It’s hardly a surprise that Apple would be pursuing a path to 5G. The promise of this next generation of wireless is that smartphone makers might eventually achieve blistering wireless data speeds of 1 gigabit per second and beyond, along with low latency and other potential benefits. In the U.S., Verizon, AT&T and T-Mobile are all chasing their own 5G future—and each other.
Apple indicates that it plans to test 5G technologies in two locations in controlled facilities, one in Cupertino and another in Milpitas, California. Apple said that it plans to use the 28 and 39 GHz bands via technology provided by Rohde & Schwarz, A.H. Systems and Analog Devices.
Apple’s FCC application reads in part:
Apple Inc. seeks to assess cellular link performance in direct path and multipath environments between base station transmitters and receivers using this spectrum…These assessments will provide engineering data relevant to the operation of devices on wireless carriers’ future 5G networks.
Apple respectfully requests that the Commission grant its request for an experimental license for operations in accordance with Section 5.3(j) of its rules.2 Apple intends to transmit from two fixed points located at Apple-controlled facilities in Cupertino and Milpitas, CA. These transmissions will be consistent with the parameters and equipment identified in Apple’s accompanying Form 442, and will include the use of a horn antenna with a half-power beamwidth of 20 degrees in the E-plane and H-plane and a downtilt between 20 – 25 degrees. Apple anticipates that it will conduct its experiments for a period not to exceed 12 months.
The transmitting equipment Apple intends to use is incapable of station identification. Because Apple will coordinate its operations with existing microwave users in the area, Apple respectfully requests that the Commission exempt this authorization from the station identification requirements.
Light Reading earlier reported Apple to be hiring at least one engineer with knowledge and experience of “radar signal processing,” which implies the signals which are used in millimeter wave transmissions. Millimeter wave is the band of spectrum between 30 GHz and 300 GHz. The ITU-R WP 5D/IMT 2020 standards committee has proposed 30 GHz to 86 GHz for use by 5G networks (see below).
“5G” Carrier Specific vs ITU-R IMT 2020 Standard?
Since Apple’s application notes that it “will conduct its experiments for a period not to exceed 12 months.” Consequently, it stands to reason that the 2019 iPhone 9 will be the first iPhone with “5G” connectivity. But what version of “5G” will that be?
A few months ago, AT&T and Verizon said that they will begin rolling out their own (non standard, carrier specific) 5G networks late this year and in 2018. That’s before ITU-R WP 5D/IMT2020 standards committee will decide on the Radio Access Network (RAN) to be used for true 5G. End point devices made for AT&T’s “5G” network won’t work on Verizon’s and vice-versa. Apple (and other smart phone/tablet makers) will likely delay the release of a volume production 5G iPhone until overall 5G coverage becomes widespread.
On May 25th, Wang Xinhui, Director of Wireless Standardization and Industrial Relationships at ZTE Corporation, said wireless telecommunications operators should work towards to incubate globally harmonized ecosystem for 5G mobile communication in the interests of the healthy development of the telecommunications industry. In an address to the 3rd Global 5G Event in Tokyo, Mr. Wang said industry standardization for mobile broadband and the Internet of Things should move forward in parallelism, in order to drive adoption by different industries and economic sectors. Mr. Wang is also Vice Chair of International Cooperation of the IMT-2020 (5G) Promotion Group. Mr. Wang said that 5G should meet the requirements of eMBB (enhanced Mobile Broadband), URLLC (Ultra-Reliable and Low Latency Communications) and mMTC (massive Machine Type Communications), supporting greater mobility and seamless coverage. Industry participants globally should collaborate in a more open manner to build unified standards and industry ecosystems. [This author doesn’t see such co-operation amongst wireless carriers in the U.S.]
ZTE has signed strategic partnerships on 5G development with the world’s top telecommunications carriers including Deutsche Telekom, Telefonica, SoftBank, KT Group, China Mobile, China Telecom and China Unicom.
From an ITU-R press release this past February:
“The IMT-2020 standard is set to be the global communication network for the coming decades and is on track to be in place by 2020. The next step is to agree on what will be the detailed specifications for IMT-2020, a standard that will underpin the next generations of mobile broadband and IoT connectivity,” said François Rancy, Director of ITU’s Radiocommunication Bureau.
We can anticipate that there will now be a number of early technical trials, market trials and deployments of 5G technologies based on the foreseen developments slated for IMT-2020. These systems may not provide the full set of capabilities envisaged for IMT-2020, but the results of these early activities will flow forward into, and assist the development of, the final complete detailed specifications for IMT-2020.
5G Frequency Spectrum:
During the World Radiocommunication Conference (WRC) 15, the ITU proposed a set of global frequencies for 5G, which it intends to finalize at the next conference in 2019 (WRC 19):
In 2014, the FCC published a Notice of Inquiry into use of spectrum bands above 24 GHz for Mobile Radio Services, 80 followed by a Notice of Proposed Rulemaking in October 2015, which listed the following potential bands for 5G in the United States.
27.5-28.35 GHz (28 GHz band)
37.0-38.6 GHz (37 GHz band)
38.6-40 GHz (39 GHz band)
64-71 GHz (unlicensed use)
70/80 GHz Bands: 71-76 GHz, 81-86 GHz
The FCC issued adopted rules to identify and open up 5G spectrum allocation in July 2016 that identify 3.85 GHz of licensed spectrum and 7 GHz of unlicensed spectrum: licensed use in 28 GHz, 37 GHz, and 39 GHz bands; unlicensed use in 64-71 GHz; and shared access in the 37-37.6 GHz band.
by Mike Gualtieri of Forrester Research (adapted from Forrester Research white paper “IoT Upsets Application Development”)
This is a follow on to the recent IoT post: Cisco Study: Few IoT projects survive proof-of-concept stage; Electric Imp on why not?
Internet of things (IoT) is the latest transformational technology, extending ubiquitous connectivity and control to the physical world. The applications are limited only by our imagination and our ability to build both cloud-based and enterprise infrastructure to deal with the flood of data and interactions that IoT represents.
Because The IoT Spigot Is Always Open, App Development Teams Need A New Stream-Driven, Machine Learning Approach! That’s explained in this article.
- IoT Apps Blur And Bridge Physical And Digital Worlds: IoT applications comprise a collection of devices that may have sensors and/or actuators that bridge the digital and physical worlds, which can turn contextual information from sensors into insight and action.
- Hello, Streaming: Forget most of what you have learned about app development. If you want to design IoT applications, you need to design apps that can ingest and analyze streaming data in real time.
- Hello, Machine Learning: Machine learning can analyze sensor and action data from devices to automatically improve program logic to make an app smarter over time.
IoT Applications Turn Real-World Context Into Physical Action:
Typical enterprise applications are “request and response.” AD&D pros design apps to get input from users, process the request, and then respond to it. These traditional apps are user-driven. That approach is insufficient for IoT applications because IoT applications must be ready to receive and react to information from device sensors and actuators, typically in real time. IoT applications help companies bridge the physical and digital worlds, turning contextual information from sensors into insights and action.1 IoT applications comprise a collection of devices that may have sensors only, actuators only, or both sensors and actuators. This is a system of connected devices that can provide applications with context, actuation, and learning.
- Context: a view of the physical world. IoT sensors measure physical parameters of people, places, or things. They emit live data such as motion, temperature, voltage, pressure, audio, video, and position, with the list going on and on. This information from a system of IoT sensors can provide applications with real-time context — what is happening right now at a single physical sensor and what is happening right now among all of the sensors in the system. That can be an amazing amount of contextual information that traditional applications can’t handle.
- Actuation: the ability to change the physical world. IoT actuators make something happen in the physical world such as opening a lock, instructing a furnace to turn down the heat, or displaying customized context within an app. IoT applications that include IoT actuators make changes to the physical world, often in real time.
- Learning: an increasing corpus of knowledge. IoT apps gather a tremendous amount of information from device sensors and generate log data about actuation commands and their results in the physical world. This data can be input to machine learning algorithms and advanced analytics to improve the application’s decision with every iteration
IoT Applications Are Stream-Driven:
Stream-driven means that data can drip periodically like dew from a leaf, pour down like the mighty Niagara Falls, or flow continuously like the Danube from one or many devices into an IoT application. The IoT application uses some of this data immediately to actuate devices, and it stores the rest of it to analyze later.2 The Nest thermostat is a classic easy-to-understand example. It continuously receives temperature, humidity, and motion data from the home sensor and uses that to actuate the heating or cooling system. It also uses the data to learn about the home owner’s habits and make automatic adjustments (e.g., based on patterns of travel).
Other IoT applications are more complex than that because they rely on many more devices and much more complex logic. But most require an application architecture that responds to streams of sensor data that help these components work in unison.
Multiple IoT devices. An IoT application must have a way to communicate with the devices that comprise the system of devices for the IoT application. IoT device connectivity and management solutions provide two-way communication and device control.
Stream ingestion and analytics. Sometimes, data spikes fast and furiously, and at other times, it drips in. IoT applications must be able to ingest data from IoT devices at the rate that it is emitted. Ingestion, however, is not enough. Streaming solutions must also be able to analyze data in real time. Many of these platforms also have smaller footprint versions that can perform ingestion and analytics at the edge — that is, you can deploy them on an IoT device. To help AD&D pros learn more about streaming ingestion and analytics, Forrester evaluated 15 vendor solutions in this space, including some vendors that offer commercial versions of open source, in a recent Forrester Wave™ report.
Machine learning. To know and not to do is not yet to know. That ancient proverb sums up the importance of including an advanced analytics regime in your IoT applications. Advanced analytics that uses machine learning can create predictive models or materialize other analytics that you can use in the IoT application’s logic. You can dump all of the data that comes from the IoT devices and all of the actuations that the application takes into a data lake for analysis to create models that the IoT applications can use. Creating a data lake in Hadoop and then using Apache Spark for advanced analytics is becoming increasingly common for implementing advanced analytics.
Actuation controller. IoT applications must trigger an action in the physical world. An IoT application must be able to issue commands to devices with actuators to make those devices do something such as open a gate, turn on a camera, or change the speed of a delivery drone.
Logic. The brain of an IoT application is the current context, programmed logic, and learned logic. The current context is a data model that represents the current situation that the sensors in the IoT devices report and any relevant external context from other applications. The simplest of current context might be that the room temperature is 66 degrees Fahrenheit. The programmed logic continuously monitors the current context and takes actions as necessary. Simple programmed logic could be that if the temperature drops below 68 degrees Fahrenheit, then the heat goes on. Additional programmed logic could be that the heat goes off when the temperature is 2 degrees higher than the target temperature of 68 degrees Fahrenheit. Learned logic modifies the programmed logic by analyzing the data and behavior of the application over time. Learned logic comes from advanced analytics and machine learning algorithms that recognize repeated patterns and turn those into logic.
Only a minority of internet of things (IoT) projects get past the proof-of-concept stage, according to a Cisco study that also says just 26% of companies report completely successful IoT initiatives.
“It’s not for lack of trying,” said Rowan Trollope, Senior Vice President and General Manager, IoT and Applications, Cisco. “But there are plenty of things we can do to get more projects out of pilot and to complete success,” he added.
According to the study, the top five challenges across all stages of implementation were time to completion, limited internal expertise, quality of data, integration across teams, and budget overruns. The study found that the most successful organizations engage the IoT partner ecosystem at every stage of the IoT implementation plan, which implies that strong partnerships throughout the process can smooth out the learning curve. Another key finding was that 64% of surveyed decision-makers agreed that learnings from stalled or failed IoT initiatives have helped accelerate their organization’s investment in IoT.
“We are connecting things that we never thought would be connected, creating incredible new value to industries. But where we see most of the opportunity, is where we partner with other vendors and create solutions that are not only connected but also share data,” said Inbar Lasser-Raab, VP of Cisco Enterprise Solutions Marketing. “That shared data is the basis of a network of industries – sharing of insights to make tremendous gains for business and society, because no one company can solve this alone.”
Almost two thirds of all participants in the survey said they are using data from IoT completed projects to improve their business, the study revealed. Globally the top three benefits of IoT include improved customer satisfaction (70%), operational efficiencies (67%) and improved product/service quality (66%).
Cisco said that the “human factor” is key for the success of IoT initiatives. Human factors like culture, organization, and leadership are critical. In fact, three of the four top factors behind successful IoT projects had to do with people and relationships, the study said. These key factors are collaboration between IT and the business area of the companies, a technology-focused culture, and IoT expertise. In addition, organizations with the most successful IoT initiatives leveraged ecosystem partnerships most widely, Cisco’s study said.
The points made in this Cisco study were earlier revealed by Electric Imp’s Hugo Fiennes in his presentation: “Why are 70% of IoT Projects Stuck in PoC Purgatory?” delivered at the IoT Developers Conference, April 26-27, 2017 in Santa Clara, CA.
“To prove the value, and explore the interactions, the PoC has to be a lot more than a “connected thing”. It has to fulfil the business needs on a small scale. Only then can the risks and rewards be evaluated,” Mr. Fiennes said. “Because good IoT is outcome driven, early data often changes the direction of a PoC – simply because you’re uncovering the previously unknown,” he added. Continuing, Hugo said: “Flexibility in all aspects is key, to allow you to iterate on the basic concepts and go in new directions if needed. This allows the project’s design to be refined whilst the process is low risk and cheap.”
Hugo claimed the top three issues slowing IoT deployment were: security, integration, and implementation complexity. Security is the top organizational concern companies have with pursuing IoT solutions, but complexity of integration with existing systems, the expense and complexity of implementation are also important concerns for many organizations.
Perhaps the biggest obstacle is the inability to prove value in the PoC / field trial scope and budget.
Generally the issues here are issues with implementation and integration. In particular:
– You need to be able to develop and deploy quickly and cheaply.
– If the data can’t get reliably from where it’s created to where it’s consumed, it’s hard to prove value.
Hugo opined that “Cloud integrations are hard, because every application is unique.” There’s an urgent need for IoT applications to be robust and scale; use multiple services and be able to change over time, he said. Flexibility is key.
The second big hurdle to overcome is the ability to move confidently from trial to production. Security, maintainability, cost and completeness are the key issues here.
And of course, security is a huge concern for IoT applications as we’ve noted for many years.
“Security is a special challenge for IoT. IoT systems operate across the public internet; are deployed outside of the physical control of the organization; may remain in place in critical systems for 10 to 20 years; and may control critical infrastructure, or be capable of coordinated attacks on other systems. Furthermore, IoT developers are focused on business problems and may not have a strong security perspective. The devices themselves may lack critical hardware capabilities for securing their operation against attack. Securing IoT requires a balance of protecting against long term devastation and accelerating value generation…
Source: ”Internet of Thing Primer for 2017,’ by Gartner Group
By Jeff Heynen of SNL Kagan
After a record year in which total estimated revenue for combined digital subscriber line, or DSL, and fiber-to-the-home, or FTTH, network infrastructure reached $9.77 billion worldwide, 2017-2019 should produce a slowdown in spending. Kagan, a media research group within S&P Global Market Intelligence, is forecasting a trough being driven by expected slowdowns in 1G EPON and 2.5G gigabit passive optical networks (GPON) spending as operators wait for 10Gig technologies, including XGS-PON to become more widely available. Equipment revenue is expected to drop to $9.43 billion in 2017, $8.98 billion in 2018 and $8.80 billion in 2019, as optical line terminal, or OLT, purchases for network expansion slow and prices for current-generation technologies continue to decline.
The vast majority of revenue will continue to come from the APAC region, specifically China, where China Telecom Corp. Ltd., China Unicom and China Mobile benefit from favorable regulatory policies designed to reduce FTTH construction and installation costs to help achieve national penetration and average bandwidth per user goals. Of the 95 million FTTH optical network termination, or ONT, units shipped in 2016 throughout the APAC region, we estimate that 83.5 (80.1 million) shipped to China. We expect total ONT shipments to the main Chinese operators will continue to stay in the 75 million to 80 million range through 2020, as the operators look to replace aging units with more integrated gateway units.
North American FTTH equipment spending was up 30% in 2016, surpassing $1.12 billion in equipment revenue, a first for the region and an indisputable challenge to the assertion that broadband spending in the region has declined. Total spending in North America was driven by 2.5G GPON equipment purchases at Verizon Communications Inc., AT&T Inc., Alphabet Inc.‘s Google Fiber and a growing number of tier 3 operators. Demand for new equipment is being driven primarily by Verizon, which is adding new FiOS subscribers and updating older GPON ONT models, and AT&T, which continues to expand its GPON-based AT&T Fiber footprint. But other operators, including CenturyLink Inc., Windstream Holdings Inc., Frontier Communications Corp. and Telephone and Data Systems Inc., continue to transition a growing percentage of their network footprint to fiber. However, we do believe that some of these initiatives, particularly Verizon’s FiOS upgrades, will slow after the peak in 2016, pushing revenue down to $1.07 billion in 2017 and $999.4 million in 2018.
2.5G GPON remains the workhorse FTTH technology on a global basis, with operators including Verizon, AT&T, China Telecom, China Mobile, China Unicom, Telefónica S.A. and many others relying on the technology for their residential FTTH deployments. We expect 2.5G GPON will remain the leading technology choice through 2021, as ONT shipments to support subscriber growth on existing networks remain high, despite the increased rollouts of XGS-PON and NG-PON2 technologies over time.
Saturation, waiting on 10G, and a focus on 5G will keep revenue growth in check
Though 2016 was a strong year for FTTH equipment revenue, it is likely to be the peak throughout our forecast period. In 2017, revenue is expected to decline from $8.33 billion to just under $8 billion. Chinese operators are expected to slightly slow their OLT rollouts after seven straight years of phenomenal growth. Their focus will be less on new FTTH network expansion and more on continued subscriber acquisition, which will result in continued spending on ONT units. Also, the three main Chinese operators will be rolling out 10G EPON and 10G GPON equipment, as they wait on XGS-PON equipment availability. The focus will be on improving bandwidth in major metropolitan areas, especially among subscribers currently served by fiber-to-the-building (FTTB) + local area network (LAN) architectures, which typically max out at 10 Mbps downstream.
In North America and Western Europe, FTTH network buildouts, measured in the number of new OLT ports shipped, will slow after 2018, when a combination of factors are expected to reduce overall investment levels:
* Many operators will have reached saturation levels within their core FTTH networks. Like Verizon, these operators will hold off on additional territory expansions and instead focus on securing subscribers within their existing serving areas. The net result will be declining OLT shipments and sustained ONT unit shipments.
* Operators will wait until 10G variants of PON technologies become more widely available and therefore less expensive, particularly 10G EPON for cable operators, XGS-PON, which delivers symmetric 10 Gbps of throughput and NGPON-2, which delivers up to 40 Gbps of symmetric throughput.
* Finally, operators will begin shifting their spending toward preparing for upcoming 5G wireless networks. The early stages of 5G network buildouts will focus on metro areas and will rely on existing fiber connections for backhaul purposes.
Beginning in 2020, overall spending on FTTH equipment is expected to pick back up, based on increased shipments of 10G EPON, XGS-PON and NGPON-2 equipment to support upgrades to first-generation FTTH networks, business services and the backhaul of 5G wireless network traffic. By 2022, we expect total FTTH equipment spending to be $8.32 billion, nearly equal to the 2016 peak.
In a change from our October forecast, we now expect XGS-PON to become the leading next-generation technology during our current forecast period. Previously, we had expected that NGPON-2, driven by anticipated deployments at Verizon, China Telecom, and others would become the leading next-generation technology. However, after conversations with service providers, equipment vendors and component suppliers, we do not see NGPON-2 equipment, with its reliance on expensive, tunable optics, becoming widely deployed for FTTH applications until 2021 and beyond.
In our previous forecast, we expected worldwide revenue for NGPON-2 equipment in 2021 to reach $2.20 billion. We now expect it to reach just over $1 billion in 2021, with much of the revenue coming from Verizon, as it upgrades its FiOS network. By 2021, portions of Verizon’s FiOS network will be over a decade old. And with cable operators’ aggressive deployments of DOCSIS 3.1 technologies, Verizon will be forced to switch to NGPON-2 to provide a bandwidth advantage for the next decade. In addition, Verizon is expected to rely on NGPON-2’s ability to deliver multiple wavelengths to support the backhaul of mobile data traffic from its 5G base stations. A single NGPON-2 OLT can theoretically split multiple wavelengths for residential services, mobile backhaul and business services.
While Verizon is expected to stick with its plan to move to NGPON-2, a larger number of operators around the world will opt for XGS-PON, beginning in late 2017, but picking up steam in 2019. XGS-PON uses fixed optics and wavelengths, like current GPON technologies, but also provides an upgrade path to tunable optics for operators that want to move to NGPON-2 down the road.
Many operators have a 5-year goal of getting symmetric 10 Gbps services out to their customers, which would provide them an edge over cable competitors who will likely be stuck with asymmetric services through at least 2020, when full duplex DOCSIS 3.1 equipment becomes available. XGS-PON gives them the ability to deliver symmetric 10 Gbps services at price levels that are currently 4x 2.5G GPON equipment prices, as opposed to the minimum 10x 2.5G GPON costs currently seen for NGPON-2 equipment. FTTH is an expensive proposition as-is, with labor and operational costs generally consuming 70% of the budget. Equipment costs have to be controlled in order to ensure reasonable payback periods for network operators. Right now and for at least the next two years, NGPON-2 equipment will simply be too much cost to bear for most operators. Hence, the growing interest in XGS-PON among operators including AT&T, China Telecom and a growing list of tier 2 and tier 3 operators globally.
For operators with 1G EPON-based deployments — particularly Korea Telecom, Japan‘s NTT DOCOMO access, China Telecom and China Unicom, 10G EPON is quickly becoming the next-generation technology of choice for providing both asymmetric and symmetric 10 Gbps services. 10G EPON equipment shipments and revenue continue to grow, driven currently by China Telecom, which is in the process of upgrading a portion of its first-generation 1G networks to provide more bandwidth to multi-dwelling units, or MDUs.
Longer-term, cable operators in North America and Western Europe will deploy 10G EPON in Greenfield deployments and, on occasion, in overbuild situations, as well as for business services. Of course, MSOs will rely heavily on DOCSIS 3.1 for the bulk of their residential deployments. But 10G EPON will also be an important technology for cable operators for MDU deployments and business services, particularly as fiber is pushed deeper into the network and remote nodes are converted into OLTs.
Our equipment revenue forecasts for 10G EPON have been nearly doubled, due largely to higher-than-expected spending levels seen in 2016 in China, but also due to our expectations that a growing number of cable operators will mix in a higher percentage of 10G EPON for greenfield FTTH buildouts. Altice USA, Inc. has already committed to a full FTTH network buildout across its footprint, which we have now factored into our forecasts. In addition, we expect other North American MSOs to slowly migrate to 10G EPON for both their business and greenfield residential access networks.
VDSL and G.fast spending to sustain DSL infrastructure market through 2019
Global spending on DSL equipment by operators and ISPs is expected to increase by 1.4% this year, with 2017 equipment revenue now expected to rise to $1.46 billion. The primary reason for the increase is a resumption in spending in the CALA region, which saw 2016 equipment revenue plummet to $75.8 million. Economic uncertainty in the region, as well as a decision by Telmex to halt its VDSL rollouts helped to push revenue down sharply in the region. We now expect DSL spending to reach normal annual levels, with 2017 revenue to reach $117.5 million.
Outside of CALA, declines are once again expected this year in North America, where total DSL revenue is expected to drop from $388.3 million in 2016 to $368.9 million in 2017. AT&T’s continued shift for its U-Verse service from very high bit rate digital subscriber line generation 2 (VDSL2) GPON is expected to result in a decline of another 600,000 VDSL ports from 2016 to 2017.
EMEA remains the world’s largest market for DSL infrastructure: 47.2% of global revenue comes from this region, where incumbents such as British Telecom (BT), Deutsche Telekom AG (DT), Orange SA, Telefonica and others continue to rely on asymmetric digital subscriber line (ADSL) and VDSL technologies for the bulk of their residential broadband service offerings. Providers have shifted a small percentage of their broadband networks to FTTH and will continue to do so. However, the cost of widespread fiber deployments, as well as line-sharing obligations will keep the bulk of broadband connections in this region copper-based. Throughout our forecast, the EMEA region will constitute 46% to 48% of global DSL revenue and will continue to be the leading region for G.fast deployments.
Along with the revenue increase expected in 2017, total DSL ports should also increase from 54.8 million in 2016 to 58.3 million. Further increases in total ports are expected through 2020, as service providers continue to shift away from ADSL/ADSL2+ technologies to VDSL2, VDSL Profile 35b and G.fast. From 2021 forward, however, we do expect the total market for DSL ports will decline, as more operators switch to FTTH as a logical progression from their deep fiber deployments to support VDSL2 and G.fast deployments.
G.fast, a high-frequency DSL protocol designed for copper loops of 250 meters that can deliver between 150 Mbps and 1Gbps, will be relied upon by BT, Orange, Telekom Austria Group, AT&T and others in the coming years. CenturyLink already announced a 44-building G.fast deployment in Platteville, Wis. CenturyLink is expected to continue its G.fast deployments throughout 2017 and beyond. But BT is expected to drive the most G.fast port and customer premises equipment (CPE) shipments, with its announced plan to pass 10 million homes with G.fast by 2020.
Until G.fast silicon chips, infrastructure and compatible CPE products are available in volume, VDSL2 will remain the workhorse technology. Vectored VDSL2 can provide 100 Mbps to 150 Mbps service over copper loops of 500 meters and has been used by a large number of operators in North America, EMEA and CALA to remain competitive with fiber over builders and cable operators.
VDSL profile 35b, alternately called Super VDSL or Vplus, provides a niche solution between vectored VDSL2 and G.fast. At loop lengths between 250 and 500 meters, VDSL profile 35b can provide speeds ranging from 200 Mbps to 300 Mbps. Germany‘s DT is the leading proponent of this technology, as the operator has yet to deploy a significant amount of vectored VDSL2 and can therefore more cost-effectively make the transition to the 30 MHz vectoring of profile 35b. Additionally, DT has a large percentage of copper lengths within the 250 to 500 meter range, making it the ideal target for this technology.
There is a dearth of good data around municipal broadband networks, and the data that is available raises some tough questions.
A new study from University of Pennsylvania Law School Professor Christopher Yoo and co-author Timothy Pfenninger, a law student, identified 88 municipal fiber projects across the country, 20 of which report the financial results of their broadband operations separately from the results of their electric power operations. Municipal broadband networks are owned and operated by localities, often in connection with the local utility.
Of those 20, during a five-year period from 2010 to 2014, 11 were cash-flow negative, meaning they did not generate enough cash to cover their current operating costs. Of the nine that were cash flow positive, five were generating returns so small that it would take more than a century to recover project costs.
In his report, Yoo and Pfenninger called the results “sobering.”
“Many cities managing these projects have faced defaults, reductions in bond ratings, and ongoing liability,” the pair wrote, noting that city officials considering a municipal broadband project must “carefully assess all of these costs and risks” before moving forward.
Yet Christopher Mitchell, director of the Community Broadband Networks Initiative at the Institute for Local Self-Reliance, argued that Yoo’s study did not present an entirely accurate or up-to-date picture of U.S. municipal networks.
“When I looked at the 20 communities that he studied — and his methodology for picking those is totally reasonable and he did not cherry pick them — I was not surprised at his results because many of those networks are either in very small communities … and the others were often in the early years of a buildout during a period of deep recession,” Mitchell said.
An EPB crew lays fiber in Chattanooga, TN Image Courtesy of EPB
As an example, Mitchell pointed to Electric Power Board‘s municipal broadband network in Chattanooga, Tenn. — one of the five networks Yoo identified as having positive cash flow but at such a low level that it would take more than 100 years to recover project costs.
Specifically, Yoo found EPB’s fiber operations were cash-flow positive by roughly $2 million from 2010 to 2014, whereas the city had used $162 million in local revenue bonds to fund the fiber build-out. Given the costs versus the cash flow, Yoo estimated it would take 412 years to repay the project cost, though he noted EPB’s fiber network is “relatively young, and revenue grew at a healthy 41% annual rate from 2010 to 2014.”
EPB, however, disagrees with Yoo’s calculations. To begin, the company notes the fiber build-out was largely done to support the electric utility’s smart grid project. As a result, the debt for that project was divided between the electric business and the fiber business. Importantly, earlier this month, EPB CFO Greg Eaves announced the fiber business had fully paid down its debt to zero.
“Our fiber-optic portion of the debt is, in fact, paid. There is additional debt related to the smart grid project that’s still within the electric system to pay, but … the fiber-optic system generates enough revenue on an annual basis to more than cover the debt service for the electric system,” J.Ed. Marston, EPB’s vice president of marketing, said in a May 25 interview.
He noted that the fiber-optics business’ repayment had happened much faster than anticipated as consumer acquisition rates exceeded expectations. The company currently counts more than 90,000 residential and business customers, well above the 35,000 fiber-optics customers that had been projected.
“We were very, very conservative in the business plan,” Mike Kaiser, EPB assistant vice president of finance and controller, said in an interview.
Kaiser also noted that the fiber-optic business will pay $13.5 million in access fees to the electric business in 2017, in addition to $24.3 million in expense allocations. As a result, all electric system customers benefit from revenue generated by fiber-optics subscription sales.
In fact, without the revenue generated by the fiber-optics business, EPB estimated it would have had to raise electric rates by 7% this year.
According to Mitchell, Yoo’s study captured the Chattanooga network when it was still “small and growing,” but misses “what’s going to happen for the rest of the life of the network, which I think is the more important part.”
In an interview, Yoo explained the time frame of the study, 2010 to 2014, had been determined by the most recent data available when the study began. Further, he noted that the municipal networks included in the study covered a range of ages.
“The oldest one was 14 years old as of 2014, so we have real world performance from different ages of projects, from brand new to 14 years old. And we will continue to get more information about them as we go,” he said.
Yoo also noted, “Every paper can’t be everything to everybody.” In the case of his study, he decided to target it toward mayors and city council members who may be considering whether to build a fiber-optic network.
“So a lot of it is focusing on the financial impacts on city budgets,” he said, adding that he is not telling local officials what they should or should not do, but rather trying to provide as much information as possible so that officials can make informed decisions.
Yoo’s study also intentionally does not include the impact of higher tax revenues or job creation, which might offset project costs. But that, he said, is something municipalities should consider.
“There are benefits of broader economic activity that don’t accrue to the city — that’s good for the citizens, but the city is still going to have to finance that debt,” Yoo said. “So if I were a city council person, if the benefits really go to the city generally, we should be financing [the debt] through general revenues such as through sales tax, property tax and income tax.”
At a May 24 presentation of Yoo’s study at Penn Law’s Center for Technology, Innovation and Competition, former Pennsylvania Gov. Ed Rendell said he viewed Yoo’s “wonderful paper as a springboard for a national discussion” on how to best to expand access to affordable high-speed broadband to all corners of the country.
According to Rendell, Yoo’s study gives “one side of the dilemma” — namely, the cost associated with doing something. The other side of the dilemma, he noted, is the cost of doing nothing.
“The cost of doing something, meaning building your own municipal fiber network, is almost prohibitive and incredibly risky,” he said.
But the cost of doing nothing, he noted, could be equally high.
“What business … is going to go to a town that doesn’t have internet access?” Rendell said, noting that balancing these costs is “not so easy.”
By Chris Young and Kamran Asaf of SNL Kagan
Losses in wireline phone subscribers picked up steam in the first quarter of 2017 as a lackluster performance by cable operators failed to offset declines from telcos. According to company reports and estimates from SNL Kagan, a media research group within S&P Global Market Intelligence, wireline phone providers lost 763,000 subscribers in aggregate during the quarter, a 40% steeper drop than the loss experienced in the first quarter of 2016.
Cable’s share of the shrinking sector creeped up to 45.2%, 2.5 percentage points over the year-ago quarter.
New commercial subscriber information released by Comcast allows us to delve deeper into the segment. As expected, commercial services boosted cable’s voice segment as residential uptake falters. In some quarters, commercial voice gains offset declining residential voice losses at the operator.
Charter is not immune to declining net additions. The operator’s voice net adds dipped considerably since closing its Time Warner Cable Inc./Bright House Networks LLC acquisitions. The operator faces a tough task overcoming churn at legacy Time Warner Cable systems, in part driven by its low-priced promotional voice offering in prior-year quarters.
Both Charter and Comcast are actively looking to deploy wireless telecom services by activating their mobile virtual network operator agreements with Verizon Communications Inc.‘s Verizon Wireless. While Charter expects to launch its service sometime in 2018, Comcast started taking sign-ups for Xfinity Mobile around mid-May. Comcast’s base offering starts at either $45 per month or $12 per gigabit of data consumed, according to the operator’s website.
Telco phone subscriptions:
The combined VoIP phone subs for AT&T Inc. and Verizon reached 9.4 million at the end of the first quarter and topped legacy circuit-switched subs by 511,000 as the traditional copper footprint contracted through upgrades and subscriber defections.
The telco sector has shown steady improvement of its fiber-deep phone penetration. AT&T and Verizon boosted combined IP voice penetration to over 51%, compared to 46% a year ago.
Despite losses in both IP and traditional voice subscribers in the quarter, FiOS improved its IP ratio with traditional subs to 54%, compared to AT&T U-verse’s 50% mix with traditional AT&T subs.
AT&T U-verse phone gained 45,000 subs in the quarter, compared to a gain of 13,000 for the same period in 2016. The IP phone segment has been affected by stalled broadband growth linked to losses of bundled U-verse video subscribers while the company shifts its video focus to DIRECTV Group Holdings LLC. The company ended the quarter with 5.5 million IP voice subs. Overall wireline phone subscribers were down 9.2% compared to first quarter of 2016 after factoring in circuit-switched subscriber losses.
FiOS IP-voice growth stalled as subs decreased slightly to just below 3.9 million at the end of the first quarter. Similar to AT&T, Verizon’s combined IP and traditional phone line subscribers were down. Verizon’s wireline phone subscribers dropped 8% year over year to 7.2 million subscribers due to traditional phone line losses.
AT&T and Verizon posted total residential access line losses to end the year with a combined 18.2 million.
“In the areas where we are the local exchange carrier, there’s a tremendous opportunity to take some market share away from the cable companies, especially small to mid-sized customers where Qwest had lost quite a bit of market share,” Ewing said.
Sunit Patel, CFO of Level 3, said that the new on-net fiber footprint will give the new company an advantage of cable competitors.
“When you look at our on-net fiber building footprint as a combined company it’s quite substantial,” Patel said. “There’s absolutely no reason why we should not be able to compete against the cable companies in those buildings.”
Patel added that CenturyLink has potential to advance its market share with a larger set of services in these buildings with a larger fiber network.
“When you look at the market share penetration in those buildings, it is reasonably low so there are opportunities for market share gains there,” Patel said. “The proximity of our network to a lot of buildings is better as a combined company so if you leverage that we’ll be able to compete quite effectively against cable companies.”
Despite numerous telcos announcing support for LTE Cat 1, M1 and NB-IoT (see recent techblog posts), LoRa WAN continues to gain market traction. Last December, Tata Communications and Semtech announced they had worked together to deploy 35 IoT proofs-of-concept (PoCs) LoRa WANs in several India cities. The PoCs cover a wide array of applications, including sensors for remotely monitoring air conditioners and safety deposit boxes, energy management systems used to optimize the use of electricity, gas and water, and multiple smart buildings and smart city applications.
On May 22nd, LPWAN provider Actility and machinestalk (an IoT solutions provider), announced they are working together to begin the roll-out of a large-scale LoRaWAN network in the Kingdom of Saudi Arabia (KSA).
The partnership will combine the expertise of Actility with machinestalk’s market-leading IoT platform and solutions and will enable cutting-edge efficient and energy-saving IoT solutions and geolocation applications in the fields of smart cities and Industries, oil and gas, supply chain and logistics.
Managing Director Eng. Nawaaf Alshalani said, “We at machinestalk always seek to build and present an integrated ecosystem to our clients. As a result, we are collaborating with Actility to implement LoRaWAN network and LPWAN technologies, which will give an added value to the region as a whole, and enable the grow of the IoT market in the Kingdom in line with the 2030 Vision. Our studies and research indicate that 11% of IoT connections will use LPWAN technologies that serve applications and solutions that require low-cost, multi-year battery operation, long-range connectivity, and geolocation. We are proud of our partnership with Actility, a leading company in this field and a developer of ThingPark, the leading IoT platform. This collaboration will help us to provide better IoT services and solutions for various private, government, and semi-government sectors.” Eng. Nawaf added.
“We’re delighted to be working with machinestalk to begin the rollout of a LoRaWAN network in Saudi Arabia,” says Actility CEO Mike Mulica. “As a provider of IoT solutions for over a decade, machinestalk really understands the needs of the key industrial sectors in the Kingdom. Not only oil and gas, which are clearly pivotal, but also other applications in the new domains being grown in response to the very forward looking Saudi Vision 2030. We believe that a this LPWAN communications network will be a powerful platform to accelerate the the implementation of that vision.”
machinestalk is planning to use the LoRaWAN infrastructure to facilitate the implementation of IoT solutions in industry sectors including oil and gas, smart city solutions, M2M, and industrial applications. For the oil and gas industry, the network will support services including smart level monitoring and smart metering, improving the end to end supply chain. From the smart city perspective, machinestalk will deploy services including smart lighting solution, environmental monitoring, smart parking systems and waste management solutions resulting in more green, efficient and connected cities in Saudi Arabia and the MENA region.
Source: Karam Targa, Managing Partner & Global Practice Leader at Arthur D Little-Austria.
On May 15th, Arthur D Little held its flagship Telco CEO & Private Equity Event in its office in Vienna, Austria. The event covered the key trends in the telecom industry, in which 60+ Telco CEOs, Managing Directors, Private Equity firms, Telco shareholders and European Regulators from more than 18 countries participated.
This year’s gathering focused on the industry’s hottest topic:
“How digitalization will impact telecommunication operators’ configuration”
It addresses five critical questions for the telecom industry:
1. Volume-driven growth in core telcos on the horizon, back to growth?
2. B2B2x: will operators finally take advantage of the digitization of the industry?
3. Changing production models: why and how?
4. A new art: managing assets – why owning everything may not be optimal?
5. Quantifying the impact for a new telco model?
The event began with a welcome by Karim Taga, Global TIME Practice Leader and Managing Partner of Arthur D. Little – Austria. Following that was a presentation on the key observations and future strategic choices by Bela Virag, Partner at Arthur D. Little – Austria and lead author of this year’s flagship report. The event finished with a Q&A session, during which the topics raised a lively discussion about the implications of the findings on the future development of telecom operators (telcos).
- AD Little expects that telcos will master the “ARPU x volume” battle moving forward, which will amount to approximately +1% CAGR (in Europe) over the next five years, stabilizing top-line growth.
- B2B2x is gaining importance – it represents a new segment and an untapped opportunity for telcos, which can be captured by leveraging core assets and capabilities and understanding what is needed to help companies digitize.
- New production models begin to emerge – a tailored transformational journey will be key to drive improved customer experience, lower production costs and more innovative/faster time to market.
- Telecom Operators (telcos) will need to review how they manage their diverse portfolios of assets to deal with a potentially significant impact on balance sheets due to a shift from depreciation to OPEX.
- AD Little expects the markets to recognize that, given a change from the traditional approach of asset management, vastly different types of operators will offer different risk profiles and abilities to scale.
- Volume-driven growth in core European telcos is on the horizon, with an estimated 1% CAGR over the next five years (in the geographic perimeter considered in the report modeling).
- Seeking further growth, some operators are expected to focus on new market opportunities outside their core segments and reconfigure their businesses in order to address the increased pressure on various financial margins.
- The “ARPU x volume” equation remains a key characteristic of the telecom services market. Declines in ARPU are anticipated across nearly all market segments, coupled with volume increases.
- AD Little forecasts that telcos will win the “price x volume” battle.
- Mobile and fixed broadband services will act as key growth drivers and offset declining segments such as fixed telephony. This is part of a transition from having voice segments as the main revenue driver to becoming a complementary service in converged bundles.
- Voice markets will become less relevant as the revenue share of converged services grows stand-alone segments and revenue becomes too complex to be attributed to the voice market.
B2B2x: Will operators finally take advantage of the digitization of the industry?
B2B2x is a new segment seen as an extension in new markets, in parallel with the existing segments of B2B, B2C and wholesale. It is developing to capture the business opportunity of operating customers’ digital solutions. B2B2x differs from the other segments in that services become part of the client’s value chain.
It differs from the Internet of Things (IoT) in that it does not include B2C, but does involve services delivered by people.
AD Little expects this market segment to reach $276B in size – or 8% of global ICT spending – by 2020 and, as such, it should be one of the fastest-growing fields for telcos to focus on.
By leveraging their assets, telecom operators can carve out a space in the segment and address a much larger share of the “digitization of the industry” mega-trend than they have historically. Doing this requires a thorough understanding of what is needed to help companies digitize. We expect that some operators will actively address this new segment in an attempt to become part of their customers’ value chains, while others may choose not to participate. The main perceived drawbacks are around possibilities that the company is not ready yet, the opportunity is too small, or IT providers are better positioned, deterring the telco’s entry. Industrial digitization is already in motion, and there is a material opportunity in providing and operating digital services for B2B clients. Telcos can, as well as or better than IT companies, operate technical assets on a reliable, low-cost basis. In order to capture this new opportunity, telecom operators need to work towards proactively engineering and jointly operating business models for their customers, adopting a perspective of value co-creation.
Telcos need to amend the design, sale and operation of offerings, as well as increase the agility and openness of their internal systems and processes so they can produce repeatable and scalable results from the B2B2x segment.
Changing production models: Why and how?
Three factors are driving new production models:
- An improved customer experience
- Lower production costs
- More innovation/faster time to market
AD Little Forecasts:
- Eventually network resources will become elastic, transparent and accessible – moving far away from today’s often slow, cumbersome and inefficient architectures.
- We will see web-like collaboration between companies emerge – even in the network and Operations Support System / Business Support System (OSS/BSS) domain.
- We will also see web-like competition emerge (amongst telcos).
- Cross-border service competition will arise and international expansion will be accelerated.
- We expect groups with multinational footprints to be able to leverage group-wide scale effects and eventually achieve lower costs.
- Beyond this, we expect some of them to become suppliers to off-footprint operators. Transformation programs must be tailored to achieve the strategic goal of the operator initiating the move.
AD Little Takeaways:
Four key takeaways emerge from AD Little’s analysis:
- There is no “one-size-fits-all” transformation program available, at least at a feasible price. As a consequence, telcos need to evaluate and set their goals and prioritize their choices.
- Customer experience strategies are geared towards enabling delivery of the demanded solutions, which still may lack the technology or an attractive business case.
- Cost optimization from business-model abstraction is enabled as hardware, software and related processes are automated and centralized, while divestment optimizes asset structure.
- Operators must make production models more accessible and programmable to enable swift and efficient innovation, beating competitors to market with a differentiating offering. Operators have struggled to monetize the growth of data traffic. More importantly, though, many operators have recognized that they need to redesign their production models to meet the continued demand for bandwidth, agility, accessibility and efficiency increases.
A new art – managing assets: Why owning everything may not be optimal:
Traditionally, telcos owned and operated their infrastructure for both fixed and mobile telecommunication services. They obtained a unique strategic advantage by owning infrastructure that was wider in geographical reach and better in technology than that of competitors. The strategic advantage of owning infrastructure needs recalibration in importance compared to the past. Diverse asset groupings, such as data centers, towers and legacy networks, among others, require differing managerial approaches and strategic objectives. Operators will need to consider establishing dedicated approaches that suit each asset class. Certain assets, such as fiber and small cells, will likely work in asset-sharing models. As many copper-network owners embark on fiber-upgrade journeys, they will have to balance the need for fiber sharing with their legacy roadmaps. This is in stark contrast to cable network operators, which, given their technical nature, can follow “upgrade with demand” strategies.
Clearly, this will have a significant impact on balance sheets: a shift from depreciation to OPEX makes EBITDA levels less comparable.
However, the most dramatic impact will stem from the vastly different types of operators that spring into existence: we will have traditional players competing with asset-light players following rigorous cost-cutting approaches while operating on simple, customer-centric models. Beyond that, we will see international operators expanding their footprints based on equally available infrastructure assets.
Quantifying the impact:
AD Little expects the markets to recognize that these vastly different types of operators offer very different risk profiles and abilities to scale. Operators can differentiate their plays by: becoming truly global players; partnering with capable players that fully embrace the new segments and customer needs; remaining strong and highly efficient in their domestic markets; becoming asset-heavy or -light operators; or becoming pure asset-holding and operating players. All of these possible paths have one thing in common: they anticipate the arrival of the next wave of efficiency increases – this time on a much more global scale.
AD Little expects to see an increase in the importance of non-tangible assets in the sense of capabilities: e.g., the “degree of openness” of an operator to third parties, the “market-oriented approach to assets”, and the ability to “take design responsibility for the software that runs their factories” will gain weight when assessing operators.
Should operators be as they are today, or transform into asset-light and asset-heavy parts?
What role will the production platform play?
It became clear that changing the current set-up will raise a number of subsequent questions, e.g. how to manage the transition, what ownership and governance models to adopt and how differentiation from competitors can be achieved.
The B2B2x opportunity also raised interest. The main issues discussed were related to telcos’ ability to build up capabilities to partner and to open their production platforms. Overall, there seemed to be a consensus on the need for clearer evaluation of the necessary steps in terms of investments, acquisitions, and other means of capability building to engage in the B2B2x opportunity.
One of the final topics discussed related to the management of such diverse operators. Will EBITDA or EBITDA margins still be as relevant? It seems that management and investors alike will need to refocus on EBIT and FCF as the leading KPIs by which operators will be managed. As some operators will own infrastructure while others share or buy access to it, the EBITDA performance may vary greatly.
About Arthur D. Little:
Arthur D. Little has been at the forefront of innovation since 1886. We are an acknowledged thought leader in linking strategy, innovation and transformation in technology-intensive and converging industries. We navigate our clients through changing business ecosystems to uncover new growth opportunities. We enable our clients in building innovation capabilities and transforming their organizations. Our consultants have strong practical industry experience combined with excellent knowledge of key trends and dynamics. Arthur D. Little is present in the most important business centers around the world. We are proud to serve most of the Fortune 1000 companies, in addition to other leading firms and public sector organizations. For further information, please visit www.adlittle.com
Copyright © Arthur D. Little 2017.
Ines Matzelle – [email protected]
Karim Taga – [email protected]
AT&T’s LTE Cat M (LTE-M) network is now live across the U.S. on the company’s nationwide LTE network after software upgrades. The deployment was ahead of schedule and comes approximately seven weeks after rival Verizon launched its own LTE-M offering. In an earlier techblog post this week, Sprint said it will deploy LTE-M in mid 2018.
The network will enable a new generation of devices and applications related to Internet of Things (IoT). The company is rolling out new rate plans with the LTE-M, starting from $1.50 per month per device, excluding SIM card fee, other setup charges, applicable taxes and fees. AT&T will also offer discounts for yearly and multiyear plans and volume commitments.
Customers can also get LTE-M modules from an AT&T supplier, starting from $7.50 each, including a SIM card, but excluding applicable taxes and fees. The software for the company’s current IoT starter kits will also be upgradeable to LTE-M with an upcoming firmware update, the company said May 18.
“Our nationwide LTE-M deployment is another example of AT&T’s continued investment and leadership in IoT,” said Chris Penrose, president of IoT Solutions at AT&T, in a press release. “We can now reach new places and connect new things at a price that’s more affordable than ever before. Our LTE-M starter kit will also spur developers to open the doors to IoT innovation.”
AT&T said it plans to deploy LTE-M across Mexico by the end of the year, which will create a “North American LTE-M footprint covering 400 million people.” The company first spoke of a potential LTE-M Mexico rollout at CES in January.
LTE-M – also know as category M1 (Cat-M1) – is one of three LPWA technologies licensed by 3GPP. The other technologies are NB-IoT and EC GSM IoT. US operators are particularly keen on LTE-M, though the technology also notably received backing in Europe from Orange and KPN.
Sigfox continues to be the largest LPWA network with LoRa WAN picking up a lot of support, as we’ve outlined in many previous techblog posts.
FTTP & Residential Broadband Bundles:
AT&T’s CFO sees residential broadband as a growth area again with FTTP driving adoption of triple play service bundles.
John Stephens, CFO of AT&T, told investors during the MoffettNathanson Media and Communications Summit that customers in the fiber markets are purchasing multi-service bundles that incorporate either satellite or IPTV and wireless.
“The exciting part about fiber is what it’s doing to churn when you bundle it with wireless, when you bundle it with video and when it eliminates our position as one product offering to the home,” Stephenson said. “Now, with the video offering, I have the broadband to go with it.”