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Power generation is perhaps not the shiny object that comes to mind when suppliers and operators think about potential 5G game-changers. After all, Nokia estimates power generation accounts for approximately 0.4 percent of the global industrial site opportunity. At the same time, LTE/5G NR activity for power utility applications using both public and local spectrum are on the rise, reflecting a confluence of factors including the benefits and flexibility with cellular technology, the improved availability of local spectrum, and the renewed sense of urgency to modernize the grid to address more extreme weather variations. In this blog, we will review the cellular power utility opportunity, the benefits of using LTE/5G, typical performance requirements for the electric power industry, and review progress with some of the early cellular electric utility adopters.

The power generation market is small relative to the manufacturing opportunity, however it still sizeable. According to the EIA, there are around 60 K to 65 K power plants globally. China is home to four of the world’s ten largest power plants. In the US, the electric systems consist of around 7 K power plants and 360 K miles of transmission lines (US Department of Energy).

Perhaps more importantly, the push to manage capacity growth while embracing energy efficiency is spurring countries to modernize their power grids with various smart grid capabilities, including improved connectivity solutions.

How can cellular technologies help electric utilities? The electricity supply chain can be conceptualized into three high-level functions: generation, transmission, and distribution. One of the more compelling aspects of the power industry is that secure, reliable, flexible high-performance connectivity can make a significant difference in various parts of the electricity supply chain and deliver material savings, both in terms of revenue and lives – there is typically not much effort required to inform this sector about the benefits with LTE and 5G vs. WiFi or other proprietary protocols.

Also, the cost, security, and roadmap benefits with the 3GPP standards are well understood. While the macro mobile network will continue to play an important role with 4G/5G power utility networks, the availability of a new local spectrum will also enable the utilities to improve the coverage in areas with limited macro coverage.

From a service perspective, early 5G adopters are looking into four types of applications including:

  • Production control area
  • Production non-control area
  • Information management
  • Local campus coverage

According to the 5G Deterministic Networking Alliance (5GDNA) and China Southern Power Grid (CSPG), 5G slices can help with the production control area to monitor power systems in real-time and address differential protection on power distribution networks, intelligent distributed FA, precise load control, and distributed energy control.

The current use of optical transport for the centralized connection is not always ideal from a capex perspective. Wireless connectivity technologies should be able to deliver an improved cost structure. And according to 5G DNA, 5G is preferred over LTE as the required network latency should be 15 ms or better to provide enough margin to ensure the phase delta does not result in asynchronous monitoring. Also, this type of latency requires the UPFs to be deployed at the edge sites.

5G is also expected to play an increasingly important role in information management. Utilities still rely heavily on manual inspections, which tend to be inefficient, time-consuming, and in some cases dangerous. LTE and 5G can help to transform these services and provide the right foundation to digitize much of the inspection process including the inspection of substations and transmission lines. Using videos, AR, robots, site cameras – thousands of devices can be checked in real-time.

Historically information management has typically been addressed using 3G/4G, WiFi, and fixed technologies such as optical fiber. But this combination is not always perfect. In addition to the UL limitations, there are also security risks that are better managed with 5G and Multi-Access Edge Computing.

Initial findings with some of the early adopters support the premise that 5G can improve efficiency. CSPG, which covers roughly a quarter billion people in China, has started to incorporate 5G into its connectivity roadmap. Working with China Mobile and Huawei, CSPG is using two separate 5G slices for production control and information management.

Preliminary findings suggest precise fault locating and fast fault isolation for power distribution network differential protections reduces the fault location time from a few second to a few milliseconds.

According to CSPG, 5G enabled them to install new monitoring systems and ultimately reduce the inspection duration for 1330 items from 3 days to 1 hour.

Similarly, the inspection duration for 500 kV power transmission lines has been reduced from 10 days to 2 hours.

In the US, power utilities are exploring how they can leverage the capacity upside with CBRS and the coverage benefits with a low-band spectrum to focus on grid modernization and wildfire prevention. New York Power Authority (NYPA), the largest state public power organization in the US, is exploring how LTE can provide drones with the connectivity needed to manage critical field operations and ultimately reduce the reliance on manual inspections.

In other words, the LTE/5G NR power utility market is nascent. However, the benefits of cellular technologies are clear and the business case is straightforward. And more importantly, we don’t have to wait to verify this narrative – utilities across the world are already exploring and utilizing LTE and 5G NR to modernize various parts of the electricity supply chain. So even if the TAM is somewhat limited relative to other industrial opportunities, the time is right to start getting excited about the incremental value LTE and 5G can deliver to the power utility vertical.

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The global demand for broadband service has resulted in an acceleration of interest among fixed and mobile operators alike to either expand their existing LTE or point-to-multipoint fixed wireless offerings or roll out early 5G services to a growing base of current and potential subscribers. In both mature and emerging markets, there has been a tremendous increase in the number of RFPs for equipment and software to support large-scale 5G fixed wireless service deployments. Clearly, service providers are looking to strike while the iron is hot, securing subscribers who need broadband now, while also taking advantage of growing government subsidization of broadband service rollouts.

The vendor ecosystem supporting 5G fixed wireless has naturally increased, particularly in the area of dedicated CPE. According to the GSA (Global mobile Suppliers Association), there are currently over 130 FWA CPE devices (both indoor and outdoor) that have been announced by a growing list of vendors, which now numbers above 50. Over 50 of these dedicated CPE are now commercially available, which is up from 15 commercially-available units just one year ago. By the end of 2021, we expect that the number of commercially-available devices will exceed 100 and will double in 2022. The number of vendors producing or planning to produce 5G FWA CPE already exceeds the number of suppliers of 4G FWA CPE.

 

Dell'Oro: 5G FWA Vendors and CPE Units

 

The increase in available units, which corresponds with the perceived addressable market of 5G network deployments and subscriber uptake, combined with the rapid uptake of 5G-capable smartphones will help to push the cost of both indoor and outdoor 5G FWA units down to levels that satisfy the business case requirements of operators globally. In particular, operators in emerging markets where ARPU levels are typically low, cost-reduced CPE are an absolutely critical requirement to ensuring a faster ROI.

The larger the addressable market, the more willing component suppliers will be to forward-price to capture a larger share of that growing market. The resulting price reductions in components begets wider availability of finished CPE. It becomes an iterative cycle that benefits the entire supply chain and the network operators as end purchasers.

 

Quick Ramp of 5G FWA Devices Expected

At the end of 2020, we estimate that there are nearly 60M fixed wireless subscribers globally. A large percentage of these subscribers use 4G LTE networks, though there are also subscribers using 3G networks, proprietary point-to-multipoint services, as well as some using early 5G technologies, including sub-6Ghz and millimeter wave. We estimate that the 5G subscribers are around 1 million currently. However, we expect that those subscriber numbers are set to double in 2021, as operators such as T-Mobile (USA), AT&T, Verizon, Bell Canada, Saudi Telecom, Rain (South Africa), Swisscom, Deutsche Telekom, Optus, and others introduce or expand 5G FWA services this year.

With those operator commitments already in place, we estimate that the total number of 5G FWA devices shipping to operators this year will easily exceed 3 million units and could push 4 million units. The vast majority of these units will be to support sub-6Ghz service offerings, though we also expect to see millimeter wave units, as some operators use a combination of those technologies to provide both extensive coverage and fiber-like speeds in areas where the competition from fixed broadband providers is more intense. Overall, however, we expect volumes first from sub-6GHz units this year and into next year, followed by increasing volumes of millimeter wave units beginning in the latter part of 2022 and into 2023.

We also anticipate that the vast majority of 5G FWA deployments will rely on indoor gateways that combine a 5G modem with a WiFi 6 access point for signal distribution within the home. Many of these gateways will also be mesh-capable and will be paired with satellite units to blanket homes with WiFi coverage and to eliminate dead spots within the home.

There will be situations where outdoor units will be required, particularly in the case of millimeter wave deployments which require line of sight because of the high-frequency ranges being used. But even in the case of sub-6Ghz 5G FWA deployments, outdoor units will be required when homes or apartments have very thick-paned windows or are located in LEED (Leadership in Energy and Environmental Design) buildings.

With this growing clarity around deployment models and device types, we expect that the costs of 5G FWA CPE will decline throughout this year and next, providing a catalyst for much larger, global deployments of the service through 2022 and beyond. We believe that the average cost for an indoor 5G FWA CPE supporting sub-6GHz frequency bands will decline from around $350 in 2020 to around $100 by the end of 2023 (Figure 2).

 

 

5G chipsets will see the biggest price declines, helped in large part by increasing volumes of 5G smartphones, but also by a growing ecosystem of 5G modems, gateways, tablets, cars, and other products reliant on 5G networks for WAN connectivity. Currently, 5G SoCs are roughly 4x the cost of 4G SoCs. But we have seen this played out before in the early stages of 4G network and device rollouts when the cost of chips dropped quickly as device volumes increased.

Similarly, the cost of WiFi 6 chips remains about 15-20% higher than WiFi 5 units. While WiFi 6 will be the primary technology for mature, highly competitive markets, WiFi 5 will remain an important option for very price-sensitive markets, particularly those in developing countries and in rural markets where competition comes from lower-cost services. But as enterprise and higher-end residential gateways are built with WiFi 6 technology, the cost of those chips will decline significantly over the next couple of years.

 

 

Beyond these two major components, manufacturing costs will also decline as equipment and contract manufacturers increase volumes based on initial board and hardware designs. FWA gateway designs, like higher-end residential WiFi access point designs, are well-understood at this point. However, with any new product spin, there is a learning curve for the manufacturers. Though the cost of producing the first few thousand units is high, the costs quickly decrease as the manufacturing process becomes clearly defined and as new iterations of the devices incorporate lower-cost components.

There are two critical components for the steady reduction in cost for 5G FWA CPE: Increased orders and volumes from service providers, along with the cooperation among providers of 4G CPE devices and 5G units to understand how to bring down the costs as quickly as possible. This cooperation will be necessary to stimulate interest among service providers, who can then drive the volumes necessary to improve the overall economics of delivering 5G fixed wireless services.

 

5G FWA Will Build on 4G Deployments

Though the deployment of FWA services using 4G LTE networks has been moderately successful around the world, 5G will dramatically boost the addressable market of subscribers, as well as the service’s ability to reasonably compete with most fixed broadband technologies. 5G can comfortably deliver downstream speeds that compare favorably with VDSL and DOCSIS 3.0 services while easily beating previous generations of both fixed technologies. More importantly, C-band and millimeter wave technologies promise to be comparable with DOCSIS 3.1 and fiber services, thereby expanding the addressable market of subscribers even further.

Mobile operators around the world who have previously been unable to compete with fixed broadband providers, as well as fixed broadband providers looking to expand the reach of their services more quickly, are all enthusiastic about the opportunity in front of them with FWA. Their growing commitment to the service, as well as a rapidly expanding vendor ecosystem for customer devices, will help to quickly reduce the cost of those devices, thereby ensuring a faster ROI for service providers and a willingness to expand their reach even further.

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Tsunami of Spending Floods Education and Government Verticals

Dell’Oro Group published an update to the Wireless LAN market 5-Year Forecast report in July 2021. We lifted our forecast and resumed our pre-pandemic outlook that spending on Enterprise-class WLAN equipment over the next five years will approximate $40 B worldwide, resulting in a CAGR of high single digits.

Governments around the world are injecting enormous amounts of cash into advancing network technology in their education systems and improving Internet access to their citizens. Enterprise WLAN equipment just happens to be in the sweet spot. Manufacturers are in the right place, at the right time, particularly those with established relationships in the education and government vertical industries.

Enterprise-class WLAN equipment has been flying off the shelf for the past three quarters. All industry participants from systems manufacturers, to component manufacturers to network integrators that we have interviewed indicated bookings are stronger than supply. Demand is being fueled by an influx of fiscal stimulus from governments of many countries, which we have estimated to approximate $1 B. We reckon there has been some spending from a few large enterprises, but we have yet to see a recovery in spending from broad-based private enterprises of all sizes, and all vertical industries.

We are modeling this phenomenon of extraordinary levels of government spending to abate over the next year, however, we question whether we are entering an Eisenhower-like era of technology infrastructure buildout which could span a decade. Additional initiatives could surface particularly if existing projects are successful, and more countries may also launch initiatives, not wanting to be left behind. We are watching for announcements of government technology or digitization initiatives.

We previously predicted a surge in sales in 2022 with the arrival of Wi-Fi 6E products, but users are not waiting, they are spending now. We learned that many government-funded projects have deadlines, and therefore users are deploying products available now. Ergo, the surge appears to be happening in 2021 rather than 2022.

 

Wi-Fi 6E and Wi-Fi 7 Low-End Access Points Accelerate Adoption

We model a more rapid penetration rate of both Wi-Fi 6E and Wi-Fi 7 because we expect lower-end products to come to market sooner than higher-end. This is a change, as previous technology transitions were led with high-end products, not low-end. Lower-end products dominate market volume and that may translate into a faster return on investment for both semiconductor and system manufacturers. Additionally, the performance advances with 6 GHz spectrum even with a lower-end access point, could delight most users.

 

Cloud-managed and Premises-managed Network Applications to Lift Sales

Sales of WLAN network management equipment (named controllers), and specialty applications such as troubleshooting, and location finding/tracing have been approximately the same level for the past 10 years, while overall WLAN market sales have about doubled, and access point unit volumes have quadrupled. Manufacturers have been developing new features and selling them separately from the management hardware, as subscription licenses. This has been intensely competitive, providing a way for manufacturers to differentiate and rapidly bring new capabilities to market. As in many intensely competitive markets, we’ve recently seen declines in license prices, resulting in a flurry of activity which portends 2021 to be a year of change. We are optimistic that manufacturers will be rewarded with higher revenues as they develop applications reducing customer pain points.

To learn more about the Wireless LAN market, or if you need to access the full report, please contact us at dgsales@delloro.com.

About the Report

The Dell’Oro Group Wireless LAN 5-Year Forecast Report offers a complete overview of the industry, covering Enterprise Outdoor and Indoor markets, with tables containing manufacturers’ revenue, average selling prices, and unit shipments by the following wireless standards: 802.be (Wi-Fi 7), 802.11ax (Wi-Fi 6 and 6E separately reported), 802.11ac (Wi-Fi 5) Wave 1 vs. Wave 2, 802.11n, and historic IEEE 802.11 standards. It includes forecasts for regions of the world and for Cloud-managed vs. Premises-managed. To purchase these reports, please contact us by email at dgsales@delloro.com.

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“We are building a truly mobile 5G so everyone can benefit from the 5G revolution”. That is what T-Mobile said when it first launched 5G in the 600 MHz spectrum, preparing to become the first operator to advertise and offer 5G nationwide. With 5G now proliferating rapidly across the globe and more operators adopt a multi-band based spectrum strategy including not just mid-band but also high-band and low-band spectrum, the timing is right to review the various 5G options, discuss the benefits with low-band spectrum, and assess the status with sub-1 GHz 5G NR deployments.

5G is not all the same. One of the more compelling aspects of 5G is that there are so many different 5G technologies and flavors to support a confluence of use cases with different performance requirements. And the spectrum will play an important role. At a highly simplified level, there are three broad 5G categories from a spectrum perspective, including low-band – ideal for coverage, high-band – ideal for capacity, and the mid-band – ideal for coverage and capacity.

5G NR Spectrum Bands - Chart

And from spectrum and transceiver perspective, there are at a high level five different 5G NR networks including  (1) sub-1 GHz NR, (2) upper mid-band Massive MIMO, (3) 2 GHz 8T8R and FDD Massive MIMO, (4) 6 GHz NR, and (5) Millimeter Wave (mmWave).

 

 

Not surprisingly, mid-band 5G NR has dominated the capex mix in this initial 5G wave, propelling cumulative 2018-2020 Massive MIMO NR investments to approach $10 B to $20 B. At the same time, low-band NR activity is firming up, validating the message that operators and suppliers have communicated for some time, namely that all spectrum will eventually become 5G spectrum.

While the spectral efficiency uplift between low-band LTE and NR is rather small (10% to 20%), assuming all else equal, both greenfield and brownfield operators are starting to realize that the low-band will play an important role in the broader 5G strategy to expand coverage, minimize the digital divide, and improve indoor performance.

The inherent propagation characteristics with sub -1 GHz spectrum and the resulting coverage benefits will enable operators to build a base layer that will serve as the foundation to expand the geographic and population coverage nationwide.

Also helping to explain the renewed interest in the sub-1 GHz NR is the role the spectrum can play to minimize the digital divide. COVID- 19 is a call for governments across the world to reexamine their broadband capabilities and increase their respective subsidization efforts to minimize the digital divide with comprehensive broadband solutions designed to handle the peak requirements of today and tomorrow. Although broadband inequities remain significant, a string of indicators suggest governments are working to improve connectivity access – the number of countries with a national broadband plan approached 174 in 2020, up from 102 in 2010 (The State of Broadband 2020).

 

 

Indoor remains a challenge. Preliminary feedback from some of the early mid-band adopters also suggests that the gap between macro and small cells will be much narrower with upper mid-band deployments relative to sub 2 GHz systems, reflecting the propagation characteristic with the higher operating frequencies and technology limitations to address outdoor to indoor losses. Given the incremental volumes required to improve the performance indoors, the low-band spectrum can help to reduce the indoor capex.

China Mobile’s recently announced 700 MHz tender, involving around 480 K 5G NR base stations, will provide a significant boost to the low-band ecosystem. This combined with the benefits discussed above and the fact that there are around 400 operators globally operating LTE or 5G NR networks in the low-band (GSA), forms the basis for the improved low-band market sentiment.

In short, the initial 5G ascent was driven by the upper mid-band and massive MIMO. The time is right to start getting excited about the low-band – sub 1 GHz deployments are expected to comprise a greater share of the 5G capex going forward.

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Dell’Oro published an update to the Ethernet Controller & Adapter 5-Year Forecast report, July 2021. Revenue for the worldwide Ethernet controller and adapter market is projected to increase at a 4% compound annual growth rate (CAGR) from 2020 to 2025, reaching nearly $3.2 billion. The increase is partly driven by the migration to server access speed of 100 Gbps and higher.

The ramp of 25 Gbps port shipments has been strong since the availability of 28 Gbps SerDes in 2016. 25 Gbps has already displaced 10 Gbps to become the dominant speed in revenue, as 25 Gbps gains broad adoption across Cloud service providers (SPs) and high-end enterprises. However, we project that 100 and 200 Gbps speed ports to overtake that of 25 Gbps in revenue as early as 2023.

We identify the market and technology drivers below that are likely to drive the adoption of next-generation server connectivity based on 100 Gbps and beyond:

  • 50 Gbps ports, based on two 28 Gbps SerDes lanes, have been deployed in mainstream among some of the major Cloud SPs. However, with the exponential growth of network traffic and proliferation of cloud computing, the Top 4 US Cloud SPs are demanding even higher server access speeds than the rest of the market. The availability of 56 Gbps SerDes since late 2018 has prompted some of the Top 4 US Cloud SPs to upgrade their networks to 400 Gbps, with upgrades in server network connectivity to 100 Gbps for general-purpose computing in progress.
  • Higher server access speeds of up to 200 Gbps, based on two lanes of 112 Gbps SerDes, could begin to ramp for general-purpose computing for the Top 4 US Cloud SPs following network upgrades 800 Gbps as early as 2022.
  • The increase in demand for bandwidth-hungry AI applications will continue to push the boundaries of server connectivity. Today, 100 Gbps is commonly used to interconnect accelerated servers, while general-purpose servers are connected at 25 or 50 Gbps. As 100 Gbps become the standard connection for general-purpose in several years for the major Cloud SPs, accelerated servers may be connected at twice the data rate at 200 Gbps.

To learn more about the Ethernet Controller and Adapter market, or if you need to access the full report, please contact us at dgsales@delloro.com.

About the Report

The Dell’Oro Group Ethernet Controller and Adapter 5-Year Forecast Report provides a complete, in-depth analysis of the market with tables covering manufacturers’ revenue; average selling prices; and unit and port shipments by speed (1 Gbps, 10 Gbps, 25 Gbps, 40 Gbps, 50 Gbps, and 100 Gbps) for Ethernet and Fibre Channel Over Ethernet (FCoE) controllers and adapters. The report also covers Smart NIC and InfiniBand controllers and adapters. To purchase this report, please contact us at dgsales@delloro.com.