We just finished our Mobile Core Network (MCN) five-year forecast (2019 to 2024). The MCN forecast includes 4G and 5G packet core, policy, and subscriber data management network functions, as well as the IMS Core. Here are some of the highlights from the forecast:

• 5G SA networks with 5G Cores are expected to launch during the second half of 2020. Regionally, China and South Korea will lead the way, followed by the US, Western Europe, and the Middle East.
• MCN revenues are projected to grow 8% per year over the next five years with the move to 5G Standalone (5G SA).
• The cumulative revenue investments from 2020 to 2024 in 5G MCN functions are expected to be 20% of the combined investments in 4G and 5G MCN functions.
• 4G MCN revenues are estimated to peak in 2022 and decline thereafter as the move to 5G SA accelerates.
• MCN revenues Y/Y growth rates will fluctuate as different parts of the world deploy 5G SA at various times.
• Technology is beginning to transition from virtual machine servers with virtual network functions, to bare-metal servers with container-based cloud-native network functions. The total cost of ownership savings is expected to be 30% over time, with the added benefit of reduced complexity.
• As expected, the cumulative revenues for 5G MCN in the Asia Pacific will represent the largest regional share, led by service providers in China.

Over 70 SPs are now providing 5G coverage with the 5G NSA architecture. The size of 5G SA deployments in 2020 is uncertain at this time and could impact the forecast. Also, the transition from 5G NSA to 5G SA could affect the product mix between 4G and 5G network functions, though the overall size of the market would be the same.

Other factors that could impact the forecast include further price erosion than assumed, brought on by competition, not only by the incumbents, but by startups trying to break into the market, or by Cloud SPs vying for SPs to host their MCN network functions on their servers; the aggressiveness of MEC (Multi-Access Edge Computing) and FWA (Fixed Wireless Access) deployments; and the number of 5G Cores built per SP, such as dedicated 5G Cores for the consumer market, the enterprise market, and the mission-critical markets, such as public safety. Examples already exist in the LTE world, with numerous private LTE networks for enterprises, dedicated EPCs for public safety by AT&T and Verizon in the US, and separate cores for MVNOs. China Mobile and China Unicom have already awarded vendor contracts to build separate 5G Cores to serve both consumers and enterprises.

To learn more about the options service provider have to transition to the 5G Core, please see my previous blog, 5G Core – Are We Ready?

Dell’Oro Group’s Mobile Core Network 5-Year Forecast Report offers a complete overview of the market for Wireless Packet Core, IMS Core, policy, and subscriber management with historical data, where applicable, to the present. The report provides a comprehensive overview of market trends by network function implementation (Non-NFV and NFV), covering revenue, licenses, average selling price, and regional forecasts for various network functions. Click here to learn more about the report or contact us (dgsales@delloro.com) for the full report.

With 5G deployments now accelerating at a torrid pace and 5G NR investments projected to comprise 30% to 50% of global RAN investments in 2020 (Dell’Oro Group), operators are reassessing how to optimize their spectrum resources to capitalize on the potential business and technology benefits with 5G NR. Many countries are realizing the strategic importance of timely 5G deployments spurring governments and regulators to actively release/award 5G spectrum. Even with some minor spectrum auction delays as a result of Covid-19, countries that have auctioned or plans to award sub 6 GHz spectrum by year-end 2020 together comprise nearly 90% of worldwide GDP. At the same time, the amount of spectrum and the type of spectrum that is available varies widely across the globe, prompting operators to effectively capitalize on their respective spectrum assets to build 5G networks with optimal experience.

One of the more compelling features with 5G in addition to the increased spectrum bandwidth that comes with the upper mid-band and the mmW spectrum is the fact that 5G NR offers spectral efficiency improvements on a like for like basis relative to LTE, implying that operators and eventually enterprises can take advantage of these efficiency benefits regardless of their current spectrum portfolio. And in contrast to previous mobile technology transitions, new technologies such as dynamic spectrum sharing, dual connectivity and carrier aggregation across multiple technologies will provide the necessary tools to simplify and accelerate the migration from LTE to 5G NR. This improved flexibility taken together with the efficiency and performance upside with 5G NR plays an important role in the improved market sentiment that has characterized the RAN market in this initial 5G mobile broadband (MBB) deployment phase. While having the right mix of spectrum remains extremely important, the relatively seamless transition enables operators to put parts of the spectrum to use today. It does not matter if the spectrum is optimized for coverage or better suited for capacity or if an operator has a non-ideal portfolio mix of low-band, mid-band, or high-band spectrum. With 5G, operators now have the tools to capitalize on the benefits with the respective bands and put together a roadmap that migrates the portfolio in various phases from legacy 2G-4G to 5G NR.

Massive MIMO configured TDD based systems accounted for the lion share of the 2019 5G NR market (Dell’Oro Group), underpinning projections that the current outdoor macro grid in combination with Massive MIMO delivers favorable RAN economics for operators with the appropriate spectrum.

Meanwhile, multiple indicators suggest that that the interest for FDD based 5G NR deployments are on the rise, reflecting not only surging demand from operators with insufficient upper mid-band spectrum but also a shift in the overall attitude towards FDD based 5G NR deployments. Operators are starting to realize that the FDD spectrum will play an increasingly important role to help the operators achieve nationwide footprints rapidly and benefit not only from the marketing upside inherent with nationwide 5G but also the spectral efficiency and overall performance gains in both the UL and DL. During Huawei’s virtual 2020 HAS event, Huawei share data suggesting FDD based UL signal to spectrum in combination with C-band TDD spectrum for the DL would result in a 7 to 8 dB UL coverage extension and improve the overall UL user experience three-fold to four-fold, addressing shortcoming with relying completely on TDD. And more importantly, for operators that are seeking to use 5G to propel the use cases beyond MBB, this FDD coverage layer will play an important role simplifying and accelerating the transition toward 5G SA and potentially open up a wide range of new opportunities with non-traditional use cases. Per Dell’Oro Groups 5-Year RAN Forecast, FDD based 5G NR investments are projected to advance 5x to 10x over the next five years.

One of the reasons this shift from 4G to 5G has accelerated at a much faster pace than initially expected is the fact that operators can for the most part leverage their existing macro grid, which has been a major benefit both from a time-to-market and TCO perspective as it reduces the need to add more outdoor sites to realize 5G NR coverage that is equivalent to the outdoor sub 3 GHz LTE coverage. This model of adding new technologies to the existing sites at a faster pace than legacy technologies are sunset will naturally complicate the situation as the sites are becoming increasingly crowded. Although suppliers have invested heavily to address some of the short comings at the site with more power efficient systems and smaller form factors to manage the challenges with adding both Massive MIMO and non-Massive MIMO configured systems, there is more work to be done.  For this approach to succeed at scale, the suppliers need to continue innovating and focus on the underlying site challenges with simplified site solutions that reduces and consolidates the amount of equipment at the cell site, reduces the size and weight of the equipment where possible, and minimizes the overall power consumption.

Given that there is a strong correlation between network services requirements and mobile broadband investments for the more simplified site deployments, this on-going shift towards multi technology sites including both legacy technologies and more complicated 5G solutions that could involve dynamic spectrum sharing and beamforming addressing a wider scope of use cases spanning across potentially multiple industries in combination with the increased site complexity and the need to focus on energy optimization will accelerate the shift towards more intelligent planning/design, operations and predictive analysis.

In other words, everyone wants more spectrum. But until then, efficient spectrum management, simplified site solutions, and more intelligence to navigate the increased site complexity will go a long way for operators seeking to maximize the efficiency of current spectrum assets while at the same time laying the basic foundation for taking 5G to the next level.

Have you ever seen a caterpillar transform into a butterfly? Within weeks, the entire organism changes to prepare itself for its new mode of existence. This process is called metamorphosis, and it is the best way to describe the change in microwave transmission equipment over time.

For every new generation of communication technology, from long-distance fixed line to mobile, from 3G to 4G, microwave transmission equipment has transformed, filling a need, fulfilling a requirement, changing itself to fit a new mode of existence. This metamorphosis has continued with the emergence of 5G, changing microwave transmission equipment and wireless backhaul for the better.

But why does microwave equipment need to evolve to support 5G backhaul when fiber optics is the future? The answer is easy—operators need the right tool for the job.

Right Tool at the Right Time

Operators, like any other company in a competitive market, will increase its market share and revenue while enjoying higher profits if it is first to market and offers a superior product experience. This drove the rapid deployment of 4G and will drive the rapid deployment of 5G. Therefore, when operators begin to roll out 5G networks, each one will face the same challenge—obtaining full population coverage in the shortest time period to ensure a great customer experience—because, anything less would tarnish the operator’s brand.

To obtain the population and geographic coverage, operators need to deploy 5G in urban areas where people work, suburban areas where they live, and rural areas where customers depend on 5G for connectivity. In all of these areas, the biggest concern will be backhaul. Simply put, without good mobile backhaul, the mobile service will suffer. Luckily, for many operators, they can leverage the existing 4G networks they have built, and in many cases a fiber connection will have been installed over the past few years. Unfortunately, however, in many locations throughout the world, new sites will be needed where operators have yet to install fiber. So, operators need to choose whether to wait one to two years to build a fiber network at costs that can exceed hundreds of thousands of dollars, possibly millions, per site or install a microwave link in under a month at a fraction of the cost. Which is the right tool under this circumstance?

Time and again, microwave systems have proven to be the right tool at the right time. It is one of the many reasons that Microwave Transmission equipment was used in nearly half of all new mobile backhaul deployments for macro cells, globally, in 2019.

Metamorphosis of Microwave

Microwave transmission was used in communication networks as early as 1930 with an experimental connection across the English Channel. During this early stage the application for microwave was for the transport of voice across long distance, across difficult terrains. In time, operators installed microwave systems across continents to deliver tens of thousands of voice circuits to connect cities along one coast to those on the other.

Since those early days, microwave transmission technology evolved, changing to meet the needs of every new generation. When cellular technology emerged, microwave transmission was used to transport hundreds of voice circuits; when 2G arrived, it was used to transmit kilobits of voice traffic; and with 4G, 100s of megabits of data. Over this period, networks shifted away from carrying lots of voice traffic towards transmitting an ever-increasing amount of data, requiring microwave equipment to grow from carrying only analog voice into carrying packets filled with a mixture of high definition voice and massive amounts of data.

When you look at a modern microwave transmission system, it no longer looks like the first system developed to carry a voice call across the English Channel. It has grown and evolved to meet the latest needs of operators, and it has continued to do so for 5G.

The latest Microwave Transmission equipment is more than able to meet the requirements of 5G backhaul with the newest features that include packet switching and up to 20 Gbps of throughput using spectrum in E-band. Other advancements that acclimate microwave to 5G backhaul include carrier aggregation and multi-band links over a single antenna—solutions that both increase the link capacity, improve the performance, and reduce the cost to operate.

And, the story of microwave will not stop here. Leading manufacturers continue to invest in this technology, developing new solutions and features that make microwave transmission more cost effective, simpler to use, and more reliable. Some of these new technologies include developing systems that operate in the D-band to deliver 100 Gbps throughput in a couple years, and others to reduce operational costs by improving the use of leased spectrum. Huawei presented two of these concepts during their 2020 global analyst conference. The first was 4×4 MIMO to quadruple the capacity without adding additional spectrum (deployment at a customer delivered 1 Gbps in 28 MHz), and the other solution that the company called SuperHUB was a novel concept that allows more microwave links at an aggregation site to use the same spectrum.

For the Better?

The answer is “yes.”

✔  Yes, microwave transmission equipment can be used to support 5G backhaul.

✔  Yes, microwave will be used in 5G networks around the world.

✔  Yes, it will save operators valuable time to market.

✔  Yes, it has already been used for 5G backhaul.

In Dell’Oro Group’s recent Microwave Transmission & Mobile Backhaul 5-year forecast, we studied the demand for 5G and its impact on the microwave transmission market. We concluded that microwave systems will be a significant part of 5G backhaul for many of the reasons mentioned above. As a result, we forecast 5G to drive about $3.5 billion of microwave transmission equipment over the next five years.

Also… Yes, 5G has changed wireless backhaul for the better.

Cisco, Huawei, and Nokia’s revenue shares for the overall telecom equipment market declined in 1Q20 relative to full-year 2019 revenue shares

We just wrapped up the 1Q20 reporting period for all the Telecommunications Infrastructure programs covered at Dell’Oro Group. Preliminary estimates suggest the overall telecom equipment market – Broadband Access, Microwave & Optical Transport, Mobile Core & Radio Access Network, SP Router & CE Switch – declined 4% year-over-year (Y/Y), tracking slightly below the full-year 2020 growth projections of 1%.

Preliminary estimates suggest 1Q20 revenue shares relative to 2019 revenue shares for the top five suppliers – the latter indicated herein parenthesis – show that Huawei, Nokia, Ericsson, ZTE, and Cisco comprised 28% (29%), 15% (16%), 14% (14%), 11% (10%), 6% (7%), respectively.

Additional key takeaways from the 1Q20 reporting period include:

• Following two years of consecutive growth in 2018 and 2019, the overall telecom equipment market started the year on a weaker note, reflecting mixed market conditions as the positive market sentiment with mobile-related segments, including RAN and Core, was not enough to offset reduced demand for Broadband Access, Routers and CE Switch, and Optical/Microwave Transport.
• While healthy end-user fundamentals and positive 5G momentum outweighed downward risks associated with the COVID-19 pandemic for both RAN and Core investments, the pandemic had a more material impact on some of the non-wireless related segments, driven partly by supply chain disruptions and weakened demand as a result of increased macroeconomic uncertainty.
• Within the technology segments, Mobile RAN and Core revenues together advanced at a single-digit rate, accounting for nearly half of the overall telecom equipment market during 1Q20. At the same time, the combined revenues for Broadband Access, Microwave Transport, and Routers and CE Switch declined at a double-digit pace Y/Y, accounting for about a third of the overall market.
• In contrast to previous recessions, the COVID-19 slowdown is shifting and transforming the way we use the network. But a shift in how users are consuming data doesn’t necessarily result in a corresponding increase in spending on new infrastructure to support that traffic growth. Some suppliers and service providers indicated that network capacity upgrades were required to accommodate data traffic growth, however, traffic surges did not lead to significant demand for network capacity upgrades across all the telecom equipment segments.
• Even though the pandemic is still inflicting high human and economic losses, the Dell’Oro analyst team collectively expect market conditions and supply chain risks to be more favorable in the second half of 2020, propelling the overall telecom equipment market to advance 1% in 2020, reflecting a downward revision from the previous 2% growth outlook.

Dell’Oro Group telecommunication infrastructure research programs consist of the following: Broadband Access, Microwave Transmission & Mobile Backhaul, Mobile Core Networks, Mobile Radio Access Network, Optical Transport, and Service Provider (SP) Router & Carrier Ethernet Switch.