Ovum 5G Broadband Acceleration Seminar (Base) Workshop 5G Overview, Convergence, and Next-Gen Access Networks
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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? 4 Ovum | Informa Tech Copyright © Informa PLC First, 5G FWA 5 Ovum | Informa Tech Copyright © Informa PLC 5G will not replace FTTx, cable modem and even xDSL subscribers ▪ 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 6 Ovum | Informa Tech Copyright © Informa PLC FWA can achieve faster payback than FTTP in certain scenarios 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 8 Ovum | Informa Tech Copyright © Informa PLC But 5G FWA will account for a meaningful % of 5G connectivity revenues – over the short term because there is a business model and ecosystem 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 9 Ovum | Informa Tech Copyright © Informa PLC Second, 5G in general, selected myths and some truths 10 Ovum | Informa Tech Copyright © Informa PLC Myth: “There’s a lot of room to increase prices once 5G gets here” Telco CEO earnings call June ‘18 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. 11 Ovum | Informa Tech Copyright © Informa PLC If 5G can slow ARPU decline from -30% to -10%, anticipated revenue decline slows-down 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 13 Ovum | Informa Tech Copyright © Informa PLC Myth: “5G deployments will render WiFi obsolete…5GNR-U is comparable to WiFi but much, much, better” Network vendor 2019 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 14 Ovum | Informa Tech Copyright © Informa PLC Reality: 5G enables new vertical opportunities for telco players – eg automotive 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 16 Ovum | Informa Tech Copyright © Informa PLC Role of fiber is growing and 5G accelerates its growth 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. 17 Ovum | Informa Tech Copyright © Informa PLC Revenue opportunities – the “next-gen” home – smart home and digital games 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. Source: Ovum 18 Ovum | Informa Tech Copyright © Informa PLC The Smart City, the Enterprise, the Campus: Non-consumer opportunities require fiber, even smart city IoT applications 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. 19 Ovum | Informa Tech Copyright © Informa PLC The IoT Smart City – numerous revenue opportunities for service providers: Focus on Public Security segment (includes cameras for public security) Service Revenues: over $2bn in 2023 Connectivity Revenues: 90% of subscriptions are wireline (does not include cost of devices) Source: Ovum Source: Ovum 20 Ovum | Informa Tech Copyright © Informa PLC Numerous Vertical Industries are moving to the cloud, rapidly The cloud requires bandwidth