Hetnets could save mobile operators $400m

New analysis from mobile solutions company Arieso suggests that mobile operators could be wasting up to $400 million by adopting “questionable business cases” in dealing with the reported one per cent of subscribers who account for over 50 per cent of mobile data.

 

Whilst operators recognise that the traditional approach of macro cell addition is not the only solution in tackling data demand, the firm says many are struggling to evaluate the specific business cases for the various elements of new heterogeneous networks. These Hetnets include components such as micro, metro and pico cells, WiFi and femto technologies. The key, says Arieso CTO Michael Flanagan, is to understand some new variables in network planning to avoid questionable investments:

 

“Heterogeneous networks offer hope, but bring problems of their own. Operators are not only faced with a dozen offload options, but also by complex subscriber behaviours, myriad charging models and extreme users. The result is a fiercely complicated business case with some brand new variables.

The risk of getting it wrong, wasting money and still not solving the problem is significant”.

 

Studies by Arieso show that half of the data traffic generated in a typical mobile network is carried by the busiest 10 per cent of cells, and that 20 per cent of these busy cells have fewer than 200 unique data users. Flanagan says that the fact that many busy cells have few users is critical intelligence for network planning. He says that the practice of ‘cell splitting’ – the addition of a new cell to provide capacity relief – “is at risk of being unjustified when there are too few users”.

 

Even allowing for some high ARPU subscribers, Flanagan believes that an operator would struggle to justify a macro cell split for less than 200 unique users. Below 50 unique users per cell, WiFi may well be the only cost effective solution – assuming the traffic is suitable for WiFi offload. But operators must implement hetnets carefully, otherwise they could waste all of their potential cost savings:

 

“In a worst case scenario, where operators try and satisfy the demands of extreme users solely with macro sites, they will waste millions of dollars – $400m across the industry this year alone. Further, a haphazard hetnet of differing offload solutions implemented without a deep knowledge of the variables in that location will cost inestimable billions in customer churn, regulator intervention and reputational damage.”

 

So how did Arieso come up with the justification for a macro cell having no business case if it caters to fewer than 200 subscribers? They assumed a capital cost of between $100k and $150k, and the fact that a high ARPU subscriber delivers $20 of margin to an operator. Therefore, 200 subscribers deliver only $48k per annum return to the operator, giving a two-to-three year payback for a macro cell.

 

And the $400 million of wasted investment? According to the company, if 50 per cent of data traffic is carried by 10 per cent of the cells in a network, and assuming $2.5 billion of capital is invested by the industry in capacity relief every year (according to ABI Research), and from the belief that 80 per cent of this investment will go into the areas covered by these 10 per cent of busy cells, then if 20 per cent of this was invested in macro sites with less than 200 users that would amount to $400 million. And that, says Flanagan, is to support a suspect business case.