Capitalizing on the indoor coverage opportunity – Oliver Bosshard, Managing Consultant

Something like 80% of mobile data traffic originates indoors. Contrast this with only 5% of RAN capex allocated to indoor coverage. At the same time, less than 2% of commercial and public buildings are currently covered by dedicated indoor solutions.

Unsurprisingly, in the vast majority of commercial buildings, mobile coverage remains weak or non-existent. This is clearly a challenge for both enterprises and operators, as many of the latter feel the business case for DAS or small cell deployment fails to stack up. Why should they invest more for diminishing returns? At the same time, most enterprises will argue it’s up to the carrier to provide reliable coverage and capacity inside and out.

From a carrier perspective, the problem is that, while mobile data usage continues to rise, ARPU growth rates have stalled and, in some markets, started to fall in absolute terms. The divergence of growing data consumption and diminishing ARPU is starkly reflected in network investment. MNOs in markets with low ARPU invest less in their network compared to markets with higher ARPU (e.g., the APRU in the US is more than double the ARPU of the UK).

But out in the world of enterprise, the natives are getting restless. For landlords and businesses, the need of good indoor connectivity is becoming increasingly urgent. Residential tenants see connectivity as essential as any other utility, and for most businesses ubiquitous connectivity is mission critical. Which is why many enterprises are willing if not always able to invest in their own infrastructure. There are plenty of examples of enterprises willing to pay for services that operators simply don’t have the processes or the sales team to deliver.

At Real Wireless, we have seen increasing interest in both venue-owned distributed antenna systems (DAS), and the use of small cells as dedicated indoor coverage solutions. From a technology perspective, small cells would appear well placed to solve the challenge of indoor coverage for most businesses. However, with the growing adoption of ‘bring your own device’ policies in the enterprise, multi-operator capability is also emerging as a crucial requirement. For many businesses, there’s no point installing a network that can only be used by subscribers associated one particular operator.

For larger-scale deployments, like stadiums, DAS remains the solution of choice. However, large DAS systems are expensive, and labor-intensive to deploy, requiring long installation periods and specialist expertise. Currently, the cost base makes DAS only suitable for very large premises such as stadiums, while its limitations in terms of cost elasticity and scalability mean its addressable market is unlikely to reach down into any but the largest companies or premises. Looking ahead a little, however, it’s worth noting that, with the advent of virtualization, the distinction between small cell and DAS technologies will become increasingly blurred.

So far, however, few mobile operators seem to have been enthusiastic about deploying small cells as a means of encouraging enterprise take up or reducing churn. This is partly because, in spite of the relative maturity of small cell technology, operators have been slow to incorporate them into their enterprise packages and many seem to believe that the business case does not stack up. There is undoubtedly an opportunity here for someone to come up with an innovative solution or a disruptive new approach to drive new revenues with indoor small cells. This, however, involves the recognition of new values chains and the elaboration of commonly understood commercial templates to distribute deployment costs across specific groups of stakeholders.

For example, when deploying a network to ensure coverage and capacity in a new shopping mall, it is clearly in the interests of the operator, the mall owner, the retailers and retail app firms to ensure ubiquitous coverage. So it’s clearly in the interests of all these businesses to share the costs of deployment. However, it’s equally true that the manner in which these costs are distributed is not something that should be reinvented for each and every shopping mall. This means abandoning outmoded business models, and more collaboration, partnership and revenue-sharing.

Ultimately indoor coverage is not something operators can afford to sideline for much longer. Absence of indoor coverage is already having a huge commercial impact and, like we have said, the enterprise (and consumers) are getting restless.