AT&T will run its 5G SA Core network on Microsoft’s Azure public cloud computing platform. Microsoft AZURE, which is the second largest cloud computing provider by revenue behind rival Amazon Web Services, has been building out specific cloud computing offering to attract carriers. AT&T is Microsoft’s first major deal in the 5G SA Core network space.
The two giant companies said that Microsoft will purchase software and intellectual property developed by AT&T to help build out its offerings for carriers. The companies did not disclose the terms of the deals, but said that Microsoft will make job offers to several hundred AT&T Network Cloud engineers.
Microsoft will use AT&T’s software and IP to grow its telecom flagship offering, Azure for Operators. Microsoft is acquiring AT&T’s carrier-grade Network Cloud platform technology, which AT&T’s 5G core network (when completed) will run on.
The companies disclosed a few key details about their new deal, but did not provide any firm numbers or any financial arrangements/guidance:
- Microsoft will “assume responsibility for both software development and deployment of AT&T’s Network Cloud immediately,” according to the companies, and will transition AT&T’s existing network cloud operations into Azure over the next three years. Eventually, all of AT&T’s mobile network traffic will run over Microsoft’s Azure.
- The effort will start with AT&T’s 5G core, but will eventually include virtually all of the company’s network operations, including its 4G core.
- Microsoft will be the company to certify all of AT&T’s software-powered network operations for inclusion in the AT&T network. That will include software from other vendors. AT&T has not yet named its 5G core network vendors.
- Microsoft will acquire AT&T’s Network Cloud technology – including its AT&T engineering and lifecycle management software – and its cloud-network operations team. The companies did not disclose exactly how many AT&T employees that transaction might cover, but an AT&T official suggested it will be in the “low hundreds.” Microsoft will then incorporate AT&T’s intellectual property into its Azure for Operators offering, which is for sale to other 5G network operators.
- Microsoft and AT&T did not provide the logistics of their deal, including exactly how many Azure computing locations might be necessary to power AT&T’s network. It’s an important issue considering AT&T’s cellular network spans an estimated 70,000 cell towers across the country, and the operation of the radios on top of those towers might eventually be handled by programs running inside of Microsoft’s cloud. A top Microsoft executive involved in the deal told Light Reading that Microsoft’s Azure software will be installed into some of AT&T’s existing computing locations. Several of those compute server locations are staffed by AT&T technicians.
- AT&T said the company plans to continue to run its network workloads inside of its own data centers and facilities. However, AT&T added that the deal today is focused on AT&T’s 5G core network and that the companies might explore additional elements of the network such as Open Radio Access Network (O-RAN) technology over the course of the agreement.
Sidebar: 5G SA Core networks to run on cloud service provider platforms:
- In late April, Dish Network made a similar deal to have Amazon run its 5G core network on AWS.
- In late May, Telefónica said it had validated AWS Outposts as option for 5G SA core deployment in Brazil.
- Earlier this week, TIM said it was building its 5G SA Core network on “Google’s cloud solutions” (whatever that means?)
Do you think the cloud service providers will essentially take over the implementation, operations, and maintenance of 5G SA Core networks, especially since they will likely all be “cloud native.” Please post a comment in the box below this article to express your opinion and why. Thanks!
“This deal is not exclusive, so I fully expect Azure will try to assert itself as the telecom cloud provider for many carriers around the world,” said Roger Entner of Recon Analytics LLC.
“It’s the first time a Tier One operator has trusted their existing consumer subscriber base to hyper-scaler technology,” Microsoft’s Shawn Hakl, VP of the company’s 5G strategy, told Light Reading. Before joining Microsoft in 2020, Hakl was a longtime Verizon executive.
The deal follows a $2 billion agreement in 2019 in which AT&T said it would start using Microsoft’s cloud for software development and other tasks. At that time, AT&T said it would continue to run its core networking functions in its own private data centers.
Andre Fuetsch, AT&T’s chief technology officer, said that shifting to a public cloud vendor will let AT&T take advantage of a larger ecosystem of software developers who are working on technologies such as wringing more use out of pricey 5G spectrum or creating new features for users. “That’s what we at AT&T want to do, and we think working with Microsoft gives us that advantage,” Fuetsch told Reuters in an interview.
“AT&T has one of the world’s most powerful global backbone networks serving hundreds of millions of subscribers. Our Network Cloud team has proved that running a network in the cloud drives speed, security, cost improvements and innovation. Microsoft’s decision to acquire these assets is a testament to AT&T’s leadership in network virtualization, culture of innovation, and realization of a telco-grade cloud stack,” said Andre Fuetsch, executive vice president and chief technology officer, AT&T. “The next step is making this capability accessible to operators around the world and ensuring it has the resources behind it to continue to evolve and improve. And do it securely. Microsoft’s cloud expertise and global reach make them the perfect fit for this next phase.”
Microsoft intends to use the newly acquired technology – plus the experience gained helping AT&T run the network – to build out a product it calls Azure for Operators, which it will use to pursue 5G core network business from telecommunications companies in the 60 regions of the world where it operates.
At MWC today Intel and Capgemini Engineering unveiled the industry’s first Machine Learning-based RAN application to boost 5G spectrum capacity. Capgemini says their solution gives mobile network operators a significant advantage to monetize 5G services faster. Entitled “Project Marconi,” it conforms to O-RAN (Open Radio Access Network) guidelines to maximize spectrum efficiency. The solution intelligently boosts subscriber quality of experience (QoE) with real-time predictive analytics.
Project Marconi is the industry’s first Artificial Intelligence / Machine Learning (AI/ML) based radio network application for 5G Medium Access Control (MAC) scheduler. Optimized with Intel AI Software and 3rd Gen Intel Xeon Scalable processors.
Network providers globally have invested heavily in spectrum and are looking for solutions to develop and gain 5G services faster. According to the Global Mobile Suppliers Association, the total value of spectrum auctions reached over $27 billion in 2020.
Capgemini’s application (running on Intel Architecture) increases the amount of traffic each cell can handle. It allows operators to serve more subscribers and deliver an outstanding experience, while launching new Industry 4.0 services such as enhanced Mobile Broadband (eMBB) and Ultra Reliable Low Latency Communications (URLLC) use cases.
Walid Negm, Chief Research and Innovation Officer at Capgemini Engineering said: “Our teams worked closely with Intel to create a truly innovative solution that can really move the needle for operators. We gathered and utilized over one terabyte of data and conducted countless test runs with NetAnticipate5G to fine-tune the predictive analytics to meet diverse operator requirements. In short, machine learning can be deployed for intelligent decision-making on the RAN without any additional hardware requirement. This makes it cost efficient in the short run and future proof in the long run as we move into Cloud Native RAN implementations.”
Cristina Rodriguez, VP of Wireless Access Network Division at Intel said: “Our 3rd Gen Intel Xeon Scalable processors with built-in AI acceleration provide high performance for deep learning on the Net Anticipate 5G platform. Together, our collaboration delivered ultra-fast inference data to enhance the Open-Source ML libraries resulting in an intelligent RAN that can predict and quickly react to subscriber coverage requirements while reducing TCO.”
Capgemini deployed its NetAnticipate5G and RATIO O-RAN platform to introduce advanced AI/ML techniques. The AI powered predictive analytical solution forecasts and assigns the appropriate MCS (modulation and coding scheme) values for signal transmission through forecasting of the user signal quality and mobility patterns accurately. In this way, the RAN can intelligently schedule MAC resources to achieve up to 40% more accurate MCS prediction and yield to 15% better spectrum efficiency in the case studies and testing. As a result, it delivers faster data speeds, better and more consistent QoE to subscribers and robust coverage for use cases that rely on low latency connectivity such as robotics-based manufacturing and V2X (vehicle-to-everything).
More information can be found on Capgemeni’s website.
Last week, Capgemini Research Institute released a report titled, “Accelerating the 5G Industrial Revolution: State of 5G and edge in industrial operations” stating that industrial 5G adoption is still at the ideation and planning stages, with only 30% of industrial organizations having moved to the pilot stage or beyond. This means there is a huge window of opportunity for telcos and those industrial organizations that are yet to make a move.
Signaling a paradigm shift, 40% of industrial organizations surveyed expect to roll out 5G at scale at a single site within two years, and the experience of early adopters could persuade others to make the move. 5G trials and early implementations are delivering strong business benefits, with 60% of early adopters saying that 5G has helped to realize higher operational efficiency, while 43% saying they have experienced increased flexibility.
The study also found that industrial organizations are optimistic that 5G will drive revenues by enabling the introduction of new products, services, and business models. In fact, 51% of industrial organizations plan to leverage 5G to offer new products, and 60% plan to offer new services enabled by 5G.
Furthermore, industrial organizations are aware of the role of edge computing in their 5G initiatives and view it as essential to realizing the full potential of 5G. 64% of organizations plan to adopt 5G-based edge computing services within three years, driven by the increased performance, reliability, data security and privacy it offers. More than a third of industrial organizations across sectors surveyed prefer to deploy private 5G networks, with interest in private 5G networks led by the semiconductor and high-tech sector (50%), followed by aerospace and defense (46%).
“Industrial 5G is a key catalyst in unlocking the potential of intelligent industry and accelerating data-driven digital transformation,” comments Fotis Karonis, Group Leader of 5G and Edge Computing at Capgemini. “Enterprises need to take advantage of the benefits of 5G by engaging with the ecosystem to tap into the shared expertise and co-create innovative, sustainable solutions for tomorrow. An element of iteration is required, but organizations should seek to leverage the 5G ecosystem to jointly test solutions and progress with full-scale 5G adoption, fine-tuning the approach as the ecosystem evolves.”
Capgemini is a global leader in partnering with companies to transform and manage their business by harnessing the power of technology. The Group is guided everyday by its purpose of unleashing human energy through technology for an inclusive and sustainable future. It is a responsible and diverse organization of 270,000 team members in nearly 50 countries. With its strong 50 year heritage and deep industry expertise, Capgemini is trusted by its clients to address the entire breadth of their business needs, from strategy and design to operations, fueled by the fast evolving and innovative world of cloud, data, AI, connectivity, software, digital engineering and platforms. The Group reported in 2020 global revenues of €16 billion.
Orange announced the official launch of a new research project starting in July, describing it as Europe’s first fully cloud-native 5G standalone network. Running over a two-year period, the experimental network in Lannion (Britanny) will reach further locations in 2022 and be tested by several hundred end-users. It will explore the benefit of a ‘zero-touch’ approach, relying on software-enabled automation and artificial intelligence to minimize human intervention in its operations.
Editor’s Note: Orange’s announcement comes just two days after TIM (previously known as Telecom Italia) said they were launching Europe’s first 5G SA Cloud Network. Both the TIM and Orange 5G SA networks are experimental tests rather than actual 5G SA commercial deployments.
Orange’s experimental network will be a 100% software-enabled network, be data and AI-driven, fully automated and cloud-native. Crucially, it will also encompass Open RAN technology – underlining its commitment to this technology. By implementing and operating this network it will enable Orange to better understand how these technologies co-exist and their impact on the network lifecycle.
Furthermore, it will enable Orange to better understand the customer experience benefits of a fully cloudified network as well as the full potential of AI and Data. It will also enable Orange to determine the future skills needed – a key strand of its Engage2025 strategy to ‘co-create a future-facing’ company, as well as the environmental benefits – another key pillar of its strategy.
Built on a single Kubernetes-based infrastructure (containers), the network will combine elements from several partners, including the 5G Open RAN software developed by Mavenir. Orange has also selected Casa Systems (cloud 5G SA core network), Hewlett Packard Enterprise (cloud 5G SA subscriber data management), Dell Technologies (servers supporting RAN centralized unit, distributed unit and core) and Xiaomi (devices) as partners in the project.
Network and service management will be automated using orchestration open source tools from GitLab and ONAP. The scope of the forthcoming trials also covers OSS and BSS integration aspects.
The new network sees the setting up of Open RAN and 5G core functions on a single Kubernetes-based infrastructure fully managed by Orange and deploying a fully automated core. From July, the network will start using and testing O-RAN radio equipment, CNF’s (Containerized Network Functions) on a cloud infrastructure, network data collection and AI automation. The experimental network will also host Information System OSS (Operations Support System – network inventory management and network operations), BSS (Business Support System – CRM and billing) as well as scaling Orange’s ambition using AI to secure and optimize the network and predict its behavior. In 2022, the network will expand to further locations to increase the number of users and to test vertical use-cases leveraging dynamic network slicing.
Michaël Trabbia, Chief Technology and Innovation Officer, Orange, commented: “Our ambition is to prepare Orange for the operator of the future by building more resilient and auto-adaptive networks that offer best in class quality of service in each situation. This experimental network represents an important milestone on our way to implement and deploy Open RAN and AI technologies to prepare on-demand connectivity and zero touch operator capabilities.”
The launch of commercial 5G services in Latin America and Sub-Saharan Africa over the last year means that 5G technology is now available in every region of the world. The pandemic has had little impact on 5G momentum; in some instances, it has even resulted in operators speeding up their network rollouts, with governments and operators looking to boost capacity at a time of increased demand. By the end of 2025, 5G will account for just over a fifth of total mobile connections and more than two in five people around the world will live within reach of a 5G network. In leading 5G markets, such as China, South Korea and the U.S.
4G – LTE has peaked and, in some cases, begun to decline. In many other countries, particularly in developing regions, 4G still has significant headroom for growth. Much of the growth in 4G will come from existing 4G – LTE infrastructure, as 5G will account for 80% of total capex over the next five years. Globally, 4G adoption will peak at just under 60% by 2023 as 5G begins to gain traction in new markets.
Subscriber growth is slowing, but mobile’s contribution to the global economy remains significant. By the end of 2020, 5.2 billion people subscribed to mobile services, representing 67% of the global population. Adding new subscribers is increasingly difficult, as markets are becoming saturated and the economics of reaching rural populations are becoming more difficult to justify in a challenging financial climate for mobile operators. That said, there will be nearly half a billion new subscribers by 2025, taking the total number of subscribers to 5.7 billion (70% of the global population). Large under-penetrated markets in Asia and Sub-Saharan Africa will account for the majority of new subscribers. In 2020, mobile technologies and services generated $4.4 trillion of economic value added (5.1% of GDP) globally. This figure will grow by $480 billion by 2025 to nearly $5 trillion as countries increasingly benefit from the improvements in productivity and efficiency brought about by the increased take-up of mobile services. 5G is expected to benefit all economic sectors of the global economy during this period, with services and manufacturing seeing the most impact.
At the end of 2020, 67% of the world’s population had a mobile network subscription of some sort. This means 5.2 billion people, generating $4.4 trillion of world GDP through mobile technologies and services. This also means adding new subscribers is increasingly difficult, with markets getting saturated. Plus a challenging financial climate for mobile operators is making them less tempted to invest to reach untapped rural populations.
There will be a half billion new subscribers between now and 2025. Most of them – nearly two thirds – will be in large, under-reached markets in Asia and sub-Saharan Africa. Not to mention a billion more mobile Internet subscribers. Mobile Internet users, now 51% of the world’s population at 4.0 billion, will reach 60% or 5 billion by 2025, the GSMA forecasts.
We will quickly get smarter, too – smartphones will make up 81% of mobile connections in 2025, up from 68% in 2020. End point devices will also get smarter, and fast. There will be 24.0 billion Internet of Things (IoT) connections in 2025, up by 85% from 13.0 billion in 2020. Still, COVID is stretching out replacement cycles – from 2.25 years on average, up to three years or more. With many consumers pinched in the pocket, there’s a pivot to lower-cost handsets, with average retail prices for 5G handsets falling more than a third since 2019.
Gruppo TIM, along with its Noovle subsidiary, has started creating the first ‘5G Cloud Network’ in Italy. The solution will lead to faster deployment of the 5G digital applications through the automation of industrial processes and the implementation of services in real time, thanks to EDGE Computing, based on specific requirements. The project will use TIM’s Telco Cloud infrastructure, Google’s Cloud solutions and Ericsson’s 5G Core network and Automation technologies.
- TIM did not disclose any implementation details, e.g. containers (with or without kubernetes) or virtual machines, type of cloud service and configuration, APIs, etc.
- The 5G core network, as defined by three 3GPP specifications, utilizes cloud-aligned, service-based architecture (SBA) that spans across all 5G functions and interactions including authentication, security, session management and aggregation of traffic from end devices. The implementation method, e.g. containers, virtual machines/network functions, etc are not specified.
- ITU-T has no serious work underway for 5G Core network, even though they are supposed to be responsible for all 5G/IMT 2020 non-radio recommendations/standards.
- TIM also did not disclose availability date(s) for their 5G Core network, locations in Italy that can access it, or 5G endpoint devices (e.g. smartphones, tablets, etc) compatible with it.
At the start of March 2020, TIM and Google announced a new partnership covering cloud and edge computing services, building on an MoU they signed back in November 2019. In line with the rapidly expanding cloud market, TIM said at the time that it would aim to generate €1 billion from cloud services by 2024.
In early 2021, TIM acquired 100% of cloud specialist Noovle, intending for the unit to ultimately operate TIM’s 17 Italian data centers. Since its launch, Milan based Noovle has been working on innovative technological solutions to improve services across various areas, such as the provision of virtual IT infrastructures, remote working, customer experience and Artificial Intelligence.
TIM says their 5G cloud solution offers businesses – e.g. those in the automotive and transportation sector – integrated innovative solutions capable of improving the efficiency of logistics and production processes, acting in collaboration with software developers. The ‘5G Cloud Network’ will be available close to companies’ premises, based on the customer’s specific requirements, in order to ensure the lowest latency possible. It also optimizes the network service implementation time and related costs.
TIM says their 5G Cloud Network is in full compliance with data protection and in line with the strictest sector standards (not disclosed how this is done and there are no sector standards for 5G data protection/security). Earlier this month, Italy created a national agency responsible for fighting cyber attacks, as it presses ahead with plans to create a unified cloud infrastructure to increase security for public administration data storage. According to Reuters, the new Italian cyber-security agency unifies under the prime minister’s authority many aspects of digital security which are currently dispersed among several ministers and state bodies.
Companies that intend to adopt 5G services and connectivity will be able to use the ultrabroadband radio network (RAN) in conjunction with the ‘5G Cloud Network’ without needing to build the physical infrastructure of the core network at their logistics or production sites.
Nokia today announced it has successfully completed a trial with Vodafone Turkey, linking Asia and Europe IP traffic in the first intercontinental, single 1T (terabit) clear-channel IP interface.
A milestone in Vodafone Turkey’s ongoing efforts to modernize its IP architecture, this trial comes at a particularly critical time as changing internet patterns from consumers, home workers and businesses continue to push the capacity limits of operators’ networks.
Changing internet traffic patterns from consumers, home workers and businesses are pushing the capacity limits of operators’ networks. As they look to combine gigabit capable fixed and wireless access technologies, the IP networks that carry this broadband traffic need to scale to keep up.
Through Nokia’s 7950 XRS routers powered by Nokia’s FP4 chipset, Vodafone Turkey can now scale up the capacity of its IP network by ten times, enabling the support of next-generation applications and access technologies, simplified operational complexity and cost overhead, SDN control automation, and more.
The trial is part of an ongoing modernization effort to transform Vodafone Turkey’s IP network. Nokia is delivering a multi-access mobile transport architecture that will enable the operator to evolve its transport infrastructure in a changing industry. Nokia’s 7250 IXR interconnect router and FP4-based 7750 Service Router portfolios have already been deployed for the delivery of high capacity, low latency 5G services to Vodafone Turkey’s customers. Nokia’s platforms support the features and protocols that will enable SDN control automation and optimization of applications and use cases.
Thibaud Rerolle, CTO, at Vodafone Turkey, said: “As we ramp up our delivery of new services, we are committed to providing the best possible quality of experience to our customers. We continue to rely on Nokia to evolve our IP network with industry-leading router innovation and technology to address our needs today and for next generation services.”
Vach Kompella, Head of IP Networks Division, Nokia, said: “Today’s IP networks are expected to handle hundreds of new applications and services for millions of users. The 1T trial builds upon Nokia’s advanced routing technology and platforms to future-proof Vodafone Turkey’s IP network, which serves one of the world’s largest intercontinental markets. Together we have successfully validated Nokia’s FP4 based 1T clear channel interface across Asia and Europe.”
- Web page: Nokia FP4 network processor
- Web page: Nokia 7950 Extensible Routing System (XRS)
- Web page: Nokia 7250 interconnect routers
- Web page: Nokia 7750 Service Routers
VIAVI today released new research demonstrating the accelerating pace at which 5G is growing, with coverage extending to an additional four countries and 301 cities worldwide since the beginning of this year. The new total — 1,662 cities across 65 countries — represents an increase of more than 20 percent during 2021 to date, according to the latest edition of the VIAVI report “The State of 5G,” now in its fifth year.
The top three countries that have the most cities with 5G coverage are China at 376, the United States at 284, and the Philippines with 95, overtaking South Korea which is now in fourth position with 85 cities. The APAC region remains in the lead with 641 cities, closely followed by EMEA at 623. The Americas region lags behind at 398 cities.
With the launch of commercial 5G services in four additional countries — Cyprus, Peru, Russia and Uzbekistan — well over a third of the world’s countries now have at least one live 5G network. However, the quality and speed of connectivity can vary significantly from region to region depending on available spectrum.
“Although we are seeing a significant jump in the number of networks being rolled out, not all 5G technologies are created equal,” said Sameh Yamany, Chief Technology Officer, VIAVI. “Networks operating in lower, mid and upper band frequencies perform very differently in terms of reach and throughput, increasing the importance of network assurance and optimization to consistently fulfill the promise of 5G.”
The latest edition of The State of 5G report is available here. The data was compiled from publicly available sources for information purposes only, as part of the VIAVI practice of tracking trends to enable cutting-edge technology development that allows communications service providers to command the 5G network.
This week during the Mobile World Congress in Barcelona, VIAVI is contributing to a demonstration of eMBB end-to-end testing with Rohde & Schwarz (Hall 3, Stand 3K30). VIAVI also will participate in a live panel discussion during the O-RAN ALLIANCE Industry Summit on June 29 to discuss the latest industry updates on the progress of O-RAN, and will showcase new virtual demos related to near-real-time RIC testing and deployment of an O-CU tester on edge infrastructure in the O-RAN Virtual Exhibition.
VIAVI is a global provider of network test, monitoring and assurance solutions for communications service providers, enterprises, network equipment manufacturers, government and avionics. We help these customers harness the power of instruments, automation, intelligence and virtualization to Command the network. VIAVI is also a leader in light management solutions for 3D sensing, anti-counterfeiting, consumer electronics, industrial, automotive, and defense applications. Learn more about VIAVI at www.viavisolutions.com. Follow us on VIAVI Perspectives, LinkedIn, Twitter, YouTube and Facebook.
Only 19% of US business professionals claim to understand the benefits of 5G, according to a survey by Ciena, conducted in partnership with research firm Dynata. The survey found that there is an opportunity for telcos and the wider industry to better educate consumers on the full benefits that 5G can deliver, with:
- 41% of working professionals saying they only know a little bit about the benefits of 5G
- 32% of working professionals stating they have heard of 5G, but don’t understand what it is
- 8% of working professionals never having heard of 5G
Today, the main benefit that U.S. professionals associate with 5G is ‘faster access speeds’, which was cited by 61% of respondents. By contrast, only 6% of respondents considered ‘reduced latency (lag)’ to be a major benefit. Furthermore, only 18% of respondents said that they consider ‘more reliable connectivity’ to be a major benefit; and only 16% recognized ‘better wireless coverage’ as a major benefit. This illustrates a significant knowledge gap relating to 5G, both in terms of what it can deliver, and the terminology used to communicate the benefits.
Steve Alexander, Senior Vice President and Chief Technology Officer at Ciena, said: “5G is much more than just a faster wireless technology. 5G enables constant connectivity for people, machines and devices and is the infrastructure that the Internet of Things will rely on to create the cloud experience that we all need in our increasingly digital world. Yet, most professionals surveyed admit they don’t completely understand the broader benefits of 5G.”
“Fortunately, the data also highlighted the demand for 5G services, which could be leveraged – and indeed, driven – by providers effectively communicating the benefits and delivering the services users want, both humans and machines.”
Alexander at Ciena concluded: “People understand 5G will have an impact for closing the digital divide and providing a boost to major industries across the US. However, alongside delivering the scalable, intelligent, and adaptive infrastructures necessary to enable 5G, service providers and their trusted technology partners like Ciena must take steps to help close the knowledge gap.”
Notes To Editors
The survey was carried out by Dynata on behalf of Ciena, from April 13-23 2021 and included a representative sample of 1908 business professionals across the United States.
Tough competition and advantages of scale will drive consolidation in the APAC telecoms industry ahead of higher 5G investments, according to Fitch Ratings. The 5G technology will favor larger operators with strong balance sheets, which we expect to contribute to diverging credit quality over time among telcos.
Scale is increasingly important for telcos to drive cost efficiencies and manage cash flows amid a subdued growth environment. Data monetization remains a challenge in most markets, aggravated by price competition and the lack of differentiation among product offerings.
5G Drives Competitiveness: Competitive position and financial structure are key differentiating factors for APAC telcos, which will invest in 5G spectrum and capex to preserve their competitive capabilities in an increasingly commoditized sector. 5G technology will favor operators with scale and strong balance sheets, which may contribute to diverging credit quality over time across the peer group.
Spectrum assignments and renewals will take place over the next 18 months in India, Australia, Thailand, Korea, Malaysia and Hong Kong, underlining the emphasis on capital preservation through staggered investment, dividend reduction and asset sales. PT Telekomunikasi Indonesia Tbk (BBB/Stable) is the only company with high rating headroom, while Singapore Telecommunications Limited (A/Stable) has the least.
APAC region telecoms industry consolidation is highly likely. Fitch expects tight competition and significance of scale to raise the prospects of M&A in India, Indonesia, Malaysia and Singapore.
Thus, it will be difficult for smaller telcos to take on 5G infrastructure investments without an immediate ROI (return on investment) payback. Network-sharing – in the form of passive tower infrastructure or active radio equipment – has become important to drive scale efficiencies and the feasibility of 5G investments.
In their November 2020 APAC Telecoms report, Fitch said APAC telcos are likely to bolster cash generation ahead of their 5G investment upcycles, supporting stable competition in most markets. The outlook has worsened for three countries – Singapore, Thailand and Indonesia – down from four in the previous year.
Rakuten Mobile, NEC and Intel announced today that they have achieved a performance of 640 Gbps per server for the containerized User Plane Function (UPF) on the containerized 5G SA core network jointly developed by Rakuten Mobile and NEC running on the Rakuten Communications Platform (RCP).
In the absence of ITU-T standards or 3GPP implementation specs (beyond architecture and functional requirements) for 5G SA core network or the ultra hyped 5G functions that go with it (e.g. network slicing, automation, service chaining, etc), the Rakuten Mobile-NEC containerized 5G SA core network is a very important development.
We documented that in this IEEE Techblog post. Rakuten has said they plan to sell their RCS platform (which includes 5G SA core network spec and software) to 5G SA network providers. They say they already have at least 15 customers.
According to Dave Bolan of Dell’Oro Group, most 5G SA networks will be based on containers (rather then virtualized network functions/VNF).
Many analysts say that containerized UPF performance is needed to maximize the value of 5G deployment. This is because the control plane (C-plane) and user plane (U-plane), which were historically collocated, are completely decoupled in this disaggregated 5G architecture. Separating them enables an independently scalable UPF which is key to private networks, edge computing, hybrid cloud and to accelerate a variety of deployment scenarios. Rakuten Mobile has adopted 5G architecture from the launch of its network, including a CUPS (Control and User Plane Separated) packet core for its 4G LTE network.
TelecomTV says that control and data plane separation enables the 5G network operator to deploy multiple UPF instances closer to where the traffic originates, rather than at fixed locations in the network. The result is lower latency and a better user experience. It also means UPF instances can be turned on and off as capacity demand dictates, enabling operators to dynamically allocate network resources.
The 640 Gbps performance per server for the containerized UPF on the 5G SA core network was achieved in a laboratory environment in Tokyo. This represents a significant opportunity to drive high performance of the commercial network in the future.
NEC says it leveraged its industry-leading product development based on its advanced telecom and IT expertise to maximize CPU utilization and fast memory access. That software was facilitated by use of Intel’s latest high-performance infrastructure, including 3rd Gen Intel Xeon Scalable processors with built-in AI acceleration and Dual-port 100Gb Intel Ethernet Network Adapter E810-2CQDA2 with Dynamic Device Personalization (DDP).
Rakuten Mobile, Intel and NEC have collaborated on high-speed processing of containerized UPF, which plays a significant role in this initiative, and achieved a performance of 640 Gbps per server. High-speed processing in a containerized environment on Rakuten Mobile’s RCP enables instant and flexible deployment of UPF from edge to central locations based on traffic characteristics, leveraging RCP’s full automation features.
“Rakuten Mobile has successfully designed and built a fully containerized mobile network based on open standards,” commented Tareq Amin, Representative Director, Executive Vice President and CTO of Rakuten Mobile. “With NEC and Intel, we have demonstrated that extremely high-speed processing is possible on containers. We aim to continue to pursue performance improvements in the core to achieve higher throughput and reduce cost and energy consumption in the rollout of network technology in Japan and worldwide.”
“We’re proud that Rakuten Mobile, Intel and NEC were able to demonstrate industry-leading UPF performance,” commented NEC Executive Vice President Atsuo Kawamura. “NEC has been developing high-performance and highly reliable 5G systems by leveraging our vast experience that includes more than 25 years in mobile core networking. Our strong track record, technical capabilities and expertise in both network and computing domains, allowed us to bring high-quality 5G core to virtualization and cloud-native technology. NEC and Intel have a long-term relationship in the hardware business, including CPUs and NICs (Network Interface Cards), and have jointly enhanced the acceleration technology for virtualization, represented by the DPDK (Data Plane Development Kit). NEC performed significant optimization and improvements to pursue higher performance for the cloud-native UPF. In the future, we will continue to contribute to society through 5G in Japan and around the world leveraging the results of this project.”
“The fully virtualized Rakuten mobile network featuring NEC’s containerized 5G UPF software built on the latest Intel technology is another key proof point of how ecosystem collaboration and industry leading technology are both essential to fulfill the promise of 5G,” said Dan Rodriguez, corporate vice president and general manager of Intel’s Network Platforms Group. “The ongoing development and optimization work among the companies on the latest 3rd Gen Intel Xeon Scalable processors and Intel Ethernet 800 Series network adapters not only provides outstanding performance, but the added flexibility to run workloads from core to edge that are designed to offer the best experience for end users.”
Rakuten Mobile and NEC started jointly developing an open, fully containerized SA 5G core network in June 2020 to be utilized in Rakuten Mobile’s mobile network in Japan and made available within RCP.
In the RAN domain, NEC is also providing 5G radio units (5G RU) for Rakuten Mobile’s network in Japan, and recently, Rakuten Mobile and NEC announced the broadening of their collaboration to provide 5G and 4G radios and engineering services for Open RAN systems aligned with O-RAN specifications for global markets, and accelerate the global expansion of the RCP.
Through the joint development of the open and fully cloud native containerized SA 5G core network, Rakuten Mobile and NEC aim to drive innovation in global mobile technology and provide high-quality 5G network technology to customers in Japan and around the world.
Comment and Analysis:
In an email to this author earlier this year, Rakuten Mobile CTO Tareq Amin wrote: “NEC/Rakuten 5GC openness are realized by implementation of “Open Interface” defined in 3GPP specifications (TS 23.501, 502, 503 and related stage 3 specifications). 3GPP 5GC specification requires cloud native architecture as the general concept (service based architecture). It should be distributed, stateless, and scalable. However, an explicit reference model is out of scope for the 3GPP specifications.”
Dell’Oro Group’s Dave Bolan via an email this week: “All of 5G Core will be Cloud-Native, mostly Container-based. Except there are different cloud-native versions and container versions, not making it truly open. Anyone that wants to put their core on the public cloud will have to customize it for each cloud platform. Same may be true for the NFVI if it runs on – x86, AMD, ARM, or Nvidia – and couple that with the different UPF acceleration techniques, it gets complex very quickly.”
Alex Quach, VP of Intel’s Data Platforms Group, said most operators around the world are still leveraging a 4G core network. “The way different service providers implement their 5G core is going to vary,” said Quach. “Every service provider has unique circumstances. The transition to a new 5G core is going to be different for every operator.”
How could 5G SA possibly be open if there are no standards or implementation specs for 5G cloud native core network or true 5G functions like network slicing?
The result will be multiplicity of 5G SA carrier specific software running on different cloud service provider (CSP) compute servers. Note also that each CSP has their own set of APIs and different cloud configurations will be used for the 5G cloud native core network. The upshot is that changing a 5G SA software vendor or cloud service provider will be a huge problem for 5G network operators. Again, that’s because of the proprietary nature of 5G SA deployments in the absence of 5G core network standards/open implementation specs.
What’s worse is that this will have a huge negative impact on PORTABLE/GEOGRAPHICALLY MOBILE 5G endpoints, like smartphones, tablets, notebook computers, gaming consoles, etc. As each network provider’s 5G core network will be different, a unique, carrier specific 5G core download will be required for 5G endpoints for each 5G SA core network provider.
That will severely restrict portability/mobility to within a single carrier serving area and effectively prevent 5G SA roaming. For example, Samsung is providing 5G SA network downloads for its smartphones that operate on T-MobileUS 5G SA network. But those downloads won’t work on any other 5G SA network, so the truly mobile user will fall back to 4G-LTE whenever he or she is outside T-MobileUS’s carrier service area.
AT&T added 235,000 fiber connections in the first quarter, ending the period with nearly 5.2 million total fiber customers. AT&T says they have a total of around 15 million fiber and non-fiber customers, so fiber access is approximately 1/3 of total customers now.
The company recently announced it plans to build fiber to 3 million new customer locations this year and 4 million next year. AT&T plans to double the number of locations where it offers fiber Internet, from approximately 15 million to about 30 million, by 2025. To do that, AT&T is planning to increase its annual capital expenses from $21 billion to around $24 billion.
AT&T’s new focus on connectivity over content is a direct result of its spinning off Warner Media to Discovery, as we chronicled in this IEEE Techblog post. Thaddeus Arroyo, head of AT&T’s consumer business, made that crystal clear at a recent BoA investor event:
“We expect capital expenditures of about $24 billion a year after the Warner Media discovery transaction closes. That’s an incremental investment that’s going to go to fiber to 5G capacity and 5G C-band deployment.
We have another great opportunity, the one we continue to talk around fiber. So as part of this capital, we’re going to be investing in fiber expansion to meet the growing needs for bandwidth that require a much more robust fiber network regardless of the last mile serving technology. Fiber is the foundation that fuels our network. Expanding our fiber reach serves multiple services hanging off at each strand of fiber. It includes macro cell sites, small cell sites, wholesale services, enterprise, small business, and fiber that’s extended directly into our customers’ homes and into businesses.
We plan to reach 30 million customer locations passed with fiber by the end of 2025. That’s going to double our existing fiber footprint. And investing in fiber drives solid returns because it’s a superior product. Where we have fiber we win, we’re improving share in our fiber footprint, and the penetration rates are accelerating and growing, given our increased financial flexibility. We’re comfortable in our ability to invest and achieve our leverage targets that we outlined of getting to 2.6% at close and below 2.5% by the end of 2023.”
Mo Katibeh, the AT&T executive responsible for fiber and 5G build-outs, added on via a recent post on LinkedIn: “We are building MORE Fiber to MORE homes and businesses. And we’re talking A LOT of fiber – MILLIONS of new locations every year, planning to cover 30 MILLION customer locations by the end of 2025! And you know what comes with all that investment in America? JOBS. Our AT&T Network Build team is GROWING..”
Previously, Katibeh wrote on LinkedIn : “Contributing to a large portion of the $105B Capital spend between 2016 and 2020 – our team is building out AT&T #Fiber to MILLIONS of new customer locations in 2021, as well as augmenting America’s best mobility network with more capacity, more speed – and more #5G (you know I love 5G!).”
So with all that said, will AT&T’s fiber build-out keep pace with cable companies/MSOs DOCSIS networks?
Tom Rutledge, Charter’s CEO, made a brief comment about plant upgrades on the earnings call (note – Dave Watson made similar comments on the Comcast earnings call):
“We’re continuously increasing the capacity in our core and hubs and augmenting our network to improve speed and performance at a pace dictated by customers in the marketplace. We have a cost-effective approach to using DOCSIS 3.1, which we’ve already deployed, to expand our network capacity 1.2 gigahertz, which gives us the ability to offer multi-gigabit speeds in the downstream and at least 1 gigabit per second in the upstream.”
According to Leichtman Research Group, the top cable companies had 68 million broadband subscribers, and top wireline telecom companies had 33.2 million subscribers at the end of 2019.
“Based on the currently available information, cable stole wired broadband market share in Verizon and AT&T markets as well. Oy vey!” said Jim Patterson of Patterson Advisory Group in his May 2, 2021 newsletter. “Think about Comcast and AT&T as having roughly the same number of homes passed (AT&T probably closer to 57 million homes versus the nearly 60 million shown for Comcast),” he added. Patterson noted that top cable companies Comcast, Charter and Altice managed to capture 86% of broadband customer growth in the U.S. in the first quarter of this year.
“(AT&T) fiber connections simply aren’t growing fast enough to keep up,” wrote colleague Craig Moffett of MoffettNathanson in a recent note to clients. Here’s more:
To be sure, there are questions about the extent to which these deployments will overlap cable (or will instead be focused on unserved rural communities), and the extent to which labor and supply chain contraints might limit acheivability of announced targets. Still, taken together, these deployments suggest that, after a precipitous decline in new fiber construction in 2020, planned fiber deployments do, indeed, rise over the next two years; we expect that both 2021 and 2022 will represent new all-time peaks in total number of fiber homes passed. Typically, the competitive impact from overbuilds is felt with some lag, suggesting the impact on cable operators will peak in 2024/2025.
At the same time, we expect that federal stimulus to accelerate broadband market growth in 2021 and 2022, perhaps significantly, with new household formation, in particular, driving upside to 2021 and 2022 forecasts.
Longer term, however, Cable operators will have to contend with more fiber overbuilds, as TelCos increasingly see both more favorable economics for fiber deployment and increasingly acknowledge that their copper plant faces imminent obsolescence without it. The forecasts for fiber deployment in this note suggest that 2021 will be a record for fiber construction – assuming labor and materials capacity can accommodate the TelCos’ own forecasts – and 2022 will step up higher still. After that, deployments are expected to abate, at least to a degree.
“Cable can upgrade its plant quickly and at low cost to offer at least 4.6Gbit/s down and 1.5Gbit/s up, well beyond current fiber offerings. They can do this before the move to DOCSIS 4.0, which is still years off,” wrote the financial analysts at New Street Research in a recent note to investors. The result, according to the New Street analysts, is that fiber providers like AT&T won’t necessarily be able to dominate the fiber market with a 1 Gbit/s FTTH/FTTP connection and take market share from cable incumbents.
“Cable will face new fiber competition in more of its markets over the next few years; however, there is little to no prospect of fiber delivering a service in those markets that cable can’t easily match or beat,” New Street concluded.
“Looking back and being a little critical, we probably allowed the cable companies to execute and to take share in that market in a significant way,” AT&T CFO Pascal Desroches said at a recent Credit Suisse investor event.
AT&T executives have said that the company’s fiber investment ultimately will generate internal returns of around 15%. Desroches said that return on investment will be due to a variety of factors. Fiber “supports not only consumer needs, it supports needs for our enterprise businesses as well as needs for potentially our reseller business. So being able to look across and integrate the planning for fiber deployment such that it not only serves consumer needs, but it serves these other market adjacencies as well is something that we haven’t been very good at historically, That’s why we’re really bullish and we believe we’re going to be able to execute really well here,” AT&T’s CFO concluded.