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Optical bandwidth is not limitless. I know we have all used the argument over the past few decades that by placing an optical fiber connection between two points you will have unlimited capacity. It is an argument we have all used when convincing the market that a fiber deployment future proofs the investment. Now, a few decades later, the reality of Shannon’s Limit hangs over service providers’ future like a dark cloud (an actual one, not the data center cloud kind).

Globally, service providers have always enjoyed the benefit of meeting customer requirements for higher network capacity at a lower per bit price by installing the latest optical DWDM transponders. It has been a tried-and-true method that leveraged the sunk costs related to fiber and amplifiers, often referred to as the fiber plant. Therefore, not only did a service provider benefit from the higher capacity and lower cost-per-bit inherent in each new generation of DWDM transponders, but they also benefited from installing these additional wavelengths in pre-existing fiber plants where much of the costs are either fixed (in the case of a leased fiber), depreciated (in the case of fiber ownership), or non-existent (in the case of fully depreciated fiber plants). The advantage of this is that for every bit added to a fiber, the cost of transporting the bits declines.

Even in the case of a green field deployment, the more a service provider can maximize the capacity of the fiber plant, the lower the cost of each bit transported. For example, if a fiber plant cost $4 million, the first gigabit may cost $4 million, but when 9,600 Gbps is installed, the cost-per-gigabit drops to $417 (Figure 1). It is a linear decline in cost. That is… until the capacity on a fiber can no longer increase due to Shannon’s Limit and spectrum availability.

Cost-per-Gigabit for $4 Million Fiber Plant
This constraint, brought about by the physical limitations of glass and light, brings to the forefront two challenges—extending the span length of higher wavelength speeds and increasing fiber capacity—and, fortunately for the industry, two solutions that will help service providers continue to reduce their cost-per-bit for at least another decade.

  1. 800 Gbps-capable transponders with probabilistic constellation shaping operating at around 96 Gbaud solves one of the challenges—extending the span length. Using these new transponders will help in a couple ways. For metro spans, service providers will immediately benefit from having a lower cost-per-bit by deploying one set of 800 Gbps line cards rather than two sets of 400 Gbps line cards. The second benefit is the extended reach. What was not shown in Figure 1 was that the un-regenerated span length of each wavelength speed diminishes as the wavelength speed goes up. However, with 800 Gbps-capable line cards, a 400 Gbps wavelength will be usable in many more fiber routes that extend in to the thousands of kilometers, reducing the need for costly regeneration sites. As a result, in both metro and long haul routes, 800 Gbps-capable line cards will reduce a service providers’ cost-per-bit.
  2. Expanding the usable spectrum in a fiber will solve the second challenge—increasing fiber capacity. For the longest time, optical equipment was designed to operate in 4 THz (80 channels @ 50 GHz) of fiber spectrum located in the C-band (Figure 2). Over time, equipment manufacturers increased it to 4.8 THz (96 channels @ 50 GHz). The next generation of equipment will inevitably be designed to operate in 6.0 THz (120 channels @ 50 GHz) of spectrum, referred to as Super C-band by Huawei. This action alone increases the amount of bandwidth-per-fiber by 25 percent. As a result, a fiber that had a maximum capacity of 38.4 Tbps (at 400 Gbps per wavelength) can now support 48.0 Tbps. Using our $4 million example in Figure 1, the cost-per-gigabit will be further reduced from $104 to $78.

Huawei Spectrum in C-Band

We believe these new technologies will need to be adopted in the future to continue the cost-per-gigabit declines that the market has gotten accustomed to.

Dell'Oro DWDM Long Haul Cost per GigabitAs a point of reference, in the past decade, the average annual decline in cost-per-gigabit for DWDM Long Haul transport equipment was about 20 percent due to improving spectral efficiency gains brought on by deployment of newer, higher-speed wavelengths (Figure 3). It was a similar rate of decline for WDM Metro, as well.

It probably does not need to be said, but this decline in the cost of a gigabit was a critical element needed for service providers to profitably keep up with network demand, which grew at an average annual rate of approximately 35 percent. Also, as we see it, demand for bandwidth will only grow from here, placing additional strain on service providers to profitably increase their network capacity for many more years.

We believe that with the new technologies mentioned, this pace of declining costs can continue to benefit service providers for at least another decade.

In the face of Shannon’s Limit, installing systems that can extract higher value from installed fiber becomes critical. Two technologies entering the market will push out the concerns brought by Shannon’s Limit for at least another decade. Therefore, to all the service providers, take a moment, and breathe a sigh of relief because there are new solutions on the way to help you: 1) increase network capacity and 2) reduce your future cost of bandwidth.

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DellOro Scalable Infra CapexLet’s face it, cable equipment vendors are certainly happy to put 2019 behind them. A glut of DOCSIS channel capacity, the lack of significant competitive threats, and indecision around DAA technologies and timing all resulted in a spending slowdown that lopped off 35% of total DOCSIS infrastructure revenue, year-over-year. Traditional, centralized CCAP platforms bore the brunt of the reductions, with total revenue down 41% year-over-year.

On the bright side of things, each successive quarter in 2019 showed an improvement in scalable infrastructure spending by two of the world’s largest cable operators: Comcast and Charter Communications. In fact, the fourth quarter of 2019 saw a return to a normalized spending level for the combined operators, with Charter having bumped up its spending to increase DOCSIS capacity across strategic areas of its footprint. 2020 should see an improvement in spending by these operators, though again not to the levels seen in 2017 and 2018.

Also on a positive note, spending on Remote PHY equipment and Virtual CCAP platforms were both up solidly for the year, as a growing number of operators began their long-term transition to distributed and virtualized architectures. That trend will only continue to ramp up over the next few years, as operators continue to modernize their networks to push fiber deeper, reduce MERs (Modulation Error Rates,) and reduce the overall costs of operating their broadband access and outside plant networks.

Focus in 2020 Shifts to Upstream Bandwidth

DAA and virtualization are but parts of major network transformation projects many cable operators are beginning or are expected to begin this year. With the DOCSIS 4.0 specification establishing a clear path forward, giving cable operators the flexibility to pursue either Extended Spectrum DOCSIS (ESD) or Full Duplex DOCSIS (FDX), operators can move ahead with their remote PHY and remote MACPHY deployments to solve immediate head-end and power consumption issues.

Also near the top of many operators’ strategic initiatives for 2020 is the resolution of one of the known liabilities of cable broadband networks: limited upstream, or return path, bandwidth. Cable operators recognize that one of the liabilities they have with DOCSIS is its asymmetric design. For the most part, competitors haven’t exploited this liability. But with FTTH being more widely-deployed, they can certainly point at cable’s lack of upstream bandwidth and how that potentially disrupts latency-sensitive applications, such as online gaming, VR, as well as the simple uploading of photos and videos to social media. With a growing number of telcos and ISPs now offering symmetric 1Gbps services, cable operators are facing increasing pressure to expand their upstream capacity.

Most operators are still providing return band of 5-42 MHz. Using a mid-split design can push the upper limits of that band to 85 MHz, with a high split design giving operators up to 204 MHz to work with in the return path. Some large operators have already started or completed their transition to mid-split, while others are jumping directly to a high-split architecture. At 204 MHz, cable operators can offer 1 Gbps of upstream bandwidth, which matches what many telcos are offering through their FTTH networks.

But these upstream upgrades also require significant changes to the outside plant, including amplifiers and taps. For many cable operators, this isn’t necessarily a bad thing, as these critical outside plant components are nearing the end of their lifespan over the next five years, after having served in broadband networks for the last 10-20 years.

vCCAP platforms can serve a key function during this transition, by giving operators more flexibility in the approach they take and which part of the outside is impacted in certain upgrade cycles. When new capacity is required, both downstream and upstream, new vCCAP servers can be quickly added in any location or existing software resources can be re-allocated to those service groups undergoing capacity upgrades. In many cases, those resources can be added much faster than they can be with a centralized CCAP platform, which would require a linecard upgrade at a minimum to support increased capacity.

Though these upgrades put a lot on the plates of cable operators worldwide, the combination of all these transitions will ultimately lead to the complete overhaul and modernization of their broadband access networks, as they continue to migrate down the path towards 1.8 GHz spectrum, Extended Spectrum or Full Duplex DOCSIS modulation, DAA, and virtualization. Again, all these changes will definitely occur in phases, as each operator weighs the vision of their future networks and services against the short- and long-term costs to get there.

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Huawei and ZTE increased their revenue shares while Nokia and Cisco’s revenue shares declined for the full year 2019 telecom equipment market.

We just wrapped up the 2019 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 – advanced 2% during 2019, recording a second consecutive year of growth.

Full-year 2019 revenue shares relative to 2018 revenue shares for the top five suppliers – the latter indicated here in parenthesis – show that Huawei, Nokia, Ericsson, ZTE, and Cisco comprised 28% (28%), 16% (17%), 14% (14%), 10% (8%), 7% (8%), respectively.

Additional key takeaways from the 4Q 2019 reporting period include:

  • Following three years of declining revenues between 2014 and 2017, the overall telecom equipment market advanced for a second consecutive year in 2019, validating the message we have communicated for some time now, namely that there are reasons to be excited about the telecom market.
  • Within the technology segments, mid-single digit growth in Optical Transport and RAN was more than enough to offset weaker demand for Microwave Transport and Broadband Access equipment. The two largest equipment markets in the year were Mobile RAN and Optical Transport, together accounting for about 55% of the overall telecom equipment market.
  • The RAN market surprised on the upside and performed better than expected in 2019, propelled by 5G RAN growth that continued to accelerate throughout the year at a torrid pace.
  • The worldwide Optical Transport market continued to expand for a fifth consecutive year, recording the highest growth rate in nearly a decade. Helping to drive this acceleration is robust growth for WDM.
  • Stable demand for PON equipment was not enough to offset declining investments in Cable and DSL, pushing the overall Broadband Access Market to a fourth consecutive year of declining revenues.
  • The efforts by the U.S. government to curb Huawei’s rise has so far had mixed results – we estimate Huawei’s overall telecom equipment share continued to improve in 2019, but the pace of the 2019 share growth was weaker than its average 2014-2019 share growth.
  • ZTE’s revenue share improved by about 2 percentage points in 2019, reflecting a robust recovery since the U.S. ban during 1H18.

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

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We just published the 4Q19 update to the Microwave Transmission & Mobile Backhaul quarter report. Here are a few key findings for the quarter.Microwave Transmission top 3 vendors 4Q19

  • Microwave Transmission market declined in 2019 following a slight rebound the prior year. The decline in 2019 was due to a massive slowdown in India. We estimate sales to Indian operators declined over 50 percent in the year.
  • Huawei continued to hold the largest share of the Microwave Transmission market, garnering 29 percent share in 4Q19.
  • Vendor share was more fluid than usual in the quarter. Typically the top three vendors in this market consists of Ericsson, Huawei, and NEC. In 4Q19, Nokia overtook Ericsson for the first time and captured the second highest share.
  • E/V Band shipments outperformed in the quarter, helping to bring full year growth rates back up above 20 percent.
  • Among the microwave technology segments, we believe E/V Band systems have the greatest growth potential driven by its ultra-high capacity (10 Gbps), small footprint, and low spectrum license fees in certain countries. In addition to these advantages, demand for E-band systems in particular is projected to grow because of the availability of multi-band solutions that combine the benefits of both standard microwave frequencies with that of E-band.

About the Report

The Dell’Oro Group Microwave Transmission & Mobile Backhaul Quarterly Report offers complete, in-depth coverage of the market with tables covering manufacturers’ revenue, ports/radio transceivers shipped, and average selling prices by capacities (low, high and E/V Band).  The report tracks point-to-point TDM, Packet and Hybrid Microwave as well as full indoor and full outdoor unit configurations.  To purchase this report, please contact us at dgsales@delloro.com

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The latest Dell’Oro Group CBRS RAN 5-year forecast report suggests delays have not changed the underlying demand for CBRS. The overall CBRS market – LTE plus 5G NR – is expected to grow at a rapid pace between 2019 and 2024 with cumulative RAN investments projected to surpass $1.5 Billion.

Even if the regulatory process has taken significantly longer than expected (> 4 years since initial NPRM), the high level vision has not changed. We continue to believe that there is an opportunity to improve spectrum utilization while at the same time stimulating innovation for both public and private networks. The CBRS band with its unique spectrum sharing characteristics include many of the right ingredients to be a game changer over the long term, making us extremely optimistic about the opportunities within the CBRS band. At the same time, we also believe it is important to be realistic about the potential upside with new opportunities—we still envision that CBRS deployments targeting new business models and use case will need some time to cross the chasm.

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.
  • Activity is anticipated to accelerate rapidly during the forecast period. 5G NR is expected to drive the lion share of the service provider CBRS capex in the outer part of the forecast period while LTE will likely dominate the technology mix for FWA, IoT, and Enterprise deployments through the forecast period

About the Report

Dell’Oro Group’s Advanced Research: Citizen Broadband Radio Service (CBRS) Report offers an overview of the CBRS LTE and 5G NR potential with a 5-year forecast for the CBRS RAN market by technology, location, and buyer along with an analysis about the vendor landscape. To purchase this report, please contact us by email at dgsales@delloro.com.