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After a long wait through 2013, and with 2014 emerging as the year when
small-cell deployment models are tested in the eld for proof-of-concept,
players hungry for participation in the small-cell ecosystem are lining up with
offerings narrow and broad. Several early development models are emerging
as wireless operators and the myriad of players that can deliver the various
components necessary for network expansion seek the best-possible models
for fast, efcient and economical small-cell network development.
White Paper:
2014 Small Cell Economics & Realities
A New Round of Infrastructure
Expansion .............................................. 2
Small Cell Requirements ....................... 3
Emerging Sourcing Models .................. 4
A La Carte ............................................. 6
Action Items .......................................... 8
About ATLANTIC-ACM .......................... 9
Contents
Sponsored by
ATLANTIC-ACM
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As 4G LTE Expansion Comes to a Close, a New Round of
Infrastructure Expansion Begins
The next round of mobile infrastructure expansion is upon us. AT&T and
Verizon are nishing up their initial 4G LTE builds and T-Mobile and Sprint,
which continue to build out, are proceeding at a rapid pace (see Figure 1).
With initial LTE deployments beginning to move into the rearview mirror, the
next round of infrastructure development is ramping up.
The next round of development
will be centered around macro-
cell and small-cell deployments
for network expansion and
densication. AT&T and Verizon
are deploying macro cells to
expand coverage and ll holes
in their LTE networks, which
will require ongoing backhaul
development and support. They
also are pursuing small-cell
solutions to add density in areas
where macro-cell expansion is
impractical due to spectrum or zoning restraints.
Virtually all carriers have been vocal about the need for small-cell solutions.
Infrastructure developers serving those carriers also report heavy interest in
Figure 1:
LTE Markets by Provider
2
#

o
f

M
a
r
k
e
t
s

w
i
t
h

L
T
E

Verizon
AT&T
T-Mobile
Sprint
LTE Markets by Provider: 2011 to 2013*
*Number of markets for 3Q, not end of year
195
476
500
26
103
435
46
254
49
230
0
100
200
300
400
500
600
2011 2012 2013
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their small-cell development services. (see Tables 1 & 2). Still, meaningful
activity and scaled deployments remain scarce.
Small Cell Requirements
Small-cell deployments have the same requirements that exist in macro-
cell deployments, but the scale of these deployments drives signicant
complexity from an infrastructure perspective. For example, an area that
is covered by a single macro cell may
require 10 or more small-cells to boost
coverage, and each small cell has the
same requirements as a macro cell (see
Figure 4). These include site acquisition,
attachment rights, backhaul, power,
Tables 1 & 2:
Quotes on Macro Cells
and Small Cells
3
Macro Cell Site Densication
As noted on our last quarterly call, our 4G LTE coverage
build is essentially completed so our capital spending
going forward will be focused on adding capacity and
density to our existing coverage. Verizon 3Q13
Earnings Call
Increasing site densifcation leading to new leasing
activity and shifting mix away from pre-sold and/
or amendment activity... It has started principally
with Verizon and AT&T, so we would expect, over
time, as the Sprint LTE and T-Mobile LTE builds go
through the markets, that they will see a similar
experience where theyll need to densify these
networks and come back and cell split.
Crown Castle International 3Q13 Earnings
Call Presentation
Consequently, the additional signal strength needed
at the cell edge for many 4G applications will further
encourage greater cell-site density and hence more
tower leases over time... And therefore, they are
increasing their demand, more tower spaces, as we
go again, whether its on existing sites through
amendments and more equipment or new sites to
densify the network. So its a positive trend that
continues along all of the fundamentals.
American Tower Corporation 3Q13 Earnings Call
Small Cell Networks
Activity on small cell networks is also seeing strong
activity as carriers continue to focus on improving their
networks. Crown castle International 3Q13 Earnings
Call Presentation
AT&T plans to deploy 1,000+ distributed antennas
and 40,000+ small cells through 2015 in order to
increase network density (2012 AT&T Financial Analyst
Day Network Strategy Presentation)
Verizon plans to deploy 200 LTE small cells in 2013 (May
2013, Verizon CTO Nicola Palmer)
Sprint plans to make aggressive use of small cells in
its future LTE network, launching tens of thousands of
tiny high-capacity base stations in high-trafc indoor and
outdoor areas in 2013 and 2014. CTIA Wireless in
New Orleans 2012, Sprint VP of Network
Development and Engineering Iyad Tarazi
Site acquisition and pole attachment rights
provide small-cell radio
Backhaul equipment
located at base of or
inside street furniture
(depending on
installation type)
Fiber backhaul and power
connection
Small
Cell
Backhaul
Equipment
colocation and network management. All of these elements must be cost-
effectively married and deployed.

Emerging Sourcing Models
No clear, cost-effective business model has emerged for dealing with the
scale-driven complexities of small-cell deployments. Accordingly, 2014 is
shaping up as a proof-of-concept year for small-cell build-outs. Sourcing
models are emerging in two forms turnkey and a la carte. Turnkey
solutions, also known as small-cell-as-a-service, include all the components
in Figure 4. Advantages to infrastructure suppliers pursing this model include
the generation of scale across existing products and opportunities to become
one-stop sourcing partners to wireless operators. For operators, advantages
include ofoading small-cell development
projects at a time when demand and
4G-related jockeying for competitive
position is at its peak.
Figure 4:
Small Cell Requirements
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Three key supplier groups encompass both models (turnkey and a la carte)
tower/real estate providers, fber operators (ILECs, CLECs, cable MSOs,
metro ber players, etc.) and integrators.
Tower providers include the likes of American Tower, Crown Castle and SBA
(among others). This groups core expertise in site selection and acquisition
delivers value on its own, but some players are directly investing in small-
cell expertise in order to meet carrier needs in the next wave of infrastructure
expansion. For example, Crown Castle acquired NexG, which added a base
of distributed antenna system (DAS) business to its portfolio as well as
establishing a ber footprint in major metro areas (read: adding backhaul and
ber services to deliver a complete, turnkey, small-cell enablement solution).
Meanwhile, SBA has invested in turnkey small cell and DAS provider Extenet
Systems and American Tower has pursued an organic strategy via an internal
business unit.
Figure 5:
Small Cell as a Service
Players / Timeline
5
Small Cell as a Service
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Fiber players, including AT&T, CenturyLink, Verizon, Time Warner Cable,
Charter, Cox, Comcast, Fiberlight, Fibertech, Tower Cloud, PEG Bandwidth,
Zayo and many others, are primarily in the game for backhaul. However,
they also hold the potential to provide services ranging from basic network
management to their own full, turnkey solutions.
Integrators such as EdgeConnex and ExteNet Systems can deliver small-
cell services in pieces but are largely focused on turnkey solutions. In some
quarters of the industry, integrators are viewed as potentially being at a
competitive disadvantage on the pricing front because they lack infrastructure
and/or direct assets to discount. However, the integrator models traditional
value propositions of vendor neutrality and the ability to drive down prices
through competitive bidding have traditionally served this model well
especially in high-demand scenarios with plenty of business to go around.
A La Carte
The downside of the a la carte model is it saddles operators with onerous
project management, including the sourcing of multiple vendors across an
increasing number of network points, with each point having more than one
infrastructure vendor. Since small-cell deployments are expected to occur at
a signicantly higher order of magnitude than macro-cell deployments, the
scope and scale of this management will be challenging.
However, wireless operators, for their part, dont mind the complexity and like
controlling services. Early discussions with market players, and data from
ALANTIC-ACMs 2013 Metro Report Card Survey indicate that, at this point, a
6
{
The next round
of infrastructure
development
will be centered
around macro-
cell and small-cell
deployments for
network expansion
and densication.
ATLANTIC-ACM
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turnkey solution is not a requirement to win small-cell infrastructure business.
When we asked about the services they expect to purchase along with small-
cell backhaul, many (nearly 50%) wireless operators/buyers told us they see
ongoing network management and utility contracting as complementary
requirements. The remaining components in turnkey solutions were each
cited by 29% or fewer wireless network buyers (Figure 6).
Hence, while the scale and complexity of small-cell deployments favors
single-vendor sourcing, desire for control of the build-out process exists with
the majority of buyers, generating plenty of opportunity for a la carte players.
Network Expectations
Small-cell deployments come with expectations for certain types of backhaul
services. With the macro-cell backhaul environment in the U.S. abuzz about
Figure 6:
Wireless Operator
Interest in Small
Cell Services
7
Wireless Operator Interest in Complementary
Small Cell Services
53%
47%
53%
47%
71%
29%
76%
24%
76%
24%
76%
24%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
On-Going Network
Management
Utility
Contracting
Site Selection
and Acquisition
RF Engineering Project
Financing
OEM Selection
and Maintenance
Q: Other than providing backhaul connectivity, do you expect the carrier/backhaul provider to provide any of the following services in conjunction with your small cell deployment?
Source: 2013 ATLANTIC-ACM Metro Wholesale Service Provider Report Card Survey
Yes
No
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dark ber replacement, operators will be interested in similar solutions
where available for small-cell deployments.
On the backhaul front, ATLANTIC-ACM surveys and discussions with wireless
operators and ber players point to heavy demand for dark ber. This trend
will hold true only if availability exists. (Small-deployments will not be able to
work on the economics of new ber builds beyond short laterals.) However,
with tight cost economics, ATLANTIC-ACM expects operators to look at new
technologies as well as creative solutions for backhauling trafc. As operators
test different deployment strategies and architecture, we expect them to
develop best practices playbooks around backhaul, which will shape the
large, scaled deployments of 2015 and beyond.
Action Items for Infrastructure and Backhaul Players
Dene the Value of Your Existing Assets. Dene a strategy that
leverages the strengths of your existing asset base, as no single
8
Average Expected Portion of Small Cell Backhaul Spend By Technology
24%
22%
19%
13%
12%
10%
0%
5%
10%
15%
20%
25%
30%
Dark
Fiber
Dedicated
Ethernet
Private Line
Switched
Ethernet
Microwave Dediated
Internet Access
TDM/OCn
Private Line
(DS1/DS3)
P
o
r
t
i
o
n

o
f

T
o
t
a
l

B
a
c
k
h
a
u
l

S
p
e
n
d

(
%
)

Source: 2013 ATLANTIC-ACM Metro Wholesale Service Provider Report Card Survey
Figure 7:
Projected Small Cell
Backhaul Spend by
Technology
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model will win it all. A preferred model may emerge in this years
proof-of-concept trials, but plenty of opportunity exists for multiple
models. Understanding your assets and how they t with mobile
operator network needs will be key in winning business as current
small-cell requirements do not create opportunities for capital intensive
new builds or infrastructure development.
Understand Customer Economics. Ultimately, deals will
succeed when customer economics align with provider offers.
Understanding evolving customer values and end user network
pressure points, and creating solutions that meet those requirements,
will be key to generating value and winning deals.
Consider Strategic Acquisitions and Partnerships. Partnerships or
acquisitions to expand skillsets or broaden asset bases should be
on the table as economics will enable scaled players with density to
drive wins.
About ATLANTIC-ACM
ATLANTIC-ACM is a leading provider of strategic research and consulting
services to the communications and information industries. In addition to
producing the industrys principal customer satisfaction, benchmarking,
and market sizing and opportunity studies, ATLANTIC-ACM assists clients in
evaluating business development opportunities for successful investment,
9
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On the
backhaul front,
ATLANTIC-ACM
surveys and
discussions with
wireless operators
and ber players
point to heavy
demand for
dark ber.
ATLANTIC-ACM
One Beacon Street, 13th Floor
Boston, MA 02108
Tel: 617-720-3700
www.atlantic-acm.com
market entry and long-term planning. For more than two decades, ATLANTIC-
ACM has helped leading companies identify opportunities, capture and retain
market share, and navigate changing markets, economies and technologies.
Contact
For more information about the contents of this white paper, contact Aaron
Blazar, ATLANTIC-ACM Vice President and principal author of this document,
at (617) 720-3700, or by email at ablazar@atlantic-acm.com
10