5G: Bridging hype, reality and future promises

The 5G situation seems paradoxical

People in China and South Korea are buying 5G phones by the million, far more than initially expected, yet many western telcos are moving cautiously. Will your company also find demand? What’s the smart strategy while uncertainty remains? What actions are needed to lead in the 5G era? What questions must be answered?

New data requires new thinking. STL Partners 5G strategies: Lessons from the early movers presented the situation in late 2019, and in What will make or break 5G growth? we outlined the key drivers and inhibitors for 5G growth. This follow on report addresses what needs to happen next.

The report is informed by talks with executives of over three dozen companies and email contacts with many more, including 21 of the first 24 telcos who have deployed. This report covers considerations for the next three years (2020–2023) based on what we know today.

“Seize the 5G opportunity” says Ke Ruiwen, Chairman, China Telecom, and Chinese reports claimed 14 million sales by the end of 2019. Korea announced two million subscribers in July 2019 and by December 2019 approached five million. By early 2020, The Korean carriers were confident 30% of the market will be using 5G by the end of 2020. In the US, Verizon is selling 5G phones even in areas without 5G services,  With nine phone makers looking for market share, the price in China is US$285–$500 and falling, so the handset price barrier seems to be coming down fast.

Yet in many other markets, operators progress is significantly more tentative. So what is going on, and what should you do about it?

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5G technology works OK

22 of the first 24 operators to deploy are using mid-band radio frequencies.

Vodafone UK claims “5G will work at average speeds of 150–200 Mbps.” Speeds are typically 100 to 500 Mbps, rarely a gigabit. Latency is about 30 milliseconds, only about a third better than decent 4G. Mid-band reach is excellent. Sprint has demonstrated that simply upgrading existing base stations can provide substantial coverage.

5G has a draft business case now: people want to buy 5G phones. New use cases are mostly years away but the prospect of better mobile broadband is winning customers. The costs of radios, backhaul, and core are falling as five system vendors – Ericsson, Huawei, Nokia, Samsung, and ZTE – fight for market share. They’ve shipped over 600,000 radios. Many newcomers are gaining traction, for example Altiostar won a large contract from Rakuten and Mavenir is in trials with DT.

The high cost of 5G networks is an outdated myth. DT, Orange, Verizon, and AT&T are building 5G while cutting or keeping capex flat. Sprint’s results suggest a smart build can quickly reach half the country without a large increase in capital spending. Instead, the issue for operators is that it requires new spending with uncertain returns.

The technology works, mostly. Mid-band is performing as expected, with typical speeds of 100–500Mbps outdoors, though indoor performance is less clear yet. mmWave indoor is badly degraded. Some SDN, NFV, and other tools for automation have reached the field. However, 5G upstream is in limited use. Many carriers are combining 5G downstream with 4G upstream for now. However, each base station currently requires much more power than 4G bases, which leads to high opex. Dynamic spectrum sharing, which allows 5G to share unneeded 4G spectrum, is still in test. Many features of SDN and NFV are not yet ready.

So what should companies do? The next sections review go-to-market lessons, status on forward-looking applications, and technical considerations.

Early go-to-market lessons

Don’t oversell 5G

The continuing publicity for 5G is proving powerful, but variable. Because some customers are already convinced they want 5G, marketing and advertising do not always need to emphasise the value of 5G. For those customers, make clear why your company’s offering is the best compared to rivals’. However, the draw of 5G is not universal. Many remain sceptical, especially if their past experience with 4G has been lacklustre. They – and also a minority swayed by alarmist anti-5G rhetoric – will need far more nuanced and persuasive marketing.

Operators should be wary of overclaiming. 5G speed, although impressive, currently has few practical applications that don’t already work well over decent 4G. Fixed home broadband is a possible exception here. As the objective advantages of 5G in the near future are likely to be limited, operators should not hype features that are unrealistic today, no matter how glamorous. If you don’t have concrete selling propositions, do image advertising or use happy customer testimonials.

Table of Contents

  • Executive Summary
  • Introduction
    • 5G technology works OK
  • Early go-to-market lessons
    • Don’t oversell 5G
    • Price to match the experience
    • Deliver a valuable product
    • Concerns about new competition
    • Prepare for possible demand increases
    • The interdependencies of edge and 5G
  • Potential new applications
    • Large now and likely to grow in the 5G era
    • Near-term applications with possible major impact for 5G
    • Mid- and long-term 5G demand drivers
  • Technology choices, in summary
    • Backhaul and transport networks
    • When will 5G SA cores be needed (or available)?
    • 5G security? Nothing is perfect
    • Telco cloud: NFV, SDN, cloud native cores, and beyond
    • AI and automation in 5G
    • Power and heat

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The 5G core and NFV: Different sides of the same coin?

The 5G core is an instance of standardised, operationalised NFV

The 5G mobile core network as defined by the 3rd Generation Partnership Project (3GPP) standards body, along with the other network functions specific to 5G mobile networks (e.g. the Radio Access Network, or RAN), is intended to be ‘fully’ virtualised.

There are four main reasons for this, as set out below. The first two in the list relate more particularly to what we describe in this report as Phase 1 of the NFV project, as well as to the so-called Non-Standalone (NSA) 5G core. The last two reasons are dependent on capabilities being introduced as part of Phase 2 NFV and the Standalone (SA) mobile core:

  1. Scalability: to enable the capacity of the mobile core – particularly that of the data plane – to be scaled up flexibly and dynamically to support rapidly growing data volumes, both for existing 4G services and especially the much higher volumes expected with 5G.
  2. Cost: the replacement of dedicated hardware appliances supporting network functions by Virtual Machines (VMs) – and other modes of Virtualised Network Function (VNF), such as micro-services and containers – running over COTS hardware in theory enables that scaling of capacity to be carried out much more cost-efficiently.
  3. Latency: virtualisation, along with separation of the control and user plane within the core, allows that dynamically scalable data-plane capacity to be brought physically closer to the end user and application. This is important in the case of latency-critical services.
  4. Network slicing: to enable dynamic, automated network-slicing capabilities, which depend on being able to spin up end-to-end virtual networks – including the core – on demand, based on the variable networking requirements of individual clients and use cases.

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There are serious questions as to whether the first two objectives in the above list have yet been adequately achieved, even in the context of 4G core (Evolved Packet Core: EPC) virtualisation let alone the context of the NSA 5G core (5GC). And in respect of the last two items in the list, there are many outstanding questions regarding the eventual technical and commercial models that will be adopted to support low-latency services from the network edge, and about the business models for network slicing in all its possible forms.Nonetheless, in the 3GPP 5G core, the industry has at least – and at last – reached agreement on a set of NFV standards, and has begun deploying and operating them as commercial 5G networks are rolled out. This is in stark contrast to the broader NFV project, where alignment around a set of industry-wide standards has proved elusive, although some momentum has built up around open-source programmes such as the Open Network Automation Platform (ONAP) and the Metro Ethernet Forum (MEF) in the past year or two.

The 5G networks that have been launched to date – which have all been done on the basis of the NSA core – are therefore an example of operationalised and standardised NFV that is finally delivering, albeit with the caveats expressed above.

3GPP has specified two 5G core standards: Non-standalone (NSA) and Standalone (SA)

In brief, 3GPP – and the many operators and vendors that have contributed to its work – have agreed on two 5GC standards. The first of these, the Non-Standalone (NSA) core (agreed as part of Release 15 of the standards, in December 2017), essentially involves using a virtualised and more ‘cloud-native’ version of the existing 4G core (or EPC) to support 5G New Radio (NR) wireless transmission in tandem with existing LTE services. This is illustrated in Figure 2 below:

NSA core and dual-mode LTE/5G NR operation

NSA Core and dual-mode LTE / 5G NR operation

Source: 3GPP

The purpose of the NSA core is to help facilitate a smooth and rapid introduction of 5G services by enabling telcos to reuse their existing virtual EPCs to support 5G NR, which in any case will be provided as a dual-band service – in combination with 4G, 3G and even 2G – for several years while 5G coverage is being built up.

The second of the 3GPP 5GC standards – the Standalone (SA) core – was first agreed in June 2018, also as part of Release 15. However, a further iteration of the SA specification is expected with Release 16, due in March 2020; and there may be further iterations in Release 17. As the name suggests, this is a completely new, 5G-only core. It has a simplified, ‘cloud-native’ and distributed architecture, and is designed to support services and functions such as network slicing, Ultra-Reliable Low-Latency Communications (URLLC) and enhanced Machine-Type Communications (eMTC, i.e. massive IoT).

Non-standalone 5G core basic architecture 

Non-standalone 5G core basic architecture

Source: 3GPP, STL Partners annotations in red

One major innovation compared with the 4G EPC is the decomposition of the Mobility Management Entity (MME) into two component parts: the Session Management Function (SMF) and the Access Management Function (AMF). This allows for optimisation of each of those functions to support increasingly complex use cases involving low-latency transmission of data, to and from multiple device types, across multiple network domains.

Each of the macro-level network functions illustrated in the above diagram are themselves composed of multiple ‘micro-services’ (smaller segments of software-based functionality) as part of the 5G core’s ‘cloud-native’ character. There are many formal, technical definitions of what ‘cloud-native’ means; but for our purposes, we take this term to mean that the software components forming part of a network function are disaggregated: broken up into loosely coupled ‘micro-services’ – containerised or otherwise – that are able in theory to be deployed, separately scaled and upgraded, orchestrated, and managed in innumerable permutations, configurations and distributions to support the demands of different use cases.

This means that not only the macro-level functions illustrated in the above diagram, but also the underlying micro-services, can in theory be adapted, recombined or exchanged with comparable micro-services from other vendors, to support the data-processing, security or mobility requirements of different use cases – although in the 3GPP standards, this can happen only within certain parameters in order not to compromise the integrity of specified services such as URLLC or eMTC.

The 5G core standards are designed for the ‘core’ telco business

The 3GPP standardisation effort has been driven by the desire to define and assure 5G network functionality, especially those aspects that relate to the ‘core’ telco business: connectivity. This is connectivity:

  • either as a service in its own right, e.g.
    • IP-based voice communications (as enabled by micro-services carrying forward the functionality of the current IP Multimedia Subsystem (IMS) in 3G and 4G networks), and
    • Enhanced Mobile Broadband (eMBB: the much higher-speed broadband services of 5G compared with 4G).

These are classic, core telco services of the first and second ‘ages’ of telecoms (the Communications Age and Information Age respectively), as described in a recent STL Partners report

  • or as the delivery mechanism for services created and monetised by others, e.g.
    • URLLC-dependent content services such as AR / VR, or
    • URLLC- and eMTC-dependent IoT / process optimisation services.

These IoT / process-optimisation use cases represent services of the ‘third’ telco age (the Coordination Age), while digital content-rich services such as AR and VR can be viewed as advanced Information Age services.

In other words, the 5G core standards embody and perpetuate the view that the core (fundamental) telco business is providing standardised, commoditised, universally available and accessible connectivity services and platforms, over which predominantly third parties – as opposed to telcos themselves – develop and deliver useful and entertaining, value-generating, digital and coordination services. The 5G standards are for standard telcos – but we believe the potential of 5G for telcos can eventually be much more.

Table of contents

  • Executive Summary
  • Introduction
    • The 5G core is an instance of standardised, operationalised NFV
    • 3GPP has specified two 5G core standards: Non-standalone (NSA) and Standalone (SA)
    • The 5G core standards are designed for the ‘core’ telco business
    • The 5G core standards are also defined with vendors’ interests very much to the fore
    • But the 5G core standards are in some respects inconsistent with the goals, status and methodology of the broader NFV project
    • Rakuten Mobile: The tension between cloud-nativity and operational NFV pragmatism
  • Rakuten Mobile: A case of (not quite yet) operational NFV – but not as virtualised and cloud-native as claimed
    • Is Rakuten’s network truly cloud-native, multi-vendor and fully virtualised?
    • The Rakuten Cloud Platform is a medium-term, pragmatic compromise – but not a long-term blueprint
  • An alternative, NFV-driven approach to 5G: What, how and when?
    • Alternative thinking: Telco-specific cores for new services and use cases
    • Telcos must adopt a ‘third age’ approach to 5G, not a ‘first age’ one
  • Conclusion: 5G and NFV – head and tail of the same coin?

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