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The overall telecom equipment and services market is projected to grow at a 1% CAGR

We just wrapped up the July 2019 5-year Forecasts for all the Telecommunications Infrastructure and Services programs covered at the Dell’Oro Group.Dell'Oro Group Overall Telecom Networks and Service Forecast 2019-2023

In this forecast, the overall telecom equipment and services market is projected to grow at a 1% CAGR, approaching $129 B by 2023, up from $121 B in 2018. Helping to drive this growth is fairly synchronized growth projections within the application mix, with mobile and fixed revenue projected to both grow at a 1% CAGR over the forecast period.

Additional key takeaways from the reporting period include:

  • In order to cope with mobile data traffic that continues to grow at an unabated pace and flattish revenue trends, operators are balancing their investments carefully between the supply side related challenges and the opportunities from a demand perspective. The need to reduce TCO has been a catalyst for the overall 4G to 5G migration acceleration, benefitting not only RAN equipment but also the demand for core, transport, and services.
  • Total Transport Market – including Microwave and Optical – is projected to grow at a 3% CAGR.
  • The demand for Mobile Backhaul is projected to grow at a 3% CAGR while the overall RAN market is projected to grow at a 2% CAGR, over the forecast period.
  • Overall 5G infrastructure projections – including 5G RAN and 5G Core – were revised upward, reflecting a more optimistic view about the 5G Core market.
  • The adoption of 400 GE will help to advance the SP Router market and offset flat growth expectations for Broadband Access.
  • Following five years of contractions, Network Equipment Services revenue growth is expected to improve, buoyed by improving market sentiment for telecom equipment. Total Network Equipment Services revenue – including Managed Service, Network Rollout Service, and Consulting Service – is projected to grow at a low-single digit growth rate over the forecast period.

Dell’Oro Group telecommunication infrastructure research programs consist of the following: Broadband Access, Carrier IP Telephony, Microwave Transmission & Mobile Backhaul, Mobile Radio Access Network (RAN), Optical Transport, Service Provider (SP) Router & Carrier Ethernet Switch, Telecom Capex, Wide Area IoT, and Wireless Packet Core.

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The latest Dell’Oro Group CBRS RAN 5-year forecast suggest short term delays and renewed concerns about the network economics for outdoor deployment will not Dell'Oro Group CBRS 5-yr forecastimpact the long-term demand for LTE and 5G NR CBRS solutions – the overall CBRS RAN market outlook is relatively unchanged since the January 2019 update. The overall CBRS market is expected to grow at a rapid pace between 2019 and 2023 with cumulative RAN investments projected to comprise a tangible share of the overall North America RAN market (Figure 1).

“There is a fine line between pleasing everyone and no one. And even with more questions raised about the outdoor CBRS TCO, our underlying position has not changed–we remain excited about the CBRS opportunity and continue to believe that the majority will benefit resulting in material CBRS investments over the next five years”, said Stefan Pongratz, Senior Research Director for RAN and Telecom Capex with the Dell’Oro Group.

Other highlights from the CBRS 5-Year Forecast Report:

  • CBRS capex is not projected to have a significant impact on the WLAN capex.
  • CBRS investments are projected to account for a mid-single-digit share of the overall North America RAN market.
  • FWA is projected to drive the lion share of the CBRS capex over the near-term.

  About the Report

Dell’Oro Group’s Advanced Research: Citizen Broadband Radio Service (CBRS) Report offers an overview of the CBRS RAN potential with a 5-year forecast for indoor and outdoor LTE and 5G NR CBRS deployments along with a discussion on the participating suppliers. To purchase these reports, please contact us by email at dgsales@delloro.com.

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China’s 5G RAN Market to Advance Fivefold

The latest Dell’Oro Group Mobile RAN 5-Year July Forecast Report indicates that the investment recovery in China that Mobile RAN 5-Year Forecast July 2019began in the second half of 2018 is expected to extend over the forecast period, propelling China’s 5G RAN market to advance nearly fivefold relative to an already-aggressive 2019 baseline.

“While there is still some uncertainty about the 5G NR business case driven by new revenue opportunities, the momentum for 5G NR eMBB is developing at a broader and faster pace than originally anticipated,” said Stefan Pongratz, Senior Director with the Dell’Oro Group. “With data traffic projected to grow 3 to 4 times over the forecast period, no one is asking any more whether there is a business case for using more spectrum and utilizing it more efficiently,” continued Pongratz.

Other highlights from the Mobile RAN 5-Year July Forecast Report:

  • China is expected to dominate the 5G capex envelope – cumulative investments projected to be more than twice the size of North America’s 5G RAN investments over the forecast period.
  • The shift from conventional antenna systems towards Massive MIMO is accelerating – operators are on track to deploy nearly 400 M transceivers over the forecast period.
  • The small cell outlook has been adjusted upward to reflect stronger than expected demand for indoor Sub 6 GHz small cells – total small cell RAN market forecasted to nearly double over the forecast period.

 About the Report

Dell’Oro Group’s Mobile RAN 5-Year Forecast Report offers a complete overview of the RAN industry, with tables covering manufacturers’ revenue, transceivers or RF carrier shipments, and base transceiver stations for 5G NR, 5G NR Sub 6 GHz, 5G NR mmW, LTE, LTE FDD, LTE TDD, WCDMA, GSM, CDMA, and WiMAX. The report also includes regional analysis and splits for macro cells, small cells, and Massive MIMO. For more information about the report, please click here.

 

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An increasing amount of publicity is shifting to user applications, and away from the network. Enabling the user to extract more value out of the network is the topic of acquisitions and new product launches. For example, Arista recently acquired Mojo Networks not for its wireless LAN technology, but for its ability to deploy network intelligence; Cisco launched greater levels of security and troubleshooting enabled by its new DNA licenses; Juniper acquired Mist Systems which boasts its cutting-edge location Wi-Fi services. Yet, a closer look at companies such as Alcatel-Lucent Enterprise (ALE) and Extreme Networks, we observe these folks have been laser-focused on user applications all along. Let’s first discuss ALE.

ALE recently celebrated its centennial with a conference including some 1,000 partners, as well as 100 industry members of the press and analysts. Enthusiasm and energy levels were high.

Here’s what I think is important:

ALE has a long-running subscription-based business. As the networking industry incorporates applications and network intelligence via subscription-based services, this experience on ALE’s part will be a definite asset. In 1919, ALE founder Aaron Weil launched a subscription-based private telephone business, “Téléphone Privé,” as a productivity enhancement tool targeting enterprises.

ALE’s near-term strategy will be to target select vertical industries focusing on applications specific to customer operations.  ALE’s focus on customer applications is the likely explanation as to why its customers place a high value on ALE’s products. For example, in Campus Ethernet Switching, we observed that ALE’s average prices for the past few years have been the third highest, well above many other larger vendors.  Figure 1 shows how ALE’s average sales price per port compares with that of the largest vendors in the most popular segment of the Campus Ethernet Switch market (Fixed Managed 1 Gbps switches). ALE senior management explained that the customer interaction process has included building custom applications by vertical industry. Whenever ALE could not on its own deliver the application, it brought in a partner that specialized in the operations of businesses in that particular vertical industry. This high-touch approach to service helps explain ALE’s ability to maintain high perceived value as reflected in its average prices.

1 Gbps Campus Ethernet Switch Fixed Managed

ALE’s networking business (Campus Ethernet LAN in particular) was challenged in 2017 and 2018, which we attribute largely to Huawei’s expansion in Europe, the Middle East and Africa (EMEA), the region representing ALE’s stronghold. During the past two years, Huawei has run aggressive promotions with new channel partners it added in 2016.  As the honeymoon period for these engagements comes to a close, we suspect the longer-term relationships with its new partners will change. Looking at the Campus Ethernet market on worldwide units (port shipments) basis, the performance was flat during the past two years, with the exception of China-based vendors, as well as vendors such as Ubiquiti that are targeting the low end of the market. The challenges ALE experienced on a unit basis was similar to the experience of other Western vendors focusing on the high-end and midrange segments of the market.

Dell’Oro Group believes that enterprise campus networks are entering a refresh cycle that will enable users to run new applications (click here to learn more about Dell’Oro Group Ethernet Switch Campus Network market report). This refresh of the installed networks, which will unfold over the next several years, will be the most significant upgrade during the past two decades—and many will be seeking high value from their networks, not the cheapest price.