5G standalone (SA) core: Why and how telcos should keep going

Major 5G Standalone deployments are experiencing delays…

There is a widespread opinion among telco industry watchers that deployments of the 5G Standalone (SA) core are taking longer than originally expected. It is certainly the case that some of the world’s leading operators, and telco cloud innovators, are taking their time over these deployments, as illustrated below:

  • AT&T: Has no current, publicly announced deadline for launching its 5G SA core, which was originally expected to be deployed in mid-2021.
  • Deutsche Telekom: Launched an SA core in Germany on a trial basis in September 2022, having previously acknowledged that SA was taking longer than originally expected. In Europe, the only other opco that is advancing towards commercial deployment is Magenta Telekom in Austria. In 2021, the company cited various delay factors, such as 5G SA not being technically mature enough to fulfil customers’ expectations (on speed and latency), and a lack of consumer devices supporting 5G SA.
  • Rakuten Mobile: Was expected to launch an SA core co-developed with NEC in 2021. But at the time of writing, this had still not launched.
  • SK Telecom: Was originally expected to launch a Samsung-provided SA core in 2020. However, in November 2021, it was announced that SK Telecom would deploy an Ericsson converged Non-standalone (NSA) / SA core. By the time of writing, this had still not taken place.
  • Telefónica: Has carried out extensive tests and pilots of 5G SA to support different use cases but has no publicly announced timetable for launching the technology commercially.
  • Verizon: Originally planned to launch its SA core at the end of 2021. But this was pushed back to 2022; and recent pronouncements by the company indicate a launch of commercial services over the SA core only in 2023.
  • Vodafone: Has launched SA in Germany only, not in any of its other markets; and even then, nationwide SA coverage is not expected until 2025. An SA core is, however, expected to be launched in Portugal in the near future, although no definite deadline has been announced. A ‘commercial pilot’ in three UK cities, launched in June 2021, had still not resulted in a full commercial deployment by the time of writing.

…but other MNOs are making rapid progress

In contrast to the above catalogue of delay, several other leading operators have made considerable progress with their standalone deployments:

  • DISH: Launched its SA core- and open RAN-based network in the US, operated entirely over the AWS cloud, in May 2022. The initial population coverage of the network was required to be 20%. This is supposed to rise to 70% by June 2023.
  • Orange: Proceeding with a Europe-wide roll-out, with six markets expected to go live with SA cores in 2023.
  • Saudi Telecom Company (STC): Has launched SA services in two international markets, Kuwait (May 2021) and Bahrain (May 2022). Preparations for a launch in Saudi Arabia were ongoing at the time of writing.
  • Telekom Austria Group (A1): Rolling out SA cores across four markets in Central Europe (Bulgaria, Croatia, Serbia and Slovenia), although no announcement has been made regarding a similar deployment in its home market of Austria. In June 2022, A1 also carried out a PoC of end-to-end, SA core-enabled network slicing, in partnership with Amdocs.
  • T-Mobile US: Has reportedly migrated all of its mobile broadband traffic over to its SA core, which was launched back in 2020. It also launched one of the world’s first voice-over-New Radio (VoNR) services, run over the SA core, in parts of two cities in June 2022.
  • Zain (Kuwait): Launched SA in Saudi Arabia in February 2022, while a deployment in its home market was ongoing at the time of writing.
  • There are also a number of trials, and prospective and actual deployments, of SA cores over the public cloud in Europe. These are serving the macro network, not edge or private-networking use cases. The most notable examples include Magenta Telekom (Deutsche Telekom’s Austrian subsidiary, partnering with Google Cloud); Swisscom (partnering with AWS); and Working Group Two (wgtwo) – a Cisco and Telenor spin-off – that offers a multi-tenant, cloud-native 5G core delivered to third-party MNOs and MVNOs via the AWS cloud.
  • The three established Chinese MNOs are all making rapid progress with their 5G SA roll-outs, having launched in either 2020 (China Telecom and China Unicom) or 2021 (China Mobile). The country’s newly launched, fourth national player, Broadnet, is also rolling out SA. However, it is not publicly known what share of the country’s reported 848 million-odd 5G subscribers (at March 2022) were connected to SA cores.
  • At least eight other APAC operators had launched 5G SA-based services by July 2022, including KT in South Korea, NTT Docomo and SoftBank in Japan and Smart in the Philippines.

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Many standalone deployments in the offing – but few fixed deadlines

So, 5G standalone deployments are definitely a mixed bag: leading operators in APAC, Europe, the Middle East and North America are deploying and have launched at scale, while other leading players in the same regions have delayed launches, including some of the telcos that have helped drive telco cloud as a whole over the past few years, e.g. AT&T, Deutsche Telekom, Rakuten, Telefónica and Vodafone.

In the July 2022 update to our Telco Cloud Deployment Tracker, which contained a ‘deep dive’ on 5G core roll-outs, we presented an optimistic picture of 5G SA deployments. We pointed out that the number of SA and converged NSA / SA cores. We expect to be launched in 2022 outnumbered the total of NSA deployments. However, as illustrated in the figure below, SA and converged NSA/SA cores are still the minority of all 5G cores (29% in total).

We should also point out that some of the SA and converged NSA / SA deployments shown in the figure below are still in progress and some will continue to be so in 2023. In other words, the launch of these core networks has been announced and we have therefore logged them in our tracker, but we expect that the corresponding deployments will be completed in the remainder of 2022 or in 2023, based on a reasonable, typical gap between when the deployments are publicly announced and the time it normally takes to complete them. If, however, more of these predicted deployments are delayed as per the roll-outs of some of leading players listed above, then we will need to revise down our 2022 and 2023 totals.

Global 5G core networks by type, 2018 to 2023

 

Source: STL Partners

Table of contents

  • Executive Summary
  • Introduction
    • Major 5G Standalone deployments are experiencing delays
    • …but other MNOs are making rapid progress
    • Many SA deployments in the offing – but few fixed deadlines
  • What is holding up deployments?
    • Mass-market use cases are not yet mature
    • Enterprise use cases exploiting an SA core are not established
    • Business model and ROI uncertainty for 5G SA
    • Uncertainty about the role of hyperscalers
    • Coordination of investments in 5G SA with those in open RAN
    • MNO process and organisation must evolve to exploit 5G SA
  • 5G SA progress will unlock opportunities
    • Build out coverage to improve ‘commodity’ services
    • Be first to roll out 5G SA in the national market
    • For brownfield deployments, incrementally evolve towards SA
    • Greenfield deployments
    • Carefully elaborate deployment models on hyperscale cloud
    • Work through process and organisational change
  • Conclusion: 5G SA will enable transformation

    Related research

    Previous STL Partners reports aligned to this topic include:

  • Telco Cloud Deployment Tracker: 5G core deep dive
  • Telco cloud: short-term pain, long-term gain
  • Telco Cloud Deployment Tracker: 5G standalone and RAN

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Telco Cloud Deployment Tracker: 5G core deep dive

Deep dive: 5G core deployments 

In this July 2022 update to STL Partners’ Telco Cloud Deployment Tracker, we present granular information on 5G core launches. They fall into three categories:

  • 5G Non-standalone core (5G NSA core) deployments: The 5G NSA core (agreed as part of 3GPP Release in December 2017), involves using a virtualised and upgraded version of the existing 4G core (or EPC) to support 5G New Radio (NR) wireless transmission in tandem with existing LTE services. This was the first form of 5G to be launched and still accounts for 75% of all 5G core network deployments in our Tracker.
  • 5G Standalone core (5G SA core) deployments: The SA core is a completely new and 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). Our Tracker indicates that the upcoming wave of 5G core deployments in 2022 and 2023 will be mostly 5G SA core.
  • Converged 5G NSA/SA core deployments: this is when a dual-mode NSA and SA platform is deployed; in most cases, the NSA core results from the upgrade of an existing LTE core (EPC) to support 5G signalling and radio. The principle behind a converged NSA/SA core is the ability to orchestrate different combinations of containerised network functions, and automatically and dynamically flip over from an NSA to an SA configuration, in tandem – for example – with other features and services such as Dynamic Spectrum Sharing and the needs of different network slices. For this reason, launching a converged NSA/SA platform is a marker of a more cloud-native approach in comparison with a simple 5G NSA launch. Ericsson is the most commonly found vendor for this type of platform with a handful coming from Huawei, Samsung and WorkingGroupTwo. Albeit interesting, converged 5G NSA/SA core deployments remain a minority (7% of all 5G core deployments over the 2018-2023 period) and most of our commentary will therefore focus on 5G NSA and 5G SA core launches.

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75% of 5G cores are still Non-standalone (NSA)

Global 5G core deployments by type, 2018–23

  • There is renewed activity this year in 5G core launches since the total number of 5G core deployments so far in 2022 (effective and in progress) stands at 49, above the 47 logged in the whole of 2021. At the very least, total 5G deployments in 2022 will settle between the level of 2021 and the peak of 2020 (97).
  • 5G in whichever form now exists in most places where it was both in demand and affordable; but there remain large economies where it is yet to be launched: Turkey, Russia and most notably India. It also remains to be launched in most of Africa.
  • In countries with 5G, the next phase of launches, which will see the migration of NSA to SA cores, has yet to take place on a significant scale.
  • To date, 75% of all 5G cores are NSA. However, 5G SA will outstrip NSA in terms of deployments in 2022 and represent 24 of the 49 launches this year, or 34 if one includes converged NSA/SA cores as part of the total.
  • All but one of the 5G launches announced for 2023 are standalone; they all involve Tier-1 MNOs including Orange (in its European footprint involving Ericsson and Nokia), NTT Docomo in Japan and Verizon in the US.

The upcoming wave of SA core (and open / vRAN) represents an evolution towards cloud-native

  • Cloud-native functions or CNFs are software designed from the ground up for deployment and operation in the cloud with:​
  • Portability across any hardware infrastructure or virtualisation platform​
  • Modularity and openness, with components from multiple vendors able to be flexibly swapped in and out based on a shared set of compute and OS resources, and open APIs (in particular, via software ‘containers’)​
  • Automated orchestration and lifecycle management, with individual micro-services (software sub-components) able to be independently modified / upgraded, and automatically re-orchestrated and service-chained based on a persistent, API-based, ‘declarative’ framework (one which states the desired outcome, with the service chain organising itself to deliver the outcome in the most efficient way)​
  • Compute, resource, and software efficiency: as a concomitant of the automated, lean and logically optimal characteristics described above, CNFs are more efficient (both functionally and in terms of operating costs) and consume fewer compute and energy resources.​
  • Scalability and flexibility, as individual functions (for example, distributed user plane functions in 5G networks) can be scaled up or down instantly and dynamically in response to overall traffic flows or the needs of individual services​
  • Programmability, as network functions are now entirely based on software components that can be programmed and combined in a highly flexible manner in accordance with the needs of individual services and use contexts, via open APIs.​

Previous telco cloud tracker releases and related research

Each new release of the tracker is global, but is accompanied by an analytical report which focusses on trends in given regions from time to time:

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MWC 2022: Sensing the winds of change

What did STL’s analysts find at MWC 2022?

This report is a collection of our analyst’s views of what they saw at the 2022 Mobile World Congress (MWC 2022). It comprises our analysts’ perspectives on its major themes:

  • How the industry is changing overall
  • The impact of the metaverse
  • New enterprise and consumer propositions
  • Progress towards telco cloud
  • Application of AI, automation and analytics (A3)

We would like to thank our partners at the GSMA for a good job done well. The GSMA say that there were 60,000 attendees this year, which is down from the 80-100k of 2019 but more than credible given the ongoing COVID-19 situation. It was nonetheless a vibrant and valuable event, and a great opportunity to see many wonderful people again face to face, and indeed, meet some great new ones.

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MWC 2022 in context of its time

It is impossible to write about MWC 2022 without putting it context of its time. It has taken place three days after the Russian invasion of Ukraine started on February 24th, 2022.

Speakers made numerous direct and indirect mentions of the war, and it was clear that a sense of sadness was felt by everyone we spoke to. This slightly offset the enthusiasm and warmth that we and many others felt on being back together in person, with our clients and the industry.

Broad support for the Ukraine was visible among many delegates and there was no Russian delegation. While totally appropriate, the Fira was a little poorer for that as one of the joys of MWC is its truly global embodiment of a vibrant industry.

We all hope for a speedy and peaceful resolution to that situation, and to see our Russian and Ukrainian colleagues again in peace soon. Sadly, as we write from and just after Barcelona, bombs and shells are falling on civilians on the same continent and the route to peace is not yet evident.

As this new and shocking war has come in Europe while COVID is still in a pandemic phase it is a reminder that change and challenge never ends. The telecoms industry responded well to COVID, and now it must again for this and all the challenges it will face in the future, which include further geopolitical risks and shocks and many more opportunities too.

The biggest opportunity for telecoms, and telcos in particular, is to build on the momentum of change rather than rest on its laurels. The threat is that it will settle for a low risk but ultimately lower value path of sticking to the same old same.  We look at the evidence for telcos successfully changing their mindset in New enterprise business: Opening, if not yet changed mindsets.

Connecting technologies

This is my 11th MWC. I came looking for what’s changed and what it means. This is what I found. Andrew Collinson, Managing Director, STL Partners Research.

Cross-dressing and role play

Trying to leave the war at the door, what else did we find at the Fira? One of the mind-bending tasks of walking through the cacophony of sights and sounds of a huge industry ecosystem on display is trying to make sense of what is going on. Who is here, and what are they trying to tell me?

First impressions count. The simple things about how companies present themselves initially mean a great deal. They often show the identity they are trying to project – who or what they are trying to be seen as more than all the detail put together. The first impression I got at MWC 2022 was that almost everyone was trying to dress like someone else.

Microsoft showed photos of cell towers on its stand while all the telco CEOs talked about the “new tech order” and becoming techcos. McKinsey talked about its ‘old friends’ in the telecoms industry and talked about sustainability on its hard-edged stand, while AWS had an advert on the frontage of the Fira and a stand in the “Four Years from Now” zone.

We’re all telcos / techcos now

We're all telcos techcos now

Source: STL Partners, AWS, Microsoft, McKinsey

It’s all about “connecting technologies”

Regular readers of STL’s material will have heard of the Coordination Age: our concept that there is a universal need for better use of resources which will be met in part by the application of connecting technologies (e.g. fibre, mobile, 5G, AI, automation, etc.).

Once upon a time, it was simply people that needed to be connected to each other. Now a huge variety of stuff needs connecting: e.g., devices, computer applications, business processes, business assets and people.

A big question in all this is whether operators have really understood how outdated their traditional operator centric view of the world has become as the industry has changed. Sure, new telecoms networks still need to be built and extended. But it isn’t just operators using licensed technologies that can do this anymore, and the value has increasingly moved to the players that can make all the stuff work: systems integrators and other technology and software players. We’ll cover operators’ mindsets more in the section titled New enterprise business: Opening, if not yet changed mindsets.

Private matters

Private networks was also a big area of focus at MWC 2022, and understandably so too as there is a lot of interest in the concept in various sectors, especially in ports and airports, mining, and manufacturing. Much of the interest for this comes from the hype around 5G which has attracted other industries to look at the technology. However, while there are some interesting developments in practice (for example Huawei and others at Shenzen port in China), many of the applications are at least as well served, and in some cases, better served by other connectivity technologies, e.g. Wi-Fi, wired connections, narrow-band IoT, and 3G / 4G, edge computing and combinations thereof. So 5G is far from the only horse in the race, and we will be looking closely at the boundary conditions and successful use cases for Private 5G in our future research.

Would you pay for “unexpected benefits”?

One great stumbling block for telcos and other business used to traditional business thinking has been “how do you make a business case for new technology?”

The classic telecoms route is to dig around for a cost-saving and revenue enhancement case and then try to bend the CFO’s ear until they give you some money to do your thing. This is fair enough, to a point.

The challenge is, what do you do when you don’t know what you are going to find and/or you can’t prove it? Or worse still, you can only prove it after everybody else in the market has proven it for you and you are then at a competitive disadvantage.

One story I saw and see elsewhere repeated endlessly is that of “unexpected benefits”. This was a phrase that Alison Kirkby, CEO Telia, used to describe what happened when the value of its population movement data was recognised by the Swedish Government during the COVID crisis. It had pulled together the data for one set of reasons, and suddenly this very compelling use came to light.

Another I heard from Qualcomm, which told of putting IoT driven shelf price signs in retail. Originally it was developed to help rapid repricing for consumers in store, then COVID struck a few weeks after installation. This meant people switched to online shopping and the stores were then mainly used by  pickers assembling orders for delivery. The retailer found that by using the signs to help the pickers assemble their loads faster they could make the process about a third more productive. That’s a lot in retail.

This is the reality of transformational business models and technologies. It is incredibly hard to foresee what is really going to work, and how. Even after some time with a new way of working new uses continue to emerge. That’s not to say that you can’t narrow it down a bit – and this is something we spend a lot of our time working on. However, a new thing I will be asking our analysts to help figure out is “how can you tell when and where there are likely to be unexpected benefits?”

 

Table of Contents

  • Executive Summary
  • Introduction
    • MWC 2022 in context of its time
  • MWC 2022: Connecting technologies
    • Cross-dressing and role play
    • Would you pay for “unexpected benefits”?
    • Getting physical, getting heavy
    • Glasses are sexy (again)
    • Europe enviously eyes eastwards
  • New enterprise business: Opening, if not yet changed mindsets
    • Customer centricity: Starting to emerge
    • Becoming better partners: Talking the talk
    • New business models: Not quite there
  • The Metaverse: Does it really matter?
    • Can the Metaverse be trusted?
    • Exploding supply, uncertain quality
    • The non-fungible flexibility paradox
    • A coordinating role for telcos?
    • Don’t write it off, give it a go
  • Consumers: XR, sustainability and smarthome
    • Operators: Aiming for smart and sustainable
    • Vendors and techcos: Would you like AI with that?
    • More Metaverse, VR and AR
    • Other interesting finds: Commerce, identity, video
  • Telco Cloud: The painful gap between theory and practice
    • Brownfield operators are still on their virtualisation journey
    • Greenfield operators: Cloud native and automated from day one
    • Telcos on public could: Shall I, shant I?
  • AI and automation: Becoming adaptive
    • Looking out for good A3 use cases / case studies
    • Evidence of a maturing market?
    • Welcome signs of progress towards the Coordination Age

 

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VNFs on public cloud: Opportunity, not threat

VNF deployments on the hyperscale cloud are just beginning

Numerous collaboration agreements between hyperscalers and leading telcos, but few live VNF deployments to date

The past three years have seen many major telcos concluding collaboration agreements with the leading hyperscalers. These have involved one or more of five business models for the telco-hyperscaler relationship that we discussed in a previous report, and which are illustrated below:

Five business models for telco-hyperscaler partnerships

Source: STL Partners

In this report, we focus more narrowly on the deployment, delivery and operation by and to telcos of virtualised and cloud-native network functions (VNFs / CNFs) over the hyperscale public cloud. To date, there have been few instances of telcos delivering live, commercial services on the public network via VNFs hosted on the public cloud. STL Partners’ Telco Cloud Deployment Tracker contains eight examples of this, as illustrated below:

Major telcos deploying VNFs in the public cloud

Source: STL Partners

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Telcos are looking to generate returns from their telco cloud investments and maintain control over their ‘core business’

The telcos in the above table are all of comparable stature and ambition to the likes of AT&T and DISH in the realm of telco cloud but have a diametrically opposite stance when it comes to VNF deployment on public cloud. They have decided against large-scale public cloud deployments for a variety of reasons, including:

  • They have invested a considerable amount of money, time and human resources on their private clouddeployments, and they want and need to utilise the asset and generate the RoI.
  • Related to this, they have generated a large amount of intellectual property (IP) as a result of their DIY cloud– and VNF-development work. Clearly, they wish to realise the business benefits they sought to achieve through these efforts, such as cost and resource efficiencies, automation gains, enhanced flexibility and agility, and opportunities for both connectivityand edge compute service innovation. Apart from the opportunity cost of not realising these gains, it is demoralising for some CTO departments to contemplate surrendering the fruit of this effort in favour of a hyperscaler’s comparable cloud infrastructure, orchestration and management tools.
  • In addition, telcos have an opportunity to monetise that IP by marketing it to other telcos. The Rakuten Communications Platform (RCP) marketed by Rakuten Symphony is an example of this: effectively, a telco providing a telco cloud platform on an NFaaS basis to third-party operators or enterprises – in competition to similar offerings that might be developed by hyperscalers. Accordingly, RCP will be hosted over private cloud facilities, not public cloud. But in theory, there is no reason why RCP could not in future be delivered over public cloud. In this case, Rakuten would be acting like any other vendor adapting its solutions to the hyperscale cloud.
  • In theory also, telcos could also offer their private telcoclouds as a platform, or wholesale or on-demand service, for third parties to source and run their own network functions (i.e. these would be hosted on the wholesale provider’s facilities, in contrast to the RCP, which is hosted on the client telco’s facilities). This would be a logical fit for telcos such as BT or Deutsche Telekom, which still operate as their respective countries’ communications backbone provider and primary wholesale provider

BT and Deutsche Telekom have also been among the telcos that have been most visibly hostile to the idea of running NFs powering their own public, mass-market services on the public and hyperscale cloud. And for most operators, this is the main concern making them cautious about deploying VNFs on the public cloud, let alone sourcing them from the cloud on an NFaaS basis: that this would be making the ‘core’ telco business and asset – the network – dependent on the technology roadmaps, operational competence and business priorities of the hyperscalers.

Table of contents

  • Executive Summary
  • Introduction: VNF deployments on the hyperscale cloud are just beginning
    • Numerous collaboration agreements between hyperscalers and leading telcos, but few live VNF deployments to date
    • DISH and AT&T: AWS vs Azure; vendor-supported vs DIY; NaaCP vs net compute
  • Other DIY or vendor-supported best-of-breed players are not hosting VNFs on public cloud
    • Telcos are looking to generate returns from their telco cloud investments and maintain control over their ‘core business’
    • The reluctance to deploy VNFs on the cloud reflects a persistent, legacy concept of the telco
  • But NaaCP will drive more VNF deployments on public cloud, and opportunities for telcos
    • Multiple models for NaaCP present prospects for greater integration of cloud-native networks and public cloud
  • Conclusion: Convergence of network and cloud is inevitable – but not telcos’ defeat
  • Appendix

Related Research

 

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How telcos can make the world a safer place

Telecoms networks can support public safety

In the wake of the pandemic and multiple natural disasters, such as fire and flooding, both policymakers and people in general are placing a greater focus on preserving health and ensuring public safety. This report begins by explaining the concept of a digital nervous system – large numbers of connected sensors that can monitor events in real-time and thereby alert organizations and individuals to imminent threats to their health and safety.

With the advent of 5G, STL Partners believes telcos have a broad opportunity to help coordinate better use of the world’s resources and assets, as outlined in the report: The Coordination Age: A third age of telecoms. The application of reliable and ubiquitous connectivity to enable governments, companies and individuals to live in a safer world is one way in which operators can contribute to the Coordination Age.

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The chapters in this report consider the potential to use the data collected by telecoms networks to help counter the health and safety threats posed by:

  • Environmental factors, such as air pollution and high-levels of pollen,
  • Natural disasters, such as wildfires, flooding and earthquakes,
  • Infectious diseases
  • Violence, such as riots and shooting incidents
  • Accidents on roads, rivers and coastlines

In each case, the report considers how to harness new data collected by connected sensors, cameras and other monitors, in addition to data already captured by mobile networks (showing where people are and where they are moving to).  It also identifies who telcos will need to work with to develop and deploy such solutions, while discussing potential revenue streams.  In most cases, the report includes short case studies describing how telcos are trialling or deploying actual solutions, generally in partnership with other stakeholders.

The final chapter focuses on the role of telcos – the assets and the capabilities they have to improve health and safety.

It builds on previous STL Partners research including:

Managing an unstable world

Prior to the damage wrought by the pandemic, the world was gradually becoming a safer place for human beings. Global life expectancy has been rising steadily for many decades and the UN expects that trend to continue, albeit at a slower pace. That implies the world is safer than it was in the twentieth century and people are healthier than they used to be.

Global gains in life expectancy are slowing down

health and safety

Source: United Nations – World Population Prospects

But a succession of pandemics, more extreme weather events and rising pollution may yet reverse these positive trends. Indeed, many people now feel that they live in an increasingly unstable and dangerous world. Air pollution and over-crowding are worsening the health impact of respiratory conditions and infections, such as SARS-CoV-2. As climate change accelerates, experts expect an increase in flash flooding, wildfires, drought and intense heat. As extreme weather impacts the food and water supplies, civil unrest and even armed conflict could follow. In the modern world, the four horsemen of the apocalypse might symbolize infectious disease, extreme weather, pollution and violence.

As the human race grapples with these challenges, there is growing interest in services and technologies that could make the world a safer and healthier place. That demand is apparent among both individuals (hence the strong sales of wearable fitness monitors) and among public sector bodies’ rising interest in environment and crowd monitoring solutions.

As prevention is better than cure, both citizens and organisations are looking for early warning systems that can help them prepare for threats and take mitigating actions. For example, an individual with an underlying health condition could benefit from a service that warns them when they are approaching an area with poor air quality or large numbers of densely-packed people. Similarly, a municipality would welcome a solution that alerts them when large numbers of people are gathering in a public space or drains are close to being blocked or are overflowing.  The development of these kinds of early warning systems would involve tracking both events and people in real-time to detect patterns that signal a potential hazard or disruption, such as a riot or flooding.

Advances in artificial intelligence (AI), as well as the falling cost of cameras and other sensors, together with the rollout of increasingly dense telecoms networks, could make such systems viable. For example, a camera mounted on a lamppost could use image and audio recognition technologies to detect when a crowd is gathering in the locality, a gun has been fired, a drain has been flooded or an accident has occurred.

Many connected sensors and cameras, of course, won’t be in a fixed location – they will be attached to drones, vehicles and even bicycles, to support use cases where mobility will enhance the service. Such uses cases could include air quality monitoring, wildfire and flooding surveillance, and search and rescue.

Marty Sprinzen, CEO of Vantiq (a provider of event-driven, real-time collaborative applications) believes telecoms companies are best positioned to create a “global digital nervous system” as they have the networks and managed service capabilities to scale these applications for broad deployment. “Secure and reliable connectivity and networking (increasingly on ultrafast 5G networks) are just the beginning in terms of the value telcos can bring,” he wrote in an article for Forbes, published in November 2020. “They can lead on the provisioning and management of the literally billions of IoT devices — cameras, wearables and sensors of all types — that are integral to real-time systems. They can aggregate and analyze the massive amount of data that these systems generate and share insights with their customers. And they can bring together the software providers and integrators and various other parties that will be necessary to build, maintain and run such sophisticated systems.”

Sprinzen regards multi-access edge computing, or MEC, as the key to unlocking this market. He describes MEC as a new, distributed architecture that pushes compute and cloud-like capabilities out of data centres and the cloud to the edge of the network — closer to end-users and billions of IoT devices. This enables the filtering and processing of data at the edge in near real-time, to enable a rapid response to critical events.

This kind of digital nervous system could help curb the adverse impact of future pandemics. “I believe smart building applications will help companies monitor for and manage symptom detection, physical distancing, contact tracing, access management, safety compliance and asset tracking in the workplace,” Sprinzen wrote. “Real-time traffic monitoring will ease urban congestion and reduce the number and severity of accidents. Monitoring and management of water supplies, electrical grids and public transportation will safeguard us against equipment failures or attacks by bad actors. Environmental applications will provide early warnings of floods or wildfires. Food distribution and waste management applications will help us make more of our precious resources.”

Vantiq says one if its telco customers is implementing AI-enabled cameras, IoT sensors, location data and other technologies to monitor various aspects of its new headquarters building. He didn’t identify the telco, but added that it is the lead technology partner for a city that’s implementing a spectrum of smart city solutions to improve mobility, reduce congestion and strengthen disaster prevention.

Table of contents

  • Executive Summary
  • Introduction
  • Managing an unstable world
  • Monitoring air quality
    • Exploiting existing cellular infrastructure
    • Is mobile network data enough?
    • Smart lampposts to play a broad role
    • The economics of connecting environmental sensors
    • Sensors in the sky
  • Natural disasters
    • Spotting wildfires early
    • Earthquake alert systems
    • Crowdsourcing data
    • Infectious diseases
  • On street security
  • Conclusions – the opportunities for telcos
    • Ecosystem coordination – kickstarting the market
    • Devices – finding the right locations
    • Network – reliable, low cost connectivity
    • Data platform
    • Applications
  • Index

 

 

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Private networks: Lessons so far and what next

The private networks market is rapidly developing

Businesses across a range of sectors are exploring the benefits of private networks in supporting their connected operations. However, there are considerable variations between national markets, reflecting spectrum and other regulatory actions, as well as industrial structure and other local factors. US, Germany, UK, Japan and the Nordics are among the leading markets.

Enterprises’ adoption of digitalisation and automation programmes is growing across various industries. The demand from enterprises stems from their need for customised networks to meet their vertical-specific connectivity requirements – as well as more basic considerations of coverage and cost of public networks, or alternative wireless technologies.

On the supply side, the development in cellular standards, including the virtualisation of the RAN and core elements, the availability of edge computing, and cloud management solutions, as well as the changing spectrum regulations are making private networks more accessible for enterprises. That said, many recently deployed private cellular networks still use “traditional” integrated small cells, or major vendors’ bundled solutions – especially in conservative sectors such as utilities and public safety.

Many new players are entering the market through different vertical and horizontal approaches and either competing or collaborating with traditional telcos. Traditional telcos, new telcos (mainly building private networks or offering network services), and other stakeholders are all exploring strategies to engage with the market and assessing the opportunities across the value chain as private network adoption increases.

Following up on our 2019 report Private and vertical cellular networks: Threats and opportunities, we explore the recent developments in the private network market, regulatory activities and policy around local and shared spectrum, and the different deployment approaches and business cases. In this report we address several interdependent elements of the private networks landscape

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What is a private network?

A private network leverages dedicated resources such as infrastructure and spectrum to provide precise coverage and capacity to specific devices and user groups. The network can be as small as a single radio cell covering a single campus or a location such as a manufacturing site (or even a single airplane), or it can span across a wider geographical area such as a nationwide railway network or regional utility grids.

Private networks is an umbrella term that can includes different LAN (or WAN) connectivity options such as Wi-Fi and LPWAN. However, more commonly, the term is being associated with private cellular networks based on 3GPP mobile technologies, i.e. LTE or 5G New Radio (NR).

Private networks are also different from in-building densification solutions like small cells and DAS which extend the coverage of public network or strengthen its capacity indoors or in highly dense locations. These solutions are still part of the public network and do not support customised control over the local network access or other characteristics. In future, some may support local private networks as well as public MNOs’ services.

Besides dedicated coverage and capacity, private networks can be customised in other aspects such as security, latency and integration with the enterprise internal systems to meet business specific requirements in ways that best effort public networks cannot.

Unlike public networks, private networks are not available to the public through commercially available devices and SIM cards. The network owner or operator controls the authorisation and the access to the network for permissioned devices and users. These definitions blur somewhat if the network is run by a “community” such as a municipality.

Typically, devices will not work outside the boundaries of their private network. That is a requirement in many use cases, such as manufacturing, where devices are not expected to continue functioning outside the premise. However, in a few areas, such as logistics, solutions can include the use of dual-SIM devices for both public and private networks or the use of other wide area technologies such as TETRA for voice. Moreover, agreements with public networks to enable roaming can be activated to support certain service continuity outside the private network boundaries.

While the technology and market are still developing, several terms are being used interchangeably to describe 3GPP private networks such dedicated networks, standalone networks, campus networks, local networks, vertical mobile network and non-public networks (NPN) as defined by the 3GPP.

The emergence of new telcos

Many telcos are not ready to support private networks demands from enterprises on large scale because they lack sufficient resources and expertise. Also, some enterprises might be reluctant to work with telcos for different reasons including their concerns over the traditional telcos’ abilities in vertical markets and a desire to control costs. This gap is already catalysing the emergence of new types of mobile network service providers, as opposed to traditional MNOs that operate national or regional public mobile networks.

These players essentially carry out the same roles as traditional MNOs in configuring the network, provisioning the service, and maintaining the private network infrastructure. Some of them may also have access to spectrum and buy network equipment and technologies directly from network equipment vendors. In addition to “new telcos” or “new operators”, other terms have been used to describe these players such as specialist operators and alternative operators. Throughout this report, we will use new telcos or specialist operators when describing these players collectively and traditional/public operators when referring to typical wide area national mobile network provider. New players can be divided into the following categories:

Possible private networks service providers

private networks ecosystem

Source: STL Partners

Table of content

  • Executive Summary
    • What next
    • Trends and recommendations for telcos, vendors, enterprises and policymakers
  • Introduction
  • Types of private network operators
    • What is a private network?
    • The emergence of new telcos
  • How various stakeholders are approaching the market
    • Technology development: Choosing between LTE and 5G
    • Private network technology vendors
    • Regional overview
    • Vertical overview
    • Mergers and acquisitions activities
  • The development of spectrum regulations
    • Unlicensed spectrum for LTE and 5G is an attractive option, but it remains limited
    • The rise of local spectrum licensing threatens some telcos
    • …but there is no one-size fits all in local spectrum licensing
    • How local spectrum licensing shapes the market and enterprise adoption
    • Recommendations for different stakeholders
  • Assessing the approaches to network implementation
    • Private network deployment models
    • Business models and roles for telcos
  • Conclusion and recommendations
  • Index
  • Appendix 1:  Examples of private networks deployments in 2020 – 2021

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Why the consumer IoT is stuck in the slow lane

A slow start for NB-IoT and LTE-M

For telcos around the world, the Internet of Things (IoT) has long represented one of the most promising growth opportunities. Yet for most telcos, the IoT still only accounts for a low single digit percentage of their overall revenue. One of the stumbling blocks has been relatively low demand for IoT solutions in the consumer market. This report considers why that is and whether low cost connectivity technologies specifically-designed for the IoT (such as NB-IoT and LTE-M) will ultimately change this dynamic.

NB-IoT and LTE-M are often referred to as Massive IoT technologies because they are designed to support large numbers of connections, which periodically transmit small amounts of data. They can be distinguished from broadband IoT connections, which carry more demanding applications, such as video content, and critical IoT connections that need to be always available and ultra-reliable.

The initial standards for both technologies were completed by 3GPP in 2016, but adoption has been relatively modest. This report considers the key B2C and B2B2C use cases for Massive IoT technologies and the prospects for widespread adoption. It also outlines how NB-IoT and LTE-M are evolving and the implications for telcos’ strategies.

This builds on previous STL Partners’ research, including LPWA: Which way to go for IoT? and Can telcos create a compelling smart home?. The LPWA report explained why IoT networks need to be considered across multiple generations, including coverage, reliability, power consumption, range and bandwidth. Cellular technologies tend to be best suited to wide area applications for which very reliable connectivity is required (see Figure below).

IoT networks should be considered across multiple dimensions

IoT-networks-disruptive-analysis-stl-2021
Source: Disruptive Analysis

 

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The smart home report outlined how consumers could use both cellular and short-range connectivity to bolster security, improve energy efficiency, charge electric cars and increasingly automate appliances. One of the biggest underlying drivers in the smart home sector is peace of mind – householders want to protect their properties and their assets, as rising population growth and inequality fuels fear of crime.

That report contended that householders might be prepared to pay for a simple and integrated way to monitor and remotely control all their assets, from door locks and televisions to solar panels and vehicles.  Ideally, a dashboard would show the status and location of everything an individual cares about. Such a dashboard could show the energy usage and running cost of each appliance in real-time, giving householders fingertip control over their possessions. They could use the resulting information to help them source appropriate insurance and utility supply.

Indeed, STL Partners believes telcos have a broad opportunity to help coordinate better use of the world’s resources and assets, as outlined in the report: The Coordination Age: A third age of telecoms. Reliable and ubiquitous connectivity is a key enabler of the emerging sharing economy in which people use digital technologies to easily rent the use of assets, such as properties and vehicles, to others. The data collected by connected appliances and sensors could be used to help safeguard a property against misuse and source appropriate insurance covering third party rentals.

Do consumers need Massive IoT?

Whereas some IoT applications, such as connected security cameras and drones, require high-speed and very responsive connectivity, most do not. Connected devices that are designed to collect and relay small amounts of data, such as location, temperature, power consumption or movement, don’t need a high-speed connection.

To support these devices, the cellular industry has developed two key technologies – LTE-M (LTE for Machines, sometimes referred to as Cat M) and NB-IoT (Narrowband IoT). In theory, they can be deployed through a straightforward upgrade to existing LTE base stations. Although these technologies don’t offer the capacity, throughput or responsiveness of conventional LTE, they do support the low power wide area connectivity required for what is known as Massive IoT – the deployment of large numbers of low cost sensors and actuators.

For mobile operators, the deployment of NB-IoT and LTE-M can be quite straightforward. If they have relatively modern LTE base stations, then NB-IoT can be enabled via a software upgrade. If their existing LTE network is reasonably dense, there is no need to deploy additional sites – NB-IoT, and to a lesser extent LTE-M, are designed to penetrate deep inside buildings. Still, individual base stations may need to be optimised on a site-by-site basis to ensure that they get the full benefit of NB-IoT’s low power levels, according to a report by The Mobile Network, which notes that operators also need to invest in systems that can provide third parties with visibility and control of IoT devices, usage and costs.

There are a number of potential use cases for Massive IoT in the consumer market:

  • Asset tracking: pets, bikes, scooters, vehicles, keys, wallets, passport, phones, laptops, tablets etc.
  • Vulnerable persontracking: children and the elderly
  • Health wearables: wristbands, smart watches
  • Metering and monitoring: power, water, garden,
  • Alarms and security: smoke alarms, carbon monoxide, intrusion
  • Digital homes: automation of temperature and lighting in line with occupancy

In the rest of this report we consider the key drivers and barriers to take-up of NB-IoT and LTE-M for these consumer use cases.

Table of Contents

  • Executive Summary
  • Introduction
  • Do consumers need Massive IoT?
    • The role of eSIMs
    • Takeaways
  • Market trends
    • IoT revenues: Small, but growing
  • Consumer use cases for cellular IoT
    • Amazon’s consumer IoT play
    • Asset tracking: Demand is growing
    • Connecting e-bikes and scooters
    • Slow progress in healthcare
    • Smart metering gains momentum
    • Supporting micro-generation and storage
    • Digital buildings: A regulatory play?
    • Managing household appliances
  • Technological advances
    • Network coverage
  • Conclusions: Strategic implications for telcos

 

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Consumer strategy: What should telcos do?

Globally, telcos are pursuing a wide variety of strategies in the consumer market, ranging from broad competition with the major Internet platforms to a narrow focus on delivering connectivity.

Some telcos, such as Orange France, Telefónica Spain, Reliance Jio and Rakuten Mobile, are combining connectivity with an array of services, such as messaging, entertainment, smart home, financial services and digital health propositions. Others, such as Three UK, focus almost entirely on delivering connectivity, while many sit somewhere in between, targeting a single vertical market, in addition to connectivity. AT&T is entertainment-orientated, while Safaricom is financial services-focused.

This report analyses the consumer strategies of the leading telcos in the UK and the Brazil – two very different markets. Whereas the UK is a densely populated, English-speaking country, Brazil has a highly-dispersed population that speaks Portuguese, making the barriers to entry higher for multinational telecoms and content companies.

By examining these two telecoms markets in detail, this report will consider which of these strategies is working, looking, in particular, at whether a halfway-house approach can be successful, given the economies of scope available to companies, such as Amazon and Google, that offer consumers a broad range of digital services. It also considers whether telcos need to be vertically-integrated in the consumer market to be successful. Or can they rely heavily on partnerships with third-parties? Do they need their own distinctive service layer developed in-house?

In light of the behavourial changes brought about by the pandemic, the report also considers whether telcos should be revamping their consumer propositions so that they are more focused on the provision of ultra-reliable connectivity, so people can be sure to work from home productively. Is residential connectivity really a commodity or can telcos now charge a premium for services that ensure a home office is reliably and securely connected throughout the day?

A future STL Partners report will explore telcos’ new working from home propositions in further detail.

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The UK market: Convergence is king

The UK is one of the most developed and competitive telecoms markets in the world. It has a high population density, with 84% of its 66 million people living in urban areas, according to the CIA Factbook. There are almost 272 people for every square kilometre, compared with an average of 103 across Europe. For every 100 people, there are 48 fixed lines and 41 broadband connections, while the vast majority of adults have a mobile phone. GDP per capita (on a purchasing power parity basis) is US$ 48,710, compared with US$ 65,118 in the US (according to the World Bank).

The strength of the state-funded public service broadcaster, the BBC, has made it harder for private sector players to make money in the content market. The BBC delivers a large amount of high-quality advertising-free content to anyone in the UK who pays the annual license fee, which is compulsory to watch television.

In the UK, the leading telcos have mostly eschewed expansion into the broader digital services market. That reflects the strong position of the leading global Internet platforms in the UK, as well as the quality of free-to-air television, and the highly competitive nature of the UK telecoms market – UK operators have relatively low margins, giving them little leeway to invest in the development of other digital services.

Figure 1 summarises where the five main network operators (and broadband/TV provider Sky) are positioned on a matrix mapping degree of vertical integration against the breadth of the proposition.

Most UK telcos have focused on the provision of connectivity

UK telco B2C strategies

Source: STL Partners

Brazil: Land of new opportunities

Almost as large as the US, Brazil has a population density is just 25 people per square kilometre – one tenth of the total UK average population density. Although 87% of Brazil’s 212 million people live in urban areas, according to the CIA Fact book, that means almost 28 million people are spread across the country’s rural communities.

By European standards, Brazil’s fixed-line infrastructure is relatively sparse. For every 100 people, Brazil has 16 fixed lines, 15 fixed broadband connections and 99 mobile connections. Its GDP per capita (on a purchasing power parity basis) is US$ 15,259 – about one third of that in the UK. About 70% of adults had a bank account in 2017, according to the latest World Bank data. However, only 58% of the adult population were actively using the account.

A vast middle-income country, Brazil has a very different telecoms market to that of the UK. In particular, network coverage and quality continue to be important purchasing criteria for consumers in many parts of the country. As a result, Oi, one of the four main network operators, became uncompetitive and entered a bankruptcy restructuring process in 2016. It is now hoping to to sell its sub-scale mobile unit for at least 15 billion reais (US$ 2.8 billion) to refocus the company on its fibre network. The other three major telcos, Vivo (part of Telefónica), Claro (part of América Móvil) and TIM Brazil, have made a joint bid to buy its mobile assets.

For this trio, opportunities may be opening up. They could, for example, play a key role in making financial services available across Brazil’s sprawling landmass, much of which is still served by inadequate road and rail infrastructure. If they can help Brazil’s increasingly cash-strapped consumers to save time and money, they will likely prosper. Even before COVID-19 struck, Brazil was struggling with the fall-out from an early economic crisis.

At the same time, Brazil’s home entertainment market is in a major state of flux. Demand for pay television, in particular, is falling away, as consumers seek out cheaper Internet-based streaming options.

All of Brazil’s major telcos are building a broad consumer play

Brazil telco consumer market strategy overview

Source: STL Partners

Table of contents

  • Executive Summary
  • Introduction
    • The UK market: Convergence is king
    • BT: Trying to be broad and deep
    • Virgin Media: An aggregation play
    • O2 UK: Changing course again
    • Vodafone: A belated convergence play
    • Three UK: Small and focused
    • Takeaways from the UK market: Triple play gridlock
  • Brazil: Land of new opportunities
    • The Brazilian mobile market
    • The Brazilian fixed-line market
    • The Brazilian pay TV market
    • The travails of Oi
    • Vivo: Playing catch-up in fibre
    • Telefónica’s financial performance
    • América Móvil goes broad in Brazil
    • TIM: Small, but perfectly formed?
    • Takeaways from the Brazilian market: A potentially treacherous transition
  • Index

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Fixed wireless access growth: To 20% homes by 2025

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Fixed wireless access growth forecast

Fixed Wireless Access (FWA) networks use a wireless “last mile” link for the final connection of a broadband service to homes and businesses, rather than a copper, fibre or coaxial cable into the building. Provided mostly by WISPs (Wireless Internet Service Providers) or mobile network operators (MNOs), these services come in a wide range of speeds, prices and technology architectures.

Some FWA services are just a short “drop” from a nearby pole or fibre-fed hub, while others can work over distances of several kilometres or more in rural and remote areas, sometimes with base station sites backhauled by additional wireless links. WISPs can either be independent specialists, or traditional fixed/cable operators extending reach into areas they cannot economically cover with wired broadband.

There is a fair amount of definitional vagueness about FWA. The most expansive definitions include cheap mobile hotspots (“Mi-Fi” devices) used in homes, or various types of enterprise IoT gateway, both of which could easily be classified in other market segments. Most service providers don’t give separate breakouts of deployments, while regulators and other industry bodies report patchy and largely inconsistent data.

Our view is that FWA is firstly about providing permanent broadband access to a specific location or premises. Primarily, this is for residential wireless access to the Internet and sometimes typical telco-provided services such as IPTV and voice telephony. In a business context, there may be a mix of wireless Internet access and connectivity to corporate networks such as VPNs, again provided to a specific location or building.

A subset of FWA relates to M2M usage, for instance private networks run by utility companies for controlling grid assets in the field. These are typically not Internet-connected at all, and so don’t fit most observers’ general definition of “broadband access”.

Usually, FWA will be marketed as a specific service and package by some sort of network provider, usually including the terminal equipment (“CPE” – customer premise equipment), rather than allowing the user to “bring their own” device. That said, lower-end (especially 4G) offers may be SIM-only deals intended to be used with generic (and unmanaged) portable hotspots.
There are some examples of private network FWA, such as a large caravan or trailer park with wireless access provided from a central point, and perhaps in future municipal or enterprise cellular networks giving fixed access to particular tenant structures on-site – for instance to hangars at an airport.

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FWA today

Today, fixed-wireless access (FWA) is used for perhaps 8-9% of broadband connections globally, although this varies significantly by definition, country and region. There are various use cases (see below), but generally FWA is deployed in areas without good fixed broadband options, or by mobile-only operators trying to add an additional fixed revenue stream, where they have spare capacity.

Fixed wireless internet access fits specific sectors and uses, rather than the overall market

FWA Use Cases

Source: STL Partners

FWA has traditionally been used in sparsely populated rural areas, where the economics of fixed broadband are untenable, especially in developing markets without existing fibre transport to towns and villages, or even copper in residential areas. Such networks have typically used unlicensed frequency bands, as there is limited interference – and little financial justification for expensive spectrum purchases. In most cases, such deployments use proprietary variants of Wi-Fi, or its ill-fated 2010-era sibling WiMAX.

Increasingly however, FWA is being used in more urban settings, and in more developed market scenarios – for example during the phase-out of older xDSL broadband, or in places with limited or no competition between fixed-network providers. Some cellular networks primarily intended for mobile broadband (MBB) have been used for fixed usage as well, especially if spare capacity has been available. 4G has already catalysed rapid growth of FWA in numerous markets, such as South Africa, Japan, Sri Lanka, Italy and the Philippines – and 5G is likely to make a further big difference in coming years. These mostly rely on licensed spectrum, typically the national bands owned by major MNOs. In some cases, specific bands are used for FWA use, rather than sharing with normal mobile broadband. This allows appropriate “dimensioning” of network elements, and clearer cost-accounting for management.

Historically, most FWA has required an external antenna and professional installation on each individual house, although it also gets deployed for multi-dwelling units (MDUs, i.e. apartment blocks) as well as some non-residential premises like shops and schools. More recently, self-installed indoor CPE with varying levels of price and sophistication has helped broaden the market, enabling customers to get terminals at retail stores or delivered direct to their home for immediate use.

Looking forward, the arrival of 5G mass-market equipment and larger swathes of mmWave and new mid-band spectrum – both licensed and unlicensed – is changing the landscape again, with the potential for fibre-rivalling speeds, sometimes at gigabit-grade.

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Table of contents

  • Executive Summary
  • Introduction
    • FWA today
    • Universal broadband as a goal
    • What’s changed in recent years?
    • What’s changed because of the pandemic?
  • The FWA market and use cases
    • Niche or mainstream? National or local?
    • Targeting key applications / user groups
  • FWA technology evolution
    • A broad array of options
    • Wi-Fi, WiMAX and close relatives
    • Using a mobile-primary network for FWA
    • 4G and 5G for WISPs
    • Other FWA options
    • Customer premise equipment: indoor or outdoor?
    • Spectrum implications and options
  • The new FWA value chain
    • Can MNOs use FWA to enter the fixed broadband market?
    • Reinventing the WISPs
    • Other value chain participants
    • Is satellite a rival waiting in the wings?
  • Commercial models and packages
    • Typical pricing and packages
    • Example FWA operators and plans
  • STL’s FWA market forecasts
    • Quantitative market sizing and forecast
    • High level market forecast
  • Conclusions
    • What will 5G deliver – and when and where?
  • Index

Telco edge computing: How to partner with hyperscalers

Edge computing is getting real

Hyperscalers such as Amazon, Microsoft and Google are rapidly increasing their presence in the edge computing market by launching dedicated products, establishing partnerships with telcos on 5G edge infrastructure and embedding their platforms into operators’ infrastructure.

Many telecoms operators, who need cloud infrastructure and platform support to run their edge services, have welcomed the partnership opportunity. However, they are yet to develop clear strategies on how to use these partnerships to establish a stronger proposition in the edge market, move up the value chain and play a role beyond hosting infrastructure and delivering connectivity. Operators that miss out on the partnership opportunity or fail to fully utilise it to develop and differentiate their capabilities and resources could risk either being reduced to connectivity providers with a limited role in the edge market and/or being late to the game.

Edge computing or multi-access edge computing (MEC) enables processing data closer to the end user or device (i.e. the source of data), on physical compute infrastructure that is positioned on the spectrum between the device and the internet or hyperscale cloud.

Telco edge computing is mainly defined as a distributed compute managed by a telco operator. This includes running workloads on customer premises as well as locations within the operator network. One of the reasons for caching and processing data closer to the customer data centres is that it allows both the operators and their customers to enjoy the benefit of reduced backhaul traffic and costs. Depending on where the computing resources reside, edge computing can be broadly divided into:

  • Network edge which includes sites or points of presence (PoPs) owned by a telecoms operator such as base stations, central offices and other aggregation points on the access and/or core network.
  • On-premise edge where the computing resources reside at the customer side, e.g. in a gateway on-site, an on-premises data centre, etc. As a result, customers retain their sensitive data on-premise and enjoy other flexibility and elasticity benefits brought by edge computing.

Our overview on edge computing definitions, network structure, market opportunities and business models can be found in our previous report Telco Edge Computing: What’s the operator strategy?

The edge computing opportunity for operators and hyperscalers

Many operators are looking at edge computing as a good opportunity to leverage their existing assets and resources to innovate and move up the value chain. They aim to expand their services and revenue beyond connectivity and enter the platform and application space. By deploying computing resources at the network edge, operators can offer infrastructure-as-a-service and alternative application and solutions for enterprises. Also, edge computing as a distributed compute structure and an extension of the cloud supports the operators’ own journey into virtualising the network and running internal operations more efficiently.

Cloud hyperscalers, especially the biggest three – Amazon Web Services (AWS), Microsoft Azure and Google – are at the forefront of the edge computing market. In the recent few years, they have made efforts to spread their influence outside of their public clouds and have moved the data acquisition point closer to physical devices. These include efforts in integrating their stack into IoT devices and network gateways as well as supporting private and hybrid cloud deployments. Recently, hyperscalers took another step to get closer to customers at the edge by launching platforms dedicated to telecom networks and enabling integration with 5G networks. The latest of these products include Wavelength from AWS, Azure Edge Zones from Microsoft and Anthos for Telecom from Google Cloud. Details on these products are available in section.

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From competition to coopetition

Both hyperscalers and telcos are among the top contenders to lead the edge market. However, each stakeholder lacks a significant piece of the stack which the other has. This is the cloud platform for operators and the physical locations for hyperscalers. Initially, operators and hyperscalers were seen as competitors racing to enter the market through different approaches. This has resulted in the emergence of new types of stakeholders including independent mini data centre providers such as Vapor IO and EdgeConnex, and platform start-ups such as MobiledgeX and Ori Industries.

However, operators acknowledge that even if they do own the edge clouds, these still need to be supported by hyperscaler clouds to create a distributed cloud. To fuel the edge market and build its momentum, operators will, in the most part, work with the cloud providers. Partnerships between operators and hyperscalers are starting to take place and shape the market, impacting edge computing short- and long-term strategies for operators as well as hyperscalers and other players in the market.

Figure 1: Major telco-hyperscalers edge partnerships

Major telco-hyperscaler partnerships

Source: STL Partners analysis

What does it mean for telcos?

Going to market alone is not an attractive option for either operators or hyperscalers at the moment, given the high investment requirement without a guaranteed return. The partnerships between two of the biggest forces in the market will provide the necessary push for the use cases to be developed and enterprise adoption to be accelerated. However, as markets grow and change, so do the stakeholders’ strategies and relationships between them.

Since the emergence of cloud computing and the development of the digital technologies market, operators have been faced with tough competition from the internet players, including hyperscalers who have managed to remain agile while building a sustained appetite for innovation and market disruption. Edge computing is not an exception and they are moving rapidly to define and own the biggest share of the edge market.

Telcos that fail to develop a strategic approach to the edge could risk losing their share of the growing market as non-telco first movers continue to develop the technology and dictate the market dynamics. This report looks into what telcos should consider regarding their edge strategies and what roles they can play in the market while partnering with hyperscalers in edge computing.

Table of contents

  • Executive Summary
    • Operators’ roles along the edge computing value chain
    • Building a bigger ecosystem and pushing market adoption
    • How partnerships can shape the market
    • What next?
  • Introduction
    • The edge computing opportunity for operators and hyperscalers
    • From competition to coopetition
    • What does it mean for telcos?
  • Overview of the telco-hyperscalers partnerships
    • Explaining the major roles required to enable edge services
    • The hyperscaler-telco edge commercial model
  • Hyperscalers’ edge strategies
    • Overview of hyperscalers’ solutions and activities at the edge
    • Hyperscalers approach to edge sites and infrastructure acquisition
  • Operators’ edge strategies and their roles in the partnerships
    • Examples of operators’ edge computing activities
    • Telcos’ approach to integrating edge platforms
  • Conclusion
    • Infrastructure strategy
    • Platform strategy
    • Verticals and ecosystem building strategy

 

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Telco edge computing: What is the operator strategy?

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Edge computing can help telcos to move up the value chain

The edge computing market and the technologies enabling it are rapidly developing and attracting new players, providing new opportunities to enterprises and service providers. Telco operators are eyeing the market and looking to leverage the technology to move up the value chain and generate more revenue from their networks and services. Edge computing also represents an opportunity for telcos to extend their role beyond offering connectivity services and move into the platform and the application space.

However, operators will be faced with tough competition from other market players such as cloud providers, who are moving rapidly to define and own the biggest share of the edge market. Plus, industrial solution providers, such as Bosch and Siemens, are similarly investing in their own edge services. Telcos are also dealing with technical and business challenges as they venture into the new market and trying to position themselves and identifying their strategies accordingly.

Telcos that fail to develop a strategic approach to the edge could risk losing their share of the growing market as non-telco first movers continue to develop the technology and dictate the market dynamics. This report looks into what telcos should consider regarding their edge strategies and what roles they can play in the market.

Following this introduction, we focus on:

  1. Edge terminology and structure, explaining common terms used within the edge computing context, where the edge resides, and the role of edge computing in 5G.
  2. An overview of the edge computing market, describing different types of stakeholders, current telecoms operators’ deployments and plans, competition from hyperscale cloud providers and the current investment and consolidation trends.
  3. Telcos challenges in addressing the edge opportunity: technical, organisational and commercial challenges given the market
  4. Potential use cases and business models for operators, also exploring possible scenarios of how the market is going to develop and operators’ likely positioning.
  5. A set of recommendations for operators that are building their strategy for the edge.

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What is edge computing and where exactly is the edge?

Edge computing brings cloud services and capabilities including computing, storage and networking physically closer to the end-user by locating them on more widely distributed compute infrastructure, typically at smaller sites.

One could argue that edge computing has existed for some time – local infrastructure has been used for compute and storage, be it end-devices, gateways or on-premises data centres. However, edge computing, or edge cloud, refers to bringing the flexibility and openness of cloud-native infrastructure to that local infrastructure.

In contrast to hyperscale cloud computing where all the data is sent to central locations to be processed and stored, edge computing local processing aims to reduce time and save bandwidth needed to send and receive data between the applications and cloud, which improves the performance of the network and the applications. This does not mean that edge computing is an alternative to cloud computing. It is rather an evolutionary step that complements the current cloud computing infrastructure and offers more flexibility in executing and delivering applications.

Edge computing offers mobile operators several opportunities such as:

  • Differentiating service offerings using edge capabilities
  • Providing new applications and solutions using edge capabilities
  • Enabling customers and partners to leverage the distributed computing network in application development
  • Improving networkperformance and achieving efficiencies / cost savings

As edge computing technologies and definitions are still evolving, different terms are sometimes used interchangeably or have been associated with a certain type of stakeholder. For example, mobile edge computing is often used within the mobile network context and has evolved into multi-access edge computing (MEC) – adopted by the European Telecommunications Standards Institute (ETSI) – to include fixed and converged network edge computing scenarios. Fog computing is also often compared to edge computing; the former includes running intelligence on the end-device and is more IoT focused.

These are some of the key terms that need to be identified when discussing edge computing:

  • Network edge refers to edge compute locations that are at sites or points of presence (PoPs) owned by a telecoms operator, for example at a central office in the mobile network or at an ISP’s node.
  • Telco edge cloud is mainly defined as distributed compute managed by a telco  This includes running workloads on customer premises equipment (CPE) at customers’ sites as well as locations within the operator network such as base stations, central offices and other aggregation points on access and/or core network. One of the reasons for caching and processing data closer to the customer data centres is that it allows both the operators and their customers to enjoy the benefit of reduced backhaul traffic and costs.
  • On-premise edge computing refers to the computing resources that are residing at the customer side, e.g. in a gateway on-site, an on-premises data centre, etc. As a result, customers retain their sensitive data on-premise and enjoy other flexibility and elasticity benefits brought by edge computing.
  • Edge cloud is used to describe the virtualised infrastructure available at the edge. It creates a distributed version of the cloud with some flexibility and scalability at the edge. This flexibility allows it to have the capacity to handle sudden surges in workloads from unplanned activities, unlike static on-premise servers. Figure 1 shows the differences between these terms.

Figure 1: Edge computing types

definition of edge computing

Source: STL Partners

Network infrastructure and how the edge relates to 5G

Discussions on edge computing strategies and market are often linked to 5G. Both technologies have overlapping goals of improving performance and throughput and reducing latency for applications such as AR/VR, autonomous vehicles and IoT. 5G improves speed by increasing spectral efficacy, it offers the potential of much higher speeds than 4G. Edge computing, on the other hand, reduces latency by shortening the time required for data processing by allocating resources closer to the application. When combined, edge and 5G can help to achieve round-trip latency below 10 milliseconds.

While 5G deployment is yet to accelerate and reach ubiquitous coverage, the edge can be utilised in some places to reduce latency where needed. There are two reasons why the edge will be part of 5G:

  • First, it has been included in the 5Gstandards (3GPP Release 15) to enable ultra-low latency which will not be achieved by only improvements in the radio interface.
  • Second, operators are in general taking a slow and gradual approach to 5G deployment which means that 5G coverage alone will not provide a big incentive for developers to drive the application market. Edge can be used to fill the network gaps to stimulate the application market growth.

The network edge can be used for applications that need coverage (i.e. accessible anywhere) and can be moved across different edge locations to scale capacity up or down as required. Where an operator decides to establish an edge node depends on:

  • Application latency needs. Some applications such as streaming virtual reality or mission critical applications will require locations close enough to its users to enable sub-50 milliseconds latency.
  • Current network topology. Based on the operators’ network topology, there will be selected locations that can meet the edge latency requirements for the specific application under consideration in terms of the number of hops and the part of the network it resides in.
  • Virtualisation roadmap. The operator needs to consider virtualisation roadmap and where data centre facilities are planned to be built to support future network
  • Site and maintenance costs. The cloud computing economies of scale may diminish as the number of sites proliferate at the edge, for example there is a significant difference in maintaining 1-2 large data centres to maintaining 100s across the country
  • Site availability. Some operators’ edge compute deployment plans assume the nodes reside in the same facilities as those which host their NFV infrastructure. However, many telcos are still in the process of renovating these locations to turn them into (mini) data centres so aren’t yet ready.
  • Site ownership. Sometimes the preferred edge location is within sites that the operators have limited control over, whether that is in the customer premise or within the network. For example, in the US, the cell towers are owned by tower operators such as Crown Castle, American Tower and SBA Communications.

The potential locations for edge nodes can be mapped across the mobile network in four levels as shown in Figure 2.

Figure 2: possible locations for edge computing

edge computing locations

Source: STL Partners

Table of Contents

  • Executive Summary
    • Recommendations for telco operators at the edge
    • Four key use cases for operators
    • Edge computing players are tackling market fragmentation with strategic partnerships
    • What next?
  • Table of Figures
  • Introduction
  • Definitions of edge computing terms and key components
    • What is edge computing and where exactly is the edge?
    • Network infrastructure and how the edge relates to 5G
  • Market overview and opportunities
    • The value chain and the types of stakeholders
    • Hyperscale cloud provider activities at the edge
    • Telco initiatives, pilots and plans
    • Investment and merger and acquisition trends in edge computing
  • Use cases and business models for telcos
    • Telco edge computing use cases
    • Vertical opportunities
    • Roles and business models for telcos
  • Telcos’ challenges at the edge
  • Scenarios for network edge infrastructure development
  • Recommendation
  • Index

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Open RAN: What should telcos do?

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Related webinar: Open RAN: What should telcos do?

In this webinar STL Partners addressed the three most important sub-components of Open RAN (open-RAN, vRAN and C-RAN) and how they interact to enable a new, virtualized, less vendor-dominated RAN ecosystem. The webinar covered:

* Why Open RAN matters – and why it will be about 4G (not 5G) in the short term
* Data-led overview of existing Open RAN initiatives and challenges
* Our recommended deployment strategies for operators
* What the vendors are up to – and how we expect that to change

Date: Tuesday 4th August 2020
Time: 4pm GMT

Access the video recording and presentation slides

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What is the open RAN and why does it matter?

The open RAN’ encompasses a group of technological approaches that are designed to make the radio access network (RAN) more cost effective and flexible. It involves a shift away from traditional, proprietary radio hardware and network architectures, driven by single vendors, towards new, virtualised platforms and a more open vendor ecosystem.

Legacy RAN: single-vendor and inflexible

The traditional, legacy radio access network (RAN) uses dedicated hardware to deliver the baseband function (modulation and management of the frequency range used for cellular network transmission), along with proprietary interfaces (typically based on the Common Public Radio Interface (CPRI) standard) for the fronthaul from the baseband unit (BBU) to the remote radio unit (RRU) at the top of the transmitter mast.

Figure 1: Legacy RAN architecture

Source: STL Partners

This means that, typically, telcos have needed to buy the baseband and the radio from a single vendor, with the market presently dominated largely by the ‘big three’ (Ericsson, Huawei and Nokia), together with a smaller market share for Samsung and ZTE.

The architecture of the legacy RAN – with BBUs typically but not always at every cell site – has many limitations:

  • It is resource-intensive and energy-inefficient – employing a mass of redundant equipment operating at well below capacity most of the time, while consuming a lot of power
  • It is expensive, as telcos are obliged to purchase and operate a large inventory of physical kit from a limited number of suppliers, which keeps the prices high
  • It is inflexible, as telcos are unable to deploy to new and varied sites – e.g. macro-cells, small cells and micro-cells with different radios and frequency ranges – in an agile and cost-effective manner
  • It is more costly to manage and maintain, as there is less automation and more physical kit to support, requiring personnel to be sent out to remote sites
  • It is not very programmable to support the varied frequency, latency and bandwidth demands of different services.

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Moving to the open RAN: C-RAN, vRAN and open-RAN

There are now many distinct technologies and standards emerging in the radio access space that involve a shift away from traditional, proprietary radio hardware and network architectures, driven by single vendors, towards new, virtualised platforms and a more open vendor ecosystem.

We have adopted ‘the open RAN’ as an umbrella term which encompasses all of these technologies. Together, they are expected to make the RAN more cost effective and flexible. The three most important sub-components of the open RAN are C-RAN, vRAN and open-RAN.

Centralised RAN (C-RAN), also known as cloud RAN, involves distributing and centralising the baseband functionality across different telco edge, aggregation and core locations, and in the telco cloud, so that baseband processing for multiple sites can be carried out in different locations, nearer or further to the end user.

This enables more effective control and programming of capacity, latency, spectrum usage and service quality, including in support of 5G core-enabled technologies and services such as network slicing, URLLC, etc. In particular, baseband functionality can be split between more centralised sites (central baseband units – CU) and more distributed sites (distributed unit – DU) in much the same way, and for a similar purpose, as the split between centralised control planes and distributed user planes in the mobile core, as illustrated below:

Figure 2: Centralised RAN (C-RAN) architecture

Cloud RAN architecture

Source: STL Partners

Virtual RAN (vRAN) involves virtualising (and now also containerising) the BBU so that it is run as software on generic hardware (General Purpose Processing – GPP) platforms. This enables the baseband software and hardware, and even different components of them, to be supplied by different vendors.

Figure 3: Virtual RAN (vRAN) architecture

vRAN architecture

Source: STL Partners

Open-RANnote the hyphenation – involves replacing the vendor-proprietary interfaces between the BBU and the RRU with open standards. This enables BBUs (and parts thereof) from one or multiple vendors to interoperate with radios from other vendors, resulting in a fully disaggregated RAN:

Figure 4: Open-RAN architecture

Open-RAN architecture

Source: STL Partners

 

RAN terminology: clearing up confusion

You will have noticed that the technologies above have similar-sounding names and overlapping definitions. To add to potential confusion, they are often deployed together.

Figure 5: The open RAN Venn – How C-RAN, vRAN and open-RAN fit together

Open-RAN venn: open-RAN inside vRAN inside C-RAN

Source: STL Partners

As the above diagram illustrates, all forms of the open RAN involve C-RAN, but only a subset of C-RAN involves virtualisation of the baseband function (vRAN); and only a subset of vRAN involves disaggregation of the BBU and RRU (open-RAN).

To help eliminate ambiguity we are adopting the typographical convention ‘open-RAN’ to convey the narrower meaning: disaggregation of the BBU and RRU facilitated by open interfaces. Similarly, where we are dealing with deployments or architectures that involve vRAN and / or cloud RAN but not open-RAN in the narrower sense, we refer to those examples as ‘vRAN’ or ‘C-RAN’ as appropriate.

In the coming pages, we will investigate why open RAN matters, what telcos are doing about it – and what they should do next.

Table of contents

  • Executive summary
  • What is the open RAN and why does it matter?
    • Legacy RAN: single-vendor and inflexible
    • The open RAN: disaggregated and flexible
    • Terminology, initiatives & standards: clearing up confusion
  • What are the opportunities for open RAN?
    • Deployment in macro networks
    • Deployment in greenfield networks
    • Deployment in geographically-dispersed/under-served areas
    • Deployment to support consolidation of radio generations
    • Deployment to support capacity and coverage build-out
    • Deployment to support private and neutral host networks
  • How have operators deployed open RAN?
    • What are the operators doing?
    • How successful have deployments been?
  • How are vendors approaching open RAN?
    • Challenger RAN vendors: pushing for a revolution
    • Incumbent RAN vendors: resisting the open RAN
    • Are incumbent vendors taking the right approach?
  • How should operators do open RAN?
    • Step 1: Define the roadmap
    • Step 2: Implement
    • Step 3: Measure success
  • Conclusions
    • What next?

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Coordinating the care of the elderly

Are telcos ready to enable digital health?

The world has been talking about connected healthcare – the use of in-home and wearable systems to monitor people’s condition – for a long time. Although adoption to date has been piecemeal and limited, the rapid rise in the number of elderly people is fuelling demand for in-home and wearable monitoring systems. The rapid spread of the Covid-19 virus is putting the world’s healthcare systems under huge strain, further underlining the need to reform the way in which many medical conditions are diagnosed and treated.

This report explores whether telcos now have the appetite and the tools they need to serve this very challenging, but potentially rewarding market. With the advent of the Coordination Age (see STL Partners report: Telco 2030: New purpose, strategy and business models for the Coordination Age), telcos could play a pivotal role in enabling the world’s healthcare systems to become more sustainable and effective.

This report considers demographic trends, the forces changing healthcare and the case for greater use of digital technologies to monitor chronic conditions and elderly people. It explores various implementation options and some of the healthcare-related activities of Tele2, Vodafone, Telefónica and AT&T, before drawing conclusions and recommending some high-level actions for telcos looking to support healthcare for the elderly.

This executive briefing builds on previous STL Partners reports including:

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Why healthcare needs to change

During the twentieth century, life expectancy in most countries in the world rose dramatically.  This was down to advances in medical science and diagnostic technology, as well as rising awareness about personal and environmental hygiene, health, nutrition, and education. Average global life expectancy continues to rise, increasing from 65.3 years in 1990 to 71.5 years in 2013.  In some countries, the increase in lifespans has been dramatic. The life expectancy for a Chilean female has risen to 82 years today from 33 years in 1910, according to the World Health Organization (WHO).

Figure 1: Across the world, average life expectancy is rising towards 80

raising lift expectancy to 2050

Source: The UN

Clearly, the increase in the average lifespan is a good thing. But longer life expectancy, together with falling birth rates, means the population overall is aging rapidly, posing a major challenge for the world’s healthcare systems. According to the WHO, the proportion of the world’s population over 60 years old will double from about 11% to 22% between 2000 and 2050, equivalent to a rise in the absolute number of people over 60 from 605 million to an extraordinary two billion. Between 2012 and 2050, the number of people over 80 will almost quadruple to 395 million, according to the WHO. That represents a huge increase in the number of elderly people, many of whom will require frequent care and medical attention. For both policymakers and the healthcare industry, this demographic time bomb represents a huge challenge.

Rising demand for continuous healthcare

Of particular concern is the number of people that need continuous healthcare. About 15% of the world’s population suffers from various disabilities, with between 110 million and 190 million adults having significant functional difficulties, according to the WHO. With limited mobility and independence, it can be hard for these people to get the healthcare they need.

As the population ages, this number will rise and rise. For example, the number of Americans living with Alzheimer’s disease, which results in memory loss and other symptoms of dementia, is set to rise to 16 million by 2050 from five million today, according to the Alzheimer’s Association.

The growth in the number of older people, combined with an increase in sedentary lifestyles and diets high in sugars and fats, also means many more people are now living with heart disease, obesity, diabetes and asthma. Furthermore, poor air quality in many industrial and big cities is giving rise to cancer, cardiovascular and respiratory diseases such as asthma, and lung diseases. Around 235 million people are currently suffering from asthma and about 383,000 people died from asthma in 2015, according to the WHO.

Half of all American adults have at least one chronic condition with one in three adults suffering from multiple chronic conditions, according to the National Institutes of Health (NIH). Most other rich countries are experiencing similar trends, while middle-income countries are heading in the same direction. In cases where a patient requires medical interventions, they may have to travel to a hospital and occupy a bed, at great expense. With the growing prevalence of chronic conditions, a rising proportion of GDP is being devoted to healthcare. Only low-income countries are bucking this trend (see Figure 2).

Figure 2: Spending on healthcare is rising except in low income countries

Public health as % of government spending WHO

Public health spending as % of GDP WHO

Source: The WHO

However, there is a huge difference in absolute spending levels between high-income countries and the rest of the world (see Figure 3). High-income countries, such as the U.S., spend almost ten times as much per capita as upper middle-income countries, such as Brazil. At first glance, this suggests the potential healthcare market for telcos is going to be much bigger in Europe, North America and developed Asia, than for telcos in Latin America, developing Asia and sub-Saharan Africa. Yet these emerging economies could leapfrog their developed counterparts to adopt connected self-managed healthcare systems, as the only affordable alternative.

Figure 3: Absolute health spending in high income countries is far ahead of the rest

per capita health spending by country income levelSource: The WHO

The cost associated with healthcare services continues to rise due to the increasing prices of prescription drugs, diagnostic tools and in-clinic care. According to the U.S. Centers for Disease Control and Prevention, 90% of the nation’s US$3.3 trillion annual healthcare expenditure is spent on individuals with chronic and mental health conditions.

On top of that figure, the management of chronic conditions consumes an enormous amount of informal resources. As formal paid care services are expensive, many older people rely on the support of family, friends or volunteers calling at their homes to check on them and help them with tasks, such as laundry and shopping. In short, the societal cost of managing chronic conditions is enormous.

The particular needs of the elderly

Despite the time and money being spent on healthcare, people with chronic and age-related conditions can be vulnerable. While most elderly people want to live in their own home, there are significant risks attached to this decision, particularly if they live alone. The biggest danger is a fall, which can lead to fractures and, sometimes, lethal medical complications. In the U.S., more than one in four older people fall each year due to illness or loss of balance, according to the U.S. Centers for Disease Control and Prevention. But less than half tell their doctor. One out of five falls causes a serious injury, such as broken bones or a head injury. In 2015, the total medical costs for falls was more than US$50 billion in the U.S. Beyond falls, another key risk is that older people neglect their own health. A 2016 survey of 1,000 U.K. consumers by IT solutions company Plextek, found that 42% of 35- to 44-year-olds are concerned that their relatives aren’t telling them they feel ill.

Such concerns are driving demand for in-home and wearable systems that can monitor people in real-time and then relay real-time location and mobility information to relatives or carers. If they are perceived to be reliable and comprehensive, such systems can provide peace of mind, making home-based care a more palatable alternative for both patients and their families.

Table of contents

  • Executive Summary
    • Barriers to more in-home healthcare
  • Introduction
  • Why healthcare needs to change
    • Rising demand for continuous healthcare
    • The particular needs of the elderly
    • Shift to value-based care
    • Demands for personalised healthcare and convenience
  • How healthcare is changing
    • Barriers to more in-home healthcare
  • Implementation options
    • Working with wearables
    • Cameras and motion sensors
    • The connectivity
    • Analysing the data
  • How telcos are tackling healthcare
    • KPN: Covering most of the bases
    • Tele2 and Cuviva: Working through healthcare centres
    • Vodafone and Vision: An expensive system for Alzheimer’s
    • Telefónica’s Health Moonshot
    • AT&T: Leveraging a long-standing brand
  • Conclusions and recommendations
    • Recommendations

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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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A new role for telcos in smart cities

This report considers how telecommunications operators could play a deeper role in smart city projects, arguing that the multi-stakeholder and multidisciplinary nature of smart city strategies requires a high level of coordination. Some telecommunications operators may be able to play that role. That will bring the operator closer to the citizens, who, in turn, are also their customers. This new position could enable new business models for telecommunications operators.

With the aim of identifying how telecoms operators can evolve and deepen their reach into the smart cities vertical, this report explores the various forms of smart city governance used or that could be used in the development of smart city strategies, and the potential value for telcos in participating in each of them.

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The smart city lifecycle

The evolution of smart city strategies

The concept of smart city and smart community goes back to 1997 when the California Institute for Smart Communities developed a “Smart Communities Guidebook” in which smart community was defined as following:

“A smart community is simply that: a community in which government, business, and residents understand the potential of information technology, and make a conscious decision to use that technology to transform life and work in their region in significant and positive ways.”

Since then, the definition of smart city has evolved between an approach majorly focussed on the use of technology and another one towards a more collaborative approach among different disciplines trying to make the entire concept less technology centric. The latter has driven the attention on the concept of smart city. In fact, on the technology side, the advent of the Internet of Things (IoT) has provided the technological tools for simply implementing the definition by the California Institute for Smart Communities. On the socio-economics side, the continuous demographic pressure on cities and their increasing economic importance have pushed city administrations to re-think the purpose of the city and the services provided to citizens, businesses and other city stakeholders. The combination of the possibilities offered by technology and the increasing socio-economic importance of cities have brought the concept of the smart city to the top of the political agenda and challenged the business community to explore how to transform smart cities into a business opportunity.

Putting aside the socio-economic and political aspects of smart cities, the IoT has become an important technological framework for smart city development. The IoT transforms spaces into connected and intelligent ones. The data are gathered, exchanged, analysed and actions are taken based on that analysis. However, the data gathered within smart cities is spread across multiple different systems. The key role of IoT is therefore to provide the technological fabric for the smooth functioning of a smart city’s “system of systems” that benefits both citizens and businesses.

In practice, many smart city projects evolve organically, from the bottom up, rather than from a top-down technology driven model. Several cities have started experimenting with the application of IoT in their services, initially, focussing on a specific application. There have been then several smart parking projects, intelligent lighting projects, smart public safety solutions and so on. But that is only the first step. As per any IoT solution, the user appreciates the value of the IoT project outcome – the beauty of the data gathered and the value of its analysis – and wants then to explore more. In that way, the smart parking projects have expanded into environmental monitoring solutions and/or public safety solutions, gradually morphing into more complex projects.

Introducing the smart city strategy lifecycle

The evolution of smart city projects requires an overall smart city strategy that needs to be managed. The smart city strategy does not have a conclusion, but rather evolves continuously based on achievements, issues and new city needs. Therefore, it is important to see smart city strategies with a lifecycle approach, broken into five key phases.

Figure 1: Smart city strategy lifecycle

Smart city lifecycle: assessment > design > launch > implementation > monitoringSource: STL Partners

  • Smart city assessment: This phase looks at the needs of the city, as well as its level of digital maturity. The digital maturity can be addressed in a variety of ways through the monitoring framework (discussed in more detail later in the report). This phase needs to be very inclusive of all the city stakeholders: businesses, academia, public organisations and citizens’ groups. The output of the smart city assessment is then used in the strategy design phase.
  • Strategy design: A smart city strategy document should contain overall objectives, projects to implement, and resources to use. The strategy document should also include a monitoring framework.
  • Strategy launch: Following agreement on a smart city strategy, some cities run an external consultation with city stakeholders for a sort of wider evaluation. The launch phase’s main goal is to make the city aware of the strategy and the roadmap for implementation. The inclusiveness of the city as a whole in the process is a key factor of success.
  • Strategy implementation: The length of this phase really depends on the decisions in the roadmap. The roadmap could include both short-term and long-term projects.
  • Smart city monitoring: In this phase the monitoring framework established in the strategy design phase is put into operation. That framework should assess the evolution of the smart city strategy implementation. The output of the smart city monitoring can enable another cycle, starting with a fresh assessment. The repetition of the cycle can also be established in the smart city strategy.

Those participating in smart city monitoring, assessment and strategy design phases tend to be long-term, ongoing partners of municipalities, while the implementation phase includes many more partners on a project basis. For telcos seeking to play a broader role in smart cities, the goal is therefore to be more involved in the monitoring, assessment and strategy phases.

Table of contents

  • Executive Summary
  • Introduction
    • Research methodology
  • The smart city lifecycle
    • The evolution of smart city strategies
    • Introducing the smart city strategy lifecycle
    • Smart city monitoring framework: What smart cities are trying to achieve
  • Smart city governance models: How cities are working towards their goals
    • Defining smart city governance
    • Mapping smart city governance models
    • Smart governance case studies
  • The smart city coordination opportunity for telcos
    • Telcos’ current participation in smart city governance
    • How telcos can develop a coordination role in smart cities
  • Conclusions and recommendations

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Three new telco business models: Soft-net, Cloud-net, Compute-net

Introduction

This report outlines three new telecoms business models that builds on previous research where we have outlined our vision of an emerging third age of telecoms called the Coordination Age. This is based on a global need to improve the efficiency of resource utilisation is manifesting in industries and individuals as a desire to “make the world work better”. We discuss this concept in detail in the following reports:

We believe that three new business models for telcos are emerging as part of the Coordination Age.

  • The Soft-Net: the core business remains connectivity, but the softwarisation of the network through SDN / NFV enables the network to adapt and scale to support new, advanced connectivity services. This includes third-party digital and networked-compute services that depend on the physical network connectivity the Soft-Net provides.
  • The Cloud-Net: also connectivity-focused, but with the production, delivery and consumption of services increasingly effected via the cloud (i.e. cloud-native). SDN and virtualisation enable capacity and services to be spun up, managed and delivered on demand over any physical network and device.
  • The Compute-Net: the core business is to provide distributed, networked, compute- and software-based services, often for specific enterprise verticals. These depend on SDN and NFV to deliver the ultra-fast, low-latency compute, throughput and routing capabilities required.

The three new models represent distinct strategic options for telcos looking to either: optimise and evolve their existing connectivity business; create new value from cloud-based, ‘horizontal’ platforms; or expand into new vertical markets – or a combination of all three approaches. This is illustrated here:

Interdependence between the three future telco business models

Source: STL Partners

In other words:

  • The Soft-Net operates the physical and virtualised infrastructure that delivers flexible, advanced connectivity in support of Cloud-Net and Compute-Net services (as well as well as legacy communications and connectivity services, delivered in a more scalable and cost-effective way)
  • The Cloud-Net delivers flexible, on-demand connectivity over hybrid infrastructure (including that owned by multiple Soft-Nets) in support of the increasingly complex and variable networking requirements of globally distributed, digital enterprises
  • The Compute-Net delivers vertically focused, compute-enabled processes and outcomes across all areas of industry and society. In doing so, it relies on networking and cloud platform services supplied by the Soft-Net and Cloud-Net, which may or may not be vertically integrated as part of its own organisation.

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The three telecoms business models link to NFV / SDN strategies

One of the distinguishing features of these models is the different modes of telco engagement in NFV and SDN they are potentially driven by. In previous analyses, we have identified three pathways towards NFV and SDN deployment. This is how they link to the three business models:

Figure 1: The three future telco business models and corresponding NFV pathways

Source: STL Partners, NFV / SDN deployment pathways: Three telco futures

In the rest of this report, we define these telecoms business models in more detail and illustrate how they present a pragmatic framework for telcos to focus their technology investments and develop valuable new Coordination Age services.

Contents:

  • Executive Summary
  • Introduction
  • Three telco futures and Telco 2.0
  • Chapter 1: Three telecoms business models for the Coordination Age
  • Three new business models: but why ‘telco’?
  • Business model analysis: Telcos’ vs competitors’ strengths
  • Relationship between the Soft-Net, Cloud-Net and Compute-Net business models
  • Chapter 2: Roles of the Soft-Net, Cloud-Net and Compute-Net in a ‘driverless car-as-a-service’ ecosystem
  • A driverless car-as-a-service business involves coordination of data, processes and events across a broad supply chain
  • Soft-Nets provide the mainly wireless connectivity
  • Cloud-Nets provide the hybrid, on-demand wide-area networking
  • Compute-Nets design and coordinate the ecosystem
  • Conclusions
  • The Coordination Age: A new purpose for telecoms, and three models for realising it
  • Key takeaways for telcos

Figures:

  1. The three future telco business models and corresponding NFV pathways
  2. The Telco 2.0 infrastructure and service stack
  3. Interdependence between the three future telco business models
  4. Two examples of the three new business models
  5. The three new business models overview
  6. Telcos face some fierce competition as they move up the stack
  7. Telco expansion across the three business models
  8. Advantages and disadvantages of vertical integration
  9. Mapping the Soft-Net, Cloud-Net and Compute-Net roles in a driverless car environment
  10. Types of data and corresponding compute-based services in a driverless car-as-a-service ecosystem

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The IoT money problem: 3 options

Introduction

IoT has been a hot topic since 2010, but despite countless IoT initiatives being launched questions remain about how to monetise the opportunity.

This report presents:

  • A top-level summary of our thinking on IoT so far
  • Examples of 12 IoT verticals and over 40 use-cases
  • Case-studies of four telcos’ experimentation in IoT
  • Three potential roles that could help telcos monetise IoT

Overview

In the early days of the IoT (about five years ago) cellular connectivity was expected to play a major role – Ericsson predicted 50 billion connected devices by 2020, 20 billion of which would be cellular.

However, many IoT products have evolved without cellular connectivity, and lower cost connectivity solutions – such as SIGFOX – have had a considerable impact on the market.

Ericsson now forecasts that, although the headline number of around 50 billion connected devices by 2020 will remain the same, just over 1 billion will use cellular.

Despite these changes IoT is still a significant opportunity for telcos, but they need to change their IoT strategy to become more than connectivity providers as the value of this role in the ecosystem is likely to be modest.

Mapping the IoT ecosystem

The term IoT describes a diverse ecosystem covering a wide range of different connectivity types and use-cases. Therefore, to understand IoT better it is necessary to break it down into horizontal layers and vertical segments (see Figure 1).

Figure 1: A simplified map of the IoT ecosystem

Source: STL Partners

We are seeking input from our clients to shape our IoT research and have put together a short survey asking for your thoughts on:

  • What role telcos can play in the IoT ecosystem
  • Which verticals telcos can be successful in
  • What challenges telcos facing in IoT
  • How can STL support telcos developing their IoT strategy

To thank you for your time we will send you a summary of the survey results at the end of June 2017.

…to access the other 28 pages of this 31 page Telco 2.0 Report, including…

  • Introduction
  • Mapping the IoT ecosystem
  • Overview
  • Mapping the IoT ecosystem
  • IoT: A complicated and evolving market
  • Telcos are moving beyond connectivity
  • And use cases are increasing in complexity
  • IoT verticals – different end-customers with different needs
  • 12 examples of IoT verticals
  • What connectivity should telcos provide?
  • Four examples of IoT experimentation
  • Case study 1: AT&T: Vertically-integrated ecosystem architect
  • Case study 2: Vodafone: a ‘connectivity plus’ approach
  • Case study 3: SK Telecom: ecnouraging innovation through interoperability
  • Case study 4: Deutsche Telekom AG: the open platform integrator
  • Three potential monetisation strategies
  • Ecosystem orchestrator
  • Vertical champion
  • Trust broker
  • Conclusions

…and the following figures…   

  • Figure 1: A simplified map of the IoT ecosystem
  • Figure 2: Telcos moving beyond connectivity
  • Figure 3: IoT use cases are increasing in complexity
  • Figure 4: Use cases in manufacturing
  • Figure 5: Use cases in transportation
  • Figure 6: Use cases in utilities
  • Figure 7: Use cases in surveillance
  • Figure 8: Use cases in smart cities
  • Figure 9: Use cases in health & care
  • Figure 10: Use cases in agriculture
  • Figure 11: Use cases in extractive industries
  • Figure 12: Use cases in retail
  • Figure 13: Use cases in finance
  • Figure 14: Use cases in logistics
  • Figure 15: Use cases in smart home / building
  • Figure 16: Connectivity complexity profile for pay-as-you-drive insurance and rental services
  • Figure 17: Telco opportunity for deep learning pay-as-you-drive insurance and rental services