GM and Toyota back DSRC to link connected cars to “smart” traffic lights; Ford, BMW, other auto makers favor “5G”
by Chester Dawson
Excitement around “5G” is eclipsing the prospects for a competing technology that General Motors Co. and Toyota Motor Corp. are backing, potentially giving rivals a leg-up in the race to debut vehicles with state-of-the-art internet connectivity.
The U.S. government has invested hundreds of millions of dollars in Wi-Fi-based technology known as DSRC (dedicated short-range communications)[1], that allows cars to link to “smart” traffic lights designed to smooth congestion and provide warnings about accidents or poor weather conditions ahead.
Note 1. DSRC (Dedicated Short Range Communications) is a two-way short- to- medium-range wireless communications capability that permits very high data transmission critical in communications-based active safety applications.
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GM and Toyota strongly support DSRC technology. But Ford Motor Co., BMW AG and other auto makers are pressing the Trump administration to allow them to leapfrog that system by fast-tracking fifth-generation cellular broadband in automobiles. “5G” will transmits data at up to 10 times the speed of current broadband and improves reliability by potentially shrinking a self-driving car’s ability to stop to one inch, from one yard with today’s network.
The showdown between the Wi-Fi-based and 4G or 5G cellular-based standards for connected cars echoes winner-take-all format wars in other industries, and is a sign of how software is emerging as a new battleground for auto makers. The stakes are high as U.S. motor-vehicle deaths have risen in recent years. Car makers say vehicle-to-vehicle communication will ease congestion and improve safety.
Speeding up adoption of new technology is a priority for an industry that has lagged behind mobile-phone makers when it comes to connecting devices to the internet. The global market for connected cars is forecast to grow nearly threefold by 2022 with more than 125 million new internet-connected cars shipped over that five-year period, according to Counterpoint Research.
Current broadband, known as 4G, has enabled Wi-Fi hot spots and streaming, allowing passengers to surf the internet or watch videos in cars. The next wave of cellular technology will usher in new entertainment and safety features, enabling cars to access cameras on other vehicles that could alert them to accidents, obstacles and driving conditions.
Ultimately, drivers might even be able to order a Starbucks drink from their dashboard or take a nap while artificial intelligence operates the vehicle. Companies like BMW say faster data transmission through next-generation broadband is critical to accelerating this push.
“We are on a broader scale pushing the telecommunication companies to roll out 5G as quickly as they can,” said BMW management board member Peter Schwarzenbauer.
GM and Toyota, meanwhile, have models already equipped with DSRC, and are urging the Trump administration to support a 2016 proposal that would require auto makers to start phasing it into new cars as of 2021. The Transportation Department has yet to make a final ruling on that Obama-era proposal, even as auto makers are already well into the design phase of 2021 model year vehicles.
“Getting the rest of the industry to follow has been tough sledding,” said Steve Schwinke, director of GM’s advanced development and connected services.
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One issue with the technology backed by GM and Toyota is cost. Telecom companies plan to pay for upgraded cell towers and roadside antennas for 5G to service their existing networks. To fully deploy DSRC, billions of dollars in government-funded infrastructure is required, according to a U.S. Transportation Department estimate.
That short-range technology also would add about $300 to the price of a vehicle for dedicated equipment, the National Highway Traffic Safety Administration estimates. Most new vehicles come installed with cellular modems, so there would be little additional cost to drivers for 5G.
GM and Toyota alone account for about one-third of the new cars sold in the U.S., and roughly 20% of the vehicles sold world-wide. Toyota has delivered more than 100,000 cars equipped with DRSC in Japan and will offer it on most of its lineup in the U.S. by the mid-2020s in addition to cellular modems.
GM and Toyota see their Wi-Fi-based technology as a bridge to 5G, which has yet to be fully tested in vehicles and may take years to be fully deployed.
Critics say the government shouldn’t force car makers to use older Wi-Fi-based technology some say is out of sync with fast-evolving cellular broadband. Last month, Audi and Ford demonstrated cellular-based safety technology called C-V2X in what they said was the world’s first application of it using vehicles from different manufacturers.
“You will have, for the first time, cars speaking together and it’s important for them to speak the same language,” said Christoph Voigt, head of R&D connectivity for Audi. As chairman of 5GAA, a trade group supporting automotive 5G, Mr. Voigt petitioned federal regulators to avoid “directly or indirectly pick[ing] technology winners and losers” because he is confident 5G will become the de facto standard on its own merits.
Even as Volkswagen AG is aligning its premium Audi brand with 5G in the U.S. and China, it is hedging its bets by deploying a version of DSRC on VW branded vehicles in Europe starting next year. A representative for VW said the German auto maker currently has no plans to introduce that technology to its lineup in the U.S. market.
The Trump administration, pointing to the expected proliferation of 5G, this year blocked the takeover of U.S. chip maker Qualcomm Inc. by Singapore-based Broadcom Ltd. on national-security grounds. Qualcomm is negotiating chip supply contracts with at least half a dozen auto makers for coming models.
Industry experts say 5G smartphones will debut next year and the first cars with 5G modems will appear as soon as 2020. That is about twice as fast as the transition for current 4G technology, which was introduced for smartphones in 2011 but didn’t show up in cars until GMintegrated it into its latest version of OnStar remote communications in 2014.
“There is going to be 5G in every single next-generation car design,” said Nakul Duggal, the head of Qualcomm’s automotive business.
Write to Chester Dawson at [email protected]
References:
https://www.wsj.com/articles/auto-makers-at-odds-over-talking-car-standards-1525608000
https://www.its.dot.gov/factsheets/pdf/JPO-034_DSRC.pdf
https://www.its.dot.gov/factsheets/dsrc_factsheet.htm
https://en.wikipedia.org/wiki/Dedicated_short-range_communications
IHS Markit: $3.5 Billion to be spent on Carrier Wi-Fi equipment between 2018 and 2022
by Richard Webb, IHS Markit
The carrier Wi-Fi equipment market continued to grow in 2017, driven by ongoing broadband demand and a strong role within 5G era. Revenue reached $626 million for the full-year 2017, increasing 1.3 percent from the prior year.
By 2022, the market is forecast to hit $725 million — a cumulative size of over $3.5 billion from 2018 to 2022 — based on two strong segments: standalone Wi-Fi access points (predominantly deployed by fixed-line operators and wireless ISPs) and dual mode Wi-Fi/cellular access points (deployed by mobile operators).
“The arrival of the 5G era will gradually transform network architectures, but the requirements for network density mean that Wi-Fi will continue to play a strong support role for mobile broadband end-users and for newer applications such as the Internet of Things and smart city,” said Richard Webb, director of research and analysis for service provider technology at IHS Markit. “We expect an uptick in carrier Wi-Fi investments through 2020, aligned with 5G network development.”
All regions are seeing strong demand for carrier Wi-Fi, demonstrating evidence of proliferation in developing countries in addition to developed markets where mobile data growth is well documented. However, the scale of requests for proposals (RFPs) from mobile operators in Asia Pacific — in particular China and Indonesia currently, with India likely to add to the groundswell closer to 2022 — means the region will be the strongest driver of growth, although all regions see continuous growth through this period.
More carrier Wi-Fi market highlights
- Dual mode 3G/Wi-Fi equipment revenue totaled just $17 million in 2017, a decline of 66.4 percent from the prior year
- Meanwhile, subscriber identity module (SIM)–based Wi-Fi access points are experiencing solid adoption growth (+21.6 percent in 2017 from 2016), driven by the desire to have closer integration between Wi-Fi and the mobile network
- Network functions virtualization (NFV) has strong potential benefits for fixed and mobile operators alike, such as opex and capex efficiencies, service flexibility and creation, reduced power usage and new service environments, including data analytics and location-based services
Carrier WiFi Equipment Market Tracker – H2 2017
This report tracks Wi-Fi equipment deployed by operators in public spaces for wireless internet access. It provides worldwide and regional market size, vendor market share, forecasts through 2022, analysis and trends for Wi-Fi hotspot controllers and carrier Wi-Fi access points.
Reference:
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In a separate report, Markets & Markets forecasts the Wi-Fi Market to be worth $15.60 Billion by 2022:
The rapid adoption of Wi-Fi technology is expected to make North America the largest region in market.
North America consists of developed economies, the US and Canada. In this region, Wi-Fi solutions and services are gaining traction within the businesses. The region’s strong financial position also enables it to invest heavily in the Wi-Fi technology. These advantages have provided North American organizations a competitive edge in the market. Moreover, the region has the presence of several major Wi-Fi vendors. Therefore, there is strong competition among the players. The number of enterprises adopting Wi-Fi solutions and services is quite high in North America as compared to the other regions.
The major vendors offering Wi-Fi solutions and services across the globe include Cisco (US), Aruba (US), Ruckus Wireless (US), Juniper Networks (US), Ericsson (Sweden), Panasonic (Japan), Huawei (China), Alcatel-Lucent Enterprise (France), Netgear (US), Aerohive Networks (US), and Riverbed Technology (US). These vendors have adopted various organic and inorganic growth strategies, such as new product launches, partnerships, and collaborations, to enhance their position in the Wi-Fi market.
T-Mobile, Sprint Combo Bypasses Dish; With spectrum plus linear and OTT subscribers, satellite provider was seen as a logical partner
By Michael Farrell of Multichannel News
The announced merger of T-Mobile and Sprint, the third- and fourth-largest wireless carriers in the nation, answers many of the scale questions that have dogged the two companies over the past several years. But in creating a carrier with about 100 million customers and valued at a combined $146 billion, the deal bypasses what many had considered to be T-Mobile’s more perfect match: Dish Network.
With a large swath of wireless spectrum, 11 million satellite TV subscribers and 2.2 million customers for its over-the-top video service Sling TV, Dish was seen by many to be a logical target for T-Mobile. Combining the No. 3 wireless carrier, which has obvious video aspirations through its January purchase of Layer3 TV, with Dish would in many minds have created a strong competitor in the ongoing wireless-OTT-traditional video wars.
Investors apparently believed so too. Shares in Dish fell 3% ($1.19 each) to $33.55 per share on April 30, the first trading day after T-Mobile and Sprint announced their deal. The stock has continued to slip in subsequent trading, closing at $33.09 on May 3.
Video Plans ‘Ratchet Up’
On a conference call to discuss first-quarter results shortly after the Sprint deal was announced, T-Mobile chief financial officer Braxton Carter said the transaction “ratchets up” the wireless provider’s video plans by allowing the combined company to provide customers with an IPTV service via wireline and wireless broadband.
“So T-Mobile’s in the position as a new T-Mobile to be able to offer a quad play, if that’s what the market wants,” Carter said on the call.
The combined company will be controlled by T-Mobile management: CEO John Legere will continue that role in the new entity, as will T-Mobile chief operating officer Mike Sievert. T-Mobile parent Deutsche Telekom will own 42% of the combined company, with Sprint parent Softbank owning 27% and the remaining 31% held by the public. The deal is expected to close in the first half of next year.
This is the two companies’ third time on the merger dance floor together. They scrapped talks in 2014 over regulatory concerns and in 2017 over control issues. While the two have managed to work out their control issues, some analysts are skeptical that the current deal will sail easily through the regulatory process.
BTIG telecom analyst Walt Piecyk gave the merger a less than 40% chance of passing regulatory muster, primarily because he didn’t believe the deal, which will reduce the number of wireless competitors to three from four, will pass the antitrust smell test.
“It doesn’t look like a competitive market right now, and that’s what the regulator may focus on,” Piecyk told CNBC.
Columbia Law professor Tim Wu wrote an op-ed piece for The New York Times urging regulators to block the deal, adding that having four separate competitors has been most beneficial to wireless customers, leading to free unlimited data plans and lower prices. Transforming the wireless business into a “triopoly” like the airline business will only serve to raise prices and lower service.
“Competition has actually worked the way economists say it is supposed to, forcing firms to improve quality or face elimination,” Wu wrote in the Times. “But it takes competitors to compete, which is where blocking mergers comes in.”
Pivotal Research Group CEO and senior media & communications analyst Jeff Wlodarczak has said in research notes over the past year that pairing Dish and T-Mobile would “immediately vault the most disruptive U.S. wireless player into the leading U.S. spectrum position,” and at worst would force rival wireless company Verizon Communications to pay more for the satellite asset. For now, though, it looks like Dish will remain on its own. Other scenarios see the satellite company being acquired either by another wireless service provider, like Verizon, or even by the new T-Mobile. The latter scenario wouldn’t take place for at least another year. Dish has struggled over the past several quarters as the satellite business has dwindled. In the fourth quarter the company lost more than 100,000 satellite-TV subscribers and added 160,000 Sling TV customers.
Dish Misses Out on Buildout Relief
For Dish, a purchase by a wireless carrier would mean relief from its obligation to build its own wireless network. As a result of its success in bidding on spectrum in several of the government’s wireless auctions, Dish faces a March 2020 deadline to build out wireless service in 70% of the market territories it won.
Dish chair Charlie Ergen has said the company will spend about $1 billion on that initial phase, which will be more geared toward IoT services.
For T-Mobile, a Dish purchase would give it an instant video base through the satellite-TV offering, programming contracts with cable networks and the largest OTT service in the country, Sling TV.
But not all analysts believe that a T-Mobile-Dish deal is more palpable. In a research note in November, after T-Mobile and Sprint ended merger talks, MoffettNathanson principal and senior analyst Craig Moffett wrote that he never saw any synergies in combining those companies, other than as a source of additional spectrum.
The argument that the dissolution of the merger was bad news for Dish is equally compelling in that, if Dish does build its wireless network, it would become the fifth player in an already-crowded market, he added.
“However bad one might have imagined the ROI (Return on Investment) for network building, it has to be worse if the industry is more fragmented than expected,” Moffett wrote in November.
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Dish’s Spectrum Yet to be Deployed:
Dish has quietly worked to cobble together a significant amount of spectrum via spectrum auctions and secondary-market transactions. The company’s first spectrum purchase was made through EchoStar’s relatively minor purchase of E Block licenses for $700 million in the FCC’s 700 MHz spectrum auction in 2008. But Dish in 2011 spent $2.77 billion to acquire 40 MHz of S-band satellite spectrum from bankrupt TerreStar and DBSD North America. Then, in 2014, Dish was the only bidder in the FCC’s H Block spectrum auction, essentially walking away uncontested with 10 MHz for around $1.6 billion. In 2015, Dish spent roughly $8 billion on AWS-3 spectrum licenses, and then just two years later it committed a whopping $6.2 billion to buy 486 licenses in the FCC’s 600 MHz incentive auction.
Dish recently outlined plans to build a NB-IoT network using its spectrum to provide connectivity to a wide range of devices other than traditional tablets and smartphones. Some analysts remain skeptical, though, believing that Dish plans to either sell or lease its spectrum, or partner with an existing service provider to join the wireless market.
Dish has to comply with Federal Communications Commission requirements that a network using the spectrum it owns be deployed by 2020, Josh Yatskowitz, an analyst at Bloomberg Intelligence, said last November.
Cloud services to reach $374 billion in 2022; Integration of AI & ML into enterprise business apps to drive growth
by IHS Markit analysts Clifford Grossner, PhD and Devan Adams
Executive Summary:
To grow market share, many cloud service providers (CSPs) are introducing specialized compute instances, which target data-intensive workloads and ease the integration of artificial intelligence (AI) and machine learning (ML) into enterprise business applications as a strategy to capture market share. This type of activity is expanding the high-growth cloud-as-a-service (CaaS) and platform-as-a-service (PaaS) segments. The off-premises cloud service market is expected to reach $374 billion in 2022, at a five-year compound annual growth rate (CAGR) of 17.7 percent.
Innovative service offerings by CSPs are multiplying, including the introduction of blockchain technology in PaaS service offers. They are also introducing new services focused on enterprise verticals, including the following: healthcare, to aid diagnosis; energy, for oil and gas exploration; financial services, for transaction monitoring; and supply chain efficiencies in retail and government, for smart city infrastructure. These services package expert domain knowledge acquired by CSPs and make it available to enterprises.
“Amazon made a smart move when it integrated Alexa into Amazon Web Services business applications — and by launching several machine learning services, further expanding its breadth of intelligent solutions,” said Clifford Grossner, Ph.D., senior research director and advisor, cloud and data center research practice, IHS Markit. “Google and Cisco also upped their AI and ML game, targeting hybrid cloud deployments with a collaboration aimed at running these tasks, both on-premises and from Google Cloud.”
As certain market segments mature, consolidation continues for two reasons: buying competitors for access to their client base and expanding service portfolios. Some recent notable mergers and acquisitions include the following: Equinix announced its intention to buy Infomart Dallas, GTT Communications is planning to acquire Interoute, INAP acquired SingleHop, Google agreed to acquire Xively and Microsoft agreed to acquire Avere Systems.
The types of partnerships CSPs are striking evolved from partnerships with enterprise software vendors, as a way to gain a foothold in on-premises data centers, to establishing relationships between providers for cross selling. Some recent noteworthy partnerships include the following: SAP and Microsoft announced a partnership to integrate SAP’s S/4HANA ERP suite with MS Azure; China Unicom plans to expand its reach across various industry verticals, by partnering with YonYou; British Telecom partnered with IBM, to extend its BT Cloud Connect Direct multi-cloud platform; and Salesforce also partnered with IBM, to enhanced its go-to-market strategy.
Highlights:
- The CaaS category is expected to grow 56 percent in 2018, with a five-year CAGR of 29 percent; PaaS will grow 55 percent, with a five-year CAGR of 31 percent.
- North America, the birthplace of off-premises cloud services, will remain the lead market through 2022, delivering approximately 53 percent of all global off-premises cloud service revenue.
- IBM continued to lead the market for software-as-a-service (SaaS) in 2017, with 18 percent of revenue; Amazon led infrastructure-of-a-service (IaaS), with 41 percent of revenue; Microsoft topped the list for PaaS, with 26 percent of revenue; Microsoft’s lead in CaaS continued, with 21 percent revenue; and Equinix led the physical facility market, with 15 percent of revenue.
Research Synopsis:
The biannual IHS Markit Cloud Services for IT Infrastructure and Applications market research report tracks public or private network delivered services offered by a third party (cloud service provider or telco); cloud brokering is not tracked. The research service provides worldwide and regional market size, cloud service provider (CSP) market share, forecasts through 2022, analysis and trends. CSPs tracked include Amazon, Alibaba, Baidu, IBM, Microsoft, Salesforce, Google, Oracle, SAP, China Telecom, Equinix, Digital Realty, Deutsche Telekom Tencent, China Unicom and others.
U.S. Commerce Secretary Talks Up 5G Implying T-Mobile/Sprint Merger Would Accelerate 5G Deployments in U.S.
The Trump administration is placing a high priority on building 5G mobile networks, Commerce Secretary Wilbur Ross told CNBC in a discussion of T-Mobile’s proposed merger with Sprint. According to a CNBC provided transcript of the interview, Ross said:
“You never know who is really ahead or behind (in 5G) until it is truly perfected. Nobody has 5G totally perfected yet. I think the pitch that Sprint and T-Mobile are making is an interesting one that their merger would propel Verizon and AT&T into more active pursuit of 5G. Whoever pursues it, whoever does it, we’re very much in support of 5G. We need it. We need it for defense purposes. We need it for commercial purposes. We (the U.S.) really need to be the player in 5G.”
A video of the interview can be watched here.
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The Federal Communications Commission (FCC) said in February it planned new auctions of high-band spectrum starting later this year to speed the launch of next-generation 5G networks. Carriers have spent billions of dollars acquiring spectrum and are beginning to develop and test 5G networks, which are expected to be at least 100 times faster than current 4G networks and cut latency, or delays, to less than one-thousandth of a second from one-hundredth of a second in 4G, the FCC has said.
Policymakers and mobile phone companies have said the next generation of wireless signals needs to be much faster and far more responsive to allow advanced technologies like virtual surgery or controlling machines remotely. T-Mobile Chief Executive John Legere met with two FCC commissioners in Washington on Tuesday to discuss the merits of the deal.
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Sprint is beginning to train its employees on what to say regarding the merger.
A memo has leaked out, courtesy of XDA-Developers, that shows the talking points that Sprint wants its customers to focus on. According to the document, Sprint employees are supposed to say that the company is very excited that the two companies have agreed to merge. And add that “this is terrific news for customers.” As well as assuring customers that the new T-Mobile will have “a faster, more reliable network at lower prices and with better value.” Which is basically what Sprint and T-Mobile said on Sunday and on Monday during their press tour with different news sites and TV networks.
Columnist Alexander Maxham wrote: “It is definitely important for Sprint to begin training its employees on what to say to customers regarding this merger, as there are bound to be a ton of questions regarding the merger in the coming weeks and months. T-Mobile is likely also training its employees on what to say about the merger – and many of the talking points are likely very similar if not exactly the same. Though T-Mobile’s memo has not leaked just yet. The two companies believe that merging together, they’ll be able to provide the best 5G network in the US, and also be able to better compete with AT&T and Verizon, both of which are more than twice the size of T-Mobile, and almost three times the size of Sprint.”
T-Mobile Sprint Merger Focus is on 5G and China Competition
T-Mobile USA and Sprint announced they would merge on Sunday. The combined company will be named T-Mobile, which says it “will be a force for positive change in the U.S. wireless, video, and broadband industries. The combination of spectrum holdings, resulting network scale, and expected run rate cost synergies of $6+ billion, representing a net present value (NPV) of $43+ billion will supercharge T-Mobile’s Un-carrier strategy to disrupt the marketplace and lay the foundation for U.S. companies and innovators to lead in the 5G era.”
T-Mobile said in that same referenced press release:
The New T-Mobile will have the network capacity to rapidly create a nationwide 5G network with the breadth and depth needed to enable U.S. firms and entrepreneurs to continue to lead the world in the coming 5G era, as U.S. companies did in 4G. The new company will be able to light up a broad and deep 5G network faster than either company could separately. T-Mobile deployed nationwide LTE twice as fast as Verizon and three times faster than AT&T, and the combined company is positioned to do the same in 5G with deep spectrum assets and network capacity.
The combined company will have lower costs, greater economies of scale, and the resources to provide U.S. consumers and businesses with lower prices, better quality, unmatched value, and greater competition. The New T-Mobile will employ more people than both companies separately and create thousands of new American jobs.
While T-Mobile (AKA “the un-carrier”) has been growing quickly, Sprint has been recovering from its worst days. It’s still growing slowly and bleeding cash, with 54.6 million users across its various brands. “This deal is probably more necessary for Sprint than T-Mobile,” said Amy Yong, a research analyst at Macquarie Capital.
“All the stars have aligned,” Marcelo Claure, Sprint’s chief executive, said in an interview. He added that the deal “allows this company to offer the best product at better prices, lower prices.”
Putting together the country’s third- and fourth-largest mobile service providers would be one of the most significant consolidations in the U.S. wireless market in years. A combined T-Mobile and Sprint, with almost 100 million retail subscribers as of Dec. 31st, would put it ahead of AT&T, with 93.6 million, and not far behind Verizon’s 116.3 million. (Or, as the colorful Mr. Legere put it, the transaction would help it better compete against the companies that he has previously referred to as “dumb and dumber.”)
Behind the Merger — Funding the 5G Infrastructure Build-Out:
A huge part of T-Mobile and Sprint’s push is emphasizing the future of 5G. Proponents say the superfast wireless standard (in late 2020 IMT 2020 standard by ITU-R WP5D is scheduled for its first release) would not only make downloading movies faster, but underpin huge advances in autonomous vehicles, internet-connected devices and more.
Wireless network operators are preparing to spend billions of dollars to expand their pre-standard “5G” infrastructure. Sprint and T-Mobile would have much more difficulty than competitors in funding that “5G” build-out. Sprint has about $32 billion in debt on its books, while T-Mobile generates a small fraction of the cash that Verizon and AT&T do.
Again, quoting from T-Mobile’s press release:
Neither company standing alone can create a nationwide 5G network with the breadth and depth required to fuel the next wave of mobile Internet innovation in the U.S. and answer competitive challenges from abroad.
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Traditional wireless telecoms (like AT&T and Verizon) now find themselves competing against newer contenders looking to chip away at their wireless market share. Comcast and Charter Communications are cable companies/MSOs each with a large installed base of broadband cable Internet customers that have begun offering wireless service plans to their subscribers, mostly as MVNOs.
As pre-standard 5G is first being positioned for fixed wireless broadband access, the unified T-Mobile and Sprint would ostensibly compete against cable providers like Comcast and Charter in addition to wireless mega telcoms AT&T and Verizon. While the IMT 2020 forthcoming ITU-R standard doesn’t implicitly acknowledge “5G fixed broadband access” there is some justification for the combined company to compete with MSOs/Cablecos, AT&T (U-Verse and AT&T Fiber) and Verizon (FiOS).
In addition to varying coverage maps, the two wireless carriers have wide swaths of spectrum that only sometimes overlap (Sprint has the 800MHz and 2.5GHz bands, while T-Mobile has 600MHz and 700MHz). You could see more comprehensive coverage from the merged entity (the new T-Mobile). Moreover, there’s no question that gigabit bandwidth and low latency make that a more of a viable option for fixed broadband internet access. The first “5G” deployments are focused on replacing broadband, not upgrading the smartphone, other mobile gadgets or IoT devices.
T-Mobile CEO John Legere took it further saying, “Global tech leadership in the next decade is at stake. And only the new T-Mobile will have the network and spectrum capacity to quickly create a broad and deep 5G network in the first few years of the 5G innovation cycle, the years that will determine if American firms lead or follow in the 5G digital economy.”
The China Factor:
The hidden agenda here from T-Mobile and Sprint is that failure to keep up in 5G would give China and Chinese firms a huge competitive technology edge. The Trump administration has called 5G a “national priority” and hinted at building a nationwide 5G network, primarily to compete against China (that rumor was later denied).
In March, the Trump administration blocked a hostile bid by Singapore-based Broadcom for San Diego-based Qualcomm, citing national security concerns. Some analysts questioned whether the predominantly foreign ownership of the combined company — including SoftBank, which has business ties to Chinese companies like Huawei — posed possible national security risks.
“They kept pointing to China on the call, but that is just a nice way to grease the skids,” said Will Townsend, an analyst with Moor Insights and Strategy, a research firm based in Texas, referring to a T-Mobile conference call with reporters and analysts on Sunday.
The focus on China does raise tricky questions for Sprint’s controlling shareholder, the Japanese conglomerate SoftBank, which buys telecom equipment from Chinese manufacturers. Still, most experts agree that the deal would produce a healthier company, one with more financial resources to pursue 5G. And where the rivalry in advanced industries between the United States and China is concerned, the prize is significant.
Many pundits (but not this author) say that 5G will impact a huge set of future economic and technological opportunities — from self-driving cars to smart cities and factories to virtual and augmented reality requiring huge amounts of bandwidth and/or low latency.
“It’s hard to argue that 5G is not key to the next five to 10 years,” said Chris Lane, a telecom analyst in Hong Kong with Sanford C. Bernstein. “Strategically, if you’re the U.S. and you’re trying to plan industrial policy, this deal makes sense.”
Mobile carriers in China have already announced bold plans to roll out 5G networks, and it is unlikely that the creation of a new American wireless giant would affect them. China Mobile, which has nearly 900 million wireless customers, is aiming to begin large-scale 5G trials in several Chinese cities this year.
Other Chinese companies are still vulnerable to American pressure, though. In particular, the United States government has placed restrictions on one giant Chinese supplier of the equipment that will make those new networks possible, and is investigating another.
For years, Huawei and ZTE have been unable to sell to large American wireless operators over security concerns. But the Department of Commerce recently went further, blocking ZTE from using American-made components for seven years, saying the company had failed to reprimand employees who violated American sanctions against Iran and North Korea.
ZTE now faces the prospect of being unable to manufacture network gear during the years in which wireless providers in China and elsewhere will most likely be building 5G networks. Huawei, meanwhile, faces an ongoing inquiry related to violations of American trade controls.
Serious disruption to either company’s business could mean a boon for their main rivals in telecommunications equipment, Nokia of Finland and Ericsson of Sweden.
It could also put SoftBank in an awkward position.
“SoftBank has been working with ZTE in Japan, but now they have to try to find other partners,” said Tsutsumu Ishikawa, an independent expert in Tokyo who covers the mobile industry.
As T-Mobile and Sprint seek Washington’s blessing for their union, the Trump administration might even require that SoftBank drop Huawei and ZTE as suppliers, said Mr. Lane of Bernstein. Masayoshi Son, SoftBank’s founder, has also cultivated personal ties with President Trump.
“If the administration for whatever reason doesn’t want Chinese suppliers of network equipment in Japan, either — and it’s possible — then I’m sure Masa would be willing to compromise,” Mr. Lane said, using Mr. Son’s nickname. “I think he’s quite pragmatic.”
“A lot of people are genuinely struggling to figure out, ‘What is the business case for 5G?’” said Ramakrishna Maruvada, a telecom analyst in Singapore with Daiwa Capital Markets. “Most operators do not think faster consumer broadband is a good enough reason to be pursuing a huge leap in technology.” [This author absolutely agrees. However, low latency is probably more important than bandwidth for many “5G” applications like real time control of IoT devices/equipment, autonomous vehicle to vehicle communications, and virtual reality/augmented reality.]
AT&T’s Q1-2018 Earnings Report with Analysis of Business Revenues & Time Warner Deal Impact
Executive Summary:
AT&T reported first-quarter 2018 results after markets closed on Wednesday April 25th. The telecom goliath reported adjusted diluted quarterly earnings per share (EPS) of $0.85 on revenues of $38.04 billion. In the same period a year ago, the company reported EPS of $0.74 on revenues of $39.37 billion. First-quarter results were a bit below the consensus estimates for EPS of $0.87 on revenues of $39.31 billion.
Operating cash flow totaled $8.9 billion and capital expenditures totaled $6.1 billion in the first quarter. Free cash flow totaled $2.8 billion.
AT&T reported total mobile subscribers and connections of 143.83 million for the quarter, of which 77.43 million were postpaid (contract) subscribers. That amounts to a loss of 78,000 postpaid customers, more than the 68,000 loss analysts were expecting. Postpaid net additions totaled 49,000, far better than the 194,000 subscribers lost in the first quarter of 2017, but less than 10% of the 558,000 net adds in the fourth quarter of last year. The company had a big surge in subscribers for its core wireless business during the quarter before this one, but analysts from New Street Research LLP are questioning the quality of those gains.
That’s largely due to aggressive promotions, like AT&T’s buy-one-get-one-free iPhone offer, which required customers who took advantage of the promo to add another wireless subscription. New Street’s analysts are concerned that if customers were prompted “to add lines they don’t need to get free or cheap devices,” a portion of those lines “will be disconnected in due course.” This means investors should watch for higher churn rates down the road. Already the benefits of such promos may be waning, with AT&T adding just 49,000 wireless postpaid customers in the first quarter, versus more than 550,000 in the fourth quarter.
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The DirecTV business lost 187,000 subscribers in the quarter, less than analysts’ estimate for a loss of 257,000. The DirecTV Now streaming service added 312,000 new subscribers.
AT&T saw declining business revenue in the first quarter (see Analysis below), as increased wireless sales to businesses and improved strategic service revenues failed to offset the decline in legacy services.
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AT&T Business Revenues by Carol Wilson of Lightreading:
AT&T saw declining business revenue in the first quarter, as increased wireless sales to businesses and improved strategic service revenues failed to offset the decline in legacy services. However, its chief financial officer pointed to an improving trend in business revenues, with slower declines, and said the move to a software-defined network is beginning to pay off.
Total business wireline revenues were $6.8 billion, down 7.9% year over year, or down 3.3% on a comparable accounting basis, according to AT&T Inc. (NYSE: T). Wireless business revenues were up nearly 4%, but wireline revenues were down 3% year over year, for an overall decline of 1.6% on a comparable basis.
This decline is “an improvement over recent quarters and similar to what we saw in the fourth quarter,” John Stephens, AT&T CFO, told analysts in the earnings conference call. “This improving trend in wireline is encouraging, and this comes before any expected bump from business activity we might see as the result of tax reform.”
AT&T saw a “significant improvement in business wireline margins where EBITDA grew year over year and margins were up 190 basis points on a comparative basis,” he noted, crediting the AT&T Business Solutions team with doing “a great job in driving cost management initiatives.”
Some of those operating expense savings came from the move to a software-defined network, Stephens said, as 55% of network functions were virtualized by the end of 2017.
AT&T also touted gains in what it calls “strategic business services,” which are the wireline offerings including virtual private networks, Ethernet, cloud, hosting IP conferencing, voice over IP, dedicated Internet, IP broadband and security services. Revenues in those areas grew about 6% or $166 million and represented 44% of total business wireline revenues and an annual revenue stream of $12 billion.
That growth could not offset a $440 million decline in legacy business revenues, however, as AT&T, like other telecom operators, continues to see businesses either move to competing carriers or replace legacy services with more cost-efficient offerings.
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Impact of the Time Warner Merger (if it happens or not?):
Without the deal, AT&T’s weaknesses will be more pronounced and its next chapter will be left open-ended—not to mention that nearly two years of planning, negotiations, adviser fees and legals costs will have been for nothing. If the deal does get done, the wireless-service and pay-TV provider’s bundling opportunities and bargaining power will be greatly enhanced, though it will also have to contend with an unprecedented level of debt that must be balanced against a dividend-hungry investor crowd and a costly but crucial 5G-network build. Interpreting the company’s quarterly results depends on which of these scenarios ultimately plays out.
This is week six of the merger trial, in which attorneys for the U.S. Justice Department are trying to make the case that a combined AT&T-Time Warner would be harmful to the industry and result in higher prices for consumers. While it’s still not clear how the judge will rule, shareholders are becoming more confident that the transaction will survive court. If it doesn’t, those shareholders may be forced to see two key operational metrics in a different light.
With Time Warner’s assets—namely HBO, Turner Broadcasting and the Warner Bros. film studio—AT&T will look like an entirely different company. It will look a lot like Comcast, and that’s part of the problem from the Justice Department’s standpoint. Time Warner will face its own challenges around advertising trends and trying to stuff its array of networks into limited streaming packages. But there’s no question that it will help make sense of Randall Stephenson’s expansion of AT&T into the pay-TV market and improve AT&T’s positioning and value proposition.
Should the Time Warner acquisition get blocked, it will mark a third deal disappointment for Stephenson. The first was AT&T’s attempt to buy T-Mobile back in 2011, which also faced regulatory opposition. DirecTV was the second—it got done, but it’s clear now that AT&T overpaid.
IHS Markit: Enterprises Evaluating SD-WAN; Ethernet Access Device Market up 8% YoY
Companies Evaluating SD-WAN As Enterprises Embrace the Cloud, IHS Markit Survey Says
LONDON (April 25, 2018) – IHS Markit (Nasdaq: INFO), a world leader in critical information, analytics and solutions, today released findings from its WAN Strategies North American enterprise survey, which reviews the evolving requirements for wide-area networks (WANs) of medium-to-large companies, including the adoption of software-defined WAN (SD-WAN). Nearly three-quarters (74 percent) of respondents conducted SD-WAN lab trials in 2017; by 2018, many will move into production trials and then to live production.
The latest annual survey of network managers from IHS Markit shows that investments in WANs continue unabated, driven by traffic growth, company expansion, adoption of the Internet of things (IoT), the need for greater control over the WAN, and the need to put WAN costs on a sustainable path. Security in particular is the number one network change by a wide margin, and the top reason to invest in new infrastructure, as companies must fend off the constant threat of cyber attacks.
“As companies shift a greater portion of their IT infrastructure into the cloud, and expand their physical presence to go after new markets or be closer to customers and partners, the need for reliable, secure and high-performance WAN and internet connectivity has never been greater,” saidMatthias Machowinski, senior research director for enterprise networks at IHS Markit. “However, companies don’t have unlimited budgets to fund growing WAN bandwidth consumption, which is why a majority are planning to deploy software-defined WAN in the next three years, to better control how their WANs are used.”
Following are some additional data points from the survey:
- Respondents expect their WAN bandwidth usage to grow over 20 percent annually — data center usage is the highest, while branch offices are experiencing the highest growth, at nearly 30 percent per year.
- Reflecting the significant demands placed on WANs, total WAN expenditures rose nearly 20 percent annually, to reach $300,000 per respondent in 2017.
- 71 percent of respondents will use off-premises cloud service providers by 2018, which will become the top application strategy in 2018.
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Ethernet access device market up 8 percent year over year in 2017
Worldwide Ethernet access device (EAD) revenue totaled $987 million in 2017, increasing 8 percent over 2016. The market is forecast to reach $1.47 billion in 2021, achieving a 2017–2022 compound annual growth rate (CAGR) of 8 percent.
“The EAD market is growing as a direct reflection of the continuous, steady demand from operators for mobile backhaul and wholesale services — and from business, broadband and building applications,” said Richard Webb, associate director, mobile backhaul and small cells research at IHS Markit.
“A new sub-segment is beginning to make an impact in the EAD market: the universal CPE, or ‘uCPE’ — a device that provides a ‘pico cloud’ of computing, storage and switching capable of executing virtualized functions,” Webb said. “Still, there will be an ongoing role for EADs even as virtual CPE takes off.”
Additional EAD market highlights
- Increasing demand for fiber-connected EADs will be the main driver of the market though at least 2022; in 2017, there was a 6 percent increase in the fiber segment
- Ciena was number one in EAD revenue market share for 2017, followed by ADVA, RAD, Actelis and MRV
- North America remained the largest market for EADs in 2017, with 50 percent of EAD revenue; Europe, the Middle East and Africa (EMEA) had 24 percent, Asia Pacific held 20 percent and the Caribbean and Latin America (CALA) had 6 percent
- For now and in the foreseeable future, North America maintains its lead through the early adoption of higher-capacity ports over fiber
Ethernet Access Devices Market Tracker
The biannual EAD report from IHS Markit tracks fiber and copper (EFM bonded and EoTDM bonded) Ethernet access devices by port speed, form factor and application. It also tracks uCPE. The report provides worldwide and regional market size, vendor market share, forecasts through 2022, analysis and trends.
FCM9003: Ethernet Access Device solution
Image courtesy of Metrodata in the U.K.
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About IHS Markit (www.ihsmarkit.com)
IHS Markit (Nasdaq: INFO) is a world leader in critical information, analytics and solutions for the major industries and markets that drive economies worldwide. The company delivers next-generation information, analytics and solutions to customers in business, finance and government, improving their operational efficiency and providing deep insights that lead to well-informed, confident decisions. IHS Markit has more than 50,000 business and government customers, including 80 percent of the Fortune Global 500 and the world’s leading financial institutions.
Taiwan Regulator: Price Wars Negative for 5G Development & Deployments
Taiwan’s National Communications Commission (NCC) regulator said that an ongoing price war in the Taiwanese mobile industry could hamper the development and deployment of 5G, according to an article in the Taipei Times.
The warning came after Chunghwa Telecom introduced a fourth-generation (4G) service plan earlier this month that targets government workers, teachers, school staff and military personnel, charging users NT$499 per month for unlimited access to mobile Internet and unlimited phone calls between subscribers of the same network. Taiwan Mobile, Far EasTone Telecommunications and Asia-Pacific Telecom quickly followed suit, introducing the same plan to attract subscribers.
NCC spokesperson Wong Po-tsung (翁柏宗) said that the commission respects a free market system, but added: “If telecoms simply want to boost their market shares and revenue by luring subscribers from competitors, rather than with innovative business models, it would not be positive for the development of 5G in the nation.”
“What they are doing does not help to make the pie bigger. They are not benefiting from innovative business models that could sustain them through the maintenance and operation of 4G services, the auctioning of the 5G service spectrum and finally commercial operation of 5G,” Wong said.
“That would hamper sustainable development of the nation’s telecommunications industry,” he added.
While carriers in other countries have sought to provide original content by buying content producers or have expanded their businesses overseas, Taiwanese telecoms are unlikely to do so, Wong said.
“Either none of them are big enough to develop their businesses overseas, or the acquisition of content providers is out of the question because of regulations that ban the government, political parties and the military from investing in media,” Wong said.
Carriers need to have courage and stop offering unlimited data and call service at unreasonably low prices, which would hurt their development in the long term, Wong said.
It is not the first time that telecoms have engaged in price competition to attract subscribers since 4G was launched in 2014. Average monthly fees dropped from about NT$1,300 to below NT$1,000 within one year of the service being launched, in a bid to motivate people to upgrade to 4G. The tactic was revived last year, with prices dropping further to NT$599 per month.
NCC statistics showed that mobile carriers’ revenue has declined from NT$53.2 billion (US$1.81 billion) in the second quarter of 2016 to NT$49.4 billion in the fourth quarter of last year.
Apart from a continued decrease in revenue from voice communication and a rapid increase in data transmission, industry experts have also attributed the decline in revenue to an ongoing price war. Offering unlimited data and call services at unreasonably low prices will hurt operators’ development in the long term, the regulator added. Operators are already grappling with declining revenue as a result of the price war, coupled with the continued decline in voice revenues.
As noted above, NCC does not believe that Taiwan’s operators will be able to follow the models their overseas counterparts have been pursuing to sustain growth – such as expanding overseas. pursuing acquisitions, or diversifying into original media content – due to Taiwanese operators’ relatively small size and regulatory restrictions.
“5G” terminals to be available 2nd half of 2019 in China; CCS Insight’s Mobile Phone Forecast
The first set of 5G end points, including data terminals, smartphones, tablets, and other products are expected to be released in China during the second half of 2019. That will lead to the commercialization of 5G technology in China, according to an official with the Ministry of Industry and Information Technology (MIIT), Xinhua news agency reported.
Wen Ku, director of the telecom development department at the Ministry of Industry and Information Technology, made the remarks as part of a timetable for 5G at the First Digital China Summit, which opened Sunday in Fuzhou, capital of Fujian province. “China started 5G research experiments in 2016, and entered the third stage of system verification this year,” Wen Ku said at the ongoing first Digital China Summit in Fuzhou, capital of east China’s Fujian Province. Wen noted that device manufacturers such as Huawei and Ericsson had participated in development of 5G products to help create a complete 5G industrial chain.
China has launched 5G cooperation mechanisms with Japan, South Korea, the European Union and the United States, with international companies joining the research and development, he noted.
Given the significantly greater speed — up to 10 gigabits per second — that 5G offers, the next-generation ultra-fast networks will see ways of life change more than in the 4G era, in virtually everything from how we “interact” with our cars to how we use the products in our homes.
In 2013, a working group focusing on 5G is established by the Ministry of Industry and Information Technology, the National Development and Reform Commission and the Ministry of Science and Technology.
At the beginning of 2016, China started its research on 5G technology. The country has finished two rounds of tests on 5G and is conducting a third round now. Initial 5G applications in China are set for 2019.
According to Beijing Youth Daily, China’s three major telecom operators including China Mobile, China Unicom and China Telecom have been approved to set up 5G networks in big cities.
- China Unicom will pilot 5G-technology in 16 cities including Beijing, Tianjin, Qingdao, Guiyang and Zhengzhou. China Unicom said it has started free chip upgrading for 2G users and cut 2G frequencies for the 5G network.
- China Mobile will launch offline testing in five cities in eastern and southern China, with each city installed with more than 100 5G stations as well as 5G application demonstrations in 12 cities.
- China Telecom has confirmed it will pilot 5G-technology in Xiong’an, Shanghai, Suzhou, Shenzhen, Chengdu and Lanzhou, and plans to expand the network to six more cities.
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CCS Insight believes that manufacturers are increasingly looking to 5G technology to reignite growth in mature markets. Koytcheva comments, “The arrival of 5G handsets offers a glimmer of hope for embattled smartphone makers. They’re betting that this new, faster technology will give consumers a reason to upgrade their phones.”
However, Koytcheva cautions that phone-makers will have to be patient as they wait for this next wave of upgrade activity. “Although we expect the first 5G smartphones will hit the market in 2019, really significant demand won’t start until 2021, eventually having a positive impact in 2022, when we expect over 600 million 5G phones will be sold, accounting for 31 percent of the global market.”
CCS Insight also notes that while advanced markets are focused on the transition to 5G, consumers in emerging markets are taking up smartphones more slowly than previously expected. Koytcheva comments, “The rising cost of components for entry-level smartphones and the arrival of affordable feature phones that support 4G networks mean that many people who otherwise might have bought their first smartphone are sticking with a feature phone for now.”
The chart below provides a summary of CCS Insight’s mobile phone forecast.
Total shipments of mobile phones, 2013-2022
Source: CCS Insight Market Forecast: Mobile Phones Worldwide, 2018-2022
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