When considering network renovations, mobile network operators (MNOs) don’t usually consider the whole picture, including the importance of smalls cell deployments that leverage the benefits of WI-Fi, according to telecommunications leader Alcatel-Lucent (News - Alert) (ALU).
“Typically, MNO conversations about new opportunities have focused on the cost of network renovations,” noted Alcatel-Lucent in a recent white paper, Turning Small Cells into Big Profits. “With small cells economic-based simulation, MNOs have the market insight needed to look beyond network total cost of ownership (TCO) to also consider the value of new small cells services and the potential for new revenues,” the white paper states.
Such a two-sided approach helps MNOs construct a more well-rounded small cells strategy that has a greater chance of success, helping MNOS determine when to use unlicensed spectrum, how to handle WLAN access, and in what situations offload data has a strong economic case.
“Simulating the economic potential of small cells is different from creating a business case, noted the paper. “An economic simulation is a top-down, market-driven approach that reflects updated results when parameters are changed or entered as new. In contrast, a business case is a bottom-up approach that is relatively static; parameter changes may require additional time and analysis.”
The small cells economic simulation process developed by Alcatel-Lucent pays a lot of attention to customer lifetime value calculations, which focuses on the present value of subscribers over the lifetime of a subscriber’s contract. This is preferable to more short-term thinking when looking at the economic case for technologies such as small cells.
While Alcatel-Lucent helps MNOs develop individual economic simulations to help operators best decide how their small cells strategy, from its simulation work it also has uncovered some general trends that MNOs should consider.
On the consumer side, small cells require a thoughtful approach.
“A large or rising market share of prepaid subscribers brings risks and challenges because they are traditionally low spending and low consuming subscribers,” noted the Alcatel-Lucent paper. “Small cells service bundles could help encourage prepaid subscribers to become post-paid subscribers, and stimulate data consumption.”
Offload data rarely justifies small cells cost in the consumer market, also noted Alcatel-Lucent, but assessing the social environment around the small cells deployment could help to maximize offloading and possibly expand subscriber market share.
Where small cells also present a profit opportunity on the consumer side is when MNOs can use them to create a better customer experience, and in helping appealing consumer applications run better due to the added bandwidth.
On the enterprise side, offload data is a lot less risky proposition, according to Alcatel-Lucent. This is due to the reliable consumption of voice and data by enterprise customers. Offload savings do justify small cells when it comes to enterprise customers, and small and medium-sized businesses are a particularly ripe market for small cells because they looking for and relatively responsive to the service improvements that come from small cells.
While these are useful general trends, however, nothing beats an individualized study.
“We tailor our offerings to assist each MNO in following the optimal path to the macro and small cells HetNets needed for a profitable future in their market,” noted Alcatel-Lucent. In other words, getting it right the first time should not be under-estimated, meaning simulations are critical as is understanding the value of adaptable small cell solutions such as the ALU lightRadio™ Wi-Fi and associated professional services.
Edited by Peter Bernstein