The global upswing that began in the second half of 2018 has become deeper and stronger. Even with the higher-than-usual degree of uncertainty around the economy, we forecast that the RAN market will grow at a healthy pace over the next three years, before growth tapers off in the outer part of the forecast period, resulting in a mid-single digit CAGR between 2018 and 2022. Cumulative investments over the 2019 to 2024 period are expected to eclipse $200 B.

The main growth drivers have not changed. They include:

(1) A rapid shift toward 5G NR for mobile broadband (MBB) applications, resulting in a condensed deployment phase;

(2) New capex to address IoT, Fixed Wireless Access (FWA), In-building, and Public Safety opportunities for both private and public deployments;

(3) The shift from passive to advanced antenna systems, which will shift capex from the antenna to the RAN market.

The expected impact of these growth drivers has changed. Cumulative revenue projections for the 2019 to 2024 period have been adjusted upward, reflecting more upbeat expectations in China and North America. This in combination with a more favorable outlook for FWA is expected to outweigh downward risks associated with COVID-19 and a pickup in Open RAN—we have adjusted the Open RAN projections upward, with Open RAN now approaching a double-digit share of the overall RAN capex by the outer part of the forecast period. Within the technology mix, cumulative 5G NR RAN revenues for the 2019 to 2024 period have been revised upward while the equivalent LTE capex has been adjusted downward.

Our forecast that 5G NR will be deployed at a faster pace than LTE and surpass LTE in 2021 hinges on a set of key assumptions, including:

(1) The 5G NR mid-band business case for MBB applications remains compelling;

(2) 5G mid-band spectrum will be available sooner than LTE spectrum was made available in the 3G to 4G transition;

(3) New dynamic spectrum sharing technologies will simplify and accelerate the migration from LTE to 5G NR;

(4) Initially 5G will be just another G, but long-term it will be more than another G, even if it takes time to reach the full potential of 5G;

(5) Complete 5G systems to address new use cases will be deployed gradually, at a slower pace than Sub 6 GHz MBB 5G NR.

Regional projections have been adjusted to reflect some COVID-19 related near-term slowdown in late majority MBB regions, including Europe, Latin America, parts of Asia Pacific (APAC), and parts of Middle East & Africa (MEA). While the CAGR is fairly flat in most regions, the capex envelope within the forecast period is expected to vary across the regions.

Risks are broadly balanced. The geopolitical uncertainty could trigger more government stimulus than we have currently considered to support network swaps and other forms of tax policies to improve the staying power of non-Chinese vendors.

Taking into consideration that significant changes in GDP resulted in material RAN changes with a roughly one-year lag in the 2001 and 2008 recessions, and that we are modeling 2021 to be a growth year, the baseline projections rest on the assumption that there will be some downward push over the short-term in the less advanced MBB markets. At the same time, we anticipate the upside driven by the 5G rollouts in the advanced markets will ultimately outweigh the downward adjustments, implying that the extent of the projected growth will appear disconnected from the underlying economy.

Other takeaways from the July 5-Year RAN Forecast include:

• The Millimeter Wave outlook has been revised upward driven by improved momentum in the Asia Pacific region.
• The pickup in mid-band deployments has propelled the demand for Massive MIMO. In this forecast, 5G NR Massive MIMO is projected to comprise more than half of the cumulative 5G NR capex.
• The underlying assumptions driving the regional projections remain fairly unchanged, with the APAC region being the main near-term growth vehicle.
• With more clarity about the 5G rollout plans in the North America region, we have adjusted the near-term outlook upward and now forecast the North American RAN market to continue advancing over the near-term.
• Global macro base station (BTS) shipments are projected to remain elevated between 2020 and 2022, underpinning projections that 5G activity is set for an upturn. This positive momentum will eventually slow, resulting in some softness in the outer part of the forecast period.
• The high level small cell vision has not changed. We expect unlicensed WiFi systems to coexist with cellular technologies. For upper mid-band deployments, operators will need to accelerate indoor deployments rapidly while the sub 6 GHz micro adoption phase will be more gradual.
• Since the last forecast, we have adjusted the outdoor small cell outlook upward, driven primarily by a more favorable Millimeter Wave forecast.
• Fixed Wireless Access (FWA) Radio Access Network (RAN) investments, including mobile network and dedicated fixed networks, are projected to comprise a growing share of the overall RAN capex envelope over the next five years, reflecting the size of the potential upside, various technology advancements, and improving market sentiment for both basic and high performance connectivity

About the Report

Dell’Oro Group’s Mobile RAN 5-Year Forecast Report offers a complete overview of the Mobile RAN industry by region – North America, Europe, Middle East & Africa, Asia Pacific, China, and Caribbean & Latin America, with tables covering manufacturers’ revenue, transceivers or RF carrier shipments, unit shipments for 5GNR, 5G NR Sub 6 GHz, 5G NR mmW, LTE, LTE FDD, LTE TDD, WCDMA, and GSM pico, micro, and macro transceiver base stations. The report also include splits for macro and non-residential small cells and Massive MIMO. Click here to learn more about the report or contact us (dgsales@delloro.com) for the full report.

 

Optical Transport Market to Expand for many more Years, Reaching nearly $18 Billion

The world experienced a global pandemic in 2020 that ushered in a global economic recession. It is still unknown how much longer the coronavirus, COVID-19, will spread and cause economic disruptions, and at what rate the global economy will recover following massive shutdowns in the first half of the year. That being said, while in past macro-economic recessions the Optical Transport market would contract, we believe that in this recession, the demand for Optical Transport will increase as a large number of people shift to remote learning and working.

We believe the fundamental driver for the optical market—bandwidth—persists and that its value has been amplified by the recent pandemic. As a result, we forecast the Optical Transport market, largely comprised of DWDM systems, to expand in 2020 and for the next five years, reaching nearly $18 billion. However, there are near term challenges related to supply, distribution, and installation.

Shift to 800 Gbps-Capable Line Cards will be Rapid in DWDM

The first 800 Gbps-capable line cards started to ship in early 2020. We expect volumes to ramp during this year, as additional vendors introduce their products. We forecast that by 2024, nearly 30 percent of wavelength shipments will be from an 800 Gbps-capable line card. More than half of these line cards are expected to be used at 400 Gbps.

We predict the next wavelength speed following 800 Gbps will be 1200 Gbps (1.2 Tbps). Based on the timing of past coherent DSP introductions and first-line card shipments, we anticipate 1.2 Tbps-capable line cards to enter the market in the 2023-2024 time period (but more likely in 2024).

Other Market Trends

• Demand for Optical Transport gear for data center interconnect (DCI) is expected to take a turn in the near future.
• Disaggregated WDM transponder unit sales are a bright spot of growth, annually growing at a double-digit percentage rate.
• 400ZR will moderate the market’s growth.

About the Report

The Dell’Oro Group Optical Transport 5-Year Forecast Report offers a complete overview of the Optical Transport industry with tables covering manufacturers’ revenue, average selling prices, unit shipments, wavelength shipments (by speed up to 1.2 Tbps). The report tracks DWDM long haul, WDM metro, multiservice multiplexers (SONET/SDH), optical switch, optical packet platforms, data center interconnect (metro and long haul), and disaggregated WDM. Click here to learn more about the report or contact us at dgsales@delloro.com.

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.