Convergence, coexistence or competition: How will 5G and Wi-Fi 6 interact?

Introduction: Wi-Fi vs cellular

The debate around Wi-Fi and cellular convergence is not new. However, the introduction of next generation mobile and cellular technologies, Wi-Fi 6 and 5G, has once again reignited this debate. Further impetus for discussion has been provided by industry bodies, including the Wi-Fi Alliance, IEEE, Wireless Broadband Alliance (WBA), Next Generation Mobile Networks Alliance (NGMN) and 3GPP, developing standards to enable the convergence between 5G and Wi-Fi.

5G, introduced by 3GPP’s release 15 in 2018, and deployed internationally by telecoms operators since 2019, is considered a significant upgrade to 4G and LTE. Its improved capabilities such as increased speed, coverage, reliability, and security promise to enable a host of new use cases in a wide range of industries.

Simultaneously, Wi-Fi has evolved into its 6th generation, with Wi-Fi 6 technology emerging in 2019. This new evolution of Wi-Fi can provide speeds that are 40% higher than its predecessor, as well as improved visibility and transparency for better network control and management. Some of the key enhancements of the new generation are detailed in the table below.

Figure 1: There are a number of key differences between next generation Wi-Fi and cellular connectivity

key-differences-next-generation-wifi-cellular-activity

Source: STL Partners

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The market context for convergence

Industry bodies have been promoting convergence

The Wireless Broadband Alliance (WBA) and the Next Generation Mobile Networks Alliance (NGMN) produced a joint report in 2021 promoting the future convergence between Wi-Fi and 5G. The report highlights the merits of convergence, noting a number of use cases and verticals that could stand to benefit from closer alignment between the two technologies. Further, the 3GPP have increasingly sought to include standards with each new release that enable convergence between Wi-Fi and cellular. 3GPP’s release 8 introduced the concept of ‘access network discovery and selection function’ (ANDSF) which allowed user equipment to discover non-3GPP access networks, including Wi-Fi. In 2018, release 15 included optional 3GPP access for native 5G services via these non 3GPP access networks. Most recently, release 16 introduced ‘access traffic steering, splitting and switching’ (ATSSS), allowing both 3GPP and non-3GPP connectivity to multiple access networks, which is a key enabler of the resilience model of convergence. Similarly, the IEEE, sponsored by the Wi-Fi Alliance has been discussing the potential pathways to convergence for a number of years. However, these bodies are less vocal about future convergence possibilities, likely given Wi-Fi’s current dominance in the provision of enterprise wireless connectivity.

Spectrum auctions

The possibility of convergence has been further supported in recent years by releases of spectrum in the 6GHz band for unlicensed use in the USA, UK, South Korea and other major markets. Spectrum in the same 6GHz range can also be used to support 5G connectivity in addition to the existing 5GHz band. With the ability to share the same spectrum, this could theoretically promote closer coupling of 5G and Wi-Fi. However, given similar propagation characteristics for each technology, it remains to be proven as to whether the increasing availability of spectrum will help to push convergence forward.

There is a disconnect between theory and practice

While standards define what is possible, the purpose of industry bodies is to be future-focused, paving the way for the rest of the ecosystem to follow. What is possible in theory must be supported in practice, and the supply-side ecosystem, including network operators, system integrators (SIs), network equipment providers (NEPs) and hardware manufacturers have a role to play if convergence is to become more widespread.

Similarly, for devices to access converged networks, they must be equipped with 5G and Wi-Fi chips. While mobile phones support both connectivity types, the vast majority of connected devices that enterprises deploy are Wi-Fi only. Until 5G chips or modules become more widely available, and used in a greater number of devices, convergence will likely remain relegated to specific use cases. For example, use cases that depend on the mobility afforded by being able to ‘switch over’ from Wi-Fi to mobile seamlessly, or highly mission critical use cases in verticals such as manufacturing that can justify the investment in (private) 5G as a back-up to Wi-Fi. We discuss both of these use cases in more detail in the report. The full ecosystem must ultimately work in concert for convergence to become a realistic possibility for a larger number of enterprises.

 

Table of Contents

  • Executive Summary
    • Convergence is still immature on both the demand and supply sides
    • What do we mean by co-existence, convergence and competition?
  • Preface
  • Introduction
  • The market context for convergence
    • Industry bodies have been promoting convergence
    • Spectrum auctions
    • There is a disconnect between theory and practice
    • There are two key use cases for convergence
  • A future trend towards convergence is still immature
    • Regional differences in the maturity of 5G
    • Inconsistent definitions
    • Who manages convergence?
  • It is still too early to see high levels of demand for convergence from enterprise customers
    • Wi-Fi is the incumbent, 5G must overcome a number of barriers before it can become a genuine partner or alternative
    • Decisions regarding convergence are driven by industry characteristics
    • Supply side players must educate enterprise customers about convergence (if they believe it is beneficial to the enterprise)
  • Conclusion

Related research

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Revisiting convergence: How to address the growth imperative

Introduction

Significant opportunity, high risk of complacency

The opportunity for communications service providers (CSPs) to provide greater value and innovative services to customers through new technology advancements is well-documented. For example, the network capabilities (and programmability) that 5G and cloud native bring is touted to change the way that CSPs address revenue opportunities with customers and partners in a more ecosystem-centric environment. The emergence of FTTx (fibre to the x) technology can optimise the use of operators’ assets in a way that delivers seamless connectivity to customers. These advancements allow CSPs to better serve customer needs in a more flexible, scalable, sustainable and agile way than ever before.

Part of the imperative to address this opportunity and vision stems from significant market disruption with new entrants and new types of ‘co-opetitors’, such as the hyperscale cloud providers and greenfield operators, that challenge operators’ existing business and operating models. As a result, CSPs face growing pressure to respond much faster to market and customer demands and enhance their capabilities in a way that does not inflate their cost base or undermine their net-zero goals.

Although CSPs have identified these green pastures for growth, there is still a considerable disconnect between the vision (and what is required to fulfil the ambition) and what capabilities CSPs have today to meet it. Today, CSPs are grappling with too much complexity, fragmentation and duplication within their networks, capabilities and systems. This not only means costs are too high, but it also poses a significant barrier to how they can accelerate the beat rate of innovation and serve new revenue-generating opportunities. This is a gap that CSPs need to close urgently or be at risk of their market shares and value eroding as a result of competition.

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The imperative that CSPs can no longer ignore

There is therefore a renewed urgency in building a stronger cost base, scalability, agility and innovation, which could soon become a matter of survival. CSPs are evaluating different strategies and means of making better (and smarter) use of their assets and capabilities in a more agile way and provide the services that customers and partners are increasingly demanding. One such strategy that CSPs have long pursued is network convergence. Although the concept is not new and has been consistently explored and sporadically pursued by operators over the years, the interest has now been reignited to address this imperative. The balance of forces between convergence and divergence has also shifted in favour of the latter in recent years. This has been driven by the adoption of cloud native technologies, which enables operators to deliver new innovative services on top of a common platform (versus siloed islands) and drive for more sustainability & efficiency in the network. This has brought convergence back up to the top of operators’ agendas.

Our report therefore looks to address the following questions:

  • Why and how are CSPs converging their networks to fulfil their growth ambitions?
  • What are the key challenges they face and how can they overcome them?

Evaluating the key drivers for convergence

Cost savings are a priority, but CSPs also want top line growth

The key drivers that CSPs are focused on as part of this renewed pursuit of network convergence are internal and external. Although most operators see capital investment savings and reduction of total cost of ownership (TCO) as an essential priority, the majority of interviewees we spoke to also emphasised the need to support greater innovation with customers and ecosystem development. We describe the main drivers we found through our research with operators below:

Four key drivers that CSPs are focused on

Source: STL Partners

Reducing TCO through network simplification and consolidation

Many operators we spoke to cited network simplification and convergence in addressing the need to ‘do more with less’ and the ability to drive economies of scale and serve market requirements. Convergence can address different disparate sub-systems and siloes that don’t interact with one another (e.g. performance management and inventory management, IP and optical). This fragmentation creates unnecessary complexity for network operations teams to run, manage and assure their networks and introduce potential human errors and associated costs. CSPs have an opportunity to move towards having common infrastructure and management toolset to serve multiple needs, reduce overall TCO and to achieve better control and ubiquitous visibility across their networks. This is particularly important for larger and/or multi-service, multi-country operators. The decommissioning of legacy services (in some cases with government support, for example with PSTN services) is a key opportunity for this.

One European operator described the importance of being able to serve fixed (residential), mobile (consumer), enterprise and wholesale customers with a single backbone and transport network. Inherent in this is greater efficiency, ease of management and less capital spend required to serve multiple types of customers. For example, our interviewee cited the economies of scale they have achieved by putting all of their traffic onto a single IP network that supports all types of customers. This includes greater efficiency and simplicity in not having to run separate IP networks for each type of customer group and less spend on IP routers and lower TCO overall as part of the consolidation.

Creating a sustainable platform for scale and massive data growth

New use cases are projected to increase network traffic and demands. Operators need to prepare for this volume expansion, support more types of fibre connections, provide more flexible capacity and address high performance demands (throughput, latency, error rates). Another European group operator described scale as the main driver for convergence, in being able to seamlessly support thousands of points within the network and offer their portfolio of services across their operations as one package to customers in a simpler way.

Operators need to consider how they can maximise the use of their infrastructure to serve increasingly demanding needs. For example, there is a significant need for CSPs to extract greater synergies from their access fibre: two operators we spoke to – one in North America, the other in Asia – are using fibre originally deployed for residential broadband (Gigabit Passive Optical Network, or GPON) to connect 5G cells. Operators are joining national governments and high-profile corporations in making ‘net-zero’ commitments which is leading them to actively identify and implement strategies that will dramatically reduce their own environmental footprint and play a more active role in reducing their customers’ carbon emissions.

Enabling greater control, resilience and automation

Implicit in these developments is the greater need for automation within the network to ensure not only the greatest cost efficient optimisation of network speeds and processing power, but also the ability to navigate greater network intricacy. One particular European operator we spoke to described the need to enable greater automation across the entire lifecycle, introduce CI/CD pipelines for more agile service development and provide much more granular information and visibility across the entire network. By simplifying and converging the network, operators, operators can address some of the inherent complexity and disparate siloes in their networks and create a unified view of their network. This provides better visibility across the entire network for network operations teams and makes the task of assuring their networks easier. A more unified or common management layer also enables a more granular view and creates scope for AI/ML to deliver further gains in operational simplification and automation. In addition to the benefits for service assurance and lifecycle management, CSPs are also looking to better identify priority areas for improvement and develop more granular cost-benefit analysis for future investment planning.

Enabling greater control, resilience and automation

Implicit in these developments is the greater need for automation within the network to ensure not only the greatest cost efficient optimisation of network speeds and processing power, but also the ability to navigate greater network intricacy. One particular European operator we spoke to described the need to enable greater automation across the entire lifecycle, introduce CI/CD pipelines for more agile service development and provide much more granular information and visibility across the entire network. By simplifying and converging the network, operators can address some of the inherent complexity and disparate siloes in their networks and create a unified view of their network. This provides better visibility across the entire network for network operations teams and makes the task of assuring their networks easier. A more unified or common management layer also enables a more granular view and creates scope for AI/ML to deliver further gains in operational simplification and automation. In addition to the benefits for service assurance and lifecycle management, CSPs are also looking to better identify priority areas for improvement and develop more granular cost-benefit analysis for future investment planning.

Supporting greater innovation and ecosystem development

As the industry moves to more ecosystem-centric, B2B2X models, operators need to be more versatile in supporting diverse types of services with different types of customers. As more and more devices become connected throughout the Coordination Age , the network will need to become more responsive to different use case needs. The underlying network infrastructure needs to facilitate the faster development of richer network functionality and the plethora of emerging use cases, in order to support greater innovation. This means the network (and network teams) need to handle fast changing functions and more agile service development, and frequent software updates.

With a resurging interest in more network-enabled applications, from telematics and connected car to different types of location-based services or immersive experiences (AR/VR) that can respond to network performance data, the network needs to become more visible, distributed, programmable and instructible. Operators can leverage and expose these network capabilities to both internal and external parties, including customers and partners such as application developers, to serve new types of revenue opportunities and ecosystem partners . The expansion of 5G will create the risk of added complexity to the network, not least through the increase in access infrastructure including thousands of locations supporting distributed virtualised workloads (both cloud native network functions and other applications). This makes convergence and the simplification of the management layer even more imperative. The ability to dynamically manipulate network functions is just one of many programmable capabilities the network will require but doing this while keeping the network and associated services secured is no simple task.

Table of contents

  • Executive Summary
  • Preface
  • Introduction
    • Significant opportunity, high risk of complacency
    • The imperative that CSPs can no longer ignore
  • Evaluating the key drivers for convergence
    • Cost savings are a priority, but CSPs also want top line growth
  • Revisiting the concept of convergence
    • Convergence is a multifaceted problem and solution
    • CSPs take different approaches to tackle similar problems
    • Logical convergence
    • Horizontal convergence
    • Vertical convergence
    • The whole is greater than the sum of its parts
  • A matter of how? not why?
    • History and market variance play a role
    • Understanding the key challenges
  • Taking the plunge
    • Convergence is not just a technology decision
    • Incremental steps, not radical change

Related Research

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Commerce and connectivity: A match made in heaven?

Rakuten and Reliance: The exceptions or the rule?

Over the past decade, STL Partners has analysed how connectivity, commerce and content have become increasingly interdependent – as both shopping and entertainment go digital, telecoms networks have become key distribution channels for all kinds of consumer businesses. Equally, the growing availability of digital commerce and content are driving demand for connectivity both inside and outside the home.

To date, the top tier of consumer Internet players – Google, Apple, Amazon, Alibaba, Tencent and Facebook – have tended to focus on trying to dominate commerce and content, largely leaving the provision of connectivity to the conventional telecoms sector. But now some major players in the commerce market, such as Rakuten in Japan and Reliance in India, are pushing into connectivity, as well as content.

This report considers whether Rakuten’s and Reliance’s efforts to combine content, commerce and connectivity into a single package is a harbinger of things to come or the exceptions that will prove the longstanding rule that telecoms is a distinct activity with few synergies with adjacent sectors. The provision of connectivity has generally been regarded as a horizontal enabler for other forms of economic activity, rather than part of a vertically-integrated service stack.

This report also explores the extent to which new technologies, such as cloud-native networks and open radio access networks, and an increase in licence-exempt spectrum, are making it easier for companies in adjacent sectors to provide connectivity. Two chapters cover Google and Amazon’s connectivity strategies respectively, analysing the moves they have made to date and what they may do in future. The final section of this report draws some conclusions and then considers the implications for telcos.

This report builds on earlier STL Partners research, including:

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Mixing commerce and connectivity

Over the past decade, the smartphone has become an everyday shopping tool for billions of people, particularly in Asia. As a result, the smartphone display has become an important piece of real estate for the global players competing for supremacy in the digital commerce market. That real estate can be accessed via a number of avenues – through the handset’s operating system, a web browser, mobile app stores or through the connectivity layer itself.

As Google and Apple exercise a high degree of control over smartphone operating systems, popular web browsers and mobile app stores, other big digital commerce players, such as Amazon, Facebook and Walmart, risk being marginalised. One way to avoid that fate may be to play a bigger role in the provision of wireless connectivity as Reliance Industries is doing in India and Rakuten is doing in Japan.

For telcos, this is potentially a worrisome prospect. By rolling out its own greenfield mobile network, e-commerce, and financial services platform Rakuten has brought disruption and low prices to Japan’s mobile connectivity market, putting pressure on the incumbent operators. There is a clear danger that digital commerce platforms use the provision of mobile connectivity as a loss leader to drive to traffic to their other services.

Table of Contents

  • Executive Summary
  • Introduction
  • Mixing connectivity and commerce
    • Why Rakuten became a mobile network operator
    • Will Rakuten succeed in connectivity?
    • Why hasn’t Rakuten Mobile broken through?
    • Borrowing from the Amazon playbook
    • How will the hyperscalers react?
  • New technologies, new opportunities
    • Capacity expansion
    • Unlicensed and shared spectrum
    • Cloud-native networks and Open RAN attract new suppliers
    • Reprogrammable SIM cards
  • Google: Knee deep in connectivity waters
    • Google Fiber and Fi maintain a holding pattern
    • Google ramps up and ramps down public Wi-Fi
    • Google moves closer to (some) telcos
    • Google Cloud targets telcos
    • Big commitment to submarine/long distance infrastructure
    • Key takeaways: Vertical optimisation not integration
  • Amazon: A toe in the water
    • Amazon Sidewalk
    • Amazon and CBRS
    • Amazon’s long distance infrastructure
    • Takeaways: Control over connectivity has its attractions
  • Conclusions and implications for telcos in digital commerce/content
  • Index

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Telcos’ Role in the Advertising Value Chain

Summary: A report identifying how to build a valuable new business model and customer base.

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Background

Fixed and mobile voice and data revenues are in free-fall in most European and North American markets. Since the 3G auctions at the turn of the century, content has long been considered the key future growth area for operators in the consumer segment. However excluding SMS, the only material content revenues for Telcos to date have been through movement into adjacent markets – particularly acquisitions in the cable and media sectors.

Through advertising, operators have a potential opportunity to:

  • Reduce the price of content and services to end-users;
  • Increase the volume of available content and services, and
  • Provide value to the advertising community

 

To achieve this they must contribute to the development of a differentiated new advertising channel in which users are provided with a portfolio of content and services supported by contextually-relevant advertising.

Operators have an opportunity both to provide their own advertising-funded services as well as become an enabler to the advertising community by helping advertisers interact more effectively with their targets (who may or may not be Telco customers). In this report, we examine both of these opportunities in both the fixed and mobile markets. We explore in detail what advertisers and users really want and the opportunities available to operators to carve out a valuable role in meeting those needs.

Key Questions Answered

This report seeks to help operators and vendors maximise future advertising-funded service opportunities by answering the following questions:

  • What is the rationale for advertising-funded services?
  • When will the market take off and how big will it get?
  • How can operators prevent cannabalising existing revenue streams?
  • What are the needs of the advertising community?
  • How should operators work with Internet enablers (e.g. Google), content providers (e.g. Sony) and aggregators (e.g. Motricity)?
  • What implementation issues need to be resolved?
  • What are the options available to operators to add value and what is the best option available?
  • What are they key factors for success?
  • What value is there in opening-up Telco assets (open APIs etc.)?
  • Which can be learned from market-leaders in advertising-funded services?
  • What are the attitudes of operators, internet enablers, content providers and aggregators to the market and how to be successful in it?
  • What needs to be done to develop the market and generate near-term benefits?

Contents

  • Executive Summary
  • Background and Key Issues to Date
  • Growing Pressure on the Existing Operator Business Model
  • Content Delivery: Not a Panacea
  • Advertising-Funded Services: Tried and Tested in Adjacent Markets
  • Telcos’ Role in Advertising: Market Scope
  • Activity from Operators to Date
  • Advertising-Funded Services – Threat or Opportunity?
  • The risk of cannibalising existing revenues
  • Internet players – partner or competitor?
  • Show me the Money! – How big could the market be?
  • Understanding the Advertising-Funded Value Chain
  • Value Chain players in Internet Advertising
  • What do Advertisers *really* want?
  • Options for the Operator to add Value
  • Key Skills and Assets Required
  • Issues to resolve
  • Operator role: The Devil in the Detail
  • Who to Partner with and How
  • Meeting Advertiser and Customer Needs:
  • Return on Investment
  • Customer attention & interaction
  • Performance measurement
  • Ubiquity
  • Legal and Regulatory Issues
  • Learning from Web 2.0
  • Content and Communications: Two sides of the same coin
  • Social Networking Communities and Advertising
  • Case studies:
  • Learning from the Master: Google and the Art of Ad-Funding
  • Accelerating the need for Advertising Revenues: The X-Series from 3
  • The Whole Hog: Blyk’s Advertising-Funded MVNO
  • Delivering an Open Platform: Amazon
  • Views from the Industry – new primary research by STL Partners
  • Action steps & Conclusions

This report is now available to members of our Telco 2.0 Research Executive Briefing Service. Below is an introductory extract and list of contents from this strategy Report that can be downloaded in full in PDF format by members of the executive Briefing Service here.  To order or find out more please email contact@telco2.net, call +44 (0) 207 247 5003.