Another MWC has come and gone, replete with the usual spectacular hype and theater. At the end of the day, what did we get out of it? One good way to answer that is to explore what the financial industry thought. While they’re no less biased in their views, the fact that they’re biased in a different way from that of the media and vendor communities may help us glimpse wireless-industry truth.
The classic net-net comment of the Street was that it is unlikely that 5G use cases will create compelling demand for 5G. A related comment is that real 5G revenue probably won’t show up for operators until 2020-2021. Another is that over half of all businesses surveyed about 5G said there was very little it would let them do that 4G didn’t cover already. It’s pretty clear that the hype on a 5G avalanche was nonsense. In fact, 5G deployment is much more likely to be an evolutionary process, gradual upgrading and replacing, than a wave of change sweeping the industry. That has implications for network operators, vendors, and of course the media.
Operators have long budgeted for 5G, some more aggressively than others. As we moved from the heady hype-driven days of 2016 to the verge of actual deployments last year, it became clear that operator attempts to drive new revenue by leveraging the so-called wave of things like cellular connected IoT or connected cars were going to fall far short. In fact, what we’re seeing with 4G/4G transition reminds me of the IPv4/IPv6 transformation. Everyone said that the explosion of home devices would demand full IPv6 conversion, and clearly it didn’t. The Street is seeing the same thing for 5G.
A 5G evolution favors evolutionary strategies. In particular, it means that 5G mobile infrastructure is likely to be deployed based on the so-called “Non-Stand-Alone” or 5G NSA model, which changes out the 4G radio access network (RAN) for the 5G New Radio (NR) model. This leaves 5G Core and things like Network Slicing and NFV, waiting in the wings. It also means that applications like the 5G millimeter-wave hybrid with fiber-to-the-node (5G/FTTN aka fixed wireless access, FWA) that focus on a specific and recognized problem; in this case, the cost of over-50Mbps Internet to homes.
The question, in fact, that 5G proponents now have to face is whether 5G NSA will lance the driver boil of wireless evolution, doing most of the things that we actually need a new wireless standard to do. If so, then 5G core evolution will be limited to some capacity-driven enhancements to backhaul and metro rather than the 5G-Core-with-a-Capital-“C” specification that includes slicing and NFV. We may never see much of either of those, and surely won’t see them in any quantity before perhaps 2023.
From a vendor perspective, the 5G reality the Street is facing is troubling because many vendors have been pointing to 5G as the driver of future revenue gains, and at least some of that assumption is now baked into their share prices. Nokia was seen by the Street as having backed off some early positive assumptions on revenue growth because of the late development of 5G. Cisco said it would be creating a fund of $5 billion for 5G financing, which isn’t what you do if you think the market is a slam dunk.
The Street sees Ericsson as the biggest potential 5G winner, based on the new market reality. Ericsson’s radio-network products use a software-defined radio that’s agile in the 4G/5G range, which means that operators can deploy the stuff now (and in fact could have done that for several years, because the feature isn’t new) and retain 5G evolution capability. If 5G NSA is the future, then that pretty much covers operators’ investment needs. Ericsson is also seeing a faster revenue up-ramp in mobile infrastructure than Nokia.
There are two wild cards in the mobile 5G picture from the perspective of the Street. One is Huawei, who has been a leader in the 5G space but now faces major problems because of the ties between the company and the Chinese government. The US may take the step of barring them from buying US semiconductor products, and they’re pushing allies to bar Huawei from 5G build-outs. The more extreme the reaction of the market to these issues, the more likely competitors (particularly Ericsson) would be to benefit from the Huawei loss of market share.
The Street tells me that they believe that many countries will refuse to bar Huawei because they’re the price leader, and the tight profit-per-bit picture that operators face makes it very difficult to accept any increase in price. However, they admit that countries like the US and perhaps some close allies may in fact impose and enforce restrictions. I can’t predict this one; perhaps the progress of the US/China trade talks will provide a data point.
The second wild card is the various open-source initiatives for virtual, open, 5G radio networks. At the moment, none of these are particularly far along or appear highly credible to network operators, but my own operator contacts suggest that they’d really like to have an open and virtual 5G radio option available. If 5G is delayed even in NSA form, there may be time for a viable open model to be worked out.
Cisco is, of course, a promoter of an open 5G wireless model. As a backhaul/metro leader, Cisco benefits from 5G adoption but could be hurt if a 5G NR provider pulled through competitive gear. Huawei (with whom Cisco has historically been at odds) is a provider who has gear that competes with Cisco, and so is Nokia. Ericsson has an affiliation with Cisco, but also with other players. In my own view, Cisco would stand to gain more from the 5G/FTTN hybrid because that could shift linear TV to IP traffic.
On that very 5G/FTTN FWA front, there’s more Street focus on millimeter-wave handsets than on FWA. In the US, Verizon has indicated it has some customers who get more than 300Mbps from 5G/FTTN, and also suggests that handset/mobile 5G linked to the same spectrum may be a good strategy. It seems that there are already variations in what a “node” means as in “FTTN”. Some operators think of nodes as a neighborhood thing, while others are talking about very high towers to extend the range significantly. That would make the technology more broadly suitable for smartphones.
There is interest from at least some Street analysts in the 5G/FTTN opportunity for businesses. The technology could offer a backup access connection at a much more reasonable cost, at least for companies who have Carrier Ethernet connections today rather than TDM. It could also provide much better speeds to branch office locations. Home broadband, the most important application, is important in the US but perhaps less so in the rest of the world, for now.
That may raise the biggest problem with MWC, which is its focus on “mobile” instead of “wireless”. The most transformational thing in wireless is very possibly the least mobile thing—that 5G/FTTN hybrid. A shift to that delivery mechanism, on a large scale, means that streaming video will supplant linear video. That means that ad insertion in video will become a key to monetization, and that ad personalization will be as critical in video as it is in web pages today. It also means that the access and metro infrastructure will have to be augmented significantly, and that caching and edge computing will expand radically.
For the mobile operators that attended, and promoted, MWC, all these changes will elevate the notion of “service” from connection bits to video experiences. As that happens, the infrastructure that matters is elevated too, above the radio networks and slices and virtualization, to caching and personalization and contextualization. None of that is specific to “mobile”, and so it may be the lesson of MWC this year is that maybe it’s time to think about the “M”.