How Big an Opportunity is CBRS Neutral Host Business?

In the era of 5G millimeter wave communications, one long-standing problem in wireless communications will assume new importance: indoor signal coverage. That has gotten to be a bigger issue as mobile communications have migrated up from 800 MHz into the 2-GHz range, and will increase as we move into the millimeter wave bands.

Wi-Fi or a distributed antenna system (DAS) is in many case the present “solution” for data or voice access. When not available, “going outside” or use of signal boosters (customer-owned or carrier provided femtocells) is the workaround.

That might continue to be the case for millimeter wave signal access, although many believe a whole new category of “indoor coverage” options will emerge.

To a greater extent than at present, mobile carriers will be the best option for any “outdoors” use cases. But, in many cases, indoor coverage might be the domain of a new breed of infrastructure provider, devoted exclusively to indoor coverage.

Precisely what business models might emerge is yet unclear, but private networks owned and operated by enterprises is one model, where the objective is simply better performance inside buildings. That is most analogous to the way enterprises deploy Wi-Fi.

In other cases some entity (enterprise, third party or carrier) might create an indoor multi-tenant infrastructure that is open to use by any mobile service provider. Just how big an opportunity that might be is unclear. But the business might be analogous to today’s Distributed Antenna System business. In that case indoor infrastructure is an interesting niche, but still a niche.

FCC "5G Fast" Plan: Unprecedented Increase in Spectrum for 5G

The U.S. Federal Communications Commission has packaged a number of initiatives to support 5G deployment as the “Facilitate America’s Superiority in 5G Technology” (5G FAST) plan.

Among more significant moves are the release of huge amounts of new spectrum for commercial use, including 5 GHz of spectrum in the 24 GHz, 28 GHz, 37 GHz, 39 GHz, and 47 GHz bands.

Consider that all spectrum now available for mobile use totals less than a gigaHertz. The FCC also is working on releasing another 2.75 gigahertz of 5G spectrum in the 26 GHz and 42 GHz bands.

In the lower millimeter range, the FCC is working to commercialize about 844 MHz of spectrum in the 2.5 GHz, 3.5 GHz, and 3.7 GHz to 4.2 GHz bands.

The FCC also is moving to release as much as 7 GHz of new unlicensed spectrum in the 6 GHz range, as well as capacity above 95 GHz band.

In the 5G era, as millimeter wave spectrum is released, raw bandwidth will increase by up to  1.5 orders of magnitude in physical terms, in many markets. Unlicensed bandwidth alone might grow by about five times to 12 times, compared to available mobile spectrum.

And that will have huge price and capability implications. For the first time, mobile substitution, on a basis comparable with fixed networks, should be possible Access to all that new bandwidth will mean the mobile network’s cost per bit and retail cost, plus usage allowances, should be equivalent to, or perhaps better than, fixed network alternatives.

source: University of Bristol

Edge Computing and the CPE Business

It has been decades since tier-one telcos actually had a significant role in customer premises equipment business. Back in the monopoly era, telcos actually made and sold the phone devices people used. In fact, it was illegal to use any phone not manufactured by the service provider.

In the competitive era, service providers have been irrelevant as suppliers of CPE, as that role was ceded to device suppliers active in the consumer electronics space.

In recent years we have seen new efforts by some device suppliers to dramatically reduce smartphone prices, driven by the need for such devices in developing markets. But technology and business opportunity never stands still in the communications business.

Could edge computing create new opportunities for access providers as suppliers or partners with mobile device manufacturers? AT&T believes that could happen.

AT&T, for example, plans to build thousands of small edge computing data centers in central offices and other locations across the United States. So could a big edge computing network affect mobile phone design as much as cloud computing has affected the design and use of computing devices? AT&T’s Mazin Gilbert, VP, thinks that is a possibility.

Edge computing could create the conditions for really cheap smartphones. “Can my $1,000 mobile phone be $10 or $20 dollars, where all the intelligence is really sitting at the edge?,” Gilbert asks. “It’s absolutely possible.”

That obviously would dramatically reduce barriers to smartphone use by everyone, while providing some means of differentiation for access services provided by AT&T. Both trends would provide more reasons for consumers or businesses to use the AT&T network, instead of rival networks.

Sprint Now Says It Cannot Recover from Losses

In August 2018, Sprint touted subscriber gains and raised its expectations for earnings. In September, Sprint now claims it is “unable” to recover from “crippling losses.”

Customers are fleeing at an increasing rate, Sprint now tells the U.S. Federal Communications Commission in a filing.

Revenue is dropping and the company can’t cut much more after eliminating about $10 billion in annual costs, Sprint now says. The decline means Sprint can’t afford needed investments, Sprint also says.

So which version of the story is the real story? The same sort of confusion also surrounds strategy for a merged T-Mobile US and Sprint. After T-Mobile US officials downplayed the value of 5G fixed wireless, the firm now seemingly suggests it sees 5G wireless as a compelling  growth story

T-Mobilke now seems to suggest it will use 5G fixed wireless as a platform to bring competition to the fixed internet access market, claiming it can garner perhaps 1.9 million subscribers by 2021 and perhaps 9.5 million by 2024. Whether T-Mobile US would consider using fixed wireless if the merger with Sprint is not approved is not so clear. Nor, in fact, is the matter of what approach actually would be considered, if the merger is approved.

Maybe neither T-Mobile US nor Sprint are completely sure what direction they might go, if the merger is denied, or if it proceeds.

Italy 5G Spectrum Auctions Produce Higher than Expected Prices

Competition in the Italian mobile market, especially from new entrants who need more spectrum, seems to be driving up 3.6 GHz to 3.8 GHz spectrum prices, which are now being auctioned in Italy. That can be a big problem, as industry executives with long memories can attest. In the past, 3G auction prices were bid up so high they nearly bankrupted the winners.

Generally speaking, spectrum prices on a potential user basis have been declining since 2000.

source: Daily Wireless

But heighted competition in the Italian mobile market, with new contestants needing lots of new spectrum, seems to be driving prices higher in the auctions for spectrum in the 3.6 GHx to 3.8 GHz band to be used there for 5G networks.

In one way, mobile competition eased when mobile operators 3 Italia and Wind Telecomunicazioni merged and form Wind Tre, reducing the number of competitors, which also include Vodafone, Telecom Italia.

On the other hand, Iliad is making a big push in Italy, while fixed network provider Fastweb is entering the mobile market for the first time. So it appears the new competitors, in need of lots of new spectrum, are forcing prices higher.

Italy's 5G auction already has crossed the  €5.2 billion ($6.1 billion) threshold, about double what the Italian government had originally expected to make.

The 700 MHz auction, just ended, raised  more than €2 billion ($2.4 billion).

source: Stratix

source: Stratix

In other countries, spectrum prices should continue to fall.

The amount of new wireless and 5G spectrum coming to market in the United States and other countries is staggering and beyond anything we have seen in the history of communications. Consider that all mobile operators in any single country have access to about 600 MHz to 1300 MHz of total bandwidth available.

source: gsmaintelligence.com

In the 5G era, as millimeter wave spectrum is released, raw bandwidth will increase by up to  1.5 orders of magnitude in physical terms, in many markets. Unlicensed bandwidth alone might grow by about five times to 12 times, compared to available mobile spectrum.

And that will have huge price and capability implications. For the first time, mobile substitution, on a basis comparable with fixed networks, should be possible Access to all that new bandwidth will mean the mobile network’s cost per bit and retail cost, plus usage allowances, should be equivalent to, or perhaps better than, fixed network alternatives.

source: University of Bristol

If you though mobile substitution was a problem for fixed networks when confronted by mobile telephony, consider what might happen next as mobile networks become a full substitute for fixed network internet access.

But “raw bandwidth” is only part of the story. Since millimeter wave networks will require small cells, physical reuse of spectrum will add to the capacity increases. All together, it is possible that bandwidth could grow by up to two orders of magnitude (100 times) in some locations.

And all that is going to cause a reset of business models for both mobile and fixed network service providers. Still, in some specific instances, such as Italy, spectrum prices might be a tougher issue.

On the other hand, as spectrum is the price of entry, new entrants and incumbents might conclude they have little option but to spend what is necessary to get 5G spectrum.

Staggering Amount of New Spectrum is Coming

The amount of new wireless and 5G spectrum coming to market in the United States and other countries is staggering and beyond anything we have seen in the history of communications. Consider that all mobile operators in any single country have access to about 600 MHz to 1300 MHz of total bandwidth available.

source: gsmaintelligence.com

In the 5G era, as millimeter wave spectrum is released, raw bandwidth will increase by up to  1.5 orders of magnitude in physical terms, in many markets. Unlicensed bandwidth alone might grow by about five times to 12 times, compared to available mobile spectrum.

And that will have huge price and capability implications. For the first time, mobile substitution, on a basis comparable with fixed networks, should be possible Access to all that new bandwidth will mean the mobile network’s cost per bit and retail cost, plus usage allowances, should be equivalent to, or perhaps better than, fixed network alternatives.

source: University of Bristol

If you though mobile substitution was a problem for fixed networks when confronted by mobile telephony, consider what might happen next as mobile networks become a full substitute for fixed network internet access.

But “raw bandwidth” is only part of the story. Since millimeter wave networks will require small cells, physical reuse of spectrum will add to the capacity increases. All together, it is possible that bandwidth could grow by up to two orders of magnitude (100 times) in some locations.

And all that is going to cause a reset of business models for both mobile and fixed network service providers.

Virtualization Creates New Business Models

Virtualization of core and access networks is a key trend that will shape the communications business over the next couple of decades, students at the PTC Academy heard. In the 5G era, as core and access networks are virtualized, it will be possible for service providers, enterprises, app and platform providers to construct private networks that go far beyond today’s methods of aggregating capacity and services.

Conder the way mobile virtual network operators (MVNOs) now buy capacity and features, and the ways they might do so in a virtualized future. Today, the MVNO buys wholesale capacity from an underlying carrier based on usage.

But that capacity (use of cell sites, some back office support, use of voice and data bandwidth) is the same as available to customers of the underlying network provider.

The ways such capacity can be sourced will change in the coming era. At one level, the fact that all networks are virtualized means it will be possible for an MVNO or other entity to source capacity across networks about as easily as they now source capacity from a single supplier.

Google Fi (Google’s U.S. mobile service) shows, in outline, the general principle. Google Fi is set up so its user devices connect first using Wi-Fi. When Wi-Fi is not available, the customer device connects using either the Sprint network or the T-Mobile US network, depending on which network offers the “best” signal at that time, at that location.

Of course, Google Fi or other MVNOs might also, in the future, use other selection criteria, such as choosing the network that also offers the best pricing, at that moment, at that location.

Source: Nokia Bell Labs

But there is more. In the 5G era, virtualized networks will offer the ability to create virtual private networks that flow through the core network to the radio edge, and might be optimized for the particular lead application any MVNO happens to require. That “network slicing” ability means not only the ability to purchase a private network, but to specify, when required, some performance elements optimized for the MVNOs business cases.

In other words, one network might require ultra-low latency (autonomous vehicles, for example). A surgical network might require both ultra-low latency and highest-possible availability. A consumer mobile network might need highest bandwidth.

Some enterprise networks might be highly geography specific, requiring access only at some locations, and not over entire wide areas.

The big takeaway is that creating and operating wide area networks (physical or virtual) that have specific performance attributes out to the network edge (radio sites) will be possible for the first time.

New business models surely will develop, based on network slicing.

The PTC Academy event, held in Bangkok Sept. 20 and 21st, 2018, was attended by 17 mid-level executives from Japan, Hong Kong, Brunei, Vietnam, Cambodia and Kiribati, including Colt, PCCWG, Ezecom, CMC and CITIC.

Disintermediation (OTT) Affects Mobile and Many Parts of Communications Ecosystem

"Over the top" is a trend mobile and fixed network service providers have confronted for a couple of decades. But that trend also operates in the wide area networks business. To understand the trend, recall that "over the top" means disintermediation.

“Disintermediation” is a term some attendees at the PTC Academy event in Bangkok, Sept. 20 and 21, 2018, heard for the first time, as a substitute for the term "over the top" (OTT). The term simply means that product and service providers go direct to end users and customers, rather than using distributors.

Since communications service providers are distributors, that has key implications. Think “over the top” and you get the point: apps go direct to customers and end users with no direct business relationship between the app/platform and the user.

To an astonishing degree, market demand for wide area communications has shifted away from telcos and to application and platform providers.

The amount of undersea traffic carried by the largest U.S. application and platform providers grew to 339 Tbps between 2013 and 2017. International capacity supplied by internet transport companies grew to 350 Tbps.

“15 years ago, 100 percent of my clients were telcos,”  said Sean Bergin, APTelecom president. “Now 80 percent of my customers are OTTs,”

source: TeleGeography

So platform and app companies Google, Facebook, Microsoft and Amazon do not yet move more bits than service providers do, but arguably will do so in the future. And that “function substitution” has happened in telecommunications before.

Though you are familiar with mobile substitution--the use of mobile networks to displace use of fixed networks--the substitution happening elsewhere is “over the top” substitution for carrier services and value.

In the undersea and wide area network business, that means enterprises of a particular type (tier-one application and platform suppliers) are creating and owning their own transmission networks, and no longer buying capacity from transport providers. And that also means disintermediation of the communications service provider.

source: Google

Put another way, wide area networks now are experiencing product substitution, as did fixed network service providers, where mobile services are preferred to fixed services. As "over the top" apps, platforms and services often displace carrier services and apps, so enterprises (app, platform, device providers) increasingly have found it makes sense to own their own global networks.

And that means the demand for capacity services from "public" networks (telcos) is diminished. In other words, as bandwidth demand grows, the amount of growth available as "revenue for service providers" diminishes.

source: Google

That trend can be seen clearly in the growth of transoceanic capacity that is supplied directly and internally by app and platform providers directly, on their own private networks.

In other words, OTT now covers a much-wider range of business cases, all based on disintermediation, where producers go straight to their customers or users, without relying on distribution partners.

source: TeleGeography

Will 5G, IoT Really Drive Big New Revenue Gains?

At the PTC Academy training event held in Bangkok Sept. 20 and 21, 2018, we spent some time looking at changes in the core business models of several parts of the communications ecosystem. And it was hard to avoid some discussion of 5G, internet of things, network virtualization and the coming era of millimeter wave use.

As always, opinions differ about the revenue and business value upside from 5G and IoT. Some believe 5G and IoT will not produce big revenue opportunities for communications service providers. Others believe 5G and IoT could do so.

Sandeep Perumal, Colt Japan, making a point at PTC Academy

Yet others, such as me, believe it is possible revenue upside might not be as big, over the the next decade, as some predict. On the other hand, 5G (and the associated other changes in core networks, bandwidth, latency, virtualization) and IoT represent the biggest opportunities for communications service providers to create big new revenue sources to offset a loss of perhaps half of present revenues.

So 5G and IoT are big gambles, but gambles that must be taken. Success is far from guaranteed. But the relentless search for big new revenue sources is imperative. Right now, 5G and IoT seem to offer the greatest upside for massive new waves of revenue growth.

One rule of thumb I use when looking at business model change is to assume that a tier-one service provider will have to replace half its current revenue with new sources every decade. And that might be a reasonable rule for suppliers of apps, platforms, devices and components as well, not just communications service providers.

Im 2012, for example, Intel earned nearly 70 percent of revenue from “PC and mobile” platforms. By 2018, PC/mobile had dropped to about half of total revenue. By 2023 or so, Intel should generate 60 percent or more of total revenue from sources other than PC/mobile.

source: Trefis

If you hear executives talking so much about innovation and new services, that is why: companies need to replace half their revenue every decade, and do so in every decade, from now on.

source: Intel

China and India Drive Mobile Subscriber Adds to 2025

As always, global trends can obscure what is happening in discrete communications markets.

That seems to be the case for mobile communications as well. Of the 1.6 billion new mobile internet users between now and 2025, the overwhelming numbers will come from China and India.

source: GSMA Intelligence

Just five countries account for half of global  growth to 2025:

• China

• India
• Indonesia
• Nigeria
• Pakistan

What that means is that subscriber additions cannot drive revenue growth in most markets globally. In many countries, additional mobile data revenue will be key. In developed markets, growth will have to shift beyond mobile data, one might argue.

Also, because fixed broadband is negligible in some of those markets, the “next internet generation will not just be mobile first, but mobile only,” says GSMA.

DoJ, FTC Looking at Possible Antitrust Against Google, Facebook, Twitter

For better or worse, both the U.S. Department of Justice and the Federal Trade Commission are looking at competition, consumer protection and potential antitrust issues related to the likes of Google, Facebook and possibly Twitter.

Attorney General Jeff Sessions is exploring a potential investigation of social media companies, and could lead to a federal case against Alphabet’s Google, Facebook and maybe Twitter for violating consumer-protection or antitrust laws.

The FTC is kicking off  a series of public hearings during the fall and winter 2018 examining whether broad-based changes in the economy, evolving business practices, new technologies, or international developments might require adjustments to competition and consumer protection law, enforcement priorities, and policy.

In other words, this might be the precursor to regulation of internet app firms in new ways, possibly including measures of an antitrust nature (breaking up firms or restraining them).

Hearing	Date	Topics	Location
#1	Sep. 13-14, 2018	Review of Competition and Consumer Protection Landscape; Concentration and Competitiveness in U.S. Economy; Privacy Regulation; Consumer Welfare Standard in Antitrust; Vertical Mergers	Georgetown University Law Center, Washington, DC
#2	Sep. 21, 2018	State of U.S. Antitrust Law; Mergers and Monopsony or Buyer Power	FTC Constitution Center, Washington, DC
#3	Oct. 15-17, 2018	The Identification and Analysis of Collusive, Exclusionary, and Predatory Conduct by Digital and Technology-Based Platform Businesses; Antitrust Framework for Evaluating Acquisitions of Potential or Nascent Competitors in Digital Marketplaces; Antitrust Evaluation of Labor Markets	George Mason University Antonin Scalia Law School, Arlington, VA
#4	Oct. 23-24, 2018	Innovation and Intellectual Property Policy	FTC Constitution Center, Washington, DC
#5	Nov. 6-7, 2018	Privacy, Big Data, and Competition	American University Washington College of Law, Washington, DC
#6	Nov. 13-14, 2018	Algorithms, Artificial Intelligence, and Predictive Analytics	Howard University School of Law, Washington, DC