Etisalat goes big on OpenRAN with Parallel Wireless

Operator group Etisalat is trialing OpenRAN tech across its markets in Middle East, Asia and Africa in partnership with ORAN specialist Parallel Wireless.

One of the reasons for this sudden keenness on ORAN, which seeks to unbundle the components and software inside the radio access network with a view to making it cheaper and more flexible, is apparently the concept of ‘All G’. That refers the convergence of all generations of cellular technology onto a single software platform, which would both save cash and simplify network management.

“Today’s announcement is a global achievement setting a technological benchmark across our markets,” said Hatem Bamatraf, CTO of Etisalat International. “This is in line with our long-term strategy and vision of ‘Driving the Digital Future to empower societies’ that has translated to provide the best-in-class customer experience and deliver best value to our shareholders.

The global trials of OpenRAN with Parallel Wireless reiterate Etisalat’s commitment to our vision encouraging us to take the lead in OpenRAN by conducting field trials with various leading technology partners to create an innovative ecosystem in all of our markets. This is also the world’s first ‘All G’ OpenRAN set to provide efficiency and cost benefits for 4G and 5G in addition to setting a roadmap for the next generation of telecom networks.”

This looks like a significant win for Parallel, which is all-in on ORAN. Most of the telecoms industry (bar, maybe, the big RAN vendors) is keen on the concept of commoditising the RAN such that you can pick and choose your components and software. But we still seem to be some way from ORAN being able to support commercial mobile networks, so the key for companies like Parallel is to maintain momentum and interest while the technology evolves.

“As one of the leading communication providers in the emerging markets, Etisalat understands the true potential of greater leverage to their business, in both high end and low-end markets with a greater buying power by shaping the telecom ecosystem and embracing new network architectures, such as OpenRAN,” said Amrit Heer, Sales Director, MENA at Parallel Wireless.

“We are proud to have partnered with Etisalat for these engagements to deliver coverage and capacity without making extensive capital investments associated with legacy network deployments. We are proud to have been selected to support Etisalat in reimagining wireless infrastructure to be much lower cost ensuring access to innovative digital services in the region.”

ORAN is one to keep an eye on in the coming months and years. It represents a significant threat to the business models of the big RAN vendors, who sell ‘closed’ RAN solutions that require you to go all-in with them. At the very least the prospect of ORAN is a useful stick for operators to beat their vendor partners down on price with and we had expected it to be a major talking point at MWC 2020.

Three UK in a spot of bother as senior execs head for the exit

With Three’s big bet on Huawei proving to be somewhat of a disaster, two senior technologists are heading towards the exit.

Many have focused on the difficulties faced by BT in light of Huawei’s limited role in the 5G future of the UK, but Three is potentially facing the biggest headache of all. And just as the team begins to pick up the scraps of a decimated deployment strategy, two of its most senior technologists have exited the business.

Phil Sheppard, who was for all intents and purposes the telco’s CTO, and Graham Marsh, the former-Director of Core Technology, have almost 30 years of Three experience between them. Now neither is working at the telco, and despite these two most likely having a significant input into the headache that is the current rollout plan, this is a company which probably needs as much experience in the ranks as possible.

While there will be conspiracy theorists who link these exits with the Huawei decision, this might be somewhat of a dubious link. Graham Marsh has already started his new role, founder at Infinite Potential, while Sheppard’s exit is less than a week after the Supply Chain Review announcement. There might well be a link, but this would be an incredibly cut-throat decision. Sheppard has said on LinkedIn he will be doing consultancy work in the immediate future, as well as taking a few holidays.

Irrelevant as to the background, Three could really use with this experience in the room not working for someone else.

The sticky situation which Three is currently in should not be taken too lightly. Three went big and bold with its 5G deployment plan, deciding to swap out Samsung 4G RAN to ensure backwards compatibility with its sole 5G RAN supplier Huawei. This strategy could have been a game-changer for the city-centric telco, but now it looks like a complete disaster.

The conclusion of the Supply Chain Review last week have certainly been met with mixed reviews. For some, at least there is a decision, a foundation of certainty which can be built on over the coming years as the industry hurtles towards the 5G era. But for others, the 35% network share restrictions on ‘high-risk vendors’ is either too extreme or not extreme enough. There isn’t a huge amount of consensus when it comes to the position on Huawei.

There are now two restrictions which the telcos will have to bear in mind. Firstly, equipment from ‘high-risk vendors’ cannot make up more than 35% of the radio inventory across the network. Secondly, no more than 35% of the total internet traffic across the year can pass through equipment from ‘high-risk vendors’. For a telcos who’s sole 5G RAN supplier is now deemed a ‘high-risk vendor’, this is a monumental migraine.

During its earning call last week, BT outlined the financial impact of the Supply Chain Review decision; £500 million. Part of this will be redefining its deployment strategy, while it will perhaps have to undertake a ‘rip and replace’ project to ensure there is interoperability between 4G and 5G RAN equipment. Three is yet to put a figure on the Huawei conundrum, but the impact here will be much more than financial.

Firstly, you have to consider the ‘rip and replace’ project it has been undertaking for the last six months in an effort to replace Samsung with Huawei as a sole supplier. Some of this work can be left alone, it has a 35% window to work with after all, but depending on progress, some of this work might have to be undone to ensure new supplier equipment performs to the levels desired.

Secondly, there is a major timing penalty placed on Three.

Picking a supplier in the telco industry does not happen overnight. There are numerous bureaucratic hurdles to jump over, commercial negotiations to take place, and trials which need to be navigated. It isn’t as simple as replacing Huawei with Ericsson, let’s say, this is incredibly time intensive.

Three is in a difficult position, and more often than not, whenever this is the case the people who have ‘been there, done that’ are some of the most valuable in the room. Unfortunately for Three, two of its most senior technologists are seeking pastures new.

Some have suggested the exit’s might be linked to the Huawei decision. There might be an element to this, but we suspect it is more a case of coincidence and bad timing. Very bad timing as it works out.

NB: On a personal note, best of luck to Phil. Having interviewed him a few times on camera and events, Phil is a lovely man with a wealth of experience. Whoever hires him next has found themselves an excellent employee!

Supply Chain Review offers clarity and new headaches for MNOs

Any decision is better than the purgatory of uncertainty which the telcos have been sitting in for months, but the Supply Chain Review offers a whole new wave of headaches.

There are still grey areas to consider, but the Department of Digital, Culture, Media and Sport (DCMS) has offered a foundation for telcos to build on. Some might be slightly disappointed by the decision, certainly some more than others, but any decision was better than playing the waiting game; action can now be taken.

Huawei’s contributions to a UK MNOs 5G radio inventory can not exceed a 35% share. However, another interesting element to consider is that Huawei radio equipment cannot carry more than 35% of internet traffic either. This presents new questions as to how networks are built. Huawei technology might not be able to be clustered in certain urbanised areas, which has been the trend in the past.

But new questions are arising for each of the players in the market.

Is Huawei to lose leadership position in the UK market?

Speaking during a call to the press, Huawei VP Jeremy Thompson said capturing 35% market share in any nation would be a job well done for Huawei, though this is assuming customer relationships are rebalanced.

For Huawei to capture 35% market share, it would have to be a major supplier to all the UK MNOs and for all the MNOs to use every inch of the 35% network share. This is a situation which is very unlikely to happen.

EE and Vodafone are over the 35% limit for Huawei equipment in their 4G networks, therefore these relationships will have to be structured down. Three named Huawei as its sole 5G RAN supplier, Samsung provided 4G RAN equipment, therefore it will definitely lose business here as well. There is room for growth at O2, but this is a telco it has not had notable success in recent years.

Huawei’s RAN equipment makes up less than 1% of O2 radio inventory, only present due to trials, and this is unlikely to change.

As Thompson pointed out, Huawei’s market share in the UK when the Supply Chain Review was initially launched was 35%. Its business with its three main customers will have to decrease for them to meet the targets in three years, and it is unlikely to increase its commercial activity with O2.

Huawei could very feasibly lose its RAN leadership position due to bureaucracy as opposed to head-to-head competition.

Three has the biggest headache of all

Three is not in a healthy position but fortunately its 5G deployment is not that advanced.

“We note the government’s announcement and are reviewing the detail,” said Three UK CEO Dave Dyson.

Last year, Three began stripping Samsung 4G equipment out of its network to ensure interoperability with its sole 5G RAN supplier, Huawei. Fortunately, Three has not been accelerating its deployment plans as quickly as EE or Vodafone, therefore does not have as much work to undo. Three will not have to start again from the beginning, but it will have to redevelop the strategy.

As a city-centric telco, the Huawei decision made sense as the Chinese vendor arguably has the best equipment for the situation. Investing so significantly in Huawei might have been a bold decision two years ago, but it is now looking like nothing short of a disaster.

Business as usual for O2

“Huawei kit makes up less than 1% of our owned network infrastructure,” said an O2 spokesperson. “We will continue to develop our 5G network with minimum disruption with our primary vendors Nokia and Ericsson.

“Whilst we agree with the government that diversity of supply is the best way to serve customers, careful consideration must be given to the distinction between ‘core’ and ‘non-core’ as 5G networks develop and evolve. We’ll now take time to review the full report.”

There are roughly a dozen Huawei radios in the O2 network, a legacy of trials during yesteryear prior to supplier decisions being made. O2 has said it will work exclusively with Ericsson and Nokia in the past, painting a gloomy picture for Huawei, though there is always room for change.

Earlier this month, O2 announced it would be aiming to integrate OpenRAN alternatives into some areas of the network. This was slightly unexpected news and would have altered deployment plans in pursuit of commercial efficiencies. This demonstrates that the plans are not 100% set in stone.

Huawei’s commercial relationship with O2 can only get better, and if it does want to maintain its RAN leadership position in the UK, it will have to figure out how to break into this business. Ultimately, very little changes for O2 unless it wants to change itself.

EE and Vodafone have some thinking to do

“While Vodafone UK does not use Huawei in its core – the intelligent part of the network – it will now analyse the potential impact of today’s decision on the non-core elements of its network (masts and transmission links),” a Vodafone statement reads.

“Vodafone UK uses a mix of Huawei, Ericsson and Nokia equipment for its 4G and 5G masts, and we continue to believe that the use of a wide range of equipment vendors is the best way to safeguard the delivery of services to all mobile customers.”

For its 4G network, Ericsson supplies 50% of the radio inventory, Nokia 12% and Huawei 38%. Vodafone CTO Scott Petty has previously suggested plans to phase out Nokia, though that position might have to be reconsidered. Vodafone will have to scale down its Huawei relationship moving forward into 5G and find a suitable replacement.

Interestingly enough, Vodafone has also launched its own OpenRAN initiative, though whether this technology is resilient for a straight swap remains to be seen. It will at some point, but Vodafone will not want to wait until that point.

EE is in a similar position.

“This decision is an important clarification for the industry,” said a spokesperson from EE parent company BT.

“The security of our networks is an absolute priority for BT, and we already have a long-standing principle not to use Huawei in our core networks. While we have prepared for a range of scenarios, we need to further analyse the details and implications of this decision before taking a view of potential costs and impacts.”

EE currently works with Huawei and Nokia. The share of Huawei radio inventory exceeds the 35% limit, though it has time and options to renegotiate over the next three years. It is a bit of a headache for the team, but not the end of the world.

The difficulty which EE faces is the current structure of the network. Huawei provides the radio equipment for the urbanised areas, while Nokia is focused on rural. The internet traffic crossing Huawei radios on EE’s network will dramatically exceed the 35% restriction.

Are Nokia and Ericsson in a stronger negotiating position?

For cut-throat sales opportunists, this is a very interesting position for Ericsson and Nokia. Unless OpenRAN makes significant progress in the short-term future, or Samsung starts swinging punches, 65% network share is effectively a straight shootout between the two.

As Heavy Reading Analyst Gabriel Brown has pointed out, the limits are only directed towards 5G access and is therefore more manageable, but the knowledge of restrictions will always be in the mind of some salespeople; this adds weight to the vendor negotiating position.

Ericsson and Nokia will of course never acknowledge this position, but these are commercial organisations who have seen profits eroded over the last few years. And the guys sitting at the negotiating table are salespeople who like getting big bonus checks.

Could this be the catalyst for OpenRAN and Samsung?

When there are challenges for some, opportunities will always be presented for others. Ericsson and Nokia are certainly set to prosper thanks to Huawei limitations, though the same could be said for the OpenRAN ecosystem and Samsung.

OpenRAN has been touted by US politicians as a potential alternative to Huawei equipment, Senator Mark Warner is proposing a $1 billion fund for the ecosystem, though needs might accelerate demand.

With Huawei’s RAN equipment under restriction, there is certainly a dent in the competitive landscape. It could have been a lot worse, but it will have an impact. The question is how much enthusiasm will be placed in the OpenRAN movement to compensate and create the competitive environment so many are hoping will emerge.

Vodafone and O2 have already dipped their toes into the OpenRAN waters, with commercial deployments to accelerate over the next 2-3 years, though the Huawei saga could make this seem like an attractive alternative to more. The UK Government has seemingly not banned Huawei completely for competition fears, therefore it might be tempted to invest in some developing ecosystems, as would EE and Three.

Samsung is a different story.

This is a vendor which has credibility in the RAN market but has never made a significant impact on the UK telco industry. It did have a healthy relationship with Three prior to the Huawei shift, but activities otherwise have been limited in this segment. Huawei limitations could present an opportunity.

At Three, it would make sense to head back to tried-and-tested waters, while other telcos might consider the Korean vendor to ensure increased diversity in the supply chain. If reliance and variety is the goal, few would want to put more eggs in the Ericsson or Nokia baskets.

With relationships in Korea with KT and SK Telecom, as well as Verizon in the US, Samsung has credibility. The Huawei woes might just be enough to tip the scale in this vendors favour, if it start to throw the right punches.

End of the UK road for ZTE?

The 35% limit is not a restriction for a single supplier, but for any suppliers who are deemed ‘high-risk’. Huawei and ZTE both fall into this bracket therefore it is likely to present a question to the telcos; do we work with Huawei or ZTE? There is room for a slice for each, but this is highly unlikely to happen, especially since the review concludes there is no way to mitigate the risk posed by ZTE.

When it comes to the global market share of RAN, ZTE is a company which falls into the ‘also ran’ category. It has experienced success in Africa and Asia, and of course in China, but exposure in Western Europe has been incredibly limited. In the UK, there is very little evidence of success, though Jersey Telecom named the vendor as its sole 5G RAN supplier.

Jersey Telecom will have to have a complete rethink of its strategy, like Three, but the writing seems to be on the wall for ZTE. This could be the end of the vendor as a player in the UK market.

1&1 Drillisch trials with ZTE seemingly up-and-running

ZTE might not get much media attention nowadays, though some might think of this as a blessing, but it seems to be getting along just fine with Germany’s newest telco, 1&1 Drillisch.

With reports being traced back to a YouTuber named Tobias Dirking, 1&1 Drillisch is seemingly trialling 5G technology with the lesser criticised but arguably more controversial Chinese vendor ZTE. While this is only a trial for the moment, ZTE equipment has been spotted on the roof of the telcos offices in Karlsruhe and Montabaur.

According to Dirking’s video, the network technology has been supplied by ZTE, while the 4×4 MiMo antenna is from CommScope. No LED lights can have seen flickering from the equipment, so it would be fair to assume it is not yet switched on.

1&1 Drillisch has said this is not an indication of a decision for its 5G suppliers, but it is working to trial all available options.

While ZTE is a well-known name in the industry, success in the European markets has been relatively low-key. The firm has a relationship with Wind Tre in Italy, as well as several smaller telcos such as JT in Jersey, though it has not experienced the triumph of its domestic rival Huawei.

Interestingly enough, if the more successful ZTE becomes in the European market, the more enflamed the relationship between European nations and the US might become. If the White House is enraged by tenuous claims of a link between Huawei and the Chinese Government, Senators are now calling it the ‘intelligence-gathering arm of the Chinese Communist Party’, it is hardly going to be enthralled by a state-owned entity supplying RAN equipment.

After being founded in 1985 as the Zhongxing Semiconductor Company, the firm now describes itself as ‘state-owned and private-run’. Xi’an Microelectronics and Aerospace Guangyu are two of the largest shareholders of the business, controlling five of the nine board seats, and are subsidiaries of state-owned organisations in China. This is a much more obvious link than what has been suggested between Huawei and the Chinese Government.

ZTE has largely escaped the spotlight in recent months, perhaps due to the fact it does not dine at the top table like its domestic rival Huawei does. The ZTE business sees greatest success in Asia and Africa, though if it does start to gain traction in Europe, we can imagine White House aggression would be expanded.

What is worth noting is this is simply one of a seemingly endless list of unknowns at 1&1 Drillisch. Right at the top said list is the launch date, but before that can be established, the telco needs to sort out its spectrum portfolio.

Having acquired two blocks of 10 MHz in the 2 GHz band and five blocks of 10 MHz in 3.6 GHz during the spectrum auction last June, 1&1 Drillisch has also confirmed it has entered a relationship with Telefonica to lease two separate frequency blocks of 10 MHz in the 2.6 GHz band. This lease will run until 31 December 2025, though the remaining unknown is for the lower frequency spectrum.

Although the spectrum which has been collected is attractive for 5G services, there is still a requirement for the low-band spectrum, more suitable for coverage and propagation. 1&1 Drillisch is drawing a blank for these valuable assets, so will have to enter into a national roaming agreement with one or more of its rivals. This is far from ideal and will have to be sorted before any commercial services can be launched.

1&1 Drillisch is a very interesting company to keep an eye on, primarily because of the regulatory leg-up it has been offered by Germany, but its choices on the supplier side could cause some ripples in the political arena.

Healthy growth forecast for RAN market – Dell’Oro

Analyst firm Dell’Oro reckons the renewed growth being experienced by the global radio access network market has a few years left in it yet.

The company has just published its latest RAN market five year forecast and is saying total revenues will be $200 billion over that period. However most of the growth will be in the next year or two, with things slowing after that once everyone has got 5G out of their system. The market is expected to grow by 4% this year, but more like 2% CAGR over the full period.

“Following three consecutive years of declining worldwide RAN revenues between 2015 and 2017, the global upswing that began in the second half of 2018 has become deeper and stronger, reflecting a shift from 4G to 5G that is accelerating at a torrid pace, much faster than anyone expected,” said Stefan Pongratz, Analyst with the Dell’Oro Group.

“We expect these trends to propel the overall RAN market to advance at a healthy pace over the near-term accommodating an intense 5G capex envelop before growth tapers off in the outer part of the forecast period resulting in a flat CAGR between 2019 and 2024.”

As is standard practice with Analyst press releases, most of the juicy, granular data is kept secret in the hope that people will pay for the full report. They did offer the following extra morsels, however: 5G NR RAN investments to surpass $100 Billion, 5G NR small cell market to approach 10 percent to 20 percent of overall 5G NR market. Global macro and small cell transceiver shipments to approach 0.7 Billion. Millimeter Wave 5G NR to account for one sixth of overall small cell investments.

Open-minded RAN key to 5G success

Telecoms.com periodically invites expert third parties to share their views on the industry’s most pressing issues. In this piece Steve Papa, CEO of Parallel Wireless, makes the case in support of the OpenRAN initiative.

Years of consolidation have left the telecoms industry with three Radio Access Network (RAN) technology giants: Huawei, Ericsson and Nokia. But, these players risk becoming obsolete as the telecoms industry starts demanding networks that are open and flexible.

The RAN is a significant expense for mobile operators, in what is already a capital-intensive industry. Legacy RAN networks, built using the technology of the major vendors, is typically hardware centric and designed in silos for each generation (e.g. 2G, 3G, 4G) of connectivity. The technology is ‘closed’ by its nature, which means that it is incompatible with other vendors. Subsequently, networks have been very difficult to adapt and upgrade, with the hardware giants dictating the timings and cost of any maintenance and installation.

As we move towards the introduction of 5G, the industry is now beginning to realise that the economics of building the RAN need to change. 2019 saw significant moves towards OpenRAN, a new model of building radio networks, based on a software-centric and open infrastructure. The benefits of OpenRAN were illustrated by Vodafone’s announcement that it would be opening its entire RAN in Europe to OpenRAN vendors during TIP Summit in November. Both the O-RAN Alliance and the Telecom Infra Project (TIP) are leading the industry towards OpenRAN, with the O-RAN alliance driving industry standards, and TIP driving deployments.

Understanding the value of OpenRAN

The OpenRAN approach is achieved by separating hardware and software in the network. This helps networks support open interfaces and common development standards, to deliver multi-vendor, interoperable networks. This gives operators the flexibility to cost-effectively deploy and upgrade their networks, reduce complexity, and deliver coverage at a much lower cost. OpenRAN also makes it easier for network to support dynamic spectrum sharing (DSS) technology, which allows LTE and 5G New Radio technology transmission at the same time. DSS is key to the early adoption of 5G smartphones, which will rely on both 5G and LTE transmission.

Analysts’ projections from ReTHINK show that the costs of building 5G Macro-cell networks will fall by 50% if deployments incorporate open architectures. This saving equates to hundreds of millions of dollars in the overall total cost of ownership, and will help mobile operators extend investments and become more profitable.

In developed markets, 5G roll-out is in full swing and operators are spending considerable amounts building out their next generation networks and marketing them to the public. However, current connectivity standards cannot be neglected, and operators need a new, software-based approach that will allow them to deploy and run 5G technology efficiently alongside their 3G an 4G networks. This is why OpenRAN is so appealing to operators such as Vodafone, as it enables to manage all connectivity standards using a software interface.

Meanwhile, operators in developing markets are currently focussed on scaling 2G, 3G and 4G to rural and urban areas that don’t have internet. But developing markets have a low average revenue per user, so operators in these markets won’t survive with the approach of building and managing siloed networks for each network generation, as CAPEX and OPEX will skyrocket.

Internet para Todos (IpT), a wholesale operator owned by Telefonica, Facebook, and Latin American banks IDB Invest and CAF Bank is also driving momentum. It recently opened talks to bring a second operator on board, after connecting more than 650 sites and covering 800,000 people (450,000 actual customers) with a 4G rollout in rural Peru. Meanwhile, MTN, the South Africa based operator, recently announced that it is deploying OpenRAN technology in 5,000 sites as it looks to unify its 2G, 3G and 4G networks, to save costs for itself and its customers.

The OpenRAN initiative takes off

In 2020, the momentum behind OpenRAN will continue to grow as other operators realise how they can reduce costs, drive more competition between technology vendors, and stimulate higher levels of innovation in the industry.

OpenRAN clearly has the support from major players in the industry, however, it is vital that operators consider the most effective technology partner to enable the OpenRAN vision. OpenRAN must address all generations of mobile connectivity standards together – 2G, 3G, 4G and 5G. If MNOs decide to only introduce OpenRAN for 4G and 5G, they will still be faced with managing separate legacy and new networks, which contradicts the aims of the initiative.

Being able to support all generations of mobile connectivity under the same OpenRAN software umbrella is crucial to providing reliable connectivity for all and allowing the transformative benefits of 5G to be realised. The industry is hungry for change, and open-minded operators are the ones which will succeed. That might mean the traditional ‘big 3’, don’t stay the big 3 for long!

 

Steve has worked in the technology industry for over 20 years and is the founder and CEO of Parallel Wireless. Previously, as founder and CEO of Endeca, he built the business ultimately leading to Oracle acquiring the company. He was part of the team creating Akamai that developed global Internet content distribution – now carrying peaks of 15 terabits/s of web traffic on any given day – and led the team at Inktomi that reimagined the network cache to create carrier class caching. Steve also previously worked with AT&T Teradata. He has a BS from Princeton University and MBA from Harvard Business School.

Deep dive: what’s the deal with network sharing?

Information is only as useful as the context you place it in, and for that reason Telecoms.com periodically provides deep dives into industry-defining topics. In this one Jamie Davies explores the opportunities and challenges surrounding network sharing.

Each year brings different trends and talking points to the forefront of the industry, and 2020 is no different. This year, it appears network sharing will be one of the biggest talking points.

5G is on the horizon and it has the telcos scrambling. Upgrading telecoms infrastructure is going to be a very expensive job, ranging from fibering up a nation, to purchasing active infrastructure for sites and even paying for civil engineering jobs; building passive infrastructure is not cheap! Telcos need a way to make the financials of the telecoms future work.

All about the money, money, money

While it might not sound like the sexiest of trends to be assessing, it could turn out to be one of the most impactful. Telcos are scrapping and scraping around to fuel the 5G euphoria which has gripped the industry, and any option to do it more cost effectively would be lovingly embraced.

“Network sharing will be vital to mobile operators still grappling with ways to make the economics of 5G add up,” said Kester Mann of CCS Insight. “Deutsche Telekom for example has projected that the cost to deploy 5G across Europe would come out at between €300 and €500 billion.

“It’s no surprise then to see a growing list of operators partnering with each other in a bid to keep a lid on 5G capex. But these deals may just be the tip of the iceberg; investment models probably need to evolve to become more creative and innovative in the long run. For example, Poland has been considering plans for a single national 5G network at 700MHz. And it would be no surprise to see a European city take the plunge and deploy all 5G mobile infrastructure through a third party.”

Back in October, during a Madrid 5G core conference, Telecom Italia’s Lucy Lombardi outlined the difficulties being faced by the operators. Between 2010 and 2018, Lombardi suggested industry revenues were down $27 billion, but the telcos had invested $250 million in the network. Over 2019-2025, Lombardi suggested another $1.4 trillion would be spend by the industry, 70% of which would be on deploying 5G.

In short, the old ways of telecommunications are not going to cut it in the digital world of tomorrow. There are plenty of opportunities for the telcos to make money as everything and anything gets connected to the internet, but new business models need to be created to ensure these companies do not go bust in the pursuit of profits.

As Mann highlights, various different countries and regulators are pursuing different approaches to create value and efficiencies in the deployment of next-generation communications infrastructure. The Poland example is an excellent one, though the UK is pushing forward with its own innovative approach.

“In the UK, the recent confirmation of plans to introduce a shared rural network is rare example of successful collaboration between mobile operators more often engaged in cut-throat competition to attract and retain subscribers,” Mann continued.

“It aims to curb costs and accelerate timelines to bring more people on online who live in remote areas. It will also help overcome the perennial challenge of tough planning and access restrictions that has hindered network roll-out in the past.”

The UK Shared Rural Network could be described as both an innovative initiative and a business compromise.

As part of the initiative, £530 million will be contributed by the telcos with another £500 million being put forward by the UK Government. The plan will include reciprocal agreements between the telcos to share existing infrastructure and also joint investments to build telco-neutral sites for total not-spots.

This is an innovative approach to deliver connectivity to the most difficult to reach places in the UK, but it is also a compromise. To secure agreement from the telcos for the Shared Rural Network, the Government and the regulator will have to agree to drop the deeply unpopular coverage commitments attached to the 700 MHz and 3.6-3.8 GHz spectrum auctions.

However, what is worth noting is this is not necessarily a new idea. EE (or what was T-Mobile at the time) and Three formed MBNL in 2007, initially to operate and deliver 3G networks, while O2 and Vodafone teamed ahead of the 4G rollout to form CTIL in 2012. Both of these organisations offer financial benefits to the telcos.

“From a cash perspective it’s broadly 50/50 on the usual operating expenditures – so site rental, rates, field operations, etc. We then have the option of sharing the build of networks – we don’t do that for 4G or 5G, but we did that in the 3G build and that saved 50% of the initial capital expenditure, including on capacity and transmission costs by usage,” said Tom Bennett, Networks Director at EE

We’re not alone…

Elsewhere around the world, regulators have taken their own approach to encourage cooperation in the industry. In Malaysia, for example, the Malaysian Communications and Multimedia Commission (MCMC) has outlined another unique approach.

Licenses for the 700 MHz and 3.5 GHz spectrum bands will be given to a consortium rather than the individual telcos. Investment in infrastructure will be shared, as will the spectrum resources to deliver commercial services, though it is unclear how the telcos will play with each other.

For Malaysia, this is an important initiative. 5G is an expensive technology to deploy, but the regulator is also keeping an eye on 4G. In Western markets 4G investments are not front of mind as coverage is wide and deep, however in countries like Malaysia, the digital divide is a lot more apparent. 4G investments need to continue, and this approach to shared infrastructure is partly to ensure enough money is still directed towards 4G.

However, what is also worth noting is that not it is not a given regulators will be accepting of shared network initiatives.

Earlier this month, the Belgian Competition Authority (BCA) put the brakes on a joint-venture between Orange and Proximus which would create a shared network. The regulator is investigating whether this would negatively impact competition, after Telenet complained over the tie-up.

The issue in Belgium seems to be focused on the number of telcos which are currently present and the breadth of the agreement between the pair. As there are only three mobile players in the market, and the JV would span across all generations from 2G to 5G, the complaint focuses on the idea that it would reduce the number of infrastructure players from three to two. This might have an impact on deployment, as well as placing an unreasonable stranglehold on Telenet.

This is not the first time this issue has been raised either.

Last August, the European Commission informed O2 CZ and T-Mobile CZ that the proposed network sharing agreement in Czech Republic would breach the Commission’s rules on competition. The duo have been in a network sharing agreement since 2011, which incorporating 2G, 3G and 4G for 85% of the country, though the European Commission has now prevented this expanding further.

As is the case in Belgium, the Czech Republic only has three material telcos investing in mobile communications infrastructure. Although there are benefits for scale deployment, the European Commission suggested:

“…the network sharing agreement is likely to remove the incentives for the two mobile operators to improve their networks and services to the benefit of users.”

The European Commission and national regulators are generally open to ideas on how the telecommunications industry can be more efficient, though they are particularly sensitive to competition. Anything which would hint at removing competition would be quashed almost immediately, which is the tricky path which telcos tread. This is particularly notable in markets where there are only three operators, and one has been left out of the network sharing agreement.

Looking at the rules in question at a European level, Article 101 dictates the state of play. These rules effectively look to prevent:

  • Price fixing
  • Production, development or investment limitations
  • Supply scarcity
  • Placing a competitive disadvantage on other parties

The maintenance of a fair and reasonable market is of course a noble pursuit, but the European Commission and national regulators do have to be careful in applying these rules. The telcos do need to apply new models to ensure the feasibility of the 5G business model.

Consolidation is still the enemy

“Regulators will clearly be vigilant, as they want to make sure that sharing does not turn into mobile-to-mobile consolidation, which they don’t like,” said Dario Talmesio, 5G Practice Leader at analyst firm Ovum.

“They could see that sharing can be consolidation through the backdoor.”

The European Commission and its regulators are very sensitive to consolidation. Despite the industry begging for attitudes to change in the pursuit of scale economics to ease the burden of deployment, the regulators have stood their ground to refuse consolidation. The attempted merger between O2 and Three in the UK during 2016 was blocked on the grounds of competition, as was an effort by Telia and Telenor to merge their Danish businesses in 2015.

The rationale for both of these mergers was to create a single-entity where the economics of running a telco at scale were more attractive. As Talmesio points out, network sharing initiatives are very important to ensure the industry progresses in a manner which keeps pace with the consumer and enterprise.

“CSPs have for very long been sharing some elements of their networks, and every G has pushed them to share a bit more, mainly because of the cost and time it would take to build new sites,” said Talmesio.

While it will never be the case that the network is finished, the widespread upgrades which are demanding with every new ‘G’ is what makes the telco industry unique and eye-wateringly expensive to play in. This is where the economics of scale are critically important and why European telcos are perhaps on the backfoot.

European nations are small, and some are drastically smaller than say China or the US. While larger countries present their own challenges in terms of coverage, the benefit of a scaled subscriber base gives more confidence to make bigger investments. Some European telcos will never have this advantage so will have to look for alternative means to fund network deployment.

Although the estimates vary quite considerably, one thing is for certain; network sharing initiatives ease the financial burden of network deployment.

There are of course financial benefits to network sharing, though the estimates do vary. A report from the Body of European Regulators for Electronic Communications (BEREC) suggests the following:

  • Passive sharing cost saving of 16-35% on CAPEX and 16-35% for OPEX
  • Active sharing cost saving 33-35% on CAPEX and 25-33% for OPEX

Efficiencies are increased when spectrum costs are also shared, though this is unlikely to be a common practice as spectrum assets are often considered a differentiator. If this was to be removed, the industry would start the precarious walk towards utilitisation.

Looking at the proposed joint-venture between Orange and Proximus, the duo will of course be saving money, but another interesting opportunity is in scaling the network. The shared network initiative would increase coverage by 20% in comparison to the combined footprint if the teams are to pursue network deployment independently. We suspect 20% is a comfortable number, and this could be increased should a partnership want to deploy more aggressively.

The financials of the telecoms industry is not working in conjunction with the demands of the consumer and authorities. Cheaper tariffs, faster speeds, greater coverage, better reliability. All of these factors weigh one side of the equation making it difficult for the telcos to continue.

Another factor to build the case for network sharing initiatives is somewhat more bureaucratic.

Telcos are being asked to improve both outdoor and indoor coverage in both the rural and urban environments, but in some cases the biggest problems can be accessing or procuring new sites to deploy infrastructure, both passive and active. It might make sense to share these sites as there is limited availability, or it would at least make more sense to share the transmission lines to ease the burden of civil engineering costs. Another factor you have to consider is the rental fees charged by landowners, some of which are deemed unnecessarily high by the telcos. This has been frequently highlighted under the term ‘ransom rent’ as the telcos have little option if they are to expand coverage.

In some towns there is another bureaucratic nightmare to consider; listed and historical buildings. In Cambridge, UK, for example, so many of the structures are deemed historical or protected, the number of potential mobile cell sites is substantially smaller; share infrastructure is a creative solution.

Its not all plain sailing

What is worth noting is that there are also drawbacks to network sharing agreements.

Firstly, more cooks spoil the broth. With shared assets in operation, especially active assets, require consent and coordination between the sharing parties. There are numerous challenges here, most notably aligning commercial objectives of the parties and more signatures to acquire. Evolution of these sites could certainly take longer in the future.

Another challenge arises when something goes wrong. Debugging the issues could be much more complicated, though this is entirely dependent on how much the two operations are entwined.

BEREC has also noted shared networks could also increase the electromagnetic field emissions. Each regulator imposes limitations on electromagnetic field emissions therefore bureaucratic revision might well be needed should more of these initiatives bear fruit.

The combination of or joint-funding of assets also decreases the resilience of communications infrastructure in a country. Fewer independent mobile networks or infrastructure might well make a country more vulnerable as it reduces the number of points of failure and robustness.

It is also worth bearing in mind that there is only so much space available on masts for active equipment. These concerns were raised in Bulgaria, Cyprus and Croatia, amongst other nations. Networking planning is another concern, as each MNO has its own unique requirements, while technical issues in relation to existing suppliers and protocols could mean MNOs are not compatible with each other.

It would be unfair to suggest network sharing is an uncomplicated path forward.

Despite there being momentum for network sharing, not all of the regulators share the enthusiasm. Aside from Belgian scepticism, Hungary believes non-participating MNOs would face a risk of being squeezed out of the market, while Austria has suggested incentives for investment will decrease in the long term.

There will be pros and cons on both sides of the equation, but it does look to be the fairest and most reasonable compromise to ensure a healthy and sustainable telecommunications industry. The traditional way of deploying networks does not look to be financially feasible, therefore new ideas are needed.

Network sharing is one of the most prominent trends during the early days of 2020 for good reason, and it is safe to assume more of these initiatives will emerge as we progress through the year.

Telenor Norway goes all-in on Ericsson for 5G RAN

Norwegian vendor Telenor has announced Ericsson will be the sole vendor for its 5G radio access network, replacing incumbent Huawei.

“We are happy to announce that we have chosen Ericsson to start building the future 5G radio network in Norway, and I am confident we now are perfectly positioned to be in the forefront of the country’s network modernisation,” said Petter-Børre Furberg, CEO of Telenor Norway.

“As the first mobile operator on 5G in Scandinavia, Telenor will ramp up the roll out of 5G to our customers in Norway in 2020. The full modernisation of the mobile network in Norway is an ambitious undertaking, and something we are excited to get started on.”

A wholesale change of vendors such as this is a tricky process if you want to avoid any disruption to the service. The modernisation of the RAN, which currently uses entirely Huawei kit, is expected to take 4-5 years. So Huawei will be in play during that time, including some of the 5G upgrade work. That implies this is a business decision rather than a security one, which is consistent with the Norwegian governments apparent decision not to ban Huawei from 5G.

“We expect 5G to be the one technology that will transform our society the most in the next decade,” said Sigve Brekke, CEO of Telenor Group. “We have been through a thorough process to evaluate all the main vendors’ ability to deliver on Telenor’s requirements for the future mobile network.

“When selecting the vendor for the radio access network, we have considered important factors like technical quality, ability to innovate and modernise the network, commercial terms and conditions, as well as carried out an extensive security evaluation. Based on the comprehensive and holistic evaluation, we have decided to introduce a new partner for this important technology shift in Norway.”

This news comes hot on the heels of Telia Norway making exactly the same decision, so Ericsson has Norway pretty much sewn up when it comes to RAN work for the foreseeable future. In the core Ericsson has to coexist with Nokia and that is set to continue with 5G. For Huawei, being frozen out of a market in which it is being allowed to compete freely must be a significant blow.

Telefónica Deutschland picks Huawei and Nokia for its 5G RAN

As part of a broader announcement concerning its 5G plans, Telefónica Deutschland revealed Huawei and Nokia are the chosen kit vendors for its 5G radio access network.

Referring to them as ‘proven strategic partners’ TD indicated that it has an established working relationship with the two vendors and doesn’t see any need to change that. That said, TD also noted that they will have to pass a safety certification as required by German law, the details of which are still being thrashed out.

So TD seems to be saying it has no problem with Huawei, at least in the RAN anyway, but ultimately it can’t fully commit to it until the government makes up its mind whether or not it constitutes a security threat. What will happen if the government does throw a spanner in the works is unclear, but since TD has a multi-vendor policy that might be good news for Ericsson. The decision on the core network will apparently be made next year.

The broader strategic statement made by TD is to significantly accelerate its growth for the next couple of years by spending 17-18% of its revenue on expanding its 4G network and getting its 5G one off to a flying start. As Light Reading notes, this will require a dividend cut, which will upset some investors, but you can’t have it both ways and the money has to come from somewhere.

Ericsson scores 5G RAN and core deal with LG U+

South Korea’s third MNO will be leaning heavily on Swedish kit vendor for its nascent 5G network, having chosen it for both the RAN and the core.

The new news seems to concern specifically LG U+’s non-standalone 5G using the 3.5 GHz frequency band, for which Ericsson will supply at least some of the RAN kit. Ericsson is only announcing itself a ‘a’ supplier, rather than ‘the’ supplier, so we can assume there are others. It seems the 5G core gig was already known, but Ericsson decided to mention it again anyway.

“We are delighted to have Ericsson as a trusted 5G Core and 5G RAN vendor,” said Daehee Kim, Vice President, Network Strategy at LG U+. “Ericsson’s end-to-end 5G technology leadership is key to ramping-up our nationwide 5G ambitions in Korea. Ericsson will help us to deliver the very best enhanced mobile broadband experiences for our subscribers, as well as opening up innovation and job creation opportunities through the Internet of Things, Industry 4.0 and digitalized society.”

“We’re working in close partnership with LG U+ to strengthen its 5G network in Korea,” said Hakan Cervell, Head of Ericsson Korea. “We look forward to building the partnership to help LG U+ meet its 5G needs as its subscriber base grows across enhanced mobile broadband, IoT, and Industry 4.0. We’re also delighted to now be working with all three communication providers in Korea to use our 5G abilities to keep the country at the forefront of 5G innovation and benefits.”

Huawei seems to be largely frozen out of South Korea, but Samsung is presumably a stronger networking competitor there than anywhere else in the world, so this is still a decent deal win. We don’t know how much of LG U+’s 5G network will be covered by Ericsson, but North East Asia is a key market so it will take whatever’s going.