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We just returned from MWC after a couple of intense days of meetings. RAN might not be the fastest growing market but from a technology perspective, the pace of change simply remains impressive and the MWC is a great event to witness the progress. Although we are not the right source to capture all of the PR activity involving incremental product announcements, we want to point out a few RAN-related observations that could potentially impact the RAN forecast or vendor dynamics.

 

Virtualized RAN is gaining momentum

As we now know, vRAN started out slow but picked up some speed in 2022 in conjunction with the progress in the US. The challenge from a forecasting perspective is that the visibility beyond the greenfields and the early brownfield adopters is limited, primarily because purpose-built RAN still delivers the best performance and TCO. As a result, there is some skepticism across the industry about the broader vRAN growth prospects.

During MWC, we learned four things: 1) Near-term vRAN visibility is improving – operators in South Korea, Japan, US, and Europe are planning to deploy vRAN in the next year or two. 2) vRAN performance is firming up. According to Qualcomm, Vodafone (and Qualcomm) believes the energy efficiency and performance gap between the traditional and new Open vRAN players is shrinking (Vodafone publicly also praised Mavenir’s OpenBeam Massive MIMO AAU). Samsung also confirmed (again) that Verizon is not giving up any performance with Samsung’s vRAN relative to its purpose-built RAN. 3) vRAN ecosystem is expanding. In addition to existing vRAN suppliers such as Samsung, Ericsson, Mavenir, Rakuten Symphony, and Nokia announcing improvements to their existing vRAN/Cloud RAN portfolios, more RAN players are jumping on the vRAN train (both NEC and Fujitsu are expecting vRAN revs to ramp in 2023). And perhaps more interestingly, a large non-RAN telecom vendor informed us they plan to enter the vRAN market over the next year. 4) The RAN players are also moving beyond their home turf. During the show, Nokia announced it is entering the RAN accelerator card segment with its Nokia Cloud RAN SmartNIC (this is part of Nokia’s broader anyRAN strategy).

 

256T256R Massive MIMO

For a technology that was initially viewed as being mostly fit for high-traffic locations, Massive MIMO has come a long way in just a few years, ramping at a much faster pace than initially expected. As we recently outlined in the Massive MIMO 2022 blog, the days of exponential growth are in the past but there is still Massive MIMO upside ahead to support TDD MBB expansions in the less advanced markets, FDD hotspot deployments, FWA, and TDD product refresh to take advantage of continuous product improvements such as wider IBW, lower power consumption, smaller form factors, and more transceivers/antenna elements.

With limited new sub-7 GHz spectrum on the horizon, improving the spectral efficiency using more didoes and transceivers will continue to play a fundamental role with 5G, 5G-Advanced, and 6G. This is not a surprise. However, since we previously assumed the 128T128R would be the de-facto configuration for the 6 to 7 GHz band, it was somewhat surprising to see Huawei’s 256TRx prototype in the booth (ZTE had a 128T128R AAU in its booth).

 

Private 5G ecosystem is evolving

Private 5G is running behind schedule. We recently adjusted the private wireless forecast downward to reflect the current state of the market. Still, the slow uptake is not dampening the enthusiasm for private wireless. If anything, the interest is growing and the ecosystem is evolving as suppliers with different backgrounds (RAN, core, Wi-Fi, hyperscaler, in-building, SI) are trying to solve the enterprise puzzle. Below is a summary of the private RAN, core, and SI/services providers that we are currently monitoring.

 

More suppliers want a piece of Europe

Per our 4Q22 RAN report, Ericsson, Nokia, and Huawei collectively accounted for around 95% of the European RAN market in 2022. Other RAN suppliers have tried to expand their respective footprints over the past couple of years without much success. One of the takeaways from the MWC discussions is that activity with the smaller suppliers is on the rise:

  • Samsung highlighted its vRAN/Open RAN progress with Vodafone in the UK, Germany, and Spain and remains optimistic its European RAN revenues will soon become more material.
  • NEC started recognizing European RAN revenues in 2022 (primarily driven by 1&1 in Germany).
  • Fujitsu believes its European RAN growth prospects will improve in 2024.
  • Mavenir has 10 K brownfield Open RAN sites in the pipeline for 2023/2024 – Deutsche Telekom is part of the mix, however, the exact upside in Europe remains unclear.
  • Rakuten Symphony recently estimated its Open RAN pipeline is worth around $2B (half of the total pipeline). We don’t know the size of the European component. However, the company recently reported that nearly half of the # (not value) of prospecting clients (for RAN and non-RAN) are located in Europe per the chart below.

While it is unlikely that management over at Ericsson, Nokia, and Huawei are losing a ton of sleep at this juncture from these announcements, it might be worthwhile to check back in a year if the collective share of the top 3 is still around 95%.

 

Skepticism is on the rise

Not surprisingly, disconnects between vision and reality are common when new technologies are introduced. Even if this is expected, we are sensing more frustration across the board this time around, in part because RAN growth is slowing and 5G still has mostly only delivered on one out of the three usage scenarios outlined in the original 5G use case triangle. With 5G-Advanced/5.5G and 6G starting to absorb more oxygen, people are asking if mMTC+/mMTC++ and URLLC+/URLLC++ are really needed given the status of basic mMTC and URLLC. Taking into consideration the vastly different technology life cycles for humans and machines, there are more questions now about this logic of assuming they are the same and will move in tandem. If it is indeed preferred to under-promise and over-deliver, there might be some room to calibrate the expectations with 5G-Advanced/5.5G and 6G.

And most importantly, this was our first live MWC event since 2019. It was great to be back and meet people in person without any Covid restrictions. The energy level at the show was amazing – now if this energy could somehow start showing in the RAN numbers, that would be even more exciting.

 

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Preliminary findings suggest Massive MIMO RAN revenues reached new record levels in 2022. At the same time, year-over-year comparisons are becoming more challenging and the implications are that growth is slowing. With Massive MIMO revenues expanding at a low-single-digit rate in 2022, the timing is right to review market status and near-term expectations.

Market Status

For a technology that was initially viewed as being mostly fit for high-traffic locations, Massive MIMO has come a long way in just a few years, ramping at a much faster pace than initially expected. Our most recent analysis suggests global Massive MIMO RAN revenues, which includes baseband and radio revenues for large-scale antenna systems featuring > 8T8R sub-6 GHz LTE and NR radio configurations, increased more than 20-fold between 2018 and 2022, propelling total Massive MIMO revenues to reach new record levels.

Helping to drive this output acceleration is the fact that Sub-6 GHz Massive MIMO combined with larger swaths of upper mid-band spectrum delivers superior coverage, capacity, performance, energy per bit consumption, and TCO tradeoffs relative to both the low-band and mmWave spectrum. Consequently, the Massive MIMO vs. Non-Massive MIMO ratio is typically high in the upper mid-band.

Regional adoption has been fairly broad based, driven by synchronized upper mid-band rollouts in especially the Asia Pacific region. Wide-band 5G deployments are now ramping up in Europe and North America. But as Ericsson recently pointed out, upper mid-band coverage in Europe is still just around 15% to 20%, significantly lagging the global average.

Most initial modeling was focused on the incremental capacity upside with Massive MIMO. But as we now understand, it is actually the coverage benefits with Massive MIMO and the ability for operators to leverage their existing site assets and realize nearly equivalent 5G coverage with the upper mid-band as with 4G that has been the most important attribute of Massive MIMO in this initial deployment phase.

In addition to the economic benefits, the ability to leverage the existing macro grid is also reducing the time required for network construction, which generally follows a similar pattern with operators addressing high-traffic areas first before transitioning towards less dense populations. Larger countries can realize nationwide coverage in around ~3 years while smaller countries are able to upgrade the first base layer in 1 to 2 years.

Although Massive MIMO requirements and performance will vary depending on a confluence of factors including the inter-site distance (ISD), traffic characteristics, and vertical user spread, operators in China have so far been favoring the capacity, coverage, and performance benefits with the 64T64R configuration while the 32T32R configurations have been favored outside of China, though continued innovation will likely change how operators think about this mix. One of the Korean operators is reporting performance and capacity gains in the order of 30% after upgrading the radios from 32T32R to 64T64R. And with RAN still accounting for around 15% of the overall site opex and wireless capex, the price premium with the 64T64R is justified in most scenarios with ISDs of 500m or less.

 

Source: Huawei

 

As the ISDs are increased, the relative gains slow – Per Ericsson’s Massive MIMO handbook, the relative cell-edge throughput gains with 64T64R vs. 32T32R are in the single digits as the ISD approaches 750m, boosting the business case for the 32T32R configuration.

Source: Ericsson

 

At the same time, the 64T64R business case for greater ISDs is expected to evolve over time as technology advances and prices improve. And in some cases, vendors believe this reality is already here. Huawei recently released data suggesting the coverage and capacity gains between the 64T64R and 32T32R can already be justified in some 700m ISD scenarios.

Source: Huawei

 

Forecast

Following the surge in global Massive MIMO investments between 2018 and 2021, preliminary findings suggest growth slowed in 2022, in part because of the state of upper mid-band 5G and more challenging comparisons in the more advanced markets such as China, South Korea, and the US. As we look forward, Massive MIMO investments are expected to remain elevated, however, global growth is projected to soften as output acceleration in Europe, North America, and parts of APAC will be offset by slower growth in the advanced markets. Taken together, we are forecasting Massive MIMO revenues to increase by nearly 20% by 2024, relative to 2021 levels.

In addition to MBB, FWA will also play an important role in the broader broadband toolkit as operators figure out the right balance between the capacity requirements and the overall profitability for the various FWA segments. Huawei estimates that the improved coverage with its latest MetaAAU product can have a material impact on the FWA business case.

Next, Massive MIMO will also play a role in supporting 2 GHz FDD. This spectrum is more challenging, however, the vendors are doing everything they can to improve the form factor. And while the 2 GHz FDD Massive MIMO market will not be as large as the upper mid-band TDD market and likely be confined to hotspot scenarios, it is worth pointing out that Huawei has already deployed 20 K+ FDD-based Massive MIMO AAUs.

Finally, continuous product improvements are expected to shorten the lifespan relative to the standard RRU products – some operators are already swapping out Massive MIMO radios deployed just two years ago for newer more efficient, and higher-performing radios.

Preliminary MWC announcements suggest Massive MIMO remains a priority from an R&D perspective as the products are evolving rapidly with incremental advances improving the form factor, weight, power output, performance, bandwidth, cost, and price.

Not surprisingly, the form factor has improved rather significantly with leading vendors now offering 64T64R radios weighing just 17 kg to 20 kg, down from the 40 kg+ range just a few years ago.  And both Ericsson and Huawei are now offering 32T32R AAUs weighing 12 kg and 10 kg, respectively, ideal for footprint-optimized capacity. Nokia is offering a 400 MHz BW 32T32R AAU weighing 17 kg.

Even though the Massive MIMO concept is relatively new, some vendors are already releasing 3rd generation products – Huawei’s latest MetaAAU utilizes 6 dipoles per radio chain. So compared with the traditional 192 array AAU, the extremely large antenna array (ELAA) uses 384 dipoles.

 

Source: Huawei

 

Also, Ericsson recently also announced a new range of ultra-wideband Massive MIMO radios with IBW spanning 600 MHz in a 30 kg form factor. Similarly, Nokia also announced its next generation Massive MIMO Habrok powered by ReefShark radios.

 

Source: Ericsson

 

In short, Massive MIMO will continue to play a pivotal role with both 5G and 5G-Advanced, and the competitive landscape will remain fierce. The days of exponential growth are in the past but there is still more upside ahead to support TDD MBB expansions in the less advanced markets, FDD hotspot deployments, FWA, and TDD product refresh.

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With 2022 now almost in the rear-view mirror, the timing is right to review how the RAN market is unfolding, and more importantly, what is on the horizon for 2023. In this blog, we will review three projections regarding the overall RAN market, 5G, and Open RAN.

1) Total RAN to decline in 2023

In retrospect, the market has evolved over the past year. Going into 2022, we projected that the RAN market would advance at a mid-single digit rate in 2022 in nominal USD terms, supported by strong growth in North America and modest growth in China, Europe, and other parts of the Asia Pacific.

While we don’t have the complete picture yet as we only have data for the 1Q22-3Q22 period, it is safe to assume that the high-level projections for both China and North America were reasonable, barring any major 4Q22 surprises. Still, we also need to recognize that RAN investments in Europe and Asia Pacific excluding China are tracking below our projections for the 1Q22-3Q22 period.

This gap in the output acceleration is primarily driven by forex fluctuations and prices – base station volumes and overall 5G activity are mostly in line with expectations, but the revenue per base station was impacted as the USD gained against most major currencies throughout 2022.

As we look into 2023, the regional mix will evolve. India, which is a smaller part of the RAN market in 2022, will be one of the bright spots going forward. Per our recently published 5-year RAN forecast, we are modeling an intense 5G deployment phase over the next 3 years, and this will already show up in the numbers this year and almost be enough to offset more challenging comparisons in North America and China.

2) 5G RAN will grow at a double-digit rate in 2023

As we now know, 5G investments have increased at a remarkable pace since the first NR networks were launched back in 2018, resulting in a 5G ascent that has been much steeper and broader relative to what we experienced with previous technology shifts. The challenge now is that the 5G comparisons are becoming more challenging in the advanced markets. And the implications are that 5G RAN growth rates will subside somewhat going forward.

At the same time, our long-term thesis still holds. We are still in the early days of the broader 4G-to-5G transition and incremental capex will be required beyond the initial coverage layer to support all the frequency flavors and use cases. In other words, the days of exponential 5G RAN growth are clearly in the past, however, 5G RAN revenues are still expected to advance at a double-digit rate in 2023.

 

3) Open RAN to account for 6% to 10% of RAN Market in 2023

The Open RAN movement has come a long way in just a few years, propelling Open RAN revenues to accelerate at a faster pace than initially expected. Going into 2022, we projected Open RAN would comprise around 3% of the full-year 2022 market. Per our 3Q22 RAN report, our analysis indicates Open RAN revenues surged at a much steeper pace than expected spurring Open RAN to comprise a mid-single digit share of the full-year capex.

Meanwhile, the underlying message that we have communicated now for some time has not changed. The early adopters are embracing the movement, however, there is more uncertainty when it comes to the early majority operator and the impact on the supplier dynamics. Per the 3Q22 RAN report, the rise of Open RAN has so far had limited impact on the broader RAN market concentration—we estimate that the collective RAN share of the top 5 RAN suppliers declined by less than one percentage point between 2021 and 1Q22–3Q22.

Still, our position remains unchanged. Even with the underwhelming progress by the smaller Open RAN focused suppliers and the challenges ahead to cross the chasm, we believe this will not be enough to derail the movement toward openness. Following the surge in 2022, Open RAN radio revenue growth will slow in 2023, reflecting a more challenging comparison with the early adopters.

In short, it will be an interesting year. As with any forecast, there are risks. Please come back as we update the RAN analysis to reflect all the latest developments.

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What’s next for RAN market in 2023?

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Broadband Market will Remain Resilient in 2023

Over the last two years, you’d be hard-pressed to find an area of service provider networks that has received more investment and attention than broadband access networks. For mature markets, is rare to see consecutive years of double-digit revenue growth. But that is indeed what has occurred, as 2021 revenue growth was 16% and 2022 growth over 2021 is currently expected to be around 12%, reaching just over $18 B worldwide.

Historically, after similar periods of strong growth, there is generally a marked slowdown as service providers focus on lighting up all that new equipment and generating recurring revenue in the form of new and upgraded broadband subscriptions. And the likelihood of a slowdown in 2023 would seem even higher, given higher interest rates and the increased cost of going into debt to finance large-scale infrastructure projects, including fiber buildouts.

But even without the benefit of having finalized fourth quarter numbers, all signs—both quantitative and qualitative—point to another year of spending increases on broadband equipment in 2023, albeit nowhere near the double-digit percentage growth we have seen over the last two years. At this point, it is safe to say that 5-7% revenue growth this year is the more likely scenario. Though slower, the revenue growth this year shows the continued emphasis on expanding and improving broadband network capacity by operators as well as state and national governments.

Here is what we are expecting in this coming year:

1) The Great DSL Displacement Will Accelerate

Amidst all the hype around fiber network buildouts, one of the biggest drivers for these investments has gone unspoken, perhaps because it is just assumed—and that is that a large percentage of the revenue growth for PON equipment has come directly at the expense of spending on DSLAM ports and corresponding CPE. While this substitution is obvious, the amount of revenue shifted from DSL to PON equipment over the last two years is informative in helping to understand just how much PON equipment revenue growth is due to Greenfield buildouts and how much is due to overbuilding and the literal retirement of copper and DSL assets.

For reference, DSL equipment revenue from 2019 to 2022 dropped by nearly $1.8 B worldwide. Over that same time frame, PON equipment revenue increased by a whopping $4 B worldwide. Although the correlation isn’t exact, it isn’t spurious to assume that some of that 45% of shifted revenue is due to fiber overbuilds and DSL replacement.

And that trend is only going to accelerate this year, as both BT Openreach and Deutsche Telekom increase their fiber expansion and overbuild projects this year. In the second half of 2022, both operators combined to fuel record quarterly shipments of both 2.5 Gbps and XGS-PON OLT port shipments. These deployments will come in addition to the projects already underway at AT&T, Frontier, Lumen, Bell Canada, Telus, Orange, Telefonica, Saudi Telecom, Turk Telekom, and Maroc Telecom, among others.

2) Subsidies Offset the Increasing Cost of Infrastructure Builds—but Subscriber Growth Will Slow

There are now signs that the Interest rate increases by the world’s largest economies are having their intended effect of lowering red-hot inflation. The flip side, of course, is that economists expect overall growth to slow this year—and a growing number of companies that expanded significantly during the pandemic are responding by laying off employees.

It would be foolish to think that these actions won’t have an impact on service providers and subscribers. Indeed, we do expect new subscriber growth to slow, resulting in flat to perhaps low single-digit ONT unit growth this year. Slowdowns in new housing starts and the purchase of existing homes will also be a drag on overall subscriber growth this year.

At the same time, we do not expect to see any slowdown in the purchase of new PON infrastructure, as state and federal subsidization efforts in the US, several EU countries, Thailand, the Philippines, China, and elsewhere will reduce the effective cost of fiber buildouts and, more importantly, offset the additional cost of any assumed debt due to interest rate increases. Service providers have already gone through a period of investing at historic levels in their broadband networks. Although the macroeconomic environment has dampened their appetites a little, the committed funds available will help keep their investment levels high, as they look to the second half of the year and 2024 for a resumption in subscriber growth.

3) Consensus in Cable Architectures; But Obstacles Remain

With Charter and Comcast now both firmly committed to DAA architectures based on Virtual CMTS and Remote PHY platforms, the supplier industry can breathe a sigh of relief. Now, the focus can shift to supplying the short-term projects of doing mid- and high-split band plan upgrades to increase upstream bandwidth using existing DOCSIS 3.1 technologies, while also preparing the outside plant for forthcoming upgrades to either 1.2 GHz or 1.8 GHz spectrum plans for either full duplex or extended spectrum DOCSIS 4.0 deployments later this year.

In addition, cable’s adoption and deployment of remote OLTs will accelerate, as well, as operators use these modules to expand their own FTTH services to select service groups and business customers. The consensus around Remote PHY for DOCSIS also opens the door for R-OLT modules to be deployed alongside RPDs in select node housings—something that wasn’t possible with R-MACPHY due to power limitations.

But cable’s biggest challenge this year and beyond is one of managing consumer perception. Consumers clearly equate “Fiber” with the future. Therefore, if service prices are roughly equal, consumers are likely to select fiber broadband over cable if the latest technology is what they value. On the other end, if the value is what they are looking for, then providers like T-Mobile have done a phenomenal job of positioning themselves as the alternative who is looking out for your budget while still providing you access to a novel technology—fixed wireless.

So, cable operators find themselves battling against the perception that they are providers with inferior technology that isn’t flexible when it comes to offering plans to meet a consumer’s budget. In this situation, the choice of DAA technology and whether they deploy full duplex or extended spectrum DOCSIS 4.0 is beside the point. From a technology perspective, the focus for cable operators has to be on how they are leading the way in delivering a secure and customizable in-home experience. The conversation has to shift from speeds to what value consumers get along with those speeds.

We are seeing cable operators already make efforts in this direction in the type of gateways they are providing subscribers. They are pushing the envelope with Wi-Fi 6E units, mesh networking, parental controls, as well as the integration of Thread and other evolving IoT technologies to allow subscribers to add sensors and other IoT devices without worrying that their integration will be difficult.

Cable operators will continue to fend off new fiber and FWA competitors with a combination of highlighting speeds that are equal to fiber (at least on the downstream side) but subscriber support that exceeds what the upstarts provide because of their years of experience. Only time will tell whether this message resonates with consumers.

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What’s next for Broadband Access & Home Networking market in 2023?

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As we enter the New Year, we pause to reflect on 2022 and look to 2023. In the last year, for the Mobile Core Network (MCN) and Multi-access Edge Computing (MEC) market, we focused on the momentum for 5G Standalone network deployments by MNOs, 5G Mobile Private Networks, and 5G Workloads moving to the Public Cloud. As we started the year, the hopes were high for all three of these segments, with much press coverage at the Mobile World Congress (MWC) in Barcelona. As the year unfolded, all three disappointed, not living up to the expectations.

5G Standalone (5G SA) Deployments

By the end of 2022, we had identified 39 MNOs that had deployed 5G SA eMMB networks. The list below does not cover MNOs that may be offering 5G SA private networks or 5G FWA networks only, which there are some. Unexpectedly, only 16 MNOs were added to the list in 2022, compared to 15 in 2021. There were hopes early in the year that many more would be launched in 2022, but the hopes were lowered as the year progressed. We even wondered if 2022 would equal 2021 as the year drew to a close.

Commercially Deployed 5G SA eMMB Networks by MNO

 

Reliance Jio, China Telecom-Macau, and Globe Telecom came to the rescue in the fourth quarter to push 2022 over 2021 for the number of 5G SA eMMB networks launched. This was a disappointment in contrast with over 200 5G Non-standalone (5G NSA) networks and over 700 LTE networks that could be implementing 5G SA networks.

 

5G Mobile Private Networks (MPN)

At the beginning of the year, it wasn’t easy to keep up with the plethora of press releases of vendors entering the private network space. We focused on Shared and Dedicated MPNs by MNOs in 2022.

Mobile Private Network (MPN) Deployment Options

The surprise for the year was China’s success with MPNs, compared to the worldwide market, excluding China. Chinese MNOs had deployed over 5,000 MPNs—employing Private and Public MEC and Network Slicing—as of June 2022, since beginning in June 2020. The Chinese MNOs reported they have over 20,000 MPNs in their respective pipelines to implement. We identified two “killer applications” in the Chinese market. Cloud gaming for Shared MPNs and Computer Vision for Public, Dedicated, and Standalone MPNs. We estimate that the Chinese MNOs account for over 90% of the MPNs in the world. So the other surprise is that the worldwide market, excluding China, is far behind in MPNs. We believe MPNs are a vital opportunity for MNOs to monetize their 5G SA investments and increase their ongoing revenues.

 

5G Workloads Moving to the Public Cloud

DISH Wireless made a big splash in 2022, building its 5G SA network with its 5G Workloads integrated into the Public Cloud of a Hyperscale Cloud Provider (HCP) as promised. A lot of press had been given to this concept at MWC – Barcelona, but interest has since waned.

HCPs Integrating 5G Workloads into the Public Cloud

HCPs are now focused on attracting their Information Technology (IT) customers to use HCPs’ services and applications for their 5G Operational Technology (OT) services and applications. A better solution might be for MNOs to integrate HCPs services and applications into the MNOs. Many MNOs have implemented this strategy, gaining more traction in the marketplace.

MNOs integrating HCPs and other 3rd Party Services and Applications Into the 5G Telco Cloud

As 2022 numbers close, it looks like 2022 will be marginally better than 2021 concerning manufacturers’ revenues for 4G Core, 5G Core, and IMS Core. We expect higher revenues in 2023 over 2022 as we anticipate more growth in 5G Core revenues as more coverage is added to existing 5G SA networks by MNOs and as new MNOs launch their 5G SA networks.