Slides Presented by Sue Rudd Strategy Analytics at Broadband World Forum 2012

1. Economics of Small Cells
and Backhaul
Stream: Future Communications
Infrastructure Focus
Broadband World Forum - Content Hub 2
October 18th. 2012
Presented by:
Sue Rudd Director Service Provider Strategies
email: srudd@strategyanalytics.com
Copyright© Strategy Analytics 2012

2. Outline
• Why Operators should Deploy Small cells:
 Traffic
 Capacity
 3G Life Extension
• How will Small cells Roll Out? Public Femto, Pico, Metro..
• How will Small Cells change Backhaul?
• How do we Resolve other Challenges created for Backhaul by
Small Cells?
• How much Backhaul is Required?
• Summary: Small Cells offer a Significant Market Opportunity
….but create Backhaul Challenges
October 2012 2
srudd@strategyanalytics.com

3. Why Operators should Deploy Small Cells:
Mobile Data Traffic Explosion
Asia Pacific will be by far the largest Mobile Broadband Data Market with
North America & Western Europe virtually tied in 2017
Mobile Data Traffic Explosion
60,000
PetaBytes Traffic Throughput
M East/Africa
50,000
Asia-Pacific
C/L America
40,000
N America
30,000 C/E Europe
W Europe
20,000
10,000
0
2010 2011 2012 2013 2014 2015 2016 2017
Source: Strategy Analytics Wireless Operator Strategies
October 2012 3
srudd@strategyanalytics.com
Copyright© Strategy Analytics 2012

4. Why Operators should Deploy Small Cells:
Solving the Capacity Crunch
Small Cells Solve the Capacity Crunch…..
Source Of Efficiency Times Capacity Grows
New Spectrum ~2 Times
Spectral Efficiency ~1.5 Times
TOTAL ~3 times (2*1.5)
Adding Small Cells & Spatial Re-Use
= 9 - 15 Times (3 *3 – 5)
= 3 to 5 times Capacity increase
Sources: Alcatel Lucent, Farpoint Group and Strategy Analytics estimates
Source: Strategy Analytics Wireless Operator Strategies
October 2012 Copyright© Strategy Analytics 2012 4
srudd@strategyanalytics.com

5. Why Operators should Deploy Small Cells:
3G Life Extension – Tri-Mode will Dominate + WiFi
Global Penetration by Technology Generation – CDMA, 3G & LTE
Legacy Technologies will co-exist for many years
Global Penetration of CDMA, 3G (UMTS, HSPA & HSPA+ and LTE
45%
Percent Penetration of Global Population
40%
35%
30%
CDMA Penetration %
25%
LTE Penetration %
20%
UMTS/HSPA/ HSPA+
15% Penetration %
10%
5%
0%
2010 2011 2012 2013 2014 2015 2016 2017
October 2012 Source: Strategy Analytics Wireless Operator Strategies 5
srudd@strategyanalytics.com

6. How will Small Cells Roll Out?
Small Cell Shipments By Region
Asia Pacific will be by far the largest market for small Cells
Small Cell Shipments By Region through 2017
9,000
8,000 M East/Africa
Small Cell Shipments 000s
Asia-Pacific
7,000
C/L America
6,000
N America
5,000
C/E Europe
4,000
W Europe
3,000
2,000
1,000
0
2010 2011 2012 2013 2014 2015 2016 2017
Source: Strategy Analytics Wireless Operator Strategies
October 2012 6
srudd@strategyanalytics.com
Copyright© Strategy Analytics 2012

7. How will Small Cells Roll Out?
Public Femto, Pico, Metro..Small Cell Shipments
Public Femto Cells dominate initially but are overtaken by Pico Cells (Right Axis)
By 2014 Metro Cell Shipment Volume will overtake Macro Cells (Left Axis)
Macro, Metro, Pico and Public Femto Cellls 000s
1,600 6,000
Pico and Public Femto Cells
Macro Cells
Macro & Metro Cells
1,400
Metro Cells 5,000
1,200 Pico Cells
4,000
1,000 Public
Femto Cells
800 3,000
600
2,000
400
1,000
200
0 0
2010 2011 2012 2013 2014 2015 2016 2017
Source: Strategy Analytics Wireless Operator Strategies
September 2012 7
Copyright© Strategy Analytics 2012

8. Seven Core Use Cases for Small Cells
Location/Area Characteristics Functions Required for Small cell
Add Capacity Complete Ensure Quality Integrate WiFi
Seven Use Cases w. Thru’put Coverage of Service(QoS) Load Mgt.
1. Urban Low Speed Hot Zone
2. High Mobility Hot Zone
3. Suburban Neighborhood
4. Outdoor Sporadic Use Locations
5. Indoor Public Spaces
6. Range Extension for Macro Cells
7. Offload to Fixed/WiFi
Note: Degree of Shading indicates Relative Importance
Source: Strategy Analytics Wireless Operator Strategies
‘Small Cell Market Outlook 2012 - 2017 - Seven Market Opportunities Quantified’
September 2012 8
Copyright© Strategy Analytics 2012

9. How will Small Cells change Backhaul?
New Topology Part 1
New Topologies Require more connections Per Cell Site
Evolution from Hub ….. to Hub and Spoke ……to Tree and Branch…..
October 2012 Copyright© Strategy Analytics 2012 9
srudd@strategyanalytics.com

10. How will Small Cells change Backhaul?
New Topology Part 2
New Topologies Require More Connections for
Redundant Cell Site Connectivity and Real Time Redirect/ Offload
Evolution to Ring and Partial Mesh
October 2012 10
srudd@strategyanalytics.com

11. How do we Resolve other Challenges created
for Backhaul by Small Cells?
…’Smart Backhaul’, QoS, Synch., C-RAN, OAM, SON & SDN
• Small cells need more than new Partial Mesh Architecture for
Backhaul Connectivity..
• Small Cells Require:
 High Performance Resilient Multi-path Links
 QoS for very high Signaling & Network Performance (S1 Links ,
Diameter etc.)
 Synchronization for Packet Ethernet connected sites
 Intelligent Pro-active Network Management with Tools for Network
Operations Support
 Self-Organizing Networks (SON) to handle increasing Complexity
October 2012 Copyright© Strategy Analytics 2012 11
srudd@strategyanalytics.com

12. How much Investment in Backhaul is Required?
Forecast by Region based on Traffic Demand & Estimated $/GB of Backhaul
By 2017 Traffic Growth Requires over $35 Billion in Backhaul
Required Backhaul Expenditures to meet Traffic Demand
M East/Africa
Asia-Pacific
Annual $000s for Backhaul
C/L America
N America
C/E Europe
W Europe
2010 2011 2012 2013 2014 2015 2016 2017
Source: Strategy Analytics Wireless Operator Strategies
October 2012 12
srudd@strategyanalytics.com
Copyright© Strategy Analytics 2012

13. Summary: Small Cells offer a Significant Market
Opportunity ….but create Backhaul Challenges
• Small cells will help solve the Capacity Crunch and
will add capacity to legacy 2.5G/3G Macro Cells
 Public Femto cells will play a key role for a few years
 Pico cells with more ‘intelligence’ and remote configurability
take off
 Metro Cells will complement Macro Cells in Integrated
Heterogeneous Networks (HetNets)
• BUT …Small cells are not necessarily cheaper
• AND create Backhaul Challenges that Require:
 High Performance Signaling
 Network QoS
 Network Management
 Partial Mesh Architectures ….
 Separate Report shows it is worthwhile to increase
Expenditures for Backhaul
Source: Strategy Analytics Wireless Operator Strategies
September 2012 Copyright© Strategy Analytics 2012 13

14. Small Cell and WiFi Reports from Strategy Analytics
Below are selected Reports that you may find useful.
Complimentary Executive Summaries
Executive Summary: Too Good to be True? Small Cells Solve the Capacity Crunch and
Improve Service
WiFi Hotspots will be Small Cells in Mobile Broadband Networks by 2015
Full Small Cells Reports and Forecasts
Small Cell Economics - Key to 3G Profitability
and
Small Cell Market Outlook 2012 - 2017 - Seven Market Opportunities Quantified
and
Small Cell Market Outlook 2012 - 2017 - Forecasts By Region and Cell Type
Source: Strategy Analytics Wireless Operator Strategies
September 2012 Copyright© Strategy Analytics 2012 14

15. Contact Information
www.strategyanalytics.com
Sue Rudd Director Service Provider Analysis
srudd@strategyanalytics.com
October 2012
15
srudd@strategyanalytics.com