2.5-GHZ Auction Starts

The U.S. Federal Communications Commission Auction 108 offers three blocks of spectrum in the 2.5-GHz range (2496–2690 MHz) band.  The three blocks offer 49.5 megahertz, 50.5 megahertz, and 17.5 megahertz allocations.

The use of spectrum sharing is among the notable auction elements. The 10-year renewable licenses will be available as an “overlay” of existing license holder rights in the same spectrum. 

The overlay licensees have the responsibility not to interfere with the original licensee’s operations. Of course, many of the original licenses were educational institutions who might originally thought they would use the spectrum to support TV broadcasting. In most cases, that has not happened, which is why so much of the allocated 2,5-GHz spectrum remains unused. 

source: FCC 

Most observers expect much of the value of the spectrum will be to support 5G mobile operations in rural areas. It might be argued that the spectrum is most valuable for T-Mobile, which acquired huge swaths of 2.5-GHz assets when it acquired Sprint. 

Were T-Mobile to win licenses in the new bands, it would remedy a patchwork of license rights in the 2.5-GHz region. 

Where Does Scarcity Value Remain in Mobile Networks?

Historically, scarcity has driven the value of access networks. It still does, to a large extent. Institutional investors value precisely that relative scarcity as a driver of long-term investment value, as such investors have valued real estate assets. 

But relative changes have occurred. Mobile operators do not believe ownership of tower sites provides so much scarcity value that they must be retained. Increasingly, monetizing those assets makes sense. Radios and cell sites do not drive scarcity value as much as spectrum licenses do, for example.

That is why mobile service providers are less likely to view spectrum licenses as "commodities," where tower sites increasingly are viewed that way.

Network infrastructure scarcity is largely eliminated as a competitive issue when assets are structurally separated, it can be argued. While it also can be argued that owners’ economics often are important, compared to renting access from a wholesale provider, the loss of potential margin and differentiation is counterbalanced by the reduction of capital investment burdens as well. 

Wholesale access also arguably changes the nature of competition. When every retail provider has the same access to network features (latency, speed, wholesale price), competitive distinctiveness has to be found elsewhere. 

And, most of the time, such distinctiveness happens with non-network features and value, typically when different features are bundled as part of network-based offers. The larger point is that competition seems to be shifting away from “scarcity” and towards other elements of the experience. 

In the mobility business, spectrum scarcity remains an issue, but is improving, relatively speaking. That is reflected in declining per-MHz spectrum costs, even if physical infrastructure costs intensify. 

And much traditional infrastructure--especially towers and radio sites--no longer are considered “must have” assets to own. To the extent networks are differentiated, it is on the basis of ownership of spectrum assets and other bundled features, not radio sites. 

Executives likely hate the idea, but physical access assets are more commoditized, and less value-driving, than access assets used to represent. Increasingly, it is the intangible assets that drive value.

That can be seen in recent deals to build fiber to home facilities. 

Telefónica Group, Crédit Agricole Assurances and Vauban Infrastructure Partners are joining to create Bluevia Fibra to build fiber to premises networks in rural parts of Spain. 

The consortium formed by CAA/Vauban will acquire a 45 percent stake in Bluevia from Telefónica España. Telefónica Group will retain a 55 percent stake in Bluevia. 

The 55 percent stake owned by Group Telefónica will be held by Telefónica España and Telefónica Infra, with 30 percent and 25 percent stakes respectively.

Operating with a wholesale model, Bluevia will offer wholesale FTTH access to all telecommunication services providers. Based on an initial footprint of 3.5 million premises currently passed, Bluevia will increase its network to five million premises by 2024.

Bluevia’s anchor tenant, as you might guess, will be Telefónica España. The deal is among many globally where service providers try to decrease the cost of building new infrastructure by partnering with investment firms looking for long-term, stable cash flows in the digital infrastructure area. 

Other joint ventures that, in part, are aimed at reducing investment and debt burdens, are happening in other markets, by other fixed network providers. Liberty Global, Telefónica and InfraVia Capital Partners have formed a joint venture to build seven million fiber-to-premises passings in the United Kingdom. 

Liberty Global and Telefónica will jointly hold a 50 percent stake in the venture through a holding company, with InfraVia owning the remaining 50 percent. Telefónica Group’s participation will be held through Telefónica Infra, the firm's infrastructure unit. 

Both deals might also raise issues about the value of access assets to tier-one telcos and other different stakeholders. Though access assets always have been seen as sources of business value, the perception of value has changed over the past few decades. 

Though necessary, access infrastructure often is not viewed as adding proprietary value. So full ownership is less valuable than in the past, while the freed-up capital is deemed more valuable. 

Fixed Wireless Net Adds--Said Not to be a Threat to Comcast--Keep Growing

Comcast continues to claim that fixed wireless is not damaging its home broadband business, and that might well be correct. For any ISP, a customer move is an opportunity to gain or add an account, so lower rates of dwelling change should logically reduce the chances of adding new accounts. 

In the second quarter of 2022, Comcast reported a net loss of customer relationships and “flat” home broadband accounts. 

That might suggest to some observers that stepped-up telco fiber-to-home and fixed wireless account gains might be starting to change market share dynamics. Those trends possibly were not obvious in the first quarter of 2022. 

All that said, there are possible signs of change. Fixed wireless already is driving net home broadband additions for T-Mobile. On its second quarter earnings report, T-Mobile added more than half a million net new home broadband accounts, which might put it on track to be the biggest net gainer for the third quarter in a row. 

In the fourth quarter of 2021, fixed wireless represented 74 percent of Verizon net home broadband additions.  

Comcast did not gain net accounts for the first time, ever, according to market watchers. Verizon added significant numbers of new home broadband accounts in the same quarter.  

One might suggest that, eventually, share loss could become a sustainable trend, as internet service providers step up marketing of FTTH and fixed wireless services. Home moves and housing starts always have been significant drivers of home broadband account gains. 

Both of those might be slowing, so slower growth overall is not unexpected. But market share shifts need to be watched, as mobile and fixed network operators increase availability and marketing of competitive home broadband services.

Are Mobile Data Prices Disparate, or Relatively the Same, Globally?

Mobile data prices compiled by Cable.co in the United Kingdom show a range of per-gigabyte prices in various markets. So we might conclude that the cost of consuming a gigabyte of mobile data ranges from about $1 per gigabyte to about $5 per gigabyte. 

source: Cable.co.uk

Mobile data prices (unadjusted for purchasing power parity) around the world are shaped by a few inputs, according to a study by Cable.co in the United Kingdom. Adjusting for PPP gives somewhat different answers. And analyzing different service plans likewise changes the results. 

Comparing either the lowest-priced, highest-priced or even median-priced plans in each country does not lead to comparable results unless consumers in all countries tend to buy the same sorts of plans. While it might be quite logical to compare the “most affordable” plan in each country, that does not necessarily tell us very much about how much data “really costs for most users,” especially when “most customers” buy different plans. 

source: Cellphonedeal.com 

Excellent 4G and 5G infrastructure; amount of substitution for fixed network access; national wealth and usage patterns tend to create low prices on one hand; high prices on the other, Cable.co suggests.  

Countries with long-established, ubiquitous 4G or new 5G infrastructure tend to fall towards the cheaper end of the per-gigabyte price range.

In many such countries, mobile data plans tend to offer considerably more data than the global median, caps usually are in the hundreds of gigabytes or  unlimited. The cost per gigabyte in these countries will tend therefore to be very low.

source: Cellphonedeal.com 

Countries with little to no fixed-line broadband availability therefore rely heavily on mobile data as a substitute. Per-gigabyte costs can be exceptionally cheap in such instances. 

On the other hand, some such markets also feature either low average incomes coupled with limited usage. In such instances, per-gigabyte costs can be high.

Wealthy nations tend to have good mobile infrastructure, decently-sized data caps and high per-capita wealth and income. Per-gigabyte mobile data prices can be average to low, in such instances. 

Adjusted for purchasing power parity, to remove currency differences and overall price differences between nations, data costs often are relatively similar around the world. When adjusting for purchasing power, fixed network home broadband, for example, costs between $35 and $40 a month, globally. 

Mobile data prices are about in the same sort of range, with a global average of about $18 for 500 megabytes of usage, using the purchasing power parity method, in 2018. 

The point is that mobile data prices globally are much more comparable globally when adjusting for differences in living costs in each country.

Processing No Longer is a Demarcation Point for Network Segments

Both fixed and mobile networks use similar architectures in the core network, diverging mostly in the access network. Core network transport these days always uses optical fiber media. Transport networks (sometimes known as distribution networks) that move traffic from the access network to the core network also are commonly based on optical fiber platforms. 

source: Dgtl Infra 

Access networks that move traffic from customer sites to transport aggregation points rely on different media (cable versus wireless radios). 

The other common change is that both fixed and mobile networks can be described without reference to places where processing operations occur. In virtualized and distributed networks, that can happen at many different places. 

In past days transitions between portions of the network would happen at processing locations such as central offices, which traditionally terminated the access network. These days, processing no longer is a consistent demarcation point between network segments (core, transport/distribution and access).

5G is Different from 4G in a Couple of Ways

While we might argue about the ways 5G is different from, or an improvement over 4G, a few capabilities really stand out. Every next-generation mobile network improves latency and speed, so that is not unusual. But the 5G standard made explicit efforts to allow support for a higher density of devices and energy efficiency. 

source: Dgtl Infra 

Some might argue that better energy efficiency arguably has been an attribute of each digital next-generation network. Also, some would argue that higher capacity (bandwidth) and higher speed are different expressions of a single improvement.

Some might say 5G is different also in that it was expressly designed to support machine-to-machine use cases (internet of things sensors).

 

RF Front Ends are More Complicated with 5G

Support for the vast range of possible frequencies is one reason. 

T-Mobile and Apple Plan for Small Businesses

T-Mobile has launched smaller business plans that include Apple Business Essentials, a subscription service by Apple that includes device management, 24/7 support, and cloud storage.

The new offer also includes AppleCare+ for Business Essentials, the main advantage of which arguably is flexible onsite repairs within as little as four hours. 

The offer also includes a new iPhone 13 for new lines, with the plan costing $50 per month (six or more lines) per device. 

The new plan combines 5G connectivity, device management, 24/7 support, secure cloud storage and backup and repair support.

5G Fixed Wireless Could be Important in Many Markets

With the caveat that global “median” speeds for downstream mobile and fixed networks tell only part of the story, June 2022 speeds suggest how important fixed wireless could be in some markets. 

The June 2022 median mobile speed was 31 Mbps, while the median fixed network speed was 66 Mbps. In some markets, fixed wireless might be quite a reasonable substitute for cabled access as 5G networks proliferate. 

source: Ookla’

Mobile Networks are Not Big Energy Users, Compared to Other Computing or Communications Segments

Mobile networks probably cannot benefit from electricity load shifting as much as consumer households. Modern mobile networks increasingly are energy efficient and designed to accommodate peak use without linear increases in energy consumption. 

Compared to other access networks or devices, mobile radio networks actually use relatively little energy. 

source: Enerdata 

On the other hand, mobile communications demand--unlike consumer electricity demand--cannot be so easily shifted. For many customers, whether working remotely or “at the office,” demand cannot be shifted much. One has to communicate with customers or business partners when those people are available. Dynamic pricing does not shift behavior very much. 

Many consumers whose homes are outfitted with smart meters know that dynamic pricing often is enabled after the introduction of such meters. In summer months, for example, pricing peaks from 3 p.m. to 7 p.m., as that is the peak period for air-conditioning-driven electricity usage.  

Shifting some demand to off-peak (weekends, evenings) sheds load, helping utilities cope with peak demand. 

Mobile network base stations also have energy usage profiles that fluctuate by day of week and time of day. Here is a plot of the weekly energy consumption of a mobile network base station. 

source: Researchgate 

On a daily basis, electricity consumption has two peaks during working hours. 

source: Researchgate 

Compared to fixed network phone usage, there is likely less opportunity to shed load by encouraging off peak consumption. To the extent mobiles get used when people are commuting to work, or starting their work day, load shifting is difficult. 

Indeed, a GSMA study found mobile network electricity consumption was relatively unchanged in the face of enforced work from home and remote education policies. More efficient networks helped, and also a shift of mobile network traffic to Wi-Fi. 

Work from home has some effect on electricity consumption, but some studies show change on the order of four percent. 

There is a reason electricity customers sometimes see dynamic pricing for their use of electricity: total demand fluctuates on weekdays (morning and evening peaks) and is generally lower overall on the weekends. There is variation by season as well, with summer months representing peak use (air conditioning). 

source: Kortex Intel 

The reason for lower weekend consumption is not so much that consumers change behavior as that commercial and business usage is lower on weekends. 

Domestic electricity consumption patterns appear to have changed because of the Covid-19 stay-at-home rules. A study of U.K. homes by Octopus Energy found Monday showed no sign of increased daytime consumption. 

source: Octopus Energy 

Tuesday and Wednesday and Thursday show increasing daytime consumption presumably as more customers work from home.

Friday shows slightly reduced daytime consumption increases perhaps as Friday is a more common day to work from home in a typical week.

On the most pronounced day, Wednesday, the customers used an average of 4.3 percent more electricity and 4.6 percent more gas.

There could be corresponding “business” energy use shifts of a some percentage points if remote work becomes permanent for large numbers of people. Fewer people in offices will tend to reduce consumption. So will less demand at all other co-located business locations (restaurants, stores). 

But mobile networks should not see too much change, no matter what happens. The networks are efficient, getting more so, and impose relatively light costs in terms of energy consumption, compared to other computing or communications activities. 

Widespread use of small cells could have an impact, but so far it is not clear how total network energy consumption changes. Smalls represent additional sites, but also represent less power consumption per site. Energy to support computing at small cells can vary, based on the network architecture (centralized versus decentralized).

Network Slicing and Private Networks Will Not Move the Revenue Needle All that Much

Despite high expectations for incremental revenue from network slicing and private networks, neither is likely to generate much new 5G revenue by 2028, at least when compared to consumer 5G subscription revenues, according to ABI Research. 

source: ABI Research

That should not come as a terrible surprise, as mobile revenues always have been dominated by consumer subscriptions and related device fees. Granted, many descriptions of service revenue segments do not distinguish between consumer and business accounts, but business accounts use mobility services in the same way consumers do, if the sales, pricing and support policies might differ. 

source: Grand View Research

The point is that mobile subscriptions drive revenue volumes for mobile service providers. Fixed network operators arguably earn a greater percentage of revenue from enterprise customers. 

Over time, as internet of things connections grow, “enterprise” accounts will grow in number. But average revenue per connection for IoT will be an order of magnitude to two orders of magnitude less per connection, compared to a mobile phone account. 

source: ABI Research

The upshot is that IoT will drive lots of connections, but with revenue far less per-connection than mobile operators earn from phone accounts. It is too early to know how much total mobile service revenues will be affected by IoT connections.

6G-ANNA is About Industrial Policy

Much of the activity we see--and will see more of--related to 6G us about industrial policy.  Nations and industrial interests want to position to defend or create new positions in 6G infrastructure, much as those interests saw 3G, 4G and 5G as markets where domestic suppliers could be helped or harmed. 

The German 6G-ANNA project fits the mold. 

 source: Nokia

5G Greatest Commercial Features Might Not Shift Roles or Revenue All that Much

“There is a strong consensus that 5G’s greatest commercial feature will shift away from acting purely as a  connectivity pipe, says Telecoms.com. Such beliefs can be both reasonable and inconsequential at the time. 

Ultra low latency performance might be both an important or key feature, and yet also have only slight impact on the ability of connectivity providers to escape their role. 

A survey of executives found industry insider belief that low-latency, sensor communications, network slicing and edge computing capabilities with most commercial significance. Again, that can be simultaneously true and yet very impactful in terms of revenue generation or ability to enhance value and role in the ecosystem. 

source: Telecoms.com

As with most other features and capabilities, 5G can be a source of competitive differentiation when other competitors cannot match a particular feature as well. At the same time, the amount of differentiation is inherently limited, as all competitors have access to the same platforms. 

Spectrum assets, on the other hand, provide a clearer case of differentiation, where ownership of licenses for various types of spectrum is disparate. T-Mobile, for example, has so far been able to leverage its greater mid-band spectrum resources against rivals whose positions still are developing. 

As always, much hinges on how customers and users behave. The values of ultra-low latency performance, for example, can be obtained in various ways, not always to the revenue benefit of mobile operators. Network slicing value can be replicated in some instances by enterprise edge computing. The same is true of ultra-low latency and predictability, which can be created by private networks as well as 5G public networks; edge computing or private 5G. 

It is understandable that industry executives hope for revenue and role outcomes that help service providers augment their connectivity role. Those hopes are likely to be hard to fulfill. 

Even if network slicing, edge computing, private networks and sensor network support generate some incremental revenues, the volume of incremental revenue will not be as large as many hope to gain. 

It is conceivable that mobile operators globally will make more money providing home broadband using fixed wireless than they will earn from the flashier, trendy new revenue sources such as private networks, edge computing and internet of things. 

source: Ericsson 

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 

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

Consider the U.S. market. By some estimates, U.S. home broadband generates $60 billion to more than $130 billion in annual revenues.

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. 

Do you believe U.S. mobile operators will make more than $14 billion to $24 billion in revenues from edge computing, IoT or private networks?

Nor might private networks or edge computing revenues be especially important as components of total revenue. 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. 

All that implies that 5G fixed wireless might be the most-material--and largest--source of new service revenues for mobile operators.