5G is Part of a Much-Bigger Change

Some observers will rightly see 5G as a “mobile” industry issue. That is partly correct, as 5G is the next big mobile platform. But 5G also is part of a larger transformation of global public networks that will involve much lower latency, much more virtualization and new roles for data centers.

Extremely low latency, high connection density, high reliability and gigabit speeds are driving the design of the whole new architecture, with implications for access, cloud computing and virtualization.

Virtualization is a key change, with separation of control and signaling functions from delivery of end user traffic becoming key. Lower cost is among the expected outcomes. Greater flexibility also is anticipated.

What might be relatively unexpected is that virtualization will increase the ability to create new virtual networks on a wider scale. That could have key implications for new suppliers, including suppliers that only want to create large virtual WANs to support internal

business requirements.

The analogy here is the shift of wide area networking from “mostly public” to “mostly private.” In other words, on many routes, enterprises carry most of the traffic, but only to support their own internal operations. Major app providers, in other words, have vertically integrated WAN services.

That has business model implications both for the enterprises and suppliers of WAN services.

Also, to support new ultra-low-latency apps, data center functions will emerge at the edge of the network. In that sense, 5G and edge computing are parts of a larger trend, the creation of next-generation networks that are both virtualized and built around latency performance.

That stringent latency performance will be needed to support emerging new applications in the connected car, internet of things and real-time application areas. Bandwidth will matter, but latency arguably is the key new capability.   

source: Heavy Reading

SpaceX Gets Authorization to Launch 4,425 Satellites for Internet Access

The U.S. Federal Communications Commission has authorized Space Exploration Holdings (SpaceX) to construct and deploy a constellation of  4,425 satellites in low earth orbit to provide internet access over virtually every square inch of the earth’s surface.

SpaceX wants to deploy those 4,425 satellites in 83 orbital planes, at an approximate altitude of 1,110 to 1,325 kilometers, operating in the 10.7-12.7 GHz, 12.75-13.25 GHz,  13.85-14.5 GHz, 17.8-18.6 GHz, 18.8-19.3 GHz, 19.7-20.2 GHz, 27.5-29.1 GHz, and 29.3-29.5 GHz and 29.5-30 GHz bands.

It seems likely such constellations proposed by SpaceX, OneWeb, Boeing and Sky and Space Global (SAS) will provide service to both fixed (homes, schools, businesses) as well as “moving” locations such as airplanes, ships, trucks).

Service will be available globally, which obviously has implications for rival internet service providers of all types, in all countries. Some countries might outlaw use of the services, for example.

What perhaps is less clear is the extent of demand (and ability to supply) connections for mobile phones, with equipment and service charges priced low enough to reach a substantial market.

It remains to be seen whether--and just how much--LEOS internet access will prove to be. If successful, it will mark a potential big change in the satellite services market, however. At the moment, the overwhelming revenue source for satellite service operators is consumer TV.

Of total 2017 satellite services revenue of about $127 billion, $98 billion (77 percent) was generated delivering consumer TV services. Internet access generated only about $2 billion (1.5 percent).

Mobile voice and data services amounted to about $3.4 billion (2.6 percent).

So success for the global low earth orbit satellite services business would have to rearrange those revenue sources. Also, over time, the linear satellite TV market is going to decline, as fixed network linear TV demand is waning. So satellite internet represents a major replacement revenue source.

source: Satellite Industry Associaton

Post-Mobile Era is Coming with 5G

Though it might seem inconceivable, we are about to enter the "post-mobile" era of telecommunications. How can that be, you might ask, when virtually all consumers and most enterprises and organizations will use mobile devices and services?

Ubiquity is not enough to denote an "age." Everyone and every company and organization uses electricity and waste water systems, roads and airplanes. Yet we do not refer to the present age using any of those services.

Instead, it is the "new" developments that give rise to names. And the big new development with 5G is that, to the extent 5G succeeds, it will be because 5G has enabled creation of big new revenue streams from new applications and use cases.

In other words, if 5G succeeds, it will not be on account of new services for smartphones and human users, but because of big new use cases and revenue streams from computers, sensors and applications.

There will be "smartphone" related revenue, as humans using smartphones will start buying 5G network services in place of 4G services. But that is substitution and replacement of existing demand, not "new" customer demand.

That is key, as creation of new value from users other than people is the essential requirement for 5G.

It will come as no surprise to anybody who follows the industry that value in the communications (internet) ecosystem is shifting from access to apps.

Access provider share of the ecosystem profit pool has declined from 58 percent in 2010 to 47 percent in 2015 and is forecast to fall further, to 45 percent in 2018, the World Economic Forum (WEF) says. Among the beneficiaries are digital content creation, distribution and aggregation companies such as Google, Netflix and Facebook.

Together with device manufacturers, the combined share of industry profits of these segments (apps and devices) is expected to increase to 40 percent in 2018, up from 29 percent in 2010.

“Telecom players, already lacking OTT businesses in this respect, face a real threat of being left to compete on two inherently contradictory fronts – price and throughput – that could put margins under further pressure,” says the WEF. “Telcos could be left to compete as IP-connectivity pure plays.”

“In the extreme scenario, increasing commoditization of the core offering could see margins drop to the levels of utility companies,” WEF says.

source: WEF

“Over-the-top (OTT) applications generate 50 percent to 90 percent less revenue for communications service providers,” the World Economic Forum says. “While the exponential rise in data consumption has provided some relief, this has not been enough to overcome the consistent decline in mobile voice average revenue per user (ARPU).”

Web-scale players such as Google, Microsoft and Facebook are moving quickly to fill key gaps in core telecom services and connectivity, as well. Google Fiber, Project Loon and Project Fi are examples of what Google has been doing.

Amazon and Apple have been making investments to make access from any available netrwork possible, moves that further reduce access provider account control.

Facebook is developing open source public network standards, in addition to the open source data center standards it already has developed, and is using.

All that is driving a search for new business models and revenue streams. The World Economic Forum believes that search will require strong collaboration with vertical industries and internet platforms.

In large part, competitive advantage in digital services and IoT will be driven by the capability to collect and analyse large pools of data specific to vertical-market use cases and to target value opportunities through customization of services and offerings, WEF says.

source: World Economic Forum

The biggest revenue opportunities for the global telecom industry will come from deploying next-generation networks and creating services beyond access, the World Economic Forum believes. The next generation of networks could be worth $440 billion, while apps and services beyond access could represent $650 billion worth of value.

WEF believes Internet of Things (IoT) solutions, consumer and enterprise digital services and communication leveraging natural human interfaces and augmented reality / virtual reality are the areas where new apps will develop.

WEF believes virtualization and an abstraction of the physical hardware layer, to create self-optimizing and secure zero-touch networks will represent the value from next-generation networks.

source: World Economic Forum

Mobile and Wireless Access is Going to Take Share from Fixed Suppliers

You might be tempted to think that it mostly is lower-income people who use their mobile devices as the sole means of internet access. In many countries, substantial numbers of people--rich and poor--do so.

While it is true that, in the United Kingdom, relatively few people actually are “mobile only for internet access (2.5 percent of the richest consumer households; perhaps seven percent of the poorest  households), in Canada, 20 percent of the richest households are mobile only for internet access, while about 30 percent of the poorest households are mobile only.

Households in rural areas also are more likely to rely on mobile networks for their internet access requirements as well.

Single-person households and households with younger consumers also are more likely to be mobile only for internet access.

Less than a tenth of people in France and the UK were mobile-only, but in Turkey the figure was more than three times higher.

In Latin America, for example, Deloitte Brazil believes that over a third of all homes in Brazil were mobile data only. And in China, a fifth of the online user base (rather than households) were mobile-only as of 2016.

In Tokyo, where fiber optic connections are widely available, hundreds of thousands of homes (or about five percent) are relying on only mobile in 2017.

In Latin America, Deloitte Brazil believes that over a third of all homes in Brazil were mobile data only.

source: Deloitte

Better mobile networks, especially 4G LTE, have made mobile internet user experience more like fixed access.

Deloitte Global predicts that 20 percent of North Americans with internet access will get all of their home data access from mobile networks in 2018.

Deloitte Global further predicts that a mixture of mobile and fixed wireless access technologies could lead to 30 percent to 40 percent of the population relying on wireless for data at home by 2022, an increase from 10 percent in 2013.

source: Deloitte

source: Deloitte

What is unclear is how wireless access might change over the next five years. Deloitte argues that, by 2022, wireless home internet solutions will grow both at the low end of the market (homes using relatively little data) and portions of the market that otherwise might have purchased a fixed connection.

source: Deloitte

We Are Entering the "Post-Mobile" Era

Craig Wigginton, Deloitte global telecommunications sector leader, talks about 5G opportunities and trends.

Among the top ideas is the role of internet of things as a driver of growth, including such applications as connected car. But other trends, including growing involvement in content and media, illustrate well enough one reality: humans using phones are not going to drive the next wave of growth.

In that specific sense, we are entering the “post-mobile” era of telecom, in the sense that “mobility” has been for decades the chief driver of revenue growth, and has been fundamentally about humans using mobile devices for communication.

In the next “post-mobiile” era, growth will have to come from new value creators, applications and use cases.

source: Deloitte

Early Winners in Private LTE Market are Small Cell Infrastructure Suppliers

At least initially, the arrival of private Long Term Evolution (LTE) 4G networks is going to matter most for sellers of small cell systems supporting Citizens Broadband Radio Service (CBRS) and other forms of indoor small cell communications, but especially enterprise deployments by enterprises.

That is not to say there are not other possible business opportunities, but as with Wi-Fi, private LTE and CBRS are mostly local area network or private networks plays.

In other words, the private LTE trend might be of immediate and highest revenue potential for suppliers of the transmission systems. There might be some incremental increase in buying of internet access services, perhaps most notably an increase in use of mobile internet access, if users stop offloading to Wi-Fi.

Some enterprises might also create new internet of things apps used indoors, which might also marginally drive additional internet access data volume.

There also should be some growth among the ranks of system integrators who build and operate such infrastructure on behalf of enterprise and smaller or mid-size business entities. Think of the example of Boingo, which runs turnkey Wi-Fi access services in larger venues.

But it is by no means clear how the availability of private (enterprise) 4G Long Term Evolution will affect the broader mobile market.

The ability to create indoor or campus LTE networks essentially complicates some elements of enterprise premises communications strategy. Where the typical network has been a cabled local area network, now supplemented with Wi-Fi and mobile access, the future might also include Wi-Gig as well.

source: Nokia Bell Labs

On one hand, enterprise indoor 4G, based on use of small cells, could help provide better mobile coverage indoors, with less capital investment than might otherwise be required. In other cases there might be some incremental increase in operating costs, especially when mobile operator access to the indoor networks is a lease arrangement with the private LTE operator.

On the other hand, the indoor LTE network could well, over time, build beyond support for mobile phones and include internet of things sensors. That could affect mobile business revenues in a variety of ways, from displacement to sharing to augmentation.

The private LTE operator could be a buyer of access and transport; a competitor for IoT services; a partner for providing better indoor coverage or platforms, possibly all at once.

source: ThinkSmallCell

In other words, private LTE might simply be another form of indoor local area network that aggregates local traffic for transmission over wide area networks, as local area networks (Wi-Fi, for example) do. In this scenario, private LTE is simply a way of supporting employee, partner and customer use of existing services and networks.

source: Nokia Bell Labs

To some extent, especially in smaller venues, private LTE might be a service sold to building managers or tenants, much as airport or hotel Wi-Fi service is a business for some suppliers.

In all cases, private LTE could establish a new role for LTE networks in the role of local area network, as Wi-Fi now is used. If you think about how Wi-Fi affects the WAN service providers, there are stimulative effects, creating additional demand for internet access services.

Private LTE should also help solve indoor signal strength issues, as has been true for mobile internet access functions inside buildings.

If you think about private LTE networks supported by new spectrum such as Citizens Broadband Radio Service as a new form of local area network platform, akin to Wi-Fi, you can figure out how it might be used, and what the implications might be.

But it always is fair to remember the fundamental distinction between local and wide area networks. WAN services are fundamental for service provider business models. LANs such as Wi-Fi have become more important functional parts of the WAN business, though, allowing service providers to provide better service (data offload and signal strength).

Private LTE will probably have much the same effect, even as some incremental new business opportunities could be created for suppliers of indoor communications services.

Will 5G Capex Break the Bank? Maybe Not

Even if some continue to argue that 5G will be so expensive (double or triple the cost of 4G) that there is no business model, there is reason to believe those dire forecasts will not materialize.

In part, that is because 5G infrastructure includes a number of potential cost items broader than has been the case for earlier networks. Much hinges on how much millimeter wave spectrum has to be used, which requires small cells, which in turn requires lots of optical fiber backhaul.

The capital investment model also depends on many other decisions, such as how extensive a deployment initially is planned.

A new network might be built only in urban cores. Other approaches might add suburban areas. Some cities or regions might be built first, with others only later.

Construction programs might follow the 3G or 4G timetables or could stretch out.  In many cases, it will matter whether a full 5G standalone network is built, or a hybrid 4G-5G network can be used.

Another variable is how much other virtualized network capability exists; how much backhaul fiber is in place; how much open source or commodity gear is available and used.

The point is that 5G capex might well not rise all that much above what was required for 4G.

source: GSMA Intelligence

“We believe it is also reasonable to assume a gradual rollout path,” GSMA Intelligence argues. IN other words, 5G will often be built gradually, and over a longer period of time than 4G. In other words, full deployment might be phased in over seven years, instead of three, in larger markets, such as China, GSMA Intelligence suggests.

In Japan, operators claim that the deployment of 5G will not lead to any significant spike in capex, GSMA says.

Some might still disagree, but capex levels tend to be rather steady. Between 2018 and 2020, GSMA Intelligence forecasts mobile capex to be about $100 billion in

the United States, for example.

Necessity and Opportunity Drive Fast U.S. 5G Adoption Efforts

Necessity and opportunity both are lining up to drive aggressive 5G adoption in the U.S. market. All four leading U.S. mobile operators will be offering 5G mobile services in 2019, with AT&T and Verizon launching mobile 5G services in selected markets in 2018.

According to GSMA Intelligence forecasts, the United States will experience one of the fastest customer migrations to 5G in the world, with 5G will reach 100 million mobile connections in early 2023.

That will make 5G the leading mobile network technology in the country by 2025, with more than 190 million 5G connections (accounting for around half of total mobile connections), excluding use of 5G to support fixed operations.

But more than supply will drive that deployment speed.

Aggressive millimeter wave spectrum allocations will be key enablers, especially for AT&T and Verizon.

But there are other fundamental reasons for the push into 5G. Simply put, the U.S. mobile market has exhausted its growth model, based on 4G. If one extrapolates from steadily declining revenue growth since 2010, it is possible revenue growth in the core mobile business might actually go negative in 2019.

Since revenue growth is a virtual necessity for firms that are publicly owned, that represents a crisis.

source: GSMA Intelligence

Though new revenue sources will have to be created, 5G offers some opportunity for services that actually have not existed on earlier platforms, including 4G. Though everyone expects early revenue upside to come in the area of “enhanced” (much faster) internet access, that expectation must be qualified.

Since 4G adoption is virtually ubiquitous in the U.S. mobile business, customers who adopt 5G access will, by definition, be replacing primary reliance on 4G. So there is substitution going on, replacing 4G accounts with 5G.

There may or may not be incremental upside from such substitution. In the early days, some incremental upside is likely.

Longer term, the hope is that brand new revenue streams can be created in the internet of things (sensor communications) area. There also is hope some new classes of apps can be created in the ultra-low-latency area. Connected cars or 4K and 8K video, plus other latency-dependent apps such as remote surgery come to mind.

The important point is that U.S. mobile operators are going to be aggressive about 5G because the 4G business model has become exhausted.

Initial 5G Revenue Upside is Fairly Limited

With the exception of markets in Asia, Africa or elsewhere that still are adding subscriber accounts and mobile data accounts, developed markets where 5G is first deployed will not likely see too much of an upsurge in revenue, for several reasons.

To start, 5G will not be available in many markets, to begin with. And in markets where 5G is available, where mostly everyone who wants to buy mobile service already does so, 5G accounts will simply cannibalize 4G accounts. So if one assumes there is a modest cost premium for 5G, incremental revenue is likely to be relatively subdued.

For such reasons, “there is limited growth left in connectivity revenue for service providers,” Strategy Analytics says.

In fact, Strategy Analytics predicts mobile service revenue will peak in 2021 at US$881 billion, just three percent above the level forecast for 2018.

User-linked mobile 5G connections will grow from 5 million in 2019 to 577 million in 2023 (excluding fixed wireless applications and industrial IOT). These will account for 10 percent of connectivity revenue in 2023.

source: Strategy Analytics

That maturation of the mobile market is why 5G revenues earned from human customers will be very slight. Each new 5G account cannibalized an existing 4G account, so net revenue gains are limited to the difference between a typical 5G account revenue and typical 4G account revenue.

5G Phone Sales Will Not Reach Volume Until 2021

Although the first 5G commercial handsets will go on sale from early 2019, sales will not begin to scale up until 2021 when volumes approach five percent of global handset sales, according to Strategy Analytics. “5G smartphone sales will begin in China, Japan, South Korea and the USA from 2019,” says Senior Analyst Ville-Petteri Ukonaho. “But volumes in 2019 will be in just the millions, and only barely in the tens of millions in 2020.”

As you would expect, in the very-early days of a new mobile network deployment, especially in larger countries, coverage will not be ubiquitous, limiting the value of the new devices.

Low volume also will mean that suppliers will be careful about ramping up production. And low volume will mean relatively-higher prices.

None of that is unusual.

Use cases might also matter. Though most consumers would agree that much-faster is better, they might disagree about how much they are willing to spend to upgrade devices--especially when selection is limited and prices are high--when there actual use cases do not benefit much--if at all--from the lower latency and higher bandwidth 5G will supply.

source: Qorvo

What could change? Customers might find mobile entertainment video offerings are more compelling than at present. Augmented reality apps might take off. Or more customers might find the killer app is the ability to cut the cord on fixed network internet access subscriptions. It just is hard to say right now.

Some might argue that 5G versions of tethering (using the mobile internet connection for in-home device support) and direct access (to support apps used on the mobile device), will be early important use cases.

For a growing number of users, that already is the case in the 4G era, and the range of use cases will be even more compelling when 5G speed and latency are available.