Mobile Network Offload

End-to-End Network Costs Comparisons for Femtocell, Wi-Fi, and Macro RAN

Executive Summary
There is near universal agreement in the industry that femtocells offer a great solution for providing indoor coverage. If you are a mobile network subscriber with little or no coverage in your home, femtocells provide voice and text services that mirror those available on the outdoor 3G macro network. It has been more challenging, however, to get agreement as to when femtocells should be used as a pure data offload solution. Furthermore, femtocells provide but one approach for offloading indoor traffic. An alternative approach is to leverage the near ubiquitous availability of Wi-Fi in smartphone devices to offload traffic using unlicensed IEEE 802.11 based technologies. While much of the early focus of Wi-Fi indoor offload has been based on user deployed, self-managed Wi-Fi, there is an alternative approach that integrates indoor unlicensed radios into an end-to-end Service Provider Wi-Fi architecture. This whitepaper provides a vendor-neutral view of how network cost per gigabyte (GB) varies across femto, Wi-Fi, and the macro, and how each individual solution is best suited for the operator depending on the type of customer involved (i.e., Bronze, Silver, and Gold tiers). The whitepaper further details the subtle differences in how cost per Mbps (and its equivalent cost per GB) should be calculated and provides a deeper dive into the unique cost attributes that can be observed for each solution.

The Evolved “Busy Hour”
Busy hour traffic has been a commonly used term to measure the instances during the day when heavy traffic is seen on networks. W hile traffic has been moving f rom voice and text messaging to more data applications like web surfing or mobile video, the “ busy hour” has been moving as well into the late evenings when people reach home and start to consume data and content on their mobile devices. This simplifies the ability to evaluate the cost trade-offs of the macro network versus femtocells and carrier W i-Fi.

Cost Modeling for Macro Versus Femto and Wi-Fi
The model calculates the end-to-end costs for each solution, taking into account radio access, backhaul, and core network costs, and breaks them out by CapEx and OpEx costs. Apart f rom accounting for the busy hour traffic, the study also uses subtle differences in the way cost is calculated for macro versus femto and W i-Fi cases. The macrocell is shared between many different subscribers. As a result, if one subscriber does not use it, the cost of the installation can be allocated to the subscribers actually using it. This means that for a given subscriber, there is no cost if he or she does not leverage the macrocell for data traffic. The macrocell is

© 2011 ABI Research • www.abiresearch.com The material contained herein is for the individual use of the purchasing Licensee and may not be distributed to any other person or entity by such Licensee including, without limitation, to persons within the same corporate or other entity as such Licensee, without the express written permission of Licensor.

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but it has the benefit of having enough users to be fully utilized in the busy hour. upfront subscriber purchase. the femtocell or Wi-Fi is based on an “all you can eat ” model. Different accounting methods (depreciation period. the cost effectiveness of using a small cell Wi-Fi is quite obvious. For a bronze user. femtocells or Wi-Fi do not provide any specific advantages. t w o carrier. without the express written permission of Licensor. the device costs the carrier a fixed amount of money whether the subscriber uses it or not. if one of these subscribers does not use it. etc. which is shown as an a v e r a g e c o m bined cost. the device sits idle. silver. The gold customer is the ideal use case for using a femto or Wi-Fi solution. without limitation. In other words. the model assumes that the macro network is 100% utilized during the busy hour which gives the macro network the best possible “cost per Mbps” when compared to small cells. Introduction T h e re i s n e a r u n i ve r s a l a g re e m e n t i n t h e i n d u s t r y t h a t f e m t o c e l l s o f f e r a g re a t s o l u t i on f o r p ro v i d i n g i n d o o r c o ve r a ge. to persons within the same corporate or other entity as such Licensee. The small cell provides coverage indoors and is only available to a small group of family or f riends that are indoors in the vicinity of the small cell installation at any given time. It becomes quite apparent that the macro network will be cost prohibitive when compared with the cost advantages that small cell solutions bring to the table. s e r v i c e s t h a t m i r ro r t h o s e a v a i l a b l e on © 2011 ABI Research • www. I f yo u a re a m o b i l e n e t wo rk s u b s c r i b e r w i t h l i t t l e o r n o c o ve r a ge i n yo u r h om e. and three carrier cases compa r e d t o f e m t o and Wi-Fi. These different models allow us to derive a fair comparison of cost per Mbps for each of the devices in the busy hour. The key difference between the macrocell model and the small cell model is that the macrocell cost can be modeled against theoretical maximum capacity whereas small cell cost has to be modeled against actual usage.) can also lead to different conclusions as to which solution is more effective than others. and bronze). The chart also s h o w s t h e “crossover points” for femto and W i . Even when using the most generous assumptions for macro network cost per GB. The overall conclusion of this study is that the business case for small cells (both femto and Wi-Fi) as offload solutions becomes more attractive as mobile data consumption increases. Observations and Summary T h e c har t in the next column shows the a v e r a g e c o s t per month for the macro for one c a r r i e r .F i v e r s u s macro when they become more att r a c t i v e t h a n the macro cell.a very expensive asset.com The material contained herein is for the individual use of the purchasing Licensee and may not be distributed to any other person or entity by such Licensee including. The small cell is only used by a few distinct subscribers.abiresearch. In addition. f e m t o c e l l s pro v i d e vo i c e a n d t e x t . the analysis still results in a “crossover point” of around 1. This is a simplified v e r s i o n o f t h e output sh owing a comparison of w h i c h s o l u t ion is the best for different types o f u s e r s ( g o l d. On the other hand.5 GB/month beyond. page 2 . As a result. The crossover points begin to become clearer for silver and bronze customers as femto/Wi-Fi is more cost effective than the macro in some specific cases.

An alternative approach is to leverage the near ubiquitous availability of Wi-Fi in smartphone devices to offload traffic using unlicensed IEEE 802. ABI Research has therefore been motivated to define a “goldilocks” (just right) model that is sophisticated enough to be useful but simple enough to be understood by industry personnel. Evolution of the Network Busy Hour This “goldilocks” simplification has been made possible by the shift in traffic loads experienced on mobile networks as data becomes the dominant traffic type. to persons within the same corporate or other entity as such Licensee. page 3 .t h e outdoor mac ro net work. The figure below illustrates an hourly usage profile that is typical of carriers in developed countries with a relatively high smart device penetration: Mobile Offload . Existing approaches either take simplistic approaches that don’t fully replicate the cost factors in the femto and/or the macro network or they require extremely complicated models that often mask the logic used in deriving © 2011 ABI Research • www. Should there be continued macro network build-out to support indoor traffic. It has been m o re c h a l l enging. ABI Research has found that the busy hour in the mobile network has been pushed well into the evening. without the express written permission of Licensor. In the coverage case. without limitation. the proposition primarily benefits the carrier. While much of the early focus of Wi-Fi indoor offload has been based on user deployed. Previously. Furthermore. or alternative service provider Wi-Fi approaches using unlicensed radio technology? This paper and its underlying model provide that analysis.abiresearch.com The material contained herein is for the individual use of the purchasing Licensee and may not be distributed to any other person or entity by such Licensee including. In the last several years. however. the “busy hour” in mobile networks occurred in the morning and the early evening when people were “on the go” between their home and their places of work. As mobile operators consider alternative approaches to supporting the rising adoption of mobile data services by users located indoors. This busy hour traffic was primarily voice and messaging traffic. self-managed Wi-Fi. femtocells provide but one approach to offloading indoor traffic. the proposition provides benefit to both the carrier and the subscriber since it can be extremely frustrating for a subscriber who does not have coverage in all parts of his or her home. to date there is no universal agreement on the validity of such models. cost calculations. Data intensive video applications on smartphones and tablets drive a tremendous amount of traffic onto mobile networks and these applications are primarily utilized indoors in the evening. to get agreement a s t o w h e n f emtocel ls should be used as a pure d a t a o f f l o ad solution. a coherent approach is required by which alternative techniques can be evaluated. there is an alternative approach that integrates indoor unlicensed radios into an end-to-end Service Provider Wi-Fi architecture. howe ver.A Different Perspective The “Goldilocks” Approach While the industry has developed many models that outline the value femtocells could provide in the offload case. In the offload case. though the subscriber will often find the femtocell data experience more compelling because of the higher data speeds supported by the technology.11 based technologies. femtocell offload using licensed radio technologies.

small cell indoor offload solutions that support busy hour traffic directly reduce that carrier RAN cost. carriers sometimes trade off the cost of installing capacity with the incremental cost of installing that capacity. three-sector cell site will need to add a full second carrier even though only half a carrier of additional capacity may be required. It requires equipment in the tens of thousands of dollars range. The cell site equipment is connected to the core network via backhaul facilities that contribute significantly towards the total cost of ownership of the macro RAN. and installing and commissioning a complete cell site can cost in excess of a hundred thousand dollars.abiresearch. and industry followers model the comparison of macro and small cell costs. In a busy urban cell site. a carrier may decide to add a third carrier at the same time as it adds a second carrier. the macrocell site is 100% utilized in the busy hour. the macro network has one significant advantage over small cells. ABI Research has found. ABI Research has assumed a 100% efficient macro cell site. ABI Research then uses typical consumption profiles to translate this cost to the cost of production required to support three different types of user: • A bronze 300 MB/month user • A silver 1. While this will decrease the utilization of the cell site for some time.5GB/month user. vendors. Ideally. without the express written permission of Licensor. but it has the benefit of having enough users to be fully utilized in the busy hour. positive impact on our ability to compare the cost of the use of small cells (femtocells and SP Wi-Fi) with the traditional macro network. capacity tends to be “lumpy. © 2011 ABI Research • www. While this really is not a fair comparison (ABI Research is skewing the analysis in favor of the macro network and against small cells). and • A gold 5GB/month user What Drives Network Cost? Macrocell Cost Modeling Macrocells and small cells have fundamentally different cost models. When the busy hour passes a defined threshold. without limitation. a straightforward yet powerful model is built to help carriers. As a result. by procuring more carriers or splitting existing cells. however. Many carriers like to leave some headroom (20% or so) between their engineered capacity and the actual throughput required in the busy hour. this is often not the case.com The material contained herein is for the individual use of the purchasing Licensee and may not be distributed to any other person or entity by such Licensee including. Additionally. The costs for the macro network simply cannot get any better than what is shown here. however. Carriers determine when they need to invest in new RAN capacity by comparing actual network capacity to usage in the busy hour. ABI Research feels that this will reduce dissension and help achieve better alignment on the structure and overall results of the model.This movement of the busy hour has had a dramatic. Given all of these factors.” A service provider that can no longer suffice with a given one-carrier. Since busy hour traffic dimensioning is the key determinant to total cost of ownership of the RAN. Evolution of the Network Busy Hour By leveraging these simplifying approaches. the carrier will typically schedule the addition of new capacity. to persons within the same corporate or other entity as such Licensee. for example. as this is truly the key driver of carrier network cost. The macro network provides coverage that is leveraged by all carrier subscribers. in the real world many cell sites do not approach anywhere near 100% capacity in the busy hour. that arguments about the appropriate busy hour macro cell site efficiency have been a big reason for a lack of alignment on macrocell cost models. Finally. In reality. The model also translates that cost into cost per Gigabyte (GB) per month. every byte of data offloaded via small cells during the busy hour will have a direct impact on the reduction of macro network CapEx and OpEx costs. Another key simplification made in the model was with respect to the utilization of the carrier macro network in the busy hour. By definition in our model. it ensures that the carrier can delay the point at which it again has to go through the expensive upgrade process at the cell site. for example. page 4 . The busy hour is and always has been the key component of network utilization that drives carrier cost. While these overall costs are extremely expensive. This model directly measures cost per Megabit per second (Mbps) in the network busy hour. The macrocell is a very expensive asset. the theoretical cost of the macrocell can be modeled as follows. For this reason. In other words. a carrier will provision a given network element such that it is completely utilized in the busy hour. A typical macrocell in an urban area will have hundreds of concurrent users. The macro RAN is a very expensive asset.

From a cost perspective. without limitation. This means that for a given subscriber.com The material contained herein is for the individual use of the purchasing Licensee and may not be distributed to any other person or entity by such Licensee including. These different models allow us to derive a fair comparison of cost per Mbps for each of the devices in the busy hour. They cost the carrier less than $150 and require no site leasing. small cells are extremely inexpensive. Small Cell Network Cost ($/Mps) = Small Cell OpEx & CapEx Actual Busy Hour Usage The macrocell is shared between many different subscribers. The macrocell is a “pay as you go” resource. page 5 . to persons within the same corporate or other entity as such Licensee. When the subscriber does use macrocell data. the cost of operation can be allocated to the subscribers that are actually using it. there is no cost if he or she does not use any data. the data cost is fixed per unit of usage. Unlike the macrocell. if the subscriber uses two GB per month. Because of this. In other words. the device sits idle. In other words. without the express written permission of Licensor. if the subscriber uses 100 Kbps sustained data in the busy hour.Macrocell Network Cost ($/Mps) = Macrocell Opex & CapEx Max Theoretical Busy Hour Usage Small Cell Cost Modeling In contrast to macrocells. however. the device costs the carrier a fixed amount of money whether the subscriber uses it or not. Gigabytes per month © 2011 ABI Research • www. one must consider that the small cell is not fully utilized. To be fair. ABI Research can compare this to the small cell model. For that reason. Use it a lot and it costs the carrier a lot. As a result. If ABI Research takes the macrocell. the cost to the carrier will be approximately twice as much as if the subscriber uses 50 Kbps sustained data in the busy hour. whereas the model considers actual data usage. the cost of the small cell in dollars per Mbps or dollars per GB will never be zero. which is shown below: The key difference between the macrocell model and the small cell model is that the macrocell model considers maximum theoretical capacity. Use it a little and it costs the carrier very little. however. if one subscriber does not use it. the small cell provides coverage indoors and is only available to a small group of family or friends that are indoors in the vicinity of the small cell installation at any given time. “Pay as You-Go” Versus “All You Can Eat” A simple graphic is provided that highlights the differences between the macrocell and small cell cost models. Power is provided by the subscriber and backhaul is provided by the subscriber’s Internet Service Provider. the macrocell cost per Mbps and GB per month will be zero if the subscriber uses zero data. As a result. the small cell is much more cost effective on a dollar per Mbps basis than the macrocell. the fundamental cost model for the carrier will look similar to what is presented below: $/GB The small cell is only used by a few distinct subscribers. ABI Research has to model the theoretical cost of the small cell in the following manner. Along the same lines. which provides coverage outdoors and is available to any mobile carrier subscriber who happens to be in the area.abiresearch. For that reason. if one of these subscribers does not use it. it will cost the carrier approximately twice as much than if the subscriber uses one GB per month.

What ABI Research also finds.com The material contained herein is for the individual use of the purchasing Licensee and may not be distributed to any other person or entity by such Licensee including.abiresearch. which is typical for a carrier with significant smartphone penetration. A busy hour consumption of 7% has been assumed for this model. the key to being able to deliver the most cost-effective mobile broadband service is to understand when it becomes more attractive for an operator to deploy a small cell data offload solution versus building conventional macro RAN capacity. As stated earlier. Silver. • Gold User – monthly quota of data consumption is five GB per month • Silver User – monthly quota of data consumption is 1. there is a crossover point at which the small cell approach becomes more cost effective to serve traffic compared to the macrocell network. The network cost model calculates the CapEx and OpEx cost in the busy hour for macrocell.5 GB per month • Bronze User – monthly quota of data consumption is 300 MB per month These consumption limits are useful in comparing the costs associated with today’s average smartphone user and those which may be experienced as the adoption of mobile broadband services continues to accelerate. a typical Received Signal Code Power distribution for urban deployments is used together with building penetration loss to estimate the actual HSDPA capacity delivered for both the indoor and outdoor case. Assuming 2100 MHz spectrum.3 Mbps for the outdoor case and 2. Network Capacity Model Given these factors. we can see that as consumption rises. A small cell that is using 100 Kbps in the busy hour will cost the carrier roughly the same amount as a small cell that is using 50 Kbps in the busy hour. which is rarely the case but provides the best-case scenario for the macro. and Bronze. network capacity. the capacity for a single sector HSDPA macro base station is estimated to be 3. Comparing Macro and Small Cell Costs When the two alternative models are compared. For the indoor case. without limitation. is that the cost of the small cell does not change significantly with respect to how much it is utilized. The small cell uses more of an “all you can eat” model. The Offload Model Introduction The three fundamental inputs to this model are busy hour traffic estimations. page 6 . A small cell that carries two GB of traffic a month will cost the carrier roughly the same amount as a small cell that carries one GB of traffic a month.2 Mbps for the indoor case. and Wi-Fi access points. This maps to the data shown in the figure in the “Small Cell Cost Model“ section. this is not a realistic assumption and will make the macro network figures look better in the model than is actually the case. which means that 7% of the user’s daily quota of data is consumed in the busy hour. femtocell. without the express written permission of Licensor. The model assumes a 100% busy hour utilization of the macro. as well as the deltas between licensed and unlicensed small cell offload solutions. however. Network Capacity Model The network capacity model is used to generate the amount of capacity that is provided in a traditional macrocell case. as shown in the figure below. In each case the end-to-end cost is assumed. a -15 dB penetration loss is assumed. and network cost. to persons within the same corporate or other entity as such Licensee. Using these calculations. © 2011 ABI Research • www. Traffic Model The user traffic model generates a traffic scenario for three different sets of users: Gold.

silver. and power. maintenance. gateways. The OpEx costs assumed include data center costs such as site lease. without limitation. we used $150 (US) as the price of the femtocell and $75 (US) © 2011 ABI Research • www. and core network (SGSN and GGSN). including access point. and GGSN. Applying a best case scenario for the network. aggregation gateway. Technologies: Core The core network accounts for network elements like the GGSN and SGSN and calculates the CapEx and OpEx costs for a typical core network.com The material contained herein is for the individual use of the purchasing Licensee and may not be distributed to any other person or entity by such Licensee including. Network integration costs for femto and carrier Wi-Fi have also been considered. and core. and GGSN. The total cost per GB for the macrocell case is the sum of OpEx and CapEx for each of the network elements. backhaul. For the multi-carrier case. The comparison between the different technologies and the different user types should give an indication as to which technologies are better placed for different user traffic conditions. Femtocell and Carrier Wi-Fi The femtocell network considered in this model accounts for the end-to-end costs. including one year and three year amortization periods as well as subscriber purchase options. including radio access. Technologies: Radio Access The radio access CapEx consists of the base station. The average cost per site again reflects a typical backhaul network using cost-effective technologies that provide high performance. 3G. and core. and three carrier cases to allow for best-case scenarios. to persons within the same corporate or other entity as such Licensee. security gateway. Femto and Wi-Fi equipment are amortized between one and three years. The CapEx elements in the network cost model are amortized for a given period that can range from one to ten years depending on the equipment. Output The output of the model is a product of two elements • Network cost per GB in the busy hour where GB is the supply capacity • Busy hour traffic consumption in GB for gold. The backhaul costs are calculated separately for the pre-aggregation and aggregation layer of the backhaul network. without the express written permission of Licensor. backhaul. femto. tower/ rooftop.For the macrocell case. and bronze users. Each carrier is assumed to use five MHz spectrum. SGSN. and site maintenance costs. In our modeling. The average cost per site represents a combination of leased and owned circuits reflected in both the CapEx and OpEx. Ethernet backhaul is assumed using both native IP Ethernet and pseudo wire to support 2G. This is done for each element in the network including the radio access (base station plus controller). while core elements like the SGSN and GGSN are amortized over ten years. The macro base station is amortized over eight years. Technologies: Traditional Macrocell The traditional macrocell is the baseline technology in this model that has been extensively built out. silver. Technologies: Backhaul The backhaul portion of the model takes into account a typical network with both leased and owned circuits. Other network cost elements like spectrum and cell site are amortized over a period of 20 years. and bronze users where GB is the demand capacity The output of the model provides a cost comparison for delivering a unit GB for the macro. the model assumes best case scenarios for each element: the macro. The model also uses one carrier. using network capacity estimates. and Wi-Fi cases for gold. The Wi-Fi network used for the model has been assumed to be a carrier-integrated Wi-Fi network and therefore considers elements like the access point. and Wi-Fi. two carrier. site rental. Both the femtocell and carrier Wi-Fi networks assume different cases for the access point. and spectrum related costs. page 7 . In order to make a proper “apples to apples” comparison between macro. and future 4G networks. backhaul.abiresearch. femto. while the OpEx takes into account power. the network cost per unit GB is calculated. additional CapEx costs (spectrum and equipment) are assumed.

and GGSN. Cost Comparison of Femto/Wi-Fi Over Macrocells The chart below shows the relative tipping point of femto and Wi-Fi over macro cells. which are typically borne out of the Network Operations Center (NOC). In the macro case. Difference between Femto/Wi-Fi and Macrocell Costs The one big difference in the network cost and capacity models for femto/Wi-Fi and macro is that femto and Wi-Fi are assumed to have similar demand and capacity. Aspects Not Covered in Model While the model aims to capture the true end-to-end costs for traffic through a macro. the better it is from an operator perspective. femto.com The material contained herein is for the individual use of the purchasing Licensee and may not be distributed to any other person or entity by such Licensee including. Both the femtocell and carrier Wi-Fi networks assume different cases for the access point. and Wi-Fi) has a role to play. security gateway. The femtocell case has considered the special optimized architecture. While the model calculates the cost for busy hour traffic. In our modeling. © 2011 ABI Research • www. and GGSN. e. which could use techniques like SIPTO (Selective IP Traffic Offload) to allow for traffic from the femtocell to bypass the GGSN and SGSN network elements.abiresearch. with the cost effectiveness of each technology varying for bronze. and gold users. • The model does not account for RAN sharing benefits that may be applicable to macro cell case. The lower the cost for a given technology for a given user. the operator is not paying for unused demand in the case of a femto or Wi-Fi network. More importantly. aggregation gateway. the chart proves that each of the technologies (macro. which allow traffic to bypass the core elements like the GGSN and SGSN. the capacity demand for a femtocell is equal to the capacity supply. SGSN. page 8 . including access point. where resources are shared between competing operators or between co-sited 2G and 3G installations. without the express written permission of Licensor. gateways. silver. • The model also does not account for network management costs. to persons within the same corporate or other entity as such Licensee. Unlike the traditional macrocellular case. the chart below provides the monthly cost for the operator. This means that the GB in “$ cost per GB” in the busy hour for the femto and Wi-Fi cases is the demand capacity (equal to the supply capacity). This chart averages out the various scenarios and provides a simplistic picture clearly showing the crossover points for the macro versus femto/ Wi-Fi. without limitation. we used $150 (US) as the price of the femtocell and $75 (US) as the price of the carrier Wi-Fi device. and Wi-Fi network. Femto and Wi-Fi have been averaged out and are considered to be one element for simplicity. including one year and three year amortization periods as well as subscriber purchase options.Femtocell and Carrier Wi-Fi The femtocell network considered in this model accounts for the end-to-end costs. The Wi-Fi network used for the model has been assumed to be a carrier-integrated Wi-Fi network and therefore considers elements like the access point. femto.g. In other words. and is the connectivity point from the mobile core to the Internet backbone. there are certain elements that fall outside its scope: • The model does not account for the Internet POP costs that are present northwards of the SGSN. Network integration costs for femto and carrier Wi-Fi have also been considered. the GB denominator in the “$ cost per GB” is the supply capacity.. Optimized Network Architecture Optimized architecture refers to the use of offload techniques in the core network.

Specific crossover points for each scenario can be identified here. macro is the preferred option in general in the case of a bronze user who averages 300 MB per month. Silver User The model clearly shows that the tipping point for deciding between a femto. the use case jumps to the bottom three lines in the chart since there is no recurring cost associated with the device. femto. femto and Wi-Fi. By Technology: Wi-Fi and Femtocells • There are multiple options for femto or Wi-Fi depending on the amortization period and optimized versus un-optimized. is a “pay as you go” model. the most valued customer on the network.com The material contained herein is for the individual use of the purchasing Licensee and may not be distributed to any other person or entity by such Licensee including. Gold User The model shows that carriers would benefit from providing the gold user at 5 GB/month. • If the operator is limited with only one carrier on the macro. There is little advantage for an operator to use femtocells in this case because these users are getting the services they need without using many network resources. For the most part. without the express written permission of Licensor. without limitation. to persons within the same corporate or other entity as such Licensee. as described earlier. ABI Research has broken out the macro. the amount of subsidization and length of depreciation. • The cost differential in the macro between users can only be reduced by using a multi-carrier strategy. whether the network is optimized or not. There is a 2. but the benefit of doing this analysis for silver users is clear. Carrier specific data will help make the final decision in this case due to the differences seen based on multiple macrocell carriers. There is a cost advantage even if the femto and Wi-Fi CPEs are fully subsidized.abiresearch. femtocells Bronze User Because the macrocellular network. • In all cases. small cells become the most cost-effective solution.5x minimal cost saving between the worst case macro (one carrier indoor) and the worst case femto (unoptimized one year amortization) Once the CPE device is paid for at a one time cost per subscriber.5 GB/month. and the minimal cost difference between © 2011 ABI Research • www. page 9 . There is a 15x to 20x difference in the cost between a bronze and gold user for the one carrier case. with a Wi-Fi or femtocell solution. and Wi-Fi cases that were averaged out in the previous chart. it makes sense to adopt either a femto or a Wi-Fi strategy. By Technology: Macro • The cost of supplying indoor capacity for a macro network increases exponentially from bronze to silver to gold users. Wi-Fi. and the advantage grows if the cost is amortized over three years or if the subscriber buys the device. or macro has been crossed by the time ABI Research considers the silver user who averages 1. once the femto or Wi-Fi device is paid for.Observations by User Type In the chart below. A macrocell using three carriers is one of the most costeffective options compared to femto and Wi-Fi for bronze and silver users. There may be some limited benefit for an operator to use SP Wi-Fi if the macro infrastructure is configured in a single carrier configuration.

they need to be translated to cost per GB per month since this is the way carriers charge subscribers. the key findings are centered on these points: • The busy hour for mobile networks has moved well into the evening and indoors with the growth of data intensive video applications on smartphones and media tablets. As the cost of femtocells start to go down over time. • The use of small cells. including femtocells and carrier Wi-Fi solutions. which could be purchased by the subscriber or amortized across one or more years. © 2011 ABI Research • www. this difference will become less meaningful. without limitation. Conclusion In summary. While Wi-Fi does have a slight advantage at the moment (mostly due to the low cost of the access point). Once those costs are determined.5 GB per month usage where the cost of the small cell deployment. this advantage will vanish as femtocell access point costs decrease. even when fully subsidized by the operator. without the express written permission of Licensor. • The busy hour for mobile networks is what drives carrier cost since more capacity is needed in the busy hour than at any other time in the network. • The cost differences between a femtocell and a Wi-Fi solution are not obvious and come down to how they are accounted for in terms of subscriber purchase or amortization periods. • Wi-Fi and femtocells become cost effective especially for silver and bronze users when purchased by the subscriber or amortized over three years. • There is a tipping point at about 1. The majority of the cost savings occur on the access point itself. to persons within the same corporate or other entity as such Licensee. and as a result they directly reduce the carrier’s CapEx and OpEx requirements for that network. • There isn’t a big difference in the savings between a femtocell that is optimized and one that is un-optimized.com The material contained herein is for the individual use of the purchasing Licensee and may not be distributed to any other person or entity by such Licensee including. • If the operator is limited with only one carrier on the macro.and Wi-Fi can prove to be similar in terms of the cost to the operator across different user types depending on the amortization model. page 10 . directly reduces the need for busy hour capacity in the macro network. can be more cost effective than adding macro capacity. it makes sense to adopt either a femto or a Wi-Fi strategy.abiresearch. • A realistic model for carrier costs needs to focus on “cost per Mbps” in the busy hour since this is the true driver of those costs. However. femtocells are roughly two times more expensive than Wi-Fi when comparing basic (un-optimized) femtocell and Wi-Fi solutions regardless of the amortization model. Operators would benefit from doing a cost analysis based on their actual costs for subscribers at this usage level and above.

photocopied. to persons within the same corporate or other entity as such Licensee. or otherwise without the expressed written permission of the publisher.com The material contained herein is for the individual use of the purchasing Licensee and may not be distributed to any other person or entity by such Licensee including.Published 2Q 2011 ©2011 ABI Research 249 South Street Oyster Bay.abiresearch. Electronic intellectual property licenses are available for site use. electronic. The owners of this data may or may not be so noted where this data appears.jsp ALL RIGHTS RESERVED. Exceptions: Government data and other data obtained from public sources found in this report are not protected by copyright or intellectual property claims. without limitation. © 2011 ABI Research • www. entered into a spreadsheet or information storage and/or retrieval system of any kind by any means. recorded. Please call ABI Research to find out about a site license. without the express written permission of Licensor. page 11 . No part of this document may be reproduced. mechanical.abiresearch. NY 11771 USA Tel: +1 516-624-2500 Fax: +1 516-624-2501 http://www.com/analystinquiry.