50 MHz More Spectrum for 5G and Other Uses

The Federal Communications Commission adopted rules permitting expanded use of 50 megahertz of mid-band spectrum in the 4.9 GHz (4940-4990 MHz) band that is currently underused by state entities.

Under the new rules, states are allowed to lease this spectrum to third parties to boost wireless broadband, improve critical infrastructure monitoring, and facilitate public safety use cases. 

“In the 18 years since the FCC designated the 4.9 GHz band for public safety use, only about 3.5 percent of all potential licensees have taken advantage of this spectrum opportunity, and this spectrum remains largely unused outside major metropolitan areas,” the FCC says. 

The rules will empower eligible states to put 4.9 GHz band spectrum to its highest and best use and to allow new partnerships with electric utilities, FirstNet, and commercial operators to increase usage of this spectrum, while protecting existing public safety operations, the FCC says. 

The move is yet another example of more-flexible licensing regimes that encourage spectrum sharing.

New Verizon 5G Fixed Wireless CPE

Nice industrial design for the latest version of Verizon's 5G fixed wireless receiver and router. Self-install is key to the deployment cost, and this is going to help. 

5G Private Networking Ecosystem Will Probably Resemble LAN Ecosystem

Something unusual is predicted to happen in the mobile infrastructure business: indoor mobile coverage might be led by enterprises, rather than mobile operators, as more of the 5G connectivity business moves indoors and into private local networking hands. 

That means traditional suppliers of public network infrastructure will have new markets, selling direct to enterprise end users, in much the same way that data networking firms sell direct to enterprises and through channel partners to smaller businesses and organizations. 

Private networking might not have service provider implications--positive or negative--as big as one might suspect. In essence, private 5G is akin to the traditional local area networks business.

And the LAN business, like the enterprise voice business before it, never has been the province of public network service providers, whose networks terminate at the side of the building. According to Real Wireless, most indoor small cells, for example, will be supplied by enterprises or their contractors, not mobile service providers. 

source: Real Wireless 

As interconnects and system integrators have led the enterprise voice and local area networking markets, so too will similar firms likely emerge to lead the private 5G market as well, and for similar reasons. 

For starters, public networks terminate at the side of buildings, with private signal distribution inside buildings the province of property owners. So the whole connectivity service provider business is built on wide area connections between places. The revenue model does not depend on revenues from creating indoor premises networks. 

So the core competencies of WAN and LAN firms are different. 

Much of the LAN business also is fragmented and hard for large service providers to address in direct fashion. There simply is too much custom work, for too many small customers, to leverage service provider scale. 

Even in the sales function, mobile operators do not employ direct sales forces except for enterprises. They often use channel partners to reach some business customers. And wholesale support for mobile virtual network operators might qualify as use of channel partners as well. 

But for the most part, retail sales to consumers and small businesses are supported by mass media advertising and retail stores. Those same sorts of economics will drive the 5G private networking business as well. 

Some mobile operators will create dedicated private networking units focused on a relative handful of large customers (sports venues, conference centers, large retail complexes, government entities), as already is the case. 

But much of the actual work will be done directly by large enterprises or specialists in premises networking, as is true for business voice or local area networks generally. 

source: Real Wireless 

Consumers Want 5G, Nokia Survey Finds

Consumer demand surveys often are difficult to interpret. So attitudes about 5G might not prove too different, in that regard. A recent survey by Nokia of users in the United Kingdom, United States and South Korea found demand, willingness to pay more and switch providers to get 5G. 

“Consumers want 5G when they understand it,” Nokia says. “We found that 80 percent of consumers who understand 5G want it, compared with just 23 percent of those who aren’t familiar with it. 

“Consumers are willing to pay more for 5G,” Nokia’s survey also suggests. “Over half of survey respondents said they’d be willing to pay more for 5G.”

Focus group participants suggested cost will be a consideration, but not a barrier to it, and consumers show a willingness to pay more for 5G, Nokia says.

Engaged users will switch providers to get 5G, the survey suggests. About half of respondents said they’re likely to switch providers to get 5G if their own provider doesn’t offer it in the next 12 months. In many markets this will be a non-issue, as every leading supplier will offer 5G. 

Remote workers, routine users of videoconferencing, video streamers and customers using home monitoring services are among those likely to switch to 5G early, Nokia believes. Some of us might qualify that list. The “sweet spot” arguably is remote work and video conferencing, not entertainment video. 

Whether a fixed solution is required, or simple mobile access with tethering is adequate, depends on signal strength issues. 

Still, use cases can turn on a single mission-critical feature. In my own case, faster 4G, using a dongle for PC internet access, supplied high enough value that the decision to adopt was easy. 

Similarly, the switch from a 3G Blackberry to a 4G smartphone was driven essentially by free turn-by-turn directions. That meant I did not need a dedicated GPS device or a recurring subscription fee. 

Even earlier than that, a change in tariffs by AT&T mobility, making a domestic long distance call available “for no additional fee” changed my behavior. I used my phone for all outbound long distance calls, and used the fixed network only for incoming calls or local calling where there was no additional charge.

The next pain point is video conferencing, which is a new need not well met by any of my existing access options. 

Upstream speed (plus latency and jitter performance) now is the compelling unmet need, not downstream bandwidth.If 5G services are able to routinely supply upstream speeds between 25 Mbps and 100 Mbps, even in the early stages where maximum 5G performance is not yet available, that is a change of supplier driver. 

In the U.S. market, 70 percent of all fixed network broadband connections are supplied by cable operators. Those connections are impressively fast in the downstream, and relatively affordable, on a price-per-bit basis as well as in terms of overall recurring cost, compared to the situation two decades ago. 

But the Achilles Heel is the limited upstream speed. Even though my cable modem connection is fine for every other application, it is not satisfactory for video conferencing. I routinely get 600 Mbps in the downstream, and could buy a gigabit service if I chose. It is not clear whether the upstream would change, even if I upgraded to a gigabit service. 

I only get maybe 18.5 Mbps to 22 Mbps in the upstream, and on any conference with more than a few people, performance is degraded. The Comcast network would have to be upgraded further to boost upstream speeds, probably to a zero radio frequency amplifier network, which would terminate the network at an optical node and then run coaxial cable--without any amplifiers--to homes. 

I believe Comcast has little to no interest in doing so, at this point. 

That single application (video conferencing), though, is important enough that I would consider a supplemental 5G connection intended to be used only for video conferencing. In principle, since I have relied exclusively on 4G for access in past settings, a full reliance on 5G for all access needs would hinge on usage and pricing particulars, plus the details of signal strength. 

In the past, my 4G signal strength indoors was problematic, and 5G (operating at higher frequencies) likely would have the same--or worse--problems. An external antenna would likely be necessary, even if only located by the right window. The point is that I would not try using a smartphone and tethering, as I am in an area of known problematic mobile signal strength. 

In a 5G context I probably would only consider an approach that combined a “side of home” 5G data-only device with Wi-Fi for internal signal distribution. 

For all other purposes the cable connection is fine. So I’d concur with Nokia’s belief that remote workers and videoconferencing users are prime targets either for switching, in some cases, or supplemental buying, which I think is the more likely scenario. 

The Nokia survey suggests that respondents found 5G fixed wireless access and simple faster speeds are the two top values of 5G. 

source: Nokia 

In the U.S. sample, 82 percent of respondents rated fixed wireless access appealing. My guess is that much of that demand will come from perceived faster downstream speeds. In my case, it is clearly--and solely--upstream speed.

The U.S. market share (net new additions) and installed base held by mobile virtual network operators is headed for big change. More share is shifting to facilities-based providers. At the same time, new entrants using the MVNO model will eventually shift to facilities-based competition over time. 

source: One Development 

The important new market entrants include the biggest U.S. cable operators and Dish Network. All presently operate as MVNOs, but Dish already is building its own national network, and cable operators will shift partially to their own facilities over the next few years. 

Also, Verizon recently made a big move into the MVNO space as a retailer, acquiring Tracfone, while the other leading national mobile service providers operate substantial “virtual MVNOs” under various brand names, offering more-affordable service under the subsidiary brands as a way of protecting prices on their core brands. 

source: S&P Global 

Sometimes, as an industry researcher, one reaches conclusions that are distasteful for suppliers. On one consulting engagement, a supplier that said it “could not” eliminate its dividend eventually wound up doing precisely that, before exiting the market entirely by sale. 

Another time, arguing that more share would shift over time to facilities-based strategies, the owner of an MVNO said “you just told me my business is toast.” The answer actually is more complicated than that, as given the availability of capital, a firm always can gain share by acquiring assets. 

Over a longer period of time, though, it might still be the case that more share and installed base will be gained by facilities-based providers, even if a few MVNOs can grow, for a time, through acquisition.

As many of us discovered during the very-late 20th century and very-early 21st century, acquired MVNO or other non-facilities-based accounts are highly unstable. I once asked a  service provider what percentage of accounts gained by acquisition just six months ago were still customers of the acquiring company. “None” was the answer. 

The point is simply that connectivity markets consolidate over time, no matter the segment. There always are specialty segments that can thrive for a time. What seems never to be the case is that they remain viable over the long term. That does not mean they go bankrupt. It does mean those assets eventually are sold, and perhaps sold again, winding up on the books of a facilities-based supplier. 

That already is happening in the U.S. mobile market.

How Much 5G Product Substitution?

End user demand for various connectivity services changes over time, but typically when some new need arises. 

5G will not be different, as has been the case for mobility in the past and for fixed network broadband as well. Since 5G requires new devices, 5G device availability, especially for the most-popular brands, is a key requirement for higher 5G adoption.

Changes in demand have many drivers other than new needs, of course. At other times, revolutionary changes in supplier policy can shift demand quite radically. 

There was a time when a deliberate pricing strategy by AT&T mobility drove a huge amount of product substitution, literally leading to huge use of mobile calling as a direct substitute for long distance, and also leading to mobile substitution for local telephone service as well. 

 source: Telecom Policy Institute

Few now recall it, but AT&T Wireless once drove rapid mobile adoption by consumers by revolutionizing the way consumers paid for--and how much they paid for--long distance calling.

Back in 1998, AT&T unveiled a major new pricing plan for mobile users that priced all domestic calls for 10 cents a minute. That Digital One Rate plan effectively erased the distinction between local and long distance calling and provided a major incentive for consumers to buy mobile service.

Even many astute industry watchers did not appreciate the revolutionary nature of the plan. Technology pundit Walt Mossberg once called Digital One Rate “marketing hype.”

“It promises to make your cell phone as simple and affordable to use as a landline phone, so that you'll use it even for casual calls without a second thought,” said Mossberg. “The actual service behind the marketing isn't good enough to really allow that. I've been frustrated with it again and again.”

Digital One Rate was anything but hype. It really did revolutionize the way consumers and businesses made calls. It really did begin the mass adoption of mobile phones and the demise of landline service.

Beyond that, Digital One Rate changed the key profit drivers in telecom, from long distance revenue to mobile service. Within a decade, the industry profit driver changed from long distance to mobility. The shift from voice to data would follow.

In the ensuing years after Digital One Rate was introduced, long distance revenue plummeted, as did use of landline phone services. Digital One Rate was the driver, as the whole industry shifted pricing and packaging.

It is unclear how much 5G can shift end user demand. It is clear that at least some mobile service providers in the U.S. market are going to try and drive a substitution of mobile broadband for fixed network access. It is not clear whether end user demand shifts will mostly be driven by end users or suppliers. 

Some of us can remember the new needs that caused us to upgrade to specific devices, and then to web-centric devices. I actually do not recall which 2G device I was using when the “need” for a Blackberry happened. Odd enough though it will seem now, “mobile email” was a huge draw, providing enough value to make it an easy choice. 

I also remember when the Blackberry became a barrier. There was a time when smartphones did not routinely offer access to turn-by-turn directions, and for no subscription fee. That alone was the killer app that made the Blackberry suddenly less capable than I needed, and made the value of a 4G device much more attractive. It meant I did not need a discrete GPS device, with a required subscription. 

I had used 3G dongles for wireless internet access when on business travel, as painful as it was, experience wise. The shift to a 4G dongle was a “no brainer” decision because the user experience was so much better. 

The visual web made routine upgrades of my fixed network, to get higher speeds, a logical decision. It has been years since download speed actually has been an issue, though, as speeds and pricing have been more than adequate for all my use cases. 

Work from home has not been a particular issue, as I have worked remotely, and out of my home, for most of the last 25 years. But what is new is the amount of time I spend on videoconferencing services. And since my connection is asymmetrical, with what now insufficient bandwidth for consistent user experience. 

The new need is “more upstream bandwidth,” for the first time. At least so far, my 4G experience is not a pain point, as I tend not to do work videoconferencing on the mobile device. 

In all those instances, a shift to different or new services, though anecdotal, was driven by a change in demand for features or services. 5G will be the same sort of thing for most people, and might initially be driven simply by the need for a new device that just happens to use the 5G network. 

5G Value: Still Probably Cost per Bit, at First

The value of 5G for mobile operators eventually will come in the form of new revenue opportunities, but initially is likely to come in the form of lower cost per bit.

It is fairly easy to describe the new use cases industry observers and executives believe will arise in the 5G era, and nearly all involve new enterprise applications. That was not the case in 2015, when, if asked, most experts were likely to point to mobile broadband, internet of things and other connected devices, plus low-latency applications. 

That should not be surprising, as it simply reflects the three big touted advantages of 5G advanced by standards bodies: enhanced mobile broadband, ultra-reliable and low-latency apps and massive machine communications. 

Expectations have changed, and largely in the direction of new enterprise IoT use cases. In 2018, a survey showed high belief in the internet of things and video use cases, for example. Industrial automation also tended to be among the new use cases people expected.

source: Gartner 

Since then, expectations in some other surveys indicate something of a shift. 

By 2019, Gartner researchers suggested that  5G will not produce many sophisticated use cases for five to 10 years, and that would be in keeping with what happened in the 3G and 4G eras. Simply put, widespread new use cases--and perhaps not exotic at all--predicted for 3G did not happen until 4G. Many predicted 4G innovations might not happen until we are well into the 5G era.

And many hoped-for 5G innovations will not likely happen until 6G. That has been the pattern until now, and might well continue. 

Aside from lower cost per bit, important in a business where data consumption goes up every year but consumer budgets remain largely flat, 3G produced mobile internet access and mobile email. 

It would be hard to point to much beyond that, though. In the 4G era, entertainment video became possible, as well as a full multimedia web experience, plus a shift to mobile apps rather than mobile web.

Supporters have argued since 3G that more-exotic use cases would develop, but that has largely not happened.

source: Cisco

Right now, it is the internet of things, private networks, virtual private networks, artificial reality and augmented reality which always top lists of expected new use cases in the 5G era. Many of us expect that will not happen until the early days of 6G. 

And many of the big changes might not be reflected in end user applications but core network operations, such as a genuine fixed-mobile convergence where mobile devices automatically connect to whatever access resources are available, blurring the lines between mobile and all fixed network access platforms. 

The point is that even when the platform can support new use cases, people, businesses and app providers do not always embrace the more-futuristic use cases “within a decade.” It often takes up to two decades for that to happen.

Will Low Oil Prices Depress Uptake of 5G?

As a rule, times of industry recession reduce capital investment, which almost always is tied to revenue. So if the global oil industry is in difficult times, it seems logical that some predict that capital investment will be reduced. 

So it is that Fitch Solutions believes oil and gas industry adoption of 5G solutions will be reduced for perhaps as much as five years.

Even if low oil prices simply have reduced the capital expenditure appetite, that might not be true for every segment of the business. It appears some U.S. oil and gas exploration firms have secured spectrum licenses allowing them to operate 5G networks, for example. It also appears that the licenses were valuable enough for winning firms to pay more than other bidders did in major urban markets, on a capacity per person basis. 

Loving, Texas, in the U.S. oil patch, recorded the highest per price on a capacity per potential user basis in the Federal Communications Commission's recent Citizens Broadband Radio Service spectrum auction, at $141 per MHz/POP.

The CBRS auction averaged a per MHz/POP price on a nationwide basis of just $0.215. So while it might generally be true that many firms in the oil and gas industry will be slower to adopt 5G (public or private), it certainly seems as though some firms are pushing ahead, demonstrating intent by purchasing their own spectrum licenses.

Mobile Operators Face a Stark Choice: Stick with Core or Move Elsewhere

At a recent session of the PTC Academy, APTelecom President Sean Bergin starkly contrasted the choices connectivity providers (telcos and others) now face. As demand for traditional connectivity services continues to decline, service providers face two basic choices: stick to the core business or create a new business. 

Telekom Malaysia is among the firms that believe they must move away from the historic core competency of connectivity and into the applications parts of the business. Whether it will succeed is not yet clear. So far, connectivity revenues still drive the business, and growth has slowed or declined. But acquiring a significant, revenue-boosting role in a new segment of the business takes time. 

Source: Telekom Malaysia

The former strategy includes options such as reducing operating costs, perhaps making acquisitions to gain scale or taking other steps that lower costs to match declining revenues, thereby sustaining profit margins. 

The latter strategy, admittedly riskier, requires creation of new products beyond the current offerings, and almost always involves some degree of movement into different parts of the ecosystem or value chain.  Think of the former as “role” (connectivity, device, application). Think of the latter as “function” (semiconductors, devices, connectivity, platform, app, business model) within any single role. 

As a practical matter, not every firm in the connectivity business can actually “change roles or functions.”  Doing so requires new competencies, capital, different supply chains and often different sales channels as well.

What if Communications Becomes Essentially "Free?"

What does your business look like if the key constraint is removed? It is a question so challenging--and often so seemingly impossible--that most of us never ask it.

But young Bill Gates, before Microsoft was a household name--in fact when the company name actually was Micro-Soft, and was based in Albuquerque, N.M.-- did ask the question. So did Reed Hastings, founder of Netflix. And therein lies perhaps the greatest strategic challenge of all for mobile and fixed network connectivity providers. 

If you are a user of computing or communications, what is your behavior if both are nearly free? 

If you are a supplier of computing or communications, what are the implications for your business? What business are you in, and what business should you be in?

“The original insight for Microsoft was this: What if computing was free? ” Bill Gates, former Microsoft CEO and chairman, once said. He has said similar things several times, more recently about price trends in communications. 

And though communications service providers bristled at the statement, Gates said in 1994 that “the big insight of the next ten years is this: “What if digital communications were free.” Of course, there is good reason for connectivity providers to worry. 

In 2004, then Microsoft Chairman Bill Gates argued that "ten years out, in terms of actual hardware costs, you can almost think of hardware as being free--I'm not saying it will be absolutely free--but in terms of the power of the servers, the power of the network will not be a limiting factor," Gates said. 

About a decade before, in 1994, Gates mused that  “we’ll have infinite bandwidth in a decade’s time.” In 1995, Gates said “And for this new era, communications is what’s becoming cheap.  So you get to thinking, well, what if communications was free, what could people do?” 

My own analysis is that Gates believed in Moore’s Law and its impact. That analysis would lead you to believe that computing costs would in fact decline substantially, every 18 months, upending assumptions about the use of computing.

Reed Hastings was very clear about the application of Moore’s Law to the foundation of Netflix. At a time when dial-up modems were running at 56 kbps, Hastings extrapolated from Moore's Law to understand where bandwidth would be in the future, not where it was “right now.”

“We took out our spreadsheets and we figured we’d get 14 megabits per second to the home by 2012, which turns out is about what we will get,”  Reed Hastings, Netflix CEO, said.  “If you drag it out to 2021, we will all have a gigabit to the home." So far, internet access speeds have increased at just about those rates.

So as crazy as it might seem, what Moore’s Law has enabled, in computing, communications, applications, hardware and business opportunities, is precisely a clear understanding of what is possible if the key constraint in any business is removed. 

Near zero pricing is the term I use to describe the larger framework of connectivity provider pressures towards ever-lower prices. Others might prefer to emphasize marginal cost pricing. The point is that there is a reason the phrase dumb pipe exists. What we need to remember is that dumb pipe now is the foundation of the whole connectivity business. 

A caveat is that what people usually mean by “dumb pipe” is that a product is sold at low prices and generates low profit margins. But think about it: industry revenue growth now is lead by broadband services (internet access), which is, by definition, a dumb pipe service. It is a way to get access to applications, not an actual application itself. 

You might call that trend another example of the impact of Moore's Law on business and economics. And near zero pricing is a big industry issue. It might be the single-biggest issue. 

In a recent survey by Telecoms.com, the number-one threat to long-term business success was “increased pressure to lower prices” and “lower profit margins,” for example. 

source: Telecoms.com 

Agility or “speed” was also a major concern. Third on the list was competition from webscale firms including Google, Amazon or Microsoft. 

But there are good reasons why “lower prices” and “lower profit margins” are the top issues. Simply, they are the most-important result of other industry threats causing the price compression and lower profit margins: competition, the shift to internet protocol as the next-generation platform and the embedding of the whole connectivity function within the larger internet ecosystem.

Aside from deregulation of the telecom industry, which lead to competition and price competition, technology is among the root causes of price pressures. Near zero pricing is a scary thought for a connectivity provider, but it is reality. 

Mobile Broadband as Fast and Cheap as Fixed? Yes, in Some Cases

Most of us historically have believed that mobile internet access could "never" be as fast, or as cheap, as fixed network services. But that now has to be qualified. For many use cases, mobile broadband might well be as functional, and as affordable, as fixed network broadband. In fact, in some markets, it can be argued that FTTH no longer is viable as a platform for any tier-one service provider with universal service obligations.

That does not always require that mobile speeds and prices be identical to the fastest fixed network offers, such as symmetrical gigabit or symmetrical multi-gigabit services. All that has to happen is that a specific mobile offer is equivalent to a similar fixed network broadband offer in terms of performance and price, for a specific customer's needs and willingness to pay.

That is why 5G fixed wireless will be the most common form of mobile substitution for home broadband, aimed at users with relatively modest bandwidth needs and high price sensitivity price sensitivity. In the U.S. market, that might be customers who will not buy speeds above 300 Mbps, or pay much more than $50 a month.

That this is possible at all is a function of new spectrum policies, Moore's Law and better technology enabled by Moore's Law. One example of the broader trend is the way Moore's Law has allowed faster speeds and lower prices, beyond what connectivity providers or computing suppliers might prefer.

The most-startling strategic assumption ever made by Bill Gates was his belief that horrendously-expensive computing hardware would eventually be so low cost that he could build his own business on software for ubiquitous devices. Basically, I believe he asked himself what his own business would look like if computing hardware was free. 

How startling was that question? Consider that, In constant dollar terms, the computing power of an Apple iPad 2, when Microsoft was founded in 1975, would have cost between US$100 million and $10 billion.

The point is that the assumption by Gates that computing operations would be so cheap was an astounding leap. But my guess is that Gates understood Moore’s Law in a way that the rest of us did not.

Reed Hastings, Netflix founder, apparently made a similar decision. For Bill Gates, the insight that free computing would be a reality meant he should build his business on software used by computers.

Reed Hastings came to the same conclusion as he looked at bandwidth trends in terms both of capacity and prices. At a time when dial-up modems were running at 56 kbps, Hastings extrapolated from Moore's Law to understand where bandwidth would be in the future, not where it was “right now.”

“We took out our spreadsheets and we figured we’d get 14 megabits per second to the home by 2012, which turns out is about what we will get,” says Reed Hastings, Netflix CEO. “If you drag it out to 2021, we will all have a gigabit to the home." So far, internet access speeds have increased at just about those rates.

As frightening as it might be for executives and shareholders in the telecommunications industry, a bedrock assumption of mine about dynamics in the industry is that, over time, retail prices for connectivity services also will trend towards zero.

“Near-zero pricing” does not mean absolute zero (free), but only prices so low there is no practical constraint to using the services, just as prices of computing appliances trend towards lower prices over time, without reaching actual “zero.”