Tie strategies to customer value
Small cells provide extremely focused capacity and coverage, but to ensure adequate service uptake deployment strategies must be appropriately focused. Mobile network operators (MNOs) must understand exactly which small cells technologies, in which locations, offer the highest potential to generate new revenues.
To gain this insight, MNOs must look beyond the network and total cost of ownership (TCO) to their customers and customer lifetime value (CLV). CLV calculations tell MNOs how much profit an average customer will generate over the lifetime of their relationship. When combined with market adoption models, CLV assessment, by definition, becomes the total future lifetime value of this group of subscribers. This information helps MNOs assess the market uptake and future value of new small cells services.
Adding the market view to the network view is particularly important as MNOs transition from traditional voice and SMS services to new data-driven services. They have less experience with market response to data offerings. An approach that considers both sides of the equation — market and network — reduces risk by eliminating potential market blind spots in the overall small cells strategy.
Match capacity and coverage to behaviors
People and their behaviors drive the need for small cells. They’re consuming more and more mobile data applications and services at the same time in common locations, while tending to remain relatively static (nomadic) during their consumption. Today’s macro cellular networks were built to deliver the opposite — to provide a decent quality of voice services over a huge nationwide area to people who are predominantly in constant motion. The contrast strains macro networks:
- Bell Labs research has shown that about 20% of macro cells carry about 80% of the total traffic during busy hours. The congested cells change continuously depending on time of day and geography. Existing networks have the capacity to handle the demand, but not the flexibility to cost effectively adapt to changes in demand.
- Indoor and outdoor demand shifts based on time of day. Due to the nature of building construction, people often need more capacity to achieve the same quality of experience (QoE) indoors as they do when they are outdoors within reach of the macro network.
- Solutions can be placed outdoors — on the sides of buildings, stadiums, traffic lights, utility poles and other physical infrastructures to target areas where people congregate outdoors.
- Solutions can be placed indoors — in homes, offices, shopping malls and conference centers to improve QoE indoors and offload data from the macro network.
CLV analysis gives MNOs insight into their customers’ average usage patterns in conjunction with particular types of locations. Additional tools, such as traffic geo-location, help MNOs find the right geographical position for the placement of small cells or Wi-Fi access points to offload data from congested macro cells. This information helps MNOs precisely target their small cells deployments to increase profits and manage TCO.
Assess market opportunities
Taking a market-driven approach to small cells deployments goes beyond identifying usage patterns and optimal deployment locations. As they develop their market strategy and business case, MNOs should also consider:
- Competitive small cells offerings. Being first-to-market with small cells services helps MNOs differentiate from the competition. They can offer better QoE and more attractive bundles that will help to reduce churn and attract new customers. If the competition is already offering small cells services, benchmarks for pricing and user experience are already defined. In this case, MNOs need to analyze the customer experience offered by the competition and try to offer a better experience at reasonable costs. Appealing applications and service bundles can also help MNOs differentiate, but they should analyze the risks of complex selling strategies in their market.
- Upsell opportunities with prepaid customers. Traditionally, prepaid customers have spent less money and consumed less data than postpaid customers. However, the improved capacity and QoE delivered by small cells could encourage prepaid customers to adopt additional services and applications that help MNOs increase average revenue per user (ARPU).
- Small office/home office (SOHO) customers and small and medium enterprise (SME) customers. According to an Alcatel-Lucent survey, more than 72% of businesses of all sizes are interested in small cells. The survey revealed that these customers are particularly interested in small cells business solutions. Medium enterprises often have enough employees to make a simple business case to offload data look promising. And MNOs may gain new customers from SME employees who like the capacity and quality improvements small cells bring.
- Their percentage of smartphone customers and the relationship to technology choices. How many of their customers’ smartphones support the Wi-Fi Alliance Hotspot2.0 standard? Will the exclusive use of a small cell be more appealing to customers? Do local regulations make Wi-Fi hotspots the only cost-effective choice?
Get expert assistance
A partner with international experience in cellular small cells and carrier Wi-Fi deployments can bring MNOs the insight, methodologies and tools needed to develop a well-rounded small cells strategy. To reduce risks for the MNO and increase the likelihood of success, the partner must bring a combination of market, commercial, technical and deployment experience, knowledge and capabilities.
Specific assets in a partner include:
- The ability to look at the economics of small cells from both the market and network perspectives. Skills should include:
- Using CLV calculations to document the evolution of the MNO’s customer base
- Assessing the net present value (NPV) of the network
- Preparing financial statements and benchmarks to quantify the efficiency of the network renovation
- Proven methodologies and tools to help MNOs align market timing and architecture decisions with growing demand and technology roadmaps
- A small cells portfolio encompassing both cellular and Wi -Fi technologies that is standards-compliant, extensible, and compatible with the existing interfaces and macro network
- The technical expertise to:
- Test interference and compensation between the macro layer and the small cells layer so that small cells are optimally located
- Optimize signaling traffic between the macro layer and the small cells layer
- Design policies and rules for switching between the macro layer and the small cells layer
Finally, MNOs should look for a small cells partner with the ability to adapt their methodologies and tools to the MNO’s specific situation. A standard business case is never adequate. Even MNOs in neighboring countries have very different requirements. Each MNO’s small cells business case must reflect their own environment, including commercial, operational, regulatory, environmental and geographic considerations.
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