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Enterprise Small Cells - the business case

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Presentation from Small Cells MENA 2013 given by Gordon Mansfield (AT&T) Chair of Small Cell Forum & Lisa Garza (Cisco) Marketing Chair.

Presentation from Small Cells MENA 2013 given by Gordon Mansfield (AT&T) Chair of Small Cell Forum & Lisa Garza (Cisco) Marketing Chair.

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  • 1. Enterprise Small Cells: The Business Case “Distributed Antenna System (DAS), is often not economical for many enterprises or operators that serve small to large enterprise customers” Gordon Mansfield, Chairman, Small Cell Forum Lisa Garza, Marketing Chair, Small Cell Forum “Poor indoor mobile coverage and capacity affects 39 percent of large businesses in Britain” “Dissatisfaction with inbuilding coverage was highest in the US, where 61% of enterprises complained of problems, while half of German firms, 43% in Spain and 39% in the UK had similar issues.”
  • 2. Introduction •  Small Cell Forum’s forthcoming Release 2 will focus on the opportunity and deployment issues for small cells deployed in Enterprise environments •  This presentation provides a ‘sneak preview’ of a small part of our work in this area, focusing on: •  The Market Drivers for Enterprise small cells •  The Business Case for Enterprise small cells Small Cell Forum PUBLIC
  • 3. What do we mean by ‘Enterprise’? The opportunity for small cells extends well beyond Enterprise offices. We see a great opportunity for the technology to address the needs of a wide range of business environments, including the following: Enterprise Types -Small business / SoHo -Medium Enterprises / Mid-sized office buildings The needs of these environments are very diverse and any solution needs to be tailored closely to those needs. -Large Enterprise / corporate campuses In •  •  •  -Multi dwelling units -Retail shops -Shopping malls -Medical facilities and hospitals -Government and municipal buildings -Hotels / Convention Centres -Underground facilities Small Cell Forum PUBLIC common however they are: Premises-based Generally indoors Needing consistent, highquality coverage Differences emerge when considering their needs for specific services and analytics
  • 4. Market Drivers for Enterprise Small Cells Small Cell Forum PUBLIC
  • 5. Situation •  39%-61% of offices have noticeably poor inbuilding coverage1 •  Yet over 80% of total mobile data traffic is indoors2 •  Serving in-building traffic from outdoors places a heavy load on Operator spectrum, reducing potential efficiency3 •  DAS plays a useful role in public buildings and the very largest offices, but costs are often prohibitive for smaller Enterprises - which are in the majority 1 YouGov research, Feb 2013, figures for UK and US respectively 2 Paolini M. “Mobile data moves indoors”, September 2011 3 Signals Research Group: “Valuable Licensed Spectrum is a Largely Under-Utilized Asset Indoors”, Feb 2013
  • 6. Key Drivers For Enterprises •  Essential coverage that their business needs •  Opportunity for value-added services For Operators •  Can deploy small cells like Wi-Fi (may need to re-engineer business processes) •  Establish good relationship by providing services in demand •  Huge opportunity for those who move quickly to gain market share For Small Cell Vendors •  High quality voice is tablestakes •  Opportunity for value-added data services Small Cell Forum PUBLIC
  • 7. Voice is Essential and May Be a Competitive Opportunity •  Voice coverage is variable •  39%-61% of offices have noticeably poor in-building coverage1 •  In the past, Enterprises have accepted this… •  ... but are now less willing to do so •  Ubiquitous high-quality voice increasingly seen as essential (“hygiene factor”) •  Enterprises demanding coverage & will switch •  •  87%2 of businesses would switch provider to guarantee coverage 72%2 of businesses are interested in small cells to improve cellular performance 1 YouGov research, Feb 2013, figures for UK and US respectively 2 Alcatel Lucent, Feb 2013 Small Cell Forum PUBLIC
  • 8. Data & Services Are Additional Upsides •  Data offload represents an important opportunity for Operators to reduce and contain costs •  There are real synergies for a combination of small cells and Wi-Fi (see the Forum’s work on Integrated Small-Cell/Wi-Fi Networks) •  At the same time, small cells will actually stimulate and enable additional usage •  Value-added services are still nascent but offer opportunities •  Monetising voice •  Location - which is especially important in retail environments •  Higher value services in Corporations (PBX features, on-net calling) •  This could be $100 Billion opportunity1 for carriers 1 Exact Ventures: “Rethinking In-building Wireless: The ‘Consumerization’ of IT and the Emergence of the Mobile Enterprise Enabled by Mobile Operator Managed Services and the Emergence of Enterprise Small Cells” Oct 2012
  • 9. The Business Case for Enterprise Small Cells Small Cell Forum PUBLIC
  • 10. Business Case Analysis •  We commissioned an independent analysis of the business case for Enterprise small cells from Real Wireless, a leading UK-based wireless advisory firm •  This includes qualitative and quantitative analysis of a wide range of Enterprise environments •  The business case is examined from both the Enterprise and Operator viewpoints – it is essential that both see clear value Small Cell Forum PUBLIC
  • 11. Case Studies The work includes in-depth case studies of the value of small cells in a wide range of Enterprise environments Hospital in the UK Large Enterprise offices in the US   Medium-sized Enterprise office in the UK   Small Enterprise office in Norway Small Cell Forum PUBLIC Convention Centre with Hotel in Japan   Retail Chain in Greece  
  • 12. Sensitivity Analysis Parameters for the case studies were carefully arrived at based on feedback from members and Real Wireless’ own research However they also varied key parameters to understand how the business case varies based on these sensitivities: Operator led vs. Enterprise led deployment Solution cost – varying deployment & system costs Trade-offs for small cells & DAS as building size varies Regional impacts on offload benefits Operator offer to the Enterprise beyond coverage Building size Synergies from deployment alongside Enterprise Wi-Fi Small cell role in stimulating demand Small Cell Forum PUBLIC
  • 13. Modelling Approach Financial model The modelling considers the costs and benefits, and divides these between the Operator and the Enterprise depending on the deployment approach (Operatorled or Enterprise-led) Small Cell Forum PUBLIC
  • 14. Example: Medium Enterprise in UK The challenge: •  180 users •  3 floors •  2700 m2 •  Need full managed service •  Want Operator to handle entire deployment The solution: •  4 small cells, remotely configurable •  Dedicated backhaul functionality •  Centrex capabilities to replace existing PBX •  Cloud-based management, enabled by Operator but allowing user configuration by Enterprise Small Cell Forum PUBLIC The outcome: •  25% increase in voice traffic •  50% increase in data traffic •  10% increase in voice and data ARPU •  Reduced spend for Enterprise on PBX and management
  • 15. First Year Costs •  Costs are dominated by operational expenditure (OpEx) even in the first year •  Hence total cost insensitive to hardware cost •  Local management costs indicate a need for high efficiency and automation 9,000 Total Costs in First Year: GBP 8,000 7,000 Local management 6,000 Enhanced Services Core functionality 5,000 Backhaul - Medium 4,000 System Integration Local Controller 3,000 LAN Port 2,000 Access Point Standard 1,000 0 Total Initial Capex Source: Real Wireless Total Initial Opex Small Cell Forum PUBLIC
  • 16. Operator Business Case: Medium Enterprise •  •  •  Shows lifetime value of customer to the Operator, including impact of all CapEx and OpEx Shows major value enhancement, even with conservative assumptions Even if only a single one of the benefits was realised in practice, business case is still positive Customer  Lifetime  Values  -­‐ Operator:  GBP 300,000 250,000 81,153 780% return on investment 200,000 27,115 266,280 185,128 55,640 150,000 24,093 100,000 33,312 64,800 50,000 0 (19,832) Start  value Operator Incr.  voice Network Reduced Lower Total  value Enhanced Total  value SC  Costs &  d ata cost churn retention basic services enhanced savings cost 100% Source: Real Wireless Basic case Enhanced case 286% Small Cell Forum PUBLIC 411%
  • 17. Enterprise Business Case: Medium Enterprise •  Enterprise benefits arise from both direct operational cost savings and from benefits to their own business growth and profitability Customer  L ifetime  Values  -­‐ Enterprise:  GBP 160,000 35,284 140,000 61% return on investment 120,000 70,568 100,000 80,000 65,003 28,227 60,000 40,305 37,544 40,000 (81,153) (25,467) 20,000 0 Inc  voice  & Device Enterprise Total  value PBX  savings Desktop Enhanced Total  value data  b enefit managem't SC  Costs basic hardware service  c osts enhanced savings savings Source: Real Wireless Small Cell Forum PUBLIC
  • 18. Summary •  The advent of Enterprise small cells builds on the established technology, standards and learnings of residential femtocells •  Operators can provide solutions to Enterprises which were previously not accessible at a reasonable cost •  Enterprises are demanding solutions, and agile Operators who provide such solutions can produce massive benefits in satisfying their customers •  Independent studies show a very strong business case for both the Enterprise and the Operator, provided the deployment approach is tailored to Enterprise needs •  Small Cell Forum’s Release Two will provide an ‘all you need to know’ guide to how to achieve these benefits Small Cell Forum PUBLIC