BY CAROLINE GABRIEL
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Real progress on standards, rather than inflated claims for '5G', is coming closer, with the ITU (International Telecommunication Union) holding a 5G working group to finalize core specifications in San Diego, California next week.
However, though some Asian operators claim they will have commercial 5G networks up and running as early as 2018, these will almost certainly be based on pre-standard equipment. Just three years ahead of that deadline, there is still little agreement on the key objectives of 5G, let alone the specific technologies.
At the CommunicAsia 2015 conference this week, the only significant point of consensus was that ultra-low latency, machine-to-machine communications would be the top priority for 5G, and this would be more important to enabling future services and business models than increased speeds.
In other respects, there were clear disagreements between various 5G projects, and between two of the countries in the vanguard of mobile R&D, Japan and Korea.
As noted by TelecomAsia, representatives from four key groups, all of which will have input to the ITU's deliberations, agreed to disagree on the KPIs (key performance indicators) for 5G, during a panel debate at the show.
The ITU-R itself, the Korea 5G Forum, the Fifth Generation Mobile Communications Promotion Forum (5GMCPF), and the 5G World Alliance all had somewhat different approaches. Colin Langtry, leader of the 5G study group at ITU-R, was the least controversial, telling the conference that the main aim is to enable ultra-reliable communications and low latency, among other capabilities.
He also said that "co-opetition" between different 5G groups would be positive for the end result. "There is a degree of competition, but it's friendly competition and constructive competition and it will come up with a good result," he told the panel.
Meanwhile, Youngnam Han from the Korea 5G Forum called for three new KPIs to be added to the ITU-R's framework. The Forum published three white papers in March, setting out KPIs and promising candidate technologies, as well as spectrum requirements and candidate bands. The KPIs tie into the eight core requirements set out by the ITU-R, which include peak data rates up to tens of Gbps, 1ms latency and mobile hand-off at 500 kilometers per hour. However, Han wants to add others which go beyond the ITU remit, including the handling of interruption time, and pinpointing a terminal's location to "within a few centimetres".
Hiroyuki Morikawa, a Japanese member of the 5GMCPF, was more focused on timelines and called for a schedule of milestones to be laid down. The two Asian powerhouses may have different priorities, but they are keen to lead the world in 5G roll-out, and especially to stay ahead of the US. "Korea and Japan are the leading countries" in 5G, partly because of their large concentration of device makers, Han said. He graciously said that the US and Europe were "welcome" to join the debate about 5G KPIs, with Langtry hastily saying that the western regions were already involved, but not leading the discussions.
Korea aims to launch pre-standard 5G in time for its Winter Olympics in 2018, though Han was vague about exactly what that would entail, only commenting that the network could be based on "anything that meets the eight KPIs laid down by the ITU-R". Japan hopes to conduct a proof of concept, at least, by the end of 2017 and will outline the details of that late this year. "Not surprisingly, the Japanese plan is very similar to the Korean plan - it's because we're neighbours," said Morikawa.
Another group, the 5G World Alliance, was heavily focused on IPv6 to enable the IoT - unsurprisingly since its chair, Latif Ladid, is also founder and chair of the IPv6 Forum. He told the conference that users would soon need millions of IP addresses, not one, and urged the mobile industry fully to embrace IPv6 this time around, something it had failed to do in 3G and even partially in 4G.
By Caroline Gabriel, Research Director
Analysts are in a unique position to assess the way service providers are thinking, and every so often, there is a tangible change in that thinking, which impacts on the whole ecosystem. In the past couple of years, one of the key watchwords has been ‘multivendor’.
Mobile operators have tended to stay in the comfort zones of end-to-end systems supplied by one or two well-established suppliers. That has some advantages, notably a high level of integration and of vendor stability. But it also has many disadvantages, including the limited freedom for operators to shop around for the best solutions, and drive competition and better pricing with a vendor neutral approach.
The profound changes taking place in the mobile architecture as 4G evolves towards 5G are seen by many operators as an ideal opportunity to break the stranglehold of the traditional equipment suppliers. Heterogeneous networks made up of large numbers of small cells, and the move towards virtualization, both encourage a multivendor approach.
Indeed, in a recent survey of MNOs, conducted by Maravedis-Rethink, the ability to adopt a multivendor strategy emerged as the second most pressing reason to invest in a HetNet (after cost: capacity improvements).
However, a decision to mix and match network equipment has a knock-on effect throughout the procurement process. For instance, it will be essential to have tools which can support equipment from any supplier. Network optimization systems, for example, will need to be able to work with a widening range of RAN architectures, and with equipment from any supplier, present or future.
That makes a strong argument for a vendor-neutral approach to optimization tools, especially as these become increasingly critical to the successful implementation of the network. Functions such as self-optimizing networks (SON), cell planning and dimensioning, video traffic management - and the many other tools which are needed to make a modern RAN perform at peak efficiency – will no longer be useful add-ons, often bundled in by the network equipment provider. Rather, they will be essential for the operator to maximize capacity and flexibility from the complex new architectures, and so to ensure return on investment (ROI).
In the small cell world, then, multivendor deployment and high levels of optimization, especially SON, will often go hand-in-hand. This helps to explain a shift in thinking, visible in two surveys of MNOs, conducted in 2013 and 2015. In the earlier study, over 70% of MNOs planned to rely primarily on their equipment vendor for optimization. In 2015, only 15% were committed to an NEP solution for future projects.
So as the HetNet takes off, there will be an increasingly strong argument for vendor-neutral optimization solutions, whether tools or hosted services. These are better designed for multivendor networks and come from suppliers whose primary business is in optimization, not selling equipment. This significant change in operator thinking is set to open up a competitive new market for specialized network optimization vendors as the 4G HetNet evolves.
BY CAROLINE GABRIEL
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The rumor that Nokia and Alcatel-Lucent would merge has come around many times in recent years, but the story hasn't got any more attractive with repetition. But now it is real, with Nokia confirming reports that it is in "advanced discussions with respect to a potential full combination" with its French rival.
Nokia said any deal "would take the form of a public exchange offer by Nokia for Alcatel-Lucent". The Finnish company currently has a market capitalisation of €29bn, and ALU's is €11bn. Analysts estimate that ALU could be worth €4.50 a share, or a total of €12.7bn ($13.4bn).
Of course, a deal would give the enlarged Nokia the scale that may be required to stay ahead in the pressurized telecoms equipment market. But it will also create massive integration challenges which could distract the new entity for a couple of years during a time of critical transition among carriers, in particular towards software-defined networking (SDN).
In the early stages of that new phase, Nokia looks well positioned in terms of product offering and philosophy. There seemed to be a real strategic option to move gradually away from the rapidly commoditizing hardware businesses, relying on partners for those (as it has already done in some areas like microwave backhaul and WiFi), and become a leader in carrier software - a smaller company, but a profitable one focused on the key area of investment for service providers in the later years of the decade.
But Nokia seems determined to cast off its long history of radical reinvention and cling to the 'size is all' mantra which has recently driven the network equipment sector. Combining with Alcatel-Lucent would give it combined revenues of €26bn, based on last year's performance, just ahead of Ericsson's €24.4bn.
It would see Nokia abandoning the strategy which has finally brought it to the brink of turnaround - doubling down on mobile broadband alone - since it will take on ALU's significant wireline business.
The mobile-only approach has seen the Finnish firm sell off its devices business (and possibly, according to other reports this week, its Here mapping unit). The refocus has also seen it divest many non-core businesses, as well as invest in smaller firms with technologies that will be important for the two dominant mobile growth drivers - SDN/virtualization and '5G'. Nokia has been prominent in the early development of both, moving early into software-driven network platforms under its Liquid banner, and demonstrating R&D breakthroughs in anticipated 5G approaches such as millimeter wave spectrum and massive MIMO.
The decision to sacrifice size and some revenues for profits and differentiation has brought Nokia close to recovery after years of losses and serial restructurings. Just at the moment when CEO Rajeev Suri might claim tentative victory, he seems set to throw it all away. Yes, ALU would bring Nokia greater scale to withstand the economics of Ericsson and Huawei; and most importantly it would bring the French firm's most impressive product line, its core and edge routers. That would enable Nokia to go after a wider range of service providers, as Ericsson is doing, and - importantly - to target the rising tide of convergence between MNOs and wireline operators, offering a complete portfolio without relying on partners.
But the risks and downsides are daunting. Nowhere will Oscar Wilde's aphorism, that second marriages are the triumph of hope over experience, be more apt. Both the would-be partners have come through exceptionally badly managed marriages which almost killed the bloated companies they created. The merger of Alcatel and Lucent in 2006, and the joint venture created between Nokia and Siemens in the same year (Siemens exited in 2013), have both become bywords for the wrong way to approach mergers, and they gave Ericsson and Huawei significant leeway to step into the breach and consolidate their shares. Both those deals were panic-driven, with traditional companies clinging together for warmth in an increasingly cold competitive climate, but without any clear vision of how they might evolve towards the realities of the future market. Sadly, nothing different could be said of a Nokia-ALU merger.
Amid the inevitable pain of the integration process, there is real risk that the new strategies both firms have put together will be lost. Logically, Nokia's mobile broadband should fit beautifully with ALU's approach. Under CEO Michel Combes, the French firm has, like its suitor, divested many units. It has drilled down on all-IP infrastructure plus SDN for growth, and on access (including mobile) for cash. On the wireless side, it generated €5bn in revenue last year and has a stronger US base than Nokia. These roadmaps seem complementary, but it is very doubtful that such new and therefore fragile strategies will be well combined by two still-traditional firms which are only just emerging from traumatic restructurings.
Nokia shares fell by almost 7% in Helsinki on its statements, but ALU's leapt by 14% in Paris, perhaps reflecting that investor confidence in the Finnish firm, especially since it addressed its cash shortage via the Microsoft deal, is higher than in ALU, and therefore the risk of a reversal of fortunes is higher.
One critical factor is how profitable a combined company could be in the short term. There would be medium term economies of scale, presumably including further large-scale cutbacks, but both have only tentatively returned to the black in the past year so the short term outlook is hard to predict. In 2014, Nokia's operating profit was €170m (its net profit was €1.2bn thanks to tax benefits), while ALU achieved an operating profit of €572m but a net loss of €83m. By contrast, Ericsson had an operating profit of SKr16.8bn (€1.8bn) and net income of SKr11.1bn.
As well as profit considerations, there will be significant regulatory review which could include intervention by the French government, which is very reluctant to see national businesses sold off. The balance of power between the French and US elements of Alcatel and Lucent was a complicating factor back in 2006 (the insistence that CEO Pat Russo should be based in Paris was blamed for weakening ties to key customers like Verizon, for instance). France may have moved on from former president Chirac's comments that Finland has the worst food in the world, but the administration of Francois Hollande will certainly scrutinize any bid for ALU carefully and has a track record of trying to block corporate mergers. Alcatel traces its roots back to 1898 and has been a flagship French firm, though it was privatized in the 1980s.
To meet mobile data demands in the second half of the decade, operators look to build two layers, with different base station types
By Caroline Gabriel
There is little room left for architectural debates in the wireless industry - in 2014, the answer is clear. The capacity requirements for wireless networks will be so great that there will be no room for either/or. Operators will be deploying combinations of many approaches on their cell sites, and in addition, making other, more fundamental shifts. Software will become as great a contributor to network capacity as additional hardware, via optimization and smart provisioning tools, while virtualization will be an important way to add density when hardware is reaching its limits.
Mobile data usage will rise by an estimated 12.5 times between 2013 and 2019, from a level Cisco calculated at 1.5 exabytes in 2013. These daunting capacity, coverage and data rate challenges mean traditional approaches will no longer suffice, and over 90% of operators have at least one brand new architecture in their five-year plan, while over one-third plan to use all the key new methods being studied in a new report from Maravedis-Rethink - small cell HetNet, virtualized RAN, new-wave distributed antenna and SuperMIMO - by 2019, somewhere in their systems. The report, Towards the hyper-dense network - the shape of the HetNet 2013-2019, surveyed about 150 mobile operators and found that capex in the period will not be driven primarily by conventional equipment, though the rise in volume roll-outs of LTE worldwide will be an important factor. Instead, there will be a significant shift in operator budgets towards new HetNet platforms, driven by advanced software, virtualization and new access points.
Overall, the operators' response to the capacity challenge is to adopt two layers (at least) of cells, macro for coverage and true mobility, and small cell for capacity and indoor services. A third layer may evolve at the end of the decade for the internet of things (IoT). The two layers underpin a typical three-stage 4G deployment, which most operators plan to follow - 1) coverage first, macro layer-only; 2) quick-fix capacity, often via WiFi or opportunistic small cells; 3) greater virtualization in parallel with a move to hyper-density.
In both the main layers, three architectures can be used, and will often be mixed and matched or even integrated, and run in unlicensed as well as licensed spectrum.
The three architectures are:
- Homogeneous - self-contained macro or small cell base stations, with the baseband, antenna and radio in the same box or located at close quarters.
- Distributed radio or virtualized RAN - where multiple radio/antenna units share a virtualized pool of baseband processing, which may be located on a nearby base station hotel or in the cloud. This evolves to Cloud-RAN.
- Distributed antenna or DAS - where a baseband/RF unit feeds a number of antenna nodes distributed around a building or neighbourhood. Traditionally a large venue solution, smaller and more open approaches are being developed to target small cells.
The next wave of macro innovation is focused on virtualization, and antennas, with technologies such as massive MIMO and Active Antenna System (AAS). In addition, the macro layer will be boosted by the introduction of some key features of LTE-Advanced, such as carrier aggregation, eICIC and CoMP, which will make new dense architectures easier to roll out. These add up to a new wave often called 'Super Macro'.
The number of LTE or multimode macro base stations deployed will peak in 2015, about a year later than we had previously envisaged - continued growth will be driven by the rising interest in macro-first enhancements as well as emerging market roll-outs, which will usually focus on coverage first. After 2015, there will be a decline in the number of macro sites built out for LTE, and over the whole period, there will be a compound annual decline of 4% for base stations, though only 1.8% for macro sites overall because of the shift to software upgrades and virtualization.
Traditional homogeneous macro stations will be a tiny fraction of the market by 2019, while remote radio heads will feature in 25% of deployments still, just ahead of C-RAN. The other architecture to have a significant impact by then will be SuperMacro.
Although there will be a steady shift towards SingleRAN strategies (replacing legacy kit with new, flexible, multimode base stations), rather than overlays, there will be limited addition of brand new sites in the macro layer. Upgrading or overlaying existing sites will be the dominant approach to LTE build-out. All this activity will create an installed base of macro sites that will still top 5m in 2019, with the largest bases in Asia-Pacific and Europe, though there will also have been extensive decommissioning of sites because of new architectures, a shift of attention to the small cell under-layer, and RAN sharing.
Meanwhile, large-scale deployments of public access small cells are still in their infancy, but there is already talk of 'hyper-dense' networks to cope with hotspots of intense data usage. In total, the number of public access small cell sites - sites deployed in a separate layer (distinct spectrum from the macro layer and closer to the ground), and less than 200 meters in radius - will reach an installed base total of over 15m by 2019. These sites will be equipped with a variety of technologies including metrocells, WiFi, DAS and virtualized small cells. This is no longer a market which is only about one technology - self-contained metrocells - but about a combination of options to create data density where required. We have reduced our forecast for metrocells somewhat, but see increased addressable market for complementary technologies, driven by new types of operators including 'WiFi-first' players.
One of the significant shifts in the pattern of deployment, which we noted in our 2013 reports, has been intensifying operator focus on indoor deployment, often at the expense of outdoor. Outdoor dense roll-outs, especially of metrocells, have been pushed back by at least two years on average, while indoor build-out plans have remained unchanged or even been accelerated. The tipping point will be in 2016, when for the first time outdoor cells will be more than one-third of total deployments.
In regional terms, the small cells space is dominated by Asia-Pacific throughout the decade and this is one reason for the steadily increasing importance of TDD spectrum, as several Asian players, notably China Mobile, are TDD-led. However, most MNOs will deploy unpaired spectrum as a capacity option from year three or four of their LTE program - and it will often be focused on small cells, for which the short range of the primary TDD bands, 2.3GHz, 2.5/2.6GHz and 3.5GHz are well targeted.
The report models four alternative scenarios with different balances between the four equipment types, based on the range of possibilities which operators are outlining for their future roll-outs, and a series of variables including product delays/accelerations, emergence of standards, and cost patterns.