Singapore Awards Mid-Band, Millimeter Wave Spectrum

The Infocomm Media Development Authority (IMDA) has awarded 3.5-GHz, 26 GHz and 28 GHz 5G nationwide spectrum licenses on 29 April 2020, ahead of its mid-2020 schedule. The IMDA awarded Singapore Telecommunications and StarHub/M1 each 100 MHz of 3.5GHz spectrum, paired with an 800 MHz band of millimeter wave spectrum,

That Singapore is moving fast is not new. What might be more surprising is that the construction timetable arguably is stretched out. 

Fitch Ratings expects the 3.5GHz spectrum band to be freed up in 2021. The IMDA aims to achieve 50 percent 5G coverage by the end of 2022, with nationwide coverage by end-2025. Keep in mind that Singapore is only 279 square miles in area. 

That sedate pace might suggest a belief that the use cases for 5G are not so immediate and compelling that construction must be swift. On the other hand, Singapore also will build 5G standalone networks, not using the non-standalone version other service providers have chosen to deploy as an interim step. 

Fitch 2.1 GHz and 4.5 GHz assets also will become available for 5G use in the future. 

Too Early to Assess 5G

STL Partners has a new 5G status tool that assesses the 5G market based on supply and demand drivers, with 2020 essentially acting as a baseline. As you can see, we are just at the beginning of the 5G era. That is worth keeping in mind the next time you hear somebody complain that 5G is not needed, does not work, is not yet deployed or provides little value. 

source: STL Partners

Think about 5G as the first mobile platform that is virtualized, cloud-based and, from an application perspective, relatively open. Keep in mind that most observers believe 5G will thrive based on new enterprise use cases, not consumer value, so much. Even when the infrastructure is substantially deployed, it will take time for enterprise use cases to be pioneered and adopted. 

As many predicted 3G use cases did not develop until 4G, we might well expect some hoped-for 5G use cases to flourish only when 6G arrives. In the near term, 5G often will be an efficient means of increasing capacity at network hotspots. It will, in many cases, also provide the platform for mobile operator entry into the fixed network internet access business. 

Give it a few years, in other words. 

Millimeter Wave Impact on Speeds is Significant

Millimeter wave spectrum matters, as a quick comparison of mobile network speeds shows. Verizon, basing its 5G rollout initially on millimeter wave spectrum, handily beats the other U.S. networks using 2.5 GHz, 850 MHz or 600 MHz frequencies. It is just physics: low frequency spectrum has better coverage, but high frequency provides the greatest capacity. 

source: Opensignal

That noted, for most customers, experience will be a combination of 4G and 5G network access. That evens out typical speeds. New T-Mobile will have an opportunity to challenge Verizon on that score. 

source: Opensignal

Since most mobile operators globally are launching 5G using mid-band spectrum, typical speeds will not reach the levels of millimeter wave deployments.

source: Opensignal

SoftBank Plans to Go "Beyond Carrier"

“SoftBank Corp. is rapidly transforming into an entity that transcends the typical business field of a telecommunications operator by advancing a Beyond Carrier  strategy, according to Ken Miyauchi, SoftBank Corp. president and CEO. 

“Beyond Carrier” is SoftBank’s strategy to sustain growth by extending its business into the service and content fields and related areas, he said. In other words, “moving up the stack” or “across the value chain” into applications, services and content that require connectivity support. 

It is not hard to find critics of such strategies. Smaller firms, in particular, might not have the assets to move up the stack. For larger firms, which might aspire to do so, there is risk, as it requires moving out of the area of core competency. 

Partnerships between connectivity providers and Google for edge computing illustrate the problem. Google Cloud says it is helping telecommunications companies monetize 5G as a business services platform, in part by prototyping and developing edge computing use cases in retail, manufacturing and transportation. 

The Global Mobile Edge Cloud program aims to create a portfolio and marketplace of 5G solutions built jointly with telecommunications companies; an open cloud platform for developing these network-centric applications; and a global distributed edge for optimally deploying these solutions, Google Cloud says.

A collaboration with AT&T is part of that effort, where AT&T supplies the network while Google Cloud supplies the computing functions. If that sounds a bit like “dumb pipe,” you’d be right. The same might be said to be the case for the AWS Wavelengths initiative, where AWS supplies the edge computing and telcos supply real estate (rack space). 

And virtually every equity analyst prefers the stick to what you do best approach, as we have seen with criticism of AT&T’s moves into video entertainment, for example. 

But you can count SoftBank amongst the carriers that plan to move across the ecosystem or up the stack.

5G Devices on the Market Favor Sub-6 GHz Frequencies

At least so far, most devices designed to work on 5G networks globally have been commercialized first on sub-6-GHz bands, the Global Mobile Suppliers Association reports. 

https://gsacom.com/

Some Day, This is How We Will Feel

SD-WAN, UCASS, WAN Capacity Markets Shaped by "Do it Yourself"

-For all the attention SD-WAN gets in the network element and managed services business, it remains an almost-perilously small contributor to service provider revenues. That is not unusual. Many enterprise products, including unified communications as a service, actually product smallish revenues for service providers. 

Granted, the SD-WAN market features high growth rates. But total revenue remained extremely small as recently as 2018, when managed service revenue was only about $282 million, according to Vertical Systems Group.  

source: Vertical Systems Group

Gartner believes managed SD-WAN services reached possibly $2.5 billion in 2020. The total SD-WAN market is a mix of managed services and network element sales, though. The issue is the balance of sales, going forward. Some predict that managed services eventually will dominate revenue. 

source: Gartner

One way of estimating eventual managed service revenue is to view SD-WAN as the  replacement for MPLS, which might have represented about $20 billion annual revenues at its peak. 

One major trend is for wide area network data transport to shift from a “service an enterprise buys” to a “capability supplied by our own private network.” Big content and app providers now are the primary drivers of WAN capacity needs, and it is cheaper for such firms to build and own their own WANs than to buy capacity on the open market.

source: TeleGeography

In the 21st century, WAN traffic has moved steadily in the direction of carriage on private networks owned and operated by major application providers, and away from the public networks offering internet backbone carriage. In large part, that is because big app and content providers rely on data centers and cloud computing to support their businesses. 

By 2016, more than 70 percent of all internet traffic across the Atlantic was carried over private networks, not on public WAN networks. Obviously, that also means no revenue was earned directly by public service providers for carrying that traffic.

On intra-Asian routes, private networks in 2016 carried 60 percent of all traffic. On trans-Pacific routes, private networks carried about 58 percent of traffic.

In other words, far less traffic now moves over public networks than once was the case, a development with important revenue and business model implications. To a growing extent, private networks are displacing WAN services.  

The point is that important enterprise services produce revenues for service providers that are smaller than you might think, despite the huge growth in WAN traffic, cloud computing capacity and shift to “everything as a service.”

Such services as SD-WAN and unified communications as a service (UCASS) are vitally important for some suppliers, to be sure. But the size of those markets, in the context of total communications revenues, is fairly limited. And a substantial portion of such revenues are actually earned by suppliers of “do it yourself” network infrastructure. 

Wi-Fi is virtually mission critical, for example, but revenues are mostly earned by equipment, chipset and router suppliers, not service providers. 

On any IP network, it is possible to create network functionality at the edge, using owned customer premises equipment (routers, for example), without buying a turned up service supplying the equivalent functionality. That shifts revenue from service providers to gear suppliers. 

Also, the economics of infrastructure make owning a more-affordable solution than buying service in a growing number of cases, for WAN capacity as well as for UCASS. 

In high volume, owning gear and creating your own services still makes sense for large enterprises. Managed services tend to make more financial sense for smaller users. Larger enterprises also now find they can build their own servers and routers instead of buying them. 

All that illustrates why enterprise spending on connectivity services is not indicative of the value derived from those purchases. Nor are connectivity, UCASS or SD-WAN markets directly correlated with traffic volume. “Do it yourself” has become a material driver of public market services demand.

Use of Wi-Fi Might be Helping Sustain Mobile Download Speeds Globally

The percentage of time that smartphone users spend on Wi-Fi connections has increased across all of the top 50 U.S. cities, says Opensignal, as well as in most other countries.

Perhaps that is one reason Opensignal did not find significant deterioration in 4G download speeds in 49 of these 50 cities in the last few weeks, though some users in some countries have seen speed slowdowns of some sort.

Smartphone users in the New York-Newark-Jersey City metropolitan area increased the average amount of time they spent connected to a Wi-Fi network from 53.4 percent to 60.1 percent between the second and third weeks of March.

The highest proportion of time spent on Wi-Fi happened in the Denver metro area in the first week of April. 

Globally, mobile operators report mobile data consumption is increasing dramatically, but Opensignal’s analytics demonstrate that despite these challenges the mobile experience is holding up well.

Opensignal has seen only relatively small changes in users’ 4G download speeds in some countries, and none at all in other countries.

Enter the Young

When I was much younger than my own children, I used to think this was about us. Turns out, it also is true of my children. And their children, and their children's children.

Stay-at-Home Rules Slash Mobile Churn in Some Countries

Stay-at-home rules seem to have sliced mobile account churn in many countries. “Real-time mobile number porting data suggesting churn reduction of 55 percent to 63 percent in France, Italy and Belgium,” note analysts at Jefferies.  

source: Jefferies

Reduced churn has some clear business effects. Reduced churn (porting activity) means less revenue loss from lost customer accounts, as well as associated overhead cost. With less churn, there arguably will be less need to spend on marketing, as well. On the upside, service providers lose fewer customers and preserve that cash flow those accounts represent.

On the other hand, less churn also means less cost. That arguably also will tend to buffer the impact of lost roaming revenue and some amount of data consumption revenues. 

In terms of market structure, lower churn means attacking and upstart service providers will lose momentum, as most developed countries essentially have zero-sum markets. An account cannot be gained unless taken from another service provider. Less churn means less capture of new accounts.

Verizon Buys BlueJeans Videoconference Service

The acquisition of business videoconference firm BlueJeans by Verizon points out a couple of ways connectivity providers can move back into the apps business. First, BlueJeans presumably still be available to any potential customers as a stand-alone cloud-based conferencing service.  

That allows Verizon to profit from demand for business class videoconferencing as an owner of the service. 

The total revenue contribution arguably is not the issue. Much business spending on videoconferencing historically has gone to hardware and software purchases, with relatively little spent on managed conferencing services. 

source: Grandview Research

But the value of the service now seems heightened, and a bundled conferencing capability adds distinctiveness and value to any 5G access service. 

source: Vyopta

But Verizon also plans to integrate BlueJeans functionality more tightly into its business 5G offerings as well, creating more potential demand for Verizon’s flavor of 5G. In that way, Verizon’s 5G access service acquires more distinctiveness and features. 

In principle, that same business approach has been pioneered by Comcast and AT&T, which license video content to third parties, but also build proprietary services sold under their own brand names, using that same content. 

The acquisition is a good example of how at least some connectivity providers can move up the value chain and across the ecosystem, expanding value beyond simple connectivity.

Where Private 4G or 5G Makes Sense

It might not be clear why a private 4G or private 5G network is “better” than Wi-Fi or some other local wireless connectivity platform at an enterprise location. 

Nokia points to mines, port terminals and airports as locations where the private mobile network has value. Vast coverage areas, needs for mobile support and assured quality of service can be issues in those venues. Wi-Fi cannot support the mobile requirements of automated guided vehicles (AGVs) or the even some of the faster-moving arms of robots, Nokia argues. 

Likewise, Wi-Fi signals do not propagate well in many industrial environments where building structures cause interference, Nokia argues. Support for low power requirements of sensors and other IoT devices as well as high density of devices also can be issues private 4G or 5G can address.

source: Nokia

Asia (and Oceania) Has 67% of Global 4G Connections

New Global Mobile Suppliers Association data on 4G mobile subscriptions shows the important role now played by countries in Asia. Asia has about 67 percent of all 4G subscriptions globally. 

source: GSA

All our Sophisticated 5G and Computing Technologies Get Used to Play

It always has seemed ironic that, as we develop more powerful communications and information technologies, we use them to watch videos, play games and entertain ourselves. Sure, there are productivity advantages, but really, all our sophisticated technology allows people to play, relax and entertain themselves. 

source: Deloitte

Nokia Introduces Dynamic Spectrum Sharing 5G/4G and 4G/3G/2G

Nokia has launched Dynamic Spectrum Sharing (DSS) software upgrade for existing Nokia AirScale base stations, allowing 5G networks and devices to use 4G spectrum resources and speeding 5G time to deployment. 

Nokia’s DSS solution, delivered as a software upgrade to existing Nokia AirScale base stations, not only allows 5G devices and radios to use 4G spectrum, but also enables dynamic sharing between 2G, 3G and 4G networks as well.

DSS helps speed 5G coverage and 5G network rollout by allowing reuse of 4G base stations, radios and spectrum to support 5G devices.

source: 3G 4G

Initial deliveries of Nokia’s DSS solution are planned to start in April 2020, with volume shipments expected by July, in line with the availability of DSS-capable mobile devices.

The new base stations also support  a functional split between real-time and non-real-time traffic. That provides a balance between processing and transport costs. Time-critical functions are handled locally, to reduce latency, while other traffic can take advantage of longer backhaul links. 

The more the concentration and processing of non-time-critical traffic, the lower network costs can be. 

DSS is among several new capacity tools mobile operators are using. Spectrum sharing allows mobile operators to share existing licensed spectrum with incumbent users, without forcing the incumbents to vacate the bands. That adds new capacity fast, without disrupting legacy use cases, and arguably at lower cost than spectrum clearing and reassignment. 

Spectrum aggregation allows a device to simultaneously use both licensed mobile spectrum and unlicensed spectrum such as Wi-Fi, boosting bandwidth.

Dynamic spectrum sharing allows mobile radios to use legacy network capacity without the cost and expense of spectrum clearing (moving existing users off the band; network decommissioning; spectrum reassignment). 

All those tools mean mobile operators can move faster, at lower cost, than they otherwise would have been able to do. 

Nokia also launched new AirScale products, including compact dual-band and triple-band remote radio heads to support cell sites. A remote radio head includes the radio frequency portions of a standard mobile base station, without the baseband signal processing functions.

It is a small outdoor module supporting transmit and receive functions, filtering, amplification, analog-to-digital or digital-to-analog converters and up/down converters. It is connected by optical fiber to a remote signal processing location. Remote radio heads reduce network cost by centralizing signal processing and distributing the radio functions. An RRH can also provide advanced monitoring and control features allowing operators to optimize performance from a remote, centralized location.

Nokia also introduced several new high-performance massive MIMO adaptive antennas to deliver 5G coverage and high capacity.

The S Curve as Applied to Mobile Access Services

This graph showing 3G (and what remains of 2G) subscriptions, compared to 4G, shows a fundamental principle: no product lasts forever. Demand for any existing product eventually saturates and declines, so new products must be created before the inevitable decline of whatever products presently drive virtually any business. This graph illustrates the application of the normal S curve curve to mobile services.

The curves show that 4G is created and then is commercialized before 3G reaches its peak, and then declines, as the new product displaces demand for the old.  The data, from the Global Mobile Suppliers Association, shows that by the end of 2014, 3G reached its peak. 

source: GSA

The 4G network reaches an inflection point at about the same time. If one examines each curve separately, successive S curves are the pattern. A firm or an industry has to begin work on the next generation of products while existing products are still near peak levels. 

source: Strategic Thinker

It also can take decades before a successful innovation actually reaches commercialization. The next big thing will have first been talked about roughly 30 years ago, says technologist Greg Satell. IBM coined the term machine learning in 1959, for example.

The S curve describes the way new technologies are adopted. It is related to the product life cycle. Many times, reaping the full benefits of a major new technology can take 20 to 30 years. Alexander Fleming discovered penicillin in 1928, it didn’t arrive on the market until 1945, nearly 20 years later.

Electricity did not have a measurable impact on the economy until the early 1920s, 40 years after Edison’s plant, it can be argued.

It wasn’t until the late 1990’s, or about 30 years after 1968, that computers had a measurable effect on the US economy, many would note.

source: Wikipedia

The point is that the next big thing will turn out to be an idea first broached decades ago, even if it has not been possible to commercialize that idea. 

The even-bigger idea is that all firms and industries must work to create the next generation of products before the existing products reach saturation. That is why work already has begun on 6G, even as 5G is just being commercialized. Generally, the next-generation mobile network is introduced every decade. 

Low-Income Country Mobile Internet Prices are Dropping Fast

In 2019, low-income countries made impressive strides towards affordability. In 2019, low-income countries increased their affordability scores three times as much as middle-income countries, on average, according to the  Alliance for Affordable Internet. 

source: Alliance for Affordable Internet

The AAI index measures infrastructure availability and take rates, not actual prices. But the index then is correlated with prices for 1 gigabyte mobile prepaid plans. 

As always, the correlations might be different if other plans offering more usage are compared, as price-per-gigabyte tends to drop as volume rises, but absolute price might climb. That is important, as typical usage varies by country. 

In other words, if users in some countries buy plans featuring 3 GB or 10 GB, that means spending will be higher, because usage is higher. Conversely, spending will be lower when most users buy 500 MB to 1GB. 

Posted rates are one thing; actual buying behavior and usage can be quite different. But prices are dropping, everywhere. 

source: Alliance for Affordable Internet

The report also confirms what you would expect, that competition also increases affordability. 

Still, low-income countries saw a 15.6 percent increase in their affordability scores from 2018 to 2019, as well, compared to 4.5 percent and 5.1 per for lower-middle and upper-middle-income countries, the Alliance reports.

If Capex Grows 1%, You Can Bet Companies Expect Muted Revenue Growth

Global connectivity supplier capital investment (mobile and fixed) is projected to grow at a one percent compound annual growth rate between 2019 and 2022, according to the Dell’Oro Group. Other forecasts call for a decline in capex after 2022, as 5G and fiber investments to support 5G and fixed network broadband projects are completed. 

Capex is a clue to operator expectations about revenue growth as well, so we can infer expectations that overall revenue growth (mobile plus fixed) is going to be in the one percent range to 2022. 

Constrained operator revenue growth is expected to be one of the primary inhibitors of further telco capex acceleration, Dell’Oro has said. 

As a rule, capex budgets for service providers in developed markets are relatively fixed, year over year, with some ebbs and flows largely related to construction of each new next-generation network. 

source: Orange

As always, mobile investment is higher than fixed network investment, for one simple reason: mobility is where the bulk of revenue growth is expected. 

source: Dell'Oro Group

There also are regional differences, as Latin America and Asia are where growth will be higher, compared to Western Europe and North America, where growth will be lower, according to Standard & Poors.  

Still, mobile capex often grows when a new next-generation network has to be built, and then tapers off as construction moderates. So there is some chance that even mobile capex might not grow too much as 5G networks are built. 

In fact, fears that mobile operators could not afford 5G are proving incorrect. Just a few years ago, projections of 5G infrastructure cost were so high that many argued the networks could not be built. In fact, some speculated that 5G networks would cost 10 times that of 4G.  Others only expected 5G costs to double or triple. 

Capital investment levels, though, seem not to be skyrocketing, even as 5G is built. In fact, there is growing evidence that 5G can be built within existing capex budgets. 

There are several reasons. First, mobile operators are being deliberate in their spending and build rates. Also, capital expense is shifted from 4G to 5G, as always happens when a next-generation network is under construction. 

Also, network architects, working with better radios, have found that 5G mid-band signal coverage is almost identical to that of 4G, meaning less physical infrastructure actually turns out to be necessary. Also, low-band spectrum is being used for 5G rollouts, limiting capacity growth, but also requiring fewer new tower or radio sites and backhaul construction.

Better technology, allowing lower cost builds, also is at work. 

The bottom line is that mobile and fixed network capex reflects assumptions about revenue growth, as capex typically is set as a percentage of expected revenue. 

Current capex assumptions suggest connectivity suppliers generally expect slow revenue growth in Europe, North America, South Korea, Japan and Taiwan, with faster growth expected generally in wider Asia and Latin America.