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Sizing the In-Building Wireless Systems Market

August 25, 2016

By John Celentano

Skyline Marketing Group

rp_Celentano-2-300x300-1.jpgThe next wave of in-building wireless (IBW) systems deployment is rolling through commercial buildings in the 100,000 to 500,000 square foot range in the United States. Dubbed the middleprise, this segment is the second tier of smaller structures below the first tier of large venues such as stadiums, arenas and airports. The middleprise includes a mix of high-rise office and residential buildings, educational campuses, and healthcare facilities (hospitals/medical centers).

In the United States, the middleprise comprises roughly 128,000 buildings, averaging 210,000 square feet, according to the Department of Energy’s Energy Information Administration’s (EIA) most recent Commercial Buildings Energy Consumption Survey (CBECS).

IBW Market, 2016-2021From these survey results, we developed a methodology to estimate the size and growth of the middleprise IBW market. Note that we are not distinguishing the market by type of IBW system. Rather, the analyses encompass DAS, small cells and bi-directional amplifiers (BDA).

The IBW product to be used in any application is determined by the size of the structure and number of carrier signals to be transmitted inside the building. A more important determinant is the equipment price per square foot.

Taking the total number of buildings and considering current market conditions, we made assumptions on how quickly buildings in this segment may be outfitted with an IBW system during the next five years. By 2021, we estimate that IBW systems will be deployed in more than 28,000 buildings or 22 percent of the middleprise installed base.

IBW system penetration is growing each year because of increasing demand for wireless as a prerequisite amenity, favorable pricing and financing from system providers and ease of installation with new digital designs.

We then multiplied the number of buildings equipped each year by the average square footage to determine the total space covered each year. Starting with prices in the $1.50-2.00 per square foot range for cellular deployments, we assume that equipment prices will decline at roughly 10 percent per year over the forecast period.

Multiplying that total area by the cost per square foot, we estimate the demand for cellular IBW systems will grow from an estimated $400 million in 2016 to more than $1.4 billion in 2021, at a compounded annual growth rate (CAGR) of 29 percent.

Public safety communications systems are not included in these figures. Certainly, the growth trajectory is similar but the market value is less than half that of cellular IBW systems.

How quickly the market develops is, in large part, a function of how well the IBW system vendors market their wares. The market potential is there but the vendors need to step up and address real customer issues, needs and wants. This effort involves extensive education on the amenity benefits that reliable IBW systems bring, not how these products work. It is not about DAS versus small cells!

As well, vendors must find ways to make it easy for middleprise decision makers to move forward by lowering the procurement barriers – upfront and ongoing costs, carrier participation, code compliance and more.

US Cellular: 2H16 CapEx Looking Up After Slow Start

By John Celentano

Skyline Marketing Group

rp_Celentano-2-300x300.jpgAugust 9, 2016 — US Cellular’s 2016 network expansion activity got off to a slow start in the first half of the year, accounting for only 34 percent of its projected $500 million in full-year capital expenditures (capex).

This conservative investment suggests that capex in the second half of 2016 (2H16) will ramp up sharply each quarter, reaching levels comparable to the previous two years.


US Cellular is the fifth largest wireless service provider in the country behind the four national carriers – AT&T Mobility, Verizon Wireless, Sprint, and T-mobile US.

fig 1The company operates in regional tier two and tier three and rural markets covering 32 million people, in licensed markets mainly in the Midwest, parts of the West coast, and in several Eastern states and the Northeast. In all, it covers about 10 percent of the total U.S. population. Additionally, it reaches parts of the country where it is not licensed to operate through roaming agreements with other wireless service providers.

fig 2With 16 per cent market penetration, US Cellular serves nearly 5 million post- and pre-paid customers. The company adds about 200,000 post-paid customers each quarter, growing at a 1 percent compounded rate. Post-paid churn in 2Q16 dropped to 1.2 percent from 1.34 percent a year ago. Even with smartphone penetration at 77 percent of the post-paid customer base, post-paid average revenue per user (ARPU) is down to $47.37 from $53.62 in 2Q15. Consequently, service revenues declined by 8 percent on a year-to-year basis.

A lion’s share, more than 60 percent, of US Cellular’s capex is allocated in the radio access network (RAN) to expand its 4G LTE coverage and prepare the network for voice over LTE (VoLTE) services that serve its own customers and augment roaming agreements. During the past year, the company added 101 new cell sites and built 58 new towers that it owns and operates.

In its Aug. 5 earning call, the company upheld its guidance for 2016e capital spending at $500 million. This level is down 6 percent from $533 in 2015 and has declined at a 12 percent compounded annual growth rate (CAGR) from its peak of $837 million in 2012.


fig 3Nonetheless, US Cellular is balancing its capital spending in line with reduced service revenue levels. The company’s capex-to-service revenue, currently at 16 percent, indicates continuing network expansion activity.


John Celentano is a principal in Skyline Marketing Group, which provides technology marketing & sales strategy advisory in advanced communications services, and wireless, telecom, data networking infrastructure markets.  Additionally, support is provided for internal positions in market analysis, business development, strategic planning, strategic marketing, product management, product marketing, sales operations.

For more information, go to https://www.linkedin.com/in/john-celentano-4822692

Selling Infrastructure to Verizon Wireless? Let’s Go!

by John Celentano

October 29, 2015 — The financial news from Verizon Wireless is upbeat.

Verizon corporate third quarter financials, reported on October 20, showed positive gains for Verizon Wireless: nearly 1.3 million new subscribers, postpaid churn below 1 percent, and $7.7 billion in operating income. Moreover, Verizon corporate maintained guidance for overall 2015 capital expenditures (capex) at $17.5-18.0 billion. We estimate that total 2015 capex budget breaks down roughly: $11.8 billion for wireless, $4.8 for wireline, and $1 billion for corporate.

For the third quarter, Verizon Wireless reported capex of $2.9 billion, down 7 percent from $3.1 billion in 2Q15 but up 18 percent year over year from $2.5 billion in 3Q14. Note that the third quarter dip was not unexpected and is in line with historical network spending patterns.

Third quarter capex accounted for 25 percent of the projected wireless network investment, estimated at $11.8 billion, for the year. Year-to-date, Verizon Wireless has invested 72 percent of its full-year 2015 budget. Capex/service revenues came in at 18 percent for the quarter indicating that the carrier is in an expansion mode.

One point of clarification: Some Wall St. analysts have suggested that Verizon is shifting its capex away from its wireline network in favor of its wireless network. Verizon’s own numbers do not support that view. The chart shows that Verizon’s investments in its wireline network have been the minor portion of its overall capex budget for the past several years.

Get Ready – a Big Uptick is Coming!

Based on full-year guidance, we think 4Q15 wireless capex will come in around $3.3 billion. That’s a 14% jump quarter to quarter, and up 23 percent over the $2.7 billion spent in the fourth quarter 2014. This means that 4Q15 capex will account for 28 percent of the full-year budget.

Verizon Wireless’ infrastructure equipment vendors and contractors should feel good about this outlook. Its capex is ramping through year-end 2015, and spending momentum likely will carry into 2016.

Where is the Wireless Capex Being Spent?

We estimate that that Verizon Wireless’ capex budget splits roughly 70/30 between radio access network (RAN) and the core switching infrastructure.

RAN includes deployments and upgrades of macrocells, small cells, and distributed antenna systems (DAS) used for in-building wireless. Radio gear still accounts for the majority of RAN capex. The balance goes into the RF subsystem including antennas and cables along with towers, shelters and power. RAN capex includes capitalized labor for site acquisition, engineering and installation (E&I). Where carriers own their backhaul systems, that investment is accounted for in RAN capex as well.

Core capex includes routers and switches, network management and operations support systems, and billing systems along with capitalized E&I. Core capex also includes investments in software-defined network (SDN) and network function virtualization (NFV) capabilities.

For now, Verizon Wireless’ focus is on increasing its network densification. This means putting radios closer to customers with high-speed connections that handle growing volumes of mobile data and video. Densification is facilitated with small cells along urban or suburban streets, and DAS inside buildings.

Stay tuned for more in-depth carrier capex analysis. Contact me with any questions.


John Celentano is a principal at Skyline Marketing Group and is on the marketing team of AGL Media Group. jcelentano@aglmediagroup.com