Private and vertical cellular networks: Threats and opportunities

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5G is catalysing demand for customisation

The arrival of 5G has catalysed a huge amount of interest in enterprise, government and “vertical” use-cases for cellular networks. Cellular technology is becoming ever more important and applicable for businesses, for diverse use-cases from factory automation, to better hospitality guest-services, to replacement of legacy two-way radios.

Some of this fits in with STL’s view of the Coordination Age, and the shift towards connectivity becoming part of wider, society-level or economy-level applications and solutions. However, in many ways it is more of an evolution of traditional enterprise use of private wireless solutions, but updated with newer and more-performant 5G radios. The future battleground is whether such coordination requires external services (and thus SPs), or whether the capabilities are best-delivered in-house on private networks.

For various reasons of cost, performance, accountability or guaranteed coverage, there is a drive towards greater customisation and control, often beyond that currently deliverable by traditional MNOs.

However, there is significant confusion between three things:

• Mobile network services and applications sold to, or used by, industrial and enterprise customers
• Mobile networks optimised, extended or virtualised for industrial and enterprise requirements
• Mobile networks built exclusively for, or owned by, industrial companies and other enterprises

This report is a joint exercise between STL Partners and affiliate Disruptive Analysis, which has covered this sector in depth for almost 20 years. Its founder Dean Bubley runs workshops on private cellular and neutral-host networks, as well as undertaking private projects and speaking engagements advising operators, vendors, regulators and investors on business models, spectrum policy and market dynamics.

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What is a private mobile network?

This report primarily focuses on the third category – private mobile networks – although there is some overlap with the second, especially when techniques like network-slicing enter the discussion. There are different models of “private” too – from completely standalone networks that are entirely isolated from public mobile networks, to ones which use some dedicated infrastructure / management, alongside shared radio- or core-network elements provided by an MNO. They can be nationwide networks (for example, for utility grids), or highly localised, such as to a factory or hotel.

There are also various hybrids and nuances of all of this, such as private networks where certain functions are installed by, outsourced to, or managed by, telcos. It may be possible for users or devices to roam between private and public networks, for instance when a truck leaves a logistics facility with a local private network, and switches to the telco while it’s on the road.

Various government bodies – ranging from police forces to local council authorities – are also interested in creating private or shared 4G / 5G networks. Over the next 3-4 years, we can expect a wide diversity of approaches, and some very vague and fluid definitions from the industry.

Three building blocks for private networks

There are three main enablers (and numerous secondary drivers) behind the private network concept:

• Availability of spectrum
• Small cells and distributed radios
• The move from 4G to 5G

A critical element in this is access to suitable spectrum for creating private networks. In recent years, many governments and regulatory authorities have started to make localised mobile licences available, suitable for covering enterprise sites, or wider areas such as cities. While private Wi-Fi and other networks have long been created with (free) unlicensed spectrum, this does not give the protections against contention and interference that more formal licensing enables. Other localised spectrum licenses have been given for point-to-point fixed links, temporary outside broadcast & events, or other purposes – but not cellular networks for normal mobile users. There are also discussions ongoing about making more national or wide-area spectrum available, suitable for mobile use in certain specialised verticals such as utilities.

Small cells and other types of enterprise-grade radio network (RAN) equipment are critical building- blocks for private mobile infrastructure, particularly indoors or on small/medium campus sites. They need to be low-cost, easy to install and operate, and ideally integrated with other IT and networking systems. While small cells have been around for 20 years or more, they have often been hard to deploy and manage. We are also seeing further innovation around distributed/cloud RAN which further increases the options for campus and in-building coverage systems.

5G – or more accurately the 5G era – changes the game in a number of ways. Firstly, IoT use-cases are becoming far more important, especially as analogue equipment and business processes become more connected and intelligent. Secondly, 5G brings new technical challenges, especially around the use of higher-frequency spectrum that struggles to go through walls – which highlights the paradox of telcos providing public network services on private property. Finally, with the advent of cloud-based and virtualised functions such as core networks, it is becoming easier to deploy and operate smaller infrastructures.

Some of the specialised skills requirements for building/running cellular networks can be reduced with automation, although this is still a significant obstacle for enterprises. This will drive significant demand for new tiers and types of managed services provider for private cellular – some of which will be satisfied by telcos, but which will also targeted by many others from towerco’s to systems integrators to cloud/Internet players.

Table of contents

• Executive Summary
• Introduction
  • Public vs. non-public networks
  • Private network vs. private MVNO vs. slices
• Motivations & use-cases for private networks
  • Business drivers for private cellular
  • Technical use-cases for private cellular
  • Industrial sites & IIoT
  • Enterprise/public in-building coverage
  • Neutral host networks (NHN)
  • Fixed 4G / 5G networks
• Regulatory & spectrum issues
  • Other regulatory considerations
• Building private networks – technology
  • Architectural choices, technology standards & industry bodies
• The emerging private networks value chain
• Conclusions & Recommendations
  • How large is the private network opportunity?
  • Challenges and obstacles for private networks
  • What is the implication for traditional telcos and MNOs?
  • Telcos’ relationship to project scope