THE NEXT GENERATION OF WIRELESS NETWORKS: 5G OPPORTUNITIES AND CHALLENGES

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1 RESEARCH STRATEGY REPORT THE NEXT GENERATION OF WIRELESS NETWORKS: 5G OPPORTUNITIES AND CHALLENGES CHRIS NICOLL analysysmason.com

2 About this report This report analyses the implications of forthcoming 5G standards for regulators, mobile network operators (MNOs) and technology companies, such as network and device manufacturers. It is based on several sources: Analysys Mason s internal research, including forecasts of fixed and wireless traffic and consumer surveys interviews with operators, equipment vendors and stakeholders in governmental policy areas governmental and standards bodies publications on 5G. VENDORS OPERATORS INDUSTRY BODIES Cisco Ericsson Huawei Technologies Nokia Networks Samsung ZTE AT&T NTT Docomo Verizon SK Telecom (SKT) Korea Telecom (KT) ITU 3GPP 5G Forum 5G PPP ARIB 2020 and Beyond AdHoc Group IMT-2020 (5G) Promotion Group NGMN 5TONIC KEY QUESTIONS ANSWERED IN THIS REPORT Which use cases will shape the development of 5G standards, and what will be required in order to address these opportunities? What is the value of the current 5G technology trials and demonstrations? Which of the many participating organisations are driving the technology development and standards work for 5G? WHO NEEDS SHOULD TO READ THIS REPORT Network vendors R&D, strategy and operator account teams supporting marketing and strategy. Mobile operators network, spectrum and technology strategy teams. Regulator work groups and policy teams responsible for licensed, lightly licensed and unlicensed spectrum policy. Industry bodies associated with assigning and managing spectrum used in fixed and mobile wireless networking. 2

3 CONTENTS EXECUTIVE SUMMARY THE 5G STANDARDS WORK HAS A NARROW FOCUS EARLY 5G IS STILL A SPEED RACE A GROUP EFFORT IS DRIVING THE DEVELOPMENT OF 5G APPENDIX: 5G VENDOR SNAPSHOTS ABOUT THE AUTHOR AND ANALYSYS MASON 3

4 Executive summary The development of 5G standards will be shaped by three main use cases during Phase 1. However, this narrow focus may pull 5G development in diverging directions, which could result in the needs of emerging markets being ignored. Figure 1: 5G Phase 1 use cases represent a narrow base of services and omit key markets Ultra-reliable networks Massive Connections The following three use cases will inform the way that 5G standards are developed during Phase 1: enhanced mobile broadband, massive connections and ultra-reliable networks. Two main applications have dominated the early development of 5G, and both have very different technology and equipment needs. In APAC, most 5G trials and demonstrations prioritise highbitrate performance, whereas European mobile network operators (MNOs) are exploring new service opportunities in areas such as transportation and the Internet of Things (IoT), which require ubiquitous coverage. MNOs in the USA are split between these two areas. However, the low-cost needs of emerging markets have taken a back seat to high-performance networking, and major spectrum issues regarding the key 15GHz and 28GHz bands remain unresolved. Vendors and operators must ensure that ongoing 5G R&D and standardisation efforts do not restrict early use cases or exclude emerging markets because this would reduce the economies of scale required to drive down 5G element and service pricing. Vendors and operators must develop a common strategy that encourages standardisation bodies to adopt a tighter focus for early 5G deployments. Enhanced mobile broadband 3G 4G 5G 384Kbps (2001) 100Mbps (2009) 10Gbps (2020) Source: Analysys Mason 4

5 The development of 5G is gaining focus, but the gap between its use in developed and emerging markets is widening 5G industry trials and standardisation efforts are currently focused on the requirements of developed markets, and emerging markets are being left behind. The three main use cases outlined on the previous slide primarily address the needs of developed markets, but overlook the requirements in emerging markets such as Africa, India and Latin America (LATAM). Vendors, regulators and communications service providers (CSPs) need to adopt globalised, rather than regionally specific, strategies for developing and deploying 5G. Countries in developed Asia Pacific (DVAP) such as Japan and South Korea are conducting 5G trials that focus primarily on highspeed mobile broadband services. In Europe, CSPs appear to be mainly interested in developing new 5G services such as transportation, which require more-ubiquitous coverage. In the USA, CSP interest in 5G is split: Verizon is advertising that its 1Gb 5G service will be available in 2016, while AT&T is taking a broader spectrum approach perhaps to support its Digital Life and Connected Car programmes. Emerging markets are being left behind because their need for 5G to be deployed at low-cost is a lower priority than the highperformance and dense coverage requirements of more-developed regions. Figure 2: Percentage of penetration for broadband and M2M for developed and emerging markets, Developed Markets Emerging Markets Key 12.8% 15.3% 3.7% 2.5% 4.1% 4.0% 4.5% 5.7% n = broadband penetration (%) n = M2M penetration (%) 13.5% 23.0% 14.0% 32.0% Source: Analysys Mason 5

6 Latency The next generation of wireless networks: 5G opportunities and challenges Vendors and operators must clarify which problems 5G solves and how the technology can generate revenue; IoT represents a strong opportunity >tens of milliseconds Early 5G technology leadership will not translate into market success unless a clear focus on monetising new opportunities is provided. IoT provides one of the main opportunities. The industry needs to be more specific about which problems 5G solves and how the technology can be monetised. Industry expectations for 5G include the delivery of a wide range of new and improved services. However, nearly all testing has focused on supporting and developing the market opportunities associated with one specific use case: high-bitrate wireless services. While early standardisation efforts have centred around three highly publicised use cases, the industry has not been quick to develop the technology s applications in the IoT space, which we expect to be a key use case driving new monetisation opportunities. A number of new technologies such as NB-IoT, LoRa, and Sigfox focused on the IoT opportunity are already being deployed to meet the requirements of market segments such as smart homes, smart grids and smart cities. 5G IoT must focus on solving the problems that today s IoT applications do not yet address. High-value IoT functions such as robotic control, virtual reality applications and remote medical procedures require very high bandwidth and/or very low latency. These solutions may be applicable to both developed and emerging markets, which further supports the need for a global approach to 5G standardisation. Figure 3: 5G IoT applications have a variety of network performance needs >1 second <1 millisecond Low latency and low throughput Basic remote control Emergency notifications High latency and low throughput Remote updates Sensor networks Low latency and high throughput 3D robotic control Virtual reality monitoring Remote medical control High latency and high throughput Digital advertising Kbps Mbps Gbps Throughput Source: Analysys Masonc 6

7 Key recommendations and implications 1 The 5G standards focus has narrowed to three use cases, but regionalised focus may pull 5G development into divergent directions, shrinking the early opportunity and leaving out emerging markets. The development of 5G standards lacks a unified approach to serve the needs of both developed and emerging markets worldwide. CSPs in APAC have conducted a number of high-bitrate 5G trials, while European CSPs are exploring new service opportunities in areas such as connected cars and other wide-area IoT-type applications including low-latency, high-performance networks. In the USA, CSPs priorities are split between these two areas. 2 Vendors and operators need to quickly expand the focus of 5G trials beyond high-bitrate services to demonstrate that there are broader monetisation opportunities for 5G. Almost all 5G trials have focused on high-spectrum, high-bitrate wireless broadband that will support download speeds from 2Gbps to over 25Gbps. Higher speeds have proven difficult to monetise with LTE. Vendors and operators must clarify how 5G will offer new or additional monetisation opportunities, compared with LTE and, in particular, high-bitrate LTE-A services. IoT may be one of the key 5G opportunities. 3 Vendors and operators need to push the WRC-19 studies to include 15GHz and 28GHz bands to avoid the spectrum fractionalisation issues that slowed LTE device development and increased costs. Regional fractionalisation is becoming apparent with spectrum. The WRC-19 agenda has omitted study of the 15GHz and 28GHz bands, which are already being used for 5G trials. 28GHz in particular is relevant to the US and APAC markets. Without a global agreement on the use of both of these bands, vendors will able to develop products for these non-standard 5G bands which may slow 5G deployments. 7

8 CONTENTS EXECUTIVE SUMMARY THE 5G STANDARDS WORK HAS A NARROW FOCUS EARLY 5G TRIALS NOT JUST A SPEED RACE DRIVING THE DEVELOPMENT OF 5G IS A GROUP EFFORT APPENDIX: 5G VENDOR SNAPSHOTS ABOUT THE AUTHOR AND ANALYSYS MASON 26

9 About the author Chris Nicoll (Principal Analyst) leads Analysys Mason s Next-Generation Wireless Networks research programme. He specialises in new and emerging wireless technologies including C-/V-RAN, edge and RAN virtualisation, small cells and HetNet, wireless fronthaul and backhaul, LTE-A Pro and the technologies being developed for 5G. Chris has more than 30 years of expertise as a leader in defining telecoms strategy. Prior to joining Analysys Mason, Chris held Principal Analyst positions at ACG Research and Nicoll Consulting, where he developed marketing strategy and positioning for leading telecoms operators. At Yankee Group, Chris was a member of the Yankee Group Research Council and provided thought leadership to the research organisation. 27

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