Which Costs Less: Adding New Spectrum or Using Small Cells?

The conventional wisdom is that, given a choice between adding new spectrum or adding more cell sites, a typical mobile service provider will spend less money acquiring spectrum than subdividing macrocell sites to increase density.

The new wrinkle is how overlaying small cells compares to the cost of buying new spectrum assets. Verizon has recently been arguing it will be cheaper, in many instances, to increase network density rather than buy new spectrum.

source: Mindspeed Technologies  

That would reverse conventional rules of thumb about the relative ways of adding capacity, where new spectrum typically costs less than redesigning a network for greater density, assuming the other alternatives (better air interfaces and modulation) are not immediately available.

New spectrum can take the form of buying new spectrum, or redeploying existing spectrum, as when older networks are decommissioned.

The tradeoffs are not easy to understand, as each particular scenario might depend on how well the new frequencies map with the existing network of cell sites. Buying spectrum might be more affordable, when it is possible.

But many would argue that, historically, most of the increase in mobile capacity has come from deploying more-dense networks. That works because using smaller cells allows intensive spectrum re-use.

What is not so clear is the cost of adding capacity using small cells, or buying new spectrum. It might well be the case that such choices are not possible, at the points in time when capacity must be added.

When that happens, the relative cost difference might not matter, as there is no practical alternative to sub-dividing existing macrocells.