Increasing ROI with Improved GSM Coverage and Capacity
By Chris Cox, Marketing Manger, ip.access
Although the business market has an acute need for enhanced GSM coverage and capacity, it has not always been economic for operators to provide this with antenna-based solutions. An alternative – the IP-based picocell – is successfully challenging these economics by delivering improved services and increased return on investment.
The Need for GSM Coverage and Capacity A Traq-wireless survey showed that 46% of phone users in the US (and 14% in the UK) would switch operators for improved coverage. Second only to cost as a reason for switching, improved coverage is the key to retaining business customers. It is also the key to increasing usage, as evidenced by the operator MTN, which reported a 27% increase following indoor coverage improvements.
Figure 1: IP Access picocell Basestation
The importance of coverage and capacity is most pronounced indoors, where they are needed the most. 70% of voice and data services are used indoors, creating high demands on spectrum coverage and capacity in busy workplaces. These demands are difficult to satisfy with traditional macrocell solutions. The GSM signal is attenuated by steel, concrete and metallised glass in building structures, and it is difficult to provide the capacity needed where population density is high.
The Cost of Antenna-Based Solutions To combat these problems, operators usually improve coverage with antenna-based in-building solutions. Distributed Antenna Systems (DAS) and passive repeaters are designed to spread coverage around a building or re-broadcast GSM signals from the macro network.
Although these solutions deliver the coverage needed, they are very expensive to implement. For the largest buildings, the total cost of installation can reach many hundreds of thousands of dollars. At the other end of the scale, the cost is at least $20-40k. The cost is high because DAS and repeaters use dedicated cabling and a leased line infrastructure. The installation of cabling results in considerable disruption to an office building. It requires access to roof space, floor space and ducts, if the landlord and tenants will allow it. Once the cabling is installed into the fabric of the building, it cannot be moved to a different building. 65% of the cost of providing coverage with antenna-based solutions is unrecoverable when moving premises.
The SME Market: a High-Margin Opportunity These costs prohibit operators from offering antenna-based solutions to the SME market. In most cases, they can only be offered to enterprises large enough to amortise the CAPEX and OPEX costs.
But the SME (small and medium enterprise) market presents an opportunity too significant to be ignored. There are over 60 million SMEs worldwide: enterprises with offices less than 50,000 sq. ft. with a typical occupancy of less than 250 people. Penetration of in-building solutions in this SME market is just 0.03%. Compared with the ‘large enterprise' market (buildings larger than 500,000 sq. ft.), where penetration is 4.2%, the potential of the SME market is conspicuously untapped.
Leading telecoms analysts have noted this potential. Rob Pritchard, Benchmark-it.co.uk ltd., says that “The revenue opportunity from small and medium-sized enterprises is very significant...the margins…are higher – up to 20%, compared with 0-10% from the larger corporate sector.” In 2003, in-building coverage solutions generated revenues of over $650m. As market penetration increases, so too will the revenue that can be generated with a cost-effective alternative to antenna-based solutions.
Picocells Increase ARPU IP-based picocells are far more cost-effective than antenna-based solutions, so they can be offered to the SME market to increase ARPU (average revenue per user). Even installations covering as few as ten users need to generate less than €1 per user per business day of additional revenue to deliver a return on investment.
Without a need for dedicated cabling, the cost of picocells is kept low. Uniquely, picocells can transport the GSM Abis interface over the broadband IP infrastructure that already exists in many offices, warehouses, retail outlets, factories and college buildings.
Installation of picocells is simple. Once a picocell has been mounted on a wall and has been connected for power and IP for backhaul, it can start to provide GSM coverage to the surrounding building space. These connections can both be provided by standard CAT 5 Ethernet cable. The picocell is controlled remotely by a basestation controller which links to the operator's network. This straightforward installation procedure keeps disruption to a minimum. In fact, 90% of the investment can be recovered if the enterprise decides to move to new premises. The building fabric is not interrupted, so permission from landlord and tenants is not required.
Demand for spectrum capacity is increasing in densely populated workplaces where a number of people want to access voice or data services at the same time. Picocells provide the extra capacity needed, instead of distributing the same capacity around a building in the manner of antenna-based solutions.
Successfully combating the radio transmission problems of outdoor macrocells and the cost problems of DAS and repeaters, picocells provide operators with the means of displacing fixed line services and generating increased ARPU in the SME market, while reducing churn and increasing customer satisfaction through improved service.
For operators considering picocell solutions, the financial impact of reduced churn and increased ARPU can be calculated online: www.smeroi.com. |
