Backhaul is the problem!

"Backhaul is NOT a barrier to small cell deployment." Thus starts a recently released whitepaper from the Small Cell Forum. I beg to differ: backhaul is a barrier, writes Frank Rayal .

The issue of backhaul for small cells is not one of technology, which is the focus of the Small Cell Forum whitepaper. There are many different technologies available. This in itself is a problem, in my opinion, for the simple reason that confusion in the market slows down investment. Operators are confused as to which approach they should adopt. Anyone thinks that major investments will happen when there’s market confusion? Moreover, the toolkit approach is not a simple one to adopt because it requires different processes which only increases the cost and complexity of small cell deployments.

But the real problem of small cell backhaul is that of cost. To date, no solution has a clear cut advantage on cost basis. Sure, wireless solutions compare positively against a fiber business case especially in an area where subterranean fiber is mandated by law and municipalities block or delay trenching. Yet despite this advantage, fibre has incomparable capacity and once it’s installed, it’s there ‘for good’ and this opens the door for many other potential applications.

Backhaul is a major expense in small cell networks. In a typical macrocell site, wireless backhaul amounts to about 10-20% of the costs. In small cell deployments, the cost of backhaul can easily exceed 50% of the total .

For instance, consider what it takes to make a base station: a baseband engine or a processor, memory, RF devices, power modules, and mechanicals. Wireless backhaul solutions consist of similar components. Furthermore, with low power small cells, the cost of the radio subsystem, which is a major cost driver in high-power base stations, becomes comparable to that of the backhaul solution. Ditto for the form factor. In all, there is not, as of yet, a technology breakthrough to allow a much lower cost point of backhaul for small cells than that for macrocells.

Looking at operational expenses, the cost problem does not get any easier. A major cost driver in small cell deployments that often gets overlooked is the pole attachment fee. Most often, this fee is charged on the basis of a mounted box or occupied distance on a pole, in which case the pole attachment fee applies equally the same to the small cell and the backhaul module. The financial case for integrating backhaul with the small cell is very strong, although this option is not without its own downside.

Moreover, it’s arguably more expensive to plan, deploy, and maintain backhaul solutions on poles and building sidewalls than it is to plan, deploy, and maintain the small cells themselves. This is a natural byproduct of the fact that small cells in their majority have omni-directional service pattern while backhaul systems (of all types including NLOS, LOS, PMP, PTP) have directional antennas that require pointing and orientation. The operator needs to ensure that the backhaul module collocated with the small cell remains in alignment with its serving hub during the entire operational lifetime of the site. This means higher installation, support, and maintenance for backhaul.

Although backhaul amounts to a greater percentage of the total site cost in small cell than in macrocell deployments, the business case for small cells can be positive if the total cost is ‘low enough’. But what is ‘low enough’?

Although backhaul amounts to a greater percentage of the total site cost in small cell than in macrocell deployments, the business case for small cells can be positive if the total cost is ‘low enough’. But what is ‘low enough’? Many derive cost parameters from coverage calculations which result in unrealistic targets that have been widely circulated in industry forums.

Small cells are, by large, a capacity solution and the cost targets should account for the value of the offload small cells provide. This in itself is an important consideration when it comes to selecting and deploying small cell backhaul solutions because it provides a benchmark to justify the investment in small cell networks. In other words, targeted deployment of small cells in high traffic density area is a primary requirement for a positive business case.

The small cell phenomenon provided great impetus for the backhaul sector industry to focus on developing specialised solutions, and great progress has been made to date. However, we should keep in mind that it’s not just about the technology required for small cell deployments, but technology at the right price and capability. Until this issue is cleared with a compelling business case, backhaul shall remain a barrier to small cell deployments.

About the author: Frank Rayal is Partner at Xona Partners. He advises investment firms, vendors, and operators on wireless technology and business strategy, spectrum, competitive positioning, and market analytics.

Xona Partners launches:
Xona is a newly launched boutique advisory services firm specialised in TMT and founded by a team of technologists and startup founders, managing directors in global ventures, and investment advisors. Drawing on its founders cross functional expertise, Xona offers a multi-disciplinary integrative technology and investment advisory service to private equity and venture funds, among other types of investors, that includes pre-investment due diligence and post-investment full-lifecycle management.

Xona services bridge the widening gap between technology, finance and marketing silos by leveraging its founders’ leadership experience. The services focus on two main areas:

1. Pre and post investment services
– M&A due diligence (business and technical)
– Investment advisory
– Full life-cycle management

2. Technology advisory services in the TMT sector
– 4G/broadband & mobile communications
– Big Data infrastructure and analytics
– Cloud platforms and applications

Xona operates from four regional hubs in San Francisco, Singapore, Dubai and Paris. For more information, visit Xona Partners

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