What Happened to IMS?

Not every telco initiative related to next-generation networks actually comes to fruition. Most today do not remember that integrated services digital network was once the expected NGN. That was replaced by aynchronous transfer mode, which was expected to underpin the telco next-generation network. 

That never happened at scale, either, as the global industry shifted to adopt the preferred computer networking protocol, TCP/IP. 

These days, though some key “proprietary” protocols and platforms continue to be key for connectivity providers, telco networks are becoming computer networks at their core, which means modern computing network principles and cloud-native approaches have grown in importance. 

Consider IP Multimedia Subsystem. One never hears much about it anymore, though IMS was considered a key method for transitioning from legacy TDM to IP-based services, especially for mobile services. 

But IMS eventually was abandoned for “voice over LTE” protocols, which are based on IMS architectural principles. IMS was eventually considered too complex, with adoption that was too slow.

BT Enters 5G Private Networks Business

System integration is one of the roles expected to emerge as a revenue opportunity as 5G private networks get traction, though perhaps the biggest opportunities remain in sales of infrastructure to support private networks, as is the case for Wi-Fi. 

BT is moving to become a system integrator, inking a deal to sell, install and support Ericsson 5G gear to businesses and organizations in sectors such as manufacturing, defense, education, retail, healthcare, transport and logistics in the United Kingdom. 

Revenue estimates for ecosystem participants can be substantial, representing double-digit billions in sales as early as 2023. 

But most of the revenue will come from hardware and software infrastructure to create the networks or system integration. Revenue from managed services related to connectivity might be 10 percent of total revenues. 

5G private networks might represent $7.5 billion in spending by enterprises in 2025, some estimate. Polaris estimates a 2027 market worth $8.3 billion by 2027. 

Others estimate $16 billion in private network spending by that point. Sometimes analysts revise their projections upward virtually every year. 

Mobile Experts estimated in 2019 spending at less than $3.5 billion by 2024. A year later the forecast was boosted to just shy of $10 billion. The early 2021 forecast showed figures were consistent with the 2020 estimate.  

Beyond the issue of overall market size, there is a key matter of ecosystem and value chain roles. Some portion of the 5G private networks market consists of infrastructure purchased by enterprises to support their “do it yourself” private networks. The analogy is hardware and software purchased directly by end users to support their own Wi-Fi networking. 

source: Verdict 

5G private networks will likely be a fragmented ecosystem, with equally fragmented revenue upside.

Doubling is an Amazing Thing

Each mobile next-generation platform has used distinct blocks of spectrum, which also means 6G will bring additional new frequencies into commercial use. As a practical matter, each successive mobile generation also has used higher frequencies. That is true for 5G and allso was true for 4G.

source: Nokia 

But there are key implications as additional spectrum is added. Earlier networks used lower-frequency signals that traveled well, if not providing all that much bandwidth. Each next-generation network has relied on higher-frequency signals that do not travel as far, but do support far more bandwidth. 

source: UR Tech 

The simple explanation is that potential mobile network bandwidth is directly related to the signal frequency: the lower the frequency, the lower the potential bandwidth; the higher the frequency the higher the potential bandwidth. 

The easiest way to explain that relationship is to note that the ability to code information is directly dependent on the oscillation rate. Waves that oscillate fewer times per second can carry less information than waves that oscillate much faster. 

source: Millimeter Wave Products 

The Shannon Nyquist theorem states that the information rate of any communications channel is twice the bandwidth of the channel. Higher frequencies support  wider channels, and therefore greater bandwidth. 

A simple coding scheme, for example, might designate the +1 position of the wave as a “one” while the -1 position of the wave might be designated a “zero.” Modern modulation is more complex than that, but fundamental physics still matters. All other things being equal, the more oscillations per second between +1 and -1, the more symbols can be represented. 

source: NASA 

So when the signal frequency doubles, the information capacity doubles. As you recall, the impact of doubling is logarithmic. In simple binary terms (without radio or modulation changes) If the information capacity of a channel at 800 Mhz is “X,” then capacity at 1600 MHz is 2X. 

At 3200 MHz capacity is 4X. At 6.4 GHz capacity is 8X. At 12.8 GHz capacity is 16X At 25.6 GHz capacity is 32X; at 51.2 GHz capacity is 64X. 

At 100 GHz capacity is 128X; at 200 GHz 32X. 

Modulation and radio architecture also matter. At any given frequency, more complex modulation can boost information capacity by 4X to 128X. More complex radios have the same impact, boosting rates by 2X, 4X, 8X or 16X, depending on the complexity of the array. 

Looking at 4G, at any defined frequency, modulation and radio arrays can increase throughput as much as 100 times. 

source: 3GPP, Frank Rayal 

The point is that using higher frequencies means higher data rates, all other things being equal.

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How Big is the 5G Private Network Opportunity?

5G private network demand is a complicated matter. Defined as use of 5G infrastructure by an enterprise to create its own 5G connectivity within a building or on a campus, 5G private networks have been seen as a suitable support for manufacturing applications, for example, to support sensor networks and edge computing, often on the premises. 

Nokia, Ericsson and other 5G suppliers naturally believe this is a growth opportunity for them, as factory automation use cases might be use 5G rather than Wi-Fi, for example. 

Forecasters sometimes try to think about the total market in terms of private networks that might otherwise use Wi-Fi. But 5G does not make all that much sense for most Wi-Fi use cases where support of phones, PCs and other office or consumer equipment is the use case, generally fixed but also for “mobile” applications such as in-car connectivity.

source: Grand View Research

Grand View Research says the global 2021 market size for 5G private network services, hardware and software was about $1.4 billion.  If the growth rate is 48 percent, then it is possible 2030 global revenue could be nearly $48 billion. 

5G Private Network Forecast Global, $ Billions
Year	2021	2022	2023	2024	2025	2026	2027	2028	2029	2030
Revenue	1.4	2.1	3.1	4.5	6.7	9.9	14.7	21.8	32.2	47.7
source: IP Carrier estimate

Much hinges on the assumptions about growth. Also often unclear is whether we ought to be counting indoor 5G transmission infrastructure (“neutral hosts”) as 5G private networks. That has been expected to develop. 

What remains unclear is the degree to which enterprises will find enough value in private 5G to replace some Wi-Fi connectivity. This is essentially a new form of the “Wi-Fi versus mobile network” debate that has arisen episodically over the past three decades or so. 

Some have argued that Wi-Fi would be a replacement for mobile connectivity. The argument now seems to be about the degree to which 5G can replace Wi-Fi. 

Applications that require ultra-low latency and predictability will be the use cases where private 5G will be considered, rather than Wi-Fi. But Wi-Fi proponents will not be standing still. So private 5G will still be compared to Wi-Fi that has much-better latency performance and quality. 

Private networks using 5G will not displace most Wi-Fi networks, but will augment some Wi-Fi networks. No private network will displace the public networks for most outdoor, untethered connectivity. 

Of New Mobile Services, Only Fixed Wireless can Move the Revenue Needle Soon

Estimates of annual global telecom service provider revenue vary by about $300 billion to $400 billion, from a low of about $1.4 trillion to a high of about $1.8 billion. For most people, that only matters because the anticipated boost to service provider revenues from new products such as multi-access edge computing, internet of things or private networks is likely to be one percent for any specific new product and smaller than 10 percent of the difference in overall market size in aggregate.

In life and in nature, a Pareto rule tends to hold. Up to 80 percent of variances in outcomes are attributable to perhaps 20 percent of actions. For mobile operators, that means consumer and business phone connections, despite the obvious promise of new services.

The likely exception will be 5G fixed wireless. Revenues from that new product will dwarf IoT, private networks and edge computing. 5G fixed wireless might, in some markets, represent as much as eight percent of home broadband revenuesfor example.

Under normal circumstances, global service provider revenue grows by at a slow rate. Growth in the 1.5 percent range or less is the present status for the industry overall, though some markets and some companies see higher growth than the average. 

The point is that organic revenue growth can be as low as $20 billion to $30 billion in a typical year. So any new product that generates $20 billion to $30 billion in industry new revenue in any given year is a big deal.  

It is almost certain that global service provider revenues from multi-access edge computing, for example, will be in the single-digit billions ($ billion) range over the next few years. The same is true of forecasts of service provider internet of things revenue. The service provider 4G or 5G private networks revenue stream is likely to be small as well. 

The point is that new revenue sources such as edge computing, IoT and private networks are unlikely to move the global service provider revenue needle over the next several years, and perhaps not for a decade. 

Those revenues might be more important in a handful of markets, however, such as large countries that are early adopters. Even there, however, the large installed base of revenue means the incremental growth from the new services will make a generally slight contribution. 

In some part, the growth challenge is the result of the size of the installed base itself. 

When including the value of subscription TV services, the global telecom services market (mobile plus fixed) amounts to about $1.8 trillion in annual revenues, according to Precedence Research. The firm uses a cumulative annual growth rate of 4.85 percent from 2022 to 2030, a figure most observers would likely agree is too optimistic. 

source: Precedence Research 

Grand View Research estimates revenue in about the same range. But others, such as Analysys Mason, tally global revenue at a lower level. closer to $1.4 trillion. 

source: Analysys Mason

IDC forecasts are close to those of Analysys Mason, with 2021 revenue in the $1.5 trillion range. 

source: IDC 

As a rule, I have found the more-conservative figures are closer to reality. 

Switching Costs, Low Upside Likely Reduce Interest in Switching Service Providers

Nobody would be surprised if told that, in general, consumers will switch products and suppliers for a better price or better value.

But consumers also intuitively understand that some savings are more important than others. In other words, there might be limits to the amount of effort most consumers will put into comparing connectivity service offers. 

Put another way, there is only so much a consumer can save by aggressive shopping for connectivity services. So it appears many do not bother. Some studies suggest that typical churn rates now are fairly low in many markets, for many services. Contracts and high prices, as well as intensity of usage, are some drivers of higher churn, as you might guess. 

source: Researchgate 

While Australians are happy to switch for a better price or customer experience, almost 50 per cent of surveyed respondents admit to doing either no research or a basic level of research before choosing their internet provider (47 per cent), according to Commonwealth Bank research.  

Switching barriers seem to exist. Some 60 percent say they worry competitive offers will be the same, or perhaps worse. That is probably much more true for experienced consumers who have had multiple suppliers in the past. 

Not to be discounted: there is a learning curve with any new provider. Once a customer has become familiar, switching barriers increase, which is why 42 percent of those surveyed say they are comfortable with their existing providers. 

Once a customer has figured out that a current provider supplies the expected value at a reasonable price, with acceptable customer service, account longevity actually is a good predictor of future “low churn” risk. 

Issues with service quality, in contrast, are a very good predictor of high churn risk. 

source 

The point is that although consumers are expected to prefer “saving money,” the incentives to research alternate providers are low, relative to search effort. Most consumers likely perceive a zone of reasonableness where value and price are concerned.

Most consumers rightly perceive that offers from competitors most often tend to be equivalent in many respects. 

“The common perception is that changing Internet providers is more hassle than it’s worth,” More CEO Andrew Branson says. 

Most consumers likely see switching costs in the form of new gear that has to be purchased or leased, set-up charges, possible contract requirements, bundling with other services that might also have to be changed, and uncertainty about intangibles such as customer service ease, signal quality and consistency.

At any given point in time, perhaps 90 percent of consumers are probably satisfied enough that unhappiness is not driving them to consider switching connectivity providers. In the U.S. mobile market, for example, fewer than eight percent of consumers say they are “likely” to switch service providers at any given point in time. A smaller percentage actually do so. 

source: Bain 

Switching behaviors for products that have little switching cost are robust, one might argue.  

For fixed services, much switching behavior is related simply to a household move from one area to another that also requires switching service providers.   

Does Network Slicing Violate Net Neutrality Rules?

Is network slicing--a new feature of the fully-deployed 5G network--a threat to “network neutrality?” Possibly, says SP Kochhar, Cellular Operators Association of India general director. At first glance, it is an odd position for a mobile industry group to take. 

"In essence, the main network will be like economy class, and ones derived out of slices with different parameters can be business class or first class,” says Kochhar. 

Built into the 5G standard is the ability of the core 5G network to create virtual private networks that can vary parameters such as latency and bandwidth prioritization. The industry has argued that such features allow creation of customized networks that are essentially “tuned” for use cases that are latency-dependent or bandwidth availability dependent. 

Industry proponents have argued that this creates new revenue potential for mobile operators. So what are we to make of COAI virtually arguing that network slicing violates network neutrality principles?

One has to work backwards. Since network neutrality prohibits “quality of service” mechanisms for consumer customers, Kochhar is virtually arguing that the 5G network core network should be prohibited from offering network-slicing-based services. 

What conceivable benefit is seen? 5G is possible without building out the full 5G core network: 5G end user services can be delivered over the 4G evolved packet core network. 

So perhaps COAI believes a bar on network slicing would mean India mobile operators could introduce 5G using the 4G core network, which would delay capital expenditures for a time. 

Also, mobile operators believe the ability of enterprises to acquire their own spectrum to set up private 5G networks is a dire threat to public 5G. They believe as much as 30 percent to 40 percent of enterprise mobility revenues are at stake. That seems an exaggeration, though it is conceivable that an enterprise 5G network could reduce demand for public 5G resources when users are “at work.” 

True “mobility” needs would not change because an enterprise 5G network exists. In essence, a private 5G network would allow organizations to offload public network traffic to the private network in the same way that they already can offload public network traffic to Wi-Fi. 

And most mobile operators consider that an advantage, not a problem. 

So it seems the invocation of the network neutrality “problem” is part of an effort to delay 5G core network requirements.

The Department of Telecommunications (DoT) defines net neutrality as the concept of non-discrimination of internet traffic by intermediate networks on any criteria. 

"The network should be neutral to all the information being transmitted through it. All communication passing through a network should be treated equally, independent of its content, application, service, device, sender or recipient address," DoT rules say.

Network neutrality means different things to different people, and is applied to different instances in different countries. The basic idea is that internet service providers (and not other entities) should provide nondiscriminatory consumer access to lawful internet content regardless of its source or destination. 

Generally speaking, internet access services sold to businesses are not covered. But many regulatory entities have added concepts. Some regulators hold that net neutrality also means ISPs cannot offer a “free tier” of service or allow sponsors to defray the cost of access to their services. 

But net neutrality is virtually nowhere a constraint on business customers. And network slicing is virtually never going to be a “consumer” service. It will be purchased by an enterprise or other organization, in the same way that content delivery network services are purchased by enterprises, not individuals and consumers. 

COAI has to understand that, so ithe comments about network slicing cannot be taken at face value. There is some other agenda.

How Big a Deal is 5G Fixed Wireless?

Many observers have argued fixed wireless would not be a material driver of U.S. home broadband market share change. Just as vehemently, T-Mobile and Verizon have argued for precisely that impact. 

Cable operators say they have not seen material impact, yet. But at least some equity analysts now say fixed wireless will be highly disruptive. Wells Fargo telecom and media analysts Eric Luebchow and Steven Cahall predict fixed wireless access will grow from 7.1 million total subscribers at the end of 2021 to 17.6 million in 2027, growth that largely will come at the expense of cable operators. 

source: Polaris Market Research 

The impact on the installed base will occur more slowly, but the primary impact will be seen in net account additions. Accustomed to getting as much as 94 percent to 100 percent of net account growth, cable might see net new additions drop to perhaps 30 percent to 35 percent in 2023.

If 5G fixed wireless accounts and revenue grow as fast as some envision, $14 billion to $24 billion in fixed wireless home broadband revenue would be created in 2025. 

5G Fixed Wireless Forecast
	2019	2020	2021	2022	2023	2024	2025
Revenue $ M @99% growth rate	389	774	1540	3066	6100	12140	24158
Revenue $ M @ 16% growth rate	1.16	451	898	1787	3556	7077	14082
source: IP Carrier estimate

How important 5G fixed wireless might be depends on which estimates we use for total home broadband revenues, as well as the expected 5G fixed wireless growth rate.

By some estimates, U.S. home broadband generates $60 billion to more than $130 billion in annual revenues. The worse-case scenario for cable operators would be the higher growth rate and the lower revenue base. 

If the market is valued at $60 billion in 2021 and grows at four percent annually, then home broadband revenue could reach $73 billion by 2026. $24 billion would represent about 33 percent of total home broadband revenues. 

		2022	2023	2024	2025	2026
Home Broadband Revenue $B	60	62	65	67	70	73
Growth Rate 4%
Higher Revenue $B	110	114	119	124	129	134
source: IP Carrier estimate

If we use the higher revenue base and the lower growth rate, then 5G fixed wireless might represent about 10 percent of the installed base, which will seem more reasonable to many observers. 

Assuming $50 per month in revenue, with no price increases at all to 2026, 5G fixed wireless still would amount to about $10.6 billion in annual revenue by 2026 or so. That would have 5G fixed wireless representing about 14 percent of home broadband revenue, assuming a total 2026 market of $73 billion.

If the home broadband market were $134 billion in 2026, then 5G fixed wireless would represent about eight percent of home broadband revenue. 

Keep in mind that telcos and independent internet service providers also are expected to take share using fiber-to-home facilities as well. While Verizon expects most of its net additions to come from 5G fixed wireless, T-Mobile expects virtually all of its net additions to come from 5G fixed wireless.