Every so often someone gets enthused by the idea that you could carpet the world with small cells and avoid building out expensive macro towers. For an even better wheeze, you can get your customers to do this for you in some way. Most recently we had the idea that customers could earn tokens by buying and then deploying a small cell site, but there have been other business models such as combined Wi-Fi/femtocell in-home routers. In the end, and despite lines such as “5G will be a small cell-first technology”, the economics of sticking as much as possible to the existing macro grid has always won. Outside-in and macro-first has won.
But in the low news days of August, the latest convert to the small cell cause has attracted attention. A large part of that is because the company talking about small cells is Elon Musk’s SpaceX.
The company said on an earnings call that it is considering a terrestrial rollout plan in the USA where it owns spectrum from Echostar that would see it combine a cellular femtocell with one of its Starlink CPE dishes. The dish could then act as both backhaul link to the SpaceX satellite and provide terrestrial cellular coverage to users on the ground. This would act as a complement to the D2D aspect of SpaceX’s coverage, which sees the devices themselves connect directly to satellites.
Elon Musk, Founder and CEO, said on the call that this could be an efficient way to add in terrestrial element with its D2D coverage.
“Instead of having to deploy these very expensive and difficult to locate large cellular base stations, we feel reasonably confident that we can deploy a large number of, sort-of, small stations. Essentially, they’re really just Starlink dishes that also provide connectivity in the mobile spectrum bands and have them be all over the place.” Musk said this would “probably” also provide better quality connectivity than that provided by America’s main operators.
Again citing the small-cell approach, Gwynne Shotwell, President & COO, said, “We definitely intend to build out the terrestrial component.”
“You will have not only the capacity from the satellites themselves, but you will have a build-out of the terrestrial, basically the hardware and systems necessary to make a true mobile service exactly what you want it to be.”
For small cell rollouts, you need power, sites and backhaul, and the ability to manage small cells or clusters of small cells so they don’t interfere with each other or your macro layers. SpaceX won’t be too bothered by any of these. The power comes from the customer dish deployment, the backhaul from the satellite link, and they don’t have a macro layer to deal with, and deployment is unlikely to be dense enough to worry about cell to cell interference.
However, a key challenge for a small-cell first deployment that is mapped to where customer terminals are located is precisely that – it locates your cell coverage in the same locations as you have user equipment, and those customer terminals might not be located in the areas where you need your cell coverage. For example, how many SpaceX customer terminals will there be in very busy outdoor dense urban areas, or in transport hubs, or in large indoor environments – all the sorts of places a mobile user will most want to see good capacity and coverage. So while Shotwell says the service might be “exactly what you want it to be”, the harder part will be having it exactly where you want it to be.
If SpaceX wants to replicate mobile coverage on top of its customer broadband satellite dish topography, then it stands to reason it will be duplicating great mobile coverage where it already has users of its satellite broadband. That is not a business that necessarily competes with the “600 billion a year” MNO market opportunity that Shotwell identified SpaceX wants to go after. To do that, you need continuity of good capacity coverage. Of course, the satellite network gives them that to an extent, but not at the performance levels that the terrestrial competitors can offer.
To get around that, SpaceX would need to enter the sorts of discussions that other operators have to – getting access to rooftops, buildings and street furniture where it doesn’t have customer dishes. Not insurmountable of course, but a significant overhead on a customer-led deployment model across a market the size of the US.
So maybe the big three US MNOs will not yet be quaking, despite the scale Musk’s company could undoubtedly bring to any market entry. On the other hand, hearing COO Shotwell say, “I anticipate us to be able to acquire quite a few of their customers because I think our service will be better” will definitely give them more strategic pause about the value of their wholesale SpaceX relationships.
