Enterprise Small Cells: The Business Case


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presented by Simon Saunders, Real Wireless for Small Cell Forum in Cambridge Wireless Small Cells SIG

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Enterprise Small Cells: The Business Case

  1. 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” Simon Saunders Real Wireless for Small Cell Forum “Poor indoor mobile coverage and capacity affects 39 percent of large businesses in Britain” “Dissatisfaction with in-building 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. 2. About Real Wireless • • • • Independent Wireless Experts, bridging the gap • between the wireless industry and wireless users The pre-eminent specialist independent expert advisor in wireless technology, strategy & regulation • UK-based but working internationally Real Wireless delivers independent, informed and innovative strategic technical and business consultancy based on a deep understanding of the physics and engineering implications associated with wireless technologies, coupled with real-world planning and deployment experience Clients include • • • • Enterprises Operators Regulators Vendors Experience • • • • • UK 4G Spectrum Auction technical policy Wireless strategy for landlords and enterprises Founded Small Cell Forum (Femto Forum) Ofcom Spectrum Advisory Board UK Spectrum Policy Forum © Real Wireless Ltd. 2014. All rights reserved.
  3. 3. Introduction • Real Wireless has conducted an analysis of the business case for enterprise small cells • This work was commissioned by Small Cell Forum, but was conducted independently by Real Wireless • The full report is available from scf.io © Real Wireless Ltd. 2014
  4. 4. 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 • The needs of these environments are very diverse and any solution needs to be tailored closely to those needs. • In common however they are: Small business / SoHo Medium Enterprises / Mid-sized office buildings • • • Large Enterprise / corporate campuses Multi dwelling units Retail shops • Shopping malls • Medical facilities and hospitals Government and municipal buildings Premises-based Generally indoors Needing consistent, high-quality coverage Differences emerge when considering their needs for specific services and analytics 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: Hotels / Convention Centres Underground facilities © Real Wireless Ltd. 2014
  5. 5. Market Drivers for enterprise small cells • 39%-61% of offices have noticeably poor inbuilding coverage1 • Yet over 80% of total mobile data traffic is indoors2 1 YouGov research, Feb 2013, figures for UK and US respectively 2 Paolini M. “Mobile data moves indoors”, September 2011 • 87%3 of businesses would switch provider to guarantee coverage • 72%3 of businesses are interested in small cells to improve cellular performance 3 Alcatel Lucent, Feb 2013 Voice coverage Data Services Analytics • Building construction • Phone performance • “Mobile first” enterprises • PBX/Centrex integration • Enterprise applications • Operational efficiencies • Retail footfall • Task schedule • Access to records © Real Wireless Ltd. 2014
  6. 6. Most businesses are small-to-medium Yet existing solutions are tailored to the very largest 50 45 40 % Employees 35 30 25 20 15 10 5 0 % employed % employed % employed Japan UK USA ≤9 10 ≤ 19 20 ≤ 49 50 ≤ 249 Cumulative % buildings as enterprises increase in size 100% % employees in different sized enterprises in selected countries 98% 96% 94% 92% 90% 88% 86% 84% 82% 80% Micro Business >250 © Real Wireless Ltd. 2014 Small Business Medium Business Large Businesses Public Buildings
  7. 7. Operator-driven or enterprise-driven? • Achieving scale may require significant change in operator processes • Benefits in customer attraction and retention – and offsetting costs Operator-driven Enterprise-driven © Real Wireless Ltd. 2014
  8. 8. Case Studies • The work includes in-depth case studies of the value of small cells in a wide range of Enterprise environments Large Enterprise offices in the US Medium-sized Enterprise office in the UK Small Enterprise office in Norway © Real Wireless Ltd. 2014 Hospital in the UK Convention Centre with Hotel in Japan Retail Chain in Greece
  9. 9. Modelling Approach The modelling considers the costs and benefits, and divides these between the Operator and the Enterprise depending on the deployment approach (Operator-led or Enterprise-led) Financial model • © Real Wireless Ltd. 2014
  10. 10. 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 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 © Real Wireless Ltd. 2014
  11. 11. First Year Costs Total Costs in First Year: GBP • 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 8,000 Local management 7,000 Enhanced Services 6,000 Core functionality 5,000 Backhaul - Medium 4,000 System Integration 3,000 Local Controller 2,000 LAN Port 1,000 Access Point Standard 0 Total Initial Capex Source: Real Wireless Total Initial Opex © Real Wireless Ltd. 2014
  12. 12. 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 300,000 Customer Lifetime Values - Operator: GBP • • • 1058% return on investment 250,000 31,901 200,000 81,153 271,434 190,281 55,640 150,000 19,737 100,000 33,312 64,800 50,000 (15,109) 0 Start value Operator Incr. voice Network Reduced Lower Total value Enhanced Total value SC Costs & data cost churn retention basic services enhanced savings cost 100% Source: Real Wireless Basic case Enhanced case © Real Wireless Ltd. 2014 294% 419%
  13. 13. 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 Lifetime Values - Enterprise: GBP 160,000 140,000 35,284 61% return on investment 120,000 70,568 100,000 80,000 65,003 28,227 60,000 40,000 (81,153) 40,305 37,544 (25,467) 20,000 0 Inc voice & Device Enterprise Total value PBX savings Desktop Enhanced Total value data benefit managem't SC Costs basic hardware service costs enhanced savings savings Source: Real Wireless © Real Wireless Ltd. 2014
  14. 14. Other case studies Case Situation Outcome Large enterprise in 6000 employees and multiple the US premises Operator CLV up 232% -308% Enterprise value up $7.1m $8.9m Small enterprise in 15 person office, single cell Norway Operator CLV up 163%-289% Hospitality centre in Japan Hotel visitors and conference delegates Operator CLV up by 434% YEN184.7million new revenue for hotel Hospital in the UK Patient and staff access Challenging base case, but scope for 138% with enhanced services © Real Wireless Ltd. 2014
  15. 15. Sensitivities • Deployment model: Enterprise-led deployment improves CLV by approximately 8% -but also provides scaleability • Deployment with Wi-Fi: Shared costs improve business case by around 6% • Access point cost: Quadrupling the AP cost only has a -0.6% CLV impact. . • Building size: Small cell benefits scale from smallest to largest enterprise but need variety of product capabilities to suit • Added value: e.g. Japan conference centre base case 177% increase in CLV. Roaming revenue increases that to +301% • Demand stimulation: Small cells may stimulate demand, which offsets offload but we found that traffic would have to rise ten-fold to offset a 10% increase in revenue. © Real Wireless Ltd. 2014
  16. 16. Small Cells vs DAS • Still a role for DAS in large multi-operator applications 3 operator DAS : small cell comparison 250,000 200,000 150,000 100,000 DAS 50,000 Small cell - PV Small cell & DAS costs: GBP PV Small cell & DAS costs: GBP Single operator DAS : small cell comparison 450,000 400,000 350,000 300,000 250,000 200,000 DAS Small cell 150,000 100,000 50,000 - Building size (m2) Building size (m2) © Real Wireless Ltd. 2014
  17. 17. Summary • Enterprises are demanding solutions to improve coverage and mobilise their business • 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 • Very positive business case with benefits which scale to all types of enterprise • Significant shift in deployment style needed from operators to meet demand but agile operators who provide such solutions can produce massive benefits in satisfying their customers © Real Wireless Ltd. 2014
  18. 18. Contact Real Wireless PO Box 2218 Pulborough West Sussex RH20 4XB United Kingdom Tel: +44 (0) 207 117 8514 Web: www.realwireless.biz Blog: realwireless.biz/blog Email: info@realwireless.biz realwireless.biz © Real Wireless Ltd. 2014
  19. 19. Annex: Detailed results © Real Wireless Ltd. 2014
  20. 20. © Real Wireless Ltd. 2014
  21. 21. © Real Wireless Ltd. 2014
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