In this paper we study, analytically and via simulation, the impact ofreducing the cell size of a wireless system on the system capacity andhand-off failure rate. First, we focus on a pure cellular system. Wedevelop exact and approximate models for cellular systems in order toemphasize the blocking probability/forced termination probabilitytrade-off. This trade-off motivates the problem of optimizing the systemperformance with respect to the cell size. For hybrid systems, weinvestigate how jointly optimizing the number of cells per spot-beam, andthe bandwidth partitioning could improve the QoS parameters of interest.For both systems, the numerical solution is only feasible for smallnumber of cells. For large systems, a simulation study is presented.