White Paper Determining the best DAS funding model for your Nestor Salvado October 2013
Contents Introduction 3 Exploring three DAS funding sources and common funding models 3 Mixed-model funding 4 The drivers and stockholders 7 Your DAS as a source of revenue 7 Technology integration and funding models 7 Conclusion 8 2
Introduction Understanding the advantages and disadvantages of the major funding options for distributed antenna systems IT departments face increasing pressure to improve the cellular coverage at their facilities. Today s high data speeds pose significant stress and capacity demands on cellular networks. When combined with construction materials such as low-e glass, this makes a distributed antenna system (DAS) mandatory for sustainable, reliable in-building cellular coverage. When considering a DAS, the first challenges the IT department faces are understanding the funding models, obtaining the funding and also understanding how to best deploy DAS technology into the current infrastructure. Funding models have to be evaluated closely before partnering with integrators and cellular carriers. In the unlikely scenario that a budget is already allocated for a DAS system, the IT team has less to worry about. In most cases, if an allocated budget exists, it s because it was requested during the prior fiscal year with a solid business rationale. However, in the absence of a budget and with increasing internal pressure to find a solution for the lack of acceptable cellular signal what are the IT team funding options? And, among the options, which funding model best addresses corporate needs? Exploring three DAS funding sources and common funding models The three most common funding options are: 1 Internal funding provided by the 2 A contract established with a neutral-host company 3 Funding from cellular carriers internal funding: In this funding scenario, the owns the DAS system. This is comprised of the active (for an optical DAS) and the passive distribution. With this solution, the has the ability to drive a multicarrier solution, which is specifically relevant for effectively addressing bring-your-own-device (BYOD) scenarios, or when many customers frequent the premises. The owns the entire deployment, which is performed at the premises. This ownership comes with CapEx and OpEx costs. In some instances, a portion of these costs can be recouped through a mixed funding model discussed in this paper. However, even if the funds the DAS system, it will still need a carrier agreement and approval for the RF signal source. The cellular RF signal source can be taken from a macro cell with a repeater solution or generated locally with a carrier base transceiver station (BTS). The cellular carrier will decide, based on the expected traffic generated by the DAS users, whether a BTS should be used as a signal source. The carrier would provide the BTS and typically take the costs after assessing the potential return on investment (ROI) for the signal source. In the event the carrier decides a BTS is not required and, instead, a repeater system should be used the might have to assume the cost for the repeater solution. 3
A neutral-host company contract: Contracting a neutral-host third party to operate and own the DAS alleviates the funding pressures. For a neutral-host company to effectively deliver a DAS, their ROI must meet their corporate targets. A neutral host typically funds their business by creating a multicarrier DAS and invoicing the carriers to use the DAS. That means the carrier s ROI has to be high enough to justify the neutral-host model. Therefore, this model is only applicable in scenarios where the number of users and system capacity usage are sufficient to meet the ROI of both parties: the carriers and the neutral host. One important thing for the to evaluate is the contractual commitment with the neutral-host company. It is usually necessary to enter a long-term contract in order for the neutral host to have a positive ROI. This agreement and other specific clauses can imply a partial loss of ownership not only on the and cable installed at the premises, but on the rights to retransmit any cellular signal in the building. Since this model will reduce the investment as well as many of the operational needs required by a DAS, it is often a very attractive model for the. Cellular carrier funding: This option minimizes the cost of the DAS solution for an. But, in order for the carrier to invest, the carrier has to ensure that the specific venue will satisfy their required ROI. In practice, this means the cellular traffic generated in the venue will translate into a significant source of revenue that will justify their investment. In certain scenarios, the carrier funding model can drive to a single-carrier DAS solution. This means that, depending on the negotiation and the agreements reached with the carrier, an facility might have only one cellular carrier radiating in the building with a potential lack of coverage from other carriers. Mixed-model funding MBased on the three funding options discussed above, it is not uncommon to end up having a mixed model with different entities funding different aspects of the DAS solution. As discussed, any company funding a DAS be it the, a neutral host or a carrier will need sufficient economic justification to do so. Each funding entity will perform an ROI analysis to confirm that its economic model will translate into a positive source of revenue over a period of time. This means the IT department will likely be confronted with a mixed model of funding options. Typically the mixed model will arise from funding three different areas: The active portion of the DAS (active ) The passive portion of the DAS (passive transport of the signal) The RF signal source for the DAS The RF signal source is crucial for the DAS. If there is no signal source, there is no DAS. Sometimes funding for the vital that provides the signal source to the DAS is overlooked. Let s remember that any DAS system is just an extension of a cellular network. Thus, it has to be provided with an RF signal source. As already mentioned, the RF source can be taken off-air (with a repeater) or provided by a specific element in the cellular network (base station BTS). In scenarios where a BTS is required as the signal source in order to provide sufficient RF capacity to the DAS system the cost of the base station will, typically, be taken by the carrier. The carrier will need to evaluate the ROI for this investment. Even if an funds the DAS, if a BTS is required, the carrier will need to evaluate this CapEx (BTS) and OpEx (O&M and connectivity to carrier network) investment. 4
Neutral Host Neutral Host Neutral Host The six most common funding models If you take into account all the factors discussed above, there are six common funding models that emerge (not in order of relevance): A. funded B. funded with carrier funding the signal source C. Neutral host driven with carrier providing the signal source D. Neutral host driven with owning the passive DAS portion and the carrier providing the signal source E. funded F. funded with owning the passive portion of the DAS Each of these combinations will bring certain benefits aligned with what we discussed specifically in the different funding models. Model A: funded The advantage of the -funded model is full ownership of the DAS by the. The can ensure technology updates. This model facilitates a multicarrier system, as it reduces the investment carriers have to perform. Additionally, in situations where the DAS does not generate significant cellular traffic, carriers are more likely to be positive to connect to the system. The downside to this approach is the fact that carries the DAS and signal source costs, with the or a third party performing DAS operations and maintenance. Model B: funded with carrier funding the signal source One of the advantages of this model is that it ensures the system will be multicarrier with full ownership of the DAS by the. Another benefit is that the can ensure technology updates. In some cases, this model will result in some revenue for the. The carries the DAS costs, with the or a third party performing DAS operations and maintenance. Model C: neutral host driven with carrier providing the signal source This model facilitates that the system will be multicarrier, if the neutral host is able to provide an attractive ROI to the carriers. Another advantage is that no CapEx investment is necessary for the. Under very limited situations, the might gain revenues from this type of funding model. Disadvantages include lack of ownership of the solution; long-term. Long-term contracts may impose additional limitations; and the ROI for the carriers must be high to factor in a neutral-host company. Model D: neutral host driven with owning passive DAS, carrier providing signal source This funding model also facilitates that the system will be multicarrier. ownership on the passive (ceiling) installation brings a degree of control to the system. On limited occasions, the may reap some revenues from this model. This funding model has the disadvantages from Model C but thisone does give the more control of the installation on their real estate. Nevertheless, this is not a very common scenario, as a neutral host is likely to require full ownership of the system. 5
Model E: carrier funded The key advantage of this funding model is that there is no CapEx investment. In certain scenarios, the might experience revenues. One disadvantage of this funding model is the need to ensure that the leading carrier will cooperate with the others to make the system multicarrier, resulting in a risk that the system might not be multicarrier. There is also a lack of ownership by the in this model. The long-term contract might also impose some limitations. Finally, ROI for the carriers must be sufficient. Model F: carrier funded with owning the passive portion of the DAS This scenario where the funds only the passive portion of the DAS brings ownership and control over what is being radiated on that passive portion. This also makes the owner of the portion of the DAS installation that is more intrusive. Additionally, this can give the some leverage to drive the system towards a multicarrier if the leading carrier is not actively pursuing it. Disadvantages include the need to ensure the system is multicarrier and the lack of partial ownership of the solution. Long-term contracts may impose limitations. The big picture: summarizing and grouping the six funding models If we took a step back and grouped these six funding models into similar attributes, there are three main groupings each with its own advantages and disadvantages. Funded (models A and B) Advantages Helps ensure the system will be multicarrier Full ownership of the DAS by the ensures technology updates Disadvantages carries the DAS costs or third party to perform DAS operations and maintenance Neutral Host Driven (models C and D) Advantages Helps ensure the system will be multicarrier Little or no CapEx investment Ownership in the passive (ceiling) installations (model D only) Disadvantages Lack of ownership by the Long-term contract imposes limitations ROI for the carriers must be higher than the -funded model to allow this model Advantages Little or no CapEx investment Ownership in the passive (ceiling) installations (model F only) Funded (models E and F) Disadvantages Need to ensure system is multicarrier, leading carrier to drive agreement among them Lack of ownership by the Long-term contract imposes limitations ROI for the carriers must be high 6
The drivers and stockholders Before engaging in funding discussions, it s extremely important for the IT department to maintain a clear understanding of its stockholders as well as the long-term implications of selecting a certain funding model. Depending on the urgency and the drivers for the DAS, stockholders could hinder the IT department from fully understanding these implications. When considering your stockholders, include not only the decision makers, but also the needs of your relevant user groups. They can strongly influence your team later if their needs are not being addressed. While it is important to clarify and verify your funding options, it s just as essential to understand and address the explicit and implicit needs of your stockholders. Differing sets of drivers will make stockholders more prone to a specific funding model. It s vital to identify your funding, but also make sure the option you choose is well aligned with your drivers and the strategy of your stockholders. If there is no clear strategy or vision, this is an opportune time to define one. Your DAS as a source of revenue IT departments and organizations often view their DAS as a potential source of revenue. In many cases, your may initially expect the neutral-host companies or the carriers to pay them in order to install and use the DAS system. Even if these scenarios exist, as we previously discussed, the neutral-host companies and carriers will evaluate their ROI. In many situations, the revenue the cellular users will generate is barely sufficient for the carrier to justify the ROI for the RF signal source (BTS or repeater). Bear in mind that your should have reasonable expectations. The final goal should be to achieve and maintain reliable cellular coverage not to create a new stream of revenue beyond your core business. With that said, it is also understandable that your might have some revenue expectations. The prudent approach is to clarify and order your priorities along with stockholder needs while maintaining a willingness to adapt as your company grows. Technology integration and funding models In certain scenarios, IT departments may consider integrating a DAS system with a Wi-Fi network. There might be a benefit from the consolidation of these systems in a single topology for signal distribution. However, depending on the implementation, there may also be technological disadvantages. It is important to evaluate the impact that integrating such systems will have on the ownership of the topology used for distribution, as well as the result of the funding model itself. If your DAS is funded entirely by your, this simplifies the scenario. However,the integration of these two technologies can cause some challanges on the Wi-fi operations and maintenance if it affects the DAS as carriers will require permission and limited downtime on their service. When different sources own and fund your DAS and Wi-Fi, the situation is often more complex. It is especially important that your contract accurately reflects your intended funding model, including operations and maintenance specifics. Conclusion It is certainly complex for the to narrow down what might be the best course of action in terms of funding models. The impact of the different funding models has to be evaluated over the short and long term, and it is very important that all stockholders be knowledgeable of the advantages and disadvantages prior to making a decision. Funding is a key topic when starting a DAS discussion. In this paper we have broken down the funding model combinations in an attempt to help you research the impact, advantages and disadvantages that might affect the in each scenario. DAS systems and indoor coverage will grow exponentially in the years to come as technology evolves and involvement will become an integral part of it. 7
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