Abstract—It has been recently shown that base station cooperation may yield great capacity improvement in downlink multiple antenna cellular networks. However, the proposed solutions assume that there is a central processing unit which coordinates the information exchange and determines the optimal resource allocation of the overall cellular network. Whilst the benefits of base station cooperation are large, computational burden of the central unit can be significant. Thus distributed solutions are desirable. This paper suggests a distributed solution for base station cooperation via block-diagonalization and dual-decomposition to maximize the weighted sum network capacity under per-antenna power constraint. The block-diagonalization pre-coding matrix is determined separately at each base station. It enables the full potential of base station cooperation by determining a trade-off between inter-cell interference mitigation, spatial multiplexing and macro diversity. The power alloca...