The Battle Over Small Cell Deployment

Governor Jerry Brown of California recently vetoed a bill, SB 649, that would have given wireless carriers cheap and easy access to poles. He said the bill was too much in the favor of the wireless companies and that a more balanced solution is needed.

This law highlights the legislative efforts of the cellular industry and the big telcos working to deploy 5G networks who want cheap and fast access to poles. There were similar pushes in many state legislative bodies this past year including in Texas, Florida and Washington. I think we can expect this to appear in many more state legislatures next year. This is obviously a big priority for the carriers who reportedly spent tens of millions of dollars lobbying for this in the recent legislative sessions.

It’s not hard to understand why the carriers want a legislative solution, because the alternative is the regulatory path. This is a complicated issue and the carriers know that if they try to get this through state regulatory commissions that it will take a long time and that regulators are likely to provide a balanced solution that the carriers don’t want.

There is one regulatory push on the issue and the FCC is considering it. The FCC voted in May to begin an investigation on the issues involved. One of the things they are examining are the regulatory impediments at the state and local levels that affect the issue. But the carriers know that the FCC path is a slow one. First, any FCC decision is likely to be challenged in court, a tactic that the carriers themselves often use to slow down the regulatory process. But there is also a big jurisdictional question, because today the states have the authority to override FCC rules concerning pole issues.

The issue is important because it’s at the heart of the hottest area of telecom growth in the deployment of mini-cell sites and the upcoming deployment of the various kinds of 5G. Not only do the carriers need to deploy millions of such connections to implement the networks they are promising to stockholders, but they also will have to be building a lot of new fiber to support the new wireless deployments.

It’s easy to sympathize with the carriers. I’ve herd the horror stories of it taking two years to get a wireless attachment approved in some cities, which is an obvious impediment to any sensible business plan deployment. But as is typical with these carriers, rather than asking for sensible rule changes that everybody can agree on they are promoting plans that are heavily lopsided in their favor. They want to deploy wireless devices using a method they are calling one-touch – which they interpret to mean installing devices on poles and telling the pole owner after it’s done. They also want these connections for dirt cheap. And they don’t want to have to be concerned with the safety issues involved in adding boxes and live electric connections into the mix of wires on existing poles.

The issue is interesting from the perspective of small CLECs and fiber overbuilders because small carriers have been yelling for years about the problems associated with getting access to poles – and nobody has been listening. In fact, one of the big proponents of the legislative process is AT&T, which is still fighting Google and others about getting access to AT&T poles. It’s not surprising to see that the proposed new laws favor wireless deployments without necessarily making it any easier for fiber overbuilders.

Since the carriers are throwing a lot of money at this it certainly seems likely that they will win this issue in some states. There are a number of states where the lobbying money of the big carriers has always gotten the carriers what they wanted. But there are plenty of states where this won’t pass, and so we are likely going to end up with a hodgepodge of rules, state by state, on the issue.

I’m not even sure where I stand on the issue. As a consumer I want to see advanced wireless technologies deployed. But as a homeowner I don’t necessarily want to see an ugly proliferation of big boxes on poles everywhere. And I certainly don’t want to see 120-foot poles deployed in my neighborhood and the trees decimated to accommodate line-of-sight wireless connections to homes. And as somebody who mostly works for smaller carriers I’m naturally biased against anything that benefits the big carriers over everybody else. I don’t know if there is a better indication about how complicated this is when somebody with my knowledge has mixed feelings about the issue.

The Challenges of 5G Deployment

The industry is full of hype right now about the impending roll-out of 5G cellular. This is largely driven by the equipment vendors who want to stir up excitement among their stockholders. But not everybody in the industry thinks that there will be a big rush to implement 5G. For example, a group called RAN Research issued a report last year that predicted a slow 5G implementation. They think that 4G will be the dominant wireless technology until at least 2030 and maybe longer.

They cite a number of reasons for this belief. First, 4G isn’t even fully developed yet and the standards and implementation coalition 3GPP plans to continue to develop 4G until at least 2020. There are almost no 4G deployments in the US that fully meet the 4G standards, and RAN Research expects the wireless carriers to continue to make incremental upgrades, as they have always done, to improve cellular along the 4G path.

They also point out that 5G is not intended as a forklift upgrade to 4G, but is instead intended to coexist alongside. This is going to allow a comfortable path for the carriers to implement 5G first in those places that most need it, but not rush to upgrade places that don’t. This doesn’t mean that the cellular carriers won’t be claiming 5G deployments sometime in the next few years, much in the way that they started using the name 4G LTE for minor improvements in 3G wireless. It took almost five years after the first marketing rollout of 4G to get to what is now considered 3.5G. We are just now finally seeing 4G that comes close to meeting the full standard.

But the main hurdle that RAN Research sees with a rapid 5G implementation is the cost. Any wireless technology requires a widespread and rapid deployment in order to achieve economy of scale savings. They predict that the cost of producing 5G-capable handsets is going to be a huge impediment to implementation. Very few people are going to be willing to pay a lot more for a 5G handset unless they can see an immediate benefit. And they think that is going to be the big industry hurdle to overcome.

Implementing 5G is going to require a significant expenditure in small dense cell-sites in order to realize the promised quality improvements. It turns out that implementing small cell sites is a lot costlier and lot more expensive than the cellular companies had hoped. It also turns out that the technology will only bring major advantages to those areas where there is the densest concentration of customers. That means big city business districts, stadiums, convention centers and hotel districts – but not many other places.

That’s the other side of the economy of scale implementation issue. If 5G is only initially implemented in these dense customer sites, then the vast majority of people will see zero benefit from 5G since they don’t go to these densely packed areas very often. And so there are going to be two economy of scale issues to overcome – making enough 5G equipment to keep the vendors solvent while also selling enough more-expensive phones to use the new 5G cell sites. And all of this will happen as 5G is rolled out in drabs and dribbles as happened with 4G.

The vendors are touting that software defined networking will lower the cost to implement 5G upgrades. That is likely to become true with the electronics after they are first implemented. It will be much easier to make the tiny incremental 5G improvements to cell sites after they have first been upgraded to 5G capability. But RAN Research thinks it’s that initial deployment that is going to be the hurdle. The wireless carriers are unlikely to rush to implement 5G in suburban and rural America until they see overwhelming demand for it – enough demand that justifies upgrading cell sites and deploying small cell sites.

There are a few trends that are going to affect the 5G deployment. The first is the IoT. The cellular industry is banking on cellular becoming the default way to communicate with IoT devices. Certainly that will be the way to communicate with things like smart cars that are mobile, but there will be a huge industry struggle to instead use WiFi, including the much-faster indoor millimeter wave radios for IoT. My first guess is that most IoT users are going to prefer to dump IoT traffic into their landline data pipe rather than buy separate cellular data plans. For now, residential IoT is skewing towards the WiFi and towards smart devices like the Amazon Echo which provide a voice interface for using the IoT.

Another trend that could help 5G would be some kind of government intervention to make it cheaper and easier to implement small cell sites. There are rule changes being considered at the FCC and in several state legislatures to find ways to speed up implementation of small wireless transmitters. But we know from experience that there is a long way to go after a regulatory rule change until we see change in the real world. It’s been twenty years now since the Telecommunications Act of 1996 required that pole owners make their poles available to fiber overbuilders – and yet the resistance of pole owners is still one of the biggest hurdles to fiber deployment. Changing the rules always sounds like a great idea, but it’s a lot harder to change the mindset and behavior of the electric companies that own most of the poles – the same poles that are going to be needed for 5G deployment.

I think RAN Research’s argument about achieving 5G economy of scale is convincing. Vendor excitement and hype aside, they estimated that it would cost $1,800 today to build a 5G capable handset, and the only way to get that price down would be to make hundreds of millions of 5G capable handsets. And getting enough 5G cell sites built to drive that demand is going to be a significant hurdle in the US.

Catching Up On Small Cell Deployment

light-pole-on-i-805-in-san-diego2I remember going to a presentation at a trade show a few years back where there was great enthusiasm for the future of small cell sites for cellular networks. The panel, made up mostly of vendors, was predicting that within five years there would be hundreds of millions of small cells deployed throughout all of the urban areas of the US.

Small cells are supposed to relieve congestion from the larger existing cellular towers. They can be hung anywhere such as on light poles, rooftops, and even in manholes. They have a relatively small coverage area ranging from 30 to 300 feet depending upon the local situation.

But I recently saw that MoffettNathanson estimated that there have only been 30,000 small cells deployed so far. That’s obviously a far cry smaller than the original projections and it’s an interesting study in the dynamics of the telecom industry for why this didn’t go as planned. We’ve seen other examples of new technologies before that didn’t pan out as promised, so it’s a familiar story to us that have been following the industry for a while.

There are a number of different issues that have slowed down small cell deployment. One of the key ones is price since it can cost between $35,000 and $65,000 to get a small cell in place. That’s a steep price to pay for a small coverage area unless that area is full of people much of the day.

Another problem is that small cells need to be fiber fed and also need to have a source of reliable continuous power. Not surprisingly, that turns out to be a big issue in the crowded urban areas where the small cells make the most sense. It’s not easy, for example, to bring fiber to an existing light pole. And it’s often not even easy to bring reliable power to some of the best-suited cell locations.

The problems that surprised the cellular industry the most are the problems with getting permits to place the cell sites. Remember that these sites are deployed in the densest parts of big cities and many of those cities have a lot of rules about running new fiber or power lines in those areas. Some of the cellular companies have cited waits as long as two years for permitting in some locations.

Yet another problem is that the big cellular companies are having a hard time figuring out how to incorporate the new technology into their processes. The whole industry has grown up dealing with big cell towers and all of the work flows and processes are geared towards working in the tower environment. I can’t tell you how many times I’ve seen big companies have trouble dealing with something new. It was the inability to change the existing workflows, for example, that led Verizon to basically start a whole new company from scratch when they launched FiOS.

And like any new technology, the small cells have not always delivered the expected performance. This has a few companies stepping back to assess if small cells are the right way to go. For instance, AT&T has largely stopped new small cell deployment for now.

The FCC recently took a stab at some new regulations that might make the permitting process easier. And the FCC just released a policy paper that promised to look at further easing the rules for deploying wireless technology and for getting onto poles.

The main reason that I’m following small cells is that the industry is on the cusp of implementing two new technologies that are going to face all of the same issues. It’s clear that 5G is going to need small cells if it is to be able to handle the number of devices in a local area that have been hyped by the cellular companies. And Google, AT&T and others are looking at wireless local loop technologies that are also going to require small fiber-fed devices be spread throughout a service area. My gut feeling is the same problems that have plagued small cell deployment are going to be a thorn for these new technologies as well – and that might mean it’s going to take a lot longer to deploy these technologies than what the industry is touting.

The Evolution of Cellular

Transmitter_tower_in_SpainThere are several big changes on the horizon that are going to really impact cellular networks. One change is transformational, one solves some local network issues and the third, and probably the least important one will get all of the press.

The transformational change is that the technology is being developed that will allow the industry to centralize the brains and the computing functions of the network. Today there are nearly 200,000 cell phone towers in the US and each cell phone tower requires a full set of switching electronics. Much of the smarts of the cellular network is done at these cell sites. That makes the cellular network somewhat unique in that most other types of networks have been able to centralize the brains and computing power of the network into hubs rather than to leave everything on the edge.

There are several groups now working on ways to start migrating the brains of cell sites back to regional data centers. Some people have called this moving the cellular network into the cloud, but that is really not a great description of it. Rather, this is a migration of computing and processing power from the edge back to a core like has happened with all other kinds of networks. The cable industry called this migration ‘headend consolidation’ where they created huge headend that can serve millions of customers.

This will be a transformational change because today it costs a literal fortune for a cellular carrier to implement a technology upgrade since they have so many cell sites. And this matters because upgrades are hitting the industry at a fast and furious pace. With a centralized cellular network, a cell company could upgrade the core software and electronics at only a few hubs since the cell sites will become little more than a transmitter site with little brains.

The second big change is that in 2014 we are seeing the cell industry adding tens of thousands of small cell sites. For a few years there have been network extenders called femtocells, but now the vendors in the industry have developed mini cell sites that are not a whole lot more than a cell site on a card. These small sites don’t have the same power as a full cell site, but they can be placed in areas where there is currently network congestion.

These small cell sites can be deployed in stadiums, downtown districts, convention centers and commuting corridors to provide extra call and data capacity where it is most needed. For example, I have a friend who I talk to regularly during his morning commute and I always lose him when he is crossing the 14th Street Bridge into DC. These mini cell sites ought to be able to fix the holes and dead spaces in the existing cellular network.

Finally is the change that will get all of the hype. Rumor has it that one or more of the cellular companies are going to start talking about 5G cellular networks this year. As I have discussed in the past, there are not even any networks today that are close to being able to call themselves 4G networks. The 4G standard begin with ability for a cell site to deliver 1 gigabit data speeds and there aren’t any sites today who can do 1/20th of that speed.

Sprint and T-Mobile coined the word 4G to promote some incremental enhancements to their HSPA+ and LTE networks. And so 4G was used as a marketing phrase to try to distinguish their technology from the competition. Then the whole industry followed suit and we now have 3G and 4G phones which use the same networks and have essentially the same capabilities.

There are dozens of little improvements to cellular technology being developed in vendor labs, and every time there is a new little tweak that makes speeds a little faster or that somehow enhances the customers experience the cell companies have been itching to say that they now have 5G. And it will happen. One of them will pull the trigger as marketing hype and the rest will follow. Ironically, by the time we finally get real 4G technology we will probably be selling phones in the market labeled as 10G.

So while the marketers make a lot of hype out of little changes in the network, the really huge change is the possibility to centralize the networks into hubs. Once that is done, a company could upgrade a few hubs and introduce a new technology improvement overnight. But that doesn’t sound sexy and is hard to market, so it will just quietly get implemented in the background.