What will be the impact of 5G on the telecoms sector?

Transcription

1 MENA Telecoms Summit 2014 Achieving success and innovating in an age of disruption What will be the impact of 5G on the telecoms sector? 10 December 2014 Rupert Wood

2 5G promises to be nothing less than a universal access network but how far will it live up to that promise? 2 Real-time performance Virtualised infrastructure 5G Critical infrastructure IoT and M2M Massive capacity

3 3 When will we be ready for 5G? The vision for the next generation Which deployment scenarios will be the most important?

4 Number of networks What will be the impact of 5G on the telecoms sector? 4 LTE is expanding, and 3G is not going away tomorrow Network deployments by type, worldwide, 1Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q 2014 HSPA+ DC-HSPA+ LTE LTE-A See Analysys Mason s Wireless networks tracker. Available at

5 Percentage of devices Percentage of traffic What will be the impact of 5G on the telecoms sector? LTE s technology advantages are driving rapid roll-out, subscriber take-up and traffic growth, but 4G s share of devices (excluding M2M), by region, % 4G devices share of traffic, by region, % 5 80% 80% 60% 60% 40% 40% 20% 20% 0% % DVAP EMAP MENA NA SSA WE World See Analysys Mason s Wireless network traffic worldwide: forecasts and analysis Available at

6 6 ignoring Wi-Fi means ignoring most of the usage Distribution of total smartphone traffic across all panellists % % % of total smartphone traffic was carried over the cellular data network 59% of total smartphone traffic was carried over Wi-Fi of total smartphone traffic was carried over the cellular data network 81% of total smartphone traffic was carried over Wi-Fi of total smartphone traffic was carried over the cellular data network 84% of total smartphone traffic was carried over Wi-Fi Source: Analysys Mason and Nielsen. For historical data, see Consumer smartphone usage 2014: mobile data; n = 1081 for 2011 and 1596 for The 2019 figure is for 3G/4G handset traffic in Western Europe from Wireless network traffic worldwide: forecasts and analysis

7 Traffic (exabytes per year) What will be the impact of 5G on the telecoms sector? Mobile data has to be placed in the context of overall data traffic 7 Data traffic (excluding linear TV) by type, worldwide, Year-on-year growth 2013: Mobile: 78% Fixed: 47% Mobile 7% Mobile Public Wi-Fi Mobile 4% Private Wi-Fi (handsets and tablets) Rest of fixed CAGRs : Mobile: 46% Fixed: 32% Includes on-net content (non-internet).

8 Percentage of smartphone users Percentage of smartphone users What will be the impact of 5G on the telecoms sector? 4G users are reducing relative usage of public Wi-Fi, but still use private Wi-Fi heavily 8 The decline is not vastly greater in a much more mature market (USA), which indicates a potential limit to this trend. About 90% of Wi-Fi traffic is generated on a home SSID (where SSID can be identified). Is the big bundle model sustainable in the long term for a mobile-only player? High level of cross-subsidy required to sustain it if users have fixed broadband Fibre cheaper for Wi-Fi usage among 3G and 4G smartphone users 100% 80% 60% 40% 20% 0% France Germany UK USA Use Wi-Fi (3G and 4G users) Use Wi-Fi (4G users only) Use 4G Share of home SSIDs among smartphone users 100% 80% 60% 4 +2 = change in 5 8 percentage points 88% 92% 94% 92% 40% 20% 0% France Germany UK USA Source: Analysys Mason and Nielsen, data from 4Q 2013

9 Mar-12 Jul-12 Nov-12 Mar-13 Jul-13 Nov-13 Mar-14 Jul-14 Traffic (petabytes per month) Percentage of traffic What will be the impact of 5G on the telecoms sector? South Korea demonstrates the diminishing importance of carrier Wi-Fi and the effects of LTE-A South Korea s traffic growth is broadly linear not exponential. Carrier Wi-Fi in very advanced LTE-A market represents just 6% of wireless traffic. We would assume that private Wi-Fi s share is much higher, but lifestyle and workday factors indicate it is probably lower as proportion of smartphone traffic than most of the rest of the world. Wireless data traffic and carrier Wi-Fi s share of this traffic, South Korea, March 2012 September % 12% 10% 8% 6% 4% 9 LTE-A (carrier aggregation) has had an effect on 2Q/3Q 2014 traffic levels and is substituting carrier Wi-Fi % 0% Traffic Carrier Wi-Fi's share Source: Korea Communications Commission

10 10 LTE-A carrier aggregation has many years to run There is a superabundance of low-power spectrum. Integration of 5GHz unlicensed spectrum onto one network is this 4.5G or 5G? Frequency band A (for example, 800MHz FDD) Contiguous intra-band Frequency band B (for example, 2.6GHz FDD or TDD) Frequency band C (for example, 5GHz unlicensed) Spectral utilisation will improve significantly only with densification of cell sites this is the key to unit-cost reduction and data traffic growth. Non-contiguous intra-band Without densification, LTE-A carrier aggregation creates a significant marketing advantage for players that have access to the most spectrum. Inter-band LTE-U

11 The decline in unit costs is a greater driver of network usage than network speed 11 Average monthly usage of YouTube on Android devices by plan and network type, USA, 2012 Traffic growth = Willingness to pay (1 (decline in unit cost)) 4G 71MB MB 1.2 A key factor in willingness to pay is also willingness to give up fixed broadband connection and savings that could be made But substitution can work both ways. 3G 34MB MB Sub-2GB plan 2GB plus plan Source: Broadband Stakeholder Group (UK), Mobidia

12 1H H H H H H H H H 2014 Annualised growth rate What will be the impact of 5G on the telecoms sector? Mobile traffic cannot be sole justification of new RAN generation Natural limits to out-of-home mobile Internet usage: willingness to pay Annualised growth rate for mobile data traffic, selected major markets, 1H H % 12 time spent in public outdoor spaces, or at home human eye s ability to see differences in screen resolution battery life. Accelerated decline in unit costs of mobile traffic is required to make further inroads. 150% 100% 50% 0% How to increase the value of data independent of traffic levels? How to economically exploit huge private Wi-Fi usage? France Germany Hong Kong Italy Japan Nordics Poland Russia Singapore South Korea Spain Turkey UK USA

13 13 When will we be ready for 5G? The vision for the next generation Which deployment scenarios will be the most important?

14 The vendor 5G vision is for higher performance, virtualised and service-driven networks 14 The vision for 5G is revolutionary, but is also a wish list for improvements to nearly all aspects of telecoms and service delivery, including: virtualised infrastructure, cloud-oriented, SDN for lower-cost flexible and scalable networks service-driven networks, driven by user experience, offering telco-grade reliability Software-defined network Scalable, low-cost systems Virtualised infrastructure Fast response time Low jitter, latency and delay High availability Real-time performance 5G High reliability Priority access Very wide area coverage Critical infrastructure real-time performance, supporting voice and interactive video, ultra-low latency everything connected, incorporating M2M and IoT as well as smartphones and other devices. IoT and M2M Many more connected devices Deep indoor coverage Signalling efficiency Massive capacity Gigabit data rates High-quality coverage Multi-spectrum service

15 Seamless connectivity between different spectrum environments is expected 15 Band Bandwidth available Merits Spectrum potential 70 80GHz Up to 5GHz Performance similar to 15GHz Similar to 15GHz Fibre wireless Gigabit mobile 28GHz Up to 500MHz Performance similar to 15GHz Similar to 15GHz 15GHz 5GHz GHz Up to 500MHz Up to 300MHz will be considered at WRC-15 Up to 400MHz, paired or unpaired Supports high speeds (5Gbps demonstrated), and limited signal range is ideal for dense access networks Likely to be licence-exempt and could be used for various technologies (such as LTE-U and Wi-Fi) Larger channels could be used (for example, 100MHz) Using 100MHz channels, supports dense, very high-speed data services and multiple operators Almost 800MHz available by combining established and new allocations Scope to accommodate multiple operators with 100MHz channels Diverse e.g. 700MHz Varies widely by country, but generally 2 30MHz to 2 45MHz Ideal for wide area coverage as well as in-building penetration Expand wide area coverage, improved quality of coverage, better indoor coverage Dedicated (for example, 700MHz) Pooled between mobile network operators Shared (by mobile network operators, others and primary users) Unlicensed (for example, 5GHz or more)

16 5G could be the most complex standardisation challenge the telecoms industry has experienced Will 5G be a new radio interface, or an evolved 4G radio interface with new capabilities? Or both? Massive MIMO systems will require new and innovative antenna designs, and will probably attract concerns from local residents about environmental exposure to radiation. Virtualisation of the architecture presents structural, support, interworking and operations challenges. High-band spectrum requires new engineering expertise for access deployment scenarios. Many more players want to influence, direct and control 5G technology. 16 It will be expensive: ROCE on mobile is low at the moment, and 5G will have to justify itself over the next few years.

17 5G specifications are expected to start being introduced in 2015, but few commercial deployments this decade Timeline for the development of mobile technology standards, including tentative dates for 5G 17 First LTE-A standard (3GPP Release 10) 3GPP Release 12 ITU report on future technology trends ITU report on IMT vision Spectrum harmonisation WRC-18 Network implementations Beyond 2020 LTE introduction (3GPP Release 8) Global projects underway for 5G vision ITU WRC-15 Technology consensus Spectrum licensing 3GPP study for 5G (Release 14 onwards)

18 18 When will we be ready for 5G? The vision for the next generation Which deployment scenarios will be the most important?

19 The use cases for 5G will have to expand beyond ultrafast personal mobility 19 Fibrewireless FMC business case 3.5G 4G 4.5G Ultrafast and hyperdense mobile FMS business case Diverse use case New revenue business case Software-defined and data-centre-based network

20 Coverage Capacity What will be the impact of 5G on the telecoms sector? Ultrafast mobile in hyper-dense topologies: mass market densification will come at the end of the decade Evenness of mobile experience across wide areas, dynamic spectrum access from sub-1ghz to 3.5GHz bands. When will demand-side scale for a successful hyper-dense network business case? Cost and access to backhaul favours integrated operators. Infrastructure sharing will be necessary to achieve the required density of small cells envisaged in urban areas. Concession holders can create bottlenecks. 20 Now Events Enterprise Stadiums Notspots, cell edge, rural Mass-market metro densification In 3 5 years Convergence of access and backhaul is key for pure mobile plays to overcome cost issues. Aided by mesh and horizontal network structures. Role of E-band (70-80GHz) for backhaul, fronthaul and even device Device ecosystem may develop after more specialised use-cases

21 Fibre-wireless: 5G could be last 50m alternative for MDU fibre G (CA, LTE-U) and 5G could be an inexpensive alternative to fixed connections in dense deployments. Potential fibre-wireless (fibre to the radio) deployment in MDU High cost to connect, low conversion rates, for FTTH/GPON, and G.fast unproven. Pure Wi-Fi lacks any QoS. 5G mmwave with massive MIMO: 10Gbps +. Mobile customer Mobile Fi-Wi customer FTTP customer (on demand) Mobile customers 5G standardisation with NG-PON2. Picocell deployments in-building (but not in-home) more monetisable than pure fibre/wi-fi solution for FTTB. Inside-out model is difficult for pure mobile network operators to replicate. NG-PON2 Mobile customer PON splitter Fi-Wi customer

22 The diverse use-case: 5G will enable new services and devices and create new types of customer 22 Packet-switched data Mobile broadband More bandwidth and devices 2.5G GPRS/EDGE 3.5G HSPA/HSPA+ 4.5G C-A/MIMO 2G GSM 3G WCDMA 4G LTE/OFDMA 5G Digital mobile telephony for everyone (roaming) and SMS Foundations of mobile multimedia and smartphones IP-based mobile broadband Beyond smartphone, multi-user, multi-stream connections, many different device types and varying target performance levels 5G will enable mobile operators to target different industry verticals and price their services according to their needs (for example, in terms of speed, quality, availability and number of connections). From supply-push to demand-pull paradigm: demand-attentive networking (DAN).

23 Is 5G worth the trouble if use-case diversification is the main driver? The story of broadband and IP is the story of the triumph of cheap best efforts over premium-priced prioritisation: Why do we always believe that the opportunity for service/price diversification is just around the corner? 23 the failures of ATM, DiffServ, MPLS as retail services outside niche or carrierinternal markets It s a brave prediction that goes the other way now for retail services 3G was meant to have differential QoS services 4G has QoS classes, but few are ever used in practice. Ethernet CoS rarely used in consumer fixed broadband either. Could new market structures make it happen this time? Are there genuine new applications?

24 Semi-autonomous and autonomous cars could require exclusively 5G specifications for control 24 Semi-autonomous and fully autonomous cars will be entertainment hubs Control may require new very low latency performance target needs, even if the capacity required is not great. Mid-2010s Connected vehicles Mid-2020s Semiautonomous vehicles 2030 and beyond Fully autonomous vehicles 5G: 1ms = 3.33cm at 120km/h 4G: 25ms = 83.3cm 3G: 100ms = 333 cm Only 5G, with full coverage, will be flexible enough to supply both content and control.

25 A single use case may not justify the effort and expense in isolation, but together they could 25 Fibrewireless FMC business case 3.5G 4G 4.5G Ultrafast and hyperdense mobile FMS business case Diverse use case New revenue business case Software-defined and data-centre-based network

26 26 Key takeaways 1 LTE has not yet run its course and is the cornerstone technology for mobile network operators LTE is the technology for multi-spectrum and multi-technology operators looking to reduce costs and increase efficiency. Wi-Fi will remain a key connection technology, and pure mobile operators need to substitute or onload the vast amount of data that bypasses mobile networks. 2 Cellular network operators have to address use cases and business models beyond mobile capacity and traffic monetisation The mobile case will benefit from cost-saving aspects of 5G, but is unlikely to tap much new revenue. Operators should use 5G as a means of developing inside-out fixed mobile convergence approaches and B2B business models for diverse connectivity and service needs. 3 In combination, the three broad approaches may be enough to justify the investment in 5G Operators and network equipment manufacturers should explore how best to converge fixed and 5G networks. They should explore what innovative services the performance targets of 5G could offer, but not overestimate the potential for price differentiation based on QoS.

27 27 Contact details Rupert Wood Principal Analyst Boston Tel: Fax: Cambridge Tel: +44 (0) Fax: +44 (0) Madrid Tel: Fax: Manchester Tel: +44 (0) Fax: +44 (0) Dubai Tel: +971 (0) Fax: +971 (0) Dublin Tel: +353 (0) Fax: +353 (0) Milan Tel: Fax: New Delhi Tel: Johannesburg Tel: Fax: Paris Tel: +33 (0) Fax: +33 (0) London Tel: +44 (0) Fax: +44 (0) Singapore Tel: Fax: