case around in-building network deployment. In outdoor network deployments, the economics are murky. Operators know where network pressure points are but struggle to equate micro level, direct network investments with measurable returns (i.e. improving coverage around a six-block area in central business district X will drive down subscriber churn or drive increased opportunity of Y). The difference in the ability to determine true network value has driven operators to push DAS and small cell deployments in areas with easy business cases (i.e. in-building).
On the other side of the fence, the deployment value chain remains disaggregated.
The NEDAS Forum event featured a wide array of participants including a large number of integrators looking for a role in the deployment ecosystem. These integrators represent the turnkey deployment partners that operators are often looking for. In parsing the attendees, the integrator ecosystem continues to be fragmented and localized, while national heavyweights such as Extenet or Crown Castle have big plays in this space. For each one of these big players there are dozens of localized entities looking to take on a piece of a project or to manage the complete deployment of solutions. This reality fuels ongoing questions about scale in this ecosystem, including the following:
–Do operators want a turnkey national deployment partner that can take on ten markets and all aspects of the network roll out, or do they prefer localized partners, essentially giving local players an advantage over larger national plays?
–Do economics justify scaled national deployment partners or is the market opportunity not large enough to support a scaled play, leaving local niche operators as the only viable long-term partner alternatives?
In short, the small-cell and DAS ecosystem is still in the midst of development. It’s clear that deployments will not happen overnight and economics will continue to be the key constraining point. Going forward, in order for this opportunity to be real, the barriers to deployment will need to be broken by making the economics work on all fronts and bringing scaled opportunities to fruition. And, since scaled opportunities attract large players, carving out a presence (and a role) will be key for any operator looking to play the long game that defines this space.
Aaron Blazar works as a VP for Atlantic-ACM on projects ranging from market sizing and forecasting to corporate strategy covering both the wireline and wireless telecom markets. Blazar has a broad perspective on the telecommunications industry and expertise in market segmentation, market analysis, market entry strategies and statistical analysis.