[wp_tech_share]

The jockeying for position in the US broadband market shows no signs of slowing down. In just the past two weeks, Verizon announced a $20B deal to acquire Frontier Communications and push the combined entity to a fiber footprint of 25 million homes and a fixed wireless footprint of approximately 60 million homes. Meanwhile, AT&T announced partnerships with four open access network providers to help it expand the reach of its fiber services outside its existing wireline footprint. AT&T will serve as an ISP in these markets, delivering both residential and enterprise services via these partnerships. AT&T is on track to pass a minimum of 30 million homes with fiber by 2025 in its own footprint, as well as an additional 1.5 million homes through its Gigapower joint venture with BlackRock. AT&T has also quietly increased the availability of its Internet Air FWA (Fixed Wireless Access) services to over 130 markets, as It potentially positions the service to move beyond just a means of capturing existing DSL subscribers.

These deals follow on the heels of T-Mobile’s proposed acquisition of Lumos Networks, which is slated to pass 3.5 million homes with fiber by the end of 2028. Under the terms of the deal, Lumos will transition to a wholesale model with T-Mobile as the anchor ISP. This is exactly the type of arrangement T-Mobile has established with some of its other infrastructure partners. However, with its partial ownership of Lumos, T-Mobile can presumably generate better returns and healthier margins from its broadband service offerings. The joint venture also is consistent with T-Mobile’s goal of expanding its market presence and footprint without expending a significant amount of capital. In fact, if you take the $1.4B that T-Mobile will ultimately invest in Lumos as it increases its homes passed from 320K to 3.5M by the end of 2028, T-Mobile’s cost per home passed ends up being somewhat less than $500.

That $500 per home passed figure could be even lower should Lumos continue to secure additional American Rescue Plan Act (ARPA) Capital Project Fund grants as well as a portion of the $3.6 B in aggregate BEAD (Broadband Equity, Access, and Development) funding across North Carolina, South Carolina, and Virginia.

The primary reason for T-Mobile’s push into both direct fiber network ownership and partnerships with open access fiber providers is that the operator has over 1 million customers on a waiting list for its fixed wireless service. These customers can’t be served because they are in markets where T-Mobile does not have enough 5G capacity to serve them. As T-Mobile expands the reach of its fiber offering, it can not only provide service to these customers but also existing FWA subscribers. Once an FWA subscriber switches to T-Mobile Fiber, that opens the spectrum for additional FWA subscribers.

US Telcos Smell Blood

US telcos are moving quickly to expand the reach of their fiber, fixed wireless, and ISP services to complement their nationwide mobile networks because they smell blood among the largest cable operators. Telcos are disrupting the broadband market faster and more efficiently right now—a disruption that could very well be amplified by Federal and State subsidies.

With the rollout of 5G networks having had little impact on the profitability of mobile services, fixed wireless has emerged as the most successful use case for mobile network operators (MNOs) can monetize their excess 5G capacity. FWA’s timing couldn’t have been better, with inflation having increased from 2021 on, pushing subscribers to seek out more affordable—but still high quality—broadband service offerings. FWA hit the market providing a powerful combination of affordability, speed, and availability.

The success of FWA combined with overall fiber network expansions has given telcos a potent tool for not only the convergence of mobile and fixed broadband services but also the emergence of these services being offered on an almost nationwide basis. It’s pretty simple math. If you can offer a product or service to a larger number of end customers, the higher the likelihood of continued net subscriber additions, all other things being equal.

Even in markets where there is overlap between fixed wireless and that MNO’s own (or marketed) fiber broadband services, there isn’t really a danger of cannibalization, because the two services will very likely address very different subscribers. As the telcos’ ARPU (average revenue per unit) results have shown, subscribers are willing to pay more for fiber-based connectivity. In 2Q24, for example, AT&T announced that its fiber broadband ARPU is $69 and that the mix shift of its subscribers to fiber has pushed overall broadband ARPU up to $66.17, representing a 6% increase from 2Q23.

Meanwhile, in the second quarter, T-Mobile reported an ARPA figure of $142.54, which was up from $138.94 in 2Q23. Partially fueling that increase was an increase in the number of customers per account, due largely to the adoption of FWA services. Remember, T-Mobile prices and treats its FWA offering as an additional line of service, making it very simple to add to an existing T-Mobile account.

With a starting price point of $50 and typical download speeds ranging from 33-182 Mbps and upload speeds of 6-23 Mbps, T-Mobile is clearly targeting the low-mid cable broadband tiers—and having a great deal of success in converting those subscribers.

Going forward, the 1-2 punch of FWA and fiber will allow the largest telcos to have substantially larger broadband footprints than their cable competitors. Combine that with growing ISP relationships with open access providers and these telcos can expand their footprint and potential customer base further. And by expanding further, we don’t just mean total number of homes passed, but also businesses, enterprises, MDUs (multi-dwelling units), and data centers. Fiber footprint is as much about total route miles as it is about total passings. And those total route miles are, once again, increasing in value, after a prolonged slump.

For cable operators to successfully respond, consolidation likely has to be back on the table. The name of the game in the US right now is how to expand the addressable market of subscribers or risk being limited to existing geographic serving areas. Beyond that, continuing to focus on the aggressive bundling of converged services, which certainly has paid dividends in the form of new mobile subscribers.

Beyond that, being able to get to market quickly in new serving areas will be critical. In this time of frenzied buildouts and expansions, the importance of the first mover advantage can not be overstated.

The push and pull of broadband and wireless subscribers isn’t expected to slow down anytime soon. Certainly, with inflation continuing to put pressure on household budgets, consumers are going to be focused on keeping their communications costs low and looking for value wherever they can find it. That means we are returning to an environment where subscribers take advantage of introductory pricing on services only to switch providers to extend that introductory pricing once the initial offer expires. That shifting and its expected downward pressure on residential ARPU will likely be countered by increasing ARPUs at some providers as they move existing DSL customers to fiber or, in the case of cable operators, move customers to multi-gigabit tiers.

The US broadband market is definitely in for a wild ride over the next few years as the competitive landscape changes across many markets. The net result is certain to be shifts in market share and ebbs and flows in net subscriber additions depending on consumer sentiment. One thing that will remain constant is that value and reliability will remain key components of any subscription decision. The providers that deliver on that consistently will ultimately be the winners.

[wp_tech_share]

The slump that shaped the second half of 2023 extended into the first half of 2024. Preliminary findings indicate that worldwide telecom equipment revenues across the six telecom programs tracked at Dell’Oro Group—Broadband Access, Microwave & Optical Transport, Mobile Core Network (MCN), Radio Access Network (RAN), and SP Router & Switch—declined 16% year-over-year (Y/Y) in 2Q24, recording a fourth consecutive quarter of double-digit contractions. Helping to explain the abysmal results are excess inventory, weaker demand in China, challenging 5G comparisons, and elevated uncertainty.

Regional output deceleration was broad-based in the second quarter of 2024, reflecting slower revenue growth on a Y/Y basis in all regions, including North America, EMEA, Asia Pacific, and CALA (Caribbean and Latin America). Varied momentum in activity in the first half was particularly significant in China – the total telecom equipment market in China stumbled in the second quarter, declining 17% Y/Y.

The downward pressure was not confined to a specific technology, and initial readings show that all six telecom programs declined in the second quarter. In addition to the wireless programs (RAN and MCN), which are still impacted by slower 5G deployments, spending on SP Routers fell by a third in 2Q24.

Supplier rankings were mostly unchanged. The top 7 suppliers in 1H24 accounted for 80% of the worldwide telecom equipment market and included Huawei, Nokia, Ericsson, ZTE, Cisco, Ciena, and Samsung. Huawei and ZTE combined gained nearly 3 percentage points of share between 2023 and 1H24.

Supplier positions differ slightly when we exclude the Chinese market. Even with the ongoing efforts by the US government to curb Huawei’s rise, Huawei is still well positioned in the broader telecom equipment market, excluding China, which is up roughly two percentage points relative to 2019 levels.

Even with the second half expected to account for 54% of full-year revenues, market conditions are expected to remain challenging in 2024. The analyst team collectively forecasts global telecom equipment revenues to contract 8 to 10% in 2024, down from the 4% decline in 2023.

[wp_tech_share]

5G RAN revenues accelerated rapidly between 2018 and 2022, propelling 5G RAN to account for around two-thirds of total 3G-5G RAN before stabilizing in 2023. With the pace of 5G construction now slowing, partly due to more challenging comparisons in advanced MBB markets, it’s important to note that growth prospects for FDD and TDD are not the same. TDD dominated investments in the first phase as operators focused on capitalizing on the larger channel bandwidths available in the upper mid-band. The mix between Sub-6 GHz FDD and TDD is expected to evolve going forward as FDD growth outpaces TDD.

While the upper mid-band offers large bandwidths of unoccupied contiguous spectrum, the combined FDD assets in the sub-3 GHz bands are significant. The amount of spectrum varies depending on the market. However, FDD generally provides around 100 MHz of combined uplink and downlink bandwidth when adding up the paired 600, 700, 800, 900, 1.4, 1.8, 2.1, and 2.6 GHz bands. Even if the spectral efficiency upside between 4G and 5G is limited, especially in non-massive MIMO configurations, FDD still comprises approximately a third to a half of the overall sub-6 GHz spectrum. In other words, sub-3 GHz deployments will play a growing role in the broader 5G roadmap as most 4G FDD spectrum will eventually become 5G.

Operators initially tend to focus on the upper mid-band before complementing it with narrow-band FDD deployments. However, results from 5G NR FDD-only deployments suggest that this spectrum holds significant potential. For example, in the Netherlands, the delay in C-band spectrum provisioning prompted local operators to optimize the use of existing assets, coordinating 4G and 5G technologies across high and low FDD bands to create a high-performance network. Umlaut testing has shown impressive average data rates and latency results in the Netherlands even with the C-Band delays.

In addition to the combined spectral resources in the sub-3 GHz bands, another major benefit is the improved RF propagation characteristics. The inversely proportional relationship between wavelengths and carrier frequencies means that the lower sub-3 GHz frequencies enhance coverage in rural areas, improve in-building performance, and elevate the uplink experience.

The situation is complicated by the small bandwidths scattered across multiple discrete bands, increasingly crowded and complex sites, challenging antenna form factors, and slowing physical cell site growth. At the same time, innovation is on the rise to tackle some of these challenges.

Site simplification is a top priority. Wideband technology enables multi-band deployments within a single radio, supporting both spectrum and power resource pooling. Most leading suppliers now offer multiband/wideband radios and antennas, which facilitate more compact site designs, simplify installation, and accelerate time to market. Some of the latest multiband radios can support three bands in a single device, and in some cases, they use just one PA (power amplifier) and filter, which helps reduce the radio’s form factor, weight, and power consumption.

Source: Huawei

 

Source: Nokia

 

Massive MIMO is not expected to play the same role with FDD as it did with TDD, in part because the 8T8R business case is more compelling in these bands. Even so, continued antenna innovation, combined with advancements in beamforming technology, will help boost the reach of higher-order and Massive MIMO in the FDD bands.

According to Huawei, intelligent beamforming combined with multi-band serving cell (MBSC) can potentially raise the overall FDD capacity and throughput by about 10x, relative to 4T4R.

5G Carrier Aggregation (CA) investments have been minimal to date but are projected to play a greater role in the future as operators expand the use of the sub-3 GHz spectrum. In addition to the potential for multi-Gbit data rates, operators can extend the mid-band range by aggregating low-band FDD carriers. For example, Elisa overcame uplink limitations in the upper mid-band by aggregating its C-band holdings with the 700 MHz carrier, which also enabled Elisa to double 5G throughputs at the cell edge (Nokia/Elisa case study).

Ericsson and T-Mobile recently demonstrated 3.6 Gbps speeds using 245 MHz of aggregated FDD and TDD spectrum. Additionally, Dish and Samsung showcased peak speeds of 1.3 Gbps using 75 MHz of FDD spectrum across three FDD bands.

In our latest 5G RAN forecast, we model FDD-based macro-RAN revenues to accelerate faster than the more mature TDD-based 5G RAN market, partly due to advancements in the 3GPP Release 17/18 specification paving the way for continuous high-bandwidth FDD deployments and multi-band FDD+TDD CA. The forecast rests on the assumption that the 8T8R gains relative to 2T2R/4T4R are sufficient to justify substantial 8T8R deployments (>20%). The future of FDD Massive MIMO looks positive, though the business case will be more limited compared to upper mid-band TDD Massive MIMO.

[wp_tech_share]

After attending Cisco Live in Vegas just two weeks ago, I returned to Las Vegas this week for HPE’s Industry Analyst Summit at HPE Discover 2024. It was HPE’s showcase to catch the AI lightning in a bottle, highlighting their ambitions and innovations in the rapidly evolving AI landscape. Below are three things that stuck out to me: HPE’s ambitious AI vision, cautious networking strategies, and the balance between Atmosphere and Discover. 

HPE’s Ambition: Becoming the Enterprise AI Hardware Provider of Choice

Like many other vendors, HPE has overpivoted on AI. Labeling everything as AI dilutes genuine AI advancements. However, HPE’s effort to be the go-to enterprise hardware vendor for AI server hardware and solutions is noteworthy.

The newly announced NVIDIA AI Computing by HPE aims to accelerate the generative AI industrial revolution. This collaboration includes NVIDIA’s powerful GPUs, DGX systems, and software, combined with HPE’s advanced water-cooling from the high-performance computing world. The stack leverages NVIDIA’s Ethernet and InfiniBand solutions for internal networking. While HPE played it safe by using NVIDIA’s networking, it must sting the HPE networking folks to be sidelined in favor of NVIDIA’s components. This approach contrasts sharply with Cisco’s, where they ensured Cisco networking had a prominent role in their joint hardware stack with NVIDIA. Nonetheless, Jensen Huang, NVIDIA’s CEO, showing up at HPE Discover but not Cisco Live might signify stronger backing for HPE.

Playing It Safe in Networking Amidst Strategic Shifts

HPE Aruba Networking played it relatively safe at Discover 2024, likely influenced by the ongoing Juniper acquisition. When Juniper arrives, strategy and tactics will undoubtedly be up for grabs again. Earlier this year, I wrote a blog about what the acquisition means for HPE’s network security aspirations, and my colleague Sian Morgan wrote a great blog about how the acquisition will change the enterprise market.

Although I anticipated updates on the Juniper acquisition, the timeline remains unchanged, targeting the end of the year or early 2025. Competitors are capitalizing on this uncertainty, generating FUD to steer business away from HPE and Juniper.

Despite no groundbreaking networking announcements, HPE Aruba showcased a broad spectrum of enhancements across its portfolio. During David Hughes’ keynote, Chief Product Officer of HPE Networking, he discussed several key advancements. A highlight was the push into “universal ZTNA” to bridge SSE’s wide-area ZTNA down into the campus with the new Aruba Local Edge. This solution identifies and enforces ZTNA on local traffic. While HPE is not the first in this area, it is far from the last; universal ZTNA is an area of active development in the industry.

Additionally, Hughes demonstrated various AI-ops demos and use cases, including AI-powered network management tools that enhance visibility, anomaly detection, and automated troubleshooting. Networking hardware also received attention with new campus switching, data center switches, SD-WAN hardware, Wi-Fi 7 access points, and even private 5G solutions. Although there were no earth-shattering networking announcements, the range of enhancements underscores that HPE Networking is not standing still or paralyzed by the ongoing acquisition of Juniper.

Balancing Atmosphere and Discover: Networking’s Place in HPE’s Vision

This year marked the first time Atmosphere, HPE Aruba’s dedicated conference, was integrated into HPE Discover. Previously, Atmosphere had a distinct identity, fostering a strong networking-focused culture. However, at HPE Discover, networking seemed to play second fiddle to the larger server and storage businesses. Many attendees lamented the loss of focus on networking and the unique culture that Atmosphere cultivated. The orange shirts of “Airheads” (Aruba’s affectionate term for its customers) were present but overshadowed by the more conservative attire of the broader HPE audience, whose only flare was a pin of HPE’s green rectangle logo.

I hope the Juniper acquisition will restore balance, bringing networking back to the forefront at future conferences. Atmosphere’s unique culture and focus should be preserved and better integrated into HPE Discover, ensuring networking and its innovations receive the attention they deserve.

Conclusion: A Glimpse into the Future

HPE Discover 2024 showcased HPE’s ambitions to lead in AI while navigating strategic shifts in networking. The partnership with NVIDIA highlights HPE’s commitment to delivering cutting-edge AI solutions, even if it means sidelining its networking components. The cautious approach in networking reflects the ongoing Juniper acquisition, with competitors eagerly watching and spreading FUD.

As HPE moves forward with the Juniper acquisition and continues to innovate, there’s hope that the unique culture of Atmosphere and the focus on networking will find a balanced place within the broader HPE and the HPE Discover show. The future promises exciting developments, and I look forward to seeing how HPE navigates these changes, driving innovation and growth in AI and networking.

[wp_tech_share]

I just returned from Cisco’s Press and Analyst Conference at Cisco Live 2024 in Las Vegas, and it was quite the spectacle. The event was a grand showcase of Cisco’s attempts to reinvent itself amidst a saturated market. While there were some genuinely impressive innovations, it was hard not to feel a bit skeptical about some of the grandiose claims. Here are my key takeaways, organized into three major themes: AI Integration, Security Innovations, and The Future of Observability.

AI Integration: A Strategic Embrace

Cisco made it clear at Cisco Live 2024 that AI is central to its future. The event was filled with AI-focused sessions, panels, and keynotes, all highlighting how AI will drive the next wave of innovation at Cisco. In fact, the term “AI” was used over 300 times across 11 presentations, or on average about 27 times per 45-minute presentation. There was no doubt that Cisco wanted to impress the importance of AI, but was it really necessary to use it so often?

Chuck Robbins, Cisco’s CEO, emphasized that while Cisco remains a networking company at its core, embracing AI is essential for staying at the forefront of technology. One of the standout announcements was the AI-powered HyperFabric, developed in collaboration with NVIDIA. This new hardware is designed to support AI clusters, ensuring that Cisco remains a critical player in the infrastructure needed for AI workloads. The practical applications of AI in automating network management and optimizing performance are genuinely beneficial, promising to reduce complexity and improve outcomes.

However, it’s important to temper expectations. While AI holds great promise, the real test will be its implementation and whether it can deliver consistent, tangible improvements. Cisco’s AI strategy is ambitious, but it’s a necessary step to ensure they stay competitive in a rapidly evolving market.

Security Innovations: Promising but Future-Focused

Security was another primary focus at Cisco Live, taking second billing to AI. Cisco is committed to enhancing its security offerings, though many innovations were announcements for future products expected over the next six months.

One of the significant security announcements was related to the upcoming Hypershield, set to launch in August. This initiative, now expanded with AMD DPU integration, aims to provide advanced AI-driven micro-segmentation and threat detection for distributed workloads. Additionally, a new Cisco low-end firewall (1200) is expected in October, reinforcing Cisco’s dedication to the firewall market, where it once was the dominant market share leader but now stands far behind Palo Alto Networks.

A significant part of Cisco’s security strategy involves integrating Splunk, which was acquired earlier this year. Splunk’s capabilities in providing visibility into the internet and cloud are crucial for understanding how external factors impact network performance. While Splunk is still finding its home within Cisco, the integration process is underway and will be pivotal for future security innovations.

Cisco’s security announcements also included the new Cisco Security Cloud Control, the unified management for Cisco Security Cloud, its AI-driven, cross-domain security platform, and partnerships with Microsoft and Google. These partnerships are noteworthy, demonstrating Cisco’s strategy of collaboration to enhance its security offerings without having to build out missing capabilities themselves. However, the true impact of these innovations will be seen once the products are fully rolled out and integrated.

The Future of Observability: Integrating Splunk

Observability and digital experience management were also prominent themes at Cisco Live. These areas are critical as they represent the evolution of traditional network management into more holistic, software-centric solutions. Cisco is positioning itself as a leader in this space, recognizing that as networks become more complex, the need for comprehensive observability tools becomes paramount.

A significant part of this strategy is the integration of Splunk and cross-pollination with standing Cisco products, such as Thousand Eyes. At Cisco Live, integrating Splunk with other Cisco products was a significant highlight, showcasing how observability can lead to better decision-making and improved operational efficiency. However, Splunk feels somewhat separated from the Cisco mothership. Given that the acquisition closed only a couple of months ago, this is understandable. The integration process will take time, and it will be interesting to see how Cisco fully incorporates Splunk’s capabilities into its broader portfolio.

A Networking Giant’s Evolution

Cisco, the blue-blood networking company, had a surprisingly limited number of CEO-caliber network infrastructure announcements. Other than the HyperFabric, there were no major hardware or networking revelations directly from Chuck Robbins or his staff. On the one hand, it’s refreshing to see Cisco focus on innovative technologies beyond the traditional “speeds and feeds.” On the other hand, isn’t that precisely what made Cisco the powerhouse it is today? The lack of significant networking announcements might leave some long-time Cisco followers questioning if the company is straying too far from its routing and switching roots.

Final Thoughts: A Bold Step into the Future

Cisco Live 2024 showcased a company making bold moves to stay relevant and competitive. The emphasis on AI, the continued focus on security, and the integration of observability tools like Splunk are all part of Cisco’s strategy to expand its market reach. While there are valid reasons to be cautiously optimistic, the real challenge will be turning these ambitious plans into concrete results.

The AI initiatives, while promising, need to prove their value in real-world applications. Security improvements, though many are future-focused, show a commitment to staying ahead of threats. Observability, particularly with the integration of Splunk, represents a significant step forward, though it will require time to realize its full potential.

Cisco Live 2024 left me with a sense of cautious optimism. The company is clearly making strategic moves to adapt and innovate. Whether these efforts will pay off remains to be seen, but one thing is sure: Cisco is not standing still. They are actively shaping their future, and it will be fascinating to see how these initiatives unfold in the coming year and beyond.

A correction was made on June 14, 2024: An earlier version of this blog incorrectly referred to Cisco Security Cloud Control as ”an AI-driven platform for unified security management.” Cisco Security Cloud Control is the unified management interface for Cisco Security Cloud, which is Cisco’s unified, AI-driven, cross-domain security platform.