5G strategies: Lessons from the early movers

What’s the best 5G strategy?

When we published the report 5G: The First Three Years in December 2018, we identified that most of the hype – from autonomous cars to surgeons operating from the beach – is at best several years from significant volume. There are no “killer apps” in sight. Telco growth from 5G deployments will be based on greater capacity, lower cost and customer willingness to buy.

If carrier revenue doesn’t rise, the pressure to cut costs will grow

For the last five years, carrier revenue has been almost flat in most countries and we believe this trend is likely to continue.

STL Partners forecasts less than 1% CAGR in telecoms revenues

Mobile and fixed revenue forecast to 2022Source: STL Partners

In our 5G Strategies report series, STL Partners set out to established what 5G actually offers that will enable carriers to make more money in the next few years.

It builds on STL Partners’ previous insights into 5G, including:

The report explores the most recent activities in 5G by operators, vendors, phone makers and chipmakers.

Enter your details below to request an extract of the report

High-level takeaways from initial 5G deployments

This section provides a high-level overview of the current efforts and activities of select telcos around the world. Broadly, it shows that almost all are pushing ahead on 5G, some much faster than others.

  • Korea is the world’s most advanced 5G market, with two million Koreans having bought 5G phones by July.
    • Korea’s 3.5 GHz networks typically deliver download speeds of 100 – 500 Mbps. SK Telecom and KT are using Samsung equipment. LG Uplus is mostly Huawei. There is little evidence that either vendor has demonstrated superior performance. Korea’s government, supported by the operators, made a decision that speeding ahead on 5G would be valuable prestige and improve the Korean economy. Korea expects to have 200,000 radios in place by the end of 2019, compared with BT which anticipates fewer than 2,500.
  • China Mobile has confirmed Huawei’s estimate that the price of 5G phones will fall to under US$300 in 2020, which will stimulate a sharp increase in demand.
    • The Chinese and the Koreans are investing heavily in augmented and virtual reality and games for 5G. This will take time to mature.
  • Verizon has taken a radical approach to simplifying its core and transport network, partly in preparation for 5G but more generally to improve its cost of delivery. This simplification has allowed it to maintain and even cut some CAPEX investments while delivering performance improvements.
    • 5G mmWave in 28GHz works and often delivers a gigabit. The equipment is of modest size and cost. However, the apparent range of around 200 metres is disappointing (Verizon has not confirmed the range but there is evidence it is short). Verizon expects better range.
  • Sprint’s 160MHz of spectrum at 2.5GHz gives it remarkably wide coverage at 100 – 500 Mbps download speeds. Massive MIMO (multiple-input, multiple-output with 64 or more antennas) at 2.5 GHz works so well that Sprint is achieving great coverage without adding many small cells.
  • Etisalat (UAE) shows that any country that can afford it can deliver 5G today. Around the Gulf, Ooredoo (Kuwait, Qatar), Vodaphone (Qatar), du Telecom (UAE) and STC (Saudi Arabia) are speeding construction to avoid falling behind.
  • BT claims it will “move quickly” and turn on 100 cells per month (which is relatively few in comparison to Korea). BT’s website also claims that 5G has a latency speed of <1 ms, but the first measured latency is 31 ms. At Verizon, latency tests are often a little better than the announced 30 ms. Edge Networks, if deployed, can cut the latency by about half. A faster air interface, Ultra-Reliable Low-Latency Communication (URLLC), expected around 2023, could shave off another 5-7 ms. The business case for URLLC is unproven and it remains to be seen how widely it is deployed. In the rest of the section we look at these and other operators in a little more detail.

Live commercial 5G deployments globally, August 2019

Live 5G commercial deployments as of August 2019

This is the best available information on 5G deployments globally as of August 2019, gathered from both public and private sources. We have excluded operators that have announced 5G launches, but where services are not yet available for consumers to buy, such as AT&T in the US and Deutsche Telekom in Germany.

Table of contents

  • Executive Summary
  • Introduction
    • If carrier revenue doesn’t rise, the pressure to cut costs will grow
  • Operators
    • High-level takeaways
    • European operators
    • Asia Pacific and Middle Eastern operators
    • North America
  • Phone makers
  • 5G system vendors
    • Datang
    • Samsung
    • Ericsson
    • Huawei
    • Nokia
  • Chip makers
    • Qualcomm
    • Samsung
    • Intel
    • MediaTek
    • Huawei-HiSilicon
  • Conclusions: (Almost) all systems go

Enter your details below to request an extract of the report

5G: Why Verizon thinks differently – and what to do about it

Introduction

Verizon’s path

Verizon is deploying 5G as quickly as it practically can, already planning to have over 1,000 base stations by the end of 2018. CEO Lowell McAdam told investors he wants to quickly reach 30 million homes, while Goldman Sachs estimated Verizon planned to spend US$20 billion for this initial phase to 2021/22 – although there is no publicised schedule. Verizon’s investments include the acquisition of XO Communications for US$1.8 billion, which has fibre in 45 of the 50 largest cities, which Verizon sees as vital infrastructure for its 5G build.

The base stations will support mobile 5G as soon as the handsets are ready. Leading mobile chip vendor Qualcomm expects a limited number of mobile phone chips to be available by the end of 2018. Sufficient chips for phones in volume are expected by mid-year 2019.[1] Taiwan’s MediaTek, the number two 4G chipmaker, says it will “hit the 5G chip market with a bang in 2019”.[2]

Verizon is building a state-of-the-art network in 800MHz of spectrum at 28GHz using existing towers and new small cells, delivering a peak speed of 10 gigabits per second or lower. A consumer in a good location should get a true gigabit in both directions, with mobile network latency of between 5 ms and 20 ms.[3]

This will probably be the largest fast 5G network built before the next decade. The Chinese operators will mostly be using frequencies below 6GHz, which will be 65% to 85% slower.

Enter your details below to request an extract of the report

Verizon’s large fixed opportunity

In two-thirds of the US, Verizon sells wireless but is not the incumbent wireline carrier. With limited unbundling at present, it cannot offer a landline (or equivalent) service to over 70 million of its wireless customers. It therefore cannot offer quadruple play for higher revenue, lower churn and better margins.

Yet in half the US, there is only one choice for decent broadband: the cable company. Over half of US cable has been upgraded to gigabit download speeds, and over three-quarters of the country will be offered gigabit cable by the end of 2019.[4] Faster speeds contributed to the 2.7 million broadband subscriptions cable added in 2017.

Figure 1: Cable is dominating US broadband

Cable dominates US broadband

Source: Leichtman Research based on company filings

In many places, the telephone companies have not upgraded decade-old DSL lines and are not competitive with their cable counterparts.  In 2017, US telephone companies lost 625,000 broadband subscriptions.

McAdam expects to quickly win 10– 20% of the new market Verizon can address. Dean Bubley notes it is very difficult to persuade reasonably happy customers to switch, but cable service in the US is notoriously bad. Verizon’s long-term goal is 40– 50%, consistent with its results where it has FIOS fibre to the home. CFO Matt Ellis believes, “When you look at other cities outside of the ILEC footprint, offering consumer services using 5G is, we think, going to have a lot of upside for the company.”[5]

Contents:

  • Executive summary
  • The contentions of Verizon and other proponents
  • Doubts about proponents’ claims
  • Crucial questions to resolve
  • Introduction
  • Verizon’s path
  • Verizon’s large fixed opportunity
  • Verizon’s cost estimates
  • What carriers should consider based on Verizon’s choice
  • Two crucial questions for predicting when you will need mmWave
  • Will there be a large first-mover advantage?
  • AT&T is divided on 5G
  • Two carriers’ planning for uncertainty
  • Preparing for 5G: contingency scenarios
  • 5G: Vendor insight
  • Risks to this analysis
  • Technology appendix
  • Advances in 4G LTE and mid-band 5G also deliver enormous capacity

Figures:

  • Figure 1: Cable is dominating US broadband
  • Figure 2: NTT DOCOMO capex by generation and traffic demand
  • Figure 3: Verizon finds 5G requires fewer cells than 4G in some locations
  • Figure 4: Samsung test data comparing LTE 1.8GHz versus 5G GHz
  • Figure 5: Wireless traffic growth to 2021
  • Figure 6: Samsung indoor and outdoor mmWave CPE

[1] http://bit.ly/2JR2bVK

[2] http://bit.ly/2la0q8c

[3] End-to-end latency for a user will depend on how far their data request needs to go into the network and the Internet. If the signal has to go from one side of the US to the other it will take longer than a locally or edge hosted service.

[4]  https://www.fastnet.news/index.php/cable/641-gigabit-broadband-downstream-available-to-50m-u-s-homes

[5] https://www.verizon.com/about/investors/jp-morgan-global-technology-media-and-communications-conference-2018

Enter your details below to request an extract of the report