LTE subscriptions crossed the one billion barrier in the last quarter of 2015, says the GSA, but revenues from 4G equipment have already peaked, according to IHS Technology.
The GSA (Global mobile Suppliers Association) and Ovum said the final tally of LTE subscriptions at the end of last year was 1.068bn, or one in seven of all mobile connections worldwide. Its growth rate has now easily outpaced that of 3G, even though HSPA remains the main data workhorse for many operators, and some countries have not yet embarked on 4G. In the fourth quarter of 2015, LTE gained 156m new connections, 75% more than 3G. However, the LTE total will not overtake the 3G installed base until 2020, believes the GSA. It also noted that GSM subscriptions fell by 141m in the quarter.
For the full year, LTE gained 552.2m subscriptions worldwide, a growth rate of 107% over 2014.
Alan Hadden, VP of research at the GSA, said: “A daily average of almost 1.7m LTE subscriptions were being signed up during Q4 2015 and the rate of LTE subscriptions growth is accelerating.”
The Asia-Pacific region has the lion’s share of LTE subscriptions, with 580m, or 54.3% of the total. By December 2015 China had passed 386m LTE connections, adding almost 84m in the fourth quarter alone. North America was the second largest LTE market with almost 237m, though its share of the world total is down at 22.2%, while Europe accounts for 14.8%.
In the Latin America and Caribbean region, subscriptions more than quadrupled to over 54m, while the Middle East ended 2015 with 32.5m – annual growth of around 110% – and Russia with over 11.7m. There are now 480 operators with commercial LTE networks in 157 countries, and the GSA predicts this will increase to 550 this year.
More than one-third of operators are now investing in LTE-Advanced deployments and upgrades, particularly focusing on the carrier aggregation options. In total, 116 operators, almost a quarter of all LTE operators, have commercially launched LTE-Advanced service in 57 countries.
As subscriptions rise, however, many of the biggest operator network roll-outs are coming to an end, creating a squeeze for equipment vendors, even as the carriers look forward to a capex breathing space in which to monetize their 4G users more profitably.
According to new figures from IHS, the fourth quarter of 2015 saw $13bn worth of macrocell roll-outs, mainly driven by LTE in India and China, but warned that the LTE market has now topped out and will start to decline this year. IHS said it expects the LTE market to decline at a compound annual rate of 13% between 2015 and 2020.
Worldwide macrocell revenues in Q415 were up 3% year-on-year and 11% on the third quarter, while mobile infrastructure software revenues grew by 17% year-on-year, led by LTE-Advanced upgrades. For the full year, the worldwide macrocell infrastructure market totaled $48bn, and quarterly LTE revenue is now $2bn higher than 2G and 3G revenue combined.
“The fast LTE roll-out ramp that occurred in China in Q4 caused LTE revenue to soar 20% sequentially, and 20% from Q4 2014,” wrote Stéphane Téral, IHS’s senior research director of mobile infrastructure. “China has reached the end of its massive LTE roll-outs led by China Unicom and China Telecom; LTE roll-outs in western and central Europe are also very close to completion, and in the Middle East 3G upgrades are complete.”
Debate continues to rage about the 5G air interface – will the new generation of mobile networks require an entirely new air interface, or several; or will it rely on evolutions of current OFDM technologies; or be primarily an umbrella framework tying different options together seamlessly and flexibly according to use case? The choices, and the companies supporting them, will become clearer as the standards process gets into gear, but it is a brave company which tries to propose such a fundamental element of 5G, if it is not one of the inner circle of giants Read more at our publication Wireless Watch
In the first instalment of Wireless Watch’s Mobile World Congress special edition, we looked at a selection of operator trials of pre-5G networks and services. Now we turn our attention to the vendors’ roadmaps, and the most interesting insights they provided in Barcelona, into developments which may well find their way into future standard or de facto technologies.
Nokia was the most aggressive of the big names in claiming to be 5G-ready – although it was a heavily overused term throughout the show. The Finnish vendor went a step further and said operators would be able to offer ‘5G’ services as early as 2017 using its new AirScale RAN platform (clearly angling for those operators which are promising ever-earlier ‘5G’ services, mainly around major sporting events in Russia and Korea, but which will, of necessity, have to use pre-standard or heavily customized kit).
AirScale will accelerate the transition to 5G when it comes by providing a smooth migration path from current LTE, Nokia promised, rehashing one of the most popular messages which vendors relay when a new generation of technology is looming. Somehow, when that upgrade becomes necessary, it’s never as automatic, low cost and software-based as the roadmaps suggest – virtualized flexible cores and software-defined radios will help, but there is still the question of the antennas, for instance. But Nokia, like its rivals, needs to persuade operators to keep investing in 4G now, rather than wait for 5G over the horizon.
CTO Hossein Moiin said the AirScale demo was “the industry’s first demonstration of how 5G will work in practice, going beyond previous experimental systems”, making 5G “no longer a distant vision” – ambitious stuff, considering the work on standards has only just begun. But some crucial elements of 5G are already accepted, Nokia argues, and these are the focus of AirScale – in particular, ultra-low latency, and a system designed with machines as well as humans in mind.
AirScale’s claim to be a vision of the future rests on its cloud-based architecture and open interfaces, which allow it to support all the radio technologies simultaneously in one base station; and to use any architecture topology with huge levels of scalability, all defined in software from the cloud. It also claims to use 60% less energy than Nokia’s current platforms. The server end of its Cloud-RAN solution uses Nokia’s AirFrame IT hardware, launched at MWC 2015, and Mobile Edge Computing is implemented on those same servers in order to harness information from the radio effectively and support low latency services.
Baseband units can be chained to support massive capacity and IoT connectivity, and a step-by-step road to virtualization is supported by Nokia’s NetAct and CloudBand offerings, which can work with legacy RANs and C-RAN at once. As well as the multiband AirScale base station, the vendor added AirScale WiFi (access points plus a WiFi controller, also running on AirFrame), and a common software layer which runs across small cells, macrocells and WiFi.
CEO Rajeev Suri said: “I believe that 5G not only must happen faster than expected – it will happen faster than expected”, which was why vendors could not wait for standards to be finalized before launching 5G products – a line also taken by ZTE with its Pre5G portfolio, though not by Huawei, which prefers the term 4.5G for its most advanced network offerings, and argues that these will meet operators’ needs for years to come, certainly until fully standardized 5G can be launched.
“5G is different. 5G must happen fast because important use cases demand it. If we know that 5G can help save lives, improve our environment and make our lives better, we need to move faster,” Suri said.
ZTE has unveiled the latest developments in its Pre5G range, the Ultra Dense Network (UDN), claiming this can provide a highly functional bridge to emerging 5G platforms. The UDN works with existing networking models but aims to enhance the user experience with a combination of techniques including interference management, suppression and mobility enhancement.
The system adopts system frequency multiplexing to address interference caused by
overlapping cells in dense networks. According to ZTE, this technique can boost downlink rates by 10 times in areas of cell overlap and will be an important component of 5G.
The equipment also uses other expected 5G technologies, but on current network infrastrucfture and sites – like Nokia, holding out the hope of a smooth migration down the road. These include massive MIMO and Multi-User Shared Access (MUSA), which ZTE has been testing for over a year. Early in 2015, it announced the first commercial base station to implement its pre5G architecture, particularly massive MIMO and MUSA, and this has completed field tests with a number of global operators, including China Mobile and Softbank.
Zhang Jianguo, wireless general manager at ZTE, said Massive MIMO “will be in commercial use in China and in other countries later this year”.
Qualcomm and Ericsson:
Qualcomm and Ericsson have announced their latest collaboration, and will work together on early trials and verification of key 5G technology components, to support the technical work required for 3GPP standardization in Release 15. The companies also said they would drive interoperability in alignment with 3GPP to enable rapid adoption of new 5G standards.
“As we did in both 3G and 4G, we are excited about collaborating with leading operators and industry stakeholders such as Ericsson in the development of a unified, more capable 5G platform” said Matt Grob, Qualcomm’s CTO. “Now that the vision and interest for 5G are well established, it is time to focus on the technical and engineering work required to support operator trials and commercial network launches.”
Intel was determined to put paid to any perception that it might be an outsider in the 5G race. Not only was it focusing heavily on virtualization and Cloud-RAN – changes to the mobile network where it has the most obvious opportunity to enter the inner circle – but it was talking up partnerships with Ericsson, Nokia, LG, Cisco and Verizon to develop technologies for the IoT, smart cities, driverless vehicles and augmented reality – all important drivers of 5G development.
“5G represents a significant shift for these networks and we think it’s essential to get ready ahead of the curve,” said Aicha Evans, general manager of the Intel communication and services group. “Rather than just being about a personal computing platform, it’s about everything that computing can connect and how it connects.”
Among the specific announcements were IoT-oriented connectivity solutions like the
Atom x3-M7272 wireless communication platform for “automotive applications capable of powering advanced security features”; and the XMM 7120M LTE modem, optimized for machine-to-machine applications.
Intel also announced a new collaboration with Cisco and its strategic partner Ericsson, to develop a 5G router. This will be submitted to the Verizon 5G Technology Forum, of which all there vendors are members, and will aim to improve speed, latency and IoT scalability for business and residential customers.
NEC has developed a prototype of a compact, A4-sized massive-element Active Antenna System (AAS) for 5G small cells operating in the lower SHF (super high frequency) bands, from 3 GHz to 6 GHz.
As well as its small form factor, the combined antenna/RF solution boasts fully digitized antenna beam control and MIMO pre-coding to improve the precision of beamforming and increase. The vendor said that, used in conjunction with NEC’s spatial multiplexing technologies, the AAS can achieve more than 10 times greater per-cell throughput than conventional LTE base stations. It is now working on trials of the AAS with NTT Docomo.
“5G communications achieve higher speeds and increased capacity through the utilization of high frequency bands which are capable of securing wider bandwidth. On the other hand, high frequency bands face the issue of heavy propagation loss in communications. As a solution to this issue, NEC has focused on beamforming technologies which improve communication distances and reduce interference,” said Nozomu Watanabe, general manager of the firm’s mobile RAN division.
NEC also issued three white papers related to 5G – ‘Optimum Network Architecture for Full-scale IoT’; ‘NFV C-RAN for efficient RAN resource allocation’; and ‘Massive MIMO for High-capacity Mobile Access’. These are the three areas which the company believes will be most central to 5G’s architecture and business case.
For the IoT, it considers coordination between Mobile Edge Computing and the cloud as well as full context awareness when allocating resources. The C-RAN paper outlines NEC’s approach to this architecture, including its proprietatry inter-cell interference mitigation techniques and its fronthaul design, and describes a migration to 5G based on “virtualization of cells”. And the third paper shows how Massive MIMO can be applied to small cells, using technologies like NEC’s new AAS.
NEC is also working with MediaTek to develop 5G air interface and chipsets.
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These were the biggest themes this year in Barcelona – no big surprises on the topic list, though there were plenty of unexpected twists within each area, many of them concerned with unexpected new alliances (Qualcomm joining the rebranded Open Interconnect Consortium; Facebook luring Deutsche Telekom and SK Telecom into its Telecom Infra Project). In Wireless Watch’s two special MWC editions, published today and on Friday, we distil the essence of each of these big topics from a mass of announcements, debates and hype.
Inevitably at the center of serious discussions and marketing hype, though lent a touch of reality by the start of the first meeting of the ITU’s IMT-2020 working party, which will specify frameworks and assess candidate technologies and spectrum, around the world in Beijing. In addition to R&D wizardry, there was much discussion of real world use cases, many of them in vertical and Internet of Things markets; and endless permutations of operators, vendors and academic bodies announcing 5G alliances.
Small cells and densification:
Small cells have been on the ‘best of MWC’ list for years now, but in 2016 they are no longer in their own ghetto, but underpinning many of the year’s big architectural themes. Operators are starting to densify their 4G networks in the bid for massive capacity, and small cells are intrinsically connected to several of this year’s bid ideas, including LTE-Unlicensed and true HetNets. A significant uptick in adoption is being driven by the enterprise need for excellent mobile coverage indoors, and will be further increased by the additional of virtualization and multi-operator platforms to the small cell mix.
Virtualization and Mobile Edge Computing:
Rather like 5G, these key architectures made the shift from interesting R&D activities to concrete element of operators’ plans, in most cases a couple of years ahead of 5G, as well as being a key future enabler of the next generation of services. The European stakeholders may be concerned about dwindling influence over core modem standards, but ETSI is asserting huge influence in these higher level frameworks, via its NFV, Mobile Edge Computing and new MANO (management and orchestration) efforts, all of them creating a common platform for the most important new approaches to mobile networking.
Facebook and Google:
The two web giants had a very high profile in Barcelona, and while some of their activities mirror one another – like last year, there was plenty of talk of drones and balloons – they are certainly not forgetting that they are engaged in a bitter head-to-head, to drive the next generation of the web experience, which will be predominantly wireless. Epitomizing this fight was Google’s endorsement of RCS (Rich Communications Services), the GSMA’s ailing attempt to defend operators’ voice and messaging businesses against over-the-top alternatives like Facebook’s WhatsApp and Messenger; and Facebook’s Telecoms Infra Project (TIP), which seeks to bring open source and hyperscale technologies into the telecoms networks, not just the data center, to shake up operator economics.
While there was plenty of analysis of the decisions of November’s World Radio Conference about 4G and potential 5G spectrum, there was also a heavy emphasis on integrating unlicensed frequencies into the carriers’ mix, as well as adopting new, flexible licensing schemes such as dynamic spectrum access. The expansion of the Qualcomm-led MuLTEFire Alliance and the imminent trials of LTE-Unlicensed set the scene, and the US’s 3.5 GHz scheme was also under the spotlight.
Internet of Things:
Since the many manifestations of the IoT are the biggest hope, for most of the mobile industry, that revenues and profits can continue to grow in future, it was unsurprising that MWC was a show about connected objects, not smartphones (despite the high profile launch of the Samsung Galaxy S7 and the LG G5). There was a real attempt to relate IoT technologies to real business models, and an improved presence for the vertical industries which will work with – or compete with – the MNOs to drive the new services. Connected and driverless cars grabbed center stage as usual, but there were many other aspects to the IoT-fest, from smart factories and Industry 4.0 frameworks; to an unexpected rapprochement between Intel and Qualcomm in the relaunched Open Connectivity Foundation. And in the home of the GSMA community, there was a starring role for the upcoming 3GPP standards for low power wide area networks (LPWANs) – NB-IoT and LTE Category-M – as they embarked on the quest to fend off unlicensed spectrum challengers.
In last week’s edition, we looked at how the major OEMs will need to tread a careful balance, at this year’s Mobile World Congress, between being ahead of the pack on the 5G roadmap, and injecting plenty of life into that nearer term source of revenues, LTE-Advanced – in particular, the last full 3GPP 4G releases, 13 and 14, known as LTE-Advanced Pro.
Huawei has been calling these ‘4.5G’ for some time, and for once this is not just a marketing slogan but a real summary of how the Chinese vendor – and much of the industry – sees LTE-A Pro. A stepping stone to 5G, yes, but one which will continue to evolve in parallel with the new generation, and with significant overlap. Operators will not tolerate a complete step upgrade again, and even if new air interface technologies are introduced alongside the current OFDM-based ones (especially for the IoT), they will look to virtualization and software-defined networking to enable them to evolve their platforms gradually, in line with real customer need, and to support multiple technologies at once.
All of which makes 4.5G quite a meaningful label, for once. Huawei, the last of the big OEMs to preview its major MWC announcements, said it believed more than 60 commercial 4.5G networks would be deployed this year, ushering in a “golden five-year period” for Releases 13 and 14. “4.5G is the natural evolution of 4G and necessary transition to the 5G,” said Ryan Ding, president of products and solutions. “It can effectively protect operators’ investments and enable them to provide faster services and better user experience on the basis of existing infrastructures.”
Huawei’s definition of 4.5G, which it unveiled over a year ago, includes gigabit download speeds – which are supported in Qualcomm’s latest modem, the X16 – and sub-10ms latency. In particular, the new releases will make LTE – initially designed almost exclusively for faster mobile broadband – more suited to the Internet of Things, with new specifications like Category-M and NB-IoT, and the ability to support up to 100,000 connections per cell (the latter another of Huawei’s 4.5G criteria).
Huawei said it had already demonstrated or tested 4.5G technology with more than 20 operators in nine countries (Canada, China, Germany, Hong Kong, Kuwait, Norway, Singapore, Turkey and the UAE.). It added that operators in China, Hong Kong and Singapore had all achieved gigabit transmissions using pre-standard Huawei 4.5G kit. In addition, it added that Korea and the UK had started building LTE integrated trunked radio networks, and MNOs in Korea and China had launched commercial trials of NB-IoT.
By 2020, Huawei predicts the average mobile customer will be using about 5GB of data per month and there will be around 3bn “connected things” on cellular networks. “The answer to this vision now is 4.5G,” it says.
It also said it was engaged in 5G trials with some operators, but refused to follow Ericsson in putting a number on it this (the Swedish firm claims “nearly 20”). “We will have to wait for five years or even longer for 5G,” said William Xu, Huawei’s chief marketing strategy officer. “That is why Huawei has proposed 4.5G.”
Among the actual products to support 4.5G, Huawei unveiled a new family called GigaRadio. The first members are a blade remote radio unit (RRU) and an active antenna unit. The former is 20% smaller and 50% faster than other products targeting the same space, Huawei claimed, and can support gigabit speeds.
The OEM was not only reiterating its 4.5G mantra at its pre-announcements, even though its label is coming into line with the wider LTE platform with the appearance of LTE-A Pro on the horizon. It also set out a five-point plan to address the future needs of telecoms operators undergoing the transformation to digital. The five are Big Video or video everywhere; Big IT; Big Operations, mainly focused on agility; Big Architecture, or elastic networks; and Big Pipe for ubiquitous connectivity.
The big message was clear – for digital transformation, telcos need to rethink their platforms from end to end, and only very few vendors can address every link in the chain (Huawei, Nokia and Ericsson/Cisco). And as many observers pointed out, there was a clear overlap between Huawei’s five initiatives and the key areas Ericsson identified as growth drivers in 2014. The Swedish firm saw those growth areas – video and media, cloud platforms, IP, OSS/BSS and ‘industry and society’ – growing their revenues by 20% to total $5.3bn in 2015.
To achieve similar results from its new five-point plan, Huawei said it would invest $1bn over five years in a “developer enablement program” to expand the ecosystem around its framework, and says it already has 600 partners in its 10 open labs in China, Europe and other regions.
Meanwhile, other vendors were far less coy about overusing the ‘5G’ term than Huawei. The head of Samsung’s Network business unit, Youngky Kim, previewed the Korean firm’s own MWC infrastructure plans, including what it said were key enablers of 5G such as “multilink connectivity technology, centralized radio, IoT and mmWave radio access solutions”. Kim said: “5G technology will offer us a new level of experience, which is immersive, tactile and ubiquitous. Thanks to seamless mobility, higher throughput and low latency of 5G technology, new services like hologram calls, virtual reality broadcasting of live football games and self-driving cars will enrich our lives.”
In Barcelona, Samsung promises to “make 5G technology a reality” with a demonstration of millimeter wave radios, transmitting eight UHD 4K videos at once with latency below 1ms.
On the LTE-A Pro side, it will also launch solutions to support LTE in 5 GHz spectrum (LTE-U and LTE-LAA), plus MP-TCP (multipath transfer control protocol), Distributed-RAN Inter-site Carrier Aggregation and Samsung Smart Multi-Link. It names MP-TCP as one of its “key priorities”. The technology allows aggregation of two or more separate networks running different RATs, such as WiFi, 3G, 4G, 5G and LPWA. It does not just connect to them simultaneously, as in dual or multi-connectivity, but merges the data streams from each network at the IP layer, to make aggregation simpler and faster. The technology has already been commercialized in Korea.
Meanwhile, Smart Multi-Link is based on Samsung’s Unified Core architecture. This is designed to support backward and forward compatibility by supporting cellular networks from 2G to 5G, plus non-3GPP technologies, using NFV and SDN approaches to enable multiple distributed RANs to behave as a single pool of capacity around a single core.
Also on the virtualization front, it has upgraded its Cloud-RAN platform to version 2.0+, integrating new SON (self-optimizing network) and scheduler elements. Among the improvements are the ability for base stations to detect interference at the cell edge and control radio transmission power in real time, to boost data throughput by an average of 40-50%.
For the IoT, Samsung will show off a range of offerings including an IoT-optimized core, a specialized standalone base station for IoT, gateways, and support for the LPWA technology LoRa. It will also be offering a package of equipment, sensors and services for public safety IoT applications, claiming to be preparing “beyond standards” implementations to address mission critical use cases, as well as supporting Cat-0, Cat-1, Cat-M and NB-IoT.
The operators will be vying for 5G glory as enthusiastically as the vendors. Vodafone, AT&T, NTT Docomo, Telefonica and SK Telecom are among those which will demonstrate pre-5G technologies or announce major trials. Vodafone, has announced an extended set of partnerships – with Huawei, Nokia, Ericsson, Intel and Qualcomm – to research 5G technologies and prepare its networks for the transition, whatever that may involve in the real world.
Pre-standard operator trials are important because they help to define real requirements and shape the platforms in the direction of concrete business cases rather than technical wizardry. Vodafone aims to work with its partners to “define industry standards, establish technical guidelines and prepare product roadmaps”. It will evaluate the emerging 5G technologies to decide which it believes should be part of the standards; test hardware and software in its group Innovation Labs in the UK; conduct trials in global markets; and prioritize the benefits of 5G that can be brought to market by 2020.
CTO Johan Wibergh said: “The telecoms industry is still establishing what technology will deliver the benefits we expect from 5G, so it is important to establish dedicated research programmes with these leading global companies.”
Vodafone also chairs the NGMN (Next Generation Mobile Networks) 5G Requirements and Architecture group.
Over the pond, AT&T is working with Ericsson and Intel to launch a trial 5G network in Austin, Texas, in order to test emerging concepts like millimeter wave radios and virtualized RAN. Lab tests will take place in the second quarter of this year, and outdoor trials in the second half. By the end of this year, AT&T says it will provide real world connectivity to certain locations in Austin, using its selected ‘5G’ technologies, though these will initially be for fixed access only.
John Donovan, chief strategy officer and group president of technology and operations, said: “New experiences like virtual reality, self-driving cars, robotics, smart cities and more are about to test networks like never before. These technologies will be immersive, pervasive and responsive to customers. 5G will help make them a reality. 5G will reach its full potential because we will build it on a software-centric architecture that can adapt quickly to new demands and give customers more control of their network services. Our approach is simple – deliver a unified experience built with 5G, SDN, big data, security and open source software.”
Ericsson will also be showing off its 5G partnerships with Korea Telecom and NTT Docomo at MWC, demonstrating radio prototypes which support Multiuser MIMO, and beam tracking in millimeter wave bands, to boost throughput beyond 25Gbps.
Seizo Onoe, Docomo’s CTO, said in a statement: “Both companies are already conducting joint outdoor trials to understand how 5G will really perform in the field. This will enable us to plan for the new and enhanced services that we will be able to offer with 5G. We will be in a good position to highlight our commercial 5G capabilities in 2020.”
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Ever since the mobile access network started its migration to IP, the narrative has centered on whether Ericsson, the mobile king, or IP giant Cisco, would be the winner in the new market. That made the news that the two companies are entering into a deep partnership seem shocking at first - but then completely logical.
The two companies announced on Monday that they will cooperate from development to delivery of systems for carriers and enterprise customers, and predicted a full $1bn each in additional revenue by the end of 2018, as a direct result of the alliance. They will focus their efforts heavily on cloud computing the the IoT (internet of things), and Ericsson will receive patent licence fees from its new friend. The Swedish firm also expects to save SEK1bn ($115m) a year from the deal.
There are huge challenges in achieving workable cooperation between two companies with such different approaches - Ericsson still R&D-heavy and increasingly services-driven; Cisco a sales machine focused on hardware and software, and tending to buy the new technologies it needs.
But the deal has fewer risks than a merger (even supposing that got past antitrust) and is a decisive move to preserve both partners' markets in the face of the rise of Huawei and the merger of Nokia and Alcatel-Lucent. Both companies are traditionally wary of major mergers and Ericsson resisted all pressure to follow Nokia's lead and acquire a router company like Juniper. "I don't believe in big mergers - this is by far the best solution you can get," Ericsson CEO Hans Vestberg told Bloomberg. "This is much faster and more efficient."
The wireless infrastructure business is consolidating as traditional hardware becomes a game of scale and the value shifts to virtualization and SDN, services and cloud platforms. In these areas of future growth, Cisco and Ericsson are far more complementary than they are in their traditional markets. While Cisco had little chance of penetrating Ericsson's mobile RAN fortress, nor Ericsson Cisco's enterprise IP heartland - despite strong attempts by both around the edges - they can target one another's customers with their software-oriented platforms.
Ericsson has a far more developed services offering - Cisco's structure and roadmap is still mainly product-focused, though the cloud, IoT and SDN markets will inevitably bring elements of managed services into the mix. Their strengths and weaknesses in virtualization, orchestration and SDN are different, and while Cisco has a more end-to-end approach to the IoT, Ericsson has been developing the links between a hosted cloud service and billions of endpoints.
And of course, they both have a core customer base of large service providers, though they usually sell different products to different departments. Even that is changing - as seen in AT&T's Domain 2.0 and many other operators' bids to shake up their supply chains, the providers of base stations, routers and other kit are being brought together around SDN.
Better then, to play nicely in those playgrounds than try to muscle each other to the sidelines, and in doing so, wrongfoot the other competitors, without the disruption of a huge merger or joint venture, Nokia/ALU-style. Indeed, as those two vendors spend much of 2016 working out the details of their marriage, with the aim of offering a full scale IP/mobile platform plus software, Ericsson and Cisco could leapfrog them and provide a similar combination in a simpler way.
Both partners will have the chance to squeeze rivals - Huawei for both of them, Nokia/ALU for Ericsson, Juniper, ALU and agile SDN specialists for Cisco. Even Huawei will have to look nervously at an axis which boasts $75.4bn in combined revenues in the last fiscal year and has 76,000 professional services staff.
They proclaimed their new alliance as one which would create the "networks of the future", and offer customers "the best of both companies: routing, data center, networking, cloud, mobility, management and control, and global services capabilities."
As well as offering an end-to-end portfolio, they outlined two other key goals - to create a new mobile enterprise platform based on a "highly secure technology architecture for seamless indoor/outdoor networks", which would presumably tap into Cisco's WiFi and Ericsson's LTE and 5G work; and the acceleration of platforms for the IoT.
Among the details of the deal are commitments to create reference architectures and products;
systems-based management and control; a broad reseller agreement; and collaboration in key emerging market segments. Also, a combined team will start work on a joint initiative focused on SDN and virtualization.
They will cross-licence each other's patent portfolios - they have a combined 56,000 patents, though clearly the weight is towards Ericsson, which will receive the revenues from the agreement. They will also discuss Frand (fair reasonable and non-discriminatory) policies.
Vestberg said in a statement: "Foremost, we share the same vision of the network's strategic role at the center of every company's and every industry's digital transformation. Initially the partnership will focus on service providers, then on opportunities for the enterprise segment and accelerating the scale and adoption of IoT services across industries. For Ericsson, this partnership also fortifies the IP strategy we have developed over the past several years, and it is a key move forward in our own transformation."
His counterpart at Cisco, Chuck Robbins, said: "With the pace the market is moving, the successful companies will be those who build the right strategic partnerships to accelerate innovation, growth, and customer value … We have worked with Ericsson during the last year on developing a strategy for future industry leadership, and can start executing together today."
The firms secured public support from the CEOs of key customers including Vodafone and AT&T, welcoming the potential to accelerate innovation in the integration of wireless and IP, and the move to the IoT.
And Roger Gurnani, chief information and technology architect at Verizon, summed it all up, saying: "This global partnership has the potential to reshape the industry."
As operators start to prepare their networks for significant increases in capacity demand and densification, they need more of everything – spectrum, equipment and of course sites. One of the most important considerations, as MNOs consider radical changes in network architecture, is how that will affect their cell sites. According to whether they place most emphasis on enhancing macrocells with techniques like Massive MIMO; on dense small cell networks; on distributed antenna systems (DAS); or on Cloud-RAN, they will have very different site requirements, some of them easier to achieve than others.
The new architectures will make it necessary for operators to work with new partners, such as local authorities and utilities, as well as deciding whether to invest in locations themselves or rely on ‘as-a-service’ approaches. And the changes will, of course, also have profound implications for tower operators, at a time when many MNOs are moving away from owning their own sites, and the independent tower provider is on the rise.
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Slowing of Chinese 4G orders, continuing US softness, and economic situation in Brazil and Russia, lead to fall in quarterly sales
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The Chinese market has a disproportionate effect on vendors' financial cycles, and it is an unpredictable beast. Ericsson, whose 11% second quarter revenue growth was largely due to Chinese 4G contracts, saw the opposite effect in the third quarter, which saw a decline in sales on a constant currency basis.
Revenues actually rose by 3% year-on-year to SEK59.2bn but without favourable currency movements, they would have been down by 9%.
The company blamed a slowdown in Chinese 4G, as well as economic weakness in two other critical BRIC markets, Brazil and Russia - which puts a lot of pressure on the fourth one, India, to deliver some big deals as the major carriers move towards LTE.
"In markets where there has been pressure on currencies, purchasing power has come down and we've seen that in Brazil and Russia," CEO Hans Vestberg told the earnings press conference, though he insisted the Chinese slowdown was temporary. "There is still tremendous demand for 4G in China and we've never seen such a quick roll-out. It's just that customers slowed down the pace in the third quarter."
There is no such optimism about Ericsson's biggest market, north America, which accounts for about 25% of its sales but has slowed significantly since 4G roll-outs at AT&T and Verizon peaked. This factor has been hitting Ericsson all year and it has yet to see improvements. North American sales rose by just 2% on a reported basis to SEK14.4bn ($1.7bn), with the OSS/BSS and TV platforms being rare highlights in the region. However, in an interview, Vestberg tried to be upbeat, saying: "It's not falling. It's on the level that we've seen in other quarters."
Despite these pressures, Ericsson's Q3 net income was up 19% year-on-year to SEK3.1bn ($370m), though there are concerns that too many of the profit improvements are coming from the firm's major reorganization program, which looks to reduce annual operating costs by SEK9bn ($1.06bn), rather than organic business growth. Staff numbers fell by almost 1,000 in the quarter, to 116,240 people.
Gross margin was down by 1.3 percentage points to 33.9%. In revenue terms, the worst performer was the core Networks unit, with sales down 4% even with the positive currency changes, to SEK28.8bn. Global Services is almost as big as Networks now, and its sales were up 11% to SEK27.1bn, while the third division, Support Solutions, was up 8% to SEK3.3bn.
Ericsson, like its rivals, is relying on building up new revenues in areas of growth, and claimed to have seen 10% sales increase from these sectors, though it does not break them out. Its target growth businesses are OSS/BSS, media, IP, cloud, and what it calls 'industry and society', which includes smart cities and the internet of things.
BY CAROLINE GABRIEL
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As outgoing CEO John Chambers hosted his last Cisco Live annual conference, it was fitting that the centrepiece of the event was virtualization. The somewhat abrupt timing of Chambers' retirement indicated that he felt the giant IP company was at an important turning point, which made it the right time for a change of leadership.
The move, by carriers and enterprises, from physical to virtual networks and towards software-defined networking (SDN) will define the next few years in Cisco's core business and decide whether it remains in the dominant position which Chambers, despite recent turmoils, carved out for it.
As part of a broad set of SDN announcements, Cisco executives spent some time focused on operators, saying that their progress towards virtualization was more rapid than many had expected. It was anticipated that carriers would largely confine their first-wave efforts to relatively discrete platforms like the packet core, but in fact, according to Kelly Ahuja, Cisco's SVP for the service provider business, they are actually trialling virtual network functions, as well as SDN, across a wide range of elements, including firewalls, load balancers and VoLTE infrastructure.
"Most operators are telling us - look, my network is a chaos, an IT construct is a chaos. Virtualized chaos is still chaos, so what you got to do is show me what value these things can add for me," Ahuja said.
In that context, Cisco is focusing on one of the areas with the greatest potential to turn virtualization into gold for operators - virtual managed services, which provide the ability to support large numbers of third party offerings, from flexible MVNOs to corporate customers' services. "Business customers are where we're starting to see most relevant application and deployment of that," Ahuja said, according to SeekingAlpha.
Building platforms to support large numbers of customers' and MVNOs' offerings is a key commercial goal of AT&T's Domain 2.0 SDN program. Cisco is working with the US carrier, and with rival Verizon, on their SDN projects, which are among the most advanced in the telco world. This will cheer investors, who have been concerned at signs that Cisco might start to be squeezed out of its central position in the infrastructure of AT&T and other major customers.
The first wave of Domain 2.0 vendors announced by AT&T indicated the disruptive effect SDN could have on its supplier roster, and included Metaswitch, Tail-f and Affirmed Systems, and excluded Cisco, (though Cisco subsequently hit back by acquiring Tail-f). Verizon, which recently announced its own SDN program, has stuck with traditional partners in phase one and will add specialists and start-ups later - its key vendors are Cisco, Alcatel-Lucent, Nokia, Ericsson and Juniper. These large companies will create the framework architecture and the interface specifications, and Verizon's first targets are the relatively low hanging fruit of SDN - the data center, packet core and IMS.
To help bolster its position in the carriers' SDN roadmaps, Cisco is steadily adding to its platform, and says it now supports 15 virtual network functions for telcos. In a long list of announcements at Cisco Live, the most carrier-focused were additions to the Border Gateway Protocol (BGP) EVPN. This is targeted at service providers and it has now gained a Virtual Topology System (VTS). For operators requiring a programmable fabric, VTS adds the ability to provision and manage a VXLAN, based on BGP EVPN, as a software overlay across Cisco Nexus switches. (VXLAN is a proposed protocol for running a virtual network on existing Layer 3 infrastructure, and an important tool for allowing operators and enterprises to migrate gradually to SDN, without sacrificing hardware investments.) VTS will support any virtual switch that supports the BGP protocol.
Cisco first introduced BGP EVPN on the Nexus 9000 switch early this year but it is now being extended to the Nexus 5600 and 7000 families, and to the modular Nexus 9500. However, the Nexus 1000v does not yet support BGP.
While programmable fabric will be important to large carrier SDN programs, some smaller ones may use the more pre-packaged Cisco offering, Application Centric Infrastructure (ACI), which is mainly targeted at enterprise customers and the SDN 'mass market'. New extensions to the fabric software include extensions to support integration with Microsoft Azure; plus a plug-in for VMware vCenter plug-in; an ACI toolkit for simplified network provisioning; and a 'stretched' fabric that can extend from 30km to 150km over DWDM, pseudowires and dark fiber for multi-site data centers.
Cisco also announced two Nexus 3000 Series switches based on merchant silicon. The Nexus 3232C is a 32-port 100G switch based on Broadcom's Tomahawk chipset, while the Nexus 3264Q is a 64-port 40G variant. Both will ship in the third quarter with prices starting at $35,000. They indicate another disruptive aspect of SDN - the shift towards hardware which is more commoditized in design, openness and, of course, price. That in turn will drive vendors like Cisco, which have relied heavily on ASICs designed inhouse, towards the economics of merchant silicon, boosting providers like Broadcom.
BY CAROLINE GABRIEL
The Small Cell Forum has unveiled the latest instalment of its Release Program, this time focused on virtualization, a trend which will have a deep impact on small cell deployment and may, in time, spur adoption of new HetNet architectures.
Release 5.1, like its predecessors, consists of case studies, technical primers, best practice guides, business cases and other resources, designed to set out technical and commercial options and to lower the barriers to deployment for would-be small cell adopters. It is a point update to Release 5, and adds 12 documents, five of them focused on virtualization (other topics include LTE-LAA and 5G).
The SCF put virtualization on its agenda a year ago, and now it has laid out its roadmap. At the heart of this is nFAPI (Network Functional Application Platform Interface), which underpins the Forum's preferred architecture split for a virtualized small cell RAN. It provides the interface bwteen the radio head, where most of the latency-specific RF activity remains, and the centralized media access controller, in which most of the intelligence is concentrated, and which may be in the cloud or more localized.
One of the big debates around vRAN, of course, is where the architectural split should occur, and how many functions should be centralized or distributed. Real world choices will depend on the individual operator's objectives and resources (for instance, access to dark fiber), but the Forum believes a common framework approach will help some carriers accelerate and simplify their projects. But it acknowledges that one approach will not suit all, and also plans to explore a second approach, centered on PDCP (Packet Data Convergence Protocol - the layer of the LTE stack which performs IP header compression and decompression).
As David Chambers explains in his ThinkSmallCell blog this week (http://www.thinksmallcell.com/Standards/small-cell-forum-become-virtual-and-paint-hetnet-roadmap.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+ThinkFemtocell+%28Think+Small+Cell%29), the main advantage of the PDCP split would be to avoid increase in backhaul overheads. Backhaul and fronthaul capacity and latency requirements are among the barriers to vRAN deployments, but the Forum says its nFAPI approach limits the impact on this, as backhaul can still be carried over IP, though with lower latency tolerance. The body said the approach was "well aligned with the packet switched backhaul service conventionally used to support small cell deployment".
Forum chairman Alan Law said: "We've found clear benefits and drivers towards centralisation and virtualization of the small cell network. These facilitate the scalability of small cells and enable functions to be moved around depending on loading conditions or availability of compute and transport resources."
A Rethink survey of mobile operators in 2014 found a clear overlap between small cell densification and vRAN in carriers' plans for next generation network architectures. With about 50% of MNOs planning some elements of vRAN or Cloud-RAN in their five-year plans for LTE, 90% of those also had urban small cells on their roadmap. And over one-third of those respondents said vRAN activities would be specifically motivated by the need for densification. Reasons to kick off vRAN projects in the small cell layer include the belief that virtualization will enable resources to be assigned more flexibly and cost-efficiently; that large numbers of cells will require centralized and automated resource allocation to avoid over-capacity and network chaos; and that there will be less risk, and more immediate benefits, from applying virtualization to a new and somewhat discrete small cell layer, rather than the well-established macro network.
Sue Monahan, CEO of the SCF, said: "Some of our most influential work to date has been around integrating small cells with not just the macro network, but with service integration, WiFi technologies and enterprise networks. Our new roadmap will help operators accelerate the delivery of integrated HetNet deployments, while also leveraging new trends from virtualization through to 5G, M2M and LAA." [Licensed Assisted Access - LTE in unlicensed spectrum.]
The Forum says 11m small cells have been deployed as of March 31, though the deployment of public access networks remains in its infancy - 95% of the base is residential, while there are 450,000 enterprise small cells installed, 16,500 in urban environments, and 20,000 for rural and remote applications.
Some players, such as ip.access's CTO Nick Johnson, believe that deployment of public access small cells will only be jumpstarted when there are better platforms to support multi-operator services. The ability for multiple providers to offer services on a common small cell network requires better management and quality control than the standard, MOCN, enables, since it takes a 'free-for-all' approach. Frameworks should allow a primary operator to build out a network (possibly working with an integrator, 'as-a-service provider, or vertical market partner) and then open it up to other MNOs and MVNOs.
The Forum's next major Release will appear in about a year's time. Release 6 will focus on the broad issues surrounding the evolution of the HetNet. This may look at some of the emerging architectures which their developers hope will be part of '5G'. For instance, NTT Docomo's Phantom Cell concept integrates small cells and virtualization, in a currently proprietary way which could feed into standards.The Forum believes one of its contributions will be to collate and distil the requirements of a large base of operators, and then feed the common themes into the vendor ecosystem and into standards bodies and specifications.