Ovum 5G Broadband Acceleration Seminar (Base) Workshop 5G Overview, Convergence, and Next-Gen Access Networks

15 October, Amsterdam, 2019 The Netherlands

5G Broadband Acceleration Seminar

Powered by: IN COOPERATION WITH: 5G Overview, Convergence, and Next – Gen Access Networks Julie Kunstler Principal Analyst, Ovum 5G Broadband Acceleration Seminar (BASe) Workshop 5G overview, convergence, and next-gen access networks

15th October 2019 Amsterdam, The Netherlands

Julie Kunstler, Principal Analyst, Service Provider Technology [email protected] We have now moved to a rational state - hopefully

What solves the problem? All things optical All things 5G What delivers the desired outcome?

▪ Significant focus on 5G FWA.

▪ Why? ▪ New revenue opportunities for wireless and integrated operators? ▪ Make-up for failures of earlier FWA technologies? ▪ Finally connect the unconnected and solve the digital divide?

▪ Well known/understood business case versus the other 5G applications.

Source: Ovum

FWA network monetization – different scenarios – urban versus suburban, Factors to consider: developed country versus developing and different bandwidth offerings • Is the FWA network for residential customers only?

• What are the upgrade paths as subscribers demand more bandwidth?

• How do you manage QoE expectations?

Note the low bandwidth rates. At higher bandwidths, wireless network capacity and backhaul costs slow-down payback Source: Ovum significantly. 7 Ovum | Informa Tech Copyright © Informa PLC FWA does not solve the RURAL problem – even in developed countries This leaves 40% of worldwide households unconnected

FWA network monetization – developed country with 20Mbps – rural area – even under the best-case scenario, monetization approaches 20 years. Rural areas:

• In developing countries, monetization was over 60 years in best-case scenario.

• Not surprising that government assistance often focuses on rural areas.

• Rural subscribers – take rates can be very high given lack of alternatives but payback still poor.

Source: Ovum

Region Country Operator Launch date Launched 5G FWA Announced Launches Through 2Q19 Africa South Africa Comsol 2019

Africa South Africa Vodacom 2018 Aug-18 (pre-commercial)

Asia-Pacific Australia Optus 2020 1Q19

Asia-Pacific New Zealand Spark 2020

Asia-Pacific Philippines Globe 2019 2Q19

Eastern Europe Romania Orange 2018

Eastern Europe Czech Republic O2 2018 4Q18

Middle East UAE Etisalat 2018

Middle East Saudi Arabia STC 2018 2Q18

Middle East Qatar Vodafone 2018 2Q19

North America US Verizon 2018 Oct-18

Western Europe Finland Elisa 2020

Western Europe Sw itzerland Sunrise 2020 2Q19

* Including pre-standardized 5G Sources: operator announcements and Ovum

5G - more data for the same or less SKT 5G proposition

▪ How to price 5G for consumers - operators claim 5G is twice as fast, or even "up to 10 times faster." VR 5G ▪ In turn, that speed enables better digital media services, such as UHD VR, 3D/AR calling, cloud gaming, and UHD content. Pack Max 4K+ dramas, ▪ Early technology adopters might appreciate the value of paying Bundled with Immersive Prime and music, only for faster but are the applications ready? large-screen entertainment, Platinum 5G UHD content ▪ 2Q19 marked the first quarter of 5G commercialization; Ovum plans etc. tracked 18 launches. Features "pinch ▪ Of the 18 plans launched, only 2 were premium in reality: zoom:" the user "5GX Game Users require a ▪ EE 6-7% premium, Sunrise $10 premium can enlarge the Pack VR headset screen by four ▪ SKT, cheaper 5G entry-level plans than 4G times ▪ Verizon 10.5–13% premium waived ‘limited time’ ▪ Unlike 4G. ▪ In Austria, telcos charged 100-150% premium for 4G over 3G.

ARPU PER YEAR (USD) MOBILE REVENUE PER YEAR 20.00 (USD) 18.00 Alternative ARPU scenario 140,000,000,000 16.00 Alternative revenue scenario 120,000,000,000 14.00 100,000,000,000 12.00 Current APRU forecast 10.00 Current revenue forecast 80,000,000,000

8.00 60,000,000,000 6.00 The 5G premium 40,000,000,000 4.00 20,000,000,000 2.00

- 0 2017 2018 2019 2020 2021 2022 2023 2017 2018 2019 2020 2021 2022 2023 Source: Ovum

Reality: The real premium of 5G may be in arresting ARPU decline

12 Ovum | Informa Tech Copyright © Informa PLC Myth: “The proven financial benefits of being first to market with a new service are driving a flurry of activity across the communications industry” Network vendor 2019

First to market performance First mover prospects – 3G & 4G

▪ 3G - 33% of operators gained 3G first to market 4G first to market Market Market ▪ 4G - 45% of operators gained 3G First share Up? 4G First share Up? ▪ Italy H3G 0.35 Y Italy H3G 11.62* Y Other factors: device strategies, France Orange -10.55 N Telecom marketing, and pricing SFR -7.33 N Italia 37.41 Y Spain Telefonica -18.84 N Vodafone Italia 27.15 Y Vodafone -0.98 N France SFR -8.32 N UK 3 11.38 Y Spain Vodafone -1.06 N Will it be different with 5G? Germany T-Mobile -4.76 N UK EE -3.64 N What are the variables? Vodafone -10.22 N Germany T-Mobile -11.16 N Japan DoCoMo -13.93 N • Competition Japan DoCoMo -3.6 N • Ecosystem KT Korea LG U+ 3.11 Y • Use cases Korea Corporation 0.86 Y SK Telecom -3.02 N SK Telecom -6.87 N USA AT&T 0.81 Y • Partnerships USA AT&T 4.84 Y * Pre-merger

Source: Operator market data and Ovum

Managed WiFi services ▪ Highly unlikely: ▪ Wi-Fi is very cheap ▪ WiFi is good enough for most applications and users ▪ WiFi 6 is coming, and coming fast ▪ Managed WiFi services are a differentiator and revenue stream for many operators

▪ 5G over WiFi will happen, selectively: ▪ Private enterprise 5G networks ▪ Driven by low latency and QoS ▪ When the business model makes sense

5G automotive Hardware Platform Application Services/content Customer data Advertising ecosystem (Automotive)

Car producer Core

Industry Supplier (eg in car Core entertainment)

Car Insurer

Digital Player CORE

Telco Player ?????? Core GROWING INTEREST

Core business Potential new business

15 Ovum | Informa Tech Copyright © Informa PLC Source: Ovum Third, the need for fiber is increasing, whether directly to the home, or to the business, or for public safety security cameras, or indirectly

Residential: 4K and Smart cities: Non-residential: Transport: wireless 8K content, cloud- camera surveillance cloud-based backhaul for 5G – based VR with cloud-based applications, virtual matching the point- applications, analytics for facial reality for training, to-multipoint including gaming, recognition. telecommuters, architecture of the smart home. campus networks. small antenna deployments.

Major improvements in ODN (optical distribution network) design, build, and operations.

Major costs reductions in next-gen PON equipment costs as volumes ramp.

Tremendous pressure to save capex and opex, leading to universal access network.

Average monthly spend ($) per German household ($) in 2023:

OTT Digital Fixed Fixed broadband Digital games voice video music Smart home

Source: Ovum

Smart home service revenues for Germany in 2023 - $m:

The smart home will not be owned by any one device vendor or service provider.

But CSPs are touching (almost) every home and have the opportunity to support and form the partnerships that enable the services.

Upstream bandwidth, wide Traffic lights, parking, lighting, coverage areas, efficient network The Smart City cameras, city services solution

The Enterprise and Financial institutions, Symmetrical bandwidth, network Private Networks government networks slicing to ensure specialized SLAs

Campus-wide Universities, hotels and resorts, Significant costs savings compared networks healthcare centers, shopping to traditional LAN, easy to (Optical LAN – POL) malls upgrade.

Service Revenues: over $2bn in 2023 Connectivity Revenues: 90% of subscriptions are wireline (does not include cost of devices)

Source: Ovum Source: Ovum

Service Providers – numerous case studies: Cloud spend by service line (global):

Providing 10G symmetrical bandwidth: Connectivity crucial for cloud-based services CAGR: 15% Partnerships with the right Bringing best-in- CAGR communications 21% class partners technology and application partners. CAGR: Managed 25% network On-going support services including managed cloud and distributed cloud services.

Backhaul equipment expenditure Fronthaul equipment expenditure

More than 50% is fiber in 5G world Almost 100% fiber in 5G world

Source: Ovum Source: Ovum

Examples include: European Operator M&As – 2016 – 2Q19:

▪ Convergent Services: ▪ Hutchinson and Veon’s (Wind) Italian assets with Wind Tre – now fully owned by Hutchinson to compete with TIM. Hutchinson had no fixed operators in Italy while Wind was the 3rdlargest fixed and mobile operator. ▪ Vodafone acquired UPC Romania (largest fixed in Romania). ▪ BT’s purchase of EE. ▪ Offloading of assets and entering adjacent markets: ▪ Selling tower sites by numerous operators across Europe. ▪ Spinning-off tower sites into separate businesses. ▪ Tele2 IoT – acquired Kombridge – offers security services, connected device management. Source: Operator announcements and Ovum

Merging of divisions/groups: Strategic time for “virtual” adoption, such as:

▪ Moving to a vBNG – Wireline Wireless ▪ Traditionally, the BNG function resides in physical edge access access routers built by major router manufacturers. equipment equipment ▪ Router manufacturers have released virtualized, software- division division only versions of router functions running on commercial servers (known as vRouter software), and the subset of vRouter subscriber management functions, (called vBNG). ▪ Several broadband equipment vendors have started developing their own BNG and router software. Merger of the ▪ Broadband Forum started a BNG Disaggregation project two divisions that addresses increased bandwidth demands being placed to better on BNGs. support customers’ ▪ Calix’s NG-PON2 solution includes vBNG functions. FMC strategies

The Winners Software Innovations

What solves the problem? What delivers the desired outcome? Wireless Wireline Technologies Technologies

The contents of this product are protected by international copyright laws, database rights and other intellectual property rights. The owner of these rights is Informa Telecoms and Media Limited, our affiliates or other third party licensors. All product and company names and logos contained within or appearing on this product are the trademarks, service marks or trading names of their respective owners, including Informa Telecoms and Media Limited. This product may not be copied, reproduced, distributed or transmitted in any form or by any means without the prior permission of Informa Telecoms and Media Limited. Whilst reasonable efforts have been made to ensure that the information and content of this product was correct as at the date of first publication, neither Informa Telecoms and Media Limited nor any person engaged or employed by Informa Telecoms and Media Limited accepts any liability for any errors, omissions or other inaccuracies. Readers should independently verify any facts and figures as no liability can be accepted in this regard - readers assume full responsibility and risk accordingly for their use of such information and content. Any views and/or opinions expressed in this product by individual authors or contributors are their personal views and/or opinions and do not necessarily reflect the views and/or opinions of Informa Telecoms and Media Limited.

An event by tech innovators for tech leaders!

Learn more about the Broadband Forum at: http://www.broadband-forum.org/

Interested in joining? Contact membership development leader Rhonda Heier at: [email protected]