As 5G is being rolled out, the demand for In Building Solutions (IBS) is growing significantly. Network design is moving inside because key 5G use cases focus on indoor usage. Typical 2-4G spectrum can penetrate structures, but the mm wave frequencies that deliver high speed/low latency 5G cannot.
From the beginning it was clear that upgrading a macro tower to 5G would not be sufficient to meet the data consumption demands 5G is there to facilitate. Infrastructure providers and MNOs have addressed this by investing in more numerous micro sites in high traffic areas by deploying outdoor small cells, mini-macro towers and smart poles.
These solutions can deliver the density of access points for the network in a cost effective and environmentally sound manner. There simply isn’t the space, resources or demand for the number of traditional tower structures that would be required for 5G.
IBS are the next logical step in this direction. While not a new concept, the scale at which IBS are being deployed, and the technology that is involved in building them is evolving to keep in line with the demand and use cases.
As towercos across Asia are looking to expand their horizons into digital infrastructure beyond macro tower sites while developing the network capabilities MNOs require for 5G, in building solutions are firmly in the crosshairs.
If you want to learn more about IBS deployment in Asia, make sure you sign up for Meetup Asia (29-30 November, Marina Bay Sands, Singapore).
What is an In-Building Solution and what are the different technologies they could use?
Put simply, an in-building solution is the combination of various network technologies that enable coverage inside where an outdoor antenna cannot reach. Typically IBS have been created through a Distributed Antenna System (DAS).
DAS are used to provide high quality cellular coverage in an indoor or outdoor space by installing a network of small antennas to serve as repeaters. These antennas are connected to a central control system which is in turn connected to the MNO’s base station.
There are two main types of DAS: passive systems, which take signal from antennas on the roof of a building and disseminate the signal through feeder cables; and active DAS, which uses fibre cables to transport the signal from rooftop antennas. Installation and equipment costs are relatively high for DAS which creates a compelling argument for sharing by multiple tenants – exactly the model that makes it so attractive to towercos.
Multi Access Connectivity as a Shared Service, or M-CASS, is a technology agnostic platform able to integrate all connectivity solutions, including Wi-Fi, small cells and DAS, ready for 5G.
An alternative to the DAS model is to use small cells. Small cells are lower powered, shorter-range cells, although the range of a small cell can vary between 10m indoors to 1-2km in outdoor rural settings. While small cells have less capacity than macro cells, they are critical to network densification, adding extra cells to areas where there is high demand for data, both indoors and outdoors.
Ravin Vickneswaran, Head of Innovation and Solutions at EdgePoint Infrastructure explains why passive DAS is often preferred over Small Cells. “It’s all down to cost” he says. “Passive DAS is significantly cheaper, its robust, and the passive components have a very long lifespan.”
EdgePoint would expect to run preventive maintenance service every 6 months to a year, and the only time any significant upgrades would be required is if the building undergoes renovation work.
Small cells and active DAS are more complex and require more servicing. Passive DAS is also software agnostic as it relays signal from the base station on the roof of the building, and due to its simplicity deployment times can be much lower. This makes Passive DAS a great option for sharing among multiple operators.
The drawback however is that as it boosts existing signal speeds are lower. Passive DAS can be a good solution for initial coverage, but as speeds need to increase to support use cases, they will need to supplemented with active DAS or small cells. This is what is driving higher demand for more advanced technologies.
“Passive DAS as an underlay and small cells at hotspots provides the best balance between cost and performance,” Ravin continues.
When it comes to backhaul for active DAS and small cells there are three options; a digital infraco can use its own fibre, use their MNO customer’s fibre, or use dark fibre. Each has its own merits.
Where the digital infraco buys bandwidth from the MNO, this creates a symbiotic relationship between the digital infraco and MNO as the MNO may recover upwards of 50% of their fees from the backhaul fee. However, the digital infraco is typically free to go to market to find the cheapest source for backhaul, which may lead them to use dark fibre, where available.
While using dark fibre or MNO fibre works, there is both value and stickiness unlocked if the digital infraco can secure exclusive rights of way for fibre in the building.
There are rarely regulations protecting the digital infraco from being disintermediated by a fibre owner, but in reality venues are strongly disinclined to re-deploy access points and the associated cabling.
Why do we need IBS?
Studies on data traffic show that over 80% of mobile data is consumed indoors.
Stadiums and tourist attractions want to ensure high upload and download speeds for attendees to engage with their digital experiences. As venues such as shopping malls and stadiums are increasingly digitising their customer experience, they need seamless uninterrupted connectivity to offer a customer journey with the same profile.
For example, a car park underneath a mall would hardly be a priority for an MNO, but if the venue wants to digitise its payment process, allowing customers to scan their phone to verify access, then connectivity is required.
Plus, access to 5G while in a venue can be seen as selling point and encourage repeat business from the visitor, or be seen as a hygiene factor for luxury venues, even if the service supplied is not consistent and offers only marginal, if any, improvements in speeds.
How do In-building systems make money?
In emerging markets such as Malaysia, Philippines and Indonesia, the owner of the building is treated much the same as a landlord for a macro tower site. They are paid rent by the owner of the IBS to install equipment in the building, just as if they were building a rooftop site on the top of the building. If that owner is a towerco or digital infraco, they then charge the MNO for access to the solution to provide connectivity.
In developed markets such as Australia, Japan or Korea, the property owner is monetised by the MNO or towerco. The property owner pays for the solution to be installed to offer their customers a better experience while visiting the venue.
In Australia, digital infracos find themselves in an extremely fortunate situation whereby the property owner pays for the system to be installed, pays a fee for it to be offered, pays for repairs and maintenance, and generates no revenue. The towerco can also lease the solution to operators in the country in addition to collecting revenue from the building.
Small cells and DAS are priced on a fixed monthly fee. There may be add-ons where there is a pole or wall mounting, for overhead cabling et cetera. Escalators typically kick in from year two, together with penalty-backed lock ins.
A digital infraco would seek seven to ten or even fifteen-year contracts for small cell and DAS. In general, revenues are amortised over the term of a contract, rather than collected as upfront fees, as this tends to drive the value of the digital infraco.
While this is remarkably similar to the macro tower company business model, some digital infracos make almost as much money selling analytics, managed services and Smart City services to venues, government and enterprises as they do from their multiple MNO tenants.
We are starting to see digital infracos form agreements with enterprise IoT and VAS platforms to locate and operate their platforms on their networks. Some digital infracos even generate revenues directly from private consumers, such as passengers paying for premium Wi-Fi service at an airport. The sale of advertising and sponsorship may also generate significant revenue from an IBS.
There are two main models for billing: price per square metre and price per antenna. The more complex of these two models is the former, as disputes often arise about the exact size of a building and therefore how much the building manager or MNO should pay. Most blueprints for buildings are on 2D maps and only very recent buildings have 3D models to accurately predict the space the solution is covering.
Price per antenna is more binary, and has been the preferred billing method of infracos up until now, but as networks are becoming more complex this is increasingly unfit for purpose.
Devid Gubiani, CEO of Global Netowrk Inc. who run IBS in Malaysia, Indonesia, Philippines, Vietnam and Myanmar explains “It is likely that as 5G systems are installed in-doors that pricing will move to a hybrid between these two models, with the inclusion of the amount of capacity that the system operates in different locations offered as well.”
Going back to our earlier example of a parking system, the capacity required is much lower than in the food court or foyer of the mall and therefore the rate at which the connectivity is billed needs to reflect this. Networking testing solutions can be used to gauge the level of service provided in different locations across the building and bills can be generated accordingly. These tests also help to ensue efficiency in the sense that the operator of the IBS isn’t overdelivering capacity based on the actual usage of network services.
How big of an opportunity is IBS for towercos?
The majority of IBS in Asia are owned by MNOs, and little to no sharing currently exists. In the Philippines it is very common for both Globe and Smart to have their own IBS installed in various venues across the country. Sharing is more developed in markets like Malaysia or Indonesia and while there is more of a neutral host footprint, infrastructure is still majority owned by MNOs.
In most markets across Asia, larger landmark buildings such as stadiums, airports and highly visited tourist locations were served by advanced in-building solutions since the mid-2010s.
This first wave is now largely complete, with infracos and MNOs focusing now on tier 2 sites (the second wave) including hotel lobbies, shopping malls and railway stations. As such, the ‘land grab’ for IBS has barely begun, and the market could be compared to the macro tower industry 15 years ago.
The third and final wave is some way off. This wave includes areas where Wi-Fi is more commonly preferred, such as residential buildings, hotel bedrooms rather than lobbies or commercial office space. The market is not quite ready for IBS to be deployed at scale in these locations, but as 5G and 6G use cases develop network traffic could stimulate demand.
From an inorganic growth perspective, there is a relatively immature M&A history when it comes to IBS. While many MNOs don’t have substantial portfolios of existing Wi-Fi, DAS and small cell networks that can be easily monetised and third party operated, most MNOs will have built a few such systems, for example such systems may be deployed for priority enterprise customers or in partnership with a stadium, mall or airport.
Especially where the technology and network design accommodate only a single tenant, such deployments are often considered a cost centre and under-invested, leaving the assets ripe to be acquired, upgraded and leased up by new entrant neutral host pureplay digital infracos.
There are tens of thousands, of captive in-building solutions stranded on MNO balance sheets across Asia. The recent tower M&A boom is proof of many MNO’s desired asset-light strategy, so it is expected that MNOs will eventually be open to hiving off these assets and leasing them back from a neutral host digital infraco.
As towercos are becoming increasingly adept at managing IBS and as demand to host them for MNOs is increasing, the economics could be in the right place for acquisitions to include outdoor tower assets alongside indoor solutions. TowerXchange is aware of one such opportunity in the Indonesian market. Indosat Ooredoo Hutchinson have a pending tower transaction for their remaining 1,850 sites and included in this transaction is the companies existing IBS DAS portfolio across the country.
However, acquiring legacy IBS from MNOs is not always as simple as cherry picking the best sites when a technology refresh is required. In many instances, even if the deployed technology lends itself to multi-tenancy (as DAS often does), the systems deployed by one MNO may not satisfy the technical specifications to support other MNOs’ spectrum.
There may also be local conditions that make an IBS a good acquisition target or not. In the Philippines for example, where Smart and Globe both have their own DAS equipment installed, an acquisition from one operator would mean that exclusivity in a building is not guaranteed. This significantly impacts valuations.
Smart and Globe have also already upgraded their individual systems for their own unique 5G requirements. In this scenario, both operators have invested capex in their systems, would not be getting a high price if they were to sell them and would potentially have to redo work if they were to decommission their own system and co-locate on a towerco owned IBS that had been purchased from their competitor. It’s not a compelling story.
Building owners may also be less willing to co-operate in markets with parallel MNO infrastructure as they are collecting rent from their two MNO tenants, rather than the single rent they would be collecting from the towerco or digital infra provider.
Looking to the future, connectivity could be included in the initial planning stages for new buildings, but certain steps need to be taken for this to be possible. IBS are most commonly retrospectively designed and implemented by network technicians and radio frequency planners.
As connectivity becomes so much more important, it creates efficiencies if it is taken into consideration when a building is designed, in the same way that air conditioning or power supply would be.
To ensure this process is sufficient, tools need to be created that allow non-radio frequency experts the ability to design connectivity networks. If this can be achieved, IBS economics become far tenable and investment from the start of the project is likely to lead to easier negotiations from infra-providers. For a $3billion dollar resort complex being constructed, factoring in connectivity costs would be a drop in the ocean, but once the building is erected these negotiations can be more challenging.
Want to learn more?
Make sure you sign up to join us at TowerXchange Meetup Asia and join our working group on Inbuilding solutions. The digital infrastructure leaders joining the discussions include:
• Vinod Samarawickrama, Manager – Connectivity Program APAC, Meta
• Nik Kamarul, Acting Country Managing Director, edotco Malaysia
• Devid Gubiani, CEO, Global Network Inc
• Ravin Vickneswaran, Head of Innovation and Solutions, EdgePoint Infrastructure
• Michel Chbat, Head of Global Strategy Execution, Nokia
