Monday, 26 October 2020

5G-aliser September update – Private networks fuel an expanding 5G playing field

by Harry Baldock, Total Telecom & Amy Cameron, STL Partners
Friday 02 October 20

September has been a positive month for 5G development, with excitement around private networks and CBRS spectrum auctions driving the enterprise market forward and opening opportunities for new entrants in the telecoms industry

  Overview Following a tough summer for 5G, we are finally starting to see some excitement in the market, primarily driven by positive moves in spectrum allocation which is fuelling the private network market.     So far, the consumer side of the 5G story has not been as explosive as enterprise because, ultimately, there is nothing revolutionary about it yet. For most people around the world, 5G right now will merely deliver faster mobile broadband over limited coverage, without offering anything particularly ‘new’. In South Korea and China we are starting to see more experimentation with gaming and mixed reality, these are still too niche to really drive growth. There is likely to be a boost in the consumer area when the 5G iPhone hits the market later this year, although the real consumer catalyst for 5G is more likely to be mixed reality glasses. STL Partners this month covered Apple’s potential entry into this market…

 

Overview

Following a tough summer for 5G, we are finally starting to see some excitement in the market, primarily driven by positive moves in spectrum allocation which is fuelling the private network market.  

 

So far, the consumer side of the 5G story has not been as explosive as enterprise because, ultimately, there is nothing revolutionary about it yet. For most people around the world, 5G right now will merely deliver faster mobile broadband over limited coverage, without offering anything particularly ‘new’. In South Korea and China we are starting to see more experimentation with gaming and mixed reality, these are still too niche to really drive growth. There is likely to be a boost in the consumer area when the 5G iPhone hits the market later this year, although the real consumer catalyst for 5G is more likely to be mixed reality glasses. STL Partners this month covered Apple’s potential entry into this market, timescales and opportunities for telcos. 

 

Despite the muted consumer angle so far, on the last day of the month Rakuten launched its 5G network, and in its press conference it focused entirely on the consumer applications with virtually no mention of enterprise. So, we may start to see a richer consumer proposition emerge as greenfield players launch their 5G networks and refine their platforms.  

 

The rhetoric around 5G platforms continued to gather pace in September, and while it is too early to assess the real impact, it suggests that the industry is at least starting to think about how to enable developer tools and applications for 5G, thus we have increased that driver’s impact very slightly in this month’s update. 

 

Spectrum allocations catalyse private network development 

 

The biggest driver this month has been allocation of CBRS spectrum in the US, allocation of local spectrum licenses in Europe – notably Germany and the Netherlands – and a wake-up call from the European Commission for member countries to press forward on delayed 5G spectrum allocations. 

 

By contrast, the US finalised CBRS auctions in September, where significant new spectrum holders emerged, including DISH, Charter, and several state utility companies (Southern California Edison, Alabama Power) and oil and gas company Chevron, and John Deere.  

 

Alongside the local spectrum licenses, September also saw the Federal Communications Commission propose to free up 100 MHz of mid-band spectrum, which is critical to cost-effective deployment of 5G, with the aim of levelling the playing field between the US’s three major operators, where T-Mobile currently owns nearly all available mid-band 5G spectrum. 

 

By contrast, the European Commission estimates the European industry is about four months behind where it was expected to be, and that only 20% of total 5G spectrum has thus far been allocated. Breaking this down by frequency band, by June 2020, the EU-27 plus the UK had allocated 17% of 700MHz spectrum, 38% of 3.4–3.8 GHz spectrum, and 10.7% of 26 GHz spectrum. Besides the impact of COVID, a lot of these delays are due to the challenges associated with refarming or vacating spectrum of its previous users, with even digitally advanced countries like the UK dragging their feet. In September, the European Commission started putting pressure on countries to make up for lost time during the pandemic, and improve cross-border collaboration on frequency assignment. 

 

There are bright some spots in Europe, however, with the German regulator reporting that it has now allocated local 5G spectrum licenses in the 3.7–3.8 GHz band to 74 applicants, with many more expected. The Netherlands has also allocated many private networking spectrum licenses, including to the Port of Rotterdam, Isala Klinieken hospital, and Edzcom (through Dutch carrier V&M Telecom). 

 

As illustrated by the types of companies bidding for local and private spectrum licenses in the US and Europe, the result is an ever-brightening outlook for the private network market within 5G. 

 

New players have the wildcard factor

Private networks are an exciting story, in no small part because, alongside the development of Open RAN, they are catalysing a shift in competitive dynamics in the telecoms market. The vast range of applications for 5G and its numerous industrial use cases is creating entirely new customer needs that may not best be served by national-level mobile network operators. Reflecting the expanding playing field in the telecoms network technology and services market, in this month’s 5G-aliser we have introduced a new wildcard category. This one replaces the wildcard on separation of telecoms infrastructure and services businesses, since we do not expect any real impact from that driver over the short term. 

 

So who are the new players with potential to shake up the market? 

    • Tower companies are starting to explore new opportunities, for example Cellnex’s acquisition of leading private networking provider Edzcom (previously Ukkoverkot) in July 

    • Satellite providers are claiming increasing attention from the press, led by high profile players such as Elon Musk-backed Starlink. While satellite players will be key to delivering connectivity in remote, rural areas, it’s still far from clear whether they will actually move the needle in the overall telecoms market 

    • Hyperscalers are eyeing the telecoms opportunity, both from an edge computing perspective, for instance with Verizon’s launch of 5G edge computing locations in partnership with AWS Wavelength, and more broadly in terms of network virtualisation and management, with Microsoft’s launch of “Azure for operators” hot on the heels of its acquisition of Affirmed Networks and Metaswitch  

    • Telecoms software players are beginning to break the mould and branch into hardware. For example, Mavenir – essentially an open RAN player with end-to-end cloud native software – is diving into the hardware game with acquisition of ip.access, a small cell solutions provider. The aim is not just to add 2G and 3G capabilities to Mavenir’s OpenRAN portfolio, but also to improve its ability to meet enterprise needs, including in specialised verticals such as aviation and maritime. 

 

5G opportunities as the status quo changes

Overall, September has been a positive month for 5G. Progress in the availability of spectrum, with more expected to become available before the end of the year, unlocks the door for rapid growth and technical innovation. This, in turn, facilitates the growth of private networks and Open RAN development – surely good news for 5G as a whole, but it should also be noted that it threatens the status quo for operators and vendors. If private networks for industry prove extremely successful without the telcos’ participation, then a crucial revenue stream could slip through their fingers; meanwhile the success of Open RAN at scale could challenge the hegemony of traditional vendors. The telecoms space is changing alongside the growth of 5G and major traditional players cannot be content to sit on their laurels or else they risk being circumvented by wily enterprise.

 

Also in the news:
GCHQ reports “serious and systematic defects” in Huawei software and security
O2 matches 5G with satellite connectivity in new connected car project
Today's headlines from The 5G Daily

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