Guest blog by Gayan Koralage, Director, edotco Group Strategy
The world has experienced an unexpected explosion of data usage for the past 20 months. As the general population continues to deal with the after effect of the COVID-19 pandemic, one thing is for sure – this storm has fundamentally changed the way we work. From virtual meeting platforms to cloud solutions, the backbone to enabling such technological usage would be to have stable and high-speed network connectivity.
The industry has literally seen a five-year per capita data usage growth delivered in 20 months and was unprepared to cater to the sudden demand surge. Based on GSMA’s estimates, 38% of mobile users in the Asia Pacific region experienced usage gaps with speeds less than 5 Mbps. These under-connected consumers with inconsistent and low-quality connectivity further widen the digital divide.
Southeast Asia is a diverse and booming region, with a combined population of over 676 million people (equivalent to approx. 10% of the total world population) and an ever-growing middle class; mobile connectivity is seen as a necessity in their daily lives.
Mobile Network Operators (MNOs) across the region are already accelerating their 5G deployment plans. Singapore is already introducing commercialized services, and Malaysia, the Philippines and Thailand are following suit. MNOs will need to seriously consider network densification in urban areas to cater to consumer and machine-to-machine connectivity. The Grid is getting smaller, and use cases are diverse. Small cells would be ideal as they are a low-powered and high-performing solution with a small footprint compared to regular cell towers.
Based on S&P Global Market Intelligence estimates, towers and small cell sites in Southeast Asia are expected to grow by 6.72% CAGR from 2021 to 20311. Although small cell sites only currently represent 4% of the total towers in Southeast Asia, it is expected to increase to 20% by 2030. This represents a 100% increase from current small cell sites available. OpenSignal also indicates that 5G users are expected to consume up to 2.7x more mobile data than 4G users; hence small cell solutions would be key in bringing down the cost per GB and increasing network capacity.
Small Cell rollouts in Europe and the USA as a Benchmark
Europe and the USA have been leading the worldwide small cell deployment, mainly due to a highly urbanized geography, demand from MNOs and a favourable regulatory environment. In Europe, Cellnex and Vantage Towers are the leading Towercos with an estimated total of almost 10,000 small cell sites, and Crown Castle is the leading small cell deployer at almost 80,000 small cell sites to date.
With a highly urbanized geography, small cell sites are ideal in increasing network capacity while only utilizing a smaller footprint in terms of land area or visual aesthetics. European and US regulators have clearly defined small cells’ physical and technical specifications, thus differentiating them from regular cell towers. In Europe, small cells are encouraged to visually blend into the surrounding and cell sites will be exempted from town planning permits if they fulfil the requirements. In the USA, the FCC has exempted small cells from certain permits and capped recurring fees, allowing for faster rollouts and lower OPEX as compared to regular cell towers.
Three key obstacles towards effective Small Cell rollout.
Small cell rollouts in Southeast Asia have been much slower compared to European and US counterparts, mainly for the reasons below:
- The yield of small cell equipment and ability to host sharable small cells
As small cells’ main purpose is to facilitate network densification rather than coverage, more small cell sites will be deployed, especially in urban areas compared to conventional towers at around a 1:2 ratio1. However, the cost of small cell equipment has been the main hindrance by both MNOs and Towercos before committing to a mass rollout.
According to GSMA Intelligence, APRU among Southeast Asian MNOs average at USD 4.01 in Q2 2021, much lower than the global and Asian average of USD 8.18 and USD 6.06 respectively2. MNOs need to ensure that the returns are justifiable before committing to such CAPEX investment. The industry needs to encourage supply chain diversification by facilitating new OEM vendors or technological advancements in open-sourced, sharable small cell sites that are efficient in cost and operation.
- Clarify on regulatory framework for neutral party host plug and play model
In most countries where edotco has a presence, small cells are considered an active element, where Towercos are prohibited from deploying and owning. Telecommunications, and more importantly Towercos, are a heavily regulated industry in the region due to their importance to national security and sensitivity of asset ownership. In comparison, Towercos in other developed markets such as the USA and Europe are relatively lightly regulated, with only a general notification required to the relevant regulatory bodies3.
The framework may need to recognize and work towards a clear differentiation between conventional towers and small cells as both solutions are vastly different in size and functionality. And may either choose to carve out small cells as a new regulated category or allow for the commoditization of small cells that allows for a “plug-and-play” model.
- Long permitting and deployment process
Small cells are treated the same as macro towers in most ASEAN markets, hence the long-tailed approval process. Current tower approval processes generally involve multiple stakeholders and authorities with a stacked timeline, which significantly extends the deployment process by weeks or months in severe cases. For example, typical tower sites require permits from the Local Council, Fire Department, Department of Civil Aviation, Power Utilities Company, and the Telco Regulator.
The permitting process, especially for small cells, needs to be simplified, standardized, and reformed to facilitate the mass rollouts expected for network densification. Jurisdictions such as the US and European Union has taken steps to define small cells and introduce simplified permitting processes as the footprint of small cells are significantly smaller than conventional towers. Other regulations in mandating shared infrastructure and blending into visual surroundings would also remove barriers in mass small cell deployment.
The Future of small cells in the region
Small Cells solution providers are slowly gaining traction in the market, either through infrastructure providers raising capital to expand into small cell offerings or new Small Cells OEM manufacturers entering and disrupting the market with competitive pricing. As seen by the recent move by few regional small cell operators raising capital to expand their services, small cells would be the future growth opportunity for MNOs and Towercos alike.
However, until the above obstacles are relieved, MNOs and Towercos in Southeast Asia would continue to be cautious before committing to mass Small Cell sites rollout. However, with 5G deployment intensifying and forward-thinking regulatory principles – the future is bright for small cells to be more widely recognized.
There is a real opportunity for hosted sharable small cells in the market, enabling the support impending 5G rollout and bringing the cost per GB down to a unity play level.
- S&P Global Market Intelligence – Asia Pacific tower and small cell projections through 2031: https://www.spglobal.com/marketintelligence/en/news-insights/research/asia-pacific-tower-and-small-cell-projections-through-2031
- GSMA State of Mobile Internet Connectivity Report 2020 – https://www.gsma.com/r/wp-content/uploads/2020/09/GSMA-State-of-Mobile-Internet-Connectivity-Report-2020.pdf
- Delta Partners – Infrastructure Regulation: overview and impact on TowerCos (Apr 2019): https://www.deltapartnersgroup.com/sites/default/files/The%20Delta%20Perspective%20-%20Tower%20Regulation%20-%20Apr2019_0.pdf
- OpenSignal – Quantifying the Impact of 5G and Covid-19 on Mobile Data Consumption – https://www.opensignal.com/reports/2021/06/quantifying-the-impact-of-5G-and-covid-19-on-mobile-data-consumption